Vincent v. Kaser Const. Co.

• Decision Date: 10 December 1963
• Docket Number: No. 51163,51163
• Citation: 255 Iowa 1141,125 N.W.2d 608
• Parties: Gladys VINCENT, Dale E. Vincent and Helen Verlee Greiner, Appellees, v. KASER CONSTRUCTION COMPANY, an Iowa Corporation, Appellant.
• Court: Iowa Supreme Court

Page 608

125 N.W.2d 608

255 Iowa 1141

Gladys VINCENT, Dale E. Vincent and Helen Verlee Greiner, Appellees, v. KASER CONSTRUCTION COMPANY, an Iowa Corporation, Appellant.

No. 51163.

Supreme Court of Iowa.

Dec. 10, 1963.

Ross H. Sidney Thomas W. Carpenter, Des Moines, for appellant.

Baldrige & Baldrige, Washington, for appellees.

PETERSON, Justice.

This is an action at law, tried to the court, for rent claimed by plaintiffs under the terms of a written lease, and for declaratory judgment for an amount due later under the lease. The trial court rendered judgment against defendant for two years rent of $500 per year which was past due, and rendered declaratory judgment for $500 as to the rent for the last year not yet due. Defendant has appealed.

There is only one question to be decided: Did the trial court commit error in holding the provision for termination of the lease constituted a condition subsequent, and consequently holding defendant cannot cancel a lease by taking advantage of its own wrong.

I. Plaintiffs were the owners of a farm of 346 acres in Washington County. February 12, 1958, they entered into an option to lease with defendant, together with a lease, to rent plaintiffs' farm under certain conditions for the purpose of drilling for limestone, sand or gravel. The agreement provided defendant should have 90 days in which to determine whether such property contained any of the minerals. If defendant, after such investigation decided the prospects were favorable, the agreement would automatically become a five year lease. Defendant notified plaintiffs on May 9, 1958, that the tests were favorable and the lease was consummated.

Defendant did not at any time during the period of the lease conduct mining or quarrying operations on the farm. However, in accordance with the terms of the lease, on May 9, 1959, defendant paid plaintiffs $500 rental for the first year. On May 9, 1960, paid another $500 for rental for the second year. Defendant failed to make payment of the rent on May 9, 1961; May 9, 1962; and at the time of the trial in January of 1963, the final rental payment of $500 would become due May 9, 1963. The trial court in its findings of fact and conclusions of law granted judgment for $1000 and interest, and a declaratory judgment for $500 which was not due at said time, but which has since become due through the passage of time.

The contention of defendant is that it had a right to declare the lease canceled by reason of a clause which appears in the lease in the following words: 'Failure to make any such payments shall terminate this lease.'

It is the position of plaintiffs that this was a condition subsequent and that defendant did not have a legal right to consider the lease canceled in view of the delinquency in payment of rent being the fault of defendant.

II. The provision to pay rent under a lease which contains a condition that the lease shall terminate on such failure constitutes a condition subsequent. The lessor has the option to terminate the lease if he so elects, but the lease is not automatically terminated for the reason that the lessee may not take advantage of its own nonperformance of a contractual duty. Nitardy v. Thayer, 275 Wis. 459, 82 N.W.2d 325; Hanley Falls Creamery v. Milton Dairy Co., 126 Minn. 226, 148 N.W. 46; 32 Am.Jur., Landlord and Tenant, Section 825; 51 C.J.S. Landlord and Tenant § 91; Restatement of Property, Section 24, page 59; Markey v. Smith, 301 Mass. 64, 16 N.E.2d 20, 118 A.L.R. 274; Unity Co. v. Gulf Oil Corp., 141 Me. 148, 40 A.2d 4, 156 A.L.R. 297; Miller v. Compton, Tex.Civ.App., 185 S.W.2d 754; Bates v. Georgia Fertilizer Co., 144 Tenn. 32, 229 S.W. 153; Wills v. Manufacturers' Natural Gas Co., 130 Pa. 222, 18 A. 721; Morris v. De Wolf, 11 Tex.Civ.App. 701, 33 S.W. 556; Chicago Daily News Pub. Co. v. Joyce-Watkins Co., Ill.App., 13 N.E.2d 117; Nelson v. Republic Iron & Steel Co., 8 Cir., 240 F. 285; All-American Oil & Gas Co. v. Connellee, 5 Cir., 3 F.2d 107.

III. One of appellant's contentions for reversal is that the agreement between the parties was in the nature of a mineral drilling operation based primarily on the number of tons defendant would take out of plaintiff's ground at ten cents per ton, and did not constitute an ordinary lease between parties for the rental of a property.

The facts in the case do not sustain defendant's position. It is true there is a provision in the lease that in case of drilling defendant was to pay plaintiffs ten cents per ton for all limestone products, sand or gravel taken from the ground, but the agreement was broader than that. Defendant agreed to pay plaintiffs $500.00 per year irrespective of the amount of sand or gravel removed. Defendant specifically stated in the lease: 'It is specifically understood and agreed that the second party is not obligated to conduct mining or quarrying operations hereunder, but if in any calendar year during the term hereof, the total of royalties payable under paragraph 3 shall be less than $500.00, then, each year upon the anniversary of this option, the second party shall pay to the first party the amount of such deficiency. * * *'

In addition to the above specific agreement on the part of second party, several statements appear in the agreement which conclusively denominates it as a lease rather than a royalty agreement only. For example, the following clauses appear at various points in the agreement:

'The parties hereto are desirous of entering into a leave agreement covering said property.'

After the parties had agreed that upon testing, the contract should become complete it was stated: 'shall cause the lease agreement herein contained to be binding upon both parties * * *'.

The agreement also states as follows: 'The first party * * * hereby leases to the second party, for the sole and exclusive purpose of mining * * *'. (Emphasis ours.) Without specifically quoting them, in six other sentences in the agreement the word 'lease' is used.

Under the above repeated statements appearing in the agreement, calling it a 'lease' there is no question nor ambiguity as to the nature of the document.

IV. The other contention made by defendant is that the agreement between the parties was clear and unambiguous as to the right to cancel and it was, therefore, not subject to either interpretation or construction. While this principle of law is well established, the point at which appellant falls into error is that there is an important and well established principle of law as to situations such as the one at bar which supersedes the general principle of nonambiguity. This principle is the one heretofore stated in Division II.

The question has had consideration by the courts of our sister state of Minnesota. In the case of Hanley Falls Creamery v. Milton Dairy Company, supra, plaintiff made a lease to defendant of certain creamery property on the basis of a rental of $15.00 per month for 5 years. The lease provided: 'That in case the said lessee shall cease to use the premises for actual creamery purposes or close the building, this lease shall be canceled and annulled at once by said lessor.' Defendant ceased to use the premises for creamery purposes and contended that the lease was canceled. The trial court held the lease canceled, but the Supreme Court reversed and said in the case: 'While formerly a provision in a lease to the effect that it should become 'void' upon the tenant's default * * * it was soon discovered that in practical application this enabled the tenant to nullify the lease merely by taking advantage of his own default, and the great weight of authority now is that whatever the form of language used, whether adapted to the creation of a special limitation or a condition subsequent, such will be construed as the latter * * *.'

The legal principle has been stated by the courts in more than 50 cases. In the Pennsylvania ...