Weatherly v. American Agr. Chemical Co.

• Decision Date: 25 April 1933
• Citation: 65 S.W.2d 592,16 Tenn.App. 613
• Parties: WEATHERLY et al. v. AMERICAN AGRICULTURAL CHEMICAL CO.
• Court: Tennessee Court of Appeals

65 S.W.2d 592

16 Tenn.App. 613

WEATHERLY et al. v. AMERICAN AGRICULTURAL CHEMICAL CO.

Court of Appeals of Tennessee, Middle Section.

April 25, 1933

Certiorari Denied by Supreme Court December 15, 1933.

Appeal from Chancery Court, Maury County; Thos. B. Lytle Chancellor.

Suit by Mrs. Eva Weatherly and others against the American Agricultural Chemical Company, brought under the Uniform Declaratory Judgment Act, for the construction of a certain lease or mining contract. From a decree construing the lease or mining contract, the defendant appeals.

Decree reversed in accordance with opinion.

Seay Stockell & Edwards, of Nashville (Sullivan & Cromwell, of New York City, of counsel), for appellant.

J. C. Voorhies, of Columbia, and Pitts, McConnico, Hatcher & Waller, of Nashville, for appellees.

DE WITT, Judge.

In their bill in this cause, Mrs. Eva Weatherly, Mrs. Sue Curry and her husband, G. T. Curry, the owners of certain lands containing phosphate rock, sought a construction under the Uniform Declaratory Judgment Act (chapter 29 of the Pub. Acts of 1923) of a certain lease or mining contract entered into between the complainants and the defendant on November 21, 1920. The complainants prayed for a declaration by decree (a) that the obligation of the defendant to pay to complainants the sum of $2,500 a year, when it is not carrying on mining operations on said property, does not relieve the defendant of the obligation to mine from said property all the phosphate material of the specified grade existing therein; (b) that the defendant is obligated by the contract with the complainants to mine from said property all the phosphate material of the grade of 72 per cent. bone phosphate of lime, or better, in or under said property, within the time specified in said contract; (c) that the defendant is answerable to complainants in damages for any waste or loss occasioned by improperly mining or removing from said property any phosphate material, or by improperly preparing same for market, or by handling or preparing the same different from or contrary to the methods prevailing in this territory from time to time.

The chancellor sustained the first two of said propositions, and deemed it beyond the scope of the suit to adjudicate the question of breach of contract or right to damages. The defendant appealed.

The defendant corporation was engaged in the business of mining phosphate rock and manufacturing fertilizer. It purchased a tract of several hundred acres of C. D. Loveless, adjoining the land of complainants, on which tract the prospecting had indicated a possible 285,000 tons of phosphate rock of 72 per cent. bone phosphate of lime. It had secured options for leases on complainants' land and three other adjacent tracts known as the John Jamison, the Margaret Jamison, and the Fitzgerald lands. Prospecting indicated a possible 200,000 tons of phosphate rock of 72 per cent. bone phosphate of lime, or better, underlying complainants' land, known as the Weatherly property. After it purchased the Loveless tract, it exercised its option and leased from the complainants their tract. The lease was entered into for a period of twenty years from and after November 21, 1920, "for the purposes and upon the terms" as follows:

"The foregoing lease is coupled with the following grants, stipulations, conditions, and subject to the following reservations and restrictions. That is to say, the party of the first part does hereby grant to party of the second part, its servants, agents, and employees, and the successors and assigns, the sole and exclusive right to enter upon said leased land for the purpose of mining and to mine and remove during said period of twenty years the phosphate rock and phosphate-bearing material from said land, with the right to remove the overburden existing on said land above the phosphate, and the right to mine and remove all the phosphate rock and phosphate-bearing material existing in, on, upon said land, which contains 72% or better of bone phosphate of lime, and to remove, and transport said phosphate and the material with which it is mixed over and across said leased lands to the plant to be erected on the land of second party, known as the Loveless tract, there to be prepared, and for the purpose of entering upon said premises and mining and removing said phosphate therefrom, said Grantee shall have the right to do any act or thing necessary for the purpose of mining, removing, and preparing said phosphate in a necessary or proper manner, and in so doing may use the methods from time to time prevailing."

The said lease further grants to the second party (the defendant), "certain rights of way across the leased premises for wagon roads, tram roads, or other ways, together with the right to lay and maintain pipes to be placed twelve inches below the surface across the premises described in the lease to lands recently purchased by the defendant from C. D. Loveless, and to establish a pumping station upon said premises to be located near the bridge on the Spring Hill road where it crosses Carter's Creek, and to take from the creeks and waters upon or bordering the said premises such water as it may need for the purpose of operating its plant upon the lands so purchased of C. D. Loveless and to cause said water to flow through said pipe lines."

The lease further granted to the lessee, its successors, and assigns, as an easement, "a right of way to establish and maintain a railroad or tram line across said leased premises as hereafter set out, with the right to lay ties and rails, and to operate over the same engines, cars, and trains."

Said lease further provides:

"Now in consideration of the foregoing grant, rights, privileges and easements, and as a rental for said leased premises, party of the second part agrees to pay said first parties, their heirs, personal representatives, or assigns, a royalty of one dollar per long ton of 2,240 lbs. for all phosphate rock or phosphate-bearing material, analyzing 72 per cent or better of bone phosphate of lime, the tonnage to be determined upon the finished product as shipped from the plant of Grantee, to be constructed on the land acquired by it from C. D. Loveless, adjoining the lands of the Grantor; railroad weights to govern and determine settlements; payment of royalties to be made after the phosphate is shipped, settlement to be made quarterly on the first day of January, April, July, and October of each year, for all phosphate shipped the previous quarter, and a tonnage of ten thousand a year is to be mined while working the lands herein described, and a minimum payment of twenty-five hundred dollars per year to be made by Grantee as lessee as rental while no mining thereon is being done. Such payment of $2500.00 per year to be applied against royalties on rock as subsequently mined and shipped. Such payment of twenty-five hundred dollars per year not to extend beyond the time when all mineable and merchantable rock of 72% B. P. L. or better shall have been mined and shipped from the premises described."

The defendant expended a very large sum of money in building its washing plant on its Loveless tract, and pumping station and power house on the corner of complainants' property adjacent to Carter's creek, and in laying the pipe line to bring water therefrom to the washing plant. It was an essential purpose, in obtaining leases on the Weatherly property, as well as the Jamison properties, to secure water rights to Carter's creek, which could not be had without leasing these properties, as well as to secure an easement for the purpose of laying pipe lines across the Weatherly property from the pumping station to the washing plant. Thus the aforesaid contract was entered into in order to obtain water rights and other easements and mining privileges.

The defendant mined the phosphate rock on the Loveless property before beginning the mining upon the Weatherly property. It mined from the Loveless property practically all of the phosphate rock thereon of the grade specified, but obtained only about 25 per cent. of the amount of phosphate rock which was estimated to underlie those premises. It did not begin any mining on complainants' property until December, 1927, more than seven years after the beginning of the lease, but it paid to the complainants the sum of $2,500 for each of said years, and, after it began mining operations on complainants' property, it paid to the complainants a royalty of $1 on every ton mined, after deducting therefrom the amount which it had paid to them at the rate of $2,500 a year. The defendant mined the phosphate rock on complainants' property from December, 1927, until May, 1931, when it discontinued such mining operations. Altogether it mined on complainants' property 84,031.58 tons of phosphate rock, for which it paid to them $84,031.58. After discontinuing such operations on complainants' property, the defendant continued paying to them the sum of $2,500 a year, which was accepted by them, and it proposes to continue paying to complainants the sum of $2,500 each year until the end of the term of twenty years provided for in the lease. It has abandoned the whole operation, having lost about $379,000 thereon, and does not intend to mine any more phosphate rock on the complainants' property. It assigns as the cause of the loss and the consequent discontinuance of operation a poor quality in grade of the phosphate rock on both its Loveless tract and the Weatherly tract.

For the complainants it is insisted as follows:

(a) That the contract made November 21, 1920, between the complainants and defendant constituted a purchase by the defendant of all the phosphate material, in, on, or under complainants' said

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