Weathers v. M.C. Lininger & Sons, Inc.

• Decision Date: 24 July 1984
• Docket Number: No. 81-3627-NJ-3,81-3627-NJ-3
• Parties: Gladys WEATHERS, Curt Weaver and Neil Burrill, Respondents, v. M.C. LININGER & SONS, INC., a corporation, and Meridian Rock, Inc., a corporation, Appellants. ; A26812.
• Court: Oregon Court of Appeals

Page 770

682 P.2d 770

68 Or.App. 30

Gladys WEATHERS, Curt Weaver and Neil Burrill, Respondents, v. M.C. LININGER & SONS, INC., a corporation, and Meridian Rock, Inc., a corporation, Appellants.

No. 81-3627-NJ-3; A26812.

Court of Appeals of Oregon.

Argued and Submitted Sept. 28, 1983.

Decided May 2, 1984.

Review Denied July 24, 1984.

Karen C. Allan, Medford, argued the cause for appellants. With her on the brief was Foster & Purdy, Medford.

Ervin B. Hogan, Medford, argued the cause and filed the brief for respondents.

Before GILLETTE, P.J., and WARDEN and YOUNG, JJ.

YOUNG, Judge.

This is a declaratory judgment action, ORS 28.020, to determine the rights of the parties under an agreement dated November 19, 1980, titled "Agreement for Mining, Sales and Processing of Basaltic Shale Rock, Topsoil and By-Products Thereof." Plaintiffs, owners of the land which is the subject of the agreement, sought a declaration that: (1) a price-fixing provision is a restraint of trade in violation of ORS 646.725 and is illegal, causing the entire agreement to be void and unenforceable; (2) plaintiffs are entitled to use the road traversing the land for access to adjacent land; and (3) plaintiffs are entitled to sell or assign their rights reserved under the agreement to extract and sell rock from the land.

Defendants moved for a partial summary judgment on plaintiffs' claim that the agreement was void. The trial court ruled that the price-fixing provision was unenforceable, but because that provision is severable, the remainder of the agreement is enforceable. No challenge is made to that ruling. Plaintiffs' remaining claims were tried by the court without a jury. The court ruled that under the agreement:

"1. * * * Plaintiffs have the right to use the road traversing the property * * * for ingress and egress to and from [their other adjacent land consisting of 160 acres,] provided that such use of said road shall not substantially interfere with the material removal operations of defendant[s] * * * pursuant to the rights granted to defendants * * * in said agreement of November 19, 1980.

"2. * * * Plaintiffs have the right to grant permissive use of the road traversing the property which is the subject of said agreement * * * provided that such use of said road shall not substantially interfere with the material removal operations of defendants * * *.

"3. * * * [T]he rights reserved to plaintiffs by * * * [the] agreement * * * are not subject to any restriction against alienation and may be exercised by plaintiffs by sale, assignment or contract to or with third persons."

Plaintiffs, as the prevailing parties, were awarded their costs, including reasonable attorney fees.

On appeal defendants contend that it was error to declare that (a) plaintiffs have a right to use the road traversing the subject property for access to their adjoining 160-acre parcel and to grant permissive use of the road to third person and that (b) the rights reserved to plaintiffs to extract and sell rock materials are assignable and to find that plaintiffs are the prevailing parties entitled to costs and attorney fees. We affirm.

In 1979, plaintiffs purchased a 520-acre parcel of land in Jackson County for the purpose of developing a rock quarry. They obtained a zone change to aggregate resource (AR) for approximately 250 acres of the 520-acre parcel. Plaintiffs then developed the land zoned AR as a quarry and engaged in the extraction, processing and sale of rock from the quarry during the spring and summer of 1980. During that summer, defendants negotiated with plaintiff to lease the AR land. Those negotiations culminated in the agreement dated November 19, 1980, which was drafted by defendants' attorney. On December 17, 1980, plaintiffs purchased a 160-acre parcel of land adjoining the AR land. They acquired this additional land to develop a rock quarry. The evidence is that the purchase of the 160-acre parcel by plaintiffs was not contemplated by the parties when the November 19, 1980, agreement was entered into.

When the parties executed the agreement, access to the AR land was by a road connecting with Highway 140. After the 160-acre parcel was purchased, plaintiffs extended the road from the AR land through the 160-acre parcel, returning to and terminating in the AR land. After completing the road, plaintiffs began quarrying rock on the 160-acre parcel and hauling it on the road traversing the AR land. Defendants objected to their use of the road across the AR land. Defendants' position was that plaintiffs had the right under the agreement only to use the road across the AR land to show the land to prospective buyers, to remove and cut firewood or to haul an agreed quantity of rock reserved by plaintiffs from the AR land. Defendants then blocked the road, and this action followed.

First, we turn to the scope of our review. Declaratory judgment proceedings requesting the construction of a contract are legal in nature. See C & B Livestock v. Johns, 273 Or. 6, 10, 539 P.2d 645 (1975). In this action, the trial court ruled, without objection, that the agreement is unambiguous. On appeal, defendants briefed and argued the case on that basis. We deal with the construction of the agreement as a question of law without resort to extrinsic evidence. Stark Street Properties v. Teufel, 277 Or. 649, 661-62, 562 P.2d 531 (1977); Lee v. State Farm Auto. Ins., 265 Or. 1, 3, 507 P.2d 6 (1973).

We consider first the extent of plaintiffs' rights under the agreement to use the road across the AR land. The purpose of the agreement is:

"3. Commencing December 1, 1980, lessee shall have the exclusive right to enter upon and to excavate and remove basaltic shale rock, topsoil and any by-product thereof, herein after collectively called 'materials' except as specifically reserved in Article 21 of this agreement."

The parties dispute the nature of the legal relationship created by the agreement. Defendants argue that the agreement is a "lease" which creates in them as lessees a possessory leasehold interest in the AR land to conduct a quarry operation and that they are entitled to exclusive possession, except for the reserved right of plaintiffs to enter the land to inspect, cut wood and extract a limited quantity of rock as provided in Article 21. Defendants' argument appears to be premised on the rule that a landlord vests his tenant with exclusive possession which precludes the landlord's entry except for certain limited purposes. See Sproul et al. v. Gilbert et al., 226 Or. 392, 403, 359 P.2d 543 (1961). Plaintiffs contend that, if the agreement is a lease, then it is a mineral lease and different rules of construction apply. See Fremont Lbr. Co. v. Starrell Pet. Co., 228 Or. 180, 183-84, 364 P.2d 773 (1961). ¹

The agreement not only contains language customarily found in leases, it contains all the essential provisions of a lease. In summary, defendants, as "lessees," have the "exclusive right" to excavate and remove "materials" from the AR land, except that plaintiffs reserve the right "during the first ten (10) year term of the lease" to mine and sell a specific quantity of rock from it. The initial term is ten years with provision for additional terms of ten years, each at defendants' option. Defendants are entitled to stockpile on the premises and to "erect and operate permanent and portable plants which may be necessary or convenient for the processing and removal of materials including an asphalt batch plant, a CTB plant or any other plant which may be agreed upon by the parties." Defendants are required to make royalty payments and to pay a minimum cash rental. Provision is made for the payment of real property taxes and the allocation of depletion allowances. Defendants must conduct their quarrying operation in a good and workmanlike manner and they must comply with state reclamation laws and regulations. The "lessors" and "lessees" have to carry certain specified public liability and property damage insurance. The agreement contains a default clause and a succession clause. It is clear from the terms of the agreement that the parties contemplated that defendants would have the right to use the AR land in all ways reasonably necessary to develop the quarry and to extract, produce and sell rock materials, which by necessity includes the destruction of the surface. ²

In general, to create a leasehold interest the lessee must be granted the right of possession. Sproul et al. v. Gilbert et al., supra:

"It is commonly said that the lessee must have 'exclusive possession' * * * but this is not strictly true because all possessory interests, including even a fee simple, are subject to limitations making the possessory right something less than exclusive. Translating 'exclusive possession' to mean the right to exclude others, it is apparent that as against the lessor the exclusiveness of possession may vary depending upon the restrictions imposed upon the transferee's use by the creating instrument. * * * Even in the absence of express reservations in the creating instrument, the lessee's right to exclude others is less than complete for the landlord always has the right to enter to demand rent and to make repairs." 226 Or. at 403, 359 P.2d 543. (Citations omitted.)

In the present case, the language of the "lease" reveals an intent to transfer to defendants not only the right to conduct a quarry operation, but also the right to restrict entry. With respect to the control of the premises the agreement provides:

"11. Lessee shall restrict entry to the general public to all portions of the leased property as is necessary to protect persons and property from harm arising from lessee's activities and operations upon the property. Lessee may also request that the lessors restrict entry to any portion of the other property of lessors as may be necessary to protect lessees' employees and property from harm arising from activities and...