Whiteside v. Rocky Mountain Fuel Co.

• Decision Date: 14 February 1939
• Docket Number: No. 1619.,1619.
• Citation: 101 F.2d 765
• Parties: WHITESIDE v. ROCKY MOUNTAIN FUEL CO. In re STANDARD COAL MINE, Inc.
• Court: U.S. Court of Appeals — Tenth Circuit

101 F.2d 765 (1938)

WHITESIDE v. ROCKY MOUNTAIN FUEL CO. In re STANDARD COAL MINE, Inc.

No. 1619.

Circuit Court of Appeals, Tenth Circuit.

November 14, 1938.

Rehearing Denied February 14, 1939.

Cass M. Herrington, of Denver, Colo. (G. Walter Bowman, of Denver, Colo., on the brief), for appellant.

Albert L. Vogl, of Denver, Colo. (Frank A. Wachob, of Denver, Colo., on the brief), for appellee.

Before LEWIS, PHILLIPS, and WILLIAMS, Circuit Judges.

LEWIS, Circuit Judge.

May 1, 1937, Standard Coal Mine, Inc., a Colorado corporation, filed its petition to be adjudicated bankrupt, and on May 3, 1937, the order of adjudication was entered. For sometime theretofore it had been operating a producing coal mine in Colorado under a sub-lease given to it by appellee. On May 14, 1937, appellee filed its claim against the estate for $13,698.61, charging that bankrupt was at and before the filing of the petition for adjudication indebted to it in that sum —

"and also all machinery, equipment, tools and other personal property and trade fixtures at the Standard Mine.

"That the consideration for which said debt was contracted is as follows: Royalties, taxes and maintenance of Standard Mine pursuant to the terms of the lease, and as agreed stipulated liquidated damages for defaults under the lease as therein provided."

The referee had a hearing, allowed the claim in part ($5,571.28), and ruled that the claimant had a lien on certain personal property of the bankrupt estate as set forth in the lease, section 7; but did not have a right to take and keep the said personal property as liquidated damages pursuant to section 8 of the lease. No definite time is stated when or under what circumstances the lease was terminated, either in the claim or in proof.

Both parties petitioned for review by the District Judge of the referee's ruling. The Judge made no comments or findings on the parts of the claim allowed by the referee amounting to $5,571.28, but reversed the referee on his holding that claimant had no right to take and keep the personal property described in section 8 as liquidated damages. In that respect he reversed and set aside the referee's order and —

"ordered and decreed that claimant, The Rocky Mountain Fuel Company is entitled to all improvements, buildings, machinery, tools, implements, equipment and property of whatsoever kind, including the leasehold interest, which the bankrupt placed or used upon the premises described in the sublease from the claimant to the Bankrupt, being the property known as the Standard Mine, as liquidated damages free and clear of all claims of the Trustee in Bankruptcy therein or thereto.

"2: That in view of the foregoing decision and order the questions presented as to claimant's claim for a lien under section 7 of the aforesaid sublease and the question of the amount of claimant's claim otherwise probable in bankruptcy become immaterial and this Court makes no decision thereon."

Thereupon the case was brought here under both section 24 and section 25 of the Bankruptcy Act, 11 U.S.C.A. §§ 47, 48.

While the sub-lease and amendment to it is the basis of appellee's claim, we set out its terms in part only, and summarize other parts that bear on the points at issue. The lease was executed on February 27, 1936, by the appellee and bankrupt. It was approved and consented to by the owner of the land from whom appellee then had a long term coal mining lease which had been given April 1, 1933. It recited that the sub-lessor was the owner of the buildings, machinery, mining equipment, personal property, supplies, office fixtures, and all other equipment and appurtenances then on and beneath the surface of the land; that the lessee desired to lease, mine and market the coal therefrom and use the buildings, machinery, mine equipment, personal property, supplies, office fixtures, and all other equipment then on the surface and beneath the surface of the said real property, and to operate what was known as the Standard Mine then open by shafts, situate in the County of Boulder, Colorado; that the upper seam of coal had been mined out; that the entries, water ways, sumps and equipment located in the upper seam must be maintained, and the lessee agreed to do so at its expense; that the hoisting shaft and the air shaft had been extended below the upper seam of coal to the lower seam, and that same had been somewhat developed; that the lessor by the lease agreement leased and demised to the lessee the mine and premises and all that portion of the equipment, improvements and other personal property there located included in an attached inventory for a term of fifteen years from the date of the lease with the right and privilege to mine, excavate and remove coal from the lower and middle seams only, together with so much of the surface thereof as might be necessary for sinking shafts or other openings through which to take out coal and for ventilation, and the necessary buildings required in mining coal or in handling same, and ways of ingress and egress, and for the removal of coal from said premises, and for necessary dwellings, all in consideration of the payments to be made and covenants and agreements therein to be kept and performed by the lessee; that lessee undertook and agreed to occupy and hold said premises for the full term of fifteen years unless such term be sooner terminated pursuant to any of the provisions of the lease, to continuously carry on mining operations upon said tract of land, mine and extract coal therefrom with a force and equipment sufficient for the production of the minimum requirements under the lease, and to so work the mine as to keep the entire property in a workmanlike mining condition and have the mine in such condition at the termination of the lease, and at all times to keep the leased premises free and clear of any liens; and that the lessee would pay to the lessor a royalty of 35¢ per ton of 2000 pounds run of mine coal, and for the calendar year 1936 would pay a minimum rental or royalty on 5000 tons amounting to $1750, and for the calendar year 1937 and each calendar year thereafter a minimum royalty on 15,000 tons amounting to $5250, payable $437.50 per month. Before the year 1936 expired the parties by written amendment to the lease reduced the per annum minimum royalty for 1937 and each year thereafter to $3750 payable in monthly installments. The 7th section of the lease deals with the claimed lien on the equipment and improvements to be made by the lessee at the mine, thus:

"Lessee covenants and agrees that at the expiration of the term or period of this agreement, or in the event such term or period is ended or terminated in any manner other than by lapse of time, as in this instrument provided, Lessee will peaceably, and without demand or request, deliver up possession of said premises to the Lessor, its successors or assigns, in good order and condition, and that it will, during the continuance of this agreement, keep the said lands, and all improvements, equipment and materials thereon or therein, including improvements, equipment and materials to be placed thereon or therein by Lessee, and every part and parcel thereof, free, clear and discharged of and from any and all liens of workmen, mechanics and material men furnishing labor or material to or for Lessee, and free of liens or claims of any kind or character whatsoever, which may be, or might be, claimed or allowed to be superior to the lien of Lessor or rights of the Owner, its successors and assigns; Lessee shall at all times keep posted two copies of `Notice — All Persons Doing Work or Furnishing Materials, Machinery, Etc.' at the mine in conspicuous places, which notices will be furnished by Lessor.

"It is further mutually and expressly understood and agreed between the parties hereto that all movable buildings, machinery and equipment and other personal property, placed upon said premises by Lessee shall, except as hereinafter provided, be and remain the property of Lessee. For the purpose of this provision, props, shafts, permanent buildings and all other improvements hereafter affixed to the leased premises, or any part thereof, and which cannot be removed without subjecting the mines to danger, or damage, shall be held to be fixtures annexed to the real estate and shall not be removed by Lessee.

"Lessor shall have a first and prior lien upon all the improvements, buildings, machinery, tools, implements, equipment, and property of whatsoever kind, including the leasehold interest hereby granted, which the Lessee may hereafter place or use upon said premises, or any part thereof, or which the Lessee shall, or may have caused to be placed on said premises, or any part thereof, as security for the payment of the rent or royalties, and the performance of the obligations and covenants provided for and mentioned and set forth in this agreement. In the event of default hereunder and Lessor elects to foreclose its lien herein granted, the property to which such lien attaches may be sold at public or private sale at the election of Lessor and Lessor may become a purchaser at such sale."

The 8th section deals with the claimed liquidated damage provisions, thus:

"In case of termination of this lease or agreement on account of any default on the part of Lessee, neither it, nor its successors or assigns, shall have any right to compensation for any of the improvements, personal property, equipment, etc., as aforesaid, whether the same be attached to said property or detachable and movable, and shall not have any right to take away, or remove, any thereof, but all of such improvements, personal property, equipment, etc., shall become the sole property of Lessor as its or their liquidated damages, and not as a penalty or penal sum, or in the nature thereof, the value thereof being hereby agreed to as a just and reasonable compensation to said Lessor for the damage by it, or them,...