Opinion
No. 28492.
July 1, 1952.
APPEAL FROM THE CIRCUIT COURT OF FRANKLIN COUNTY, RANSOM A. BREUER, J.
Joseph T. Tate, Owensville, for appellant.
Frank W. Jenny, Union, Theodore P. Hukriede, Washington, for respondents.
This is a suit brought to determine the right, title and interest of the parties to certain clay deposits in land situated in Franklin County, Missouri. Plaintiffs, Carl A. Thacker and Clifford Rhoads, base their claim upon a certain mining lease obtained from William Farrell and Frances Farrell, owners of the land in question. This lease was dated February 4, 1949. Defendant, Oscar Flottmann, claims title to the clay deposits under a lease executed by the Farrells on September 29, 1949. The issue tried was whether or not plaintiffs had abandoned their lease at the time of the execution of the lease to defendant, Oscar Flottmann. The case was tried to the court, and the trial resulted in a finding and judgment in favor of the plaintiffs. Defendant has appealed.
The lease, dated February 4, 1949, granted respondents mining rights for a term of three years in the tract of land in Franklin County belonging to the Farrells, and described in the lease as "The south-west Qr. of section (20) Township (42) north of Range 3 west of 5th P.M., containing 160 acres, more or less." The lease provided that:
"The Lessors hereby agree to give unto the Lessees 133 days to prospect for said clays, and in the event that the prospecting proves satisfactory and, if in the opinion of the Lessees there are sufficient clays to justify the taking of this lease, then at the end of the said 133 days above mentioned this instrument shall become a true and binding lease for the full term of years first above mentioned. * * * the Lessees agree to pay the Lessors a royalty of 15 cents per 2000 lbs. of merchantable Flint clay; and 85 cents per 2000 lbs. of merchantable Burley clay, analyzing 60% AL203 or better; and $2.00 per 2000 lbs. of merchantable Diaspore clay, analyzing 70% AL203 or better; said royalty to be paid on or before the 30th day of each month in each year for the materials removed from said premises during the month preceding except clay purchased under option hereinafter set forth; all settlements to be governed by railroad weights or standard scale weights. The Lessees further agree to keep a record of the entire output of said mine or mines operated under this lease; to allow Lessors to inspect said record at any and all reasonable times; and in case the Lessees, at the end of the option period herein mentioned do not desire to exercise their right to have this instrument become a lease as heretofore provided for, then said Lessees shall deliver up to said Lessors this instrument first having had same removed from the record of the Recorder of Deeds of the county designated herein.
"The Lessees further agree to pay to Lessors a minimum royalty at the rate of $160.00 per year, but if in any one year the royalty shall be in excess of the quantity of clays removed during that year, such excess shall be treated as advance royalty and credited as payment pro tanto on clays removed in any subsequent year in excess of the minimum required in that year; first payment of advance royalty to be made on June 1, 1949.
"In further consideration of the premises it is stipulated and agreed by and between the parties hereto that said Lessees or their assigns are hereby granted the option within said term of 133 days within which to determine the actual usable amount of clay of the various types hereinbefore referred to, using as a formula for such determination based upon the drilling theretofore done 20 cubic feet of clay for each ton of the various types of clay at the prices hereinbefore set forth and upon exercise of such option and the payment for such amount of clay as has been determined to exist under, in and on an area to be predetermined by survey or surveys, including necessary surface and surface rights for the disposition of necessary waste and overburden and right of ingress and egress thereto, said Lessors or their assigns shall and will convey all of such clay under such area or parcel of ground unto said Lessees or their assigns by proper deed of conveyance, free and clear of encumbrances, with the right and privilege vested in said Lessees and their assigns to remove such clay under the terms and conditions of this agreement at the discretion of said Lessees or their assigns."
Plaintiff Rhoads owned and operated the Union Sand and Gravel Company, and devoted his full time to that business. Plaintiff Thacker was employed by Rhoads to haul sand and gravel, and worked on an average of eight hours a day for six days a week. He had helped mine clay in 1929 when working for a Mr. Rousset.
At the time of the execution of the lease plaintiffs owned a prospecting machine, and in March, 1949, Thacker went upon the Farrell land with this machine and prospected for clay by drilling, according to Thacker's testimony, about 200 holes. Mr. Rhoads did not accompany Thacker on this project, but contributed money and furnished a hand to take his place. Altogether, Thacker spent about a week on the job. Samples were kept of the drillings and delivered to the Harbison-Walker Company for testing.
On April 15, 1949, Harbison-Walker Company wrote Mr. Thacker the following:
"Mr. Carl Thacker
"Union, Mo.
"Dear Sir:
"We have received the following information on your clay samples from the Wm. Farrell pit.
"On partial testing it looks all right, further tests are being run this week.
"We will have complete picture by April 18."
Thacker testified that no further report on the samples submitted was ever made by the Harbison-Walker Company.
Thereafter, during the last week in April, 1949, respondents talked to Raymond Worth about selling their interest in the clay. Mr. Worth was superintendent of prospecting for the Harbison-Walker Company. Mr. Worth testified that he was prepared to take an option at that time, but could not do so because there was not enough time left for prospecting under the terms of the lease. Mr. Thacker testified that at this meeting he showed the lease to Mr. Worth and the latter stated that he would probably have to have more time and suggested that Thacker see the Farrells about getting either a new lease or more prospecting time under the lease they had. Thacker further testified that he told Worth that he would see Mr. Farrell. He further stated that he had no further discussion with Mr. Worth until after the suit was filed.
Plaintiffs failed to pay the advance royalty due June 1, 1949. After said date Mrs. Farrell wrote a letter to Thacker reminding him that the payment due June 1, 1949, had not been paid. Mrs. Farrell testified:
"Q. Now, you had written a letter to Mr. Thacker before you talked to the Flottmanns? A. Yes, sir.
* * * * * *
"Q. You told him in that letter that the lease was out because he had not paid the royalty? A. No, sir. I asked him when he was going to sell the clay.
* * * * * *
"Q. Now, he did not write you a letter in answer to that, did he? A. No, sir, he came up there though."
The evidence shows that Thacker, on the visit referred to, talked to Mr. Farrell. Thacker testified that this visit was not in October while the Flottmann people were drilling, but was before that time. Thacker testified:
" * * * I went out after I received the letter from Mrs. Farrell, and I said if Harbison-Walker wasn't going to send a drill in, I would get another man to come in, and I did.
"Q. And did they take your money then? A. No. sir. Mr. Farrell said it was all right.
"Q. They told you that you had your chance and that it was too late? A. No, sir; absolutely not.
* * * * * *
"Q. They did not take your money? A. No, sir; he said, `That is all right, Carl, if you want a few days' more time, it is all right.' I said, `All right, if Harbison-Walker isn't coming in, I will get Mr. Langenberg to come in.'
"Q. Now, Mr. Thacker, isn't it a fact that when you did talk to them that you told them that you could have paid the royalty, but just didn't get around to it. * * * A. That's right, and Mr. Farrell said that it was all right."
The next important event shown by the record was the execution of the Flottmann lease on September 29, 1949. On September 28, 1949, the Farrells went to the Flottmanns' store to buy grass seed. While there Mrs. Farrell had a conversation with Mr. Leo Flottmann, son of defendant Oscar Flottmann. Mrs. Farrell testified:
"A. Well, we were buying feed, and we was speaking of clay, they had sold a pit around there, and I said that it looked like Mr. Thacker wasn't going to sell our clay, and he said he didn't think Mr. Thacker was in the clay business, that he had sold his drill, and he wasn't any more in the clay business. * * * and then, I says, `Couldn't you handle it?' * * * He said, `Yes,' that the clay was good, for they had gotten a report from the company."
Leo Flottmann gave the following testimony with reference to his conversation with Mrs. Farrell:
"A. * * * Mrs. Farrell said to me, she said, `We don't have enough money to pay for all of this (grass seed), we will have to wait to let you know. By the way, can you boys sell our clay for us? We are getting old, and we don't have much chance making any money.' And she wanted to know if we could get the clay sold for them. And I told them, yes, we could if they had a good pit. I says, `I can't go out today, but there will be someone out to see you.' * * * I said, `Is the place clear?' and I think it was Mr. Farrell said, `Yes, it is.' He said, `We had a lease on it, but they failed to pay the royalty and the lease is out.' * * * Well, I sent Dad out there to lease it * * * it was the next day."
Mr. Farrell testified that at that time he "didn't think it (lease) was good any more." He further testified:
"Q. And you were willing at that time for them to abandon, and you would do something with somebody else and that was your intention? A. Yes, sir.
"Q. In other words, you accepted their failure to do anything and considered they were out, didn't you? A. That's right."
The next day Oscar Flottmann appeared at the Farrell farm, stating that he had come to lease the clay. According to the testimony of Mr. and Mrs. Farrell, Flottmann was shown the Thacker lease and after reading it said that "it was no good." Oscar Flottmann denied saying that the lease was no good. The latter testified that his son Leo informed him that the Farrells had called and wanted someone to come out and look at their clay; that Leo told him to "go out and lease that clay"; that when he arrived at the Farrell farm he met Mr. Farrell and told him the boys had sent him out to lease the clay; that Farrell said, "all right," and asked what they were paying for clay; that he told him what they were paying, and Farrell then wanted to know if that was all they could pay; that he told Farrell that clay had gone down and that they could not pay any more; that Farrell said, "Let's go in and see Mrs. Farrell"; that they went in the house and Mr. Farrell told his wife that he (Flottmann) had come to lease their clay, and Mrs. Farrell said "all right". Flottmann further stated that Farrell on that occasion said he had a lease from Thacker, "but it was out, that he didn't pay the royalty." He further testified:
"He says, `Do you want to read the lease?' and he just handed it over, and he says, `Right there it says that it must be paid the first day of June, 1949.' * * * I never read the lease until today. * * * He handed me the lease and I took it in my hand.
"Q. Did he point out at that time he handed it to you the royalty portion of the lease? A. Yes, sir.
* * * * * *
"Q. Did you say anything to him about whether that lease was good or not? A. No, sir."
The Farrells, thereafter, on the same day, September 29, 1949, accompanied defendant Flottmann to his feed store in Gerald, Missouri, and executed the mining lease in favor of defendant Flottmann.
After the execution of the Flottmann lease defendant employed Harbison-Walker Company to drill for clay on the Farrell land. Thereafter, two men employed by said company did drilling for a period of two weeks during October, 1949. While these men were thus engaged, Thacker came to the Farrell farm and offered to pay Mr. Farrell the royalty due under his lease. Farrell refused the tender. Farrell testified:
"I told him I wouldn't take it until I seen my attorney and seen what was about it * * * I just told him I had given another lease on the clay.
"Q. Well, he came back, didn't he, in a day or two after that time? A. Yes, sir.
"Q. And he offered you the royalty again, I believe, didn't he, the second time? A. Yes, sir, he did.
* * * * * *
"Q. When you told Mr. Thacker that you couldn't take his money, it was after Mr. Flottmann told you that the Thacker lease was no good, and before you had been an attorney? A. Yes, sir."
Mr. Rhoads testified that he was not at the Farrell farm during the time the Flottmanns were drilling. He said he was told that there was drilling going on, but he did not go out to the Farrell farm to see about it. He did not say anything to Mr. Flottmann or any one else about what they were doing on the Farrell land.
Mr. Thacker testified that he was told by Farrell that he had given defendant a lease; that the Farrells told him that there was drilling going on, but that he did not go down to see about it; that he never talked to defendant Flottmann about it, nor did he make any objections to the Flottmanns or the Harbison-Walker Company about the drilling on the Farrell land.
Mr. Farrell testified that a few days after the Harbison-Walker Company came to his farm to drill, Thacker came to the farm with another drilling outfit, but this other outfit would not go on the place because the Harbison-Walker men were there working.
The drilling by the Flottmanns was finished within ninety days, as provided by their contract. Subsequent to the completion of said drilling the Farrells were offered a settlement for the clay by defendant, but Mrs. Farrell refused to sign the deed for it. Mr. Farrell testified that he was satisfied with the way defendant was drilling the pit. Mrs. Farrell testified: "I was satisfied with Mr. Flottmann until I saw that he was trying to beat Carl Thacker, and then I wasn't satisfied." The record also shows that appellant sold his interest in the clay to Harbison-Walker Company.
Some time after the execution of the Flottmann lease the Farrells received a letter from Frank W. Jenny, attorney for plaintiffs. This letter was not put in evidence. However, Mr. Farrell testified that "it said that the Thacker lease was good, and wanted to hear from me." The Farrells and defendant then called on Mr. Jenny "to see him on his letter", and to explain that Thacker "had not done anything". On this occasion, Mr. Jenny refused to talk to the Farrells and defendant about their side of the matter because he was employed by Mr. Thacker. Defendant then took the Farrells to Mr. Tate's office but, because they could not agree on a fee, Mr. Tate was not employed by the Farrells.
This suit was thereafter instituted on December 20, 1949. Either before or after the suit was filed, Mrs. Farrell attempted to persuade defendant to settle the case. Mrs. Farrell testified: "I called up Mr. Flottmann, and I wanted him to see Carl. I says, `At least we ought to pay Carl for the drilling,' and Mr. Flottmann says, `Folks, it will pass away for Carl, he hadn't got the money to fight it, and the company is back of me.' * * * I wanted him two or three times to come down and see Carl and straighten it up so we could sell the clay. And he said he wasn't interested because he said Carl couldn't fight it." Mrs. Farrell further testified that when the case was continued at the January, 1950, term of court, "I wanted us to all get together and get down and make a settlement, and Mr. Flottmann refused. I said that I thought he (Thacker) ought to have something for his drilling. And he said, `He won't have the money to fight it, it will blow over.' * * * It was as quick as Mr. Thacker, or his attorney, notified us that Mr. Thacker considered his lease binding, then I wanted to make a settlement."
On February 2, 1950, plaintiffs paid to the Farrells the sum of $320, the amount of the royalty payment due on their lease from June 1, 1949, to June 1, 1951.
Mrs. Nora A. Churchill testified that in the early part of the fall of 1949 she had a conversation with Mr. Thacker in which conversation Thacker said "he was going to have to give the Farrell pit up. He had a lease on it, and he was going to have to give it up. * * * He said he was under heavy expense, and he was running short of money, and his wife was pregnant, they were expecting a new baby, and he said he couldn't pay the royalty." Thacker denied making the foregoing statement.
The lease gave plaintiffs the privilege of making a determination of the actual usable amount of clay on the premises within the 133 days' period, and of purchasing the clay for cash. Plaintiffs did not exercise this option. It was also provided in the lease that the lessees should keep a record of the entire output of any mine or mines operated under the lease and to allow the lessors to inspect said record at all reasonable times. Plaintiffs did no mining on the Farrell land, hence there was no output to record. However, Thacker testified that he made oral reports to Mr. and Mrs. Farrell as to the clay found on the land.
It appears that when the Flottmann lease was executed both Mr. Farrell and Mrs. Farrell believed that plaintiffs' lease was not then binding as a legal obligation.
The issue on this appeal is purely one of fact. Appellant claims an abandonment by respondents of all rights under the lease. Respondents, on the other hand, maintain that under the evidence there is no basis for an inference of an intent to abandon, and that the judgment of the trial court should be affirmed.
A lease of land for mining purposes vests in the lessee only the right to mine and dispose of the products extracted, and not with title to the mineral in place; hence, under the authorities, it has become well settled that such right may be lost by abandonment. Abandonment of a lease is the relinquishment by the lessee of his rights under the lease, without intention to resume them. It is primarily a question of intent to be inferred from the facts and circumstances in the case. The burden of proof is upon the person asserting an abandonment.
Appellant in his brief relies upon a number of facts and circumstances shown in evidence as establishing an intent to abandon on the part of respondents. Among those facts chiefly relied on are that respondents (1) failed to mine clay after drilling a few holes in March, 1949; and (2) failed to pay the royalty due on June 1, 1949.
It is true that an unexplained cessation of operations under a lease, or failure to begin mining within a reasonable time, evinces an intention on the part of the lessee to abandon or surrender his right and, standing alone, would justify the lessor in treating the contract as surrendered. Chandler v. French, 73 W.Va. 658, 81 S.E. 825, L.R.A. 1915B, 561; Mineral Land Investment Co. v. Bishop Iron Co., 134 Minn. 412, 159 N.W. 966, L.R.A. 1917D, 900; Bluestone Coal Co. v. Bell, 38 W.Va. 297, 18 S.E. 493; Thomason v. Funderburk, Tex.Civ.App., 254 S.W. 400; McColl v. Bear Creek Coal Mining Co., 162 Iowa 491, 143 N.W. 532; Paine v. Griffiths, 3 Cir., 86 F. 452; Worrall v. Wilson, 101 Iowa 475, 70 N.W. 619.
The evidence shows that respondents did prospect for clay in March, 1949, and that they submitted samples to the Harbison-Walker Company for testing. A partial report of the testing was made by Harbison-Walker on April 15, 1949. During the latter part of April, 1949, respondents were negotiating with Mr. Worth of the Harbison-Walker Company for the sale of the clay. In June, 1949, after receiving a letter from Mrs. Farrell, Thacker went to the Farrell farm and was told by Mr. Farrell that it was satisfactory if he took more time to pay the royalty. During this conversation, Thacker told the Farrells "if Harbison-Walker wasn't going to send a drill in, I would get another man to come in, and I did." Clearly, no inference can be drawn from the foregoing evidence that respondents intended to abandon and surrender their lease.
In October, 1949, Thacker, on two occasions, came to the Farrell farm and offered to pay Mr. Farrell the royalty due under his lease. This tender was refused by Mr. Farrell. Also, about that time, Thacker came to the Farrell farm with another drilling outfit, but the latter would not go on the place because the Harbison-Walker men were there drilling for appellant.
Clearly, Thacker's actions in making the foregoing tender, and in attempting further drilling operations, were inconsistent with an intent to abandon. In our opinion, there was, under the circumstances, no unreasonable delay in operations which would warrant a finding of an intent on the part of the respondents to abandon their rights under the lease.
It is also urged as evidence of respondents' intent to abandon, their failure to determine the amount of clay in the pit in question within 133 days after taking the lease, and to inform the lessors whether they wanted to buy said clay in the pit. Respondents' right to purchase the clay in place was a mere option under the lease. Failure to exercise this option cannot be said to be evidence of an intent to abandon all rights under the lease.
Also, as evidence of intent to abandon, appellant points to respondents' failure to keep a record of their mining operations; failure to make monthly reports to the Farrells; and not allowing the Farrells to inspect said records, as provided in the lease. A reading of the provisions of the lease in question will reveal that the above mentioned records related to the output of any mine or mines operated under the lease. Since the operations under the lease had not reached the mining stage, there was no violation of the above mentioned terms of the lease upon which to base an inference of intent to abandon.
It is also urged that respondents' failure to voice their objections to the Farrells, or to appellant, when informed of appellant's lease, indicated that respondents had abandoned their lease. Ordinarily, one would expect a protest under such circumstances, but a failure to do so is only one circumstance to be considered in determining the issue. It appears that shortly after being informed of appellant's lease, the Farrells received a letter from respondents' attorney. In view of this fact, and respondents' previous actions, we do not believe their failure to protest at the time indicated an intent to abandon their lease.
Lastly, it is urged that Thacker, by express declaration, manifested an intention to abandon the lease. On this point, appellant relies upon the alleged conversation which Mrs. Churchill stated she had with Thacker. Thacker denied he had such conversation. After considering the whole record, we are of the opinion that Thacker's testimony is the more credible.
Upon examination of the record, it is our opinion that the trial court reached the right result in this case.
Taken with the case was a motion filed by respondents to dismiss the appeal for failure of appellant to comply with the rules. Said motion is overruled.
The judgment appealed from is affirmed.
BENNICK, P. J., and WEBER, J., concur.