Macon v. Trowbridge

Mr. Justice Goddard delivered the opinion of the court: The only question presented for our consideration is whether the court erred in excluding evidence in support of the cross-complaint upon the ground that it did not state facts sufficient to constitute a cause of action. It is contended by counsel for appellee that, under the lease, it was optional for appellee whether he would comply with its requirements as to working and developing the property, and that, for his failure to comply with these provisions, the only remedy the lessor was entitled to avail himself of was to forfeit the lease. In other words, that these requirements were merely conditions which, if complied with, gave Ellis the right to possession of the premises, and imposed upon him the duty only to pay the royalty agreed upon in case he mined and shipped ore therefrom. We do not so understand the law applicable to leases of this character, but rather that these require [335] ments impose upon the lessee the obligation to work the mine in the manner specified, so long, at least, as he retains possession under the lease. In Koch’s Appeal, 93 Pa. St. 434, the rule is thus stated: “ Where a right to mine iron ore or other minerals is granted, in consideration of the reservation of a certain proportion of the product to the grantor, the law implies a covenant on the part of the grantee to work the mine in a proper manner and with reasonable diligence, so that the grantor may receive the compensation or income which both parties must have had in contemplation when the agreement was entered into.” In construing a'lease, as in construing any other contract, the first question to determine is what the parties thereto understood and intended, as determined by the words employed, and as an aid to the ascertainment of this intent the situation of the parties, the subject-matter of the contract, and the purpose to be accomplished should be taken into' consideration. Applying this rule to the lease under consideration, it was very clearly within the intendment of the parties that this interest covered by the lease should be worked for the purpose of benefiting both the lessee and the lessor, and with the expectation that the royalties reserved would, at least, satisfy the note as’ provided in the written agreement, and that the expectation or anticipation of receiving such benefit was a strong inducement for the appellee to grant the-lease in question. The failure, therefore, of the lessee to work and develop the property as provided rendered him liable for such damages as the appellants could show they suffered by reason of such failure. The amount of such recovery, if any, would depend upon the amount of ore that could have been mined, if reasonable diligence had been exercised, and its value; in other [336] words, whether there was ore that could have been rained and the leased premises operated at' such profit, after deducting the stipulated royalties, as would he regarded fair and reasonable for ventures of this kind. — C. F. & I. Co. v. Pryor, 25 Colo. 540. The averments of the answer were sufficient to admit of proof of this character. We think, therefore, the court erred in excluding evidence thereunder. The judgment is reversed, and the cause remanded for a new trial. Reversed and remanded. Chiee Justice Gabbert and Mr. Justice Bailey concur.