Millar v. Mauney

McCulloch, C. J. This is an action instituted by "appellee in the chancery court of Pike County to cancel a lease executed by them to appellants of certain land for the purpose of testing the dirt for diamonds and for developing a diamond mine thereon. The ground set forth in the complaint for the cancellation of the contract, is that appellants have ceased operations under the contract and have abandoned it. The action is a renewal of former litigation between the parties with reference to the same subject-matter, viz., the cancellation of the lease., In the last of the former suits between the parties the chancery court denied relief to appellees and on appeal this court affirmed the decree. Mauney v. Millar, 134 Ark. 15. The facts are set forth in detail in ‘the former opinion and reference thereto is made for rehearsal of the facts contained in the present case. In the opinion we said: “The right of action in this case, if there is one, extends back no farther than the last of the adjudications thereof and must be tested solely by proof tending to show a breach of the contract since that time. After consideration of the testimony we have reached the conclusion that there is not a preponderance against the finding of the chancellor. The contract contains no express provision for forfeiture of the lease, and counsel for defendants invoke the established rule that a tenancy can not be terminated for breach of covenant by the lessee where there is no express provision for a forfeiture, and that a court of equity will not lend its aid to declare a forfeiture on account of a breach of the contract.” * * * “There is another principle, however, equally well established that where one party to a contract has completely abandoned performance, a court of equity will give relief by canceling the contract, and that principle is applicable to a contract of this kind where the sole benefit is to result from continued performance, such as one to develop a mine to pay royalty or divide the proceeds. ’ ’ In addition to the facts set forth in the former opinion, the following clauses of the contract should be set forth in order to completely understand the merits of the present controversy: “Seventh. In the event the lessee, his associates and assigns, become fully convinced that diamonds or other valuable minerals do not exist in the said leased land in commercially paying quantities, and that further operations for this reason would not be warranted, then the said lessee and assigns may, at their option, surrender and cancel this lease without further obligation of lessee, his.associates and assigns. And upon such cancellation by the lessee he, his associates and assigns, shall have the right to remove any and all buildings and equipment of whatever nature, placed on or in the properties leased hereunder,- at the expense and cost of said lessee, his associates and assigns, within a reasonable time. It is further stipulated and agreed that the said lessee, his associates and assigns, shall pay all- taxes lawfully accruing against the land hereby leased from time to time during the life and continuation of this lease, except the taxes for the year 1911.” “Eighth. The lessees shall in no event cease work for a longer period than three months continuously, unless a necessity therefor should arise by the act of God, or from contingencies beyond the control of the lessees, or from physical or other conditions which are not the fault of the lessees, and which could not reasonably be guarded against. But this clause of this lease shall not, operate or be construed to release the lessees from washing and treating for diamonds as much as 10,000 loads of dirt every year, and as much more as can reasonably be done.” There was a supplemental contract between the parties with reference to the same matter dated May 6, 1912, which was about a month after the execution of the original contract. The supplemental contract was not pertinent to the issues involved in the former case, but it is important to consider the same in the present case. It reads as follows (omitting caption and conclusion): “As supplemental to the lease contract heretofore executed by M. M. Mauney and wife to Howard A. Millar and associates, it is agreed by and between said parties as follows: When in the course of the mining operations contemplated by the lessee and his associates, it becomes necessary to make a change in the method of operating to the underground system, the lessee, his associates and assigns may take such time as is actually necessary to make such change, without forfeiting their rights as lessees. But such change, when begun, must be completed as soon as it can reasonably be effected. The said M. M. Mauney and Bettie Mauney, his wife, in consideration of the benefits of said lease, hereby let and leased to the said Howard A. Millar, his associates and assigns, the tract of land designated upon the plat of the town of Kimberly, as ‘Miller Diamond Washing Plant,’ which plant is recorded in the office of the recorder of Pike County, Arkansas; said parcel of land being east of Garnet street and south of Gosnell street, in said town of Kimberly; also all of the land east of said tract and south of the public road or Garnet street, lying west of Prairie Creek. “The said lessors also agree with the said Howard A. Millar, his associates and assigns, to lease to them from time to time such land as they may need for flooring purposes in the east half of the northwest quarter of the southeast quarter of section 20, township 8 south, range 25 west, and that part of the northeast quarter of the southeast quarter of section 20, township 18 south, range 25 west, lying west of Prairie Creek, at an annual rental, of $6 per acre. And the said lessees are to notify the lessors at least one year in advance of the amount of land they will need for flooring purposes in order that the lessors may use or lease to others such of said land as is not needed by the lessees, for agricultural or other purposes. But the rights given by this supplemental agreement are not to extend beyond the life of said lease.” Appellants in their answer denied each of the allegations of the complaint with respect to their acts constituting an abandonment of the contract, and alleged that they had been proceeding in good faith in the performance of the contract, notwithstanding the conduct of appellees in attempting to obstruct them in various, ways in the performance of the contract. Appellants alleged that appellees had harassed them with numerous lawsuits and with criminal prosecutions, and in various other ways unnecessary to mention in this opinion. They further allege that they had been hindered by the wartime conditions from prosecuting the work of operating the mine by reason of the fact that labor was scarce, that diamond mining had been declared among the nonessentials by the Government authorities, that many of the employees had been drafted into the army, and that appellants themselves had been drafted into war work. They also alleged that there were no facilities in this country for cutting and polishing small diamonds and that war conditions prevented appellants from having that work done abroad. They allege that, notwithstanding these hindrances, they had washed the mim'rrmm amount of dirt as specified in the contract up to the commencement of this action. It was also alleged in the am swer that it had been determined in December, 1917, that it would be necessary to resort to the underground system of mining as provided for in the supplemental contract, and that war conditions had prevented the preparation for the change, but that appellants had now “located the place for the constructing of the shaft, and that it would be necessary probably to go to a depth of 500 feet to determine whether or not the diamond bearing dirt is offset by the nondiamond-bearing rock, and that unless it does exist to a depth of 500 feet there is not sufficient quantity of diamond-bearing dirt to justify the expenditure of the sums necessary to commercially mine the land,” and that “it has been found advisable to construct this shaft off of the Mauney property, and that before they can go to this expense it is necessary that the court construe the lease as to whether or not they have the right to construct this shaft off the Mauney property.” The answer contained a cross-complaint, the prayer of which was that the court construe the lease “ as to whether they will be required to wash 10,000 loads of dirt before a new plant can be erected, and decide whether they can construct the diamond mine shaft off the Mauney property. ’ ’ On the trial of the cause the chancellor decided that there had been an abandonment of the contract by appellants, and entered a decree canceling the contract. The decision of this court in the former case is conclusive of the fact that there had been no abandonment of the contract up to this time. This suit was begun a short time after the decision in this court, and, as stated in the former opinion, the right of action “extends back no farther than the last of the adjudications ’ ’ between the parties. There is a conflict in the testimony as to whether or not appellants had washed the minimum quantity of dirt specified in the contract, viz., 10,000 loads per annum; but we are of the opinion, that, according to the preponderating weight of the evidence, appellants had complied with the contract to that extent. The testimony on this subject introduced by appellee is fragmentary and indefinite, whilst that introduced by appellants is direct and' positive. Appellants kept an accurate account of the amount of dirt washed from the Mauney mine, and it exceeds the minimum' amount specified in the contract. We think the proof does not show that there was an abandonment of the contract, nor that there was merely a desultory attempt to comply with its terms sufficiently to escape the charge of abandonment. We are of the opinion that the evidence shows that appellants were attempting in good faith to perform the contract the best they could in the untoward circumstances which surrounded the venture. We held in the former opinion that, there being no forfeiture clause in the lease, nothing short of complete abandonment of performance of the contract would justify a court of equity in granting relief by canceling the contract. The question introduced in the present litigation concerning the change in methods of mining from surface, mining to the underground system is one which was not involved in the former litigation. It appears from the testimony that during the progress of mining operations it was discovered that most of the washable ground on, the small five-acre tract constituting the Mauney mine was covered with non-diamond bearing rock, which obstructed access to the dirt and that on this account it was necessary to change to what is termed in the supplemental contract as the underground system, by tunneling under this rock, which was of uncertain thickness, possibly 500 feet. Tlie engineers decided that it was necessary to sink a shaft or slope under the rock, and that on account of proper drainage it was necessary to start the shaft or slope just off this property on the adjoining property rather than on the leased premises. These facts are set up in the answer and cross-complaint of appellants, and are established by the testimony which they introduced. These facts are not controverted by appellees. Appellants present these facts as one of the answers to the charge against them of having abandoned operations, and also ask for the construction of the contract so that they may know whether or not they are within their rights in starting the shaft off of the leased premises. It is proper, therefore, for us to consider this feature of the contract and to construe it in order to ascertain whether or not the appellants are proceeding /by a method not authorized by the contract. The testimony is not elaborated so as to show whether or not the particular spot selected as the location for starting the downward shaft is well chosen, or that it is necessarily the only place for it, nor even is it shown that it is absolutely essential that a shaft be started off of the leased premises, though the testimony is that it was found necessary by the engineers to do so, and that this place was\selected as the proper location. If, as a matter of fact, it is unnecessary tó go off the leased premises to start the shaft, or if the selection of the particular location is such as to operate to the disadvantage of the mining operations, appellees would have the right to interfere, but the question is presented as a matter of defense, and we deem it proper to decide it, whether or not under the contract appellants have the right to start the shaft off of the leased premises if it is found necessary to do so in order to properly reach the washable dirt under the rock on the leased premises. We are of the opinion that' they have that right under the contract, for there is nothing in the letter of the contract which forbids it. The controlling feature of the contract is to test and develop a mine and to operate it for a period of fifty years for.the mutual profit of the lessors and the lessees. The supplemental contract grants to appellants unqualifiedly the right to change to the underground system. If it was intended to restrict the rights of appellants in the selection of the method of operating the underground system, it should have been made to appear by the letter of the contract, or by fair and necessary implication. The contract contains no expression to that effect, nor can it be implied from the language of the contract. The rule is laid down in an encyclopedia that “where a coal lease simply provides that the lessor has leased all the coal underlying his land and does not expressly require the sinking of shafts, the lessee is not bound to open the mine by means of a shaft on the lessor’s land, but may do so by means of a shaft and drift from other land, provided he uses reasonable diligence.” 27 Cyc. 707. The following authorities cited, support the text: King v. Edwards, 32 Ill. App. 558; Van Meter v. Chicago & Van Meter Coal Mining Co., 88 Ia. 92; Lewis v. Fotheringill, L. R. 5 Ch. 103; 17 Eng. R. C. 766; James v. Cochrane, 7 Exch. 170; Wheatley v. Westminster Brymbo Coal & Coke Co., 22 L. T. R. (N. S.), 7. It is important to consider that feature of the contract which provides that when the lessees “become fully convinced that diamonds or other valuable minerals do not exist in the said leased land in commercially paying quantities, and that further operations for this reason would not be warranted, then the said lessee and assigns may, at their option, surrender and cancel this lease without further obligation.” They are required under the contract to operate the mine in good faith, but they are not compelled to do so when in good faith it is determined that the mine can not be successfully operated. This gives them the right to determine the means and method of operating, and, as before stated, there is nothing in the contract which limits their underground method to sinking the shaft on the leased land itself. Our conclusion is, therefore, that they are within their rights when it is shown that it is reasonably necessary to start the shaft off of the leased land, and that the selection of such a location does not constitute a departure from the terms of the contract so as to be treated as an abandonment. The conclusion of the chancellor on the question of abandonment is, we think, against the preponderance of the testimony, and the decree is therefore reversed, and the cause is remanded with directions to dismiss the complaint for want of equity.