Blough v. Lochrie , 275 Pa. 491 ( 1923 )

Opinion by

Mr. Justice Sadler,

This action was brought to recover royalties claimed to be due by the defendants under the terms of a lease, and for rental of certain land occupied. The record discloses denial of liability, and a right of set-off insisted upon. A special verdict disposed of the collateral matters, and the only question now requiring consideration relates to royalty payment's. There is no substantial dispute about the facts, and the case turns upon the proper interpretation of the written contract executed October 6, 1916, between the plaintiff and Eeese, who thereafter assigned a one-half interest to Lochrie, his codefendant. If plaintiff, Blough, is entitled to a minimum royalty of thirty cents on unmined coal, under the terms of his agreement, then the judgment entered must be sustained. On the other hand, if the charge should be on the basis of twenty cents, no recovery in this action can be had.

The contract gave to Eeese the right to mine two veins of coal, operation of one to begin in six months, and the other in three and one-half years. It is the sixth section, providing for the payment of rents, which gives rise t'o the present contention. For a proper understanding of the controversy, it is necessary to quote the first part thereof: “Sixth. The lessee agrees to pay to the lessor in cash for each and every ton of coal mined from the demised premises a royalty of ten (10) per cent of the selling price of the said coal at the mouth of the mine; provided, however, that the minimum per ton of twenty-two hundred and forty (2240) pounds shall be twenty (20) cents and the maximum per ton of twenty-two hundred and forty (2240) pounds shall be thirty (30) cents. The lessee agrees to pay a minimum royalty on one thousand (1,000) tons per month during the first year and after that a minimum royalty of one thousand (1,000) tons per month, on the said C-Prime or Cement seam, the said minimum royalty to start six (6) months after the date hereof; and the lessee agrees to pay a minimum royalty on one thousand (1,000) tons per month on the said ‘B’ or Miller seam, said minimum royalty to start three and one-half (3%) years after the date hereof. Provided, however, if the lessee shall commence to mine and ship said C-Prime or Cement vein at any time before (6) months from the date hereof, or if the lessee shall commence to mine and ship the ‘B’ or Miller seam at any time before three and one-half (3%) years from the date hereof, that then in such event or events the said minimum rates shall begin to run when the mining and shipping of said coal shall commence. If in any month the lessee shall mine less than the amount of tonnage as above provided during each month, the minimum royalty paid on coal not mined during such month shall be applied oh coal mined in any subsequent month.”

The learned court below, in view of the fact that coal had been selling for $3 per ton, came to the conclusion that the. ten per cent of such value, or thirty cents, should be the measure of liability, whether the coal was mined or unmined. Its view rests on the construction of the clause quoted, holding that the minimum tonnage named merely fixed the lowest amount' of coal to be paid for, but also finding the price was to be calculated on the basis of the sums realized by sales. It so held, notwithstanding the reference to the latter is in terms limited in the opening sentence to “coal mined.” Further, it is expressly stated the “minimum per ton of twenty-two hundred and forty (2240) pounds shall be twenty (20) cents.”

The second portion of the same paragraph is pointed to as indicating the intention of the parties. There it is said as follows: “It is expressly provided, however, that when the lessee shall have paid the royalty in accordance with the provisions of this agreement on all coal mined, and also on all coal which may not have been mined and removed by the lessee, which the lessee is entitled t'o mine and remove under the terms of this agreement, all obligations of the lessee to pay royalty shall thereupon cease and determine.” It is then directed if the royalties shall at any time have been paid in excess of that due for coal mined and the estimated amount of all remaining unmined, then no charge shall be made for any subsequently taken out, unless in excess of the estimate. It is therefore argued that if the contention of the defendant as to minimum royalty is sustained, it could pay for the estimated tonnage in the ground on the basis of twenty cents, and subsequently mine and sell at a price in excess of $2 per ton, thus depriving the lessor of rentals contemplated by the agreement.

The fallacy of this argument is apparent when the former portion of paragraph six is considered. It provides, if the minimum tonnage is not mined in any month the royalty paid shall be “applied” on coal removed in “any” subsequent month. The agreement does not say that the sum paid shall give to the lessee the right to mine later without payment of an additional sum if the ten per cent of sale price shall be in excess of twenty cents but merely that the sum advanced shall be a credit upon the amount becoming due, the excess, if any, being collectible when the sales are made. To limit the present recovery to the minimum royalty named in the contract fully protects the lessor if coal is removed later and sold for a price which would entitle him to a larger sum. At the same time it prevents injustice to the lessee, who, if the court below is correct, will be required to pay a royalty of thirty cents on the unmined coal, and subsequently may be compelled to sell the same when mined at a sum justifying a less royalty.

An effort was made to explain the language used, by the testimony of one of the defendants, who said that for fourteen months thirty cents was paid as the minimum royalty. It is, of course, true that the acts of the parties may throw light on their understanding of the terms employed (Lehigh Val. Coal Co. v. Searle, 248 Pa. 385; McKeever v. Westmoreland Coal Co., 219 Pa. 234), but resort to such, testimony is permissible only when ambiguity appears (Corona C. & C. Co. v. Dickinson, 261 Pa. 589; Greek v. Wylie, 266 Pa. 18), and does not bind one who operates under misapprehension of the facts: Sternbergh v. Brock, 225 Pa. 279. In the present instance, the payment was the result of misunderstanding, and ceased when opportunity presented itself to examine the contract. The evidence offered, taken at its strongest, as stated in effect by the court below, was not so clear as to show an interpretation of the terms of the agreement by the acts of the lessee. It can have no effect in this proceeding.

Viewing the contract in all of its parts, as is necessary to a proper finding of the intention of the parties (Heningkamp v. Valley Smokeless Coal Co., 274 Pa. 186), and giving to the words used their plain and ordinary meaning (Mt. Lookout Coal Co. v. Schooley, 271 Pa. 539), we find no difficulty in determining the minimum royalty allowable was twenty cents. If a real doubt existed, it would be resolved against the lessor (Advance Industrial Supply Co. v. Copper Co., 267 Pa. 15; Miles v. N. Y. S. & W. Coal Co., 250 Pa. 147; Todd v. Wheeler, 194 Pa. 213), but the application of this rule is not required here.

Only one assignment' of error, the sixth, complaining of the refusal to enter judgment non obstante veredicto, need be considered, and it is sustained.

In this case, we are advised by the statement of questions involved, and the oral and written arguments, that the only matter to be passed upon was the amount of minimum royalty chargeable under the lease in dispute, and if the rate was fixed at twenty instead of thirty cents, judgment should be for the defendant, which order was finally entered. The appellee now claims that a proper settlement of all accounts between the parties will show a balance in its favor of $265.53, and asks that a judgment for this amount be here entered. On the other hand, the appellants, insist they are entitled to a certificate for $714.42. These disputes, as to items of debit and credit can be more satisfactorily disposed of by tbe court below.

Tbe judgment is reversed at tbe cost of tbe appellee, and tbe record is remitted to tbe court below to state an account in accordance with tbe views expressed in tbe opinion filed in this case, and to enter judgment in favor of either party in sucb amount as may be found to be due.