Muhlenberg v. Henning

Opinion,

Mr. Justice Clark:

This action of covenant was brought upon a contract, under seal, denominated a lease, and dated 28th July, 1883, by the terms of which the lessors granted to the lessees the exclusive right, for five years, to all the iron ore contained in a certain tract of fifty acres of land therein described; in consideration whereof, the lessees agreed to pay to the lessors, for every ton “ of clean merchantable ore raised, mined and taken away by them or their order from the said premises, the price of thirty-five cents,” etc. The lessees further agreed “ to raise, mine, carry away and sell at least fifteen hundred tons of iron ore, annually, during the continuance of this lease, or, in default thereof, pay a royalty of $525, annually ” ; the lease to be forfeited at the option of the lessors if, at the end of any year, $525, as rent or royalty, had not been paid during the year.

It appears by the several affidavits of defence that the lessees, after the execution of the lease, promptly entered into the possession, and at an expense of $3,000 erected all the machinery and appliances necessary for the proper prosecution of the work; that they were fully equipped to mine, dig and wash all the iron ore upon the tract; that, with the aid of practical miners of large experience, they prosecuted their undertaking with due diligence for nine months or more in a workmanlike and skillful manner, but, after a full exploration and search, they failed to find sufficient ore to enable them to carry on and continue the operation as was contemplated in their contract; and, further, that the ore which they did find, and which the said tract contained, was of such inferior quality that, when properly and carefully mined, washed and prepared for market in the usual manner, it was not “ merchantable iron ore ”; that the lessees communicated these facts to the lessors, and the operation of the mines was thereupon discontinued, but the machinery was suffered to remain with the verbal understanding between the parties that, as long as the mine was not operated for the reasons stated, the royalty would not be required. On the 1st April, 1886, this suit was brought to recover two years royalty with the interest thereon. The question for our consideration is whether or not the affidavits -exhibit a good defence to the whole or any part of the plaintiff’s claim.

The lessees were without doubt bound to prosecute the work without delay. It was their duty to search for and find the ore, and to ascertain its quality; and, if ore in sufficient quantity and of proper quality could be found, they were held to raise fifteen hundred tons of it annually ; failing in either, they were bound for the minimum stipulated royalty of $525 per year: Johnson v. Cowan, 59 Penn. St. 275.

If, however, it was established by actual and exhaustive search that, at the time of the contract, there was in fact no ore in the land, ox no ore of the kind, contracted for, it cannot be pretended, upon any fair or reasonable construction of the contract, that the lessees were nevertheless bound for the “ royalty ” of $525 annually; for the payment -of the royalty was undoubtedly based upon the assumption of the parties that ore, ore of the quality specified, existed there. The subject of sale, it is true, is the exclusive right to mine the iron ore, but for that right the lessors were to be compensated according to the number of tons of “ clean and merchantable iron ore ” mined; the lessees undertaking to mine fifteen hundred tons annually, “ or in default thereof ” to pay $525 royalty. And how could the lessees be in default in mining fifteen hundred tons annually, if there was no ore to mine? We are not to construe the contract to require the lessees to perform an impossible thing. The $525 is not a penaltj1-, it is the price of the ore. The grant was of the ore in place, and, if the subject matter of the contract fail, the price is not payable. If there was no ore to mine, there could be no royalty to pay. As well might the vender of meat which proved to be putrid, or of a cargo of corn which had no existence, enforce collection from his vendee. We think the manifest meaning or intention of the parties, as exhibited by the terms of the contract, was that fifteen hundred tons “ of clean and merchantable iron ore ” were to be mined in each year, if that quality and quantity of ore were there found, and that the contract by necessary implication must be so construed.

There was no guarantee, it is true, on part of the lessors that any ore was to be found in the land, or that the operation would be profitable to the lessees, who certainly entered upon the enterprise at their own risk; the lessees, therefore, could have no recourse upon the lessors for their outlay in the event of failure: Harlan v. Lehigh Coal Co., 35 Penn. St. 287; on the other hand, if the latter were to bring an action against the former upon the covenant to work the mine, equity would interfere to prevent a recovery: Ridgway v. Sneyd, 1 Kay 627. But, the contract having been made upon the assumption of the parties that ore of the quality mentioned existed in the land, when it became manifest that the parties were mutually mistaken, the contract obligation ceases. It may turn out at the trial, of course, that the ore was in fact merchantable, but, as the case is now presented, we must assume the facts to be as stated in the affidavits of defence.

This view of the case accords with and is fully sustained by the ruling of this court in the Kemble Coal and Iron Co. v. Scott, 15 W. N. C. 220. In that case, Scott granted to the company “ the exclusive right to dig and take away the iron ore in a certain tract of land, the company covenanting to pay at the rate of fifty cents per ton of ore mined,” etc.; and, further, that for any period of three years, after the first year, the rent, in the aggregate, should not be less than $10,000 whether ore to that extent was mined or not. At the end of four years, Scott brought suit and recovered a judgment for $10,000, rent accrued in the three preceding years, and, at the expiration of three years more, brought a second suit to recover $10,000, the alleged minimum rent for that term, and it was held competent for the company to prove, by way of defence, that the ore contained in the leased premises was insufficient in quantity to produce the amount of rent or royalty claimed by the plaintiff.

The authorities cited'by the plaintiff in error are inapplicable to the case under consideration. In Jeffries v. Fair, L. R., 4 Ch. Div. 448, the lease was of a vein or seam of coal, with the overlying and underlying beds of clay, under a farm called Llwyndu, at £100 per annum “on a certain or dead rent,” and royalties of 9d. per ton for the coal, and 4d. for the clay, the coal being necessary for working the clay with advantage. It was held that it was in consideration of the dead rent reserved the lessees obtained license to enter and search for the vein, and that the lessors were therefore entitled to an order for the payment of the dead rent.

In Jowett v. Spencer, 1 Exch. (W., H. & G.) 647, the covenant was to pay £40 for every statute acre of coal which should be found within certain premises, and, until the said price or consideration should be fully paid, to pay £40 per annum whether the whole of an acre of the said coal should in any such year be gotten or not. The sole question, under the pleadings, was whether the finding of the coal was a condition precedent to the plaintiff recovering the annual sum of £40; and it was decided that it was not, as the defendant was the proper party to find and "ascertain the quantity of the coal. In Jervis v. Thompson, 1 Exch. (H. & N.) 195, the lessees entered into the covenant knowing the exact state of the mine, and, with that in view, covenanted positively and absolutely to get the quantity of 2000 tons of salt in every year, or pay for the deficiency at the end of it, and therefore, whether they could be got easily or with difficulty, or even whether they existed at all, was held to be immaterial in the case of an absolute and unqualified covenant.

In the Marquis of Bute v. Thompson, 13 M. & W. 486, the plain intentions of the parties, as manifested on the face of the contract, was that the rent stipulated should be paid whether there was coal or not; there was an express provision in the alternative to pay the rent. See Clifford v. Watts, 18 W. R. 925.

We are clear in our convictions that the affidavits of defence in this case are such as should send the case to a jury.

Writ of error dismissed at the cost of the plaintiffs without prejudice, etc.