Nease v. Coal & Coke Ry. Co.

195 F. 987, 1912 U.S. Dist. LEXIS 1702

• Court: District Court, N.D. West Virginia
• Decided: April 23, 1912
• Status: Published

Opinion

DAYTON, District Judge

(after stating the facts as above). This controversy must depend primarily upon the construction to be given the contract of May 5, 1900. Two preliminary questions raised seem to me to be clearly determined.

First. That whatever rights thereunder vested in Nease, Kelsey, and Hadley are now owned by Nease. The interests of Hadley and Kélsey were originally only contingent ones derived from Nease. Hadley conceded this, and, by his own sworn answer filed in the injunction cause instituted by Kelsey, admitted he had not complied with the contingent requirements, and therefore disclaimed any interest. As to Kelsey’s interest, a compromise agreement, a trustee’s sale, and deed made thereunder fully vested it in Nease.

[1] Second. The defense of want of notice of the rights of Nease under this contract of May 5, 1900, sought to be asserted by the subsequent purchasers, Kerens, Elkins, Davis, the Washington Coal & Coke Company, and the Coal & Coke Railway Company, cannot be maintained. This for the very plain reason that this contract had been properly acknowledged by the parties and duly admitted to record in the three counties of Eewis, Gilmer, and Braxton where said coal lands were situate, on November 21, 22, and 23, 1900, respectively. The deed of Gillmor, trustee, to the Braxton Coal Company, was not executed until five days after, November 28th, and was not admitted to record until December 29, 1900. The deed of the Braxton Coal Company to Kerens, trustee, was not executed until a year after. Thus, under our state statute, these subsequent purchasers were bound to take notice of this contract. They had to take notice, not only of one, but of all, of its clauses and provisions.

[2, 3] In construing this contract of May 5, 1900, f'or the purpose of determining what rights were secured to Nease therein, we may well remember that it must receive that construction which will best effectuate the intention of the parties. This intention must be ascertained, not from detached parts, but from the whole agreement. “Greater regard is to be had to the clear intent of the parties than to any particular words which they may have used in the expression of their intent.” If the meaning is not clear, we must consider the circumstances under which the contract was made, the subject-matter, and the relation of the parties to aid us in ascertaining its true intent and purpose. Parol evidence is admissible to show these. Clark on Contracts, 590.

[4] It is very clear that Jackson and his associates, owning the majority stock of the Little Kanawha Railroad Company, a corporation greatly involved and unable to extend its line so as to be profitable in operation, primarily desired to secure for it sufficient funds to liquidate its outstanding obligations, extend its line, and put it on a paying basis. The first contract between them and Nease, that of November 25, 1899, was executed with this purpose in view. Both sides, uxrder it, had the right to negotiate the $600,000 mortgage loan necessary to finance the railroad. Both failed, and disagreement and litigation followed. In the meantime they had secured options on the 25,000-acre coal field. Nease had put his money in this to the extent of at least $5,000 under the contract. He had nothing in the railroad except a speculative profit, contingent upon his ability to secure some one else to finance it. This was the condition of things at the time the compromise agreement of May 5, 1900, was executed. A careful analysis of this contract demonstrates its purposes to be (a) to settle all disputes and disagreement and dismiss all pending litigation inter partes; (b) to define the interests of the parties in and to the coal interests and options; (c) to provide for the taking up of such options and securing the coal in fee; (d) to take away from Nease all right to negotiate the financing of the railroad and vest such right in Jackson and his associates alone. To carry out these purposes, the contract provided: (1) That the coal rights should" be held by Gillmor in trust only for the parties in accord with the terms of the contract. (2) Jackson and his associates should organize a coal corporation to which Gillmor, at their reqxiest, should convey the options and coal rights obtained. (3) Pending the oi-ganization and financing of the corporation, each party was to contribute equally the necessary funds to pay for the coal rights as payments therefor matured, and for the expenses incident to the taking up thereof. (4) That Gillmor, as trustee, should not convey to the corporation until it, by agreement duly executed and acknowledged, should bind itself (a) to make payment of all unpaid purchase money due under the terms of the option; (b) agreeing not to lease the coal or any part thereof to any concern or persons, retaining to the corporation, or any of its officers, any financial interest; (c) to pay monthly to Nease and associates a one-fifth average prevailing royalty on all coal mined; (d) allowing. Nease’s representative free access to the coal lands and rights and to the corporation’s books of account and records of shipment; (e) agreeing that the corporation should not mine other coal as long as the 25,000 acres could be mined as profitably. (5) The contract further provides that Gillmor, before conveying such coal rights to the corporation, should further require it to refund to him all moneys paid by the parties in the securing of such rights which he was to pay over to the parties in the amounts contributed by them. (6) That Jackson and associates should make immediate and diligent efforts to (a) finance the coal corporation; arid (b) to finance and cause the construction'of a railroad to the coal lands. (7) In case they failed •in these two undertakings and in having the money advanced to secure the coal rights refunded to the parties on or before December 1, 1900, then the rights of parties were to be “finally fixed, determined, and defined” to be that Nease and associates were to have “in lieu of any royalties or other interest an undivided .49 of all such coal rights and coal property” and Jackson and associates the remaining .51 thereof. Two plans, in the alternative, seem clearly to have been provided for, the primary one the extension of a railroad into and the mining of the coal. Within what time? The securing of the financial backing, necessary for these purposes, by Jackson and associates, was expressly limited to December 1, 1900, less than seven months from the contract’s date. No limit, by express terms, was fixed wherein the railroad should be built and the mining operations commence. Was such limit implied? In my judgment, yes, a reasonable limit. The contract provided that “immediate and diligent” efforts should be put forth to secure the necessary means to build the road and commence mining operations; that royalty should be paid monthly; that access to the field, to the books of account, ánd the records of shipment should be granted; that no part of the coal field should be leased; and that no other coal should be mined by the company to be formed in preference. All these provisions negative the idea that either side contemplated at the time that Nease was to surrender his vested half interest in these coal rights for the promise of a fractional royalty, ■not to accrue, possibly, within his lifetime. The clear intent was that the means to build the railroad, pay for the coal, and to conduct mining operations should be secured within seven months, and therewith the road should be built and mining operations commenced within a reasonable time thereafter. But what if the means to build the railroad and to open and operate the mines were not secured? Under such circumstances, it is clear that this contract undertook to settle, fix, and finally define the rights of parties by vesting an undivided .49 interest in the options, coal rights, and coal in Nease subject to his liability to contribute one-half of the outstanding and unpaid purchase money, required by the options and contracts to be paid by Gillmor, trustee, to the owners of the coal rights and coal lands. Having reached this conclusion, after long and earnest study of the contract and the circumstances surrounding and giving rise to its execution, it seems to me, with full notice in law by reason of its recordation, no subsequent purchasers could purchase, as against the fixed and vested rights of Nease, any other right or interest, or upon any other terms and conditions, than those provided to be vested in the coal company to be formed to operate, and imposed upon that company and upon Jackson and his associates; in other words, upon the Braxton Coal Company to operate and mine the coal within a reasonable time, and upon Jackson et al. to secure, within a like reasonable time, the extension of the railroad to the coal for its transportation, if it was desired to hold Nease to the royalty provision set forth in the contract. Failure, within such reasonable time, to comply with these requirements, necessarily involved the concession on their part of Nease’s right to a .49 undivided interest in the coal properties, subject to their right to be reimbursed one-half of the actual cost of such properties paid and payable to the landowners under the original options and optional contracts, and necessary expenses, with such interest as may have accrued since the dates of payment.

[5] This conclusion it seems to me to be inevitable upon the well-settled principles: That purchasers, with full notice of another’s rights, cannot secure any greater right or interest as against such other’s right than that vested in their vendor, and, when their vendor’s right is incumbered with certain and fixed obligations to be performed in futuro, they take cum onere.

[6, 7] Further, where vested interests in real estate are secured by executory contracts, acknowledged and recorded, under all ordinary conditions, the defense of laches in asserting and maturing such interests into perfect legal title is not applicable. Such interests may be divested and lost by reason of open, notorious, adverse, and exclusive possession under hostile title, color, or claim of title for the period required by statute; but, where one holds in privity of title with another, he will not be permitted to plead the neglect or laches of that other in asserting and taking possession of his interest. In such case he will be held to be a trustee for the other.

[8] It is undeniable that coal in place in the ground is in this state realty, and not personalty. Nease, by this contract, had a vested interest in this coal in place in the ground.

[9] It was a clear right that these purchasers had to require his joinder in the conveyance of the Braxton Coal Company to them either releasing wholly his rights in the premises, or restricting them solely to the royalty interest, upon pain of their refusal to purchase. This they did not do, and they must be held, by thus ignoring him in the purchase, to have elected to assume the obligation of the Braxton Coal Company to carry out the requirements of the May S, 1900, contract, to mine and transport coal within a reasonable time, pay a royalty thereon, or concede the .49 undivided interest in the coál as real estate. A careful consideration of such cases as Hammond v. Hopkins, 143 U. S. 224, 12 Sup. Ct. 418, 36 L. Ed. 134, Felix v. Patrick, 145 U. S. 317, 12 Sup. Ct. 862, 36 L. Ed. 719, Patterson v. Hewitt, 195 U. S. 309, 25 Sup. Ct. 35, 49 L. Ed. 214, Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 23 L. Ed. 328, Hayward v. National Bank, 96 U. S. 611, 24 L. Ed. 855, and Holgate v. Eaton, 116 U. S. 33, 6 Sup. Ct. 224, 29 L. Ed. 538, cited by counsel in support of this defense of laches, seem to me to clearly demonstrate that they are here wholly inapplicable for these reasons: (1) There was no fraud or concealment by Nease of his rights and interests in these properties. They were set forth fully in a written contract, duly acknowledged and recorded, before any conveyance made to any one by the other joint owners, whereby, under the law, the world had complete notice. (2) The Braxton Coal Company took these properties upon the express conditions that it would perform toward him the conditions and in accord with the true purpose and intent of this express contract. It was organized for this express purpose and executed its express contract to do so. It thereby, so far as Nease was concerned, became a trustee for the purpose of executing its purposes, intent, and conditions. (3) The subsequent purchasers had not only legal notice by reason of the recordation of the contract, but direct personal notice as shown by the verbatim quotation in their deeds from the contract of the royalty clause, whereby they took the place only of the Braxton Coal Company subject to all of its obligations to Nease. The rights of Jackson and associates had passed absolutely to this company which they had formed. Nease’s certainly had not. The contract expressly set this forth. The character of his interests • was dependent upon whether the properties were made mining ones or one of purchase of real estate to either hold as investment or for speculative profit by sale. (4) The property never was made a mining one, but apparently one of investment in real estate by these purchasers from the Braxton Coal Company, and therefore their interests became simply those of any ordinary purchaser of real estate with an interest in another outstanding with whom such purchaser became a cotenant thereof. It is well settled in such case that such purchaser can secure the outstanding interest in only two ways—by purchase (by deed, descent, will, or legal proceedings), or by ouster and adverse possession under the statute of limitations.

[10, 11] Finally, I cannot see wherein Nease has estopped himself from asserting his right. It is insisted he has: (1) “By record. In abandoning former suits.” This contention is fully answered by the facts developed in the case. He says he dismissed his suit, the one brought by him against the Braxton Coal Company, Cartwright, et al., wherein he was asserting his right, under assurances that the Braxton Coal Company had been organized in good faith, and would be able to carry out the intent and purposes of the May 5, 1900, contract. The evidence bears out this statement; but, if it did not, his interest could not be destroyed by either the institution or dismissal of a suit on his own motion where no defense was made and no right adjudicated. (2) “By writing. In giving a receipt for money derived from these purchasers under date of January 21st, 1901, and.agreeing to dismiss the suit that had been brought to assert the . right.” The plain answer to this contention is that the Braxton Coal Company was under contract to refund through Gillmor, trustee, this money, $11,200, advanced by him, as a condition precedent to its right to take over the properties under the terms of the May 5, 1900, contract, and this payment was made, and this receipt given, with the understanding, that it was in accord with this condition precedent of the May 5, 1900, contract. The receipt so shows on its face. None of the subsequent purchasers had anything to do with this payment. The Braxton Coal Company can hardly allege that the rights of Nease are destroyed because it in one particular only undertook to perform its obligations, wholly failing, however, in the performance of all others. This contention is much the same as would be that of a man who, having contracted to buy another’s farm, insists, because his vendor has received from him a part of the purchase money, he is estopped from enforcing the balance. Nease must account for this payment it is true. In other words, if he is to have a .49 interest decree to him, he must now pay a full half of the cost of the properties as sold to Gillmor, trustee, by the landowners, under the options. Had he not received from the Braxton Coal Company, through Gillmor, trustee, this $11,200, he would have been entitled to credit therefor on this sum that he must now pay. It seems to me the other grounds of alleged estoppel relied on are, in effect, but different statements of those above given, and need no further consideration. I am therefore driven to the conclusion that this defense cannot avail.

[12] The only remaining question is whether such compliance with the May 5, 1900, contract has been made by Jackson and associates, the Braxton Coal Company, or by its subsequent vendees, as will justify the further withholding from Nease the right to demand a .49 interest, instead of the royalty interest conceded to him by defendants. As I have construed the contract, it was its clear requirement that transportation facilities should be secured and mining operations conducted within a. reasonable time after the date of the contract. Nearly nine years hail elapsed from the date of the contract until this suit was brought. No railroad facilities have been secured and no mining operations commenced. On the contrary, Nease’s statement is substantially undenied that he was informed by those in authority and control of the present claimant of the properties, the Coal & Coke Railway, that no purpose to build a railroad to the property and no expectation to mine the coal in the next 50 years was entertained. Under these circumstances I think the “reasonable time” to convert this into a mining proposition has gone by, that it must be held simply an investment one in real estate, and that this court of equity must decree to Nease the .49 interest therein which he demands, and partition thereof as prayed for in the bill. But in doing so it must be charged with the payment of one-half of the total cost of the properties incurred under the original options from the landowners and by reason of expenses in securing said options and perfecting thereunder the titles. To ascertain what this sum shall be, a reference to a master will be necessary.