North Star Co. v. Howard

341 S.W.2d 251
CourtCourt of Appeals of Kentucky
DecidedNovember 23, 1960
StatusPublished
Cited by8 cases

This text of 341 S.W.2d 251 (North Star Co. v. Howard) is published on Counsel Stack Legal Research, covering Court of Appeals of Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
North Star Co. v. Howard, 341 S.W.2d 251 (Ky. Ct. App. 1960).

Opinion

WADDILL, Commissioner.

The several appeals and cross-appeals question the correctness of: (1) The trial court’s interpretation of certain provisions of a lease executed by J. W. Ploward and his wife to the North Star Company; (2) the adjudication of the claims of the creditors of the North Star Company; and, (3) the order directing the sale of the .real property owned by the North Star Company.

r 'dn September 1, 1951, J. W. Howard and ‘his wife executed a lease on an 8,000 acre tract of land which they owned in Breathitt County to North Star Company (hereinafter referred to as Star). This lease provided for the payment of royalty of 15⅜⅞ a ton of coal mined and a minimum of $7,200 a year and was amended in August of 1953 to 20^ per ton. Star subleased to Buchanan Coal Company (hereinafter called Buchanan), which was engaged in the mining of coal. These companies were entirely owned by I. H. Buchanan, Sr. and his family. Star’s business enterprise consisted solely of acquiring property and leasing it to Buchanan. The operations of both companies were interdependent.

The financial condition of Buchanan had been unstable since 1949. Under its contract with the United Mine Workers Union, Buchanan was required to pay 40⅞⅛ per ton of coal mined to the Union’s Welfare and Retirement Fund. When Buchanan was unable to pay this obligation the Union ordered the miners to stop work, and as a consequence the mines were shut down June 17, 1955. The insolvency of Buchanan resulted in an assignment for the benefit of its creditors.

Subsequent to the execution of the lease by the Howards to Star in 1951, Harris Coal Company (hereinafter called Harris), which acted as the sales agent for Buchanan, advanced money to Buchanan to use in furtherance of its mining operations on the Howards’ property.

When Harris refused in 1953 to advance further money to Buchanan unless its existing debt was secured, Star executed a mortgage to Harris on the coal and mining rights which it owned on 258 acres and on an additional 1083 acres which it owned in fee. These tracts of land adjoined the Howards’ property and are referred to in the proceedings as Items 33 and 34.

On August 22, 1955, the Howards filed an action against Star and numerous other parties who were asserting claims against both Star and Buchanan’s assignee. In their complaint they sought certain amounts allegedly due them under their lease and asserted a lien on all properties of Star and Buchanan. On October 31, 1955, an order was entered consolidating the proceeding which Buchanan had instituted for the benefit of its creditors with this action.

After hearing proof the trial court entered judgment for the Howards on December 21, 1955, for $11,640.60, which represented unpaid royalties on coal removed from the Howards’ land from April 25, 1955 to July 25, 1955. The Howards were adjudged a lien on all properties of Star both .real and personal.

On October 9, 1956, following further hearing, judgment was entered for the Howards in the additional amount of $43,-200. This award was for damages the court found that the Howards sustained by reason of Star’s failure to diligently mine Howards’ coal from July 25, 1955 to March 17, 1956, the date Buchanan’s equipment was sold by order of the court.

On November 2, 1956, the Howards were adjudged a first lien on the real estate identified herein as Items 33 and 34. Harris was adjudged a second lien on Items 33 [254]*254and 34 to secure a judgment it obtained against Star. Peoples Bank of Hazard, which also asserted a claim against Star, was awarded a first lien on fifty mine cars and a second lien on two power shovels belonging to Star. The Howards were awarded a second lien on the mine cars. Three drop bottom Euclids which were being used in connection with the mining operations were adjudged to be property of Katie Buchanan.

Pursuant to order of court a sale of Star’s property was held on November 26, 1956. I. H. Buchanan, Jr. was the high bidder on certain property identified by the judgment as the mining unit which consisted of the leasehold and parts of Items 33 and 34. When I. H. Buchanan, Jr. was unable to provide surety, J. W. Howard’s bid of $46,000 was accepted. That part of Items 33 and 34 which was not included in the mining unit was sold to Harris for $42,000.

The Howards contend that the court erred in failing to assess damages for loss of royalties after the sale of Buchanan’s mining equipment, notwithstanding the fact that they did not object to this sale. The trial court correctly refused to allow the Howards damages for the period between the date of this sale and the final decree. To hold otherwise would permit the Howards to recover damages after they had not objected to a sale that, as the court has found, prevented further mining operations under the lease.

Appellants Star and Harris urge that the Howards are not entitled to recover damages against Star because of Star’s failure to diligently mine the Howards’ coal, but are limited to the minimum royalty specified in the Howards’ lease. The lease contains not only a provision for the payment of minimum royalty but also a covenant requiring Star to diligently mine the Howards’ coal. The parties to the lease obviously did not intend the minimum royalty provision as a limitation on the specific covenant requiring Star to mine diligently. Any other interpretation would render the requirement of diligence meaningless. The damages awarded for the breach of this specific covenant were warranted under the record. Freeport Sulphur Co. v. American Sulphur Royalty Co. of Tex., 117 Tex. 439, 6 S.W.2d 1039, 60 A.L.R. 890.

The Howards maintain that the trial court erred in not finding the amount of coal lost by improper mining. Their claim is based on the following clause of their coal lease:

“ * * * should any coal be lost through negligent, careless or improper mining by the Lessee, or in any manner destroyed, the Lessee shall pay for same as if mined and removed. * * *»

With reference to this clause of their lease, they claim that due to the augering operations of their coal it has become economically unfeasible to mine 800,000 tons of coal in back of the augered area and another 95,000 tons in unnecessarily large pillars. However, Star maintains that the coal back of the augered area is mineable and the coal pillars are not so large as to constitute wasteful mining practices. The trial court found that the evidence as to the quantity of coal lost by alleged improper mining practices was too indefinite to assess damages. The record supports this finding.

Harris contends that the court erred in concluding that a provision of the lease gave the Howards’ a lien on the real estate of Star identified herein as Items 33 and 34. The provision in question reads:

“And the Lessors shall have and are hereby given a first and prior lien upon all the property of the Lessee, both real and personal, of every kind and character whatsoever, whether now owned or hereafter acquired, which is in or upon the premises hereby leased or adjacent thereto at the time any default occurs, including, but without limitation, im[255]

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Bluebook (online)
341 S.W.2d 251, Counsel Stack Legal Research, https://law.counselstack.com/opinion/north-star-co-v-howard-kyctapp-1960.