Borden Mining Co. v. H. & W. A. Hitchins Coal Co.

Bond, C. J., delivered the opinion of the Court. The appellant, owner and lessor of a coal mine in Allegany County, appeals from a decree compelling it to renew the lease, under a covenant for renewal at the end of the term on the same terms, stipulations and conditions, provided the lessee should have complied with or performed all of the conditions, covenants, agreements and stipulations to be by it complied with or performed. The conditions and covenants had not been performed, particularly in that the payments of rent or royalties by the lessee had in all but one year of the twenty for which the original lease was made fallen short of a minimum amount covenanted to be paid. The lessee, now appellee, produced evidence to show that amounts which had been paid had been received by the lessor without complaint, and, until near the expiration of the term, without any announcement of intention, or threat, to refuse a renewal; that it was not practicable, if possible, to produce from the mine coal sufficient to bring royalties according to1 the covenants; that a strike had interfered during eighteen months; that depression in the business had interfered; and that a new agreement by the parties with a sublessee altered the basis of the payments, so that the covenants of the lease could no longer be insisted upon.

These facts and conditions, it is contended, establish a waiver or abandonment of those covenants, with ²⁵³ the result that the condition of performance of them as a ■prerequisite to the renewal of the lease could no longer be insisted upon by the lessor. The Borden property, covering an area of over 400 acres, adjoins another, owned by the Consolidation Coal Company, which was deeper and equipped with sufficient machinery for keeping clear of water, while the Borden mine became filled with water, and as a consequence there had been no mining’ from it between the years 1898 and 1910, during which period it had been leased to the Hitchins Company. To gain the advantage of drainage through the Consolidation Company property, it was agreed that another lease should be made to the Hitchins Company, and that it might, in turn, make a sublease to the Consolidation Company. The lessor expressly assented to that sublease.

The Borden property was then estimated to contain about 6,000 tons of coal to the acre. The lease and sublease were made on the 1st days of October and Aovember, 1910, respectively. The royalty agreed to be paid by the Hitchins Company to the Borden Company was ten cents for each ton mined and carried away, with the proviso, “that the lessee shall pay a minimum royalty of $6,000 whether the quantity of coal mined for the respective years shall produce that amount of rental or not for the calendar year ending September 30, 1911, and for each calendar year thereafter during the continuance of this lease.” The minimum was to be relaxed in a specified situation; that is. “when the workings of this seam of coal shall have receded to such narrow limits as to make it impossible to mine and ship the minimum tonnage provided, the lessee will be required to pay only the royalty on the amount actually shipped.” And a second proviso for relaxation of the minimum by agreement or arbitration was “that in the event of any unavoidable delay or in the event of a general strike among the employees, not. within the control of the lessee, the lessee shall be released from an equitable proportion of the minimum rental; the said equitable proportion, if it cannot be agreed upon, to be determined by arbitration in the manner hereinafter provided.” The usual ²⁵⁴ remedies given landlords against delinquent tenants, including the right of re-entry, were expressly secured to the lessor. The privilege was given the lessee of renewal for a further-term “upon the same 'terms, stipulations and conditions hereinafter contained, provided the lessee or its assigns shall have complied with or performed all of the conditions, covenants, agreements and stipulations to be by it complied with or performed.” It was only in the year 1916 that the minimum requirement was met; the sum of $7,847.12 having been paid in that year.

In the years 1928 and 1929 no payments were made. And the total of royalties paid during the whole twenty years of the lease was less than half of the total minimum of $120,000. The sublease to the Consolidation Company required payments from it to' the Hitchins Company of eighteen cents a ton of coal mined, thus leaving the Hitchins Company an intermediate profit of eight cents a ton; and the Consolidation Company, during the twenty years, paid only $99,330.21 to the Hitchins Company, the amount exceeding $6,000 in nine years. Erom this total amount paid, the Hitchins Company thus received for its profit $44,146.35.

Payments were made at the unit rates for coal actually mined, but not enough coal was mined to bring the payments at those rates up to the minimum fixed. Of the several explanations given by the plaintiff’s witnesses, that which accounted for the greater part of the shortage below the minimum was unprofitableness of mining more because of the cost of work required to get out the coal, and the overproduction and depressed state of the coal market of the country since 1921. The testimony was that during the term of the lease, the Consolidation Company had mined over 147 acres, and had left about 60 acres of recoverable coal about the old Borden shaft. What coal there was in the remaining area was not known;- it was unexplored, and might prove productive later.

But there was crushed coal there, much rock, and ventilation would be difficult and expensive, with the result that the cost would be prohibitive. At a meeting of representatives of the three companies in ²⁵⁵ New York at the expiration of the lease, a representative of the Consolidation Company declared that his company could mine a great deal of coal from the property, but that it was impossible to pay as much as eighteen cents a ton royalty; he had come intending to ask for a reduction!to twelve cents a ton. In 1922 an arrangement was made for bringing coal from the Consolidation Company’s own mine out through the Borden shaft, and during the remaining nine years of the term of the lease the Consolidation Company brought out from its own mine 1,500,000 tons, while from the Borden mine, on which it had a sublease; it brought out 35,819 tons, although it was estimated that there were 228,456 tons of recoverable coal in thirty-seven acres or more about the Borden shaft. A strike of employees during eighteen months in the years 1922 and 1923 had interfered with mining to some extent.

Exactly how far, is not stated, but the amount mined in those years was much smaller than the amounts in years preceding, although much larger than the amounts in all but one of the succeeding years. A fire in the year 1927 caused a shut-down of twenty-nine days. The agreement made in Eebruary of 1922, by the lessor, lessee and sublessee, is referred to as a cause of stoppage of shipments. It was made, as stated, in order to give the Consolidation Company the right to use the Borden shaft for its own coal, and, according to the evidence, resulted in a reservation from the mining work of about 3% acres of coal, estimated to contain 40,000 tons.

That would, of course, be less than the minimum to be mined and paid for in one year. There was evidence, too, of a verbal agreement or understanding that sufficient coal should be left in pillars for support, but the amount of this is not definitely fixed; it is left in doubt whether the Borden Company had anything to do with that arrangement, which w'as the solving of an engineering problem, and it is conceded that the amount was to have been paid for. Were the shortages of coal mined and royalties paid such as were provided and allowed for in the lease? The lease provides a relaxation of the minimum requirement only in ²⁵⁶ specified situations: (1) When the workings of the seam should have receded to such narrow limits as to make it impossible to mine and ship the minimum tonnage, whereupon royalties should be paid on only the amount mined and shipped; and (2) when there should be unavoidable delay; or (3) a general strike among the employees not within the control of the lessee, whereupon there should be a release of an equitable proportion of the minimum by agreement or by arbitration.

It is in no part of the record stated or suggested that the seam had receded to such narrow limits as not to afford the minimum tonnage, or that there was any unavoidable delay except that of twenty-nine days from the fire in 1921, and that of the eighteen months from the strike in 1922 and 1923. The strike is not described so as to permit a decision whether it was of a specified kind or degree, if it were necessary to make that decision. There was no suggestion during the term of an agreement or arbitration on the release or relaxation of the minimum requirements. And the agreement of 1922 caused at most only a small withdrawal of coal from the minimum.

It seems clear, therefore, that after making any allowance and deduction claimed as the result of these several causes, there would still remain a large shortage from the contract requirements in coal and royalties. It is not, indeed, insisted that there was not. The insistence of the plaintiff is that compliance with the requirements and with the condition precedent to a renewal, of which that compliance would form a part, was waived by the lessor. About a month before the expiration of the term, the Hitchins Company wrote from Cumberland to a resident agent of the Borden Company, Davisson Armstrong, notifying him of its desire to have the lease renewed, and Armstrong replied by letter from Erostburg on the next day, “We accept all the provisions as stated in the lease dated the first day of October, 1910, and consider the said lease renewed.” Armstrong’s authority to commit his principal to a renewal is denied, and the court found that he did» not have the authority.

Armstrong testified that he had in mind another lease, for renewal of which no action was then required of ²⁵⁷ the Borden Company. Correspondence between the parties followed, and a meeting was held in New York, at which, after the amounts of payments made had been considered, the lessor refused to renew. In addition to the contention that there had been a waiver of the condition precedent of compliance with all the covenants of the lease, a contention of mutual mistake in fixing the minimum requirements, and need of reformation, was advanced by the Hitchins Company, but that contention is not made in the suit filed. If the completion of a contract for the renewal is to be sought in any actions or statements of the local agent, then we should have to' consider at greater length the arguments with reference to the authority of the agent to make a binding contract for such a lease, and compliance with the statute of frauds.

There is no showing of express authority in the agent, the original lease was executed by the principal itself, and the agreement here might apparently be for a new lease, in effect departing from the basis specified, because the evidence tends to prove that the minimum requirements to' be attempted under the old lease and included in the new would not be met. But the completion of a contract for the renewal is not to be sought in any action of the agent; the landlord or principal had covered all that ground for itself. The privilege or option of renewal included in the lease was a continuing offer by the¡ lessor, upon specified conditions, to enter into a fresh lease at the expiration of the first term. The offer was made under seal and upon the consideration of the first lease, and therefore, though to some degree unilateral, the lessor was bound to continue it until released by some means.

The acceptance of it by the lessee, at the proper time, and in compliance with any conditions imposed, completes the contract-. The lessor makes its offer in a formal manner, over its own signature and seal, and, if there is an effective acceptance by the lessee, there is nothing more to be done. Spear v. Orendorf, 26 Md. 37, 43 ; Liggett Co. v. Rose, 152 Md. 146 , 136 A. 651 ; Waters v. Wambach, 140 Md. 253 , 117 A. 751 ; Sweeney v. Trust Co., 144 Md. 612 , ²⁵⁸ 125 A. 522 ; Andrews v. Meyerdirck, 87 Md. 511 , 40 A. 173 ; 2 Tiffany, Landlord & Tenant, p. 1537; Finch v. Underwood, 2 Ch. D. 310’; Bastin v. Bidwell, 18 Ch.

D. 238; Job v. Bannister, 2 Kay and J. 324; note, 29 L. R. A. (N. S.). 177. This being the legal situation, there was no effect possible for the statement of the local agent interposed after the lessee’s announcement of. its intention to accept, unless it could be said that the statement was sufficient to override or alter in any way the terms of the lessor's formal offer; and there would seem to be no ground for an inference that the agent had authority sufficient for that. Oxweld Acetylene Co. v. Hughes, 126 Md. 437 , 95 A. 45 .

Eor these reasons this court concurs with the opinion of the trial court on the position in the case of Armstrong’s letter. No waiver of the condition to renewal is to be found, we think, in the absence of complaint by the Borden Company of the shortages in royalties as they occurred, or the absence of any declaration of consequences to be expected to the privilege of renewal of the lease as offered. Silence or indulgence in this respect could not reasonably be construed to signify that the lessor intended to renew without having had compliance with the covenants during the first term. It is quite conceivable that the lessor may have resigned itself to enduring the delinquencies of that term and yet have resolved not to go- into- another lease, or not to decide the question of renewal until it should arise.

It is true that upon a lessor’s accepting a later rent he waives his right of re-entry by reason of delinquency in an earlier rent. As it was put in a leading English case on the subject, this is “because it is a contradiction in terms to treat a man as a tenant and then treat him as a trespasser.” Finch v. Underwood, 2 Ch. Div. 310, 316. But the lessor does not by that action take any position, or make