Reed v. Consolidated Feldspar Co. , 71 S.D. 189 ( 1946 )

The lease involved in this action provides that: "When in the opinion of the Consolidated Feldspar Corporation, all the feldspar which can be economically extracted has been mined, the Consolidated Feldspar Co. shall notify the owner to that effect and cancel this lease."

This clause of the contract grants to the lessee the right to discontinue or terminate the contract as to future transactions when, in its opinion, feldspar can no longer be profitably mined on the claim. The relationship of the parties to this lease is commercial. The opinion or judgment of the lessee that feldspar can no longer be economically extracted from the mine conclusively establishes its right to terminate the lease, provided, the lessee acts in good faith with a reasonable basis for its belief. Burns v. Reis, 196, Mo. App. 694, 191, S.W. 1096; Goltra v. Weeks, 271 U.S. 536, 46 S. Ct. 613, 70 L. Ed. 1074; Thompson-Starrett Co. v. La Belle Iron Works, 2 Cir.,17 F.2d 536; Santa Maria Del Oro M. Co. v. International Min. Corp.,20 F. Supp. 316; Winship v. Colbath, 123 Me. 70, 121 A. 236; Van Demark v. California Home Extension Ass'n, 43 Cal. App. 685,185 P. 866; Appeal of Roadmix Const. Corporation, 143, Neb. 425, 9 N.W.2d 741; 17 C.J.S., Contracts, § 399.

In this case the decision as to termination of the lease is left to the opinion or judgment of the lessee. Here the question is not whether such opinion has been induced by facts which would be sufficient to induce the same opinion in the minds of reasonable persons, but whether the opinion of the lessee has been formed in good faith. Burns v. Reis, supra, Winship v. Colbath, supra. Good faith is shown when the opinion of the lessee is supported by substantial evidence and is honestly formed. There is a conflict in the evidence on the subject of whether the remaining ore can be economically mined. Defendant's evidence consists of the testimony of the Superintendent of Mines, Superintendent of Operations, Head of the Department of Geology, State School of Mines, and miners who worked in the pit. These witnesses testified that there was little feldspar left in the mine when they quit; that feldspar was not there in paying quantities; that nearly all the feldspar had been taken out and that the possibilities of the mine had been exhausted, and that there was no reason to mine further. Other evidence consisted of appellants' Exhibits 4 to 41 showing the total production of feldspar during the period of operation under the lease, the tonnage of waste removed from the pit as a part of the mining operations, the cost of superintendents, labor, repairs, insurance, supplies and explosives, month by month until the mine closed on September 8, 1943. From the oral testimony and the facts disclosed by the exhibits, referred to above, the opinion of the lessee that feldspar could no longer be economically extracted from the mine is supported by substantial evidence.

The majority opinion in this case states that "the evidence does not sustain the finding of the trial court that the remaining ore could be `economically mined'." The opinion gives no consideration to the clause which leaves the decision as to termination of the lease to the opinion of the lessee on condition that his good faith is supported by substantial evidence, but holds in effect that the burden was on the lessee to prove by a preponderance of the evidence that the mine was worked out. On this hypothesis the right to terminate this kind of a contract must be justified in the mind of the court or jury, instead of in the opinion of the lessee, founded on good faith and substantial evidence. The majority opinion says that the question of whether these provisions of the lease should be construed one way or the other "is a matter of minor importance." It is true that the decision of the circuit court on the issue of termination of the lease must be reversed in either case if, as the majority say, there is no evidence to support it, but the majority opinion establishes in this state a rule of property which, in my opinion, is founded on an erroneous principle, and if that is true it is a matter of more than minor importance.

The lease also provides "All mining shall be done carefully and in a workmanlike manner. * * *." Under this clause of the lease it was the duty of the lessee to conduct its mining operations so as not to cause a detriment to the mine, or to impede its future use. Consolidated Coal Co. v. Shaefer, 135 Ill. 210, 25 N.E. 788; Newlee v. Heyting, 167 Or. 288, 117 P.2d 829; Shores Lumber Co. v. Stitt, 102 Wis. 450, 78 N.W. 562. The evidence shows that the cave-in was caused by the mining operations, and that it was precipitated by the lessee. After the cave-in occurred, the lessee stopped mining and gave notice of cancellation of the lease, without removing the muck and stone from the floor of the mine. By thus permitting many tons of useless material to remain in the pit, material which must be removed before mining operations can be resumed, the lessee placed upon subsequent operations of the mine a burden which it, as lessee, was obliged to bear as part of the expense of its own mining operations. This was a violation of the terms of the lease requiring that the mine be operated in a workmanlike manner, and the respondent is entitled to compensation for any damages suffered by her therefrom. Consolidated Coal Co. v. Shaefer, supra.

On the question of whether the plaintiff has been damaged, the circuit court found that the leased property has no value except as a feldspar mine; that large quantities of feldspar may still be economically extracted from the mine; that the removal of the muck is necessary to future mining operations; that the damages suffered by plaintiff as a result of such unworkmanlike mining is the cost of removing the muck. The lessee has questioned the sufficiency of the evidence to support the finding that the remaining feldspar may still be economically extracted from the mine. If it cannot be economically extracted, plaintiff has not been damaged by the failure of defendant to remove the muck. If the remaining ore cannot be economically mined; if "continued mining operations would not have been profitable;" if plaintiff cannot recover damages "because lessee ceased to operate the mine," as this court has now determined, and if the property is valueless except as a feldspar mine, which is undisputed, then the evidence is insufficient to show that the plaintiff has been damaged by failure of defendant to remove the muck, and the judgment of the circuit court should have been reversed on this branch of the case also. Instead, the opinion says that the measure of damages is "the reasonable cost of restoration" not to exceed the value of the leased property, and orders a new trial, without deciding the question of whether the evidence is sufficient to show that plaintiff has been damaged by the failure of defendant to remove the muck. By this method of disposition, litigation ends only when the parties have become exhausted.