Graham v. Drydock Coal Co.

SUPREME COURT CASES

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State: Ohio

Court: Supreme Court

Docket No: 1995-0313

Case Date: 08/14/1996

Plaintiff: Graham

Defendant: Drydock Coal Co.

Preview:GRAHAM, APPELLANT, V. DRYDOCK COAL COMPANY,

APPELLEE; HOLMES

ET. AL., APPELLANTS.

[Cite as Graham v. Drydock Coal Co. (1996), ___ Ohio St.3d. ___.]

Mining -- Deed severing mineral estate from surface estate, and reserving right to use surface incident to mining coal, does not reserve right to strip-mine to mineral owner, when. A deed which severs a mineral estate from a surface estate, and

which grants or reserves the right to use the surface

incident to mining coal, in language peculiarly

applicable to deep-mining techniques, whether drafted

before or after the advent of strip mining, does not

grant or reserve to the mineral owner the right to

remove coal by strip-mining methods. (Skivolocki v. E.

Ohio Gas Co. (1974), 38 Ohio St.2d 244, 67 O.O.2d

321, 313 N.E.2d 374, expanded and clarified.)

(No. 95-313 -- Submitted March 6, 1996 -- Decided August 14,

1996.)

APPEAL from the Court of Appeals for Athens County, No. 93CA1599.

The tract at issue in this case consists of approximately 300 acres

of farmland in Athens County. The fee simple owner of the entire tract

in 1955 was Cambria Mining Company ("Cambria"), which deeded the

surface rights to approximately 234 acres of the land to Helen Holmes

for farming purposes, but retained the rights to all of the minerals in the

land for itself. In 1962, Cambria deeded the surface of the rest of the

tract to Holmes with a similar reservation clause. The Holmes family

rented the land as a farm prior to its purchase of the surface rights and

has continued farming it to the present.

The reservation clauses in the deeds, which were both drafted by

Cambria, are substantially the same. They each clearly provide for the

ownership of all the coal and all the other minerals in Cambria and for

Cambria's right to remove those minerals.

They further provide for

Cambria's use of some portion of the surface in the process of the

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removal of its minerals. Ownership of the surface, however, is granted

entirely to Helen Holmes.

Such deeds have long been common in the mineral-rich areas of

the state. See, e.g., Gill v. Fletcher (1906), 74 Ohio St. 295, 78 N.E.

433, construing an 1838 deed with a similar severance of interests.

These deeds serve a particularly valuable purpose in maximizing the

utility and productivity of the land by allowing simultaneous use by those

who extract minerals and those who till the surface. The clauses in the

deeds, however, have produced a dispute between the successors in

interest of Cambria and Helen Holmes.

The deeds at issue expressly recognize the agricultural intentions

of the Holmes family but do not mention strip mining.

Cambria's

successor,

Drydock

Coal

Company

("Drydock"),

possessed

of

technology that did not exist at the time the subject deeds were drawn,

desires to extract coal, which is not removable by deep mining, using

modern strip-mining methods. Helen Holmes' successors in interest,

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however,

Everett Holmes, Jr. and Joan Holmes ("the Holmeses,

executed a contract with appellant James F. Graham in 1990, entitled

"Surface Lease for Coal," which conveys to Graham the right to strip-

mine coal from the property.

The coal does not belong to the

Holmeses, and therefore has not been transferred to Graham.

In July 1992, Graham filed a complaint in the Athens County Court

of Common Pleas seeking a declaratory judgment stating that, although

Drydock owned the coal, it did not have the right to strip-mine the

surface.

Drydock filed a counterclaim and a third-party complaint

against the Holmeses alleging that the surface lease between the

Holmeses and Graham was void on the grounds that Drydock owned all

the minerals and the right to extract them. The trial court granted partial

summary judgment to Drydock, but specifically stated that the issue of

whether Drydock owned the right to strip-mine the land was not properly

before the court at that time.

On appeal, the Court of Appeals for

Athens County reversed the judgment and instructed the trial court to

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determine whether Drydock owned the right to strip-mine or whether

the Holmeses had retained an interest that could be transferred to

Graham and could effectively prevent Drydock from strip mining.

The trial court found that Drydock's mineral rights did not include

the right to strip-mine the property. Drydock appealed, and the court of

appeals reversed the trial court again, this time holding that, as a matter

of law, Drydock did have the right to strip-mine the property. It is from

that decision that the current appeal is taken.

The cause is now before this court upon the allowance of a

discretionary joint appeal by Graham and the Holmeses.

-------------------------

Vorys, Sater, Seymour & Pease, John C. Elam and Michael G. Long,

for appellant Graham.

John P. Lavelle and Jack V. Oakley, for appellee.

Donald Wirtshafter, for appellants Everett and Joan Holmes.

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Neal S. Tostenson, urging reversal for amicus curiae, Ohio Mining

and Reclamation Association.

Larry R. Gearhardt, urging reversal for amicus curiae, Ohio Farm

Bureau Federation.

-------------------------

MOYER, C.J.

The issue before the court is whether a deed which

severs a mineral estate from a surface estate, which is drafted after the

advent of strip mining in the region, and which grants the right to use the

surface incident to mining coal, in language peculiarly applicable to deep-

mining techniques, reserves the right to remove coal by strip-mining

methods.

The parties agree that each possesses precisely the same

property rights as their predecessors in interest, the signatories to the

original deeds. Their respective rights, therefore, are determined by our

construction of the 1955 and 1962 deeds between Cambria and Helen

Holmes. The issue raised in the construction of the deeds is whether

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the drafting of the subject deeds after the advent of strip mining in Ohio

dictates a result different from that prescribed by our most recent case

on the subject, Skivolocki v. E. Ohio Gas Co. (1974), 38 Ohio St.2d 244,

67 O.O.2d 321, 313 N.E.2d 374. For the reasons that follow, we hold

that it does not, and we therefore reverse the judgment of the court of

appeals.

"The construction of written contracts and instruments of

conveyance is a matter of law." Alexander v. Buckeye Pipe Line Co.

(1978), 53 Ohio St.2d 241, 7 O.O.3d 403, 374 N.E.2d 146, paragraph

one of the syllabus. "Unlike determinations of fact which are given great

deference, questions of law are reviewed by a court de novo."

Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm (1995), 73 Ohio St.3d

107, 108, 652 N.E.2d 684, 686; Ohio Bell Tel. Co. v. Pub. Util. Com.

(1992), 64 Ohio St.3d 145, 147, 593 N.E.2d 286, 287.

The purpose of contract construction is to discover and effectuate

the intent of the parties. Skivolocki, at paragraph one of the syllabus.

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The intent of the parties is presumed to reside in the language they chose

to use in their agreement. Kelly v. Med. Life Ins. Co. (1987), 31 Ohio

St.3d 130, 31 OBR 289, 509 N.E.2d 411, paragraph one of the syllabus.

Extrinsic evidence is admissible to ascertain the intent of the parties when

the contract is unclear or ambiguous, or when circumstances surrounding

the agreement give the plain language special meaning. Shifrin v. Forest

City Ent., Inc. (1992), 64 Ohio St.3d 635, 638, 597 N.E.2d 499, 501.

Finally, a contract is to be construed against the party who drew it. Cent.

Realty Co. v. Clutter (1980), 62 Ohio St.2d 411, 16 O.O.3d 441, 406

N.E.2d 515.

The reservation clauses in the two deeds drafted by Cambria are

substantially the same. It is the language of these clauses that we must

examine to determine the intent of the parties. The reservation clause of

the 1955 deed provides:

"There is reserved and excepted from this conveyance all of the

minerals of whatsoever nature and description, including oil, gas and

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salt water together with the right and privilege of entering in, on, or

under said premises for the purpose of exploring for, testing, mining and

removing the same, and of making, constructing, driving, opening and

maintaining any entries, passages, airways, shafts or slopes thereon

and thereunder, or for drilling for and producing oil, gas, or salt water or

their constituents thereof, with the right to enter in and upon said

premises, place and use proper equipment for drilling outlets for mine

water, and the rights to occupy that portion of said surface necessary for

said shafts, slopes, tanks and/or pipe lines and the right to convey

and/or transport any or all of said minerals contained in and under said

lands, on, in and under adjacent lands in, on or under said demised

premises, except that any damage caused to fences and/or growing

crops caused by such entry and transportation of said minerals shall be

paid for by said Grantor, its successors, assigns and/or lessees.

"Grantee, for herself, her heirs, successors and assigns,

covenants and agrees that in the event it becomes advisable and/or

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necessary for Grantor, its successors or assigns, to use and occupy any

of the surface of said demised premises, not to exceed 5 acres in extent,1 for the purpose of the installation of a mine plant or facilities in

connection therewith, then and in that event said Grantee, her heirs,

successors and assigns, will sell and convey to Grantor, its successors

or assigns, said surface acreage for the price of fifty dollars ($50.00) per

acre, plus the additional cost of any improvements or additions made

and placed on said surface by Grantee, her heirs, successors or

assigns.

"Grantor, its successors and/or assigns, shall be held harmless

and without liability for any injury or damage that may occur to the

surface of said demised premises or to any buildings, wells, springs or

improvements now or hereafter placed or erected thereon by reason of

the mining, removing and/or transporting of any or all minerals in, on or

under said demised premises, or damage resulting from drainage of

mine water." (Footnote added.)

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The syllabus of Skivolocki reads:

"1.

Contracts are to be interpreted so as to carry out the intent

of the parties, as that intent is evidenced by the contractual language.

"2.

The right to strip mine for coal is not implicit in the ownership

of a severed, mineral estate.

"3.

A deed which severs a mineral estate from a surface estate,

and which conveys the right to use the surface incident to mining coal,

in language peculiarly applicable to deep mining techniques, does not

grant the right to remove coal by strip mining methods."

The issue in Skivolocki was the same as that before the court

today, though the technological context in the mining industry at the

time of drafting of the deeds was different. The court of appeals below

found the difference to be critical. We, however, do not.

In Skivolocki, the successor in interest to the mineral estate

sought the right to strip-mine the land in question over the objection of

the surface owner. The deed severing the estates vested the mineral

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owner with rights to all the coal on the land. The mineral owner argued

that the right to remove the coal included the right to remove it by strip

mining. We held that the right to strip-mine for coal is not implicit in the

ownership of a severed mineral estate, and that a deed severing the

estates, conveying the right to use the surface incident to coal mining,

using language peculiarly applicable to deep mining, does not grant the

right to strip-mine.

Skivolocki, at paragraphs two and three of the

syllabus.

In reaching our decision here, we rely on a long line of Ohio coal

cases originating with Burgner v. Humphrey (1884), 41 Ohio St. 340.

Though Burgner predated the advent of strip mining, it stated a principle

which we have held applicable to the strip-mining issues of today.

When the mineral and surface interests in a tract of land are severed so

that use can be made of the same land by different parties, and the land

is thereby rendered doubly productive, the surface owner has an

unequivocal right to the integrity of the surface. Burgner, supra, at 352.

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The actions of the mineral owner are limited by the obligation not to

destroy or damage the surface estate unless a release from that

obligation is expressly included in the deed or contract. Id. at 353.

In Skivolocki we stated, "Because strip mining is totally

incompatible with the enjoyment of a surface estate, a heavy burden

rests upon the party seeking to demonstrate that such a right exists."

Skivolocki, 38 Ohio St.2d at 251, 67 O.O.2d at 325, 313 N.E.2d at 378.

One line of dictum following this quotation, however, appears to have

generated confusion. We added, "This is especially true when the deed

relied upon was executed prior to the time strip mining techniques

became widely employed." (Emphasis added.) Id. at 251, 67 O.O.2d at

325, 313 N.E.2d at 378-379.

The court of appeals relied, at least in part, on this dictum for its

conclusion that the parties intended to reserve to Cambria (and its

successors) the right to enter and strip the surface estate purchased by

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Helen Holmes as an incident of its ownership of the mineral rights. We

find the appellate court's reliance to have been misplaced.

Though it may be especially true that mineral reservation clauses

written exclusively in terms of deep mining and drafted before the

development of strip-mining, cannot be presumed to include the right to

strip-mine, it does not follow that the right to strip-mine must be

presumed if the reservation clause was drafted after development of the

technology.

Such reasoning could only be based on the untenable

presumption that, despite the absence of explicit language, if strip

mining was generally known at the time of drafting, it is probable that

the parties intended the mining rights to include the right to strip-mine.

To state the proposition, however, is to discredit it. We find it unlikely

that any purchaser of a surface estate would buy the surface of a tract

subject to the right of the mineral owner to destroy the surface at its

pleasure. For us to impose such a presumption would truly be turning

the proclivities of human nature on their head.

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"`Where the language of a contract *** is susceptible of two

constructions, one of which makes it fair, customary, and such as

prudent men would naturally execute, while the other makes it

inequitable, unusual, or such as reasonable men would not be likely to

enter into, the interpretation which makes a rational and probable

agreement must be preferred.'" Stewart v. Chernicky (1970), 439 Pa.

43, 49-50, 266 A.2d 259, 263 (finding no right to strip-mine).

For the same reason, we find Drydock's contention that "all means

all" (i.e., ownership of all the coal along with the right to remove it gives

the mineral owner the right to extract the coal by any convenient means,

no matter how destructive to the surface estate) equally unpersuasive.

The deeds in this case express the clear expectation by both

parties that the surface of the land will be used for farming, as it had

been prior to the severance of the interests and as it has continued to

be for forty years.

Specific provision is made within the reservation

clauses for damages payable to the surface owners for destruction of

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crops and fences by the mineral owners. Such provisions would hardly

be necessary if the deeds reserved to the mineral owner the right to

remove the entire surface of the land by strip mining. And, as we noted

in Skivolocki, strip mining is entirely incompatible with the enjoyment of

a surface estate. Skivolocki at 251, 67 O.O.2d at 325, 313 N.E.2d at

378.

Further, the reservation clauses provide for the use of the surface

for the installation of a mine plant or facilities and for roads permitting

the transport of mining equipment and vehicles from extraction points to

the border of the property. Again, it would be unnecessary to make

such a reservation if the mineral estate included the right to operate

machinery everywhere on the property whose purpose is to scrape

away the entire surface in pursuit of shallow veins of coal. Examples of

provisions in the deeds which pertain only to deep mining and make

sense only in that context are legion. In contrast, the deeds contain

neither an express provision authorizing strip mining, nor any provision

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even suggesting that strip mining was intended.

These facts in

themselves would be sufficient to support our holding under Skivolocki.

Drydock urges, however, that we adopt the other grounds relied

upon by the court of appeals for its decision.

First, the dictionary

definition of "mining" at the time the deeds were drafted included strip

mining. Second, the surface interest in this case was severed from the

fee as opposed to the mineral interest being severed from the fee. We

find neither argument persuasive as to the intent of the parties.

Though strip mining is undeniably a form of mining, and the deeds

reserved to Cambria the right to mine and remove all the coal and other

minerals, we find the dictionary definition to be far outweighed in our

search for the intent of the parties by the weight of the deep-mining

context and language of the reservation clauses and by the patent

incompatibility of strip mining with separate ownership of the surface of

the land.

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Neither do we agree that the determination of the intent of the

parties should be made according to whether the surface interest or the

mineral interest is severed from the fee. Though the court of appeals

described the difference as "critical," we have not discovered any

authority in support of that contention. The second syllabus paragraph

of Skivolocki does not differentiate between the two situations; rather, it

speaks in terms applicable to both.

Indeed, in Burgner, we long ago stated that the "obligation to

protect the superincumbent soil, exists whether there is a conveyance of

the surface reserving the minerals, or a grant of the minerals, without a

conveyance of the surface. In either case, the presumption arises, that

the owner of the minerals is not, by removing them wholly or in part, to

injure the owner of the soil above." Burgner, 41 Ohio St. at 352-353.

The principle applies equally to the present case.

Though Drydock

owns all the coal and minerals on the property and clearly is entitled to

extract them, what it may not do is extract them by means of a

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technique that destroys the estate sold by its predecessor in interest to

another.

We note also that our holding in this case is consistent with the

rules adopted in the other coal-mining jurisdictions to have considered

the question. Drydock points to Bellville Mining Co. v. United States

(C.A.6, 1993), 999 F.2d 989, a federal Sixth Circuit case construing

Ohio law, for the proposition that deeds drafted after strip mining

became widely known and used should be interpreted to include the

right to strip-mine along with the mineral owner's right to deep-mine for

coal. Appellee mischaracterizes the court's holding. In fact, the court

held that the intent of the parties is controlling, and that when deep-

mining language is used exclusively, courts must assume that strip

mining was not intended. Id. at 993-994.

The courts of Pennsylvania, West Virginia, Virginia, Missouri,

Colorado and Texas have all adopted the rule we state today using such

language as: "[W]hen a grantor, as in this case, sells the surface of the

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land, he knows that the use of it for farming and other purposes is

contemplated and assents thereto. *** [I]f he desires to reserve rights

inconsistent with the full enjoyment of the surface, it is his duty to

reserve those rights by clear and unequivocal language. It is hardly to

be supposed that either the grantor or the grantee *** for a moment

contemplated the reservation of a right which would enable the grantor

to totally destroy the subject matter of the conveyance.***" Stonegap

Colliery Co. v. Hamilton (1916), 119 Va. 271, 292, 89 S.E. 305, 311.

"`[I]n view of the surface violence, destruction and disfiguration which

inevitably attend strip or open mining, *** no land owner would lightly or

casually grant strip mining rights, nor would any purchaser of land treat

lightly any reservation of mining rights which would permit the grantor or

his assignee to come upon his land and turn it into a battle-ground with

strip mining'. ***

Therefore, `the burden rests upon him who seeks to

assert the right to destroy or injure the surface' *** to show some

positive indication that the parties to the deed agreed to authorize

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practices which may result in these consequences." (Citations omitted.)

Stewart v. Chernicky, 439 Pa. at 50, 266 A.2d at 263. See, also Phipps

Leftwich (1976), 216 Va. 706, 222 S.E.2d 536; Groves v. Terrace Mining

Co. (Mo. 1960), 340 S.W.2d 708; Smith v. Moore (1970), 172 Colo. 440;

474 P.2d 794; Acker v. Guinn (Tex. 1971), 464 S.W.2d 348; West

Virginia-Pittsburgh Coal Co. v. Strong (1947), 129 W.Va. 832, 42 S.E.2d

46.

Thus we hold that a deed which severs a mineral estate from a

surface estate, and which grants or reserves the right to use the surface

incident to mining coal, in language peculiarly applicable to deep-mining

techniques, whether drafted before or after the advent of strip mining,

does not grant or reserve to the mineral owner the right to remove coal

by strip-mining methods.

In view of our holding it is unnecessary to determine whether the

contract at issue is ambiguous such that consideration of extrinsic

evidence would be appropriate.

The trial court found the extrinsic

21

evidence to be cumulative, indicating that strip mining was not intended.

The court of appeals found the contract unambiguous and did not

consider extrinsic evidence. As the extrinsic evidence adduced at trial

clearly indicated absence of intent to allow strip mining, our

consideration of the extrinsic evidence would have no bearing on our

conclusion that the parties to the original deeds did not intend Cambria

to have reserved strip-mining rights.

Last, we agree with amici Ohio Farm Bureau Federation and Ohio

Mining and Reclamation Association, both of whom filed briefs urging

reversal, that our decision today will promote judicial economy and avoid

confusion in the drafting and interpretation of deeds severing mineral and

surface rights. The large number of extant deeds with similar reservation

clauses would be subject to a multitude of unnecessary litigation in order

to clarify respective rights in the absence of the clear rule we announce

today.

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Accordingly, the judgment of the court of appeals is reversed, and

the judgment of the court of common pleas is reinstated.

Judgment reversed.

DOUGLAS, POWELL, RESNICK, F.E. SWEENEY and PFEIFER, JJ.,

concur.

COOK, J., dissents.

STEPHEN W. POWELL, J., of the Twelfth Appellate District, sitting for

WRIGHT, J.

FOOTNOTE:
1

The April 2, 1962 deed does not contain this acreage limitation,

though the discrepancy does not bear on our holding.

Cook, J., dissenting. I respectfully disagree with the decision of the majority because

I agree with the court of appeals that Skivolocki does not dictate the result in this case.

The majority cites Skivolocki language, reasoning that "`strip mining is totally

incompatible with the enjoyment of a surface estate,'" and thus "`a heavy burden rests upon

the party seeking to demonstrate that such a right exists.'" That balancing of the agricultural

use of property against the total destruction of such uses by strip mining played an important

23

part in the Skivolocki decision.

The instant case differs in that here we have a challenge

between the lessee of the surface estate, whose lease permits strip mining, and the owner of

the mineral estate, which also claims the right to strip-mine.

The court of appeals analyzed this case "in a manner consistent with well-established

contract law." Given the plain meaning of the language of the deeds, the appeals court

concluded, and I agree, that Drydock reserved the right to surface-mine. The deeds provide

that Drydock continues to own "all of the minerals of whatsoever nature and description" and

may enter "in, on or under said premises for the purpose of *** mining and removing the

same***." Moreover, as cited by the appellate court, the dictionary definition of "mining" at

the time the deeds were executed included the method of surface mining.

Although the majority seems to be persuaded by the unassailable proposition that it is

unlikely that any purchaser of a surface estate would buy the surface of a tract subject to the

right of the mineral owner to destroy that surface, the concurring opinion of Judge Grey of

the court of appeals poses the equally sound question as to whether any reasonable person

would reserve a mineral interest but not the right to recover the minerals. Today's decision

results in Drydock owning the coal but with no right to mine it and Graham having the right

to mine it but no ownership.

I therefore would affirm the judgment of the court of appeals based on the language of

the reservation clauses in the deeds.

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