The construction of the lease contended for on the part of the defendant, is that, in effect, it imposed upon the lessee an obligation merely to mine or pay for an average of 100,000 tons of coal per annum during the last division of the term of his lease, and that whenever he had mined more than at that rate he had the right to suspend mining or paying, until the average quantity of coal mined during the preceding years was reduced below 100,000 tons per annum. So that if, during the first five years of the second division of the term, he should have mined 1,500,000 tons in the aggregate, the lessee would be entitled to hold the demised premises during the remaining ten years without mining any more coal unless he chose, or paying any rent or royalty. The mines, and the costly improvements there erected at the expense of the lessors, might remain idle and unproductive, no one but the lessee having the right to operate them. On the other hand the plaintiffs claim that the lessee, according to the true intent and proper construction of the lease, was to pay thirty cents per ton for all the coal he should mine, even though it should exceed 100,000 tons per annum, and at the same time was bound to pay, as a minimum rent, during each and every year, thirty cents per ton on at least 100,000 tons, even though he should in fact mine less than that quantity during the year, and that the intention of the contract was to secure to the plaintiffs a rental, in any event, of at least $30,000 in each and every year of the term, and at the same time to secure compensation at the rate of thirty cents per ton for all the coal the lessee should remove from the mines, if he should remove more than the minimum quantity.
The lease, read without the proviso which gives rise to the dispute, clearly expresses the intent claimed by the plaintiffs. The lessee covenants that during the second division of the *Page 275 term, viz.: Fifteen years after the expiration of the first five years, he will mine and carry away from the demised coal lands, not less than 100,000 tons of coal per annum, and that he will pay to the lessors rent, or royalty, of thirty cents per ton for every ton of coal mined and carried away during the full term of the lease, and that the payment of this rent, or royalty, shall be made quarterly on the first days of October, January, April and July, in each year from the commencement of the term. And he further covenants, that in case the quantity of coal mined by the lessee in any year of the said term shall fall short of the proper minimum quantity above named, the lessee will pay to the lessor, as rent for such year, a sum of money equal to the amount he would have been required to pay if he had mined the full minimum quantity. Thus far the lease is free from any ambiguity, and its construction admits of no doubt. The lessee covenants to pay thirty cents for every ton he shall mine, whatever the number of tons may be, and further that the number shall not be less than 100,000 tons in each year, and if in any year it should be less than the prescribed minimum, then that he will pay as rent for such year a sum of money equal to thirty cents per ton on 100,000 ton, viz.: $30,000, payable quarterly. Under this covenant he clearly bound himself to pay this minimum rent in any year during which he mined less than 100,000 tons, whatever amount he might have mined and paid for during the preceding years.
But there was still a contingency unprovided for. There might be a deficiency during some year of the term, of say 50,000 tons, in the number of tons mined, but under this covenant the lessee would have been obliged to pay for 100,000 tons. The lessee would therefore have paid a royalty upon 50,000 tons deficiency, though he never had the coal, and the lessors would have received a royalty upon 50,000 tons which still remained in their mines.
The depletion of the mines was an injury for which the lessors were compensated by the royalty reserved in the lease. The value of the coal lands demised was permanently diminished *Page 276 in proportion to the amount of coal removed. But at the same time the tract was large, nearly 2,500 acres. Upwards of $236,900 had been expended out of the funds of the lessors, in machinery and improvements. The lessee obtained the possesson of the coal lands and mines and improvements for a long term of years, and the owners naturally desired to secure to themselves an adequate rental during each year of the term. This they did by requiring that the lessee should mine at least 100,000 tons each year. If he mined only 50,000 tons he covenanted to pay in the shape of rent, a royalty upon the deficiency of 50,000 tons, which he had never removed from the mines. But in case he should, in any other subsequent year, mine and remove, say 50,000 tons in excess of the stipulated 100,000, he might still, under the terms of the lease, be deemed bound to pay the royalty of 30 cents on every ton of coal mined during that year, which would have been unjust, because he had already paid a royalty upon a deficiency of 50,000 tons of coal which still remained in the mines, and when he should take them out he ought to have credit for the deficiency which had thus been paid for. Some further clause was, therefore, necessary to protect him against a double payment of royalty on the same amount of coal, viz.: first, as a deficiency, and again, as a royalty for taking out the coal.
The question now is, whether the proviso out of which the present controversy has arisen, was not intended to meet the difficulty, and supply the omission above suggested, and whether, if it is fairly capable of that construction, it should not be preferred to one which would be a material departure from the scheme indicated by the preceding part of the lease and repugnant to the language of the preceding covenants.
The language of the proviso is somewhat obscure, but light is thrown upon it by the explanatory sentence with which it concludes. The language of the proviso is: "Provided that if, in any year, the party of the second part, shall mine and carry awaymore than the proper minimum quantity for such year, such excess, or so much thereof as may be necessary, may be set off against the deficiency of any other year or *Page 277 years within the same division of the term hereby demised. So much of said excess as is applied to make up such deficiency,having been paid for, shall not be paid for again."
I think it plain that the excess here spoken of is an excess arising after the deficiency has occurred, and has been paidfor. This excess in such a case, instead of being paid for, shall be set off against the previous deficiency, which has beenpaid for. This is plain from the concluding paragraph "so much of said excess as is applied to make up such deficiency, havingbeen paid for (i.e. having been paid for in pursuance of the covenant to pay for deficiencies) shall not be paid for again." How could it possibly be ascertained how much of the excess in any year was necessary to make up the deficiency in any other year, and how could the necessary amount be so applied, and thus have been paid for, unless the deficiency had occurred before the excess was produced? It must be that in referring to the deficiency "in any other year," the parties meant the deficiency in any other preceding year.
This construction harmonizes all parts of the agreement. It requires the lessee to pay thirty cents per ton on all the coal he takes out in every year, and it secures to the lessor a minimum rental of thirty cents on 100,000 tons for each year, but if the lessee has to pay for any deficiencies as rent, the amounts so paid are to be regarded as royalties paid, and are to be set off against royalties on any subsequent excess over the 100,000 tons, so that the lessee shall not be compelled to pay again, a royalty which has once been paid. When he has paid for a deficiency he becomes entitled to take out an equal amount of excess without paying, but there is nothing in the clause which purports to excuse him from paying for a deficiency in any year. There is no provision for reducing payments for deficiencies by off-set, but only for reducing payments for excess by so much of the excess in any year as shall be applied to make up deficiencies which have been paid for.
These views would lead to a reversal of the judgment of the General Term and a new trial. *Page 278
All concur with DANFORTH, J., except RUGER, Ch. J., who concurred with RAPALLO, J., dissenting, and PECKHAM, J., taking no part.
Judgment affirmed.