Daily Development for Tuesday, February 29, 2000

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

MINES AND MINERALS; DEFINITION OF "MINERALS:" Where a grantee reserves the right to "coal and all other minerals," the probable intent of the reservation was to reserve an interest in minerals that can be mined without disturbing the surface, and consequently the owner of the property, and not the holder of the mineral reservation, has the right to engage in quarry excavation to obtain limestone near the surface.

Save Our Little Vermillion Environment, Inc., v. Illinois Cement Co., 2000 WL 198923, No. 3990315 (Ill. App. 3rd District, 17 February 17, 2000)

This little case involves an interesting role reversal and a questionable language interpretation, albeit an interpretation consistent with earlier precedent.

Plaintiff SOLVE apparently (from the name) is an environmental group that acquired an undivided interest in the mineral estate reserved in 1907 in a certain property. The estate is defined in the reservation as: "the coal and other minerals underlying the [property]."

Defendant Cement Co. owns the fee interest in the same property. The property has substantial limestone deposits which Cement Co. proposes to mine through a quarrying operation. The deposits are from three feet to sixty feet below the surface, and the only practical method of mining is through an open quarry.

SOLVE apparently acquired the mineral rights specifically to prevent the limestone from being mined. It sought an injunction to prevent Cement Company from removing what SOLVE alleged were its minerals. Although the trial court denied SOLVE's petition for a temporary restraining order, it eventually granted summary judgment to SOLVE on the merits of the ownership issue. Both sides appealed.

The appeals court held for Cement Company. It ruled that the intent of the parties to the original reservation was not to reserve the right to minerals that could be mined through surface extraction methods.

The basis for this decision is Kinder v. La Salle County Carbon Coal Co., 310 Ill. 126, 141 N.E. 537 (1923), a case involving property very near to the property involved here, where there had been a reservation in 1867 of an interest in "all the bituminous or stone coal, together with the right to mine the same" . . as well as "the oil and minerals, of every description." There was some limestone on the surface of the property involved in this precedent case, but much of the limestone was underground as deep as 60 feet, as was the case here. In fact, the property involved in Kinder was less than a mile away from the Cement Co.'s parcel here.

The issue in Kinder, as here, was whether the reservation included the right to surface mine for limestone. The party holding the minerals rights in Kinder, however, was the cement company. The court first ruled that the technical definition of "mineral" was of no use here, as it was likely that the parties did not have the scientific concept in mind. It then concluded that the grantor in 1867 intended to preserve the integrity of his agricultural operation on the surface, and therefore that the parties did not intend to transfer the right to remove minerals that were to be extracted through surface mining operations.

Both sides attempted to parse the language in the Kinder grant or in the opinion to find support for their claimed interpretation of the language in the instant case. But the court ultimately found Kinder distinguishable.

SOLVE argued that the primary difference between Kinder and the instant case is that in 1867, the parties would not have viewed limestone as a valuable commodity, while in 1907, when the instant reservation was written, they would have known of its value. The court rejected this argument out of hand:

"SOLVE argued that, unlike in Kinder, the parties in 1907 would be presumed to know that limestone was a valuable extractable mineral, and that therefore they should have been presumed to intend to include limestone as a "mineral" when they reserved the mineral rights. But the court rejected this reasoning. While that may be true, it is of little help in determining . . . intent. First, it cannot be ascertained if [the party reserving the minerals] knew of the existence of the limestone. Second, if he knew of it, was aware of its value, and intended to keep it, why did [the party reserving the minerals] fail to specifically reserve the limestone, as he did the coal?" Then, despite its earlier conclusion that these matters ought to be considered on a case by case basis, the court relied heavily on precedent in other jurisdictions to conclude that it was inappropriate to view limestone as a mineral:

"Coal is a source of energy that can be mined without disturbing the surface. Limestone is not combustible and cannot be mined without destroying the surface. Moreover, decisions of other jurisdictions that have considered the question have held that a grant or reservation of "minerals" does not include limestone. See, e.g., Holland v. Dolese Co., 540 P. 2d 549 (Okla. 1975); Little v. Carter, 408 S.W. 2d 207 (Ky. 1966); see also Downstate Stone Co. v. United States, 712 F. 2d 1215 (7th Cir. 1983) (reservation of "all minerals" did not include limestone); 58 C.J.S. Mines and Minerals §175, at 161 (1998) (limestone is not ordinarily included in a grant or reservation of minerals; language of reservation should be clear and specific to justify inclusion of limestone). Indeed, SOLVE has not cited, nor has our research disclosed, a single case from any jurisdiction construing the term "minerals" as including limestone."

Comment 1: It is always good to look to precedent for the definition of concepts commonly used in commercial transactions. The editor basically agrees with that approach, and thus would rely heavily on precedent, as the court did here, in the end.

But court at first concluded that precedent ought to have little to do with the issue, because in its view the definition of "minerals" necessarily ought to be based upon a case-by-case analysis. There is something to that approach here. We must acknowledge that the parties to the 1907 transaction did not have the Kinder interpretation to rely upon in determining what language to use. Still, for purposes of modern regularity, the editor would support a more uniform approach.

Comment 2: The editor disagrees with the court's conclusion that the failure of the parties drafting the reservation to mention specifically limestone in the reservation means that they did not intend to reserve a right in limestone. They only mentioned coal, because that was apparently the central concern at the time of the grant. But they certainly intended that the reservation reach other minerals. They said so directly. Would the court here have concluded that the parties did not intend to include gold or diamonds because neither had been mentioned specifically? The editors thinks not. In short, the court did not give adequate attention to the probable fact that the parties, in reserving minerals, intended to reserve anything that had probable value. Since they knew or should have known that limestone fit that description in 1907, the editor would start with an assumption that limestone was included.

The court also stated that limestone was different from coal because coal is a source of energy and limestone is not. But, of course, diamonds and gold are not a source of energy, and beyond question would have been viewed as included in the reservation. Thus, the value of the substance as extractable wealth seems to be more to the point. It cannot be denied, however, that at some point the character of the substance makes a difference. Water, for instance, would presumably not be included, even if valuable.

Comment 3: The court ends its analysis by concluding that, where all other things are equal or uncertain, the presumption ought to go against the party holding the interest of the party making the reservation - the grantor of the original deed. This old chestnut of an interpretation doctrine is, in the view of the editor, absurd, and ought to be abandoned. Both sides to every transaction ought to have an equal responsibility to study the language of the operative documents to insure that this language meets their needs and expectations. Most often, that is exactly what happens, or ought to happen. To suggest that either the party making the deed or the party charged with the initial draft of contract language has some special burden to make the language clear is inherently illogical to the editor's mind.

The only basis for supporting it is that these old presumptions is that they do provide a basis for appearing to make sense in close cases when one is really just tossing a coin. There is something to that argument. Appearance of regularity in judicial decision making is valuable. But surely we can have presumptions that are more consistent with the reality of modern real estate transactions. Each side ought to be equally charged with the responsibility to insure that the documentation clearly reflects intent, and neither should be punished specially if it does not.

Comment 4: In the header to this item, the editor suggested that the distinction used in this case is the fact that limestone is surface mined while coal and other minerals might not be mined in that manner. This might indeed be a sensible distinction, and there is some suggestion in the last quote from the court's opinion that this formed some basis for the court's views. The editor may be engaged in wishful thinking, however, since a number of other less relevant factors eventually seemed to sway the court's view.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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