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decided: December 16, 1986.


Appeal from Order of Superior Court of Pennsylvania Entered on August 2, 1985 at No. 548 Pittsburgh 1983 Reversing Order dated February 14, 1983, of the Court of Common Pleas of Butler County at Civil Division - Law, A.D. No. 80-471, Book 118, Page 294 Pa. Superior Ct. , 503 A.2d 54 (1985)


Leo M. Stepanian, Stepanian & Muscatello, Thomas W. King, III, Dillon, McCandless & King, Butler, for appellant.

Charles E. Gutshall, Baskin Flaherty Elliott & Mannino, P.C., Philadelphia, for amicus curiae Pennsylvania Coal Mining Ass'n.

Henry Ingram, Thomas C. Reed, Rose, Schmidt, Chapman, Duff & Hasley, Pittsburgh, for amicus curiae Keystone Bituminous Coal.

Peter H. Shaffer, Butler, for appellees.

Nix, C.j., and Larsen, Flaherty, Hutchinson, Zappala and Papadakos, JJ. McDermott, J., did not participate in the consideration or decision of this case. Nix, C.j., concurs in the result.

Author: Hutchinson

[ 513 Pa. Page 194]


Appellant, Sunbeam Coal Corporation, appeals by allowance Superior Court's order reversing Butler County Common

[ 513 Pa. Page 195]

Pleas. 349 Pa. Super. 625, 503 A.2d 54. Common Pleas had denied appellees relief in their suit for a declaratory judgment. The court construed a coal "lease" they had granted appellant to continue as long as appellant paid minimum advance royalties to appellees, Glenn and Virginia Hutchison.*fn1 As stated, Superior Court reversed Common Pleas, holding the lease had expired. The court reasoned that such leases contain an implied duty to mine diligently which appellant Sunbeam breached. Superior Court erred in implying a general covenant to mine into coal leases which provide for minimum advance royalties. Nevertheless, Superior Court correctly held that the term of this particular lease had expired. Therefore, we affirm.

Appellees, Glenn and Virginia Hutchison, are the owners of 85 acres of land in Oakland Township, Butler County. On December 14, 1976, they executed an "Option and Lease Agreement" with appellant Sunbeam Coal Corporation. The agreement provided, inter alia, for the payment of minimum advance royalties for at least three years should Sunbeam choose not to actively engage in the extraction of coal from the demised property. The parties differ over whether the three year term is a minimum term during which appellant coal company cannot terminate without payment of royalties or a maximum term during which the lease will continue in the absence of mining. In the event mining operations should commence, the agreement provides that Sunbeam is to pay to the landowner royalties in the amount of one ($1.00) dollar per net ton (2,000 pounds) of coal removed. The agreement gave the coal company an option to enter into a lease for the purpose of extracting the coal in place under appellees' land pursuant to terms and conditions also set forth in the December 14, 1976 agreement.

[ 513 Pa. Page 196]

Appellant made a timely exercise of its option on June 1, 1977 and began paying minimum royalties on September 1, 1977. The Hutchisons received and cashed minimum advance royalty checks covering royalties due through December, 1979, three years after the signing of the document.*fn2 Contending the lease had then expired, the landowners refused minimum advance royalty checks tendered after January of 1980 because no mining had begun.

Appellees then sought declaratory relief, pursuant to the Declaratory Judgments Act, 42 Pa.C.S. ยงยง 7531-7541, and asked Butler County Common Pleas to declare that the lease had terminated three years after the execution of the document. Appellee Glenn Hutchison, Homer Rodgers, leasing agent for the Sunbeam Coal Corporation, and Attorney Leo Stepanian, drafter of the lease for Sunbeam, all testified before Common Pleas as to the meaning of the document and the circumstances attendant to its execution. The court examined the lease and stated that appellee Hutchison had simply misinterpreted the express provisions of the lease. It held that as long as Sunbeam tendered minimum advance royalty payments the lease would continue. Superior Court reversed. We granted ...

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