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ESTATE ROBERT P. FIKE (04/03/89)

submitted: April 3, 1989.

IN RE ESTATE OF ROBERT P. FIKE, DECEASED. APPEAL OF EVELYN R. FIKE AND PITTSBURGH NATIONAL BANK, EXECUTORS OF THE ESTATE OF LOUIS S. FIKE, DECEASED, AND APPEAL OF GALLATIN NATIONAL BANK, ADMINISTRATOR D.B.N., C.T.A. OF THE ESTATE OF ROBERT P. FIKE, DECEASED


Appeal from the Decree October 14, 1988, in the in the Court of Common Pleas of Fayette County, Orphans, No. 122 of 1978.

COUNSEL

Henry R. Beeson, Uniontown, for Evelyn R. Fike and Pittsburgh Nat. Bank, appellant.

John R. Hoye, Jr., Uniontown, for Gallatin Nat. Bank, appellant. Melvin B. Bassi, Washington, for Purco Coal, Participating Party.

Cirillo, President Judge, and Olszewski and Watkins, JJ.

Author: Olszewski

[ 385 Pa. Super. Page 628]

This is an appeal from a final decree entered by the Court of Common Pleas of Fayette County which served to interpret certain provisions of a coal mining lease by and between Purco Coal Company ("Purco") as lessee and Louis S. Fike, Executor of the Estate of Robert P. Fike, deceased (successor in interest being Gallatin National Bank, Administrator d.b.n.c.t.a. of the Estate of Robert P. Fike, deceased), and Louis S. Fike, individually (now deceased, his successors in interest being Evelyn R. Fike and Pittsburgh National Bank, Executors of the Estate of Louis S. Fike, deceased), as lessors ("lessors").

[ 385 Pa. Super. Page 629]

On December 8, 1982, Purco and lessors entered into a coal mining lease. Following, the Orphan's Court of Fayette County approved the execution of the lease. Paragraph 3 of the lease required Purco to promptly apply to the Pennsylvania Department of Environmental Resources for certain mining and drainage permits. Purco complied, and, in accordance with paragraph 4 of the Lease, paid $50,000 as an advance royalty. In pertinent part, paragraph 4 provides:

As an advance royalty, Purco shall pay Lessor the sum of $50,000 on the effective date of this agreement, which sum shall be held in escrow by Lessor's attorneys . . . [T]he advance royalty and any accrued interest shall be paid to Lessor on the permit approval date; and the advance royalty (but not the interest) shall be applied to the first tonnage royalties due Lessor from Purco for coal mined and removed during the lease year beginning on the permit approval date. If the advance royalty exceeds the tonnage royalty during that year, the excess shall be retained by Lessor.

On April 1, 1985, Purco obtained its mining and drainage permits, but, due to other procedural mandates, was unable to actually mine and remove coal until January 8, 1986, when compliance with said mandates was achieved. Thereafter, on January 7, 1987, Purco made a second escrow deposit of $50,000, which it again characterized as advance royalty. This deposit, although not actually required, was made by Purco since it had not actually begun to mine and remove coal. The lessors characterized the payment as a minimum tonnage royalty which is addressed in paragraph 5 of the lease. In pertinent part, paragraph 5 provides:

[ 385 Pa. Super. Page 630]

For each ton of 2,000 pounds of coal mined and removed from the premises, Purco shall pay Lessor a tonnage royalty of $2.75. Payment for all coal mined and removed during any calendar month shall be made not later than the 15th day of the following month. If the tonnage royalties beginning on an anniversary of the permit approval date or during any renewal year is less than Page 630} $50,000, Purco shall pay Lessor the amount of the deficiency not later than 15 days after the end of such lease year or renewal year.

Due to this discrepancy, Purco filed a petition for declaratory judgment asking the trial court to interpret the relevant provisions of the lease. Specifically, Purco asked the court to determine the definition of the "permit approval date," and to determine whether the advance payments made by Purco constituted minimum royalties or advance payments ...


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