Court Opinion

ID: 9957797
Source: CourtListenerOpinion
Date Created: 2024-04-05 14:08:03.886274+00
Date Added: 2024-06-11T08:18:39.373318
License: Public Domain

RENDERED: MARCH 29, 2024; 10:00 A.M.
                       NOT TO BE PUBLISHED

               Commonwealth of Kentucky
                         Court of Appeals

                            NO. 2022-CA-0582-MR

CHARLES W. HYDEN; EAST
KENTUCKY MINING, LLC; HYDEN
MANAGEMENT, LLC; AND
RICHARD M. YOUNG                                                APPELLANTS

               APPEAL FROM LAWRENCE CIRCUIT COURT
v.             HONORABLE JOHN DAVID PRESTON, JUDGE
                       ACTION NO. 22-CI-00045

CYRUS AND SONS FARMS, LLC
AND LARRY JOSEPH CYRUS,
EXECUTOR OF THE ESTATE OF
JAMES R. CYRUS                                                    APPELLEES

                                  OPINION
                                 AFFIRMING

                                ** ** ** ** **

BEFORE: ACREE, COMBS, AND ECKERLE, JUDGES.

ACREE, JUDGE: Appellants appeal the Lawrence Circuit Court’s May 3, 2022

Order granting summary judgment in favor of Appellees. After a thorough review,

we affirm.
             On June 3, 2019, the parties entered into two identical leases whereby

Appellees gave Appellants the right to mine coal from certain lands owned by

Appellees. Appellant Richard Young drafted both contracts.

             The lease contains a “Term” clause, which states: “This [lease] shall

be and extend for an Initial Term of TWO years, beginning on and including the

date above and if mining has commenced, for so long as coal is being mined.”

(Record (R.) at 5). Additionally, the contract states:

             In connection with it’s [sic] mining operations hereunder,
             Lessee shall use its best efforts to comply with all
             applicable law[s], rules, regulations, and orders which are
             currently in force or which may be hereafter enacted by
             the United States of America, the Commonwealth of
             Kentucky, or any other applicable governmental authority.

(R. at 6.) Further, “Lessee covenants and agrees to diligently develop and mine all

of he [sic] mineable and merchantable coal from he [sic] Leased Premises.” (R. at

6.) And, pursuant to the contract’s “Force Majorie [sic]” clause, which we

construe as a Force Majeure clause, “In the event the [sic] of an occurrence of an

event/s which either prohibits the sale of coal or the sale of the coal at a reasonable

profit, [Appellants] reserve[] the right to ‘idle’ the operations until such time as it

can be reasonably determined that the prohibitive event/s are removed.” (R. at 9.)

             After entering into this deal, Appellants began satisfying all regulatory

requirements prior to mining coal. Appellants filed an application with the

Kentucky Energy and Environment Cabinet (Cabinet), which required a $750

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filing fee, for mining approval. Appellants also initiated two studies on the leased

premises required by state and federal regulations. The first study, an

archeological study, took place over the course of a few weeks and cost Appellants

$8,500 to complete. The second study was a water study required by the Cabinet.

However, prior to disturbing the leased land, Appellants needed the Cabinet to

approve its filed application.

             Although Appellants acted in a timely fashion, they did not receive

this permit until July 2021, one month after the initial term on the lease agreement

expired. Thereafter, Appellees alleged the contract expired by its own terms

because Appellants failed to mine coal from the property. In response, Appellees

told Appellants they would be unable to mine the land. Looking to the record,

there exists no evidence demonstrating the Appellants moved machinery onto the

leased lands, nor any evidence showing Appellants mined coal.

             Interestingly, Appellees initiated this lawsuit, asking the Lawrence

Circuit Court to declare the lease null and void, though, this complaint appears to

request relief the circuit court cannot grant. Accompanying its answer, Appellants

alleged a counterclaim that Appellees breached the terms of the lease by their

actions. Appellees moved for summary judgment on Appellants’ counterclaim,

and the circuit court granted this motion. This appeal follows.

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                A circuit court properly grants summary judgment “if the pleadings,

depositions, answers to interrogatories, stipulations, and admissions on file,

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” CR1 56.03. “An appellate court’s role in reviewing a summary judgment is

to determine whether the trial court erred in finding no genuine issue of material

fact exist[ed] and the moving party was entitled to judgment as a matter of law.”

Feltner v. PJ Operations, LLC, 568 S.W.3d 1, 3 (Ky. App. 2018). Thus, appellate

courts review a circuit court’s summary judgment de novo. Cmty. Fin. Servs. Bank

v. Stamper, 586 S.W.3d 737, 741 (Ky. 2019).

                However, “where the movant shows that the adverse party could not

prevail under any circumstances” summary judgment is appropriate. Steelvest, Inc.

v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky. 1991). “[A] party opposing

a properly supported summary judgment motion cannot defeat that motion without

presenting at least some affirmative evidence demonstrating that there is a genuine

issue of material fact requiring trial.” Hubble v. Johnson, 841 S.W.2d 169, 171

(Ky. 1992) (citing Steelvest, 807 S.W.2d at 480). Crucially here, a court must

reasonably construe all facts in the light most favorable to the non-moving party.

Schmidt v. Leppert, 214 S.W.3d 309, 311 (Ky. 2007).

1
    Kentucky Rules of Civil Procedure.

                                           -4-
                Pursuant to KRS2 350.060: “No person shall engage in surface coal

mining and reclamation operations without having first obtained from the cabinet a

permit designating the area of land affected by the operation.” KRS 350.060(1)(a).

In relevant part, Kentucky defines surface coal mining operations as:

                mean[ing] activities conducted on the surface of lands in
                connection with a surface coal mine and surface impacts
                incident to an underground coal mine. The activities shall
                include excavation for the purpose of obtaining coal,
                including such common methods as contour, strip, auger,
                extended depth secondary recovery systems, mountaintop
                removal, box cut, open pit, and area mining, the use of
                explosives and blasting, and in situ distillation or retorting,
                leaching, or other chemical or physical processing, and
                cleaning, concentrating, or other processing or
                preparation, and the loading of coal at or near the mine
                site.

KRS 350.010(1).

                On appeal, Appellees claim summary judgment is appropriate because

the lease expired by its own terms and cites North American Refractories Company

v. Jacobs, 324 S.W.2d 495 (Ky. 1959), to support its claim. A review of Jacobs

shows it has little applicability to the case sub judice. In Jacobs, the parties

entered into a lease to mine clay from leased lands and, at the expiration of the

lease, North American Refractories continued to conduct “operations” on the

leased land, none of which constituted mining clay. Jacobs, 324 S.W.2d at 496-97.

2
    Kentucky Revised Statutes.

                                             -5-
Because North American Refractories failed to literally mine clay, the court

determined the lease at issue in that appeal did not renew. Id. at 497.

Nevertheless, setting aside the fact that coal mining is far more regulated than clay

mining, in the Kentucky Supreme Court’s modern jurisprudence, the Court has

expanded what mining means, beyond the mere act of mining coal. See Litton v.

Mountaineer Land Co., 796 S.W.2d 860 (Ky. 1990).

             In Litton, the Kentucky Supreme Court said: “By nature, surface

mining requires more than mere removal of coal, especially in a mountainous

area.” Id. at 861. In Litton, the parties signed a lease which stated: “it is agreed

between the parties hereto that if mining operations have not commenced within

three years from the date hereof, Lessor may declare this lease void by giving

written notice to the Company.” Id. The Littons’ land was a small fraction of the

total lands Mountaineer Land Co. leased or bought for their mining operations, as

the company ultimately acquired 24 leases and 20 deeds. Id. at 860. The company

planned on mining tracts of land closest to the only nearby serviceable haul road

and thereafter move tract-by-tract until all of the area was mined. Id. at 861. The

Littons’ land was not near this road, and after three years, Mountaineer Land Co.

failed to actually mine coal from the Littons’ land.

             At issue in Litton was whether physical acts on lands, that prepare

lands to be mined, constituted “mining operations.” Id. at 860. The Kentucky

                                          -6-
Supreme Court, adopting the standard used in the context of oil and gas mining,

determined mining operations included physical acts done prior to coal being

removed. Id. at 861-62. The general principles of oil and gas lease, which are to

be applied to coal leases, are that:

             The general rule seems to be that actual drilling is
             unnecessary, but that the location of wells, hauling lumber
             on the premises, erection of derricks, providing a water
             supply, moving machinery on the premises and similar
             acts preliminary to the beginning of the actual work of
             drilling, when performed with the bona fide intention to
             proceed thereafter with diligence toward the completion of
             the well, constitute a commencement or beginning of a
             well or drilling operations within the meaning of this
             clause of the lease. If the lessee has performed such
             preliminary acts within the time limited, and has thereafter
             actually proceeded with the drilling to completion of a
             well, the intent with which he did the preliminary acts is
             unquestionable, and the court may rule as a matter of law
             that the well was commenced within the time specified by
             the lease.

Id. at 861 (citing Summers, The Law of Oil and Gas, Vol. 2, § 349). Thus,

applying this general principle, any physical acts taken on the land in preparation

for coal mining, constitute “mining.”

             Appellants argue summary judgment is inappropriate because,

although they failed to physically touch the land, they engaged in the mining

process by diligently seeking to comply with all laws and regulations concerning

coal mining. However, nothing in the lease, nor anything in KRS 350.010,

includes the permit process as a part of mining or mining operations. See KRS

                                         -7-
350.010(1), (6). This court rejected the same argument in D & H Coal Company

of Laurel County, Inc. v. Smith, No. 2002-CA-1938-MR, 2004 WL 691627, at *1

(Ky. App. Apr. 2, 2004). We reject it again today.

             Additionally, Appellants argue the lease’s Force Majeure clause

allowed them to idle coal mining because the COVID-19 pandemic prevented them

from obtaining their permits in a timely fashion. While the Force Majeure clause

does permit Appellants to idle coal mining if coal cannot be sold for a reasonable

profit, nothing in this clause can be construed as permitting them to idle operations

as they wait for their permits. Appellants fail to point to any evidence in the record

showing the pandemic caused the price of coal to be unreasonable so that it could

not be sold for a reasonable profit.

             Because the record reflects no evidence Appellants engaged in

mining, per the terms of their lease, the Lawrence Circuit Court did not err when it

granted summary judgment in favor of Appellees.

             Accordingly, we affirm.

             ALL CONCUR.

 BRIEFS FOR APPELLANTS:                    BRIEF FOR APPELLEES:

 James P. Pruitt, Jr.                      Eldred E. Adams, Jr.
 Pikeville, Kentucky                       Louisa, Kentucky

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