248 F. 172 | D. Or. | 1918
The purpose of this suit is for specific performance and to restrain the defendant company (herein to be called tlic Mining Company) from selling or delivering any of its lead-silver ores, concentrates, or slimes to any person or corporation other than the plaintiff (to be called the A. S. & R. Company herein). The present inquiry is whether a preliminary injunction shall issue pending the final determination of the cause.
It is only necessary at this time to get an understanding of those features of the agreement between the Mining Company and the Tacoma Smelting Company (to be called the Smelting Company) that seem to he controlling where the parties are not in accord. These features must be construed in the light of the events attending the consummation of the agreement which show the. motives that induced it and the purposes which it was intended to subserve. In this we may be aided somewhat by the treatment accorded by the parties themselves to particular provisions.
The Smelting Company has a capital stock of 5,000 shares, of the par value of $100 per share. On March 20, 3905, it entered into and had contracts with the Alaska-Treadwell Gold Mining Company, Alaska-Mexican Gold Mining Company, and Alaska United Gold Mining Company, and with, the Mining Company, the defendant herein, previously signed, for the purchase of ores from each of the several companies, for smelting purposes. The plaintiff company had also at the same time a contract with the Mining Company for the purchase of some of its ores. All these mining companies, either by direct holding or through their stockholders, were owners of shares of stock in the Smelting Company, the defendant Mining Company being the owner of 1,567 shares. The A. S. & R. Company, acting through Bernard M. Baruch, effected a purchase of the whole of the capital stock of the Smelting Company, at a price exceeding $5,000,000. The stock was transferred to the American Smelters Securities Company, a New Jersey corporation, of the voting stock of which the A. S. & R. Company held, and now holds a controlling interest, so that it dominates the action of such New Jersey corporation. The defendant Mining Company ivas aware of all these relationships.
On March 20, 1905, the Mining Company entered into an agreement with the Smelting Company, which action was within the contemplation of the Baruch purchase, whereby the former agreed to sell and the latter to purchase all the lead-silver ores, slimes, and concentrates mined from all the properties owned or leased by the Mining Company, delivered f. o. b. cars at or near Wardner, Idaho, at sales prices agreed upon, with certain stipulated deductions. It was stipulated that the products to be delivered should be of a load assay of between 30 per cent, and 75 per cent., and that the average product should be of approximately the same yearly average analysis and lead assay as the shipments made from the mines during any year of the 12 years immediately preceding the date of the agreement, unless the Smelting Company should give its written consent to the shipment to it of products varying from that standard in analysis and in lead assay, as to which it was given the option to purchase at the best going market rates
From such values, deductions are to be made as follows: “From the value of each lot of ore, slimes, or concentrates (not containing less than a daily average of 27 tons, nor more than a daily average of 37 tons of metallic lead, the tonnage between the minimum and the maximum to be entirely at the option of the Mining Company), shipped to the Smelting Company’s smelter at Tacoma, Washington, there shall be deducted a freight and treatment charge, when the lead quotation is $4.35 per hundred pounds or over, of $15.75, and, when the lead quotation is less than $4.35 per 100 pounds, of $16 per net dry ton f. o. b. cars at or near -Wardner when the gross value is not over $60 per ton, said value to be arrived at by counting silver at New York quotations and lead at $3.50 per hundred pounds. If, however, any ore or concentrates should contain less than 53 per cent, lead, a deduction is to be made from the freight and treatment charge of one-half cent for each pound of lead under 53 per cent.but should the ore or concentrates contain more than 53 per cent, lead, there shall be added to the freight and treatment charge one-half cent per pound above that percentage. It is further provided that: “The Mining Company, in making shipments, may exercise its option as to lead contents of ores, slimes, and concentrates, wherever the same may be shipped.” This is known as the differential clause. From the value of each lot of products shipped, .in addition to above-mentioned Tacoma shipments, except as provided in article 1, “there shall be deducted a freight and treatment allowance, figured on dry weight, equal (without regard to the actual destination of the ores shipped under this contract) to the sum of the tariff railway charge for freight from tire mines of the Mining Company to Pueblo or Denver,” plus an allowance for smelting of $8 per ton.
The fourth paragraph provides that deliveries shall be made to any smelting plant owned by the Smelting Company, its successors or assigns. Should the Mining Company, however, desire to ship greater amounts of ore than the smelting- plant or plants of the Smelting Company can conveniently smelt, the Smelting Company shall have the right to sell or divert such excess shipments, at same rates, prices, and conditions as in the agreement provided for. Then follow provisions for the payment for the ores.
By the eighth article, the provisions are made to extend for a period of 25 years from February 1, 1905, except as subsequently provided.
“This agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto, and all its provisions relating to the sale of ore shall, as to the Mining Company, be deemed to be and considered as a covenant running with the land.”
By the twelfth paragraph, the terms of the agreement were to continue in any event until June 1, 1910, and it is further stipulated that thereafter the Mining Company shall, during the remainder of the period, receive at least the same terms, and, in addition thereto, shall receive the benefit of any and all direct and indirect reductions in charges, and any and all direct and indirect concessions in methods of determining values, in methods of per centum deductions, in methods of making quotations, and in any other way whatsoever, that may be made at any time after the date of the contract by the A. S. & R. Company, and be in effect after June 1, 1910, to a majority of Coeur d’Alene shippers.
The agreement was ratified by the stockholders of the Mining Company.
By a supplemental agreement, made on the same day between the parties, the Mining Company undertook to terminate its ore contracts, which it then had, with the Pennsylvania Smelting Company, and the Ohio & Colorado Smelting Company, and, on the other hand, the Smelting Company agreed to use its best endeavors to procure the cancellation of a contract then in force between the Selby Smelting & Bead Company and the Mining Company.
The terms of section 12 of the agreement were modified by a second supplemental agreement, whereby it is stipulated that, in case smelting companies other than the A. S. & R. Company make rates that the Smelting Company does not desire to meet, then the Mining Company may accept such rates, and may ship to such other smelters after giving 60 days’ notice to the Smelting Company, but that, on the termination of such arrangements, the Smelting Company agrees to continue to buy in pursuance of the principal contract. It was further agreed that the Smelting Company should have the right to resume the purchase of any products so diverted by giving 60 days’ notice to the Mining Company of its willingness to meet the terms of the other smelters for the period for which the other smelters had offered to contract.
And it was also further agreed that the terms that are to govern under clause 12, unless the A. S. & R. Company shall cease to do business or to purchase a majority of the Coeur d’Alene ores, shall be those made by the A. S. & R. Company to a majority of Coeur d’Alene shippers, and that, in determining such majority, the Mining Company’s ores and the ores of mines owned by the Smelting Company shall be included; but in case the A. S. & R. Company shall cease to purchase a majority of the' tonnage, then the terms given by the other smelting companies for a majority of the Coeur d’Alene ores, after excluding the ores produced by mines of the Mining Company and mines owned and controlled by any smelting company, shall govern, provided the same amounts to an average of at least 1,000 tons per month; and it
On November 17, 1910, the parties entered into a further supplemental agreement, which was to apply from June 1, 1910, to June 1, 1915, whereby it was agreed that in addition to the terms of payment stipulated for in the principal agreément, the Mining Company -should receive 85 cents per ton for each ton of ore delivered containing a lead assay of between 30 and 75 per cent. By the fourth paragraph, •it was further stipulated that the Smelting Company should not assign nor transfer the said original or supplemental contract prior to November 17, 1915, without the written consent of the Mining Company.
Prior to the date of the contract here in controversy, the Mining Company had contracts for smelting-with the following smelting companies: Tacoma; Ohio & Colorado; Pennsylvania; Selby; and American Smelting .& Refining Company, the plaintiff herein. The present agreement superseded, as was the intention and purpose of the parties, the contract with the Tacoma Company. The first supplemental agreement provides for- a termination of the contracts with the three companies, as aforenamed, following the Tacoma. And it was further the purpose of the present agreement to wholly supersede the agreement with the A. S. & R. Company. So that, in the end, the Smelting Company acquired the right to purchase all the ores of the Mining Company. That such an arrangement, to culminate in the agreement that was finally entered into between the Smelting Company and the Mining Company, superseding all other agreements on the part of the Mining Company for disposing of its ores, was in the minds of the parties concerned, including the Mining Company and the A. S. & R. Company, at the time Baruch consummated the purchase of the stock of the Smelting Company, can scarcely be questioned. Whatever part the Mining Company may have had in the consummation of the Baruch enterprise to acquire, in the interest of the A. S. & R. Company, the corporate stock of the Smelting Company, it surely was wholly cognizant of what was taking place, and was acting in pursuance of the plan, to the purpose of finally obtaining from the Smelting Company an agreement for disposing of the major part of its ores, if not the entire output. The Mining Company knew that the hand of the A. S. & R. Company was. in the enterprise, and that it was really the controlling factor in bringing about the agreement of tire Smelting Company of March 20, 1905, to- purchase the Mining Company’s ores.
“Tlie idea of providing for tlie same yearly average analysis and load a ¡«¡aj-as tlie ore shipped in any 1 year of the preceding 12 was to be sure of being able to deliver to the smelter any possible mixtures of ore. That is, if an oro carrying .‘10 per cent of lead and under could not be sold locally and if an ore carrying 75 per cent, in lead and over could not be sold at a distance, then tb.oso two products could be mixed to fit the average of any 1 of 12 preceding years.”
Thus it will be seen that diametrically opposed views as to Idle meaning of the paragraph in question are maintained. The view dictated by reason, however, is that, as the usual and normal product of the mine ranged between a lead assay of 30 per cent, and 75 per cent., which constituted by far the larger proportion of the output, it. was. the intention of the parties, and is the intendment of tlie agreement, that the Mining Company shall sell and the Smelting Company shall purchase the whole of this product, the average analysis of which shall approximate the average of any 1 year of the 12 preceding years, and not that the Mining Company shall be privileged to work the output into a high or a low grade, to suit its convenience and purpose.
The clause under the head of “Deductions,” extending to the Mining Company the exercise of its option as to lead contents of orcs,-etc., has relation only, as we shall see hereafter, to the Tacoma shipments, as to which a price differential is applicable. Any other interpretation would defeat the primary and moving spirit of the agreement, namely, that the Mining Company should have a continuing and stable market for its normal and usual output, constituting the bulk thereof, and that the Smelting Company should have a dependable source of supply of a reasonably uniform commodity for the smelting operations of itself and its associate "companies.
It was contemplated, however, and within the minds of the parties, that there would be sotno of the Mining Company’s ores that would not, in the usual course of concentration, comport with the normal standard; that some of them would fall below the minimum of assay and some above the maximum comprising the normal grade; and as to these the parties concurred in a different contractual treatment. The Smelting Company was accorded the option to purchase these products at the best going market rates and terms, and also any ores, slimes, and concentrates that might carry copper, zinc, or other metals of commercial value, the payment for which was not provided for in the agreement. As to the meaning and intendment of this part of the agreement, Judge Rindlcy has given a very clear and lucid interpreta-
“The Tacoma Company had an absolute right to and was required to take all ore, slimes and concentrates whose lead contents were not 30 per cent, and less nor 75 per cent, and more. The price to. he paid for this product between the maximum and minimum was fixed by the contract. As to the product varying from the above analysis, the Tacoma Smelting Company had the 6p-tion to purchase at ‘best going market rates and terms,’ and it is quite clear that until some notice was given of the exercise of this option the Bunker Hill Company had the right to deal with snch product as it saw fit. It is also quite clear that you could not have been compelled to take any product of 30 per cent, and lower or 75 per cent, and higher. I understand that this interpretation of the contract is concurred in by Mr. Chiekering, your counsel in this city and the counsel of the American Smelting & Refining Company in New York.- To say that the spirit of the contract was that the Tacoma Smelter should have all the product of the mine regardless of the lead contents is to practically nullify the express letter of the instrument. I know of no rule of law which sanctions this method of interpretation.”
The parties have since acted in pursuance of this interpretation until the coming on of the differences giving rise to the present controversy. •Of these I will have more to say later.
It is quite obvious, from a consideration of tire history of the draft of this agreement, how the particular sentence “shipped to the Smelting Company’s smelter at Tacoma” came to be written in in that way. By the previous agreement of May 31, 1904, known as “Exhibit F,” the Smelting Company’s entire purchase consisted of 27 tons minimum and 37 tons maximum of lead per day under the identical terms incorporated in the present agreement. The A. S. & R. Company’s agreement, of date April 11, 1904, Exhibit G, was to purchase a minimum of 40 tons per day, on terms coinciding with the general terms ■of purchase of ores running from 30 per cent, to 75 per cent, under the present contract; and so, in formulating tire present agreement, the parties have put it together from the two previous agreements, and the words above quoted were run in as descriptive of the particular shipments-rather than as a condition obligatory. This construction is in harmony with the provisions of-the fourth paragraph, while the one
"The Alining Company, in making shipments, may exercise its option as to lead contents of ores, slimes, and concentrates, wherever the same may be shipped.”
Evidently the option as to the lead contents relates to the shipments of 27 to 37 tons daily, carrying the differentials as to price, and not to the general shipments of ore concentrates ranging between 30 per cent, and 75 per cent, lead assay, and the words “wherever the same may be shipped” are indicative of a mutual understanding that they may be shipped anywhere. This is borne out, not only by the context and arrangement, but by the manifest wording and language of the agreement. The price that the Mining Company is to receive for its normal and usual output, as well as for what are termed its Tacoma shipments, being fixed, it is obvious that it is a matter of no concern whatever to it where the ores may go for smelting purposes.
Other clauses of the agreement will receive attention later.
A controversy arose in 1910 with reference to the clauses under discussion, wherein it was claimed by the Mining Company that it should receive a higher rate for its normal ores. This resulted in the agreement of November 17, 1910, whereby the Smelting Company agreed to pay, in addition to the price agreed upon under the original contract, the sum of 85 cents per ton, to extend from June 1, 1910, to June 1, 1915. Since the latter date — I take it from statement of counsel for complainant — the Smelting Company has been paying the increased rate.
The ores not included by the normal grade have a different history. Those falling below 30 per cent, lead assay have been relatively small in amount, and not a great deal of dispute has arisen concerning them. As to those containing 75 per cent, lead assay and above, there has been considerable controversy. These controversies were adjusted from lime to time in pursuance of Judge Lindley’s interpretation of the agreement, and the parties continued in mutual accord concerning them until June 5, 1915, the date when the Smelting Company notified the Mining Company that after June 7th this particular grade of oro would be settled for on regular contract rate, namely, $16 treatment basis, and 90 per cent, of lead at 90 per cent, of New York quotations up to $4.10, plus one-half the excess above $4.10. No adjustment between the parties followed this notification. The Mining Company thereupon insisted that the Smelting Company receive the whole of the 37 tons of lead maximum shipment per day at Tacoma. This being refused, it declared that the Smelting Company had breached its agreement. Matters have so remained up to the present time; the Mining Company continuing its shipments of normal grade ores to smelters controlled by the A. S. & R. Company.
The Mining Company has recently constructed a smelter of its own, and though it has not yet diverted any of the ores agreed to be sold to the Smelting Company, except some of the high and low grade, it lias threatened to do so, and there is no doubt that such is its pur
It is urged that the bill fails to state a cause of suit for specific performance or an injunction, in that it is concerning personalty, and that it appears that complainant has a plain, speedy, and complete remedy at law, and, further, that the conditions are such that a court of equity will not intervene to enforce specific performance. I will not attempt to pass categorically upon the bill as to its sufficiency, except to inquire whether the questions presented are grave and,weighty, and difficult of solution, and such as to call for a maintenance of the status quo during the pendency of the 'litigation.
By the eleventh paragraph it is expressly stipulated that:
• “This agreement shall be binding upon and inure to tbe benefit of tbe successors and assigns of tbe respective parties bereto.”
The general rule is that the right of one party to a contract to its performance is assignable, unless the assignment is. unauthorized or forbidden by statute or by the terms of the contract itself. To this rule exist exceptions, and among them are contracts involving relations of personal confidence and contracts for personal service. -If reliance be had for performance upon the integrity, credit, or responsibility of a party, or confidence or trust be reposed in him personally, the contract is without assignability. And so it is if it be one for personal services, involving the exercise of knowledge, taste, or skill, for it is said to be considered contrary to .public policy that any person should exercise
The exceptions are concretely stated in Pollock on Contracts (4th Ed.) 425, as quoted in Arkansas Valley Smelting Co. v. Belden Co., 127 U. S. 379, 388, 8 Sup. Ct. 1308, 1309 (32 L. Ed. 246):
“Rights arising out of contract cannot be transferred if they are coupled with liabilities, or if they involve a relation of personal confidence such that the party whose agreement conferred those rights must have intended them to be exorcised only by him in whom he actually confided.”
But whether the contract falls within either branch of the exception is a question which must turn upon the intention of the parties, and must be eventually determined by consideration of the language employed, the kind of acts and services to be performed, and the nature and purpose of the contract itself. King v. West Coast Grocery Co., 72 Wash. 132, 129 Pac. 1081.
Now, turning to the contract, it is expressly stipulated that deliveries shall be made to any smelting plant owned by the Smelting Company, its successors, or assigns. Then follows the stipulation of the eleventh paragraph above quoted, respecting the binding effect and the inuring benefit to successors and assigns.
The parties have recognized the significance of this clause, by stipulating in the fourth supplemental contract that no assignment of the agreement shall be made without the consent of the Mining Company. This stipulation expired by limitation in June, 1915; but it serves to indicate, with much force, how the parties themselves regarded the primary stipulation.
In this connection, a matter is pertinent for consideration, though outside of any specific terms of the agreement. I refer to the Baruch purchase of the Smelting Company’s stock. The purpose of the purchase, with scarcely a question, was to enable the A. S. & R. Company to control the affairs of the Smelting Company; and, when the present agreement was entered into, it was, by the strongest probability, within the contemplation of the parties that it would be convenient, and perhaps serviceable, that the agreement he assigned to the A. S. & R. Company,-as it was designed that a large proportion, if not all, of the ores should, in the immediate future or at some stage of the time limitation of the agreement, be diverted to the A. S. & R. Company’s smelters. So that when the Tacoma smelter, in January, 1912, ceased the smelting of lead ores, it was but natural that an assignment of the agreement should be made to what is termed the parent company, namely, the A. S. & R. Company. Thus, by the assignment, eventually transpired just what the parties contemplated might or should come about in the course of legitimate dealings respecting the agreement. True, it may be, as claimed by counsel for the Mining Company, that the Smelting Company would have no interest in the agreement after it ceased to smelt lead ores, except the right to direct shipments to other smelters; but the assignment has accomplished the very purpose of diverting shipments, and the diversion now is entirely to the A. S. & R. Company’s smelters, and has put the A. S. & R. Company in a position to make the diversions in the stead of the Smelting Company. And
The assignment, it must be understood, cannot relieve the assignor of its obligations to the Mining Company under its agreement. 5 C. J. 879. But the Smelting Company having by the assignment delegated its performance to the A. S. & R. Company, and the’A. S. & R. Company by accepting the assignment having become bound to perform as the Smelting Company was bound in the first instance, the Mining Company has lost no remedial rights, but instead has been accorded a like remedy against the A. S. & R. Company to that it had against the Smelting -Company. In a broad sense, this is exactly what the parties from the very inception of the negotiations contemplated might happen.
I have examined with much care the cases of Arkansas Smelting Co. v. Belden Co., supra, Wooster v. Crane & Co., 73 N. J. Eq. 22, 66 Atl. 1093, Central Brass Co. v. Stuber, 220 Fed. 910, 136 C. C. A. 475, Swarts v. Narragansett Lighting Co., 26 R. I. 436, 59 Atl. 111, and Rice v. Gibbs, 33 Neb. 460, 50 N. W. 436, and 40 Neb. 264, 58 N. W. 724, and find no pertinent analogy of the facts upon which those cases are based to those of the present case, except the last cited. The Wooster Case is a good example of contract provisions which, as it was there held, do not render the contract assignable. The contracts purport to have been made between Lizzie E. Wooster and Crane & Co., their successors and assigns, and it was stipulated that: .
“The above agreements are made with the understanding that the said Crane & Co. and their representatives and assigns shall in substantial good faith keep and-perform their agreement hereinafter contained.”
Pitney, Advisory Master, states the pith of the controversy in a pingle sentence:
“I am,” says the master, “unable to construe it as a contract on the part of Miss Wooster to deal with anybody to whom Crane & Co: may assign umt contract and to accept such assignee as paymaster.”
Not so with the agreement of the parties here, which is specific that it shall be binding upon and inure to the benefit of the successors and assigns.
In the Nebraska case, it was held on the first hearing that the contract involved was assignable, and the ruling was not departed from on the rehearing. After setting forth the stipulation which it was claimed rendered the contract assignable, the court says:
*187 ‘‘The precise point in the construction of this contract is not whether it is in its nature assignable, so that, its conditions being performed, an assignee might enforce it, but whether or not the plaintiff in this case as assignee did perform or tender a performance of those conditions.”
So the case was determined upon the question whether the assignee had performed, thus in effect conceding the assignability of the contract.
Tiie record does not show in the Belden Case what provision was made in the contract respecting assignment.
Another suggestion is that the A. S. & R. Company has brought about an unlawful combination with other smelting companies, so that it has a monopoly of the market for the purchase of lead ores, and, for that reason, that it ought not to be allowed to prevail bore. While there is a surmise that such may be the case, the testimony in the record falls far short of establishing the fact.
I conclude that a preliminary injunction should issue restraining the Mining Company from disposing of any of its lead ores of normal grade to any other person or corporation than the plaintiff, and from itself smelting such ores in its own behalf, upon the giving of a bond by the plaintiff in the sum of $20,000, to indemnify the Mining Company for any loss it may sustain if the injunction be wrongful or without sufficient cause.
I will hear the parlies further, if they desire to be heard, as to the amount of the bond.