Eustis Mining Co. v. Beer, Sondheimer & Co.

239 F. 976 | S.D.N.Y. | 1917

LEARNED HAND, District Judge

(after stating the facts as above). The form in which this case is now presented is embarrassing to its disposition. Being dissatisfied with the decision of Judge Sheppard, who tried the cause and entered a decree for the plaintiff, the defendant moved before him for a reargument, which he found it impossible to grant, owing to his immediate departure for Elorida. He suggested that, in place of such a reargument, application for reargument be made to a local District Judge, and the defendant thereupon applied to me. The plaintiff consents that I may hear the application for a reargument, though the motion is certainly anomalous, but refuses to consent that the cause be reargued, unless as a condition I find that, under the rules governing such motions, the cause is proper for reargument. This is the reason for my embarrassment,' because I have obviously nothing to go on in determining whether Judge Sheppard omitted to consider some of the points raised, except his opinion, and every one knows that a judge disposes of much matter which he does not put in his opinion. Before I could, therefore, undertake to malee a new decision, especially one different in. result from Judge Sheppard’s, I should have to reach a conclusion upon that preliminary ■matter.

Although it therefore upsets the proper- order of consideration, I shall nevertheless first take up the points really at issue, and indicate my own opinion upon them, since it so happens that I agree with Judge Sheppard. This cannot prejudice the plaintiff, and, if it does not satisfy the defendant, at least it achieves that reconsideration o'f the case which is its-present object.

The main controversy turns upon the meaning of the letter of June 30, 1914, especially as to whether the phrase, “estimated to be 12,000 tons per year,” effects a limitation upon the general undertaking to accept the plaintiff’s “total production.” The defendant does not, indeed, urge that, standing alone, the clause would protect it; its position rather is that, taken in conjunction with the preceding and formal contract of February 11, 1914, either it becomes apparent that the intent was to limit the defendant’s obligation to’ 12,000 tons, or at the least that the resulting contract was so ambiguous as to admit extrinsic evidence of the meaning of the parties, as set forth below. Its chief reason for insisting upon a reargument is because it insists that Judge Sheppard showed in his opinion a failure to apprehend this position in detail.

[1] The defendant is, of course, on solid ground in saying that the two instruments must be read together, in so far as they may be reconciled with each other. It is equally solid ground to say that, in so far as they cannot be reconciled, the later must prevail. We start, moreover, with the assumption, which is not disputed, that, broken from the earlier contract, the second would have hound the defendant to accept the total output, regardless of its.amount. Brawley v. U. S., 96 U. S. 168, 24 L. Ed. 622. In judging how far this naked meaning may be changed by its setting, however, we must recognize, not only that there is a critical breaking point, as it were, beyond which no language can be forced, but that in approaching that limit the strain increases. To reconcile two clauses, whose native meanings conflict, we must therefore find the resultant of their several opposing forces. With this premise I may begin the detailed consideration of the contracts.

[2] In the earlier contract, the tonnages were máximums inserted for the plaintiff’s protection, and the fifth and sixth articles, the chief reliance of the defendant, were in further execution of that purpose. The fifth article may be paraphrased as follows:

“While the plaintiff is to give preference to the defendant’s deliveries, still it need not ship cinders where the profits are less than 50 cents. Vet, although it may ship ore to such points, nevertheless, in justice to the preference so acknowledged, it must keep in reserve enough ore to supply all sulphur burners within the 50 cent radius. In short, it must not allow the distant sales to trench upon its local cinder market, upon which the defendant shall have the right absolutely to rely without impairment.”

The sixth article is only complementary to the fifth; indeed, it is hardly necessar)'-:

“If the plaintiff fails to sell to sulphur burners out of the reserve ore kept on hand enough to fufill the tonnages of cinders specified, then it need ship only so much cinders as arise out of the ore actually sold. In short, it does not guarantee its market with the sulphur burners.”

Together these articles provide that, while the plaintiff is bound to fill all sulphur burners’ orders within the zone of cheap shipment up to the defendant’s possible ‘orders, -it was not liable for the absence of such orders.

Coming, now, to the application to the later contract of these articles, we need not be troubled by the reconciliation of the fifth. If we assume that the clause called for the acceptance of an unlimited production, it was even more necessary that the defendant’s calls should be preferred. It was proper, therefore, to provide that, if any sales were to be made beyond the 50 cent radius, they must not be at the possible expense of the local market. Such a clause fits as well upon the plaintiff’s interpretation of the second contract as upon the defendant’s. With the sixth article, however, it is different. If the clause in the later contract only binds the plaintiff to furnish its total production, it is absurd to provide against a deficiency in the sulphur burners’ production. They will produce as much as they produce in any event, and the plaintiff’s obligation is measured only by what they produce. On the other hand, if the plaintiff was bound to produce and the defendant to accept 12,000 tons, the clause was necessary.

If the article had occurred in the second contract itself, this might have created an embarrassment; but it does not. It is in an earlier contract, and it is one thing to have two provisions to- reconcile in a single contract, and another to determine whether a provision of an earlier contract should survive. Indeed, until we have decided that it was intended to survive, no conflict can arise; we are free to select that meaning which is most natural for the later clause, and say that all earlier provisions are superseded. To raise the conflict is already to beg the question, because the conflict presupposes the survival of the earlier provision.

But, even though it be assumed that the general purpose to preserve the earlier contract, so far as possible, could be specifically extended to'article 6, it would not, in my judgment, be sufficient. It must be remembered that there is no actual conflict between the two; the argument rests only upon the redundancy of the earlier clause, if it be preserved. It is not even wholly redundant, for it might be intended to provide against a possible supposition that the plaintiff was bound to fulfill its yearly estimates after they were made, or that it applied to the “fines” which were to be produced in stated quantities, though it is true the second contract carried its own excuse for failure to produce the required amount of “fines.”

Yet, even though the article survived and could not be construed as above, I should still, on the balance of interpretation, not be disposed to make its redundant presence control the language of the clause. The parties showed in the first contract that they could say so, when they meant to fix the plaintiff’s obligation quantitatively; and they showed it again in the second contract itself, as respects “fines.” They spoke of an “estimated” total production of “fines” in that very contract, but they did not agree that the defendant should take all, or even an aliquot share, of the production. On the contrary, they provided that it should take certain proportions of the sum at which the estimate was fixed, or less if the production was less. In short, they fixed by quantity their obligation touching “fines,” notwithstanding that they were thinking of its estimated, maximum. When we remember that “fines” were the less desirable part, requiring a special, or sintering,- machine, it seems to me impossible to resist the conclusion that, while the defendant did not suppose that it would get much more than 12,000 tons of “lump,” it was ready to take all that it could get. The surplus beyond 12,000 tons has no doubt turned out immensely greater than the defendant could have anticipated, which is a serious matter for it; but that does not change its actual purpose as expressed at the time of the contract. Article 6 I should therefore regard, if I had to reconcile it, either as applicable to “fines” only, as a protection against the statement of yearly estimates required of the plaintiff, or as a needless provision for any purpose, which did not overbear the meaning of the rest of the contract.

[3] This result the defendant resists, because of evidence dehors the writings. The evidence is of three sorts: First, the admission or declaration arising from the “Proposed Combination Agreement of April 8, 1915”; second, the contemporaneous negotiations of the parties; third, the general setting in which the contracts were drafted. The first consists of a proposed contract, proffered by the plaintiff, which it is alleged the accompanying correspondence shows to have been intended to subsume the existing contracts. The defendant’s theory is that it may be used as an interpretation of those contracts, certainly to the extent of proving how much of the earlier contract survived, because it is an admission by the plaintiff of what it thought those contracts, taken together, effected. The defendant does not, of course, suppose that the “Proposed Combination” could affect any actual obligations of the parties, since it was -never accepted; but it asserts that it shows which of the earlier stipulations must have been intended to endure. As articles 5 and 6 are incorporated in the “Proposed Combination,” with some important modifications, not necessary to consider, the defendant insists that the plaintiff has admitted that they were meant to continue.

This evidence is, I think, irrelevant to the issues, for a reason going to the very nature of a contractual obligation. It is quite true that we commonly speak of a contract as a question of intent, and for most purposes it is a convenient paraphrase, accurate enough, but, strictly speaking, untrue. It makes not tire least difference whether a promisor actually intends that meaning which the law will impose upon his words. The whole House of Bishops might satisfy us that he had intended something else, and it would make not'a particle of difference in his obligation. That obligation the law attaches to his act of using certain words, provided, of course, the actor be under no disability. The scope of those words will, in the absence of some convention to the contrary, be settled, it is true, by what the law supposes men would generally mean when they used them; but the promisor’s conformity to type is not a factor in his obligation. Hence it follows that no' declaration of the promisor as to his meaning when he used the words is of the slightest relevancy, however formally competent it may be as an admission. Indeed, if both parties severally declared that their meaning had been other than the natural meaning, and each declaration was similar, it would be irrelevant, saving some mutual agreement between them to that effect. When the court came to assign the meaning to their words, it would disregard such declarations, because they related only to their state of mind when the contract was made, and that has nothing to do with their obligations. This is, of course, a wholly different question from a preceding or subsequent agreement assigning an agreed meaning to any given words used in another contract. Marriner v. Luting, Fed. Cas. No. 9,104.

[4] The second class of evidence is of the negotiations which attended the execution of the contract of June 30th. As to these the rule of exclusion applies which the plaintiff invokes. Since the parties certainly intended, as appears by the mere character of the document, to make out of the writing a definitive memorial of their words, that intent the law will effect, and it can do so only by disregarding everything but the writing itself. Hence all other verbal expression must be eliminated; the writing is agreed upon as the final verbal act. The ambiguity of the written language does not determine this question in any way whatever, in spite of some occasional confusion of language in the books; but the exclusion of such negotiations depends upon their agreement to exclude, and extends so 'far as the parties have agreed that it shall exclude all but the written words, and no further. In the case at bar it is plain enough that the parties meant not to rely on the oral negotiations; that they wished to have a complete and final written memorial of their obligations. That purpose, being lawful, the court will fulfill by disregarding all other verbal expression, except that selected.

[5] The admissibility of the general surroundings in which the contract.was written (Merriam v. U. S., 107 U. S. 437, 441, 2 Sup. Ct. 536, 27 L. Ed. 531), rests upon quite a different basis, one which can be said with a nearer approach to accuracy to turn upon the ambiguity of the written words. All the attendant facts constituting the setting of a contract are admissible, so long as they are helpful; the extent of their assistance depends upon the different meanings which the language itself will let in. Hence we may say, truly perhaps, that, if the language is not ambiguous, no evidence is admissible, meaning no more than that it could not control the sense, if we did let it in; indeed, it might “contradict” the contract — that is, the actual words should be remembered to have a higher probative value, when explicit, than can safely be drawn by inference from surroundings. Yet, as all language will bear some different meanings, some evidence is always admissible; the line of exclusion depends on how far the words will stretch, and how alien is the intent they are asked to include.

[8] There remains to consider, therefore, the general situation of the parties as disclosed to each other, as an assistance in understanding their words. Now the total capacity of the defendant’s smelter was apparently about 36,000 tons of cinders, dependent in practice, of course, upon a corresponding amount of silicious copper ore which they expected to get from the Cobre mine. Just what the prospecta of that mine were does not definitely appear; indeed, being a mine, they must obviously have remained uncertain. In the spring of 1914 apparently they were not good, but the mine had been very irregular in its production, and Frohnknecht had at one' time given F. A. Eustis “the impression” that it would produce thousands of tons a month; he had told him that he expected more than he could handle, which would have been 3,000 tons a month. How much ore was actually forthcoming does not appear. The contract, article 4, perhaps gives some color to the plaintiff’s position that the defendant contemplated sales of the cinders, besides use of them at its smelter, though the matter is not clear. Therefore, while the supposed “abnormal” production of the plaintiff’s mine is in a sense true, because never before had there been 20,000 tons of “lump” cinders produced, yet it should be recalled that the defendant clearly contemplated the possibility of its needing 36.000 tons of “lump” and “fines” in February, 1914, else there was no conceivable reason why the plaintiff should have fixed its limit at that amount. Since by the amendment the “fines” were limited to less than 8,500 tons, that possible total consumption, if ever reached after June 30th, would have been filled by “lump” to the extent of 27,500, a more desirable situation for. the defendant, had it chanced to want 36.000 tons, than under the first contract. The consumption of 20,000 tons of “lump” by the'defendant does not, therefore, seem to me so completely out of the possibilities as to involve the gross injustice the defendant supposes.

[7] Still, I agree that the production occasioned by the Great War was a surprise to both sides, and that it was not within their forecast of the future. It is altogether likely that the defendant would have cried off upon the whole bargain, had they thought it probable. Contracts cannot, however, be treated so loosely; if parties wish more certainty, they must use more certain words. The case, therefore, ends where it starts, with the initial acceptance clause as the best indication of what the meaning was; it admits of no interpretation which does not distort it beyond what the words will bear. If it be necessary to treat the sixth article as superseded, I treat it so, rather than by an attempted reconciliation to wrest the words so far from their meaning. Budge v. U. S. Smelting & Refining Co., 104 Fed. 498, 43 C. C. A. 665 (C. C. A. 9), is the defendant’s best case; but it turned upon the buyer’s express undertaking to pay for specified amounts of timber, “about 600,” “about 15,000.” In addition, no doubt the seller was bound to furnish “all mining timbers required and used,” if they came to more than the minimums. T. B. Walker Co. v. Swift & Co., 200 Fed. 529, 119 C. C. A. 27, 43 L. R. A. (N. S.) 730 (C. C. A. 5). Smoot v. U. S., 237 U. S. 38, 35 Sup. Ct. 540, 59 L. Ed. 829, is not without some pertinence to the subject.

[8] The remaining question relates to the measure of damages. Cinder the contract the buyer was bound to accept the cinder as it was delivered, and without limit as to the amount which was tendered during the course of any calendar year. The refusal of the defendant to accept any greater tonnage during the year 1915 than 12,000 absolved the plaintiff from further deliveries during that year, but did not, of course, absolve it from proving by way of damages what added tonnage it- would have tendered during that year, but for the refusal. The defendant’s letters which contain this refusal must be understood to refer to the date of arrival; that is, to such cinders only as might arrive at West Norfolk during the year 1915. In his testimony E. A. Eustis says without contradiction that Erohnknecht told him (Q. 148, 149) that he then turned back to the plaintiff all “the production which was made in excess of 12,000 * * * produced during the latter part of the year 1915.” Strictly, this might be taken as including so much as was produced during the last two weeks or ten days of 1915, too late for arrival during 1915; but obviously it should not be so understood. The proper meaning is that the plaintiff need not tender any more of the cinder than it could have tendered during 1915. There is no evidence of what it coüld and would have tendered during 1915, and no basis for such damages.' Perhaps the parties can agree upon the amount produced before say December 15th or 20th, which it is safe to assume the plaintiff would have tendered. If not, the plaintiff may have the case reopened to present that proof. It is quite clear that to this extent the evidence needs reconsideration, and I am satisfied that Judge Sheppard would do so, if he could be consulted.

[ 9 ] The provisions that the plaintiff shall make yearly estimates, and shall ship, so far as practicable, in regular monthly installments, do not affect the result. Both these provisions endure, and the plaintiff must abide by them so far as possible; but the first only calls for a bona fide estimate, nothing more, and there is no evidence that the second was violated. The defendant’s objections throughout were to that construction of the contract by which they could be compelled to' accept more than 12,000 in any case, not to the irregularity of tire distribution.

The decree will be vacated, because of the matter of damages, and the cause stand over for further hearing to consider the matter above specified, unless the parties can adjust their difference out of court.

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Case Details

Case Name: Eustis Mining Co. v. Beer, Sondheimer & Co.

Court Name: District Court, S.D. New York

Date Published: Feb 17, 1917

Citation: 239 F. 976

Court Abbreviation: S.D.N.Y.