202 F.2d 664 | 9th Cir. | 1953
Lead Opinion
This is an appeal from a judgment of the United States District Court for the District of Montana, awarding damages for breach of a leasing agreement of mining properties by Chromium Products Corporation, hereafter called Chromium, to Metals Reserve Company,
This Act of June 25, 1940, stated in its preamble that it is enacted “In order to aid the Government of the United States in its national-defense program”. At that time Germany had invaded Norway. The Netherlands (after the aerial bombardment of Rotterdam) had surrendered as had-Belgium. Italy had entered the war. The Germans had crossed the Marne and entered Paris and the Franco-German armistice negotiations had begun. The purpose of the legislation was to prepare for a likely second World War. So also was the lease with Chromium for its chromium ores, producing a metal essential to the hardening and rust-proofing of the steel used in munitions for all the Armed Forces.
The lease, as will be seen, was drawn by Metals Reserve Company as a separate entity from the government as sovereign, for it expressly provides for governmental action affecting its corporate performance. The compensation to Chromium is in royalties to be paid it on the chromium ore mined by Metals Reserve. It is agreed in paragraph 9 of the contract that “Beginning January 1, 1942, and thereafter during the term of this lease Lessee agrees to pay Lessor a minimum royalty of Thirty Thousand Dollars ($30,000) per year payable quarterly on or before thirty days after the end of each calendar quarter. In the event that the total royalties payable under Paragraph 4 hereof during any calendar year shall equal or exceed Thirty Thousand Dollars ($30,000) this minimum royalty obligation shall be fully complied with * *
Metals Reserve at any time on ninety days’ notice to Chromium could terminate the lease upon payment of $1,000.00 and the royalty or minimum royalty then accrued. Metals Reserve also was to be relieved from payment of the minimum royalty during a period of suspended operations by a specific provision of paragraph 9 of the lease.
By these two provisions Metals Reserve could terminate the contract if it became apparent there was no further war need for
The specific provision of paragraph 9 for suspending the mining operation is:
“ * * * provided, however, should Lessee’s construction or development or mining or milling operations or any other operation hereunder be suspended because of any of the causes or reasons-set forth in Paragraph 29 hereof Lessee’s obligation to pay a minimum royalty as aforesaid shall be suspended during -any and all periods where such causes or reasons exist and the obligation to pay such minimum royalty shall be reduced in such. proportion as the period of suspension -of operations bears to the entire calendar year.” (Emphasis supplied.)
The portion of paragraph 29 above referred to which is pertinent here is: “Anything in this Lease contained to the contrary notwithstanding, * * * any requirement, regulation, restriction or other act of any government * * * which, is beyond the control of the lessee or which delays or interferes with the performance of this agreement, shall be considered sufficient justification fbr delay in such performance until such cause ceases to exist.” (Emphasis supplied.)
Under this war expectant contract it is to be noted that it is “any” requirement or restriction of “any” government for which provision is made.
Chromium contends in effect that the words “any restriction” do not mean what they say, but that the only restriction applicable is one by a broad general regulation such as that in Horowitz v. United States, 267 U.S. 458, 461, 45 S.Ct. 344, 69 L.Ed. 736, and in Jones v. United States, 1 Ct.Cl. 383. Neither of the cases consider a contract in which the government could impose “any” restriction. Applying the usual canons of construction of contracts, we are required to give effect to the word “any” and not make it negatory by confining it to a single kind of restriction.
Chromium likewise contends in effect that the words “any government” do not mean what they say but that they exclude the Government of the United States. Here again the ordinary rule of construction requires us to give effect to the word “any” by including, the Government of the United States.
Chromium also contends that the contract is not with Metals Reserve Company as a separate corporation, but directly with the United States because that corporation is an agency of the United States. This it contends although Chromium did not sue the United States but Metals Reserve’s successor in interest, the Reconstruction Finance Corporation. Here again is applicable the rule that we must give effect and not make negatory the contract’s carefully-drawn distinction'between the provision of the corporate agreement to mine chromium and its provision that the government may “restrict” such action by the corporation. Under the contract Metals Reserve could not suspend operations by its corporate action. It could be done only by the government, an act beyond the corporate control of the lessee. The situation is that of the corporations in U. S. ex rel. Skinner & Eddy v. McCarl, 275 U.S. 1, 6 et seq., 48 S.Ct. 12, 72 L.Ed. 131; Reconstruction Finance Corp v. J. G. Menihan Corp., 312 U.S. 81, 61 S.Ct. 485, 85 L.Ed. 595; Farm Security Administration v. Herren, 8 Cir., 165 F.2d 554. The case of Cherry Cotton Mills, Inc., v. United States, 327 U.S. 536, 66 S.Ct. 729, 90 L.Ed. 835, dealt with a contract having no such provision.
The anticipated second World War began on December 7, 1941, before the first payment of the royalties became due on January 1, 1942. On February 24, 1942, the President transferred the control of the Metals Reserve Company to the Secretary of Commerce. Metals Reserve continued the operations under the lease and the payment of royalties until the performance of the agreement on December 31, 1943, was “restricted”- as to mining operations but
We regard this “restriction” of the corporation’s operations as the sovereign’s act, being one provided in the specific provision of the proviso of paragraph 9 invoking paragraph 29 of the lease, supra, for suspending mining when such action is by restriction by the government.
By the President’s Executive Order No. 9024,
The letter detailed the underlying facts and reasons for the Chairman’s “plans and procedure” and then stated that “In view of the present stringent manpower situation and the lack of need for Montana concentrates as outlined above, we believe it advisable to divert the men now employed in mining low grade chrome concentrates in Montana into the production of more critically needed materials such as copper and zinc. We, therefore request that you shut down all operations at the Benbow and Mouat-S amp son properties except for such maintenance men as are necessary to keep both mines and mills in sufficiently good condition so that either or both operations could be revived in the event that the chromite picture should change for the worse.” (Emphasis supplied.) It was pursuant to the requirement of this letter that the mining operations were suspended.
Such a Presidential restriction of the miners’ operations so diverting them to the production of the “critically needed” war materials of copper and zinc is as much a governmental operation as a Presidential order that soldiers should be removed from one field of battle to another.
We think that the delay in the operations of the mine caused by the action of the government relieved the Metals Reserve Company from the liability for the minimum royalty. The judgment is reversed and judgment ordered entered that Chromium take nothing by its complaint.
. The properties, etc., of Metals Reserve Company were later transferred to the Reconstruction Finance Corporation (hereafter referred to as R.F.C.), a corporation wholly owned by the United States, by statute, Joint Resolution June 30, 1945, 59 Stat. 310, 15 U.S.C.A. § 611 note. R.F.C. is the defendant in this action.
. “3. Federal departments, establishments, and agencies shall comply with the policies, plans, methods, and procedures in respect to war procurement and production as determined by the Chairman [of the War Production Board] * *
. “The Chairman of the War Production Board may exercise the powers, authority, and discretion conferred upon him by this or any other Order through such officials or agencies and in such manner as he may determine; and his decisions shall be final.” (Emphasis supplied.)
. Since Congress gave the President the power to make such orders, the contention that Batcheller was acting merely as a “vice chairman” and not for the government, as a warring sovereign, is without merit.
Dissenting Opinion
(dissenting).
The Government’s corporation has interposed a specious defense which the majority have sustained by what seems to me to be an over-simplified treatment of the problem here, which is one of interpretation of a paragraph in this lease.
I know of no reason why the lessee, creature of the Government, might not stipulate in its contract that the minimum royalties bargained for shall cease to be paid whenever the Chairman of the War Production Board makes a “requirement” that such payments stop. But such an extraordinary, one-sided, and delusive arrangement should be found only when clear language to that effect has been used.
A fair reading of paragraph 29, and all of it, — not just a detached phrase thereof,— will disclose no intent to ignore or do away with the distinctions made in Horowitz v. United States, 267 U.S. 458, 45 S.Ct. 344, 69 L.Ed. 736, in Jones v. United States, 1
None of those cases involved the construction of contract language such as that in paragraph 29. But what they all point out is that inherently, and in the nature of the case, there are two types of acts which the Government may do, or perform, after it, or one of its corporate agencies, has made a contract with private citizens. Thus the appropriate Government authority may enact or promulgate a rule or order, public and general in character, which is a manifestation of its sovereign power, which puts a stop to further performance of any such contract. On the other hand, the Government officer authorized to act for the Government, or to give orders to its corporate agent, may simply direct that there be no further performance of this particular contract by the Government or its agency, and thus bring performance to a stop.
The Horowitz case makes it plain that a stoppage on account of the former type of acts, those it describes as “its public and general acts as a sovereign” give rise to no liability. Such acts excuse performance by the Government of its contracts just as those same governmental acts furnish an excuse to a private obligor. Conversely, if the other type of act by a government agent brings about a stoppage of performance contracted for, there has been an actionable breach of contract.
Appellant contends the distinctions noted in these cases are not applicable here because this lease was executed by the corporate agency, not by the Government itself. That argument misses the point. What we must determine is what is an act of “any government or governments” as described in the lease. The man who gave the order to stop was, no doubt, on the public payroll, but the question remains, was he then acting in the sense of this language in paragraph 29, or was he merely functioning as an-officer authorized to give directions for corporate action?
Those distinctions are verities in the light of which the lease here in question must be deemed to have been made.' The parties-to the contract must be taken to have had! them in mind when the lease was drawn. And we must remember them as we read
This paragraph discloses nothing different from the sort of thing which would likely be inserted in any similar lease between private parties. Its reference is to the “requirement, regulation, restriction or other act of any government or governments”. (Emphasis supplied). Clearly it refers as adequately to the State of Montana as to the United States. And it concludes its long list of excusing acts, beginning with “strike, lockout”, and proceeding through “accident”, “fire”, “war”, “acts of public enemies”, “inability to secure * * * supplies * * * or electric power”, with the statement “and any other contingency, whether or not of the nature or character hereinbefore specifically enumerated, which is beyond the control of Lessee or which delays or interferes with the performance of this agreement. * * * ”
Surely there is nothing here to warrant the bizarre result reached by the construction the majority opinion places upon this very common-looking paragraph. Such a construction is incongruous, for while I do not question the possibility of the Government, or one of its corporate agencies, stipulating that only the other party to one of its contracts shall be bound, and that the mere ipse dixit of some vice-chairman speaking for the public obligor, shall serve to release the latter, yet the likelihood of such being the intention seems highly improbable. The Government does not usually try to drive any such one-sided bargains with its citizens. I do not think it or its corporate creature intended to do so here.
The fact that when the Metals Reserve Company was created, and the lease was executed Rotterdam had been bombed, the Germans had entered Paris and the war in Europe was on, does not mean that the language of this lease can be construed otherwise than in accordance with the principles of general contract law, or differently than if it were one between individuals. In Priebe & Sons v. United States, 332 U.S. 407, 68 S.Ct. 123, 92 L.Ed. 32, the contract construed was made almost a year after the date of this lease, and at a time when Pearl Harbor had been added to the warlike acts listed in the majority opinion. That contract was in aid of a program to assist the same nations under attack by the same Germans. The court there said, 332 U.S. at page 411, 68 S.Ct. at page 125: “It is customary, where Congress has not adopted a different standard, to apply to the construction of government contracts the principles of general contract law. United States v. Standard Rice Co., 323 U.S. 106, 111, 65 S.Ct. 145, 147, 89 L.Ed. 104, and cases cited. * * * We adhere to those
Ever since Sir' Edward Grey, a generation earlier,, said “The lamps are now going out all over Europe”, the world has been confronted with a series of crises, but, as the case just cited shows, the Government still enters into contracts whose meaning must still be determined by ordinary standards.
Here the vice-chairman gave the direction that the Metals Reserve Company “shut down all operations at the Benbow ■ and Mouat-Sampson properties”. In type or kind of act this is no different than the act of a private corporation whose stockholders, pursuant to charter power, require the officers to cease performance of a contract.
The excuses listed in paragraph 29 cannot fairly be construed to refer to that kind of act. The vice-chairman’s order to stop has no resemblance to that sort of thing which under the common construction of such a clause, would be “beyond the control of the lessee”.
There is other language in the lease which indicates that the purpose of paragraph 29 was not intended to give the Government, or its creature, any different type of excuse for nonperformance than the same paragraph would supply to a private lessee. Thus paragraph 17 permits the lessee, on ninety days notice to the lessor, and payment of $1000 to surrender and terminate the lease. This is a paragraph inserted for the exclusive benefit of the lessee.
I cannot believe that the Government intended to drive any such sharp bargain with its citizens. And my reading of this contract proves to me that it has no language susceptible of a construction so unnatural as that put forward here.
. And, with, particular reference to the situation here, if the agent in question is one authorized to give orders to a government corporation, and his order to stop performance is obeyed by this corporation, the latter has simply breached, its contract.
. Not the least interesting thing about the majority opinion is that it has so abbreviated paragraph 29 as to make it appear to say: “any requirement, regulation, restriction or other act of any government”, etc. It then charges appellee with arguing that the words “any restriction” do not mean what they say. If all the omitted words are inserted between the word “any” and the word “requirement”, the effect is quite different. That is, the paragraph does not say “any requirement”.
. Cf. S.R.A., Inc. v. Minnesota, 327 U.S. 558, 564, 66 S.Ct. 749, 90 L.Ed. 851; Reading Steel Casting Co. v. U S., 268 U.S. 186, 188, 45 S.Ct. 469, 69 L.Ed. 907.
. It has been suggested that Congress, under its power to make war, might acquire the sinews of war by conscription. See Lichter v. United States, 334 U.S. 742, 766, 68 S.Ct. 1294, 92 L.Ed. 1694. But neither Congress nor the Executive chose to take this mine in that way. Instead a contract of lease was made. In fact, the Renegotiation Act dealt with in the Lichter case, supra, which defines the Metals Reserve Company as a “Department” along with the departments of the Army and the Navy, expressly provides that its terms shall not apply to a lease such as that here involved. 50 Appendix, U.S.O.A. § 1191,(i) (B).
. The opinion takes issue with appellee’s argument that the contract, viewed realistically, was one with the United States, which acted through its agency, Metals Reserve Company. Cherry Cotton Mills, Inc., v. U. S., 327 U.S. 536, 66 S.Ct. 729, 90 L.Ed. 835, would appear to support that view. As I see the matter, the position of the opinion that the contract was with Metals Reserve Company as a separate corporation makes even more clear the error into which the majority have fallen. Proceeding from this premise of theirs the next question is, was the decision to stop mining corporate action, or was it governmental action? The mere circumstance that the man who gave the order was on the public payroll did not make him any the less the human being who directed and ordered the specific action which was here taken, and which was definitely nothing but corporate action.
. Obviously .this was the real reason for the stop order, for if the ore were needed, stoppage would not have occurred.
. The opinion’s fustian references to the panoply and sounds of war, patently an afterthought, and wholly without meaning in the context of the opinion, might be excused if the majority were making the equally untenable argument that the paragraph’s reference to “war, foreign war, hostility”, furnished a defense here.
. This variety of action, which is referred to in the Horowitz ease as governmental “public and general acts as a sovereign” would no doubt include also some orders directed to a single mine. Thus the State of Montana might, under a mine safety act, find the mine workings hazardous and order operations closed down. The substance of such an order would be: “Pursuant to our general rule that an unsafe mine shall not be operated we have found that your mine is hazardous and must be closed.”
. It reads as follows: “17. The Lessee may at any time, on ninety days notice to Lessor and by the payment to the Lessor of the sum of One Thousand Dollars ($1,000), surrender and terminate this Lease, provided that, promptly after snch termination, Lessee shall pay all royalties, if any, accrued up to the effective date of such termination, any guaranteed minimum royalty payable to be prorated up to the date of such termination and no royalties shall accrue after the date of such termination.”
