Eustis Mining Co. v. Beer, Sondheimer & Co., 239 F. 976 (S.D.N.Y. 1917)

A mining corporation and tbe owner of a smelter made a contract, whereby the former agreed to deliver to the latter the cinders produced from the ores it mined, not to exceed certain specified quantities each year, the lump and fine cinders to be in the same proportion as produced by tbe works burning tbe ore. A subsequent clause provided that it was the essence of the agreement that the mining company should ship cinders within the tonnage as specified as a first agreement, but should not be required to ship them from such a distance as would leave less than a stated profit per ton, and could sell its ore at such distances as to make shipment unprofitable, if it maintained at all times a supply sufficient to sell to burners from whom the cinders could be shipped to the smelter. Another clause provided that, if the mining company was unable to sell to the burners enough ore to produce the specified tonnage, it should be obliged to "ship only such cinders as were- produced from ores actually sold. Subsequently the contract was modified, so as to provide that the smelting company purchase the mining company’s total product of lump cinders, estimated at 12,000 tons per year, and 700 tons per month of fine cinders. It appeared that the cinders were the product obtained by burning tbe ore to extract the sulphur, and the quantity depended on the p. 977demand for sulphur. Because of the war the demand for sulphur greatly-increased, so as to increase the quantity of cinders produced; but the smelting company refused to receive more than 12,000 tons of lump cinders per year, and plaintiff sued for breach of the contract. Held, that the later contract, standing alone, required the smelting company to take the mining company’s entire output, and the provisions of the earlier contract did not indicate a contrary intention, since they were, at most, rendered merely ineffectual or operative only as to the fine cinders, or, if they were conflicting, they were superseded by the later provision.

Where defendant refused to accept any more cinders from plaintiff during the then current year, in violation of his contract to purchase the entire output, plaintiff cannot recover damages for refusal to accept cinp. 978ders produced within the year, but so late that they could not have been delivered to defendant until after the beginning of the next year.

Sixth. It is mutually understood and agreed that in the event that the party of the second part is unable, during the life of this contract, to sell, in. p. 980addition to the contracts now in force, sufficient ores to pyrite'burning concerns to produce the tonnages of cinder agreed to be shipped to the said leasing company in paragraph 2 herein, then the party of the second part shall only be obligated to ship to the said leasing company such cinder as is produced from the ores of the party of the second part which are actually sold and burned; excepting, however, that the party of the second part shall not.be obligated to ship hereunder cinder covered by a certain contract between the Nichols Copper Company, ending about March 28, 1913, and the party of the second part, and the contract with Beer, Sondheimer & Co. and the party of the second part, dated May 15, 1912, mentioned in paragraph 7 herein.

“It is further agreed, in regard to fine cinder, that you estimate your production two thousand (2,000) tons per month; that we have agreed to release from our option seven hundred (700) tons per month, which you are entitled p. 981to have for leaching and. sintering. Seven hundred (700) tons are to go to us as above. In regard to the balance of six hundred (600) tons, we are to advise you first of each year whether we desire to buy these six hundred (600) tons during the coining year at the terms of the above-mentioned contract, or whether yon are at liberty to use it yourselves or dispose of it elsewhere; and it is further agreed that in ease you should be unable to produce full two thousand (2,000) tons per month, as estimated, you are to be entitled to one-third (%) for your leaching, we to one-third (%) of the amount actually produced for our purposes, and one-third (%) to be subject to our option, to buy it or decline it as we see fit.

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 p. 984estimate 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.

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 p. 985competent 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.

[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 p. 986expected 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.

[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 abp. 987solved 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.