McKell v. Chesapeake & O. Ry. Co.

¶73SEVERENS, Circuit Judge

¶74(after stating the facts as above). It appears from the bill of exceptions that the presiding judge delivered an opinion in which he stated the grounds and reasons upon which he concluded that the plaintiff was not entitled to recover. This opinion is set forth therein, and shows that it was based upon a construction of the contract altogether different from that alleged in the petition. Taking it to be true that there was some kind of contract made, by the correspondence, he held that it extended only to such coal and coke as McKell hjmself should produce in a plant to be established on his land, and did not include the productions of others who might lease parts of his land, as to which he thought the language in the letter of Ingalls to McKell of March 31, 1892, imported an agreement that the company would make further contracts at the proper time, after McKell should have performed his contract by donating the right of way and putting in the coal and coke plants. Referring to this letter, the judge said:

“By tlie terms of the letter, wlioever donated that right of way and constructed the two plants would be given the option of shipping for himself, at the lowest rate made to any parties, or of entering into a subsequent contract with the defendant company as to the disposition of not less than 300,000 tons per year. Assuming there was an agreement here entered into for the building of the road, 1 am of the opinion that under the contract the defendant company agreed to make another contract with the party or parties who donated the right of way and constructed a coal plant of not less capacity than 1,000 tons per day and coke ovens such as are mentioned in this letter of March 31, 1892, if such party or parties did not themselves elect to ship coal. It does not appear that such other contract was ever made.”

¶75And the judge went on to refer to the manner in which the parties by their subsequent acts and correspondence in the progress of their business, particularly the correspondence between the company and McKell and his lessees, indicating how the parties understood it, and in which the judge, admitting that sometimes it favored the interpretation claimed by one party and sometimes that claimed by the other, concluded that upon the whole it favored the construction which the judge put upon it.

¶76It must be admitted that, if the contract was what the judge held it to be, there was no error in arresting the trial and directing a verdict, for it was not the contract allegéd in the petition. We do not understand that this is disputed. But we are unable to agree with the learned judge in his interpretation, of the agreement. We cannot think the parties intended to restrict their contract to a single mining plant to be established .on his land by McKell-and worked by himself, and did not include the production of other plants operated b)' other parties under leases made by McKell. On the contrary, it seems to us to have been contemplated that McKell would make leaser to other parties in subordination to his contract and as an aid in the execution of it.

¶77It is always of much importance in the interpretation of a contract, upon which doubt arises, to ascertain what was the attitude of the par*327ties to the subject, and to find out what was their main purpose and object in making it. If this can be done, the terms of the contract will be so construed as to promote the main purpose, if the language employed will fairly permit such construction. This statement of the general rule necessarily implies that explicit and positive language importing a different purpose cannot be overruled, but must be given its obvious meaning.

¶78On looking at the preliminary letter of McKell to Ingalls, of March 28, 1892, we find that the former had theretofore foreborne the development of his coal lands lying on Dun Loup creek, and had been holding them as an investment. Now he was considering a plan to make them productive, the time seeming favorable. Several parties had proposed to take leases, and some proposed to build a railroad, leading from the defendant’s railroad into this land, for the purpose of taking out the coal. Thereupon he suggests several propositions to the railway company, all of which he says are based upon the building of a railroad of about eight miles up Dun Loup creek; “also that operators on this branch shall have same in and out rates of freight on coal, coke, lumber, etc., as given to operators on main line on New River section.” The first proposition was this:

“The C. & O. R. It. Co. to build and operate said branch. Receiving from me deed for right of way through land owned by me. Also my procuring or paying cost, if condemned, for right of way not owned by me. Receiving also from operators to be secured by me a guarantee of a tonnage of freight that will be satisfactory to you.”

¶79The other proposition contemplated the building the railroad by himself, to be operated either by himself or by the railway company. Again he says:

“It has been my opinion that cheaper coal and colte must bo produced than possible on Xew River under costly method necessary on river front, or this coal and coke cannot maintain itself against close competition in dtili times from moro favorably located mines of other sections. Tf my revenue come's from royalties on the coal, more revenue will come to me if mines on my land can keep in the market at all times. If I want to sell any of my land, it will for the same reason bring a higher price.”

¶80The first proposition, above stated, was the one upon which the subsequent correspondence was based. It was in response to this letter that Mr. Ingalls wrote the letter of March 31, 1892, to McKell. The former knew what McKell’s objects were, and his letter was manifestly intended to provide a means by which McKell could carry them out and at the same time effect a profitable contract for his own company. To effect this, he makes for his company the following offer:

“To build a branch of reasonable cost for any parties who will furnish the right of way and who will agree to put in a coal plant of not less Ilian a thousand tons of coal per day and coke ovens that shall use one-third of the same, and who will furnish the coal at the same price as the I’ocalionias people do.”

¶81This is the first part of the contract he proposes. He says “any parties.” We think he has in mind that the right of way would be given by McKell, and that he, or those whom he should bring into relations with himself for operating the mines, would put in a coal plant and coke ovens of the capacity mentioned and would furnish the codl at *328the price prevailing in the Pocahontas region. Else, why did he not name the particular party he was dealing with? He seems to have recognized that there would probably be other parties engaged in producing the coal. Then the offer proceeds, still speaking of the other parties in the plural:

“We will agree then to take from them at this price whatever amount of coal they agree to furnish, not less than 100,000 tons a year; or, if they prefer to ship it themselves, we will give them the rate made to any parties.”

¶82This is the second branch of the offer proposed. And we can find in it no ground whatever for restricting its intended operation to the first branch of the contract, or to the particular method of development, whether by men hired by McKell or by lessees under contract with him. Then, when these parties thought they had finished their contract, McKell says to Ingalls in the letter of April 26, 1892:

“X will commence immediately to make leases and push my part of this contract with all promptness.”

¶83The contract is roughly framed and very crisp, but we cannot perceive any serious difficulty in understanding it. Though it relates to a matter of importance, we suppose the manner of it is not unusual with men dealing constantly with large affairs.

¶84Notwithstanding Mr. Ingalls supposed that the letters seemed “to correspond and clearly express our meaning,” and that they “will .form all the contract we shall need,” and the parties conducted the business for jrears as if they had a contract, counsel for defendant now insist that there never was a contract, and in argument press the fact that there was never any written acceptance of the fresh conditions which they find in McKell’s last letter of April 26, 1892. But it is a sufficient answer to this that the parties proceeded with their contract as if these supposed conditions were a part of it, and this was as effectually an acceptance as if they had been formally accepted.

¶85Another point which is strongly urged and much dwelt upon in argument is upon the construction of the particular language in Mr. Ingalls’ letter of March 31, 1892, where he says, “We will then agree to take from them at this piice whatever amount of coal,” etc., which they say means that the company will make a further agreement when the company shall have built its railway, and the other party shall have put in a coal plant and the coke ovens, the company will then agree, etc., and they attach the word “then” to the word “agree,” and not to the words “to take,” etc., and this seems to have been accepted as correct by the court below and made a basis of decision, for the judge said, concluding his discussion of the point, that “there never was a contract.” But we regard this language as indicating a mere sequence, and imports that the company agrees that, when the things mentioned have been done, the company will do the things following. Besides, an agreement to agree to do a certa'n specified thing, as here, is nothing else than an agreement in prsesenti to do it; all the conditions of the agreement postponed being specified. These parties seem never to have supposed that any such an agreement to make a further agreement, on that subject had been left unperformed, and that they were *329therefore going along without guide or compass. The argument upon this point is ingenious, hut not persuasive.

¶86Counsel for defendant also contend that the contract lacks the essentials of validity, in that it does not adequately express necessary conditions, such as place of delivery, amounts to be delivered per day or month, times of payment, and the like. But we think the intendments of the law are sufficient to supply all these details.

¶87\gain, it is urged by both parties that subsequent letters written and things done by them fortify,their respective conclusions in regard to the proper construction of the contract; and it is undoubted!}' true this is a species of evidence which ought to be resorted to in a case of doubt. As to this, it sufficiently appears from what we have said that we have felt no difficulty in arriving at the meaning of the parties in making this contract. But if this were not so, we should find little in the balance of opposing inferences to be drawn from the way in which the parties proceeded, to help us out. We are under an impression that the railway company, after the contract was made and its execution had progressed, paid more attention to h own interests than it did to the stipulations of the contract; and if the original plaintiff in the circumstances in which he was placed sometimes yielded to the company’s requirements, it would not be safe or just to treat such concessions as an interpretation of the contract. One thing of considerable significance is that the president of the railway should have so frequently taken a hand in the choice of lessees and their conduct in the performance of their duties as such. If the contract did not include their operations, it is difficult to see- what right the railway company had to meddle. Many letters passed between them while the business progressed, too many to warrant their insertion in this opinion. It must suffice to reaffirm what we have said that they furnish no clear indication of what the parties understood their contract to uean.

¶88This brings us to the question which the learned judge passed by as not necessary to the determination of the case, but which he commented upon, and cited certain cases in a way which seems to indicate his view. That question is: What was the intended duration of the contract? It is the largest question, in respect to value, in the controversy, and was the one most fully argued at the .hearing in this court. For the defendant, it is insisted that the contract was terminable at the will of either party upon notice given to the other. Inutile plaintiff, it is contended that it was to enduye so long as the objects ‘contemplated hv it should remain unfulfilled; that is to say, so long as the plaintiff would furnish coal from his tract in quantities not less than 100,000 tons a year. No limitation is expressed in the agreement. And in such case the rule seems to be that neither party can terminate it without the consent of the other, unless the nature of the contract itself indicates with sufficient clearness that the parties must have intended some other determination. Turning again to the stipulations of the contract, we see how impossible it is to believe that the parties intended that it should be terminable at any time, when either party should he so minded. On the contrary, it seems perfectly *330clear that they intended it should have a permanent duration. Its objects could not otherwise be fulfilled. What would the railway company have said if, after it had built the railroad and made ready to receive the coal, McKell had given it notice that he would neither sell the coal nor ship it by that road? Its disappointment would have been complete, and justly so. Or suppose the railway company, on McKell’s having deeded the right of way, turned over the survey, and incurred the expense of making preparations for mining coal and making coke, should have refused to go on and take the coal as agreed, either for transportation a,t the specified rate, or purchase it at the specified price ? It would undoubtedly have been a surprise to McKell and a reversal of his plans and expectations. He had relied upon the contract as the means of promoting his enterprise. What was to become of his leases, on which he relied for revenue?

¶89Counsel for defendant exclaim earnestly against the probability of such an extensive contract as it would be if for all the coal in 25,000 acres, and that such a construction as the plaintiff contended for would impose a great hardship upon the railway company, and therefore it should not be admitted. But it does not appear wliat amount of coal was, or was supposed to be, in the tract, nor what amount the railway company would need to have for its own consumption or that of others which it might supply. The railroad was a permanent institution, and its want of coal would go on for many years. And it may be that the railway company was anticipating the disposition of what it did not want to use to others, and make profit in its transportation, and, perhaps, in the resale. It is well known that at that time such a course of business was not uncommon.’ But a more conclusive answer is that-it should have been considered by the parties when they made their agreement whether it would impose too great a hardship upon them. The decisions upon the question we are now dealing with are not very numerous, but some of them are of high authority, and, if not controlling, are very persuasive. Some of which are cited in support of the contention for the plaintiff are Great Northern Ry. Co. v. Manchester, Sheffield, etc., Ry. Co., 5 De Gex & Sm. 138, decided by Vice Chancellor Parker in 1851, and said by Lord Justice James to have been the law of England since that time; Llanery Ry. & Dock Co. v. London & N. W. Ry. Co., L. R. 8 Ch. App. 942, affirmed by the House of Lords in L. R. 7 H. of L. 550, in 1875; Franklin Tel. Co. v. Harrison, 145 U. S. 459, 12 Sup. Ct. 900, 36 L. Ed. 776; Robson v. Mississippi Logging Co. (C. C.) 43 Fed. 364, affirmed by the Circuit Court of Appeals for the Eighth Circuit in 69 Fed. 773, 16 C. C. A. 400; and Western Union Tel. Co. v. Pennsylvania Co. (decided by the Circuit Court of Appeals for the Third Circuit) 129 Fed. 849, 64 C. C. A. 285, 68 L. R. A. 968.

¶90In the case cited from 5 De Gex & Sm. 138, two railroad companies had mutuallys agreed to grant each other running- privileges over their respective roads. There were no words in their contract fixing the duration of the agreement. The defendant contended that it was terminable by either party on notice to the other, and sought to avail itself of that privilege. But the Vice Chancellor held otherwise, and granted an injunction on a bill filed by the other party.

¶91*331In Llanery Ry. & Dock Co. v. London & N. W. Ry. Co., the complainant had agreed with the defendant, for a sufficient consideration and upon specified conditions, to grant to it the privilege of running trains over its road. As in the preceding case there was in terms no limitation or restriction in respect to the time during which the agreement should be operative. The complainant took the ground that it was terminable by it on giving notice, and proceeded accordingly by giving three months’ notice. The defendant, on the other hand, contended that it was a permanent and irrevocable contract, and res>r'"d the contention of the Llanery Company. The controversy reached the Chancery Court upon a bill filed by the latter company to restrain tlie other from running its cars over the road of the Llanery Company and for a declaration that the contract had been terminated. The case was decided by the Vice Chancellor upon an indifferent question. But the parties by agreement waived this, and the case was taken to the Chancery Court of Appeals, where it was heard by James and Mellish, L. JJ., each of whom delivered an opinion affirming the defendant’s contention that the contract was not subject to the will of either party, but was of mutual obligation and permanent in duration, and the bill was ordered to be dismissed. The complainant appealed to the blouse of Lords. The Law Lords who participated in the hearing were the Lord Chancellor Cairns and Lords Chelmsford, Hatherly, and Seldom. Counsel for defendant were stopped on the opening for the plaintiff. Each of the members delivered his own opinion, and the judgment of the Court ,of Chancery Appeals was unanimously affirmed. We have referred to this case thus fully because it seems directly in point and was argued and decided by lawyers and jurists of the highest reputation, and because, also, every point on the main question was elaborately considered. We cannot give space to an analysis of the opinions. In these two English cases the controversy was between railway companies, but there was nothing peculiar in the circumstances which affected the judgments. The discussions proceeded upon the general law of contract.

¶92In the case of Franklin Tel. Co. v. Harrison, 145 U. S. 459, 42 Sup. Ct. 900. 36 L. Ed. 776, a bill vas filed to obtain a decree restraining the defendant from terminating, or in any wise interfering with, the use by tlie plaintiffs of a telegraph wire upon the poles of the defendant between Philadelphia and Few York, and requiring the defendant to maintain such wire in good working order for the use of the plaintiffs and their licensees. .It was another mode of obtaining relief quite similar to that of a bill for specific performance of the contract therein alleged. Tlie contract did not specif}', as the majority of the court held, the time during which it should continue to be operative. The defendant had given notice of its purpose to terminate it. It is manifest that its right to do so vas a vital question in the case. If it had such right, the plaintiffs could not maintain their case. The court, by Mr. Justice Piarían, among other things touching this point, said:

“If it was intended that Harrison Bros. & Co., having relinquished their valuable contract with the Insulated Lines Telegraph Company and put tip the wire at their own expense, should become, after 10 years, only tenants *332from year to year of tlie telegraph company, that intention, it seems to the court, would have been distinctly averred.”

¶93The court accordingly held that the contract was intended to continue permanently, and that the plaintiffs were entitled to the relief prayed. It was so held, notwithstanding the inconvenience which might result to the telegraph company.

¶94In the case of Robson v. Mississippi Logging Co., the contract was between the owner of large tracts of land on branches of the Mississippi river, the Chippewa and Flambeau rivers, wherefrom he proposed to take the timber down the branches to the Mississippi, and there .equip it for further transportation. To do this would require several years. The Logging Company agreed to do what was required. By the contract rates and terms and the annual payment of the amount due for each season’s business were agreed upon. The Logging Company continued to perform its contract for seven years, and then, insisting- that it had the right to terminate the contract at will, gave notice of its purpose. Robson thereupon brought an action for damages. To a petition alleging the contract and its breach, the defendant demurred because it appeared therefrom that the contract “was silent as to the time during which it should remain in force, and the defendant had therefore the right to terminate it at its pleasure, or upon giving reasonable notice.” The demurrer was overruled upon an opinion filed by Judge Shiras, in which he discussed the question at some length. Subsequently the case was taken by writ of error to' the Circuit Court of Appeals for the Eighth Circuit upon findings of fact and law by the trial judge, whereon a judgment had been entered for the plaintiff. The Court of Appeals affirmed the ruling of the lower court.

¶95In Western Union Tel. Co. v. Pennsylvania Co. this subject was much, discussed in an able opinion by Judge Gray, speaking for the court, upon a contract whereby the Pennsylvania Company agreed to furnish and set upon its line telegraph poles with arms, and the telegraph company was to furnish and string wire thereon for the joint use of the two companies. It was held by the Circuit Court of Appeals that, as no time during which the contract was to be operative was specified, it was not terminable at the will of either party, and the judgment of the court below, which refused an injunction against the Pennsylvania Company restraining it from violating the contract, was reversed.

¶96Several federal Circuit Court decisions are cited by counsel for defendant in support, of their construction of .the contract, but they seem to us to be not entirely in harmony with the decision of the Supreme Court of'the United States in the case of Franklin Tel. Co. v. Harrison, above cited, and not, in all of them, to sufficiently observe the sanctity of contracts deliberately made. The same observation may be made regarding the case of Stonega Coal Co. v. L. & N. R. R. Co., 106 Va. 223, 55 S. E. 551, 9 L. R. A. (N. S.) 1184. The case before us is to be differentiated from those which relate -to contracts for personal service and special .confidence, where there is an implication that the *333parties intended that it should not be prolonged if either of the parties should become dissatisfied.

¶97Another point urged for the defendant is that the contract exceeded the powers of the president of the company, and, further, that it was not within the scope of the defendant’s franchise. As to the first, it seems quite clear that Mr. Ingalls was not merely the president, hut was also the business manager of the company. Enough appears to show that in this matter at least he was allowed a free hand, ¡hit it further appears that subsequently the company acted with full knowledge of it. upon the assumption of the existence of the contract for several years, and at no time signified its dissent.

¶98As to the objection that it was ultra vires of the company, we cannot perceive from anything in the record that it was so. Admitting for the sake of argument that the purchase of coal to sell again, and the motive was to thereby secure a profit by its transportation, would be outside of its charter powers, nevertheless the jury might regard the circumstances that the purchase of coal was a necessary incident to its proper business, and was likely to be so for a long time to come, blow much it would require was impossible then to estimate. Extensions might be made, mergers effected, or other combinations made, requiring more of coal than its present needs, but of all these considerations the compan)- would judge. The presumption would be that both parties intended a lawful contract, if there was no convincing proof to the contrary.

¶99The judgment must be reversed and the cause remanded, with instruction to award a new trial.

¶100Judge EURTON participated in the hearing and decision of this case, but is not now a member of the court.