136 S.E. 673 (Va. 1927), Mathieson Alkali Works v. Virginia Banner Coal Corporation

Citation:136 S.E. 673, 147 Va. 125
Opinion Judge:CHICHESTER, J.
Party Name:MATHIESON ALKALI WORKS, ET ALS. v. VIRGINIA BANNER COAL CORP., ET ALS.
Attorney:Buchanan & Buchanan, Hutton & Hutton, White Penn & Stuart, Rushmore, Bisbee & Stern, for the appellant. E. M. Fulton, W. H. Rouse, Walter H. Robertson and Joseph L. Kelly, for the appellees.
Case Date:January 20, 1927
Court:Supreme Court of Virginia
 
FREE EXCERPT

Page 673

136 S.E. 673 (Va. 1927)

147 Va. 125

MATHIESON ALKALI WORKS, ET ALS.

v.

VIRGINIA BANNER COAL CORP., ET ALS.

Supreme Court of Virginia

January 20, 1927

Appeal from Circuit Court, Dickenson County.

Suit by the Virginia Banner Coal Corporation and others against the Mathieson Alkali Works and others. From a decree construing the contract, defendants appeal. Reversed and remanded.

VIRGINIA REPORTS SYNOPSIS

Appeal from a decree of the Circuit Court of Dickenson county. Decree for complainant. Defendant appeals.

Reversed and remanded.

The opinion states the case.

Page 674

[147 Va. 128] Buchanan & Buchanan, Hutton & Hutton, White Penn & Stuart, Rushmore, Bisbee & Stern, for the appellant.

E. M. Fulton, W. H. Rouse, Walter H. Robertson and Joseph L. Kelly, for the appellees.

OPINION

CHICHESTER, J.

This cause has twice before reached this court upon appeal. The first appeal was dismissed by the appellant (alkali works), the second appeal was dismissed by this court as improvidently awarded (see Mathieson Alkali Works v. Virginia Banner Coal Corp., etc., 140 Va. 89, 124 S.E. 470). The practical result of this decision was that the chancellor should have construed the contract, which was the basis of the controversy between the alkali works and the coal corporation, before referring the cause to a commissioner to take proof on the issues raised therein. Upon receipt of the mandate from this court the trial court vacated the order of reference, and by decree entered on August 28, 1925, after the taking of much evidence introduced by both parties, the purpose of which was to assist the court in the construction of the contract, construed the contract against the contention of the alkali works. The present appeal is from this decree, and the question involved is the correctness of the construction adopted by the trial court.

[147 Va. 129] In 1917, the coal company owned a lease for a long term on a boundary of coal land, but it had neither funds, plant nor equipment to mine coal and hence was producing none.

The alkali works was an established manufacturing industry operating a large plant and using a large quantity of coal.

On September 1, 1917, a written contract was entered into between the alkali works and the coal company, which provided in substance as follows:

Page 675

First: (a, b, c) The alkali works agreed to loan the coal corporation $150,000.00, and the stockholders agreed to provide an additional $50,000.00 for the development of the premises and place same in condition for the delivery of coal as thereinafter provided.

‘ Second: (a) The alkali works agrees to buy and pay for and the coal corporation agrees to sell and deliver, f.o.b. cars at the mines, for and during the term of ten (10) years from April 1, 1918, until April 1, 1928, at the price hereinafter specified, the annual requirements of coal of the alkali works, estimated approximately at 200,000 tons per annum, to be delivered, as specified by the alkali works, in approximately equal monthly installments, of the following proportions and grades: 133,000 tons of nut and slack coal, such as will pass through bar screen, the bars of which are one and one-half inches apart; 67,000 tons of egg and lump coal, such as will not pass through bar screen, the bars of which are one and one-half inches apart, and will pass through bar screen, the bars of which are four (4) inches apart.

‘ The said two grades of coal shall be of such quality as is required, as of this date, by the United States Government for coal supplied to the Soldiers' Home at Johnson City, Tennessee, and shown upon the specifications hereto attached, marked 'specifications.’

[147 Va. 130] ‘ (b) Payment for the said coal shall be made by the alkali works to the coal corporation monthly, on or before the 20th day of each month, for the coal so delivered during the preceding month, price per ton to be paid by the alkali works for said coal shall be in the average per ton cost f.o.b. cars during the month in which the coal is mined, plus a profit of twenty-five cents ($0.25) per ton; provided, however, that in determining such price the item representing the cost per ton f.o.b. cars shall in no event exceed the 'standard cost’ as hereinafter defined, and, in the event that during any month the coal corporation's cost per ton exceeds such standard cost, the alkali works shall pay for the coal mined during such month standard cost plus a profit of twenty-five cents per ton. The term 'standard cost' as used in this agreement shall mean the average cost per ton f.o.b. cars for any such month or months of the coal mined by the Stonega Coal and Coke Company at their Southwest Virginia operations. In event detailed cost figures of said companies for any month are not available to the parties hereto, then the cost per ton to be charged the alkali works shall be the average cost per ton f.o.b. cars during said month of three efficiently managed and well located collieries at the time operating in the Southwest Virginia coal fields, which cost of production shall be determined from the best evidence by a majority of three competent, disinterested arbitrators, to be named as hereinafter, in section fourth, paragraph (a), provided; cost of any such arbitration to be borne equally by the alkali and the coal corporation.

‘ The alkali works, or its duly authorized agent, for the purpose of ascertaining the coal corporation's cost per ton, shall be entitled to demand and receive [147 Va. 131] from the coal corporation all information relating to and necessary for the matter of such determination, and to verify the same by an examination and audit of the books, records and accounts of the coal corporation.

‘ (c) The coal corporation agrees that all coal sales made by it to third persons shall be made subordinate to and dependent upon the said delivery to the alkali works of its average monthly coal requirements.

‘ If (for certain exempting causes) the coal corporation is unable to so deliver, or the alkali works is unable to use said coal, then and to the extent only of such inability either as the case may be shall be relieved of its agreement to deliver or to take said coal during the period of said preventing causes.

‘ (e) If the coal corporation for any other than the foregoing causes fail for seven or more consecutive days so to deliver to the alkali works its average daily requirements, then the alkali works shall have the absolute right to purchase in the open market the coal required by it and charge the coal corporation with the difference between the contract price and the price paid in the open market plus all additional costs incurred, or losses resulting from said failure; and the alkali works may cancel the whole contract if said excesses and losses shall not be paid in five days after demand.

‘ (f) If the coal corporation's failure so to deliver continues for a period of thirty days or longer, the alkali works during the remainder of the term of the contract shall receive its said requirements of coal at actual cost of production.

‘ Third: (a and c) To secure to the alkali works the performance of this agreement of the coal corporation to deliver coal as herein provided and the right to [147 Va. 132] manage the affairs of the coal corporation, the stockholders were required to deposit and pledge, with proxies attached, sixty per cent of the authorized capital stock of the coal corporation with the alkali works on condition (inter alia) that if the coal corporation fail to deliver the average coal requirement as herein provided for a period of thirty days or longer (excluding exempted periods) then and in such event the alkali works shall have the right to take and have full and complete power of voting sixty per cent of the capital stock for the remainder of the term of the contract at all stockholders' meetings of the coal corporation.

‘ Fourth: This section provides for the arbitration of questions relative to performance of the contract, quantities to be delivered, failure to deliver, costs, right of alkali works to take the stock, etc.‘

The original bill was filed by the coal company, alleging various breaches of the contract of September 1, 1917, which was exhibited with the bill, claiming large damages therefor, and also alleging an effort on the part of the alkali works to work the financial ruin of the coal company. The bill insisted that the contract required the alkali works to take 200,000 tons of coal per annum, and averred its willingness and ability to perform the contract as to quantity, quality and grades of coal to be furnished by it. The bill also prayed for a mandatory injunction to require the alkali works, in the future, to receive

Page 676

and pay for 200,000 tons of coal per annum, and also a large sum of money for having failed theretofore to take coal from it at that rate.

Subsequently, the alkali works filed its answer and cross-bill, claiming large damages for alleged breaches of the contract of September 1, 1917, on the part of the coal company.

[147 Va. 133] The coal company then filed its answer to the cross-bill in which it undertook to deny every affirmative allegation of new matter set up in the cross-bill. The cross-bill had set up the construction by the alkali works of the contract of September 1, 1917, on the subjects of (1) the quantity of coal the contract required the alkali works to purchase of the coal company annually; (2) the price per ton to be paid by the alkali works, and (3) the quality of coal to be furnished by the coal company. The answer of the coal company denied that the alkali works had put the proper construction upon the...

To continue reading

FREE SIGN UP