William C. Atwater & Co. v. Terminal Coal Corp.

• Decision Date: 15 March 1940
• Docket Number: No. 7280.,7280.
• Citation: 32 F. Supp. 178
• Court: U.S. District Court — District of Massachusetts
• Parties: WILLIAM C. ATWATER & CO., Inc., v. TERMINAL COAL CORPORATION.

32 F. Supp. 178

WILLIAM C. ATWATER & CO., Inc., v. TERMINAL COAL CORPORATION.

No. 7280.

District Court, D. Massachusetts.

March 15, 1940.

Charles J. Miller, of Boston, Mass., for plaintiff.

Alexander Whiteside, Warren Garfield, Whiteside & Lamson, and David Stoneman, all of Boston, Mass., for defendant.

FORD, District Judge.

This case involves the rights of the parties under a written contract for the sale and delivery of coal. The material parts of the contract are as follows:

"Coal Contract "New York, March 21st, 1934. "Old Colony Coal & Wharf Company "114 State Street, Boston, Mass "Bought of William C. Atwater & Company, Inc., Agent "Atwater Pocahontas Smokeless Coal "Requirements, not exceeding 50,000 Tons R.O.M. See statement attached. 100,000 " Slack 5/8" " " " approximately 70% Slack 5/8" " Stoker 1¼" " " " "Delivery See statement attached. "Contract effective April 1st, 1934, Contract expires March 31st, 1935. "Remarks For shipment to New England as ordered by Old Colony Coal & Wharf Co., Boston, Mass. (Excluding Fall River, Mass., and territory adjacent thereto.) "William C. Atwater & Company, Inc., Agent "By Geo. H. Lachnicht, Sales Manager. "Old Colony Coal & Wharf Company "March 26, 1934. By Jos. W. Gorman, V.P."

On a statement attached and made part of the contract appears the following:

"Delivery: Unless otherwise mutually agreed, the coal covered by this contract shall be taken by the buyer as follows:

"Run of Mine. During the months of May, June, July, August, September and October, 1934, approximately 3,000 tons monthly; during the months of April, November and December, 1934, and January, February and March, 1935, approximately 5300 tons monthly.

"Slack, 5/8 ". During the months of May, June, July, August, September and October, 1934, approximately 4,000 tons monthly; during the months of April, November and December, 1934, and January, February and March, 1935, approximately 7700 tons monthly.

"Stoker, 1¼". During the months of May, June, July, August, September and October, 1934, approximately 1800 tons monthly; during the months of April, November and December, 1934, and January, February and March, 1935, approximately 3200 tons monthly."

In the conditions attached to the contract appears the following: "5. The coal covered by this contract is to be used only in the yards or plants of the Buyer, and is not to be diverted by the Buyer to other purposes without the consent of the Seller."

The defendant Terminal Coal Corporation was organized May 29, 1928 under the name of Old Colony Coal & Wharf Company (hereinafter called Old Colony) for the purpose of conducting a coal company in New England. The change to Terminal Coal Corporation occurred August 11, 1934. The company owned a lease of part of the Mystic Wharf in Boston and handled shipments of coal at tidewater for sale in New England. Old Colony remained in business until August, 1934, when it sold its assets and good will to the Carter Coal Company (hereinafter called Carter) and then liquidated.

On September 7, 1928, Old Colony and the North American Coal Corporation (hereinafter called North American), the latter an Ohio corporation, of which one Frank E. Taplin was president and had the controlling interest, entered into an agreement by which Old Colony agreed to purchase its requirements of coal through North American. Taplin was an original subscriber and owner of 50% of the total capital stock of Old Colony and was also its president. Joseph W. Gorman was vice president of Old Colony, as owner and original subscriber of a quarter interest in the stock of the latter, and had full charge of the management of it from 1929 until the sale to Carter in 1934. Gorman was also a vice president of North American.

From about 1912 to 1935 North American was the exclusive selling agent for Atwater coal in the Middle West and Great Lakes territory. Outside this agency agreement the plaintiff (hereinafter called Atwater) sold its coal to North American for shipment to New England and up to 1934 all coal shipped to Old Colony's Mystic Wharf was sold and consigned on account of North American.

In November, 1933, Gorman requested Atwater thereafter to send its invoices for coal to Old Colony rather than to North American. The North American had and did guarantee payment for all coal actually shipped to Old Colony. In 1933, shipments were being made to Old Colony under a contract between Atwater and North American dated June 1, of that year. This contract was to expire by limitation March 31, 1934. On March 21, 1934, the present contract in suit was entered into between Atwater and Old Colony, the latter, as stated, being substituted for North American by consent of all parties. The contract was executed in New York.

The main controversy in this case centers around the construction of this contract.

The plaintiff contends that it is a bilateral contract for the sale of a definite and specific quantity and tonnage of coal, to wit, 150,000 tons. On the other hand, the defendant contends it should be construed as an ordinary "requirements" contract, i. e., for the coal requirements of Old Colony not exceeding 150,000 tons.

To construe the type of contract in suit, it is necessary to look for the "dominant measure" of the material to be furnished, Smoot v. United States, 237 U.S. 38, 42, 35 S.Ct. 540, 59 L.Ed. 829. Other cases have employed other phrases, such as, "determinative words", Brawley v. United States, 96 U.S. 168, 24 L.Ed. 622, "dominating specification", Marx v. American Malting Co., 6 Cir., 169 F. 582, and "determining words", Budge v. United Smelting & Refining Co., 9 Cir., 104 F. 498, 500.

In the contract in suit Old Colony stated its requirements as not exceeding a certain amount. This language seems plain. The very essence of a requirements contract is that the amount needed cannot be exactly defined at the beginning of the year and it is for this reason that a contract of this type which deals with future needs is entered into. The natural and plain meaning of the contract in suit is that the needs, or requirements, of Old Colony for coal for the period of the contract would not be more than 150,000 tons and might be less. Thus, it would appear that the measure of the coal sold was "the requirements of the defendant for the period stated." The contention of Atwater that the "150,000 tons" is the dominant measure is without merit. To accept such a construction would be to give no effect whatsoever to the word "requirements." This would be avoiding the plain meaning of such an expression, well known in coal and other contracts for material. We cannot take the word "requirements" from the context and cast it aside as meaningless, as the plaintiff would want us to do, nor can we restrict its plain meaning in such a manner as to make it entirely nugatory.

The two cases mainly relied on by the plaintiff, Budge v. United Smelting & Refining Co., supra, and Taxi Service Co. v. Gulf Refining Co., 252 Mass. 314, 147 N.E. 863, do not warrant a contrary conclusion. The Budge case hinged on the fact that the Court construed the contract to mean that the buyer expressly promised to pay for definite amounts of timber of two different kinds. Here, the promise was to pay for "requirements" and not for any definite amount. In the Taxi Service case, 252 Mass., page 321, 147 N.E. 863, the Court intimates it would have given effect to the word "required," if it were present in the contract itself. Certainly, the word "required" in the Budge case would have been given effect if the buyer needed more than the minimum amounts named for which he expressly agreed to pay.

The fact that in the statement attached to the contract and made a part of it deliveries for specified tonnages were provided for does not make it a contract for a definite tonnage. This clause was obviously inserted, as such provisions usually are, for the convenience of the seller and was a provision for deliveries of hoped-for orders. The coal was to be shipped as the contract itself said, "as ordered," and the evidence in the case showed that the clause relating to delivery of the tonnage specified therein was merely for the purpose of preventing the plaintiff-company from having any "free coal" (coal mined but not ordered) on hand at any time. Atwater preferred, for obvious reasons, not to mine coal until ordered. This specification of quantities was not controlling and did not have the effect of compelling a determination that the contract in suit was for a definite amount of coal. Cf. Kellogg et al. v. Norman, 74 N.Y. 596; Texas Co. v. Pensacola Maritime Corp., 5 Cir., 279 F. 19, 24 A.L.R. 1336; National Publishing Co. v. International Paper Co., 2 Cir., 269 F. 903; Worcester Post Co. v. W. H. Parsons Co., 1 Cir., 265 F. 591.

Although the plain meaning of the terms of the contract seemed to require that it be construed as a requirements contract, yet in view of the possibility that there might be some ambiguity present, the defendant was permitted to introduce oral evidence concerning the circumstances surrounding its execution and the following conduct of the parties concerning it. Vice president Gorman of Old Colony, who had been in the wholesale coal business for about thirty-five years, in the negotiations for the contract in suit, testified, and I find it to be a fact, that he reminded the representatives of Atwater that Old Colony was for sale and a buyer would not want to take it with a contract "for definite tonnages." The representatives of Atwater assured Gorman, who was representing Old Colony, "that we will make it a requirements contract and you can take care of yourself that way. We will make it a requirements contract the same as you took care of yourself last year." This evidence was not denied in any particular by Atwater. The evidence showed the 1933 contract between Atwater and North American (Old Colony being substituted for the...