Alaska Placer Co. v. Lee
| Decision Date | 04 June 1969 |
| Docket Number | No. 847,847 |
| Citation | 455 P.2d 218 |
| Parties | ALASKA PLACER COMPANY, Appellant, v. Richard E. LEE and Phyllis Lee, Appellees. |
| Court | Alaska Supreme Court |
Charles E. Cole, Fairbanks, for appellant.
Joseph Rudd, of Ely, Guess, Rudd & Havelock, Anchorage, for appellees.
Before NESBETT, C. J., and DIMOND and RABINOWITZ, Justices.
Appellant owned 15 tin mining claims on Cape Creek, near Nome, Alaska. In March 1965 appellees entered into a written agreement with appellant to purchase the claims for $400,000. The purchase price was payable $2,500 in cash upon execution of the agreement, $5,000 from smelter receipts from the 1965 production, and the balance in annual payments equal to 15 percent of the annual net mineral production of tin concentrates.
Appellees were to work the mines to their full capacity. It was provided that if appellees failed to perform their part of the agreement, appellant had the option to forfeit appellees' interest in the property. Upon notice of forfeiture being given, appellees would have 30 days to remedy the failure to perform. If appellees' failure to perform was not corrected within the 30-day period, they agreed to quit the premises and surrender possession to appellant.
On October 5, 1965 appellant sent a telegram to appellees giving notice of forfeiture of their interest in the mining claims, 'for non-performance of minimum requirements among other reasons.' Appellees failed to vacate the claims, and in March 1966 appellant brought this action to enjoin appellees from mining the claims. After a trial the court entered judgment for appellees and appellant then brought this appeal.
Paragraph (3) of the agreement provided as follows:
Lee covenants and agrees at his own expense, to be on the mining properties with the proper and sufficient mining equipment, and with a sufficient working crew to actively work the mines in a good workmanlike manner to its full capacity of production on the first day of each year when weather conditions are such that a reasonable and prudent operator interested in securing maximum production from his own property would be on the same or similar property in the Nome area and continue to work said mining operation in such fashion continuously each day (seven days per week) thereafter so long as weather conditions are such that a reasonable and prudent operator would continue to work in. Lee agrees to work in said manner and for said time each year of the term hereof until the purchase price has been paid in full. For the purposes of this paragraph, 'sufficient working crew and equipment' shall be defined as requiring the following minimum workers:
Equipment and skilled workmen required to work said property in a minerlike manner so as to deliver at least 1200 tons of ore bearing material to the washing plant on said property each production day.
The obligations of Lee under this paragraph are subject to Acts of God, strikes or other matters over which he has no control.
During the 1965 mining season, between July and October, only 3,500 tons of material were delivered to the washing plant. Appellant claims that this amounted to a default on the part of appellees, since the language of paragraph (3) of the agreement required the delivery to the washing plant of 1,200 tons of ore bearing material each production day. Appellees contend that this is not what the agreement calls for-that the 1,200 ton requirement merely defined a standard of capability and was not a requirement of the contract. The trial judge agreed with appellees. In his oral opinion he said:
I find that it was not the intention of the parties for 1200 tons of ore to be washed each day. I find that it was not the intention of the parties that 1200 tons of ore be delivered to the washing plant each day. Some days the parties may be stripping and working in other phases of mining about the claims. The real intentions of the parties was as stated by Mrs. Richard E Lee and Richard O. Lee that there would be men and equipment in the area sufficient to have delivered 1200 tons of ore bearing material to the washing plant each day.
In two prior decisions we applied the rule that where the terms of a contract are ambiguous or uncertain--
(I)ntent may be ascertained from the language and conduct of the parties, the objects sought to be accomplished and the surrounding circumstances at the time the contract was negotiated. 1
The initial question is whether that rule is applicable in this case.
As Professor Corbin points out:
(S)eldom in a litigated case do the words of a contract convey one identical meaning to the two contracting parties or to third persons. Therefore, it is invariably necessary, before a court can give any meaning to the words of a contract and can select one meaning rather than other possible ones as the basis for the determination of rights and other legal effects, that extrinsic evidence shall be heard to make the court aware of the 'surrounding circumstances,' including the persons, objects, and events to which the words can be applied and which caused the words to be used. 2
We have such a situation here. The fact that the contracting parties are in disagreement as to the meaning of paragraph (3) of the contract indicates that the language there does not convey one identical meaning to the two parties. Nor are we able to say that the meaning is so clear that extrinsic evidence bearing on the intention of the parties should not be considered. The trial judge permitted the introduction of evidence of all surrounding circumstances relevant to the issue of what the parties intended by paragraph (3) of the contract, without any exceptions or limitations. We believe this was proper. 3
A history of the dealings between the parties leading up to the formation of the 1965 contract is pertinent. On April 6, 1960 a lease with option to buy was executed between H. G. Gabrielson and Ralph Lomen, lessors, and Richard E. Lee, lessee. This lease was for the same mining claims as those involved in the present litigation. Under the lease Lee was obligated to mine the property for tin and to continue mining operations every year. However, as of 1964 Lee had only done some stripping of the overburden on the mines. He had not taken any ore out.
Meanwhile in 1962 Gabrielson died and his interest in the claims passed to his widow, Pauline Gabrielson. In 1963 Mrs. Gabrielson gave Kirk Dunbar, her son-in-law, a special power of attorney with respect to her interest in the claims. Subsequently, Alaska Placer Company was formed and Mrs. Gabrielson and Ralph Lomen transferred their interest in the claims in exchange for capital stock.
In January 1964 a meeting was held in Seattle, Washington, to discuss the situation of the tin mines. Richard E. Lee, Ralph Lomen and Kirk Dunbar were present. Lomen and Dunbar told Lee they were unhappy with the lack of production from the mines. Lee offered a number of reasons for his inability to produce but added that he had done two years of stripping in advance and was ready to go into production. Lee's explanations evidently satisfied Lomen and Dunbar, because on January 31 Dunbar wrote Lee expressing the hope that Lee's plans for the 1964 season would be effective.
Various difficulties prevented Lee from getting to Cape Creek until quite late in the summer. By October 16, 1964 Lee had not begun actual production of the ore bearing material, although he had stripped some overburden. Evidently, by this time it was too late in the season to do any mining.
In a letter dated February 19, 1965 Dunbar informed Lee that he was in default under the lease. Dunbar stated that he Lee and Lomen should meet in Seattle in March to discuss the situation. The meeting was held on March 25, 1965. Present were Richard E. Lee, his wife Phyllis Lee, his father Richard O. Lee, Ralph Lomen and Kirk Dunbar. Dunbar stated that the owners of the tin claims were upset over the lack of production, and that the purpose of the meeting was to determine whether Lee should be permitted to mine the claims in 1965. Dunbar told Lee that they would have to arrive at some sort of a performance contract in order to proceed further. It was then that the written agreement for the sale of the mining claims was entered into by appellant and appellees.
As to what was intended by paragraph (3) of the agreement, Dunbar testified that in the discussions prior to the formation of the agreement he had suggested that as part of the agreement appellees be required to deliver through the washing plant 60 tons of ore bearing gravel an hour, that Lee had objected to such a requirement because of the presence of large boulders that could not go through the washing plant, that Dunbar had then agreed that delivery to the washing plant of 60 tons an hour would suffice, and that Dunbar had arrived at the figure of 1,200 tons a day by figuring that appellees would deliver 60 tons an hour during a day of two shifts of 10 hours each, for a 20-hour working day.
Dunbar stated that the purpose of the contract was for the production of tin, that the contract required production by appellees, and that the language of paragraph (3) meant that appellees were to deliver to the washing plant each day 1,200 tons of ore bearing material in order that tin could be produced from the mining operation. Dunbar anticipated that appellees would fulfill the terms of the contract in producing tin because, as Dunbar stated, Lee had told him that he had spent all of 1964 repairing equipment, that it was all ready to go, that Lee would get on the claims on the first day of the 1965 season and start mining, and that he had a two-year stockpile of ore bearing gravel to mine.
In his testimony Lee denied having done any stockpiling of gravel. But his testimony on this score was with respect to only a specific, limited area of the mining property. He was asked whether, at the March 1965 meeting, he had made any...
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