American Smelting & Refining Co. v. Bunker Hill & Sullivan Mining & Concentrating Co.

• Decision Date: 14 January 1918
• Docket Number: 7555.
• Citation: 248 F. 172
• Parties: AMERICAN SMELTING & REFINING CO. v. BUNKER HILL & SULLIVAN MINING & CONCENTRATING CO.
• Court: U.S. District Court — District of Oregon

248 F. 172

AMERICAN SMELTING & REFINING CO. v. BUNKER HILL & SULLIVAN MINING & CONCENTRATING CO.

No. 7555.

United States District Court, D. Oregon.

January 14, 1918

[Copyrighted Material Omitted]

Carey &amp Kerr, of Portland, Or. (George Donworth, of Seattle, Wash F.H. Brownell, of New York City, F.W. Lehmann, of St. Louis, Mo., and Root, Clark, Buckner & Howland, of New York City, of counsel), for plaintiff.

Myron A. Folsom, of San Francisco, Cal. (Curtis H. Lindley, of San Francisco, Cal., George F. Holman, of Portland, Or., and George Hatfield, of San Francisco, Cal., of counsel), for defendant.

WOLVERTON District Judge.

The purpose of this suit is for specific performance and to restrain the defendant company (herein to be called the Mining Company) from selling or delivering any of its lead-silver ores, concentrates, or slimes to any person or corporation other than the plaintiff (to be called the A.S. & R. Company herein). The present inquiry is whether a preliminary injunction shall issue pending the final determination of the cause.

It is only necessary at this time to get an understanding of those features of the agreement between the Mining Company and the Tacoma Smelting Company (to be called the Smelting Company) that seem to be controlling where the parties are not in accord. These features must be construed in the light of the events attending the consummation of the agreement which show the motives that induced it and the purposes which it was intended to subserve. In this we may be aided somewhat by the treatment accorded by the parties themselves to particular provisions.

The Smelting Company has a capital stock of 5,000 shares, of the par value of $100 per share. On March 20, 1905, it entered into and had contracts with the Alaska-Treadwell Gold Mining Company, Alaska-Mexican Gold Mining Company, and Alaska United Gold Mining Company, and with the Mining Company, the defendant herein, previously signed, for the purchase of ores from each of the several companies, for smelting purposes. The plaintiff company had also at the same time a contract with the Mining Company for the purchase of some of its ores. All these mining companies, either by direct holding or through their stockholders, were owners of shares of stock in the Smelting Company, the defendant Mining Company being the owner of 1,567 shares. The A.S. & R. Company, acting through Bernard M. Baruch, effected a purchase of the whole of the capital stock of the Smelting Company, at a price exceeding $5,000,000. The stock was transferred to the American Smelters Securities Company, a New Jersey corporation, of the voting stock of which the A.S. & R. Company held, and now holds a controlling interest, so that it dominates the action of such New Jersey corporation. The defendant Mining Company was aware of all these relationships.

On March 20, 1905, the Mining Company entered into an agreement with the Smelting Company, which action was within the contemplation of the Baruch purchase, whereby the former agreed to sell and the latter to purchase all the lead-silver ores, slimes, and concentrates mined from all the properties owned or leased by the Mining Company, delivered f.o.b. cars at or near Wardner, Idaho, at sales prices agreed upon, with certain stipulated deductions. It was stipulated that the products to be delivered should be of a lead assay of between 30 per cent. and 75 per cent., and that the average product should be of approximately the same yearly average analysis and lead assay as the shipments made from the mines during any year of the 12 years immediately preceding the date of the agreement, unless the Smelting Company should give its written consent to the shipment to it of products varying from that standard in analysis and in lead assay, as to which it was given the option to purchase at the best going market rates and terms. For the purpose of determining the net sales prices, the contract provides that the values of the contents of the product shall be ascertained as follows (omitting silver and gold): "Lead. The value of ninety per centum of the lead contents at ninety per centum of the average sales price in the city of New York for common desilverized domestic lead, in lots of fifty tons or more, for shipment within thirty days, as made by the American Smelting & Refining Company, during the week preceding the week of shipment of the lot in question" (subsequently changed, by agreement of February 28, 1907, to read "on the date of shipment of the ore"), whenever the selling price does not exceed $4.10 per one hundred pounds, and when the price exceeds that sum, 90 per cent. of $4.10 and one-half of the excess.

From such values, deductions are to be made as follows: "From the value of each lot of ore, slimes, or concentrates (not containing less than a daily average of 27 tons, nor more than a daily average of 37 tons of metallic lead, the tonnage between the minimum and the maximum to be entirely at the option of the Mining Company), shipped to the Smelting Company's smelter at Tacoma, Washington, there shall be deducted a freight and treatment charge, when the lead quotation is $4.35 per hundred pounds or over, of $15.75, and, when the lead quotation is less than $4.35 per 100 pounds, of $16 per net dry ton f.o.b. cars at or near Wardner when the gross value is not over $60 per ton, said value to be arrived at by counting silver at New York quotations and lead at $3.50 per hundred pounds. If, however, any ore or concentrates should contain less than 53 per cent. lead, a deduction is to be made from the freight and treatment charge of one-half cent for each pound of lead under 53 per cent.;" but should the ore or concentrates contain more than 53 per cent. lead, there shall be added to the freight and treatment charge one-half cent per pound above that percentage. It is further provided that: "The Mining Company, in making shipments, may exercise its option as to lead contents of ores, slimes, and concentrates, wherever the same may be shipped." This is known as the differential clause. From the value of each lot of products shipped, in addition to above-mentioned Tacoma shipments, except as provided in article 1, "there shall be deducted a freight and treatment allowance, figured on dry weight, equal (without regard to the actual destination of the ores shipped under this contract) to the sum of the tariff railway charge for freight from the mines of the Mining Company to Pueblo or Denver," plus an allowance for smelting of $8 per ton.

The fourth paragraph provides that deliveries shall be made to any smelting plant owned by the Smelting Company, its successors or assigns. Should the Mining Company, however, desire to ship greater amounts of ore than the smelting plant or plants of the Smelting Company can conveniently smelt, the Smelting Company shall have the right to sell or divert such excess shipments, at same rates, prices, and conditions as in the agreement provided for. Then follow provisions for the payment for the ores.

By the eighth article, the provisions are made to extend for a period of 25 years from February 1, 1905, except as subsequently provided.

By the eleventh paragraph it is stipulated that:

"This agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties hereto, and all its provisions relating to the sale of ore shall, as to the Mining Company, be deemed to be and considered as a covenant running with the land."

By the twelfth paragraph, the terms of the agreement were to continue in any event until June 1, 1910, and it is further stipulated that thereafter the Mining Company shall, during the remainder of the period, receive at least the same terms, and, in addition thereto, shall receive the benefit of any and all direct and indirect reductions in charges, and any and all direct and indirect concessions in methods of determining values, in methods of per centum deductions, in methods of making quotations, and in any other way whatsoever, that may be made at any time after the date of the contract by the A.S. & R. Company, and be in effect after June 1, 1910, to a majority of C ur d'Alene shippers.

The agreement was ratified by the stockholders of the Mining Company.

By a supplemental agreement, made on the same day between the parties, the Mining Company undertook to terminate its ore contracts, which it then had, with the Pennsylvania Smelting Company, and the Ohio & Colorado Smelting Company, and, on the other hand, the Smelting Company agreed to use its best endeavors to procure the cancellation of a contract then in force between the Selby Smelting & Lead Company and the Mining Company.

The terms of section 12 of the agreement were modified by a second supplemental agreement, whereby it is stipulated that, in case smelting companies other than the A.S. & R. Company make rates that the Smelting Company does not desire to meet, then the Mining Company may accept such rates, and may ship to such other smelters after giving 60 days' notice to the Smelting Company, but that, on the termination of such arrangements, the Smelting Company agrees to continue to buy in pursuance of the principal contract. It was further agreed that the Smelting Company should have the right to resume the purchase of any products so diverted by giving 60 days' notice to the Mining Company of its willingness to meet the terms of the other smelters for the period for which the other smelters had offered to contract.

And it was also further agreed that the terms that are to govern under clause 12, unless the A.S. & R. Company shall cease to do business or to purchase a majority of the C ur d'Alene ores, shall be those made by the A.S. & R....