Corbett v. Winston Elkhorn Coal Co.

• Decision Date: 14 March 1924
• Docket Number: 3886.
• Parties: CORBETT v. WINSTON ELKHORN COAL CO.
• Court: U.S. Court of Appeals — Sixth Circuit

296 F. 577

CORBETT v. WINSTON ELKHORN COAL CO.

No. 3886.

United States Court of Appeals, Sixth Circuit.

March 14, 1924

J. J Moore, of Pikeville, Ky., and Robert J. Hanley, of Detroit Mich., for appellant.

T. H Harman, of Pikeville, Ky. (Harman, Francis & Hobson, of Pikeville, Ky., on the brief), for appellee.

On November 28, 1919, E. J. Corbett, of Detroit, Mich., entered into a contract with the Winston Elkhorn Coal Company, of Regina, Ky., by the written provisions of which Corbett agreed to buy and the coal company agreed to sell to Corbett, all of the output of screened coal and run of mine coal, if desired, from the Kewanee and Winright mines, owned and operated by the coal company, at market price at time of shipment, or best available price, less 10 per cent. of selling price to E. J. Corbett for his commission, and that the contract should expire April 1, 1924. On July 2, 1919, a similar contract had been entered into between the same parties for the output of both mines, which differed from this contract, in that it expired April 1, 1920, and Corbett, in addition to the 10 per cent. Commission, was to receive half of all amounts obtained over $2.50 per ton mine run basis. Some differences had arisen between the parties in reference to the first contract, and the contract of November 28th purported upon its face to be 'an adjustment of our contract of July 2, 1919. ' After the execution of the latter contract, orders taken under the former contract were filled by the coal company, and except as to these orders and some shipments made by the coal company to the Ohio & Michigan Coal Company, orders were given by Corbett and shipments made by the coal company under the terms and provisions of the contract of November 28, 1919, until the 24th day of March, 1920, during all of which time the United States Fuel Administration was in control and had fixed a flat price of $3 per net ton f.o.b. mines, which price regulation was in effect until April 1, 1920. On and after March 24, 1920, the coal company refused to make further shipments of coal upon Corbett's orders, and up to the time its mines shut down in December, 1920, it mined and shipped 27,421 tons of coal to other purchasers, for which coal it received in the aggregate $231,692.

On June 21, 1920, the coal company brought an action in the Pike circuit court of Kentucky against E. J. Corbett to recover the sum of $8,089.39 for coal shipped to Corbett in March, prior to its refusal to make further shipments and for 15 cents per ton, amounting in the aggregate to $1,115.65, which balance it claimed was yet due and owing to it on a number of tons delivered to defendants during the months of December, 1919, and January and February, 1920, and sought by garnishee process to reach money due to Corbett from the G. E. George Coal Company in satisfaction of its claim. On the application

of Corbett the cause was removed to the United States District Court for the Eastern District of Kentucky. On June 2, 1921, Corbett filed an amended answer and counterclaim denying that he was indebted to the plaintiff for 15 cents per ton on coal received by him in December, 1919, and January and February, 1920, amounting to $1,115.65, or any other sum, and averring, among other things, the execution of the two contracts to which reference has hereinbefore been made; that plaintiff was indebted to him in the sum of $356.54 commission on coal sold and delivered by it to other parties while these contracts were in force, and without his knowledge and consent; that defendant had been guilty of a breach of contract; and praying for specific performance and for an accounting in damages. To this answer and cross-petition the coal company filed a reply, which in substance denied the allegations of the answer and cross-petition.

Upon the trial of the issue so joined the District Court dismissed defendant's cross-petition and entered a judgment for the plaintiff for coal shipped upon defendant's order in March 1920, for $7,991.84, less a credit thereon of $166.04 for commissions on coal shipped by plaintiff on orders from Ohio & Michigan Coal Company during month of December, 1919, leaving a net balance due the coal company of $7,825.80, with interest thereon from the 20th day of April, 1920, from which judgment the defendant appealed.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

DONAHUE Circuit Judge (after stating the facts as above).

It is claimed upon the part of the coal company that the contract of November 28, 1919, was not a contract for the sale and purchase of coal, but merely a sales agency contract. The first paragraph of this contract read as follows:

'E. J. Corbett, Detroit, Mich., agrees to buy from the Winston Elkhorn Coal Company, of Regina, Ky., and Winston Elkhorn Coal Company agrees to sell to E. J. Corbett the output of Kewanee and Winright mines.'

Courts do not make contracts for parties, and it is a rule of construction that, where the language used in a contract is plain and unequivocal, it must be given its plain, usual, and ordinary meaning, unless it further appears that words or phrases therein have acquired a trade or technical meaning. It is also a rule of construction that contracts must be construed in accordance with the meaning and intention of the parties, in so far as that intention can be ascertained from the language of the whole contract, the situation of the parties at the time the contract was written, the purposes and subject-matter of the contract, and the mutual construction by the parties themselves of the terms and conditions therein written. Parol evidence may not be received to vary the terms of a written agreement, but only for the purpose of aiding a court in construing the language used in accordance with the understanding of the parties at the time the contract was written, but where, under the state of the proof, the language is not subject to such construction, a court of equity will reform the contract to conform to the real intent, agreement, and understanding of the parties.

After this contract was executed, the coal company, with the knowledge of Corbett, and without objection on his part, referred to him in a number of letters as its selling agent, and Corbett, in many letters that he wrote to the coal company and to others interested in the purchase of coal, referred to himself as the selling agent of the Winston Elkhorn Coal Company. For these reasons, we are inclined to think that both parties understood and intended that this was a sales agency contract, and not an absolute contract of purchase and sale; but, in view of the conclusion this court has reached, we do not consider this question of vital importance in the determination of the issues in this case. Accepting the theory of the coal company that this was merely a sales agency contract, nevertheless, under its terms and provisions, it was required to ship upon the orders secured by its agent, Corbett, the entire output of these two mines, and Corbett was required to pay therefor the market price, or best price available, less 10 per cent. commission.

It is also claimed by the coal company that Corbett was to pay to it the market price, or the best price available, on the day of shipment, and not on the day the orders were received. The language of this provision of the contract as to price is not more definite, certain, and unambiguous than the first paragraph, which provides that 'Corbett agrees to buy, and the coal company agrees to sell to Corbett,' the entire output of these two mines, and therefore is equally subject to construction or reformation by a court of equity, in accordance with the mutual intention and understanding of the parties at the time the contract was written.

A contract requiring a selling agent to pay the market price on day of shipment would be practically impossible of performance by the agent on a rising market, and especially so if the principal is permitted to delay shipment through necessity or whim until the market price on day of shipment is largely in excess of the price at which the agent had sold the coal. On the other hand, in case of a falling market, such a provision would be wholly inconsistent with the further provision in this contract that the principal is to receive the whole of the selling price, less 10 per cent. commission; that is to say, if coal were sold to-day for $3, and at date of shipment the market price were but $2, the principal under one provision of this contract would be entitled to all the money received by the agent, less 10 per cent., and under the other provision to but $2, less 10 per cent. although the agent, received $3 for his principal's coal. It must be remembered that this contract was to continue for practically five years, and it necessarily must have been within the contemplation of the parties that in that length of time there would be both a rising and falling market. Nor is it conceivable that a selling agent would be sent out by his principal to sell coal at the market price, or best price obtainable, upon day of shipment. If the agent were able to find any customers willing to buy upon these conditions, such customers would certainly demand, not only a further agreement as to prompt delivery, but also a definite date when such delivery would be made, and there is nothing in this contract that would authorize the agent to bind his undisclosed principal to a definite date of delivery. In fact, the obligation to make any shipments at all is subject to strikes, accidents, wrecks, or car supply, or other occurrences beyond control of either party.

That the coal company did not so understand this contract at the time it was written, or even as late as the 24th of March, in the...