Florida Canada Corp. v. Union Carbide & Carbon Corp.

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Citation280 F.2d 193
Docket NumberNo. 13903.,13903.
PartiesFLORIDA CANADA CORPORATION, Appellant, v. UNION CARBIDE & CARBON CORPORATION, Appellee.
Decision Date11 July 1960

Howell Van Auken, of Lucking, Van Auken & Miller, Detroit, Mich., for appellant, Lucking, Van Auken & Miller, Lawrence Rothenberg, Detroit, Mich., on the brief.

James K. Watkins, Detroit, Mich., for appellee, Milton F. Mallender, Detroit, Mich., on the brief.

Before CECIL and WEICK, Circuit Judges, and BROOKS, District Judge.

BROOKS, District Judge.

This is a civil action based on an alleged breach of contract. The appeal is from the award of a summary judgment.

The appellant, Florida Canada Corporation, formerly named Chemical Research Corporation, brought this action for an alleged breach of a contract between Gyro Process Company, a corporation now merged with appellant, hereinafter generally referred to as plaintiff, as first party, and Carbide and Carbon Chemicals Corporation, now the appellee Union Carbide Corporation, hereinafter generally referred to as defendant, as second party. This contract was entered into on November 1, 1943, in settlement of litigation pending between the parties arising from a licensing agreement dated September 17, 1927, which granted a license to the defendant to use the Gyro Process. The Gyro Process is a patented process for the production of high octane motor fuels and chemical intermediates.

The 1927 licensing agreement provided that the defendant construct a plant in South Charleston, West Virginia, designed for a capacity of one thousand barrels of gas oil input per day into the apparatus used in the operation of the Gyro Process. This plant was constructed and equipped in accordance with plans furnished by the plaintiff. Thereafter, however, the defendant constructed and installed certain other machinery and plant facilities in close proximity to the South Charleston plant which plaintiff claimed were a part of the original plant thus increasing its daily capacity beyond 1000 barrels of gas oil input and giving rise to the question of whether a proper accounting of royalties had been made. To resolve this dispute plaintiff brought suit against the defendant in the United States District Court for the Eastern District of Michigan, Southern Division, and it was this litigation that was settled by the 1943 contract.

Under the provisions of the 1943 settlement contract the defendant paid the sum of $75,000 for a full release of all claims asserted against it by the plaintiff in the then pending litigation and for all claims in any way growing out of the 1927 licensing agreement which was declared cancelled. The defendant was also released from all claims "whether by way of royalty or otherwise, based on or arising out of any operation or other use which Carbide defendant may hereafter make of the Plant1 and other facilities as now existing or as hereafter repaired, remodeled or improved up to the present capacity thereof." The contract further recited that since the defendant desired to acquire the right to operate the "Plant" in excess of its present capacity that the plaintiff sold to the defendant for $50,000 a paid up license permitting the defendant to increase the daily capacity by an additional two thousand barrels of gas oil input. And it was declared to be the intention of the parties that the defendant without further obligation or payment of royalties "by virtue of this agreement, shall have the right to operate the said Plant and other facilities as now existing or as hereafter repaired, remodeled, rebuilt, improved, expanded, added to or otherwise changed up to the present capacity thereof and, in addition thereto up to a daily input of two thousand (2000) barrels of gas oil or its equivalent."

The plaintiff contends that the defendant has breached the 1943 contract in two principal respects. The first breach complained of is that the defendant has utilized the Gyro Process in excess of royalty paid limits and has used it in a large number of newly built plants other than the South Charleston plant which is the only plant covered by the prepaid royalty license. The second alleged breach of the contract is that the defendant has developed improvements to the Gyro Process and has refused to disclose these improvements to the plaintiff although obligated to do so by the contract.

The defendant submits that the 1943 contract deals solely with the use of the Gyro Process in the South Charleston plant and does not prohibit or limit its use in any other plant built or operated by the defendant, and further, in answer to plaintiff's second contention, that the contract does not require the disclosure to the plaintiff of any improvements that may have been developed to the Gyro Process. While the use of the Gyro Process outside of the South Charleston plant is not admitted, the defendant contends that even if it was so used in violation of plaintiff's rights the remedy does not lie in this action since such usage would not be a violation of the 1943 contract. It urges that the only grounds upon which the plaintiff could recover in this action for breach of contract would be a showing of an increase after November 1, 1943, of the capacity of the South Charleston plant by more than a daily input of two thousand barrels. We agree.

The replies to interrogatories and affidavits filed in support of defendant's motion for summary judgment establish without dispute that there was no excess use of the Gyro Process at the South Charleston plant. Therefore, since this fact is undisputed, the breach of the contract because of alleged excess usage in other plants of the defendant presents a question of law depending on the construction and legal effect of the 1943 contract.

The language of the contract is clear and unambiguous. It settled litigation arising out of the 1927 licensing agreement under which the South Charleston plant was constructed and operated. No other plant or operation is...

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