McKell v. Chesapeake & O. Ry. Co.

• Decision Date: 04 January 1910
• Docket Number: 1,977.
• Parties: McKELL v. CHESAPEAKE & O. RY. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

175 F. 321

McKELL v. CHESAPEAKE & O. RY. CO.

No. 1,977.

United States Court of Appeals, Sixth Circuit.

January 4, 1910

The owner of a tract of coal land some little distance from a railroad, in a letter to the president of the railroad company, stated that he was considering the development of his lands, had received several proposals for leases, etc and suggested a number of propositions for the building of an eight-mile branch line from the company's road, among them that the company build the branch, "receiving from operators to be secured by me, a guarantee of a tonnage of freight that will be satisfactory to you." In answer the president signified the willingness of the company to build the line "for any parties who will furnish the right of way, and who will agree to put in a coal plant of not less than a thousand tons of coal a day, * * * and who will furnish the coal at the same price as the Pocahontas people do. * * * We will agree then to take from them at this price whatever amount of coal they agree to furnish, not less than 100,000 tons a year, or, if they prefer to ship it themselves, we will give them the rate made to any parties." This offer was accepted by the landowner in a letter in which he said: "I will commence immediately to make leases, and push my part of this contract with all promptness." Leases were accordingly made, the mines developed, right of way was furnished, and the branch built and the lessees, electing to sell their coal to the company did so for a number of years, after which it refused to receive more. Held, that the correspondence created a contract for purchasing the coal when accepted, and was not merely a proposal on the part of the company to negotiate future contracts.

Thomas G. McKell, since deceased, and of whose estate the plaintiff in error has, during the progress of this suit, been appointed adminstratrix, commenced this action in the court of common pleas for Scioto county, in the state of Ohio, to recover damages for the alleged breach by the defendant, the Chesapeake & Ohio Railway Company, of a contract made by the parties on or about April 26, 1892, the particulars of which are to be hereinafter stated. The defendant removed the action into the United States Circuit Court for the Southern District of Ohio upon the ground of the diverse citizenship of the parties.

The contract which the plaintiff relies upon was made by letters of correspondence between the intestate and M. E. Ingalls, then president of the railway company, and related to the building of a branch railroad by the defendant, about eight miles long, leading from its main line to a tract of coal lands in West Virginia owned by McKell, and the mining and delivery of coal by him for transportation by the railroad, or for sale to the company.

Upon the trial these letters were produced by the plaintiff and given in evidence; and other testimony explanatory of the circumstances in which the contract was made, and giving an account of the dealings of the parties thereunder, such as the deeding of the right of way by McKell, the furnishing of surveys made by him, the building of the railway, the location of and operation of mining plants and coke ovens, the leasing of lands by McKell for the production of coal, the election of McKell to sell the coal to the railway company, and the acceptance of the coal and shipments by the company, until on or about the end of 1894, when the company refused to take any more than a certain limited quantity, which was much less than the production of the mines, was being introduced by the plaintiff, when the presiding judge, being of opinion that enough had been shown in relation to the contract to enable the court to determine whether a contract between the parties was in fact made, and, if so, what was its nature, arrested the further introduction of testimony. The learned judge thereupon proceeded to give his construction of the letters, and upon that construction held that the plaintiff could not recover. After allowing the plaintiff to make certain offers of proof, which was admitted, tending to show the performance of the contract on the part of the plaintiff, the breach of it by the defendant, and the damages sustained in consequence, the court instructed the jury to return a verdict for the defendant, which the jury did.

The letters which constitute the contract are here set out in their order. The first is somewhat lengthy, but it seems necessary to a proper understanding of the main object and purpose which the parties had in view when they entered into the stipulations contained in the correspondence which followed:

'Chillicothe, O., March 28, '92.

'The propositions I suggest are all based on the building of not less than eight (8) miles of railroad up Dun Loup creek, commencing at New River bridge; also, that operators on this branch shall have same in and out rates of freight on coal, coke, lumber, etc., as given to operators on main line New River section.

'(1) The C. & O.R.R. Co. to build and operate said branch. Receiving from me deed for right of way through land owned by me. Also, my procuring or paying cost, if condemned, for right of way not owned by me. Receiving also from operators to be secured by me a guarantee of a tonnage of freight that will be satisfactory to you.

'(2) A corporation organized by me to build the road, subject to approval of chief engineer of C. & O.R.R. The road to be operated by C. & O.R.R. Co., a guarantee of tonnage by operators. The company building the railroad to receive compensation for use of road based on tonnage coming from or to this road.

'My reason for not favoring leases on or near New River, now, when I have as good coal and much more favorable location for mining coal and making coke than Thurmond or Rush Run plants, is that any mines located there would have to pay New River rates to miners for digging coal, and as new mines were opened one after another going up the creek, this rate would be demanded even though conditions became more and more favorable as advance was made into thicker coal.

'I have taken the liberty of writing you at almost unpardonable length and at a time when the subject may have little interest to you, using this means to explain matters that circumstances prevented me doing in my interviews with you; also to explain my situation and views at this time. I must ask your kind indulgence for this.

'Very respectfully,

Thomas G. McKell,

'Office of the President.

'M. E. Ingalls, President, Cincinnati, Ohio.

'On Road, March 31, 1892.

'Very truly yours,

M. E. Ingalls, President.' 'Albemarle Hotel, Madison Square,

'New York, April 25, 1892.

Thomas G. McKell.

'Office of the President.

'M. E. Ingalls, President, Cincinnati, Ohio.

'New York, April 26, 1892.

'Second. That the present agreement will require about eight miles of railway to be constructed, and the cost of the same you feel certain will be less than $200,000.

'Third. Work on this railway shall be commenced not later than July 1st and pressed as rapidly as weather and circumstances will permit.

'Fourth. That you will commence on the coal development at the same time, and push it as fast as is consistent with economy and the weather, until it reaches the amount per day, to wit, 1,000 tons.

'If these are as we agreed and as you understand them, kindly answer, and the letters will form all the contract we shall need.

'Yours truly,

M. E. Ingalls, President.'

'New York, April 26, 1892.

'Hotel Burnswick Co.

Thos. G. McKell.

Murray Seasongood and John H. Holt, for plaintiff in error.

Judson Harmon and Edward Colston, for defendant in error.

Before LURTON and SEVERENS, Circuit Judges, and McCALL, District judge.

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

It appears from the bill of exceptions that the presiding judge delivered an opinion in which he stated the grounds and reasons upon which he concluded that the plaintiff was not entitled to recover. This opinion is set forth therein, and shows that it was based upon a construction of the contract altogether different from that alleged in the petition. Taking it to be true that there was some kind of contract made by the correspondence, he held that it extended only to such coal and coke as McKell himself should produce in a plant to be established on his land, and did not include the productions of others who might lease parts of his land, as to which he thought the language in the letter of Ingalls to McKell of March 31, 1892, imported an agreement that the company would make further contracts at the proper time, after McKell should have performed his contract by donating the right of way and putting in the coal and coke plants. Referring to this letter, the judge said:

'By the terms of the letter, whoever donated that right of way and constructed the two plants would be given the option of shipping for himself, at the lowest rate made to any parties, or of entering into a subsequent contract with the defendant company as to the disposition of not less than 100,000 tons per year. Assuming there was an agreement here entered into for the building of the road, I am of the opinion that under the contract the defendant company agreed to make another contract with the party or parties who donated the right of way and constructed a coal plant of not less capacity than 1,000 tons per day and coke ovens such as are mentioned in this letter of March 31, 1892, if such party or parties did not themselves elect to ship coal. It does not appear that such other contract was ever made.'

And the judge went on to refer to the manner in which the parties by their subsequent acts and correspondence in the progress...