Monolith Portland Mid. Co. v. Reconstruction F. Corp.

• Decision Date: 20 January 1955
• Docket Number: No. 11816.,11816.
• Citation: 128 F. Supp. 824
• Court: U.S. District Court — Southern District of California
• Parties: MONOLITH PORTLAND MIDWEST COMPANY, a corp., Plaintiff, v. RECONSTRUCTION FINANCE CORPORATION, a corporation, Defendant.

128 F. Supp. 824

MONOLITH PORTLAND MIDWEST COMPANY, a corp., Plaintiff, v. RECONSTRUCTION FINANCE CORPORATION, a corporation, Defendant.

No. 11816.

United States District Court, S. D. California, Central Division.

January 20, 1955.

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Joseph T. Enright, Norman Elliott, Gibson, Dunn & Crutcher, Henry F. Prince, William French Smith and Richard E. Davis, Los Angeles, Cal., for plaintiff.

Lillick, Geary & McHose, Allan E. Charles, Frank Adamson, William A. C. Roethke, Lyon & Lyon and Earl L. Martin, Los Angeles, Cal., for defendant.

JAMES M. CARTER, District Judge.

There is presented here the question of the application of the Contract Settlement Act of 1944, c. 358, 58 Stat. 649; 41 U.S.C.A. §§ 101-125, hereinafter called the Settlement Act, and the War Mobilization and Reconversion Act of 1944, Act Oct. 3, 1944, c. 480; 58 Stat. 785; 50 U.S.C.A.Appendix §§ 1651-1678, hereinafter called the Reconversion Act, to a War contract terminated on September 10, 1946, and the war contractor's claim for monetary compensation.

Plaintiff, Monolith Portland Midwest Company, hereinafter called Monolith, is a corporation organized under the laws of Nevada, and doing business in California and Wyoming. For more than twenty years, it has owned, operated and maintained a cement manufacturing plant located at Laramie, Wyoming. A second corporation, Monolith Portland Cement Company, is the parent corporation and is not involved herein, except that it appears as one of the parties to the second Licensing Agreement signed April 18, 1944.

The Defense Plant Corporation, hereinafter referred to as D.P.C. was organized on August 22, 1940, pursuant to Act of Congress, Act June 25, 1940, 54 Stat. 572, 6 FR 2970, amending the R.F.C. Act of Jan. 22, 1932, c. 8, 47 Stat. 5, as amended, 15 U.S.C.A. §§ 601-617, as amended, and specifically § 5d thereof. All the stock of D.P.C. was at all times owned by the defendant, R.F.C. On July 1, 1945, D.P.C. was dissolved by Act of Congress, Act of June 30, 1945, c. 215, 59 Stat. 310. Pursuant to the Act, the R.F.C. succeeded to and assumed all the rights, duties and obligations of the D.P.C.

The R.F.C. is in the process of liquidation, R.F.C. Liquidation Act of 7/30/53; P.L. 163, 83rd Congress, c. 282. By Section 105 thereof actions do not abate, and substitutions may be made.

THE PRIOR DECISIONS IN THE CASE.

The first Contract involved was dated June 1943, and since termination on September 10, 1946, the matter has been in litigation almost continuously to this date. This court has tried the case on the merits, in trial lasting three months, and it has been the purpose of the court and counsel that in the event of further proceedings, the record made will not have to be duplicated.¹

An action was first filed in the Superior court on November 7, 1946, was removed to the District court and was dismissed by judgment dated January 25, 1949 (unreported) generally on the ground that Monolith had not exhausted its administrative remedies under the above Acts. That judgment was affirmed on appeal in Monolith Portland Midwest Company v. Reconstruction Finance Corporation, 9 Cir., 1949, 178 F.2d 854, certiorari denied Apr. 10, 1950, 339 U.S. 932, 70 S.Ct. 668, 94 L.Ed. 1352; rehearing denied May 8, 1950, 339 U.S. 954, 70 S.Ct. 839, 94 L.Ed. 1367.

On June 16, 1950, Monolith filed the present action in the Superior court. It was removed to this court on June 26, 1950. Thereupon the defendant (hereinafter referred to as R.F.C.) filed motions to dismiss or for summary judgment. This court denied the motions on the ground that a claim for relief had been stated under the Settlement Act, but struck certain portions of the complaint that sought and spoke of, damages for breach of contract and injunction. This court's opinion on such motions is reported in Monolith Portland Midwest Company v. Reconstruction Finance Corporation, D.C.S.D.Cal.1951, 95 F.Supp. 570.

Thereafter, Monolith requested a jury trial and R.F.C. moved to strike the request. This court denied a trial by jury and its opinion thereon is reported in Monolith, etc., Co. v. R. F. C., D.C.S.D. Cal.1952, 102 F.Supp. 951.

The case was tried beginning November 5, 1952, and ending February 20, 1953. Extensive printed briefs were filed from May to August 1953. Thereafter the matter was argued in October 1953.

A.

THE FACTUAL BACKGROUND

(1) The Contracts; Plancor 1844

Five contracts were entered into between D.P.C. and Monolith and represent the project called Plancor 1844.

(a) The Licensing Agreements.

Two of these contracts dated June 28, 1943, and April 18, 1944, were licensing agreements. By the contract of June 28, 1943, Monolith granted D.P.C. and any operator of a proposed alumina plant, a non-exclusive right and license (a) to use only in the plant and to make and sell products produced therein through information disclosed by Monolith, and (b) to use only in the plant and to make and sell all products covered by U. S. Letters Patent, then or thereafter issued, owned or controlled by Monolith, relating to Monolith's processes for producing alumina.

The second licensing agreement dated April 18, 1944 was a longer contract, joined in by Monolith Portland Cement Co. (the parent company) spelling out more specifically a royalty free, non-exclusive, irrevocable and continuous license to D.P.C. for a production of alumina and by-products in the proposed plant at Laramie, Wyoming, using Monolith's patents and processes and an option to acquire rights and licenses for any and all additional plants; that the license was to be royalty free for the period of the national emergency and thereafter subject to a fair and reasonable royalty to be determined by negotiation. If such an agreement was not negotiated, the matter was to be subject to arbitration. Article V provided "that any abandonment by Defense Corporation of the project referred to in the Operating Agreement prior to its completion and attempted operation as defined in the Operating Agreement, will terminate any rights of Defense Corporation acquired under Article II of this agreement." (Article II referred to the license, and options for additional licenses.) Further reference will be made to these license agreements, if and as they become necessary in this opinion.

(b) The "A & C" and "M & O" Contract.

The remaining three contracts, the original dated June 28, 1943; an amendment thereof dated August 26, 1944 and a further amendment dated September 28, 1944, were commonly referred to as the "Acquisition and Construction" and "Management and Operation" agreements. Hereafter they will be referred to as the "A & C" and the "M & O" agreements. They were agreements between Monolith and D.P.C. in which the parent company did not join.

The original "A & C" and "M & O" agreement of June 28, 1943 recited that the production of alumina for the government, and the expansion of capacity for such production was in the interests of the national defense program, and that the War Department "has advised that the establishment of facilities for such production in the vicinity of Laramie, Wyoming, having a daily productive capacity of approximately sixty (60) to seventy-five (75) tons of alumina, and the acquisition of machinery and equipment for use in such production * * * are in its opinion necessary to the interests of national defense." The agreement was then divided into two parts, Title I concerned "Construction and Acquisition" of the plant and necessary lands and facilities and Title II was entitled, "Management and Operation of the Plant."

The "C & A" portion provided that Monolith would assist D.P.C. in the acquisition of sites for facilities and sites and options on sites containing deposits of anorthosite, and in the acquisition of all necessary patents or licenses and contracts for water, power and other utilities. Monolith agreed to submit to D. P.C. plans and specifications and schedules for the construction of the plant, and for the acquisition and installation of machinery. Monolith was designated as the contractor and was to employ other contractors with the approval of D.P.C. D.P.C. was to advance the funds necessary for carrying out the construction program, and to pay for machinery necessary.

Section Nine of the "A & C" provided that as compensation for Monolith's services in the acquisition of sites and options, and the supervision of the construction of the plant, D.P.C. would pay Monolith a fee of 1% of D.P.C.'s actual expenditures, not to exceed $38,885 in lieu of executive salaries and other costs, charges and expenses of the "A & C" program. It was originally contemplated that the plant would cost approximately $3,885,000. Title to all sites, options, buildings and machinery were to remain vested in D.P.C.

Title II, the "M & O" program provided in Section Twelve, "Beginning with the readiness of the plant or any part thereof for operation, as certified to Defense Corporation by Contractor (Monolith) and approved by Defense Corporation, or as certified by Defense Corporation to Contractor," Monolith was to manage and operate the plant, including the mining of the anorthosite and the transportation of raw materials, as an independent contractor for D.P.C., hiring all necessary employees.

D.P.C. agreed to reimburse Monolith for the costs of management and operation. D.P.C. agreed also to pay to Monolith as a fee for management and operation, and the sale of the products, $1.50 per ton on all salable alumina produced in the plant, but in no event should such fee be less than $6,000 for each year that the provisions of the contract "beginning with the readiness of the plant or any part thereof for operation," were in force. From such date, the M & O provisions were to be in force for ten years.

D.P.C. or Monolith could "cancel this...