Superior Portland Cement, Inc. v. Pacific Coast Cement Co.

Decision Date14 April 1949
Docket Number30700.
Citation33 Wn.2d 169,205 P.2d 597
PartiesSUPERIOR PORTLAND CEMENT, Inc. v. PACIFIC COAST CEMENT CO.
CourtWashington Supreme Court

Rehearing Denied June 9, 1949.

Action by Superior Portland Cement, Inc., against Pacific Coast Cement Company, for specific performance of provision in lease giving the plaintiff the first right to purchase the property or in the alternative for damages on account of breach thereof. From a judgment for the defendant, the plaintiff appeals.

Judgment reversed and cause remanded for further proceedings in conformity with opinion.

Appeal from Superior Court, King County; James B. Kinne, judge.

Little Leader, LeSourd & Palmer, of Seattle, for appellant.

McMicken Rupp & Schweppe and Graham, Green, Burnett, Howe & Dunn, all of Seattle, for respondent.

BEALS Justice.

In this action, the plaintiff, Superior Portland Cement, In., a Washington corporation, sought specific performance of a provision contained in a lease wherein the defendant, Pacific Coast Cement Company, a Washington corporation, was lessor and plaintiff lessee, or, in the alternative, for damages on account of alleged breach of contract by the defendant.

During the year 1931, the parties to this action were each in the business of manufacturing cement. Plaintiff's plant was located at Concrete, Washington, and defendant's (referred to as the 'Diamond' plant) at Seattle. The defendant also owned and operated a limestone quarry on Dall Island, land, Alaska, from which it procured limestone which it used in the manufacture of cement. The defendant transferred the limestone from Alaska to Seattle by a ship known as the 'Diamond Cement,' which was owned by Pacific Coast Coal Company, a New York corporation.

While the defendant herein is a Washington corporation, all of its stock is owned by Pacific Coast Cement Corporation, a Florida corporation, which has two classes of stock, common and preferred, and, until August, 1947, the greater portion of the capital sotck of the latter corporation (almost eighty-seven per cent of the common stock and a little more than ninety-three per cent of the preferred stock) was owned by Pacific Coast Company, a New Jersey corporation. The remaining shares of the capital stock of the Florida corporation were in various ownerships. Pacific Coast Coal Company is a New York corporation, all of its capital stock being owned by Pacific Coast Company (of New Jersey).

From the foregoing, it is clear that Pacific Coast Company (of New Jersey) controlled a larger interest in the business of the defendant herein, Pacific Coast Cement Company, a corporation, than all other stockholders combined.

In this opinion we shall refer to the foregoing corporate entities as follows:

Superior Portland Cement, Inc., a corporation, as plaintiff (or appellant).

Pacific Coast Cement Company, a corporation, as defendant (or respondent).

Pacific Coast Cement Corporation, as Florida Cement.

Pacific Coast Company, a New Jersey corporation, as New Jersey Pacific.

Pacific Coast Coal Company, a New York corporation, as New York Pacific.

In the defendant's business operations prior to 1931, it made use of the limestone quarry on Dall Island, Alaska, the ship 'Diamond Cement' owned by New York Pacific, and defendant's plant for the manufacture of cement (known by the trade name 'Diamond Cement') at Seattle. These three items, forming one operation, were frequently referred to by the owners as 'the package.'

During the month of June, 1931, defendant, by a thirty-seven-page written agreement, leased its Seattle cement manufacturing plant (including real property), and the defendant's interest in the placer mining claims upon which is located the Dall Island quarry, to plaintiff for the term commencing July 1, 1931, and ending June 30, 1936, plaintiff to operate the properties and pay defendant, as rental, a sum equal to forty per cent of the profits derived from the quarrying, manufacture, and sale of cement manufactured at plaintiff's plant at Concrete and defendant's leased plant at Seattle, defendant to transport the lime rock from Dall Island to Seattle at an agreed rate per ton.

In the lease agreement the plaintiff herein is referred to as 'Superior,' and the defendant as 'Pacific.'

By the lease agreement the lessee, plaintiff herein, was granted

'31. * * * an unconditional option to extend this lease for a further period of five (5) years from the expiration date hereof. * * * all of the terms and conditions of this lease without change shall be in full force and effect between the parties hereto as the lease on said premises for said period of time, except there shall be no extension beyond June 30, 1941.

'In the event of the exercise of this option for extension, all of the covenants, agreements and other provisions of this lease shall apply to the extended term and inure to the benefit of, and be binding upon Pacific and Superior, and except as to the dates shown in this paragraph 31 above all dates herein shall be automatically applied to fit such five year extension.

'32. In consideration of one dollar and of the premises, Pacific agrees that if at any time or times during the term of this lease or during the five year period of extension, if extended, Pacific decides to sell, subject to this lease, the premises described in first and/or second of the granting clause herein and the personal property connected with and constituting a part of its plants, it will give to Superior Portland Cement, Inc., the first right and privilege of purchasing the same at the price it is willing or at any time or times offers to sell to others and upon the same terms and conditions. Superior shall have thirty days from the date of receipt from Pacific of written offer to sell in which to accept the same, by writing delivered to Pacific, in default of which the offer shall be deemed rejected.'

In paragraph No. 23 of the lease appears the following: 'This lease may be continued for such additional term as the parties hereto may by mutual agreement determine.' There follows a provision that appellant should notify respondent on or Before July 1, 1935, of its desire to extend the term of the lease. Naturally, the provision of the lease just quoted primarily referred to the extension provided for in the lease, but the language quoted is not limited by its terms to that particular extension.

At the time of the execution and delivery of the lease agreement above referred to, New Jersey Pacific (the parent organization), by letter, accorded to plaintiff the privilege of purchasing its stock in Florida Cement in case New Jersey Pacific should decide to dispose of its stock in that corporation.

With the exception of some modifications not here important, the lease of June 1, 1931, was subsequently, from time to time, by mutual agreement of the parties, renewed and maintained in full force and effect until December 31, 1946, during which period plaintiff paid to defendant thereunder an amount aggregating over $6,400,000.

The plaintiff herein instituted this action, February 21, 1947, by filing its complaint, alleging the execution of the lease agreement above referred to and the extension thereof, by mutual agreement of the parties, to December 31, 1946, and that the plaintiff thereafter, in accordance with the agreement, surrendered possession of the leased properties to the defendant.

That up to the last mentioned date, all provisions of the lease applied to the extended terms thereof and were binding upon plaintiff and defendant. Plaintiff further alleged that, prior to December 31, 1946, the defendant had decided to seel the cement plant and the other leased properties. That on or about August 8, 1946, defendant orally offered to sell these properties to plaintiff for the sum of $2,500,000, which offer was not accepted by plaintiff, and that no other offer of sale of the properties was ever communicated to plaintiff by defendant. That defendant negotiated with other parties for the sale and purchase of the properties, receiving offers and making counter offers, without informing plaintiff of any such negotiations.

That, during the fall of 1946, General Construction Company, a corporation (hereinafter referred to as General), and others, negotiated with defendant for the purchase of the leased properties and that defendant, having decided to sell these properties for a sum less than the price at which they were offered to plaintiff, did not further negotiate with plaintiff.

That, promptly upon termination of the lease, defendant received a formal offer from General for the purchase of the properties, in the sum of $1,170,240.90, plus certain book costs and inventories, and soon thereafter formally accepted that offer.

That plaintiff protested to defendant and was informed that the properties would be sold to General, whereupon plaintiff made written demand upon defendant to sell the properties to plaintiff on the same terms and conditions pursuant to which defendant agreed to sell to another, plaintiff being ready and willing to pay to defendant the price at which defendant had agreed to sell the properties to General, and that the defendant had failed to inform plaintiff of the offers it had received, the counter offers which defendant had made, or the price which defendant was asking for the properties. That defendant thereby prevented plaintiff from exercising its right to purchase the properties upon the same terms and conditions as defendant offered to others.

Plaintiff prayed that the defendant be required to abide by the provisions of paragraph No. 32 of the lease as extended, and that this portion of the lease be specifically performed. Plaintiff also prayed that, in the...

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