Vanadium Corporation v. Fidelity & Deposit Co., 26

• Decision Date: 06 January 1947
• Docket Number: No. 26,Docket 20259.,26
• Citation: 159 F.2d 105
• Parties: VANADIUM CORPORATION OF AMERICA v. FIDELITY & DEPOSIT CO. OF MARYLAND et al.
• Court: U.S. Court of Appeals — Second Circuit

159 F.2d 105 (1947)

VANADIUM CORPORATION OF AMERICA v. FIDELITY & DEPOSIT CO. OF MARYLAND et al.

No. 26, Docket 20259.

Circuit Court of Appeals, Second Circuit.

January 6, 1947.

Dwight R. Collin, of New York City (Chadbourne, Wallace, Parke & Whiteside, and Virginia M. Simpson, all of New York City, on the brief), for appellant.

Milton Pollack, of New York City, for appellees.

Before SWAN, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

This action against a surety on a bond securing performance of a contract of sale of mining leases was originally brought in the Supreme Court of the State of New York and came to the district court below through removal by defendant because of the diverse citizenship of the parties. The principal on the bond, Horace Ray Redington, then intervened as a party defendant. Since the contract of sale was not completed, plaintiff vendee by its terms became entitled to repayment of the consideration paid in advance of $13,000, unless its own acts justified defendants' refusal to make the refund. Accordingly the issues below concerned the defenses raised by defendants that plaintiff had refused that co-operation required by law in obtaining completion of the contract. These defenses, three in number, were upheld as legally sufficient by the District Court against attack by motions before and after verdict and by requests to charge. The jury having found for defendants, this appeal from the resulting judgment brings the issues of the validity of the defenses before us.

The two original mining leases were made in 1939 and 1940 to three lessees, John F. Wade, Thomas F. V. Curran, and Redington, and covered various lands belonging to the Navajo tribe of Indians in the Navajo Reservation in Arizona. The lands produced vanadium-bearing ore, vanadium being a critical war material. Since Indian lands were involved, all transfers required the approval of the Secretary of the Interior. 25 U.S.C.A. § 396a et seq.; 25 CFR § 186.26. The contract here in question was made by Redington with plaintiff on June 3, 1942. By it, in return for the payment of $13,000 which he acknowledged, Redington assigned to plaintiff his interest in the two leases, "subject only to approval by the Secretary of Interior." It also contained a provision that in the event the assignments were not approved, Redington would repay the purchase price and the agreement would be deemed cancelled. Redington further agreed to furnish a bond with appropriate surety for the return of the money in the event that his assignments "aforesaid shall not be approved by the Secretary of Interior of the United States within a period of six (6) months from the date hereof." At the same time Redington executed formal assignments of his interests in the leases, and he and the corporate defendant executed the bond in suit. By the latter the principal and surety bound themselves to return all amounts paid Redington "under protection of this bond." It also provided that plaintiff should be held harmless against all loss or damage arising "by reason of any invalidation of this purchase agreement."

From the beginning, however, it appears that the stumbling block was the unwillingness of the other two owners to go along with plaintiff's plans. But plaintiff was not in the dark as to this situation; while it held only an option from, and before closing with, Redington, it had approached the other owners for a purchase of their interest, and had been refused. After taking the assignments from Redington, plaintiff tried to reopen negotiations with the others, either for purchase or for joint operations of the mines; but its proposals were again repulsed. Under date of June 7, 1942, Curran notified it that Wade, acting for all the owners, had made a contract with the Metals Reserve Corporation (a government corporation) for the entire output of ore from the properties for the duration of the war. Curran added that they would do all possible to get the largest possible tonnage from the leases, on their contract with the Metals Reserve Corporation, and "will welcome any aid you may give that will promote this end." It is defendants' contention that this information as to the prior right of the Metals Reserve Corporation to the output caused plaintiff's desire for the Redington interests to cool; and this disposal of the output obviously ran counter to plaintiff's program of securing a large flow of ore to a government-financed processing plant at Monticello, Utah, being built for operation by plaintiff on a fee basis. Plaintiff denies any lack of co-operation, calling attention to its general offers otherwise appearing as late as August 28, 1942, in a letter of that date to the Assistant Commissioner of Indian Affairs. But so far as an issue of fact was presented, that was resolved by the jury against the plaintiff.

Actually the proof adequately supported the allegations of fact of all the defenses. These were, first, that plaintiff refused reasonable assurances to the Department of an intent to co-operate with Curran and Wade in an amicable operation of the mines; second, that prior to November 18, 1942, it withdrew its request for approval of the assignments and caused the Department to withhold approval; and, third, that after November 18, it prevented reconsideration of the disapproval already made. Thus when the Assistant Commissioner notified plaintiff by letter of September 4 of the official intent to disapprove the assignments because of plaintiff's failure to work out an operating agreement with Curran and Wade, plaintiff's immediate reaction was to perfect its rights against the surety by formal demand upon the latter and by request to the Department for final certification of the Secretary's disapproval. True, it acknowledged the communication from the Assistant Commissioner by letter of September 8; but this, like other acts of the plaintiff during the period, was subject to various interpretations, depending upon the background. For in this acknowledgment it expressed regret at the withholding of approval, since it had hoped to increase production of vanadium ore by "our co-operation" with the owners of the leases and that the maximum amount of ore would be removed from the claims, tendered "any assistance that we may properly offer to accomplish that end," and closed by stating that it was "immediately notifying" Redington and taking steps to secure the return of funds it had advanced. Further, there was evidence that in October it refused to give the assurances desired by the Department of its intent to co-operate with the other owners, but indeed went so far as to tell the General Superintendent of the Navajo Service in Arizona of its lack of further interest in the assignments. Accordingly the Assistant Secretary of the Interior, acting on a recommendation from the office of the Department Solicitor reciting that the officers of plaintiff had stated that they were no longer interested in obtaining the assignments, formally disapproved the assignments November 18, 1942.

The evidence is yet more direct on the issue that plaintiff prevented reconsideration of the disapproval after November 18, 1942. Here plaintiff's position is that its rights became fixed on that date and that later reconsideration could not affect them. It is not contested that the Assistant Secretary, on the appeal of Redington and his counsel, was prepared to reconsider the matter if the plaintiff would go along, and so wired plaintiff's president on November 28, saying that the disapproval was "being reconsidered with view to approving assignments. Wire your position," to which plaintiff's answer, November 30, was, "Our position therefore must be to respectfully request no reconsideration of your position." And so the Assistant Secretary on December 3 notified the parties that without "a joint request for reconsideration by both parties to the assignment," no further consideration could be given the matter. Plaintiff now argues that it understood the original assignments and contract to be dead, and hence was refusing merely to enter into an entirely new contract, not interfering with approval of those assignments or preventing fulfillment of the original conditions. But this seems only a different verbalization of its same argument that the time period granted for performance in the contract must be further restricted by an earlier disapproval by the Secretary. Of course it overlooks completely the Assistant Secretary's explicit statement that the action disapproving the Redington assignments was being reconsidered with a view to approval.

On the record, therefore, there seems to be no doubt of the plaintiff's complete disinterest in the Redington assignments at this time. But clearly it is in error in asserting that the rights of the parties became finally fixed on November 18, 1942. For the explicit provision of the contract, calling for the bond here in question, required only refund of the consideration if the Secretary did not approve within six months, i. e., by December 3, 1942. Nothing is said to suggest that the period is shortened by an earlier notice of disapproval. Particularly under the circumstances here where the Secretary was prepared to reconsider, it would be harsh to add to the contract such a provision which the parties themselves did not choose to incorporate in it. The District Court was correct in considering the third defense as on the same plane as the others.

The question therefore is reduced to that of the extent of plaintiff's legal duty in the premises. Professor Williston says that "wherever the cooperation of the promisee is necessary for the performance of the promise, there is a condition implied in fact...