Case Name: RECONSTRUCTION FINANCE CORP. v. CHROMIUM PRODUCTS CORP.
Court: United States Court of Appeals for the Ninth Circuit
Jurisdiction: United States
Decision Date: 1953-02-17
Citations: 202 F.2d 664
Docket Number: No. 13185
Parties: RECONSTRUCTION FINANCE CORP. v. CHROMIUM PRODUCTS CORP.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 202
Pages: 664–671

Head Matter:
RECONSTRUCTION FINANCE CORP. v. CHROMIUM PRODUCTS CORP.
No. 13185.
United States Court of Appeals Ninth Circuit
Feb. 17, 1953.
Rehearing Denied March 18, 1953.
Wm. Amory Underhill, Asst. Atty. Gen., John F. Cotter and Edmund B. Clark, Dept. of Justice, Washington, D. C., for appellant.
Fred L. Gibson, Livingston, Mont., Rock-wood Brown, Horace S. Davis, William H. Bellingham and Ben N. Forbes, Billings, Mont., for appellee.
Before DENMAN, Chief Judge, and HEALY and POPE, Circuit Judges.

Opinion:
DENMAN, Chief Judge.
This is an appeal from a judgment of the United States District Court for the District of Montana, awarding damages for breach of a leasing agreement of mining properties by Chromium Products Corporation, hereafter called Chromium, to Metals Reserve Company, a corporation created under Section 5 of the Act of June 25, 1940, 54 Stat. 573. See 6 F.R. 2970. By that section appellant had been authorized "(2) When requested by the Federal Loan Administrator, with the approval of the President, to create corporations, with power (a) to produce, acquire, and carry strategic and critical materials as defined by the President, Metals Reserve Company was created for the purpose of acquiring .and carrying a reserve supply of such materials and all its stock was owned by appellant. It is not questioned that the chrome ore sought to be mined was a strategic and critical war material.
This Act of June 25, 1940, stated in its preamble that it is enacted "In order to aid the Government of the United States in its national-defense program". At that time Germany had invaded Norway. The Netherlands (after the aerial bombardment of Rotterdam) had surrendered as had-Belgium. Italy had entered the war. The Germans had crossed the Marne and entered Paris and the Franco-German armistice negotiations had begun. The purpose of the legislation was to prepare for a likely second World War. So also was the lease with Chromium for its chromium ores, producing a metal essential to the hardening and rust-proofing of the steel used in munitions for all the Armed Forces.
The lease, as will be seen, was drawn by Metals Reserve Company as a separate entity from the government as sovereign, for it expressly provides for governmental action affecting its corporate performance. The compensation to Chromium is in royalties to be paid it on the chromium ore mined by Metals Reserve. It is agreed in paragraph 9 of the contract that "Beginning January 1, 1942, and thereafter during the term of this lease Lessee agrees to pay Lessor a minimum royalty of Thirty Thousand Dollars ($30,000) per year payable quarterly on or before thirty days after the end of each calendar quarter. In the event that the total royalties payable under Paragraph 4 hereof during any calendar year shall equal or exceed Thirty Thousand Dollars ($30,000) this minimum royalty obligation shall be fully complied with
Metals Reserve at any time on ninety days' notice to Chromium could terminate the lease upon payment of $1,000.00 and the royalty or minimum royalty then accrued. Metals Reserve also was to be relieved from payment of the minimum royalty during a period of suspended operations by a specific provision of paragraph 9 of the lease.
By these two provisions Metals Reserve could terminate the contract if it became apparent there was no further war need for chromium ore, or it could stop mining but continue the lease without, the payment of royalties and keep the mines in a condition to renew mining if a need again arose for the ores. As later seen, it was for the express purpose of being able to renew mining if the war needed it that the mining was suspended and the mines required to be kept in condition for such further operation.
The specific provision of paragraph 9 for suspending the mining operation is:
" provided, however, should Lessee's construction or development or mining or milling operations or any other operation hereunder be suspended because of any of the causes or reasons-set forth in Paragraph 29 hereof Lessee's obligation to pay a minimum royalty as aforesaid shall be suspended during -any and all periods where such causes or reasons exist and the obligation to pay such minimum royalty shall be reduced in such. proportion as the period of suspension -of operations bears to the entire calendar year." (Emphasis supplied.)
The portion of paragraph 29 above referred to which is pertinent here is: "Anything in this Lease contained to the contrary notwithstanding, any requirement, regulation, restriction or other act of any government which, is beyond the control of the lessee or which delays or interferes with the performance of this agreement, shall be considered sufficient justification fbr delay in such performance until such cause ceases to exist." (Emphasis supplied.)
Under this war expectant contract it is to be noted that it is "any" requirement or restriction of "any" government for which provision is made.
Chromium contends in effect that the words "any restriction" do not mean what they say, but that the only restriction applicable is one by a broad general regulation such as that in Horowitz v. United States, 267 U.S. 458, 461, 45 S.Ct. 344, 69 L.Ed. 736, and in Jones v. United States, 1 Ct.Cl. 383. Neither of the cases consider a contract in which the government could impose "any" restriction. Applying the usual canons of construction of contracts, we are required to give effect to the word "any" and not make it negatory by confining it to a single kind of restriction.
Chromium likewise contends in effect that the words "any government" do not mean what they say but that they exclude the Government of the United States. Here again the ordinary rule of construction requires us to give effect to the word "any" by including, the Government of the United States.
Chromium also contends that the contract is not with Metals Reserve Company as a separate corporation, but directly with the United States because that corporation is an agency of the United States. This it contends although Chromium did not sue the United States but Metals Reserve's successor in interest, the Reconstruction Finance Corporation. Here again is applicable the rule that we must give effect and not make negatory the contract's carefully-drawn distinction'between the provision of the corporate agreement to mine chromium and its provision that the government may "restrict" such action by the corporation. Under the contract Metals Reserve could not suspend operations by its corporate action. It could be done only by the government, an act beyond the corporate control of the lessee. The situation is that of the corporations in U. S. ex rel. Skinner & Eddy v. McCarl, 275 U.S. 1, 6 et seq., 48 S.Ct. 12, 72 L.Ed. 131; Reconstruction Finance Corp v. J. G. Menihan Corp., 312 U.S. 81, 61 S.Ct. 485, 85 L.Ed. 595; Farm Security Administration v. Herren, 8 Cir., 165 F.2d 554. The case of Cherry Cotton Mills, Inc., v. United States, 327 U.S. 536, 66 S.Ct. 729, 90 L.Ed. 835, dealt with a contract having no such provision.
The anticipated second World War began on December 7, 1941, before the first payment of the royalties became due on January 1, 1942. On February 24, 1942, the President transferred the control of the Metals Reserve Company to the Secretary of Commerce. Metals Reserve continued the operations under the lease and the payment of royalties until the performance of the agreement on December 31, 1943, was "restricted"- as to mining operations but the mines were kept in condition to renew mining by the Chairman of the War Production Board. Thereafter, the Metals Reserve Company refused to pay any royalty.
We regard this "restriction" of the corporation's operations as the sovereign's act, being one provided in the specific provision of the proviso of paragraph 9 invoking paragraph 29 of the lease, supra, for suspending mining when such action is by restriction by the government.
By the President's Executive Order No. 9024, 7 F.R. 329, U.S.Code Cong.Service 1942, p. 49, Metals Reserve was required to comply with the plans, methods and procedure of the Chairman of the War Production Board. By a second Presidential Executive Order of January 24, 1942, No. 9040, U.S.Code Cong.Service 1942, p. 51, the Chairman was authorized and chose to exercise his powers through H. G. Batcheller, operation's vice chairman of that Board. Through Batcheller the Chairman finally determined the "plans, methods, and procedures in respect to production", with which the Metals Reserve Company must comply, in an extended letter to the Secretary of Commerce then controlling that corporation.
The letter detailed the underlying facts and reasons for the Chairman's "plans and procedure" and then stated that "In view of the present stringent manpower situation and the lack of need for Montana concentrates as outlined above, we believe it advisable to divert the men now employed in mining low grade chrome concentrates in Montana into the production of more critically needed materials such as copper and zinc. We, therefore request that you shut down all operations at the Benbow and Mouat-S amp son properties except for such maintenance men as are necessary to keep both mines and mills in sufficiently good condition so that either or both operations could be revived in the event that the chromite picture should change for the worse." (Emphasis supplied.) It was pursuant to the requirement of this letter that the mining operations were suspended.
Such a Presidential restriction of the miners' operations so diverting them to the production of the "critically needed" war materials of copper and zinc is as much a governmental operation as a Presidential order that soldiers should be removed from one field of battle to another.
We think that the delay in the operations of the mine caused by the action of the government relieved the Metals Reserve Company from the liability for the minimum royalty. The judgment is reversed and judgment ordered entered that Chromium take nothing by its complaint.
. The properties, etc., of Metals Reserve Company were later transferred to the Reconstruction Finance Corporation (hereafter referred to as R.F.C.), a corporation wholly owned by the United States, by statute, Joint Resolution June 30, 1945, 59 Stat. 310, 15 U.S.C.A. § 611 note. R.F.C. is the defendant in this action.
. "3. Federal departments, establishments, and agencies shall comply with the policies, plans, methods, and procedures in respect to war procurement and production as determined by the Chairman [of the War Production Board]
. "The Chairman of the War Production Board may exercise the powers, authority, and discretion conferred upon him by this or any other Order through such officials or agencies and in such manner as he may determine; and his decisions shall be final." (Emphasis supplied.)
. Since Congress gave the President the power to make such orders, the contention that Batcheller was acting merely as a "vice chairman" and not for the government, as a warring sovereign, is without merit.