Court Opinion

ID: 8168839
Source: CourtListenerOpinion
Date Created: 2022-09-09 21:06:52.648415+00
Date Added: 2024-06-11T16:39:43.204744
License: Public Domain

ELLETT, Justice
(concurring and dissenting) :
To me, this case involves nothing more than the interpretation to be placed upon a lease contract drawn by the plaintiffs’ attorney. That contract required defendants’ predecessor to erect a mill on the land now owned by the plaintiffs1 and to take all ore to be used therein from the leased land and to pay therefore eleven cents per ton (as of now) together with seven percent of the net profit earned by the plant. There was a provision in the contract that the lease payments would not be less than $12,000 per year.
The lease further provided that the seven percent of net profit would be based upon “sound accounting principles and practices in the gypsum industry” and that in the event of any disagreement between the • parties with reference thereto, “the parties shall be bound by the final determination of the Bureau of Internal Revenue for Federal Income Tax purposes for the year in which the dispute arises.”
Later the parties entered into an agreement providing that the deductions for selling, advertising, and administrative expenses and purchase discounts would be ten percent of the gross profit.
I am unable to see any provision in the lease which would require the lessee to operate at any given rate of production or to sell its products in any given market.
The agreement seems to me to be clear that if the lessee wishes to close the plant for whatever reason, its lease cannot be terminated so long as the minimum rental of $12,000 per year is paid.
The trial court was convinced that the market for wallboard in the Pacific states belonged to the mill on the lessors’ ground, and when wallboard from other plants of the lessee was sold there, it was a violation of the rights of the lessors under the contract.
The present lessee has plants all over the United States, and when it can produce and ship its products from a plant at a cheaper price than it can from the plant here involved, it is a matter of its own concern.
The judgment of the trial court required the lessees to produce 128,539,000 square feet of wallboard per year for the duration of the lease so long as there are mineable and processable reserves and a sufficient market in the eleven western states to absorb the production.
This holding is neither justified nor required by the terms of the lease, and I concur with the main opinion in reversing as to this.
*15I do not agree, however, that the court correctly assessed the damages of lessors by failure of the lessees to pay the seven percent. The judgment of the trial court required the lessees to take paper manufactured in another one of its subsidiary plants and furnish it to the local plant at cost, thus allowing no profit to the stockholders of the corporation owning the other plant. It seems that there is a genuine dispute as to the method of accounting in arriving at gross profit, and it is my opinion that the amount of gross profit shown on the income tax returns for the years in dispute and accepted by the Bureau of Internal Revenue should be used and the net profit ascertained by deducting therefrom ten percent as provided for in the contract and modifying letter. If the income tax return is so merged in intercompany consolidated returns that the true gross profit of the local plant cannot be ascertained, then I think the gross profit should be determined under the guide lines which the Bureau of Internal Revenue would approve if no consolidated return was made.2
I, therefore, would reverse the case and remand it for a determination of the amount of money, if any, due to the lessors, and whether there has been an overpayment by the lessee. I also agree that each party should bear its own costs on this appeal and would let the question of attorney’s fees abide the final result of the litigation.
CROCKETT, J., concurs in the views expressed in the concurring and dissenting opinion of ELLETT, J.

. Both plaintiffs and defendants are successors to the rights and liabilities created by this contract, and the parties and their predecessors will be referred to as lessors (plaintiffs) and lessees (defendants).

. I do not know what type of return was filed with the Internal Revenue Service. It is to he noticed that one of the plaintiffs, S. Lewis Crandall, was at the time of making the lease an auditor for the Internal Revenue Service and remained such for many years until his retirement.