Court Opinion

ID: 6852539
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:37:59.438404+00
Date Added: 2024-06-11T16:05:05.989950
License: Public Domain

McDERMOTT, Circuit Judge
(dissenting).
It is agreed that appellee’s smelter was not operated during the period for which recovery is sought. It neither used nor required any gas during that period. Appellee’s obligation to purchase was limited by the requirements of its smelter. There is no express obligation in the contract to operate the smelter during the three-year period of the contract, or to pay for gas not required. Can such an obligation be fairly implied? I do not think so, and am therefore compelled to dissent.
The contract recites that vendee desires to purchase gas for its Henryetta smelter. The principal obligations of the parties under the contract may be analyzed as follows:
The vendor agrees: To deliver gas to the limit of its capacity, with these reservations: (a) It shall not be required to furnish more than the minimum agreed to be purchased (two or three million cubic feet per day); ' (b) it shall not be responsible for unavoidable casualties.
The vendee agrees: To take and pay for gas to the limit of vendor’s capacity, with these reservations: (a) To take at least two million cubic feet per day the first'year, and three million cubic feet during the second and third years; and (b) that if its total requirements for gas fuel does not equal or exceed the two or three million, it “shall be required to’ take only the amount of its total requirements.”
The contract was to remain in force for three years, and it was agreed that if vendor’s supply did not enable vendee to operate its smelter continuously,, then vendee might buy elsewhere and be relieved of its obligation to take the minimum. ■
This is an agreement to buy and sell a definite amount of gas, two million cubic feet per day the first year, and three million the last two years, with reservations protecting both vendor and vendee. It is not a contract to furnish the requirements of the buyer, as Judge LEWIS has demonstrated; it could not be, when all parties agree that the buyer’s known requirements were far in excess of the amount specified in the contract. The agreement left open the question of furnishing and receiving amounts in addition tol the two or three million feet, for their mutual consent, as stated in the concurring opinion; the excess being left to a future agreement, there is no present contract as to such excess.
There are reservations to the obligation of the vendor to furnish two or three million feet, the principal one of which is that it was only obligated to furnish gas to the limit of its capacity. There is a reservation to the obligation of the vendee to buy two' or three million cubic feet, to wit, if its requirements did not equal or exceed that amount, it should only be required to take the amount of its requirements. Does this clause mean, as it says, that the vendee need buy no gas if none is required? Appellant, conceding that some meaning must be given to the limitation, argues that this reservation is only- applicable to temporary fluctuations in the demands of an operating plant. It should be enough to say that the contract contains no such qualification; moreover, the suggested interpolation is unreasonable, for when we consider the fact that the smelter’s requirements from October to June averaged six and one-half million eubie feet per day, appellant’s suggestion would make the clause • practically meaningless.
I think the appellee was entitled to a directed verdict. The parties agreed upon a partial supply of gas needed for a particular smelter described in the contract. If that smelter burned any gas, appellee must purchase it of appellant, up to the specified amount. That is a fair and valid contract. Vendee could not escape its obligation by selling the smelter; as long as the smelter required gas, the obligation remained. But does the obligation remain if the smelter is destroyed by fire, or is razed by a tornado, or is dismantled because of the collapse of business? In such events, no gas is required for the smelter, and there was no agreement to buy gas not required. It matters not whether the dismantling occurred in a year, or a month, or a day. That is the contract the parties made.
Judge COTTERAL penetrates to the core of the case when he says: “The defendant owning an established business had the im*837plied obligation to continuo it in the usual manner, and accept during the timo fixed the gas required to so conduct it.”
This is in accord with the contention of appellant, its brief stating: “It is our contention that this contract means that the defendant is to continue its operations in the usual business way.”
Vendee did not expressly covenant to operate the smelter for three years, regardless of fires or tornadoes or economic conditions that required a dismantling of the plant. I am unable to imply such a far-reaching covenant into the contract. The cases cited in support of the proposition that such a covenant should be read into this contract do not seem to me to he in point. Cold Blast Transp. Co. v. Kansas City Bolt & Nut Co. (C. C. A. 8) 114 F. 77, 57 L. R. A. 696, Lima Locomotive & M. Co. v. National Steel C. Co. (C. C. A. 6) 155 F. 77, 11 L. R. A. (N. S.) 713, Texas Co. v. Pensacola Maritime Corp. (C. C. A. 5) 279 F. 19, 24 A. L. R. 1336, and Griffin v. Oklahoma Natural Gas Corp. (C. C. A. 10) 37 F.(2d) 545, hold that an agreement to buy or sell the requirements of an established business is sufficient consideration to support a contract. Hickey v. O’Brien, 123 Mich. 611, 82 N. W. 241, 49 L. R. A. 594, 81 Am. St. Rep. 227, Loudenback Fertilizer Co. v. Tennessee Phosphate Co. (C. C. A. 6) 121 F. 298, 61 L. R. A. 402, Wells v. Alexandre, 130 N. Y. 642, 29 N. E. 142, 15 L. R. A. 218, Kamm v. Pritchard (C. C. A. 5) 296 F. 871, and Great Lakes & St. L. T. Co. v. Scranton Coal Co. (C. C. A. 7) 239 F. 603, hold that an agreement to purchase the requirements of a business cannot be evaded by a sale or in other devious ways. With these decisions I am in entire accord. They do not reach the question of a business which has no requirements. In Du Pont de Nemours Powder Co. v. Schlottman (C. C. A. 2) 218 F. 353, the purchase price of a plant was to he determined by the success! of a year’s operation of the plant; an agreement to continue operations wa,s necessarily implied. In Diamond Alkali Co. v. P. C. Tomson, & Co. (C. C. A. 3) 35 F.(2d) 117, and in Burgess Sulphite Fibre Co. v. Broomfield, 180 Mass. 283, 62 N. E. 367, an implied obligation was found to exist, under the circumstances of those cases; hut in each case, oral evidence was received in an effort to ascertain, the intent of the parties. The oral evidence in the ease at bar is all to the effect that no such obligation was intended by either party.
It is then urged that the parties contemplated continued operations of the smelter for three years; that vendor constructed the gas line because of that contemplation. The vendor did not agree to construct the line; section 7 released it from liability if the line was not constructed; it had other customers, and this smelter was shut down during 1920 and 1921. It is therefore doubtful if it ea,n be said that the vendor cfintracted with any other contemplation than that a large consumer of gas was willing to contract for its needs up to a certain amount. Be that as it may, the expectation of vendor that operations will continue does not take the place of a covenant by vendee that they will continue. Eddy v. Clement, 38 Vt. 486; Whitman v. Anglum, 92 Conn. 392, 103 A. 114; Northern Irrigation Co. v. Watkins (Tex. Civ. App.) 183 S. W. 431; Turner v. Goldsmith, 1 Q. B. 544. If wo are to interpolate a covenant or a stipulation into this contract because of the expectations of the parties, what will it he! A covenant continuously to operate, as Judge COTTERAL suggests, or a stipulation that the obligation of vendee terminates in event of a dismantling of the smelter? The question of what implied provision will conform to the contemplation of the parties must be answered either with or without the help of testimony as to what they contemi>lated. If testimony may be resorted to, the evidence is undisputed that a covenant for continued operations was not contemplated; on the contrary, the clause in section 2 was to protect against such implication. If testimony is not resorted to, then the court must determine from the written contract, what agreement the parties probably would have made on the subject. 1 think it highly improbable that vendee would ever have agreed to the covenant now implied; I think it more reasonable to assume that the vendor was willing to take the chance of continued operations, than to assume that vendee would agree to operate its smelter at a loss, or to pay for gas it did not use.
Where parties have entered into written contracts, the courts are reluctant to enlarge them by implication, the presumption being that they have expressed all the conditions by which they intended to he bound. Loyalton Electric Light Co. v. California Pine Box & Lumber Co., 22 Cal. App. 75, 133 P. 323; Barnes v. American Brake-Beam Company, 238 Ill. 582, 87 N. E. 291; Northern Irrigation Co. v. Dodd (Tex. Civ. App.) 162 S. W. 946; Prest v. Farmington, 117 Me. 348, 104 A. 521, 2 A. L. R. 1390; McPherson v. Gullett Gin Company, 134 Miss. 771, 100 So. 16; Brown v. Fales, 139 Mass. 21, 29 N, E. 211. *838Only such provisions will be implied as are indispensable to effectuate the intention of the parties and as arise from the language of the contract and the circumstances under which it was made. Sacramento Nav. Co. v. Salz, 273 U. S. 326, 329, 47 S. Ct. 368, 71 L. Ed. 663; Williston on Contracts, § 1293; Brodie v. Cardiff Corporation (1919) A. C. 337, 358. Stipulations not actually made, and to which the parties might not have assented, cannot be imported into a contract, however equitable they may be. Nims v. Vaughn, 40 Mich. 356; Raner v. Goldberg, 244 N. Y. 438, 155 N. E. 733. A covenant will not be implied if in conflict with express provisions of the contract. Cliffe Company v. Du Pont Engineering Co. (D. C. Del.) 298 F. 649; Berry v. Humphreys, 76 W. Va. 668, 86 S. E. 568; Foley v. Euless (Cal. Sup.) 6 P.(2d) 956. Covenants or conditions should never be implied unless it is entirely clear, from the contract and the circumstances, that the parties intended so to bind themselves.
To imply a covenant on the part of vendee to continue to operate this smelter for three years, is in conflict with the principles above stated. The parties in this ease reduced their engagement to writing. It is a comprehensive and complete agreement, and provides for many eventualities. To import therein a covenant by the vendee that the smelter would be continuously operated for three years, or that it would pay for gas it had no need for, is to contract where the parties did not. It is not essential to the carrying out of a contract by which the vendor is given a preferential right to furnish gas if any is required. The evidence discloses that vendee would not sign except upon assurance that the contract contained a clause exactly to the contrary of the one which the court implies. Nor is it unreasonable to assume that the vendor, for the purpose of securing a large customer for its enterprise, was willing to assume what appeared to be the slight risk of a shut-down of the smelter. The covenant here implied is in conflict with the express limitation in section 2.
There appears to be a dearth of authority directly in point. There are numerous eases where a buyer undertook to escape his obligation by selling a business. But in those cases, the business continued to operate, and the agreement to buy its requirements of course remained undischarged. Here the business stopped, and there were no requirements. There are two cases, decided by courts of high authority, that consider a situation quite similar. In Pellet v. Manufacturers’ & Merchants’ Ins. Co. (C. C. A. 7) 104 F. 502, and in English & Scottish Marine Ins. Co., 5 Ch. App. 737, it appeared that the insurance company defendant had in each ease contracted with an agent for representation in a given territory for a period of time. During the period in question, the insurance companies ceased or curtailed operations in the territory. Both courts held that while the agents were entitled to represent the companies as to any business done in the territory, no obligation could be implied that required the companies to continue in business in the usual way for the period involved.. Mr. Williston, in discussing the consideration of requirement contracts, touches upon the precise point here involved. He says: “Though it may be true that a seller by ceasing to manufacture may relieve himself from any performance and .still keep a promise to sell all the goods he manufactures, and similarly a buyer by going out of business may avoid performance while still observing the terms of an agreement to buy all that he requires, these results can be obtained only by doing something which is in itself a legal detriment, namely, the cessation of business.” Williston on Contracts, § 104.
The appellant herein agreed that appel-lee’s obligation to pm'chase two or three million cubic feet per day should be limited by the provision that if the requirements of the smelter did not equal that amount, appellee need only take its total requirements. The smelter was dismantled and neither required nor used any gas during that period. Appellant cannot recover, therefore, unless this limitation of obligation is ignored, or unless a covenant by appellee to operate the smelter for three years is implied. I am unwilling to do either. I think the contract should be enforced as written, and that thej judgment of the trial court should be affirmed.