Freeman v. Martin

HUNT, Circuit Judge

(after stating the facts as above). The point in the case being, who has the title and right of possession to the dust and slag involved, we will'first consider the rights of the parties under the contract of August 14, 1906. The recitals contained in that agreement refer to the Smelting Company as organized for the purpose of carrying on a general smelting and reduction business and purposes incidental thereto, and to the Copper Company as a producer of ores carrying copper and other valuable materials. Reference is also made to the fact that the Copper Company had acquired a valuable smelter site, and to the desire of tire Smelting Company to acquire the smelter site and “have erected thereon a smelter plant,” and to the special desire of the Smelting Company “to obtain a contract for the ores of the Copper Company in order to have a basis On which to operate the smelter for outside customer’s ores.” The consideration for the agreement was based upon the covenants and agreements made and to be kept by the parties. The covenant of the Copper Company was to erect a smelting plant, and, upon completion, to sell and convey it to the Smelting Company, with certain land, embracing-640 acres, and also “to furnish the Smelting Company with all ores ,of every kind produced from the mines of the Copper Company * * * that may be desired by the Smelting Company to be smelted and reduced by the Smelting Company,” the “smelting, reduction, and marketing of such ores so delivered” to be done by the Smelting Company at the actual cost thereof, plus 5 per cent, interest on the cost of the property and plant to the Smelting Company, to wit, $800,000. In consideration of these things, the Smelting Company agreed to issue to the Copper Company 7,995 shares of its stock in payment for the real estate and plant to be transferred, “and the contract for the furnishing of the ore by the Copper Company to form a basis for the Smelting Company’s operations in custom ores,” and the Smelting Company also agreed “to take and reduce the ores so to be furnished by the Copper Company upon the terms and at the prices for smelting set forth in the agreement.”

We do not find any contract for the sale of the ores to the Smelting Company in these covenants. The contract specifically binds the Copper Company to sell and transfer by deeds, bills of sale, and other instruments to the Smelting Company the land and smelting plant; but there is a marked contrast between the language used in agreeing to sell the land and smelter, and that which’pertains to-tire ore to be furnished for smelting. The land and plant were to be sold, but with respect to the ore the covenant was simply “to furnish” the Smelting Company with all ores that “may be desired by the Smelting Company to be smelted and reduced by the Smelting Company.” No sale price for the ore is fixed, and no arrangement is made for any amount to be paid as a purchase price.

But, furthermore, next after the covenants just referred to is the provision that “the smelting, reduction, and marketing of such ores so delivered” is to be done by’the Smelting Company at the actual cost thereof, plus S per- cent, interest on the cost of the property and plant to the Smelting Company, to wit, $800,000. Here again there are no words of agreement to sell the ore to the Smelting Company, but the imposition of an obligation upon the Smelting Company to do three things — smelt, reduce, and market for a compensation specified in clear terms as the value of the service. In providing for the marketing, as well as the smelting and reduction, we think it was evidently intended that the Smelting Company was to act as thé agent of the Copper Company. Just what the actual cost of smelting and reduction might be would be dependent upon cost of the materials bought by the' Smelting Company. When these sums would be ascertained, the percentage named was to be added. The Copper Company, under obligation to pay to the Smelting Company all costs of smelting, was entitled to receive the total product of the ore, and this product, we believe, would properly include the flue dust and slag.

It is argued by the appellant that the, agreement of December 16, 1907, which was the contract between the Smelting Company, the American Metals Company, and the Copper Company, should.be considered in connection with the contract of August 14, 1906, and that, when so considered, it shows an intention on the part of the Copper Company to sell its copper to the Smelting Company. But it was the original contract of August 14th which required the Smelting Company to market as well as smelt the ores delivered by the Copper Company under the terms of the contract of that date. When, therefore, the Smelting Company, fulfilling its -original covenant to market the product of the ore, agreed with the American Metals Company to sell and deliver all of the copper bullion “smelted, owned, or controlled by it” at certain prices, and the Copper Company guaranteed to the Metals Company the prompt and faithful performance by the Smelting Company of the terms and provisions of the agreement on the part of the Smelting Company to be performed, the Copper Company did not transfer its ownership in the property to the Smelting Company, but at most guaranteed that the Smelting Company would deliver and sell all copper smelted, owned, or controlled by it to the Metals Company, under the terms named in the agreement, which would include the bullion owned by the Copper, Company but in the possession of the Smelting Company, to be marketed by the Smelting Company as agent for the Copper Company.

The circumstances bear out the view that we have taken of these contracts. When a shipment of .bullion was made by the Smelting Company, the bill of lading was attached to a draft drawn in favor of the Copper Company and turned over to it, and the proceeds of these drafts were received by the Copper Company; the Copper Company paying all the expenses of the Smelting Company. The Smelting Company turned over tire draft for the product of the ore to the Copper Company, and seems not to have claimed any other nor greater compensation than the cost of the smelting, plus the 5 per cent., as agreed in the contract of August 14, 1906. As we look upon the guaranty by -the Copper Company of the performance of the contract on the part of the Smelting Company as not a transfer of the title to the property to the Smelting Company, which merely held for the Copper Company, the true construction of the tripartite agreement is that the Smelting Company, in the sale of the bullion, acted solely as the agent of the Copper Company and for its benefit, and with lcnowledge on the part of tire Copper Company, and the assurance by it that the Smelter Conipany would market with the Metals Company. In re Galt, 120 Fed. 64, 56 C. C. A. 470; In re Columbus Buggy Company, 143 Fed. 859, 74 C. C. A. 611.

It is evident that there was the closest. relationship between the Copper Company and the Smelting Company, and it is not unreasonable to regard their interrelated situation in connection with the apparently studied use of the language in the August contract which effected a sale of the land, and that which required the delivery of' the ore to the smelter and the smelting and marketing by the Smelting Company. It is true that, in the smelter returns made to the Copper Company, the caption of the form used was, the Smelting Company “bought” of the Copper Company; but we do not think this circumstance conflicts with the reasons for concluding that the whole contract was as we have construed it. Sturm v. Boaker, 150 U. S. 312, 14 Sup. Ct. 99, 37 E. Ed. 1093.

Appellants cite Chisolm v. Eagle Ore Sampling Company, 144 Fed. 670, 75 C. C. A. 472. The question there involved arose upon the construction of a contract for the reduction of ore between the complainant in the case and a smelting company. The Sampling Company agreed to deliver to the Mill Company all of the ore which it received from leasers and mines, the ores to'be delivered upon the schedule of treatment rates, which included freight deliveries^ etc. Settlement for all ores shipped was to be based upon the Mill Company’s weights and samples, and payments for all ore delivered were to be made by the Mill Company promptly upon agreement as to assay value upon the basis of $20 per ounce for gold, less treatment charges as set forth in the agreement. The Court of Appeals said that the true construction of the contract, regarding solely the letter thereof, was not altogether clear, but the features pertaining to settlements and payments of freight charges and requirements for payment upon agreement as to assay values were held to indicate the characteristics of a sale rather than those of a bailment for treatment and return of the content values of the specific ore delivered. The court was confirmed in this view by the actions of the parties under the contract, which disclosed that the checks had been drawn “in payment” for the ores.

Our view being that the contract in question was in the nature of a bailment and not of a sale, we think it follows that the CoppeP Company is the owner of the flue dust and slag involved, and we affirm the decree based upon the finding to such effect. This conclusion renders it unnecessary to review the further conclusion of the lower court that the Smelting Company was a subsidiary and adjunct of the Copper Company.

Affirmed.