A provision in a contract for the mining, removing, and loading
by the party of the first part of ore from a mine of the party of
the second part that the party of the second part may be at liberty
to terminate it at any time when he shall be satisfied that the
system employed by the party of the first part is prejudicial to
the welfare and development of the mine, and that in that event,
there shall be a reference to determine the damages sustained by
the party of the first part by reason of the termination, does not
give the party of the second part a right arbitrarily to terminate
the contract, but only to do so when it is determined that the
system employed is prejudicial to the future welfare and
development of the mine.
A contract made for the extract of ore from the first level of a
mine provided that the ore should contain at least 56 percent of
metallic iron. Subsequently the parties extended the contract so as
to include the ore contained on and above the second and third
levels, with the exception that the ore extracted under this
contract should contain at least 58 percent of metallic ore.
Held that this stipulation was applicable only to the ore
taken from the second and third levels.
Whenever one party to a contract is guilty of such a breach as
is here attributed to the defendant, the other party may treat the
contract as broken and may abandon it and recover as damages the
profits he would have received through full performance, which
measure of profits was within the intent of both parties when the
contract was made, and could be ascertained without difficulty.
A letter of a party to the suit bearing upon the issues
introduced in evidence against him may be explained by him as a
witness in his own behalf, and its effect upon the issues and the
force of the explanation are proper subjects for the consideration
of the jury.
By the terms of the contract in this case, the amount due the
plaintiffs from time to time was to be determined by the
weigh-bills, which were in the possession of the defendant's
bookkeeper. The plaintiff applied to the bookkeeper for information
on this point, and received a reply.
Held that that was
competent evidence on that point.
On May 1, 1888, John Humble, Joseph H. Johns, and James Johns,
who were partners doing business under the firm name of Johns
Brothers & Humble, entered into a contract with the Anvil
Mining Company for mining iron ore.
Page 153 U. S. 541
The provisions of the contract, so far as they are material, are
that
"they, the said party of the first part, shall and will, in a
good and workmanlike manner, and at their own proper charge and
expense, mine, remove, and load into the skips all the merchantable
iron ore contained on or above the first level of the mine now
owned and worked by the said Anvil Mining Company at its No. 1
shaft, in said Township of Bessemer. The said ore shall be mined
and removed by what is known as the 'caving system,' and the ore
removed shall be at least seventy-five percent (75 percent) of the
merchantable iron ore contained on or above said first level, and
shall be worked, taken out, and removed in such manner as not to
interfere with the future workings and development of said mine.
Said party of the first part shall work said mine to its full
capacity, and remove the ore therefrom without unnecessary delay,
and shall mine from said level at least two hundred (200) tons of
merchantable iron ore per day -- that is, the average amount of ore
removed each month shall not be less than two hundred (200) tons
per day."
"It is understood and agreed between the parties hereto that
should it be determined by said second party that the ore from the
second and third levels of said mine can be removed and extracted
by the caving system of mining, or by the same system practiced in
removing the ore from the said first level, that this contract, at
the option of said second party, shall extend to and include the
ore contained on and above the second and third levels of said
mine."
"It is also agreed that it shall be entirely optional with said
party of the second part to extend the contract to the ore below
the second level, and that the said party of the second part shall
have the right of terminating this contract and the said system of
mining at any time when said second party shall decide that said
system is prejudicial to the future welfare and development of said
mine; equitable compensation to be made said party of the first
part for damage suffered by them by reason of the said party of the
second part so terminating this contract, and should said parties
be unable to agree upon the basis of settlement, then the
matter
Page 153 U. S. 542
shall be left to two disinterested mining superintendents, one
to be chosen by the party of the first part and the other to be
chosen by the party of the second part, and, in case said referees
fail to agree, they shall choose a third, and the decision of said
referees, or the majority of them, shall be final and conclusive
upon the parties hereto as to the compensation to be made said
party of the first part because of the termination of this
contract."
"The said party of the first part agrees that the said party of
the second part shall have the use of number one shaft for the
purpose of raising either rock or ore from said mine, in the
sinking of said shaft and developing said mine below the first
level. This privilege to use number one shaft is to be considered
to apply only to the removal of ore, rock, or other material
necessary to be taken out in sinking said shaft, and in drifting,
cross-cutting, and opening the lower levels."
"The ore to be taken out by said party of the first part under
this contract shall be merchantable iron ore, containing at least
fifty-six (56) percent or upwards of metallic iron, and no ore of
lower grade shall be accepted or paid for by the said party of the
second part."
"The said party of the first part are to mine said ore and place
the same in the skips at No. 1 shaft in said mine, ready for
hoisting, the ore to be hoisted at the expense of the said party of
the second part, who agree to furnish all necessary power to
properly run the skip in said No. 1 shaft for the purpose of
hoisting the ore mined and placed therein by the parties of the
first part, but this covenant shall not deprive the party of the
second part of the right to use said skip for the purposes and in
the manner hereinbefore provided. In case of any accident to said
machinery, said party of the second party shall not be liable for
any damages sustained by said party of the first part, caused by
delay in replacing or repairing said machinery, provided the said
party of the second part shall cause the same to be replaced or
repaired with all reasonable diligence."
"The said party of the first part are to take out all the ore
which can possibly be taken out under the caving system of
Page 153 U. S. 543
mining, and in no case shall the amount taken out be less than
seventy-five (75) percent of the ore contained therein, as above
agreed."
"The party of the second part are to have the right or privilege
of superintending and directing said work, and for that purpose to
enter said mine and inspect the works thereof at any time for the
purpose of seeing that the work is properly conducted by the said
first party and that the work so done is not prejudicial to the
future interest and working of said mine."
"It is further expressly stipulated and agreed that the said
party of the second part shall not under any circumstances be
liable for any damage or injury to either person or property by
reason of the carelessness or negligence of the said party of the
first part or of their workmen, apprentices, or other persons in
their employ, in the furtherance of this contract, and that the
said party of the first part shall and will indemnify and forever
save harmless the said party of the second part from all actions,
claims, suits, and damages by reason thereof. In consideration
whereof, the said party of the second part covenants and agrees to
and with the said party of the first part to pay to them, the said
party of the first part, the sum of sixty cents (60 cts.) for each
and every gross ton of merchantable iron ore mined and removed by
the said party of the first part from the said mine under this
contract, each gross ton to contain two thousand two hundred and
forty (2,240) pounds avoirdupois. The amount of ore shipped from
said premises, and the amount due said party of the first part
therefor, shall be determined by and based upon the weights as
ascertained by the reports of the railroad company or companies,
made to said party of the second part, of the shipment of the ore
from said mine, in case of the shipment of the ore so mined from
said premises."
This contract was subsequently extended by the following
stipulation, dated the 10th day of July, 1888:
"It is mutually agreed by the parties to the within agreement
that this contract shall extend to and include the ore contained on
and above the second and third levels, as named
Page 153 U. S. 544
therein, with the exception that the merchantable iron ore
extracted under this contract shall contain at least 58 percent
(fifty-eight percent) or upwards of metallic iron."
The firm commenced the work soon after this contract was entered
into, and continued it until the 11th of October of that year. On
February 11, 1889, they began this action in the Circuit Court of
the State of Michigan for the County of Gogebic to recover for work
done and damages sustained. The defendant removed the case to the
federal court, where issue was joined, and the case went to trial
before a jury, which, on September 16, returned a verdict for the
plaintiffs in the sum of $5,943.79. Pending the proceedings in the
trial court, one of the plaintiffs, Joseph H. Johns, died, and the
suit was revived in the name of John Humble and James Johns, the
surviving partners. Upon the verdict as returned, judgment was
entered, and to reverse such judgment the defendant sued out this
writ of error.
Page 153 U. S. 546
MR. JUSTICE BREWER, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The claims of the respective parties, as stated by the court in
its charge to the jury, are briefly these: plaintiffs claimed
Page 153 U. S. 547
first, an amount unpaid for ore mined in September and October;
second, wages which they had paid during certain periods when they
were delayed in the prosecution of the work by the fault of the
defendant; and third, the profits which they would have made if the
defendant had not prevented them from completing the contract. On
the other hand, the defendant claimed first, excessive freights
paid by reason of a failure on the part of the plaintiffs to
produce the ore seasonably; second, damages for a failure to bring
out that percent of the ore which by the contract plaintiffs had
agreed to take out of the mine; and third, damages on account of
the unskillful working of the mine.
The first claim of the plaintiffs, to-wit, for ore mined in
September and October, is not disputed. With regard to the second,
the court accepted the rule of law agreed upon by counsel for both
parties, and therefore there is no dispute as to that. The
controversy is in respect to plaintiffs' claim for profits, and
here many questions are discussed by counsel. We shall, in our
examination of them, follow the order in which they are presented
in the brief of defendant's counsel. The first objection to any
recovery under this claim is that by the very terms of the contract
the defendant was at liberty to terminate it at any time, and hence
it is insisted that even if it did so, plaintiffs were not entitled
to recover any profits which they might have made had it not been
terminated; that coupled with the right to terminate was a special
provision, to-wit, an award of referees for estimating the damages
which the plaintiffs should sustain in consequence of such
termination, and that no attempt to secure such an award was
alleged or proved. To this it may be replied that the contract did
not give to the defendant a right arbitrarily to terminate the
contract, but only when it determined that the caving system was
"prejudicial to the future welfare and development of the mine,"
and that there is no pretense that it ever made such determination.
On the contrary, the defendant set up as a defense that the
plaintiffs abandoned the work, and thus broke the contract, and
that it suffered great damage thereby, and on the trial the
whole
Page 153 U. S. 548
scope of its testimony in this respect was in denial of the
charge that it had stopped the plaintiffs from continuing the
mining of ore, or in any manner sought to terminate the contract.
For aught that appears to the contrary in this record, the
defendant now, as ever, believes that the caving system is not only
not prejudicial, but the best method of working the mine, and broke
the contract with plaintiffs only for the sake of giving it to
another party.
A second matter of dispute, and one which bears upon the
rightfulness of the conduct of the respective parties pending the
work, arises on the construction to be given to the stipulation of
July 10. The original contract provided that the ore should contain
at least 56 percent of metallic iron, and that no ore of lower
grade should be accepted or paid for by the company. The contention
of the defendant is that this stipulation modified the contract so
that thereafter all the ore taken from the mine, in order to be
accepted, must contain at least 58 percent of metallic iron, while
the plaintiffs insist that this only applied to the ore from the
second and third levels, that from the first level being subject to
the provision of the original contract, to-wit, 56 percent of
metallic iron. We agree with the plaintiffs in their construction
of the stipulation. The original contract was only for removing ore
from the first level, the company having, however, the option to
extend it to the second and third levels. This stipulation provides
for such an extension, but it is made expressly subject to "an
exception." The use of the word "exception" indicates that
something is taken out from the principal matter provided for in
the clause or paragraph in which the word is found, and not that
something is taken out of or changed from other provisions in other
clauses of the entire contract. It will be borne in mind that this
is an independent agreement, made at a subsequent time, though
supplemental to and in extension of the original contract, and
while, for a full understanding of the scope of the obligations
created by it, the original contract must be referred to, yet in
determining the import of the language used, it is to be construed
as an independent agreement, and when it
Page 153 U. S. 549
makes an extension of the obligations of the plaintiffs to a new
matter, anything which is stated as an exception is to be taken as
an exception to the obligations assumed in respect to this
additional matter. If the intent was to change the stipulation as
to the first level, some other word than "exception" would
unquestionably have been used. It is unnecessary to refer to
extrinsic testimony, of which there was some, and of great
significance, in order to establish the meaning of this
stipulation, for, standing by itself, the fair and reasonable
construction is that the stipulation as to the increased percent
was applicable only to the ore taken from the second and third
levels, while as to the first level, there was no change.
A third proposition of defendant is that, "under the facts in
this case, the damages claimed for loss of profits were too
uncertain, contingent, and conjectural to found a verdict upon."
Profits which are a mere matter of speculation cannot be made the
basis of recovery in suits for breach of contract, while profits
which are reasonably certain may be. As said by Mr. Justice Lamar
in
Howard v. Stillwell & Bierce Manufacturing Co.,
139 U. S. 199,
139 U. S.
206:
"But it is equally well settled that the profits which would
have been realized had the contract been performed, and which have
been prevented by its breach, are included in the damages to be
recovered in every case where such profits are not open to the
objection of uncertainty or of remoteness, or where, from the
express or implied terms of the contract itself or the special
circumstances under which it was made, it may be reasonably
presumed that they were within the intent and mutual understanding
of both parties at the time it was entered into."
See also Cincinnati Gas Company v. Western Siemens
Company, 152 U. S. 200.
Now there was in this case testimony to show the cost of mining
each ton of ore, and also the amount of ore remaining in the first
level of the mine at the time the work stopped. From these figures
the profit which would have been made by the plaintiffs if they had
completed the work of mining all the ore on the first level is a
mere matter of multiplication.
Page 153 U. S. 550
It is true that the cost of mining the remaining ore might
differ from that of mining the ore which had already been taken
out, but still proof of the cost of taking out that which had been
mined, and of the condition of the mine as it was left, furnished a
basis upon which a reasonable estimate could be made as to the cost
of extracting the remaining ore. Equally true is it that there was
no mathematical certainty as to the amount of ore remaining in the
mine; yet both plaintiffs and defendant furnished testimony as to
such amount, and testimony which, while not such as to put it
beyond doubt, was sufficient to enable the jury to make a fair and
reasonable finding in respect thereto. The case is one, therefore,
in which the profits are not open to the objection of uncertainty,
and certainly not to that of remoteness, for they would have been
the direct result of carrying on the contract to a completion, and
were obviously within the intent and mutual understanding of both
parties at the time it was entered into.
Again, it is insisted that there was no evidence that the
plaintiffs were stopped and prevented from going on with the
contract, but this is a mistake. While there is no pretense that
the plaintiffs were forcibly removed from the mine, there was
testimony that they were directed to quit. One of the plaintiffs,
John Humble, gave this account of a conversation held in October
with the defendant's superintendent, and their action in
consequence thereof:
"We worked from the 9th to the 11th, and then Mr. Bennett
stopped me again. We had worked half a day, and at dinner time my
partner and I were going together to the dry house, and Mr. Bennett
came to us and said: 'You boys can stop in that third level
altogether.' 'Well,' says I, 'you mean to bring out tools out?'
'Yes,' says he, 'you can run what ore you have broken in the first
level, and quit.' Then we went down and stopped the men in the
lower level, and commenced to run out what we had in the first
level, and we sent out all the tools in the mine, and left. We got
out all the ore we had broken on the foot-wall lens. There was no
more ore left there to break except the pillar. "
Page 153 U. S. 551
John Rowe testified that the defendant's superintendent told him
that if he could get the plaintiffs out he would let him have the
contract, and that, by the superintendent's orders, he ordered them
to stop work. It must be borne in mind that the plaintiffs were
making a profit of some thirty cents a ton in carrying on this
mining, and it is hardly to be presumed that they were desirous of
giving that up, and more reasonable to believe that they quit under
compulsion.
In view of the verdict of the jury, which is equivalent to a
finding that the defendant had broken the contract, it is
unnecessary to inquire as to whether there was any error in the
instructions of the court as to damages recoverable by the
defendant in case the jury should find that the plaintiffs had
broken the contract. It may also be remarked in passing that the
court excluded from the consideration of the jury the amount of ore
remaining in the second and third levels, and limited the recovery
to the profits which the plaintiffs would have made if they had
been permitted to continue the work so far as to remove all the ore
from the first level.
Defendant also complains of the following instruction:
"If the jury find from the evidence that the plaintiffs were in
good faith endeavoring to carry out and perform said contract
according to its terms, and the defendant wantonly or carelessly
and negligently interfered with and hindered and prevented the
plaintiffs in such performance to such an extent as to render the
performance of it difficult, and greatly decrease the profits which
the plaintiffs would otherwise have made, then and in such case
such interference was unauthorized and illegal, and would have
justified the plaintiffs in abandoning the contract, and would have
entitled them to recover such damages as they actually suffered by
being hindered and prevented from performing such contract."
It is insisted, and authorities are cited in support thereof,
that a party cannot rescind a contract and at the same time recover
damages for his nonperformance. But no such proposition as that is
contained in that instruction. It only lays down the rule, and it
lays that down correctly, which obtains when there is a breach of a
contract. Whenever one
Page 153 U. S. 552
party thereto is guilty of such a breach as is here attributed
to the defendant, the other party is at liberty to treat the
contract as broken, and desist from any further effort on his part
to perform -- in other words, he may abandon it and recover as
damages the profits which he would have received through full
performance. Such an abandonment is not technically a rescission of
the contract, but is merely an acceptance of the situation which
the wrongdoing of the other party has brought about. Generally
speaking, it is true that when a contract is not performed, the
party who is guilty of the first breach is the one upon whom rests
all the liability for the nonperformance. A party who engages to do
work has a right to proceed free from any let or hindrance of the
other party, and if such other party interferes, hinders, and
prevents the doing of the work to such an extent as to render its
performance difficult, and largely diminish the profits, the first
may treat the contract as broken, and is not bound to proceed under
the added burdens and increased expense. It may stop and sue for
the damages which it has sustained by reason of the nonperformance
which the other has caused.
In the course of the trial, a letter was produced, signed by the
plaintiffs, and directed to the general manager of the company in
which was a statement that the first level had been practically
exhausted of all commercial ore, and that not to exceed five
percent was left in it. The defendant insisted that this letter was
conclusive upon the plaintiffs, but the court permitted testimony
on their part to the effect that this letter was written at the
solicitation of defendant's superintendent, who said to one of them
that some one was reporting to the company that "they were leaving
lots of ore in the first level, and he wanted to have this letter
written by us to take the blame off of his back," suggesting at the
same time that if anything good was discovered in the bottom level,
to keep it quiet, and that they could make some money out of a
speculation in the stock. The court instructed that this letter had
"considerable value" as being "a statement in writing" of a party,
but also that it was not conclusive, and, if the testimony
satisfied the jury that the facts were not as stated, they were
Page 153 U. S. 553
at liberty to so find. We see nothing in this ruling of which
the defendant can complain. There was nothing in the way of
estoppel in such a letter, and, even if the plaintiff shad written
it voluntarily and without any solicitation, they would not have
been precluded from showing the actual facts. Much more so is this
the case if, as stated, the letter was written at the solicitation
of the defendant's superintendent, and to accomplish a wrongful
purpose on his part.
Another matter is this: the contract provided that
"the amount of ore shipped from said premises, and the amount
due said party of the first part, shall be determined by and based
upon the weights as ascertained by the reports of the railroad
company or companies, made to said party of the second part of the
shipment of the ore from said mine."
In the bill of exceptions is this statement of what took place
when one of the plaintiffs, John Humble, was on the witness
stand:
" In order to get information as to the amount of ore shipped, I
had to go to the office, and ask the bookkeeper, and he gave me
3,610 tons for the month of May. I asked the bookkeeper to give us
the weigh bills so that we could copy them off. There was no one
present but the bookkeeper when I made this application."
"The witness was then proceeding without further interrogatory
to state what the bookkeeper said to him in answer to his
application. Defendant's counsel objected thereto as irrelevant and
incompetent, but the court overruled said objection, and to said
ruling defendant's counsel excepted."
"The witness proceeded:"
"He, the bookkeeper, told me Mr. Bennett's orders were to lock
those weigh bills in the safe, and keep them, and give us our
account off the books. The next day I asked Mr. Bennett, in the
office, in the presence of the bookkeeper, to give us those weigh
bills, and he said there was no need of it as long as they copied
them off from the books; that was good enough for us."
It is insisted that there was error in permitting the witness to
give the statements of the company's bookkeeper, on the ground that
such bookkeeper had no authority to speak for
Page 153 U. S. 554
the company, that his admissions were not the admissions of the
company, and that what he said was mere hearsay, and tended to
prejudice the jury against the company. There is no force in this
objection. By the terms of the contract, the amount due the
plaintiffs was to be determined by the weigh bills. They were in
the possession of the bookkeeper, an officer of of the company, and
one of the plaintiffs applied to that officer for those bills. The
reply of such officer, in possession of that made by the contract
the evidence of the amount due the plaintiffs, was competent
testimony. If there were any doubt as to its competency, the
objection to it would be obviated by the fact that the next day,
the superintendent practically assented to the truth of the
statement, and if the plaintiffs did not produce the weigh bills,
they certainly had a right to show why they were unable to do so,
the effects they had made to obtain them, and how it was that they
failed.
These are all the questions that we deem it important to
consider. We have examined the record very carefully, and find
nothing in the rulings of the court of which the defendant can
justly complain, and while, in view of the conflicting testimony,
there is room for difference of opinion as to what the facts really
were, there was testimony which, in amount and character, was
sufficient to uphold the verdict of the jury, and, of course, under
those circumstances, its determination is conclusive upon those
questions of fact. The judgment will be
Affirmed.
