Paragon Jewel Coal Company, Inc. v. Commissioner of Internal Revenue Page 2

Paragon Jewel Coal Company, Inc. v. Commissioner of Internal Revenue general information

Media for Paragon Jewel Coal Company, Inc. v. Commissioner of Internal Revenue

Audio Transcription for Oral Argument - March 08, 1965 in Paragon Jewel Coal Company, Inc. v. Commissioner of Internal Revenue

Frederick Bernays Wiener:

There was no negotiation about depletion.

Actually, the depletion issue didn't arrive even in the bureau and even in the Tax Court after these contracts remained.

The price fixed by Paragon varied prospectively so that the contractors would know when how much they would get for the next ton of coal they mine.

It was not changed in the course of mining and not changed retrospectively and the Tax Court found that Paragon could and did change this price at will.

It found also that the contractors were not obligated to mine any specific amount of coal and that they were not specifically given the right to mine any particular area to exhaustion.

They couldn't be, because it was impossible to determine in advance what areas would be mined.

For one thing, any contractor could quit and the good many of them did.

For another the mining operations would uncover rolls and faults in the seams so that it was never possible to say at the beginning of the operation, you shall have this track describing it either by means and bounds or by natural monuments, it just wasn't and Paragon had an engineer to coordinate the mining of the several contractors so that they would work together, so that they extract all the mineable coal which Paragon under its leases was bound to do and so they wouldn't blow up each other's tunnels.

Now as determination, the Tax Court said that they couldn't say that the contract was terminable but by the same token they couldn't say it was non-terminable and they found that nothing was said about terminability at the time the contracts were made.

We think that last finding is plainly wrong because a year-and-a-half before any of these petitions for review were in the Tax Court, one of the respondents in 237 in two separate sworn documents filed with the Internal Revenue Service on behalf of all the partners in two partnerships constituting all of these respondents set under oath, the contracts specified the right of termination by either party at any time but the question never arose between the partnership in Paragon.

We say that in view of these ante motam litem admissions binding all the respondents that particular finding of the Tax Court is clearly erroneous.

We don't have to rest on that.

Even without that correction, even taking the findings of the Tax Court as they now stand we say that on the facts that they found it is perfectly clear that there never was any transfer of capital interest in the unmined coal by Paragon Jewel to any of these contractors.

Mr. Wiener --

Frederick Bernays Wiener:

Yes Your Honor.

(Inaudible) the reading of this record that somewhat the respondent say the capital to the miners (Inaudible)?

Frederick Bernays Wiener:

Yes Your Honor, and if I can persuade Your Honor to pay me $300,000 for the Brooklyn Bridge that doesn't pass title to you and these people had no capital to settle.

They may have --


Frederick Bernays Wiener:

Yes sir.


Frederick Bernays Wiener:

Oh, there's no question that was terminable at will in the first place a lot of these miners quit.

The record is perfectly clear on that and as a matter of state law, if a contractor is terminable at the will of one party, it's terminable at the will of both and if it weren't -- if the miners could quit but Paragon couldn't terminate them it would lack mutuality.

How do you purport people then who were making investments?

Frederick Bernays Wiener:

They didn't make it -- they made an investment, yes, but not in coal.

And if -- again, if I can soft talk, Your Honor, into buying the Brooklyn Bridge, that wouldn't convey title and that's what this was.

I don't know what they represented that they had to sell.

They might sold them machinery.

They might have said, “Look I put in all this wood and all this timber and that costs me a lot of time and money and blood and sweat and if you want to take my place you got to pay me something for it.”

Well, that doesn't mean they had any interest, capital interest in the unmined coal which by taking money from a successor miner.