Hemenway v. Peabody Coal Co.

United States Court of Appeals for the Seventh Circuit

159 F.3d 255 (7th Cir. 1998)

Contracts are generally interpreted according to the plain meaning of its terms.

Relevant Facts

In 1969, Peabody Coal Co. (the defendant) and Hemenway (the plaintiff) entered into a mineral lease agreement, giving the defendant permission to mine coal on the plaintiffs’ property in exchange for a royalty of 12 cents per ton plus 10% of the difference between the sales price of coal and a base price provided for in the lease. The base price was set at $2.28 at the time of the execution of the lease, but it fluctuated based upon the cost of labor. Additionally, excise taxes that the defendant incurred did not affect the base price. The defendant sold coal for $28.635 per ton and added an additional $1.10 per ton, which represented the excise taxes that the defendant wished to shift to the customer. Subsequently, the defendant only paid the plaintiffs royalties for the price it set for the coal, and did not include the amounts that covered the excise taxes. The plaintiffs sued, arguing that the defendant was obligated to pay a tax on the entire amount charged to customers, including the amount representing excise taxes.

Issue

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Holding & Reasoning

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Concurrence

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Dissent

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Last updated:

December 20, 2020

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Procedural History

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Citations

159 F.3d 255 (7th Cir. 1998)