Court Opinion

ID: 8806713
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:50:01.564844+00
Date Added: 2024-06-11T17:04:07.810422
License: Public Domain

BATTS, Circuit Judge
(dissenting). I cannot concur in the judgment of affirmance entered herein. The Sun Company and the Vin-ton Petroleum Company, on December 21, 1912, entered into a contract, to continue for two years, for the sale of the oil production of the Vinton Company. A provision of the contract was :
“In consideration of tlie obligations assumed by the first party hereinbefore [Sun Company] said first party is to have the option to renew for an additional two years following December 24, 3914, this contract at the expiration of said two years, the oil for said following two years to be paid for in case said option to buy the same is exercised by the gun Company at a price to be equal to the highest contract price then and in good faith being paid by either of the pipe line companies doing business in the Vinton oil field for similar oil in said field; notice of the exercise of said option by the said first party to be given to the second party by the said first party in writing within ten days following December 25, 1914.”
On January 2, 1915, the Sun Company addressed a letter to the Vin-ton Company, advising the latter that it elected to exercise the option, and quoting from the contract the provision with reference to the price, followed with the statement:
“We understand- that the price being offered by the companies named is approximately 45i cents. If we are mistaken in this, and you have bona fide offers from them as provided in the contract for a higher price, we will bo pleased to go over the offers with you and determine definitely what the price should be.”
A letter from the Vinton Company, acknowledging receipt of the notice, contained a paragraph to this effect:
“We beg to call your attention to the fact that, as a basis for the price established, your contract with the Gum Cove Company, which we understand is $1, and we understand there are several other contract prices now in good faith being paid at $1.”
On the 25th of January following the Vinton Company filed its bill of complaint in the United States District Court for the Eastern District of Texas, setting up the contract aforesaid and the correspondence between the parties, alleged the difference between the construction given to the contract by the Sun Company, and its insistence that the price to be paid was 60 cents per barrel, and its own construction of the contract and contention that the price was $1, alleged an additional difference of construction which is not material to the present controversy, and asked for a specific performance of the contract, as construed by complainants, and for ar accounting.
The defendant answered that:
Under the terms of the contract, the price to be paid “for said oil so delivered under said contract is to be deten lined by ascertaining the highest contract price being in good faith offered or contracted on or about December 24, 1914, to be paid for a production ol oil of similar character in the Vinton oil field by other of the pipe line companies which were doing business in said Vinton field December 21, 1912; in other words, the highest price at *631which other of the pipe lines which were doing business in the Vinton oil field on December 21, 1012, were, on or about December 24, 1014, offering or contracting to pay for oil to be produced and delivered to them, beginning on or about said date, and extending over a period thereafter.”
The paragraphs setting up this defense, and defenses with reference to the other points in controversy, were followed by another to the effect that:
“In the event the court should construe and hold the contract and the option clause therein providing for a two years’ extension, as written and signed by the parties, to fix as the price for the oil during said extension period the highest contract price for similar oil in the Vinton field, which was being in good faith, on or about December 21, 1914, paid by either of the pipe lines which were doing business therein December 21, 1912, without reference to the time when said contract was entered into, and not the highest contract price being in good faith, on or about December 24, 1914, offered or contracted by either of said lines to be paid, [defendant] presents this its counterclaim.”
And it: says that it was the intention of the, parties, when the contract was entered into, to pay the price provided by the contract as construed by the defendant, and that the parties believed that the writing so expressed their contract, and that, if the writing meant anything ■other than this, a mutual mistake in the choice of words and in reducing the contract to writing had been made, and the defendant prayed that the contract be reformed to express the intention of the parties.
Evidence was introduced of the circumstances under which the contract was made and the option exercised, and of pertinent facts concerning the conduct of the oil business. The court’s opinion was introduced by the words:
“I am called upon to construe a certain contract” — identifying the contract in question. “It is the contention,” said the court, “of the plaintiff that the price to which reference is made in this contract under consideration in Otis suit was the price at which oil was being sold under contracts executed in 1913, before the expiration of this contract period in 1914. I do not think I can give it that construction without doing violence to the language employed, oven without regard to the testimony produced on the trial of this case as to the meaning the witnesses understood was conveyed by the language of the contract. !i * * The witnesses have plainly indicated that there is a difference between the market price and the contract price of oil. The market price means the price at which oil will be delivered to the purchaser, and the contract price is the price at which the producing company can sell oil for a period in future covered by an agreement. * * * So that I think, under rho agreement the parties have made, and the language contained in this contract, the purpose of the parties was to give the Sun Company the right to renew this contract: for a period of two years at the price for which the oil could be contracted at the time of renewal, and not at the price for which oil could be contracted for months in advance of the expiration of the agreement between the parties. I hold, therefore, that the Sun Company has the right under this contract to exercise its option of renewing its contract at the contract price of 60 cents per barrel.”
A judgment was accordingly entered, from which judgment an appeal was taken. The appellants, in their brief filed therein, begin their argument by stating:
“There was no proof offered to show any mutual mistake, and that issue is not in this case. The question is: What does the language of the contract mean ?”
*632The brief of the appellees was entirely confined to a consideration of the meaning of the contract. The Circuit Court of Appeals reversed the case. 230 Fed. 105, 144 C. C. A. 403. The opinion was confined exclusively to the construction of the contract. Neither in the opinion of the trial judge, nor in the brief of appellant, nor in' the brief of appellee, nor in the opinion of the appellate court, was any reference made to the cross-action of the defendants. The opinion of the appellate court sustained the construction given by the District Court to the contract, except as to the meaning of the paragraphs here-inbefore recited with reference to the renewal price. The opinion concludes :
“Because of the effect it gave to the provision of the contract first above mentioned, that decree is reversed, and the cause is remanded for further proceedings not inconsistent with the conclusions above stated.”
The cross-action was, under its very terms, effective only in the event that the construction refused by 'the District Judge and given by the appellate court should prevail. There was no occasion for the trial court to pass upon the question as to whether or not a mutual mistake was made in the drawing of the contract, because the trial court held that the contract meant exactly that which the defendants who filed the cross-action insisted that it meant. There could be no occasion to determine whether a mutual mistake was made in the use of language, when the language was construed to mean what the defendants filing the cross-action said that the parties understood it to mean.
It is quite possible that, notwithstanding tire trial court had no reason and no occasion for passing upon the facts with reference to mutual mistake, the appellate court could have held that the evidence introduced in the first trial was available for determining the cross-action, and could have held that this evidence did not sustain the cross-action. Such a holding would have deprived the defendants of the very substantial right of having this issue of fact passed upon by the trial court; but it is possible that the appellate court could, nevertheless, have determined the issue. But no such issue was determined by the appellate court! No reference whatever was made to the cross-action. Until the filing of the opinion of the majority of the court in the present case, no court had ever undertaken to determine whether or not a mutual mistake was made by the parties in using.the language which the trial court held to mean one thing, and which this court has held to be unambiguous and to mean another thing.
Upon the remanding of the case for “further proceedings not inconsistent with the conclusions above stated,” the evidence introduced in the original case was again introduced. The trial court, assuming that the judgment of- the Circuit Court of Appeals disposed of the case, refused the Sun Company a trial upon its cross-bill. In my opinion, the Sun Company was and is entitled to a trial upon this cross-bill. A determination that the parties to the contract did not mean to contract,as the writing indicated could not be in conflict with a conclusion as to what the words actually meant. In the case of Mutual *633Life Ins. Co. v. Hill, 193 U. S. 551, 24 Sup. Ct. 538, 48 L. Ed. 788, Justice Brewer says:
“Wlien a case is presented to an appellate court it is not obliged to consider and decide all tlie questions then suggested, or which may be supposed likely to arise in the further progress of the litigation. If it finds that in one respect: an error has been committed so substantial as to require a reversal of the judgment, it may order a reversal without entering into any inquiry or determination of other questions. While undoubtedly an affirmance of a judgment is to be considered an adjudication by the appellate court that none of the claims of error are well founded, even though all are not specifically referred to in the opinion, yet no such conclusion follows in case of a reversal. It is impossible to foretell what shape the second trial may take, or what questions may then be presented. Hence the rule is that a judgment of reversal is not necessarily an adjudication by the appellate court of any other than the questions in terms discussed and decided. An actual decision of any question settles the law in respect thereto for future action in the case. From the rule as stated above the appellate court is not compelled to pass upon all questions presented, and the parties and tlie trial court arc bound only by those decided.”
If additional authority on this question is desired, it is furnished in the following cases: Sibbald v. United States, 12 Pet. 488, 9 L. Ed. 1167; Ex parte Union Steamboat Co., 178 U. S. 318, 20 Sup. Ct. 904, 44 L. Ed. 1084; In re Sanford Fork & Tool Co., 160 U. S. 248, 16 Sup. Ct. 291, 40 L. Ed. 414; Hawkins v. Cleveland, 99 Fed. 323, 39 C. C. A. 538; Taenzer v. Chicago, etc., Ry. Co., 191 Fed. 543, 112 C. C. A. 153.
Appellants are entitled to a trial in the District Court on the issues of fact presented by their pleadings, and they have never secured such a trial. The court in its present opinion holds that appellant has not been prejudiced by the failure of the trial court to pass upon the .issue, upon the ground that the evidence was insufficient to support a finding for appellant. I do not undertake to express an opinion as to what judgment ought to be rendered on the facts of this case. I am, however, of the opinion that, if the District Judge had found for the appellants upon the issue of fact presented by the cross-action, an appellate court would not be justified in setting aside the finding.
The question as to the meaning of the clause under consideration has been definitely determined. Apparently all of the parties to the contract primarily construed the language as the District Judge construed it. At the date of the exercise of the option, the appellant construed it in the same way. According to testimony, it was not until after that that a lawyer could be found who gave it a different construction. This court has held that the language of the agreement is ‘‘not ambiguous”; that its meaning “is not doubtful.” While this must be accepted as true, the circumstance that all the persons connected with the transaction primarily gave it a different meaning from that now given must he regarded as evidence of great weight in determining the issue of mutual mistake. The circumstance that it was not a contract of a character that parties would have been likely to enter into under the cireumstanees connected with the oil business is also entitled to weight in determining that issue. Parties were contracting with reference to a price two years subsequent to the date of the contract; it is not to be assumed that they intended to have the *634price fixed by contracts of others which might have been entered into prior to the making of this contract, or at any time within two years thereafter; it is not to be assumed that they would have made any reference to good faith in the fixing of the price, if prices were to be determined by contracts entered into antecedent to the making of the contract providing for the renewal.
Even at the time the renewal was made, and the Vinton Company acknowledged the receipt of the notice of renewal, it called attention to contract .prices of $1, and stated that it understood that the contract “is renewed for two years'at the price of $1, or over, if we ascertain a higher contract is being paid.” It cannot be assumed that the parties intended to make the contract dependent upon facts not even ascertainable. No other language can be as clear as that which is judicially determined to be unambiguous, but the circumstances detailed cannot be ignored in passing upon the question of mutual mistake. The testimony of the manager of the Sun Company leaves no question of the fact that he made a mistake, even if any additional evidence was required, when he renewed at $1; the market price being 60 cents. Mr. Pew, the manager, testified that:
There was a discussion between the parties, before the renewal clause was placed in the contract, to the effect that the Sun Company, “to exercise its option, would have to do so on the basis of the highest market price then-paid by pipe line companies at that time.” “The agreement was that the Sun Company, if it exercised its option, would have to do so at the highest price that would be offered to them by any one else.” “There was a very clear understanding of what we we/e trying to do; everybody understood it.” “They claim these terms meant the contract price was the price being offered on contracts at that time; they understood it that way, and that is the way I think it is.” “The other parties to the contract understood it that way.” “I understand the contract price at any time is the contract price then being offered for contracts.” “I was not mistaken as to our intention — the Sun Company’s intention and the Vinton Petroleum Company’s intention.” “We discussed the matter with Stark and Brown as to market price, and we left it at the highest market price being paid by our competitors.” “I think it was fully discussed. I know the opposite side, as represented by Mr. Abbott, who negotiated the contract, had the same idea.” “Undoubtedly, we would not have made a contract for a long term of years, unless wé could govern the prices of, oil on renewal. We insist absolutely that that was to govern the price — the price at that time.”
Mr. J. M. Abbott testified that he participated in negotiating the sale. He testified:
“Well, the thing was how to word it, so that it would be properly worded. I remember we discussed using the term ‘market price,’ and finally put it in the language that is in the contract now. My recollection is that there was not much discussion about it; it was. just how to word it so as to convey the meaning intended to be conveyed.” “My recollection is that the only thing that was considered was what was to be paid for the oil in the incoming year after the two outgoing years. The parties tried to put it down; I remember that we discussed the words ‘market price,’ and the language that was in the contract was finally put in.” “Q. Well, did the parties reach, a common agreement and understanding as to what should b’e paid for the oil sold by the Vinton Petroleum Company to the Sun C.ompsiny after the termination of the two years period? A. I thought so at the time. Q. Now, you say that you were discussing as to how you should arrive at the option price to be exercised, and you discussed the market price, and substituted for that the highest *635contract price? A. Yes, sir; to be paid by other companies or by any company in the field, by any pipe line company in the field.”
“Question by the Court: You said awhile ago that you talked about the market price, and discarded that word, and used the words ‘highest contract price.’ Was there anything said before you discarded that term and used the ether? You said for some reason the market price was concluded not to be tiie proper term to use and was discarded, and the term ‘highest contract price’ was used. A. Well, we wanted to get the benefit of all the competition, in order to get the highest price for the incoming years under the option of tile Sun Company. Q. By competition you mean you were to get the best offers of other companies, and get the price that way; is that what you mean? A. You understand, if we had expressed it any other way, nobody would bid on Dr. Brown’s oil, or the Vinton Petroleum Company’s oil, rather* and by putting it at the highest price paid you would have the benefit of any deal That the Gulf Company would make with other parlies, or the Texas Company would make with other parties, as a guide for the price.”
The evidence clearly indicates that the officers of the Vinton Petroleum Company, 'contemporaneously with the renewal, or just prior thereto, undertook to secure offers for the oil, to be used as the basis for the charge to be made the Sun Company under the terms of the renewal contract. This is indicated by the testimony of the witness fiarían with- reference to what took place between him and Mr. Dul - liiiham, the secretary of the Vinton Company. To the like effect is the testimony of the witness Hauszeii, who testified with regard to what took place between Mr. Nazro, of the Guffey Petroleum Company, and Mr. Gordon and Mr. Jiankenstcin. The testimony of YY. HL. Stark, a stockholder, and, at the time of the trial, general manager, of the Vinton Company, indicated that at the date of the renewal he understood the contract as the Sun Company did, and undertook to ascertain what was being paid at that time on contracts by the Texas Company mid the Gulf Company. The testimony of this witness also indicates that the construction now contended for by them did not occur to any one of them until the day on which a letter was written, acknowledging receipt of the renewal notice, and suggesting that the price payable was to be determined by contracts made prior to that time. It was asked:
“Was not that the first timo it over occurred to you? A. I don’t know; it might have been the first time. 1 do not say it was or was not. Q. Didn’t Mr. Holland suggest that interpretation of the written contract then for the first time? A. I don’t know; X think so, probably. Q. You think it is a fact? A. Yes, sir.”
No effort is made to give all the testimony; hut, if the District judge had predicated a finding in favor of the defendants on the testimony of the witnesses referred to, this court would have been compelled to depart from its ordinary practice in order to set aside the finding.
A litigant has the right to a trial of his cause, and then to an appeal. At least, that is so ordinarily, and certainly that was the right of the Sun Company in this case. The right to have the trial court pass upon the issues of fact is a very substantial right. 1 f the trial court finds for a party, he has thereafter the point of vantage; the burden of showing the incorrectness of the judgment is upon his adversary. The appellate court will not reverse the finding of the trial court upon a *636.matter of fact, unless it is clearly erroneous. The course which this case has taken has deprived the Sun Company of this substantial right. It has not been permitted to secure the judgment of the District Court upon whether or not the parties intended to enter into a contract such as the Sun Company insists was entered into. If the trial court had passed upon tne issue of fact presented by the cross-bill, and had made a finding in behalf of the Vinton Company, a judgment of affirmance would, doubtless, have been in accordance with the function and practice of an appellate court. If his finding had been in behalf of the Sun Company, the "evidence heretofore reviewed would have rendered necessary an affirmance.
The case should be remanded, to give the Sun Company that which it is entitled to — a finding by the District Judge upon the merits of the cause submitted by its cross-action.