Court Opinion

ID: 17802
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:07:57+00
Date Added: 2024-06-11T15:04:22.810278
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT

                        _____________________

                             No. 98-20898
                           Summary Calendar
                        _____________________

CONSTRUCCIONES INDUSTRIALES DEL GOLFO,
S.A. DE C.V.,

                                                Plaintiff-Appellant,

                               versus

SEAREX, INC.,

                                              Defendant-Appellee.
_________________________________________________________________

           Appeal from the United States District Court
            for the Southern District of Texas, Houston
                           (H-97-CV-3588)
_________________________________________________________________

                            May 28, 1999

Before JOLLY, SMITH, and WIENER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:*

     The dispositive issue in this appeal is whether the parties

entered into a binding contract.    We conclude that they did not,

and we therefore affirm the district court in all respects.

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                                          I

     The facts relevant to our decision are undisputed.                  During

1997, Searex, Inc. and Construcciones Industriales Del Golfo, S.A.

de C.V. (“CIGSA”) entered negotiations over a proposed joint

venture.      The object of this joint venture would have been to

construct and charter several new vessels for use in oil and gas

exploration. Searex possessed the proprietary design for these new

vessels.          Eventually, however, the negotiations over a joint

venture failed. Soon thereafter, on July 24, 1997, the two parties

executed      a    document   entitled    “Agreement    to   Time   Charter   and

Subcharter Vessels.”          This document’s preamble expressed CIGSA’s

“desire[] to time charter the first two vessels” produced using

Searex’s proprietary design.            The document also expressed Searex’s

willingness        to   charter   the    vessels   to   CIGSA   under   certain

conditions, and the document contains the following provisions:

     [T]he parties hereto agree to the following basic terms:

     1.       Upon delivery of each of the Vessels by Alabama Shipyard
              Inc. (“Builder”), it will be chartered by SEAREX to CIGSA
              under the Master Time Charter Agreement in similar form
              of Exhibit 1 attached hereto.

     2.       Each initial vessel time charter will be for a period of
              not less than two years on a 365-day “Hell or high Water”
              basis at the charter hire rate of not less than $12,500
              per day, plus 25% of the net remaining charter hire, up
              to $25,000 per day, received from PEMEX1 or other company

          1
        Pemex is Petroleos Mexicanos, the Mexican national oil
company. As is evident from the document, the parties initially
thought that Pemex would be the third party to whom CIGSA would
subcharter the vessels.

                                          2
             or under the PEMEX Subcharter or other company subcharter
             of the vessels.

     3.      CIGSA will subcharter each of the vessels to PEMEX or
             other company acceptable to MARAD,2 under a subtime
             charter in similar form to Exhibit B attached hereto.

     4.      This agreement will become effective upon MARAD approval
             and shall terminate if such approval is not obtained by
             October 31, 1997.

     These    provisions   mention   several   non-existent    documents.

Although provision (3) contemplates a subtime charter form, no such

form was ever attached to the document.            Furthermore, a subtime

charter agreement involving CIGSA has never been entered.                The

Master Time Charter form, mentioned in provision (1), was attached

to the document.       This form, essentially a red-lined, working

draft, stated (in Article 3 of the form) that “Each vessel Vessel

shall be delivered to CHARTERER at the time and place and for the

duration and subject to the extensions specified in the applicable

Short Form.”     The parties, however, never created a Short Form.

     After    executing    the   document,   the   parties   continued   to

negotiate over the terms of a Master Time Charter Agreement.             In

the midst of these negotiations, on August 8, 1997, Searex sent

CIGSA proposed changes to the Agreement form. The relevant changes

were indicated in a new, draft version of the proposed Agreement:

                           Article 2 - Charter

          Subject to the conditions set forth herein OWNER
     agrees to charter the Vessels to CHARTERER, and CHARTERER

     2
      MARAD is the federal government’s Maritime Administration.
Searex sought financing for the vessels from MARAD.

                                     3
     agrees to hire the Vessel Vessels from OWNER on the terms
     and conditions set forth herein. Each Vessel shall be
     subjected to this Agreement by the execution by the
     parties of a Short Form. Each Vessel shall be subjected
     to this Agreement upon delivery of the Vessel to the
     Owner by its builder, Alabama Shipyard, Inc. (the
     “Builder”). OWNER shall give CHARTERER at least 30 days
     notice of the delivery date proposed by the Builder, but
     OWNER shall have no liability to CHARTERER or any one
     claiming by, through or under CHARTERER for failure to
     deliver the Vessel as per any notice given by OWNER or
     for any delay in delivery of either Vessel for any reason
     whatsoever. CHARTERER’s sole and exclusive remedy for
     any delay in delivery shall be to cancel this Agreement
     in accordance with the provisions of the last sentence of
     Article 1 hereof.3

          OWNER shall have no obligation to charter any Vessel
     to CHARTERER hereunder unless, (i) at least 90 days
     before the projected delivery date of a Vessel (of which
     delivery date OWNER shall have notified CHARTERER),
     CHARTERER has secured a subcharter of the Vessel to PEP;
     and a Permitted Subcharterer; (ii) prior to the
     commencement of the term of the charter of such Vessel,
     OWNER shall have received the consent of MarAd to charter
     the Vessel to CHARTERER and to subcharter it to PEP. such
     Permitted Subcharterer; and (iii) MarAd shall have
     approved proceeding with the construction and financing
     of the second Vessel pursuant to the terms of the
     Commitment to Guarantee referred to in the second recital
     of this Agreement.

     In response to Searex’s proposed changes, CIGSA sent a reply

memorandum on August 11, 1997, with the following language:

     We have   received your last form of the charter agreement
     between   Searex and CIGSA and are in agreement with its
     terms.    However there is a point that has to be clarified
     . . . .   Regarding delivery date of the Vessel, according
     to the     information we had originally received from
     Searex,   we have negotiated with Pemex to prepare a tender

     3
      The referenced sentence states, “Each party may cancel the
this Agreement upon the giving of thirty (30) days prior written
notice to the other, provided, however, that any unexpired Short
Form shall continue in effect subject to the terms and conditions
hereof until expiration of such Short Form.”

                                   4
     for the contract of the Vessels with a delivery of no
     later than April 30 of next year. Said delivery must be
     guaranteed with a performance bond equal to 10% of the
     total value of the contract.

     As you can understand we must comply with said date, and
     therefore can not accept your proposal that owner shall
     have no responsibility whatsoever in regard to late
     delivery. . . . In short, we must insert language that
     explains that both Searex and CIGSA, will make its best
     efforts to guarantee delivery in Mexico by no later than
     April 30, and in case of fault to that deadline, if such
     is pertaining to any other party, they in turn shall face
     the responsibilities that may arise.

     What must be clearly understood is that the tender will
     be published in the next 10 days, and we are not in a
     position to negotiate deliveries later than April 30.

     The remaining conditions of the charter . . . are acceptable.

     No other relevant communication occurred between Searex and

CIGSA until October 1, 1997, when Searex sent CIGSA a letter

stating that the parties had not reached an agreement sufficient to

pursue “the SEAREX/CIGSA project,” and that Searex would explore

other   opportunities   for   the   use   of   its   vessels.   One   last,

important fact to note is that MARAD never gave its approval (see

provision (4)).

                                    II

     After receiving Searex’s letter, CIGSA filed suit against

Searex for breach of contract.4      CIGSA sought damages and specific

performance as relief for the alleged breach.           The district court

issued a very able, comprehensive opinion addressing Searex’s

        4
        CIGSA also included other claims, none of which CIGSA
presents on appeal.

                                     5
motion for summary judgment and CIGSA’s partial motion for summary

judgment and its motion for leave to amend its complaint.             The

district court concluded that Searex and CIGSA never entered a

binding contract.      Accordingly, the district court found that

Searex could not be held liable under any of CIGSA’s breach of

contract theories.     The     district court then reviewed CIGSA’s

proposed waiver and estoppel arguments (which CIGSA sought to add

to an amended complaint), and concluded that those arguments had no

merit. The district court therefore decided to deny CIGSA’s motion

to amend its complaint as futile.         In its final judgment, the

district   court   granted   Searex’s   motion   for   summary   judgment,

denied CIGSA’s motion for partial summary judgment, denied the

motion to amend the complaint, and dismissed the complaint.

                                  III

     We review the grant of summary judgment de novo, using the

same standard as the district court.     Burditt v. West American Ins.

Co., 86 F.3d 475, 476 (5th Cir. 1996).     We will affirm the grant of

summary judgment if the record shows “that there is no genuine

issue as to any material fact and that the moving party is entitled

to a judgment as a matter of law.”       Fed. R. Civ. P. 56(c).       Upon

our thorough review of the record, and with the standards for

granting summary judgment well in mind, we conclude that the

district court was exactly correct in granting Searex’s motion for

summary judgment after finding that the parties did not enter a

binding contract.

                                   6
                                    A

     We begin by noting that the parties never agreed on a Master

Time Charter Agreement. Contrary to CIGSA’s arguments on appeal,

CIGSA did not accept the Master Time Charter Agreement proposed by

Searex on August 8.     CIGSA’s August 11 letter effectively rejected

the proposed agreement by rejecting various terms and demanding

that any Agreement contain newly suggested language.            See, e.g.,

Restatement (Second) of Contracts § 59 (“A reply to an offer which

purports to accept it but is conditional on the offeror’s assent to

terms additional to or different from those offered is not an

acceptance but is a counter-offer.”); Blackstone v. Thalman, 949
S.W.2d 470, 473 & n.4 (Tex. Civ. App. 1997, no writ).         For example,

CIGSA’s August 11 letter stated that CIGSA “[could] not accept

[Searex’s]   proposal    that   owner   shall   have   no   responsibility

whatsoever in regard to late delivery.” The CIGSA letter then went

on to say that “we must insert language that explains that both

Searex and CIGSA will make its best efforts to guarantee delivery

in Mexico no later than April 30, and in case of fault to that

deadline . . . they in turn shall face the responsibilities that

may arise.” Thus, although CIGSA did begin its letter by informing

Searex that CIGSA was in agreement with the proposed Agreement’s

terms, CIGSA clearly did not accept all of those terms and demanded

the inclusion of others.

     Given that the parties never agreed to a Master Time Charter

Agreement, we are left to consider whether the July 24 document

                                    7
binds Searex to enter a charter agreement with CIGSA. CIGSA argues

that the document does exactly this because it contains all of the

necessary terms, including price (see provision (2) of the July 24

document) and delivery date.           The document specifies the date,

CIGSA argues, in provision (1):             “Upon delivery of each of the

Vessels by Alabama Shipyard Inc. (“Builder”), it will be chartered

by SEAREX to CIGSA . . .”          Although the document does not specify

a date that one can locate on a calendar, CIGSA argues that this

provision indicates that the parties agreed to the condition--i.e.,

delivery by Alabama Shipyard, Inc.--that would fix that date at

some time in the future.

     This argument has no merit.             The undisputed evidence shows

that the parties did not, in fact, intend for the statement in

provision (1) to bind the parties to any preordained delivery date.

First, the attached Master Time Charter Agreement form stated that

the exact delivery date would be specified in a “Short Form”

(which, again, was never created). Second, CIGSA’s own statements,

in its August 11 letter, reveal that it did not intend for the

July 24 document to fix a binding delivery date.                  In its letter,

CIGSA   stated   that   it   was    “not    in   the   position    to   negotiate

deliveries later than April 30.” Obviously, CIGSA thought that the

delivery date was open to negotiation.

     But we need not rest our decision on the fact that the July 24

document was defective for failing to contain essential elements of

an agreement.    The July 24 document, by its own terms, would not

                                        8
become effective until MARAD approved the agreement (see provision

(4)).        MARAD   never   granted   its      approval   and     the   document,

therefore, never had any legal effect.                CIGSA argues that Searex

should not be able to defend itself by pointing to this provision

because Searex ended its attempts to come to an agreement (as

stated in Searex’s October 1st letter) before the October 31

deadline.       Therefore, CIGSA argues, it was still possible for

Searex to obtain MARAD approval, but Searex prematurely gave up; in

legal terms, CIGSA argues that Searex anticipatorily repudiated the

contract. Searex counters this argument by pointing out that CIGSA

did not cooperate with Searex (by supplying necessary documents) in

gaining MARAD approval.        But all of this is beside the point: the

July    24    document   had   absolutely        no   effect--and    could     not,

therefore,     bind   Searex   in   any       way--until   MARAD    approved   the

document.      In other words, and as the district court’s incisive

opinion notes, Searex could not anticipatorily repudiate a contract

when there was no contract.               See Texas Dept. of Housing and

Community Affairs v. Verex Assurance, Inc., 68 F.3d 922, 928 (5th

Cir. 1995) (“‘When a promise is subject to a condition precedent,

there is no liability or obligation on the promisor and there can

be no breach of contract by him until and unless such condition or

contingency is performed or occurs.’ Reinert v. Lawson, 113 S.W.2d
293, 294 (Tex. Civ. App.--Waco, 1938, no writ).”); Valencia v.

Garza, 765 S.W.2d 893, 898 (Tex. Civ. App. 1989, no writ) (“[A]

                                          9
valid   contract   must   first   be    established   in   order   to   prove

repudiation.”).

     In sum, the July 24 document never became effective.               As no

contract existed, CIGSA’s breach of contract claim must fail.

                                       B

     Finally, we consider whether the district court abused its

discretion in denying CIGSA the opportunity to amend its complaint

by adding arguments based on waiver and estoppel.              See Ashe v.

Corley, 992 F.2d 540, 542 (5th Cir. 1993) (stating that district

court’s denial of leave to amend a complaint is reviewed for abuse

of discretion).

     Aside from the fact that the deposition testimony CIGSA points

to, see CIGSA Br. at 42-44, does not, in any way, support its

stated characterizations of the alleged nefarious behavior by

Searex, we are able nevertheless easily to conclude that the

district court was correct in finding that amendment would be

futile.   To support its arguments, CIGSA cites the same two cases

that it cited in the district court and does not attempt to explain

why the district court’s plain reading of Fifth Circuit precedent

is somehow erroneous.     CIGSA cites Wheeler v. White, 398 S.W.2d 93

(Tex. 1965), for the proposition that “a party can be estopped by

its conduct from claiming that a contract is not sufficiently

specific to be enforced.”    CIGSA Br. at 45.     CIGSA thus argues that

Searex’s conduct estops it from denying the existence of a contract

based on alleged indefiniteness.

                                       10
     As we have explained above, however, the July 24 document is

not a contract that has failed for indefiniteness.             Instead, it is

a document that never went into effect--not because of legal

indefiniteness, but because of its own terms (in provision (4)).

As the district court explained, we have recognized that “[i]t is

a well-established principle in Texas that ‘contract rights cannot

be created by estoppel [but estoppel can] prevent a parties conduct

and actions from operating as a denial of the right of enforcement

of a contractual obligation already created.’”               Oliver Resources

PLC v. International Finance Corp., 62 F.3d 128, 131 (5th Cir.

1995)     (bracketed       phrase   in   original)      (quoting   Roberts    v.

California-Western States Life Ins. Co., 470 S.W.2d 719, 726 (Tex.

Civ. App. 1971)).       Furthermore, and, again, as the district court

noted, we have said that Wheeler does not contravene the basic

principle that estoppel does not affirmatively create contract

rights.       Oliver Resources, 62 F.3d at 131 n.5.          Wheeler does not

contravene      this   basic   principle      because   “Wheeler   involved    a

contract between the parties that was later found defective.”                Id.

See also Wheeler, 398 S.W.2d at 96 (“[Promissory estoppel] does not

create a contract where none existed before, but only prevents a

party from insisting upon his strict legal rights when it would be

unjust to allow him to enforce them.           The function of the doctrine

of promissory estoppel is, under our view, defensive in that it

estops    a     promisor    from    denying    the   enforceability    of    the

promise.”).      As CIGSA has cited no other authority to support its

                                         11
arguments, we are certain that the district court has not abused

its discretion.

                              III

     For the foregoing reasons, we AFFIRM the district court’s

judgment in all respects.

                                                A F F I R M E D.

                               12