Sun Co. v. Vinton Petroleum Co.

248 F. 623, 160 C.C.A. 523, 1918 U.S. App. LEXIS 1454

• Court: Court of Appeals for the Fifth Circuit
• Decided: February 15, 1918
• Docket: No. 3039
• Status: Published

Opinions

WAEKER, Circuit Judge.

This is an appeal from a decree rendered after the reversal by this court, on an appeal by the plaintiff, the appellee in the present appeal, of a former decree, and the remandment of the cause. Vinton Petroleum Co. v. Sun Co., 230 Fed. 105, 144 C. C. A. 403. There was no change in either the pleadings or the evidence in the case after it went back to the trial court. What the appellant, the defendant below (and which will be called the defendant), now complains of, is the refusal of the trial court, when the case came before it again as a result of the reversal and remandment by this court, to consider and pass on that part of the defendant’s answer to the bill which prayed that the option clause of the contract between the parties of December 21, 1912, be reformed, and alleged, in support of the prayér for such relief, that before that contract was reduced to writing it was mutually agreed between the parties that the price at which the defendant was to have the option of renewing the contract for the plaintiff’s production of oil for an additional two years following December 24, 1914, was to be equal to the highest price which either of the pipe line companies doing business in the Vinton oil field when the original contract was made was, on or about December 24, 1914, in good faith contracting to pay or offering by contract to pay for oil in said field, but that by mutual mistake in the choice of words and in reducing the contract to writing the contract failed to clearly express the intention and meaning of the parties which had actually been agreed on before the contract was written, and which they thought and believed the writing expressed. . It is pointed out by counsel for the defendant that the claim asserted by the bill was resisted on-two grounds, namely: (1) That the contract as it was written did not have the meaning attributed to it by the bill; and (2) that if, as it was written, it had that meaning, such a mutual mistake was made in reducing it to writing as to entitle the defendant to have it reformed, and that the trial court, by the decree which was reversed, sustained the first-mentioned ground of defense and made no disposition, of the other one. And, based upon the fact that in the opinion rendered by this court on the former appeal nothing was said about the claim made by the defendant in its answer that the option provision, the exercise of which was sued on, should be reformed, the contention is made that the former action-of this court, left that issue undisposed of and subject to be presented anew to the-trial court.

[1-3] In the opinion of the writer the last-mentioned contention is not sustainable. Under the well-settled, rule that an appeal in an equity case brings thfe entire case before the appellate court, the issue raised by the defendant’s answer and the evidence adduced to support it as to its right'to.'have the, option feature of .the contract so-reformed as to make it express the agreement which it was alleged the parties made before they undertook to reduce it to writing was before this court when the case was here on a former appeal. It was as open to the party opposed to the reversal of that decree to resist a reversal of it on the ground that the evidence supported its cross-demand for a reformation of the option provision of the contract as it was to resist reversal on the ground that the meaning for which it contended was expressed by the contract as it was written. If the issue, as to the suggested reformation of the option clause of the contract had been insisted on by the defendant when the case was here on the former appeal, the ruling which this court then made could not properly have been made without deciding that issue against the defendant. A party may abandon an issue by failing to insist on it. It seems that this is what the defendant did by failing to urge in this court, when the case was here on the former appeal, that the decree then under review should be sustained because the evidence supported the claim, set up by the defendant’s answer, that the option provision of the contract should be reformed. It is not at all uncommon for a court’s opinion to omit any mention of an issue raised by the pleadings and evidence in the case under consideration, but which is not insisted on by the party by whom that issue was tendered. The writer understands that questions which by an appeal have been brought before an appellate court for its decision cannot again be insisted on when the case comes before the same court on a subsequent appeal; that a party cannot create an exception to this rule by calling to the attention of the appellate court, when the case is first before it, some only of the questions which the record presents for its decision, reserving other questions, also presented by the record, for a second presentation to the trial court in the event of the remandment of the case to it, or to the same appellate court on a subsequent appeal; and that a subsequent appeal brings up nothing but the proceedings subsequent to the mandate. Illinois v. Illinois Central Ry. Co., 184 U. S. 77, 22 Sup. Ct. 300, 46 L. Ed. 440; United States v. Camou, 184 U. S. 572, 22 Sup. Ct. 505, 46 L. Ed. 694; Smith v. Vulcan Iron Works, 165 U. S. 518, 17 Sup. Ct. 407, 41 L. Ed. 810. As was said in the opinion in the first-cited case:

‘•To allow a second writ * * * or appeal to a court ol! last resort on tlio same questions which, were open to dispute on the first would load to endless litigation.”

The propositions just stated are not controverted by the decisions in the cases of Mutual Life Insurance Co. v. Hill, 193 U. S. 551, 24 Sup. Ct. 538, 48 L. Ed. 788; and In re Sanford Fork & Tool Co., 160 U. S. 247, 16 Sup. Ct. 291, 40 L. Ed. 414. The questions which in those two cases were held to have been open to decision in the trial court after a remandment by the appellate court had not been raised when the cases were first in the appellate court, but were first raised by proceedings in the trial court subsequent to the mandates. Expressions made use of in the opinions in those cases are to be read in the light of this fact. It seems to the writer that this court’s former decree disposed of the issues raised by the pleadings and evidence as disclosed by the record then before it, as well the one which was waived’by not being urged for consideration, when it was open to the defendant to do so if it chose, as the one which was argued by counsel and was discussed in the court’s opinion.

[4] But, if the record discloses that the result must have been the same if the action which is complained of had not been taken, it may be assumed, without being conceded or decided, that when the case went back to the trial court the demand asserted by the bill could not properly have been maintained, if the evidence which had been adduced was such as to support the claim set up by the defendant that it was entitled to have the option provision of the contract reformed pursuant to the prayer contained in its answer. The defendant could not have been prejudiced by the refusal of the trial court, when the case was last before it, to pass on an issue it had tendered, if the record discloses that the evidence which, it had to rely on to support that issue was insufficient for that purpose.

[5-7] By a written contract between the plaintiff and the defendant dated December 21, 1912, the former sold and the latter bought the former’s production of oil during the period of two years commencing December 25, 1912. What is sought to be reformed is a clause contained in that contract which gave the defendant the option of renewing the •contract for an additional two years following December 24, 1914. On January 2, 1915, the defendant exercised the option in the way prescribed in the option provision as it was written, without suggesting that the option it was entitled to exercise was in any way different from what the writing showed it to be. So far as the record discloses, the first suggestion that the option which the parties agreed on was not truly expressed in the writing was made by the defendant in its answer, filed April 10, 1915, to the bill in this case. It may be inferred that in the circumstances, existing on January 2, 1915, the defendant would not have exercised the option, if it had then understood or believed that the option provision contained in the written contract had the meaning which this court has decided was expressed in the provision as it was written. So it is disclosed that the defendant did not seek a reformation of the option provision as it was written until after its exercise of the option had made it of vital importance to it to sustain the contention that the option for which it really contracted was not correctly stated in the written instrument which evidenced the contract. If at any time both the parties to the contract understood that the option provision which they agreed on was different from the one expressed in the writing, certainly it was not made to appear that that mutual understanding existed when the option was exercised. The defendant’s exercise of the option, shown by the written communication, dated January 2, 1915, was not preceded by any negotiations or verbal communications between its representatives and those of the plaintiff; and in the reply promptly made to the notice given by the defendant of its election to exercise the option it was clearly disclosed that the plaintiff relied on the writing as truly stating the contract, and that it gave the option provision the meaning which this court has decided was expressed by its language.

The defendant cannot sustain its claim that it is entitled to have the option provision as it was written reformed, without showing that before the instrument of December 21, 1912, was signed the parties had verbally agreed on the option provision alleged in the answer, and that each of the parties signed the written instrument under the mistaken belief that it correctly stated the substantially different previously made verbal agreement. It was incumbent on the defendant to prove that before the written instrument was signed the alleged different provision which is sought to be substituted in the place of the one found in that instrument was verbally agreed on by the parties, each acting through a representative or representatives authorized to bind it. The negotiations which led up to the making of the contract between the two companies were conducted by J. F,dgar Pew, who had charge of the defendant’s business, and J. M. Abbott, who at that time was not an officer or agent of the plaintiff company, and, so far as appears, was w ilhont authority to hind it, but who a short time before had acquired stock in that company, and in that way was interested in its making- a contract for the sale of its production of oil. It was distinctly made to appear that what Abbott did in behalf of the plaintiff company was to make a preliminary arrangement, which was subject to be rejected or confirmed by the plaintiff’s board of directors. The two individuals mentioned agreed on the terms of a contract to be made by and between the two companies. A draft of the proposed contract was made by an agent or official of the defendant company on a printed form of contract which had been prepared by Mr. Pew and the attorney of the defendant company several years before, which form had been used frequently by the defendant in the conduct of its business. There was evidence tending to prove that Dr. Brown and W. IT. Stark, directors of the plaintiff company, were present at an interview in Mr. Pew’s office in the afternoon of the same day during the evening of which the contract as it was written was approved by the plaintiff’s hoard of directors and signed by its president. During that interview the use of the term “market price” in the proposed option provision was discussed, with the result that those words were discarded, and it was agreed to use the language found in the contract as it was written and signed, namely:

“A price equal to tlie highest contract price then and in good faith being paid by either of the pipe line companies now doing business in the Vinton oil field for similar oil in said field.”

There was no testimony which would support a finding that in the interview' just mentioned anything was said from which it could he inferred that the minds of the negotiators met in an agreement that what tlie defendant was to pay, in the event of its exercise of the option stipulated for, was to be determined by what any pipe line company was at that time contracting or offering to pay for oil. The option provision, as it is found in the written instrument evidencing the contract, was either dictated by the defendant’s attorney, an experienced and capable lawyer, or was examined and approved by him. It is not explained how it happened that such a lawyer could have approved the option provision as it was written, if he had been informed that what his client’s representative.had assented to was a distinctly different provision. The option,provision found in the written instrument evidencing the contract remained just as it was when the draft of the proposed contract was presented to the plaintiff’s board of directors for its approval or rejection. Four witnesses testified as to what occurred on that occasion; Mr. Pew and Mr. Abbott, who were examined in behalf of the defendant, and Dr. Brown and Mr. Stark, who were examined in behalf of the plaintiff. The testimony of no one of these witnesses indicates that on chat occasion the option provision was verbally mentioned or discussed, except that Mr. Pew stated that he thought that the question of the option came up again on that occasion, and that- he was not sure whether it was Mr. Gordon, who was a director of the plaintiff and its attorney, or Mr. Bankenstein, who was a director of the plaintiff, that raised the question, and that he thought that Mr. Gordon ruled that the price that the pipe line companies were paying for oil at that time would sufficiently protect them. Mr. Abbott, who at the time he testified was not connected with the plaintiff and had no financial interest in it, testified that he had no recollection of anything being said on that occasion about what the option provision meant. Dr. Brown and Mr. Stark testified that on that occasion nothing was said about the option provision.

In the course of the direct examination of Mr. Pew he stated in effect that the verbal agreement was that the Sun Company, if it exercised its option to buy the Vinton Petroleum Company’s oil for an additional two years, would have to do so at the highest price that would be offered by any one else. This was a statement of the opinion or conclusion of the witness as to the meaning of what was. said and assented to in discussions or- conversations between the negotiators before the written instrument evidencing the contract was signed. He did not detail or narrate any previous conversation or statement which would support the conclusion that the negotiators agreed on an option'provision different from the one which the signed written instrument contains. Besides, it may be inferred that this witness would have had the same opinion as to the meaning of the option provision which he claims was verbally agreed on by him and Mr. Abbott, if the oral statement of what that provision was to be had been in the identical language which was used in the provision as it was written, as it was brought out in the course of the examination of this witness that he construed that provision as it was written to mean that, if the Sun Company exercised the option, the' effect of its doing so was to obligate it to pay the highest price being offered on contracts at that time by either of the pipe line companies doing business in the Vinton oil field for similar oil in that field.

We think that the evidence adduced was wholly insufficient to warrant the granting of the relief, which the defendant prayed for. Proof to establish a mistake in a written contract is to be received with great caution, and, where 1he alleged mistake is denied, should never be made the foundation of a decree variant from the written contract, except it be of the clearest and most satisfactory character, sufficiently cogent to satisfy the mind of the court that the writing does not express what was intended by the parties, not merely the one who seeks a reformation, and what it was they intended the writing should express. Snell v. Insurance Company, 98 U. S. 85, 25 L. Ed. 52; Simmons Creek Coal Co. v. Doran, 142 U. S. 417, 12 Sup. Ct. 239, 35 L. Ed. 1063; Travelers’ Insurance Co. v. Henderson, 69 Fed. 762, 16 C. C. A. 390; Hertzler v. Stevens, 119 Ala. 333, 24 South. 521. In the opinion rendered in the case of Travelers’ Insurance Co. v. Henderson, supra, the following was said:

“The rule'referred to is so well settled that it may be safely asserted that a court of equity has no right to correct an alleged mistake in a written agreement, on the strength of testimony purely oral, if the testimony is to such extent uncertain, equivocal, or contradictory as to leave the fact of mistake open to doubt. Moreover, a court of equity ought to be especially cautious in altering the provisions of a written contract where it has been in force for a considerable period before an attempt is made to reform it, and the parties thereto have in the meantime had ample opportunity to become acquainted with its provisions, and an event has also occurred which renders a change in the terms of the contract of vital importance to the person who is seeking to reform the instrument.”

The evidence in the instant case by no means clearly and satisfactorily proves that the two men who conducted the negotiations which led to the framing of a proposition for a contract to be submitted to the plaintiff’s board of directors for its adoption or rejection mutually agreed that the option provision which the proposed contract was to contain was to he the one which the defendant seeks to have substituted for. the one found in the written instrument which was adopted and signed. But, even if the minds of those two men met on the proposition that the option provision was to be the one which the defendant alleges was verbally agreed on, that was not enough to entitle the defendant to the relief it seeks. There was no contract, either verbal or written, which bound the plaintiff until it was assented to by the plaintiff, which acted in the matter through its board of directors. There was an entire absence of evidence to support the conclusion that the plaintiff’s directors ever at any time or in any way assented or agreed to an option provision different from the one contained in the written instrument, which they approved and authorized the plaintiff’s president to sign. Even though the defendant’s representative signed that instrument under the mistaken belief that the option provision it contained had a meaning different from that expressed by its language, it was not entitled to have that provision reformed, unless it proved that the other party to the contract labored under the same mistaken belief when it signed that instrument. Certainly this was not shown by that measure and. character of proof which is required in such a case. To say the least, the requisite mutuality of the alleged mistake was not proved. The effect of granting the relief prayed for would be to incorporate into the contract made by the parties a provision which the party resisting the granting of that relief is not shown ever to have agreed to.

The conclusion is that the record shows that the defendant was not legally prejudiced by the action of the trial court of which it complains.

The decree appealed from is affirmed.