Sunburst Oil & Gas Co. v. Neville

257 P. 1016, 79 Mont. 550, 1927 Mont. LEXIS 125

• Court: Montana Supreme Court
• Decided: June 27, 1927
• Docket: No. 6,110.
• Status: Published

Opinion

MR. CHIEF JUSTICE CALLAWAY

delivered the opinion of the court.

In July, 1920, Andrew Dipple, who then was the owner of lands in Toole county, executed an oil and gas lease for a term of years to Gordon Campbell. Eventually this lease was assigned to the plaintiff. Prior to giving the lease Dipple had executed several mortgages upon the land, two to Mohall State Bank and a third to Hart-Parr Company. The Mohall State Bank foreclosed its second mortgage but did not make plaintiff, then owner of the Campbell lease, a party to the action. Dipple did not attempt to redeem from .the sale following foreclosure. The Ilart-Parr Company foreclosed its mortgage and at the sale, on October 6, 1922, purchased the property. The defendants, having acquired some interest in the property, redeemed from both foreclosure sales.

Dipple claimed that he was not properly foreclosed of his rights in the Mohall State Bank foreclosure and that he had a right to redeem from the Hart-Parr foreclosure sale. He threatened to start suit to cancel the sheriff’s deed which had been executed following the Mohall State Bank foreclosure, on the ground that the court had not acquired jurisdiction as to him.

Plaintiff, owner of the Campbell lease, claimed that as successor to Dipple it had the right to redeem from the Hart-Parr foreclosure sale. The defendants denied that Dipple had any right of redemption, or any interest in the property whatever.

In view of the fact that the period of redemption following the Hart-Parr sale would expire on October 6, 1923, an at torney of the plaintiff on September 28 telegraphed Dr. Johnson, one of the defendants, who resided at Bottineau, North Dakota, asking whether he and his associates could meet Ií. P. Jackson, a representative of the plaintiff, early in the following week and “adjust the Dipple lease matter.” In answer Johnson telegraphed plaintiff: “Can meet your representative B. P. Jackson at Bottineau any time next week regarding Dipple lease but are advised you have no right of redemption and will not deal on the basis of old lease.” Mr. Jackson arrived at Bottineau on October 2.

The defendants, Johnson, Moline and Neville, were trustees for a number of people living at Bottineau and vicinity. Mr. Jackson’s purpose in going to Bottineau, as he said, was to “confer with Dr. Johnson and Mr. Neville there with a view of entering into a contract or oil and gas lease” covering the Dipple land. He was in direct charge of the leasing department of the plaintiff company but did not have any written authority from the plaintiff to enter into a contract with the defendants. Having met the defendants and their attorney, Mr. Adams, an extended discussion took place. There was considerable debate as to whether the plaintiff had the right to redeem from the Hart-Parr foreclosure sale. Mr. Jackson asserted that the plaintiff did have the right to redeem and this the defendants emphatically denied. Jackson told the defendants that if they could not arrive at an agreement he would return to Shelby for the purpose of redeeming the property from the sale. The fact that Dipple was threatening to commence a suit was discussed. Mr. Jackson said he thought a settlement could be made with Dipple by giving him a royalty of one and one-half or two per cent, and if that could be done he thought his principal would assume that obligation. There is considerable conflict in the testimony as to whether Jackson simply gave it as his opinion that a settlement could be reached with Dipple upon those terms or whether he affirmatively represented that such a settlement could be made. It was asserted by all of those who testified for the defendants that they agreed to enter into a contract relying upon the representation of Jackson that the plaintiff would make a settlement with Dipple and would assume the obligation of paying him the royalty agreed upon. This Mr. Jackson denies. After discussions which ran over a period of two days, Mr. Jackson presented a form of lease which he said his principal would be willing to execute. This was amended in some particulars by the defendants and redrafted by Mr. Adams. It is unnecessary to explain its terms in detail. It will be sufficient to say that it purported to be an oil and gas lease for a term of years from the defendants as trustees to the plaintiff, containing provisions respecting development upon the land, payment of royalty, and so forth. In the beginning there was specified a consideration of one dollar “in hand paid by the party of the second part, the receipt whereof is hereby acknowledged, and of the covenants and agreements hereinafter contained on the part of the party of the second part to be kept and performed.” Later on it was provided that the party of the second part (the plaintiff) should pay the parties of the first part (the defendants) “the sum of Fifteen Hundred Dollars in cash at the delivery of these presents or within ten days of the date hereof, and the further sum of Fifty-seven Hundred Dollars, together with interest thereon at eight per cent per annum from the date hereof, and such further sum as the parties of the first part shall hereafter pay upon the principal and interest of the first and second mortgages against the said premises, with interest thereon as aforesaid from the date of payment thereof by said first parties,” and methods of payment were provided for. It was provided also that in case the parties of the first part were put to any expense to defend their title to the land or any part thereof by reason of the act of some party other than the parties of the first part, the party of the second part should pay the expense of any litigation fiecessary to defend the title; the parties of the first part to select their own attorney and the party of the second part to pay his fees. This provision was inserted in apprehension of litigation with Dipple.

Mr. Jackson was not an officer of the plaintiff and did not attempt to execute the lease which the parties have referred to as the contract. He told the defendants that it was customary for the president of the company personally to execute all contracts for the plaintiff but if they preferred to have him do so he would sign as attorney-in-fact for the plaintiff. The defendants said they preferred to have the contract executed in the usual manner by the president of the company. Jackson informed them that the president was frequently away from Great Falls, his home, for extended periods of time. It was agreed that ten days would be a reasonable time within which the contract should be executed by the plaintiff, and that period was inserted therein. Two copies were signed and acknowledged by the defendants. It was agreed that these should be sent immediately to the Conrad Banking Company at Great Falls, Montana, for execution by the plaintiff. The documents arrived at the office of the Conrad Banking Company on the morning of October 6. With the documents there was transmitted by the defendants a letter addressed to the Conrad Banking Comí)any, in which it was said: “These contracts have been signed by the three first parties and are sent to you for the signature of the party of the second part. Party of the second part should sign by its proper officer and attach its corporate seal. We enclose also sight draft for $1,500, drawn against the Sunburst Oil and Gas Co. Upon execution of both duplicate contracts by the Sunburst Oil and Gas Co. and upon its payment to you for us of the $1,500 sight draft you will kindly deliver one duplicate contract to Sunburst Oil and Gas Co. and return the other one to us with the $1,500 paid by the Sunburst Oil and Gas Co., which is to be free of charge to us.” No written agreement was signed at any time by anyone representing the plaintiff.

It seems to be agreed by all that Mr. Jackson was in a hurry to leave Bottineau in order that he might arrive in Shelby on October 5. On the evening of October 4, about 11 o’clock, Mr. Neville, one of the defendants, conveyed Mr. Jackson by automobile from Bottineau to Towner, at which point Jackson boarded a Great Northern train, which arrived in Shelby about 5:30 in the afternoon of October 5. All understood that the period for redemption of the property from the sale would expire on October 6. The defendants testified Mr. Jackson told them that he desired to reach Shelby in time to redeem the property if that were deemed advisable by the officers of the plaintiff, while he says he desired to return there in order to make a settlement with Dipple if that were possible. Mr. Jackson agreed to advise the defendants of the result of his conference with Dipple. On the evening of October 5 Mr. Jackson sent the following telegram to Dr. Johnson: “Am informed by Dipple that he would accept six and one-fourth per cent royalty and surface rights as settlement otherwise suit will be filed. Black informs me no mailing of notice or affidavits of mailing filed under Mohall Bank foreclosure. Will be at Great Falls Monday. My company will assume no additional royalty.” The purport of this telegram is variously interpreted by the parties. The meaning intended by Jackson was widely different from that which defendants deduced from it. Whether the interpretation given it by the defendants was justified is not now important. The fact is that it set in motion that which resulted in a change of purpose on part of defendants. It should be said, and may as well be said here, that we are impressed with the good faith shown throughout by the plaintiff; and while there is intimation to the contrary, we are unable to see that the defendants did not act in good, faith also. They may have been mistaken; if so, we think they were honestly mistaken.

Upon receipt of this telegram Dr. Johnson called his associates and their attorney into conference, and as a result they dispatched a Mr. Hennessy to Great Falls with a letter to the Conrad Banking Company, in which they said that if the plaintiff had already signed the contracts to deliver one, of them and the money paid, to Mr. Hennessy, but “if the contracts have not been executed by Sunburst Oil and Gas Co. kindly deliver them forthwith to the bearer, Mr. Hennessy, and if there are any charges for your trouble Mr. Hennessy will pay you.” Pursuant to this direction the Conrad Banking Company delivered the documents to Hennessy and he delivered them to the defendants. The fact that the documents had arrived at the office of the Conrad Banking Com-any seems to have been communicated by an officer of that company to the office of the plaintiff on the morning of October 6, and Mr. Jackson examined the papers on Monday morning, October 8. On the day the papers Were withdrawn, the Conrad Banking Company communicated that fact to the office of plaintiff. Mr. Stevenson called in person at the office of the Conrad Banking Company on October 10, to ascertain “what had happened and why.” On October 11 the plaintiff tendered the sum of $1,500 to the defendants and offered to execute the agreement but the tender was refused. Thereafter the plaintiff brought this suit in the nature of specific performance, or to be exact, to compel the defendants to deliver to the plaintiff one of the duplicate copies of the “contract.” After trial the court entered judgment in favor of the plaintiff, from which the defendants have appealed. .

The court did not make any findings of fact and we are not apprised of the theory upon which it reached its decision. We start out with the presumption that the case was decided correctly, and in aid of that presumption every legitimate inference will be drawn from the evidence. (Tucker v. Missoula Light & Water Co., 77 Mont. 91, 250 Pac. 11; Security State Bank v. Soule, 70 Mont. 300, 225 Pac. 127.) In their argument in support of the decree counsel for plaintiff discuss the instrument under three heads: considering it as (1) a contract, (2) an option, (3) an offer.

1. If either, the instrument was required to be in writing. “An agreement for the leasing for a longer period than one year, or for the sale of real property, or for an interest therein” must be in writing. (Sec. 7519, Rev. Codes 1921.) An agreement which must be in writing is not valid if executed by an agent unless the agent is authorized in writing to enter into it (sec. 7939, Id.), in the absence of ratification by the agent’s principal. There is no question of ratification in the case at bar.

Plaintiff’s agent was not authorized to execute the contract in behalf of the plaintiff; it was known to the defendants that before the contract could be executed by the officers of the plaintiff who were authorized to execute it, it was necessary that the instrument be forwarded to Great Falls. This is the express pleading of plaintiff, which the proof supports. Plaintiff’s agent was a mere negotiator, without power to effect the agreement under discussion. To the terms embodied in the instrument there never was an expression of mutual assent by the defendants and the plaintiff. There was no meeting of minds between the defendants and anyone authorized to speak for the plaintiff. There was therefore no contract. The instrument which embodied the terms which would have ripened into a contract was forwarded to Great Falls, but was withdrawn before the plaintiff signified its acceptance thereof. Before acceptance by plaintiff the defendants changed their minds and withdrew their proposal. As we shall see hereafter, they were within their rights in so doing.

2. “An option is a right acquired by contract to accept or reject a present offer within a limited or reasonable time.” (Winslow v. Dundom, 46 Mont. 71, 125 Pac. 136; Snider v. Yarbrough, 43 Mont. 203, 115 Pac. 411; Ide v. Leiser, 10 Mont. 5, 24 Am. St. Rep. 17, 24 Pac. 695.) It is clear that plaintiff did not have any right acquired by contract. What has been said upon the contract feature of the ease is equally applicable upon this feature of it.

3. But it is earnestly argued that the defendants made the plaintiff an offer. An offer is a promise; it is a statement made by the offeror of what he will give in return for some promise or act of the offeree. (1 Williston on Contracts, sec. 25.) The offer must be communicated to the offeree. Before it will become a binding promise the offer must be accepted. There must be mutual consent to create the contract. In order to form a contract there must be an offer by one party and an acceptance of it by the other. (Glenn v. S. Birch & Sons Construction Co., 52 Mont. 414, 158 Pac. 834; Polich v. Severson, 68 Mont. 225, 216 Pac. 785.) Unless there be consideration for the offer, until the moment of acceptance it may be revoked and a subsequent acceptance will be inoperative. (Clark on Contracts, sec. 23; 13 C. J. 293.)

“So long as the offer has been neither accepted nor rejected the negotiation remains open, and imposes no obligation upon either party; or one may decline to accept or the other withdraw his offer; and either rejection or withdrawal leaves the matter as if no offer had ever been made.” (Minneapolis etc. Ry. v. Columbus Rolling Mills, 119 U. S. 149, 30 L. Ed. 36, 7 Sup. Ct. Rep. 168, quoted in Brophy v. Idaho Produce & Provision Co., 31 Mont. 279, 78 Pac. 493; Donlan v. Arnold, 48 Mont. 416, 138 Pac. 775.)

With these principles in mind we shall proceed to the main point in the case.

The defendants say that upon the facts shown, the defendants did not, in contemplation of law, make an offer; they merely offered to contract. Whether or not there is anything in this distinction, we will assume, for the purposes of this case, that the defendants did make an offer. It is essential to determine whether it was based upon a consideration. Upon the evidence it was not. Counsel for plaintiff claim plaintiff’s forbearance to redeem the property from the foreclosure sale is an adequate consideration. That it might be under some circumstances is true. But the fact here is that the defendants do not seem to have concerned themselves on this score. They seem, rightly or wrongly, to have satisfied themselves that plaintiff did not have any such right. They were concerned about the probability of a suit by Dip-pie. Their testimony indicates that they considered plaintiff at liberty to attempt the redemption if it saw fit to follow that course. Forbearance to enforce a legal right is a sufficient consideration to support a contract, but there must be an agreement to forbear. (Doorly v. Goodman, 71 Mont. 529, 230 Pac. 779; Cowan v. Browne, 63 Mont. 82, 206 Pac. 432.) There was no such agreement between plaintiff and defendants.

It is said that Neville, one of the defendants, admitted that one dollar, a part of the consideration, named in the contract, was paid to him by Jackson, but this admission was explained and nullified by him. It seems certain that he did not receive any part of the consideration recited in the contract. It is particularly noteworthy that Mr. Jackson did not testify that he made any such payment. To the point that the writing contained an acknowledgment of the receipt of one dollar, it is enough to say that even if the instrument could be referred to, the statement is subject to explanation. (Sec. 10605, subd. 2, Rev. Codes 1921.) But if an instrument is invalid for want of delivery, statements contained therein are not binding on the grantor. (Devlin on Deeds, sec. 260a.)

The instrument was sent to the Conrad Banking Company with directions. The Conrad Banking Company was the agent of the defendants for the purposes expressed. The instrument was subject to the control of the defendants until accepted by the plaintiff. If the offer was communicated to the plaintiff it would seem that it was by the information given by tbe Conrad Banking Company to plaintiff’s office. It cannot be held tbat it was communicated to plaintiff’s agent Jackson.

An offer may be revoked at any time before its acceptance is communicated to the offeror. (Sec. 7494, Rev. Codes 1921.) Since an offer unaccepted creates no rights and is not binding on the party making it, it follows that it may be revoked at any time before acceptance. An order, for instance, given to the agent of the party for whom it is made, who has no authority to accept it, is a mere proposal and revocable at any time before its principal accepts it. (Clark on Contracts, p. 47.)

That the offer was not accepted is clear. But it is argued that the defendants did not have the right to revoke it when they did; it is said that if plaintiff’s position that it had ten days in which to signify its acceptance is untenable, nevertheless it has a reasonable time in which to do so. Neither position may be maintained. An offer, unless for consideration, may be revoked by the offeror at any time prior to the creation of a.contract by acceptance, even though a definite time in which acceptance may be made is named in the offer. (Clark on Contracts, sec. 26; Brown v. Savings Union, 134 Cal. 448, 66 Pac. 592; Cooper v. Lansing Wheel Co., 94 Mich. 272, 34 Am. St. Rep. 341, 54 N. W. 39.) The withdrawal of the instrument by the defendants and the communication of the fact by the Conrad Banking Company to the plaintiff’s office, the same course pursued in communicating the offer, must be held to have- been a revocation of the offer. (Secs. 7486, 7495, Rev. Codes 1921.) A formal notice is not necessary to constitute a communicated revocation.

The defendants had the right to revoke the offer and did so before acceptance. The decision of the trial court cannot be sustained.

Rehearing denied July 18, 1927.

Tbe judgment is reversed and tbe cause is remanded to tbe district court of Cascade county, witb direction to render judgment for defendants.

Reversed.

Associate Justices Myers, -Stare:, Matthews and Galen concur.