Joyce v. Davis, 75-1670

• Decision Date: 26 July 1976
• Docket Number: No. 75-1670,75-1670
• Citation: 539 F.2d 1262
• Parties: C. G. JOYCE, Jr., et al., Plaintiffs-Appellees, v. Edward Mike DAVIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1262

539 F.2d 1262

C. G. JOYCE, Jr., et al., Plaintiffs-Appellees, v. Edward Mike DAVIS, Defendant-Appellant.

No. 75-1670.

United States Court of Appeals, Tenth Circuit.

Submitted May 20, 1976.

Decided July 26, 1976.

Edward C. Eppich, Denver, Colo., for plaintiffs-appellees.

Richard H. Shaw, Denver, Colo. (Stanley L. Spangler, Denver, Colo., on the brief) of Shaw & Coghill, Denver, Colo., for defendant-appellant.

Before McWILLIAMS and BARRETT, Circuit Judges, and STANLEY, ^* District Judge.

BARRETT, Circuit Judge.

In this diversity case, Edward Mike Davis (Davis) appeals from a judgment and order obligating him to pay a $60,000 bonus relative to an oil and gas lease. The lease in question was executed between C. J. Joyce, et al. (plaintiffs), as lessor, and Davis' company, Tiger Oil Company, as Lessee.

During the latter part of 1973 Tiger Oil contacted plaintiffs relative to leasing certain lands in Arapahoe County, Colorado, for oil and gas development. The properties in question were then considered very "active". Davis had leased the same lands from the same plaintiffs in 1967. At that time he paid plaintiffs a bonus of $5,900. All the parties assumed plaintiffs' interest to be an undivided 3/8 interest in approximately 320 acres.

The lease at issue here was executed by the parties on December 10, 1973, at which time Davis gave plaintiffs his post-dated bonus check (January 10, 1974) for $60,000. Plaintiff Joyce testified that although he had wanted cash, he accepted the post-dated check because he thought Davis would pay it since Davis had related that he was worth four or five hundred million dollars.

Prior to January 10, 1974, Davis notified plaintiffs not to cash the check because he would not be able to cover it until later in the month. On January 25, 1974, Davis executed a second lease agreement offer which was given to plaintiffs on January 26, 1974 for their approval. This offer was for an oil and gas lease of the same lands with the same bonus as that committed under the December 10, 1973 lease, but it deleted the prior drilling commitment.

This offer was unilaterally conditioned by Davis' requirement that it be accepted by plaintiffs by 11:00 A.M., Sunday, January 27, 1974. This requirement was not made known or otherwise communicated to plaintiffs until January 28, 1974, when they received Davis' telegram to that effect. Prior to the receipt of Davis' telegram, the plaintiffs had telegrammed their acceptance of Davis' offer (the second lease agreement) on January 27, 1974. ¹ The acceptance telegram was received by Davis on January 28, 1974. He promptly stopped payment on his $60,000 check.

Plaintiffs filed suit on August 15, 1974 to enforce payment of the $60,000 bonus. Plaintiffs sought recovery for (1) a wrongful stop payment order issued in connection with the $60,000 bonus check, and (2) breach of lease agreement based upon Davis' failure to honor his bonus check.

Davis contended that there was a failure of consideration, mutual mistake, fraud, and misrepresentation. He counterclaimed for rescission of the contract and for costs. Davis argued that a reservation in a royalty deed giving rise to plaintiffs' interest created an ambiguity which limited their interest, thus making it impossible for them to convey a full 3/8 interest. (We deem it worthy to note that after suit was filed, but before trial, a corrective deed was obtained and recorded by plaintiffs without demand having been made by Davis.)

In rendering judgment for plaintiffs, the District Court found that the uncertainty with respect to the original royalty deed did not create an absolute defense on the part of Davis relative to his obligations as the lessee under the lease contract. The court also found that neither fraud, mistake nor misrepresentation were present, and that the cloud on plaintiffs' title gave rise only to an obligation on the part of plaintiffs to protect and defend their represented title upon demand. We have previously noted that no demand was made upon the plaintiffs by Davis, but that even so, the plaintiffs obtained a corrective, clarifying deed after this suit was filed.

Findings of the trial court will not be disturbed on appeal unless they are held to be clearly erroneous. Fed.Rules Civ.Proc. Rule 52(a), 28 U.S.C.A.; Quarles v. Fuqua Industries, Inc., 504 F.2d 1358 (10th Cir. 1974). Appellate courts do not try factual issues de novo. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969); Sims Consolidated, Ltd. v. Irrigation and Power Equipment, Inc., 518 F.2d 413 (10th Cir. 1975), cert. denied, 423 U.S. 913, 96 S.Ct. 218, 46 L.Ed.2d 141. On appeal we must view the evidence and all reasonable inferences therefrom in the light most favorable to the prevailing party. Hart v. Western Investment and Development Company, 417 F.2d 1296 (10th Cir. 1969). The views and findings of a federal district judge which have support in the record, involving the interpretation and application of the law of the state of the federal trial judge's residence, carry extraordinary force on appeal where there are no decisions on point or none which provide clear precedent. United States v. Hunt, 513 F.2d 129 (10th Cir. 1975); Stevens v. Barnard, 512 F.2d 876 (10th Cir. 1975); United States v. Wyoming National Bank of Casper, 505 F.2d 1064 (10th Cir. 1974); United States Fidelity and Guaranty Co. v. United States, 446 F.2d 851 (10th Cir. 1971).

On appeal Davis contends that the court erred in (1) holding him liable on his promise to pay, (2) relying on a corrective deed to show good faith, and (3) in ordering specific performance.

I.

Davis contends that the court erred in holding him liable on his promise to pay. He argues that the lease negotiations were carried out under a mutual mistake of fact (ambiguity within the royalty deed); that the mistake was substantial and amounted to a failure of consideration; and that where consideration has failed, cancellation of a promise to pay is justifiable. Davis further argues that specific performance should not have been granted and that he should have been granted the relief of rescission.

In disposing of the above contentions the trial court found:

. . . (I)t is my conclusion that the existence of an uncertainty with respect to the legal effect of the deed does not amount to a failure of consideration within the legal sense, . . .

I do not find on this record that there is any active misrepresentation, and certainly not the common law elements of fraud required in Colorado . . .

. . . (T)here wasn't a mutual mistake involved that (sic) the existence of the ambiguity in the instrument was such a mistake to vitiate the parties' agreement.

We hold that the trial court did not err in finding that Davis is liable on his promise to pay. Significantly, we believe, Davis' own expert testified that (1) the "royalty" deed in question was not a nullity, (2) it was possible even under the original "royalty" deed, that Davis may have received a full 3/8 undivided interest, (3) certain corrections could clarify Davis' interest, ² and (4) the corrective deed filed of record by plaintiffs "cleared up" any problem involving the reservation that created the ambiguity in the original instrument entitled "Royalty Deed" relating to plaintiffs' oil, gas and mineral interest in the lands.

The relative necessity of an adequate, merchantable...