OPERATORS'OIL CO. v. Barbre, 781.

• Decision Date: 13 July 1933
• Docket Number: No. 781.,781.
• Citation: 65 F.2d 857
• Parties: OPERATORS' OIL CO. v. BARBRE et al.
• Court: U.S. Court of Appeals — Tenth Circuit

65 F.2d 857 (1933)

OPERATORS' OIL CO. v. BARBRE et al.

No. 781.

Circuit Court of Appeals, Tenth Circuit.

July 13, 1933.

M. H. Silverman and C. H. Rosenstein, both of Tulsa, Okl. (Henry L. Fist, of Tulsa, Okl., and S. K. Bernstein, of Oklahoma City, Okl., on the brief), for appellant.

John Barry, of Oklahoma City, Okl. (Hayes, Richardson, Shartel, Gilliland & Jordan, of Oklahoma City, Okl., and D. Haden Linebaugh, of Muskogee, Okl., on the brief), for appellees.

Before LEWIS and McDERMOTT, Circuit Judges, and POLLOCK, District Judge.

McDERMOTT, Circuit Judge.

Upon a trial without a jury, judgment was rendered in favor of appellees for $31,313.84 on account of commissions alleged to have been earned for negotiating a contract for the sale of oil. The suit is upon a written contract of date January 9, 1931, which recites that the appellant on January 7th contracted in writing to sell to the Continental Oil Company a million barrels of common stock Oklahoma City crude oil, which contract was negotiated by appellee Barbre; that for the purpose of compensating him for his services in negotiating and consummating said contract of sale, appellant "agrees to pay second party, from the sale of oil to the said Continental Oil Company, when and as soon as paid first party," a percentage "of the posted market price received by first party." Under the sales contract, deliveries of the oil were to be in installments and in accord with the proration laws of Oklahoma. Except for an insignificant sum, later paid, recovery was sought for commissions on oil which was neither delivered, nor due to be delivered, when the action was filed. The petition alleges an anticipatory breach of the sales contract, in that appellant refused further to comply with its terms. The defenses raised by the answer are (a) that the commissions were not earned until the oil was delivered and paid for; (b) that, in any event, the suit was prematurely brought; and (c) that further performance by appellant was prevented by the interposition of vis major, to wit, the receivership of the Sunray Oil Company, whose oil was the subject matter of the sale.

Upon the trial certain facts were stipulated, subject to relevancy, among them being the various contracts to which reference will be hereafter made. The contract negotiated by Barbre between appellant and the Continental Oil Company discloses that the Continental agreed to buy specific oil, to wit, common stock Oklahoma City crude oil from leases owned by the appellant or the Sunray Oil Company, or in which either had an interest. The parties stipulated that appellant owned no oil or gas leases in the Oklahoma City field or elsewhere, either at the time the contract was entered into or since; that oil from the Sunray leases was delivered to the Continental in accordance with the contract, and commissions paid thereon, until October 24, 1931, on which date a receiver for the Sunray Oil Company was appointed by the United States District Court; that deliveries thereafter were not made by the receiver because of an order of the court of his appointment. At that time there remained undelivered 278,145 barrels under the contract. Appellees supplemented this stipulation with testimony that the Continental Oil Company was ready, able and willing to comply with its contract to purchase the oil in question.

At the close of appellees' case, appellant moved for judgment upon the various grounds disclosed by its answer. This motion was denied, and the error, if any, was waived by the introduction of testimony thereafter. Thereupon the appellant offered evidence which disclosed generally this state of facts: Appellee Barbre solicited the Sunray Oil Company to pay him a commission for selling a million barrels of Sunray oil; the Sunray agreed to pay him a commission of 12½ per cent therefor if a satisfactory contract could be consummated. Thereupon the question arose as to a method of handling the matter so that the owners of royalty interests, for whom the Sunray had no authority to contract, should bear their share of Barbre's commission. Another complication arose because the buyer to whom Barbre proposed to sell the oil, the Continental, would not purchase oil under the posted price. It was suggested that the deal might be handled by using the appellant as an intermediary between the Sunray and the Continental. Barbre and an officer of the Sunray then went to Ponca City and discussed the proposed contract with Mr. Bruce, vice president of the Continental. Mr. Bruce stated that he must know from what leases the oil which he was contracting to buy would be produced, because of the proration laws of Oklahoma. The tentative contract was modified by limiting the agreement of the Continental to the purchase of oil from leases owned either by appellant or the Sunray Oil Company, or in which either had an interest. Since it is conceded that appellant owned no leases, it is entirely clear that the agreement of the Continental was to purchase oil from the Oklahoma City leases of the Sunray Oil Company and no other. After these negotiations between Barbre, the Sunray, and the Continental, the matter was taken up with appellant, and the contract between appellant and the Continental was entered into. The appellant is a pipe line company, not engaged in the production of oil, and it fairly appears from the evidence offered that the only interest which appellant had in this transaction was to procure its normal charges for transportation of the oil. It may be observed that appellant already had a contract with the Sunray to transport this oil. The offered testimony further discloses that as a part of the transaction, a complementary contract was entered into between appellant and the Sunray, by which the Sunray agreed to deliver to appellant oil in the same quantities, at the same times, under the same conditions, and at the same price (with a differential for commission and transportation charges) as was provided in the contract between appellant and the Continental. It also appears that the Sunray guaranteed the performance by appellant of its contract with the Continental, and also guaranteed the performance of the commission agreement sued on in this action.

This evidence was received by the trial court subject to objection; the objection was later sustained. The judgment rendered is predicated upon the assumption that if the contract had been carried out, 9,000 barrels of oil could have been delivered under the proration laws of Oklahoma up to November 2, 1931; that 150,000 barrels of oil could have been delivered between November 2, 1931, and April 1, 1932; and that after April 1, 1932, 119,145 barrels of oil could have been delivered. In some way, not explained by the record, the commission for the last item was figured, not upon the then posted price of the Carter Oil Company as provided in the contract, but upon a price posted by the Continental Oil Company.

Appellees have moved to dismiss the appeal or affirm the judgment on the ground that the appellant did not move the trial court for judgment in its favor at the close of all the evidence. The appeal cannot be dismissed on this account. The failure to interpose such a motion precludes only a consideration of the sufficiency of the evidence to support the judgment. 28 USCA § 875; White v. United States (C. C. A. 10) 48 F.(2d) 178. Errors appearing on the record proper, and rulings of the court in the progress of the trial are open for consideration by the express terms of the cited statute.

The principal controversy between the parties is over the construction of the commission contract. Appellant contends that it did not agree to pay any commissions except from the proceeds of the sale of oil to the Continental when it received them, and that its failure to receive such proceeds was through no fault of its own. Barbre, on the other hand, contends that his full commission was earned when the sales contract was signed; that he cannot be deprived of his commissions by the refusal of the appellant to deliver the oil, no matter whose the fault; that the agreement to pay commissions "from the sale of oil * * * when and as soon as paid first party" fixes the time of payment only, and is not a condition upon the obligation. A careful scrutiny of the commission contract raises such a serious question as to the intention of the parties, that we are of the opinion that the court erred in excluding the evidence offered by appellant. In the construction of any contract, the court may look to the surrounding circumstances in order to avail itself of the light which the parties possessed when the contract was made. Merriam v. United States, 107 U. S. 437, 2 S. Ct. 536, 27 L. Ed. 531; Brawley v. United States, 96 U. S. 168, 173, 24 L. Ed. 622; United States v. Bethlehem Steel Co., 205 U. S. 105, 118, 27 S. Ct. 450, 51 L. Ed. 731; United States v. Peck, 102 U. S. 64, 26 L. Ed. 46; Jones on Evidence (3d Ed.) § 450; Wigmore on Evidence, §§ 2470, 2471. One of such surrounding circumstances is the contract between appellant and the Continental; it was received in evidence as proof of services rendered and for what light it might throw upon the commission contract; but it is not the contract in suit, and proof of the negotiations leading up to its execution does not vary or contradict the contract sued upon; such negotiations are admissible for the same reason as the contract itself is admissible, as part of the circumstances against the background of which the commission contract was made. Sigua Iron Co. v. Greene (C. C. A. 2) 88 F. 207; Lee v. Adsit, 37 N. Y. 78; Harriss, Magill & Co. v. Rodgers & Co., 143 Va. 815, 129 S. E. 513; Nissen v. Sabin, 202 Iowa, 1362, 212 N. W. 125; Wigmore on Evidence, § 2446.

If a contract is ambiguous, negotiations leading up to its execution are admissible to ascertain the intention of the...