American Refining Co. v. Sims Oil Co.

• Decision Date: 30 January 1926
• Docket Number: (No. 11371.)<SMALL><SUP>*</SUP></SMALL&gt
• Citation: 282 S.W. 894
• Parties: AMERICAN REFINING CO. v. SIMS OIL CO.
• Court: Texas Court of Appeals

282 S.W. 894

AMERICAN REFINING CO. v. SIMS OIL CO.

(No. 11371.)^*

Court of Civil Appeals of Texas. Fort Worth.

January 30, 1926.

Rehearing Denied February 27, 1926.

Appeal from District Court, Wichita County; P. A. Martin, Judge.

Action by the Sims Oil Company against the American Refining Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Bullington, Boone, Humphrey & King, of Wichita Falls, for appellant.

Thompson, Knight, Baker & Harris, of Dallas, and Carrigan, Britain, Morgan & King, of Wichita Falls, for appellee.

DUNKLIN, J.

The Sims Oil Company instituted this suit against the American Refining Company to recover $12,811.52, alleged to be due it on a certain contract made and entered into by and between the parties, by the terms of which the plaintiff agreed to sell, and the defendant agreed to buy, all the oil produced by plaintiff from certain lands leased by it for a period of eight months next ensuing after May 1, 1923, which was the date of the contract.

The contract sued on contained this stipulation:

"The oil received under this division order shall be paid for by the purchaser (American Refining Company) to the party or parties entitled thereto according to the division of interests shown above, at 25 cents (25) per barrel premium over and above the posted market price of Texas Pipe Line Company for the same kind and quality of oil in the particular field in which it is received on the day on which it is received by the purchaser into its custody. Settlements therefor shall be made semimonthly. For the amount due on account of the oil received during the first fifteen (15) days of each calendar month, payment shall be made on or before the 25th day of such month, and for the amount due on account of oil received during the balance of such calendar month payment shall be made on or before the 10th day of next succeeding month."

The record shows that in the drafting of the contract the term "Texas Pipe Line Company" was intended to mean "the Texas Company," and that the error was the result of mutual mistake of the parties. As said by appellant in its brief:

"This appeal in part hinges upon the proper interpretation to be given to the meaning of this term `posted market price' as the term was used in the contract."

The controversy was as to the correct amount of money due by the defendant to the plaintiff for oil delivered under the contract from August 16, 1923, to the middle of October, 1923.

There was testimony showing that, when the contract was first prepared, the words "posted price" of the Texas Company was used, and that, at the request of a representative of the defendant, the word "market" was inserted after the word "posted" before the contract was executed, so as to make it read, "posted market price," as appears in the contract. Testimony was also introduced tending to show that the prices of oil posted by the Texas Company during the period of time in controversy were then above the market prices of the same quality of oil in the same field. All that testimony was introduced in support of a special plea filed by the defendant that at the time the contract was executed it was understood by and between the parties that the term "posted market price" should mean the price posted by the Texas Company when that price was the price paid in open market by that company in the free and unobstructed course of trade and competition. It was further alleged in that connection that the prices posted by that company involved in this controversy were above the market prices as so understood, and were voluntarily fixed by the Texas Company for its own individual profit and advantage.

The defendant also introduced in evidence three checks payable to the plaintiff; the first of which was for $18,928.89, with the following notation on its face:

"In payment of 11,636.86 bbls. crude oil run from August 16th to September 15th as per statements."

This check was returned by the plaintiff because of the claim made that it was below the amount due under the contract. On October 19th the defendant again inclosed the check to the plaintiff in a letter containing this statement:

"This covers payment of your oil for the above period mentioned according to our interpretation of your contract, and we trust that you have reconsidered the matter, and that you will accept the inclosed check in full payment of the oil run the last half of August and first half of September."

Plaintiff again returned the check, refusing to accept it because of the insufficiency of the amount which plaintiff claimed to be due it. The defendant for the third time again sent the check to the defendant for its acceptance, and in that letter there was also inclosed the two other checks mentioned above; one for the sum of $6,893.21, with the following notation thereon:

"In payment of 5,514.57 bbls. of crude oil runs for last half of Sept. 1923, as per statement."

And the other check was for the sum of $7,269.39, with this notation thereon:

"In payment of 5,336.09 bbls. of crude oil runs for the 1st half of Oct. 1923, as per statement."

Both of those checks were likewise made payable to the order of Sims Oil Company, plaintiff herein. All three of the checks just mentioned were later collected by the plaintiff company, as evidenced by its indorsements thereon. The giving and acceptance of those checks with the notations thereon was specially pleaded by the defendant as an accord and satisfaction of plaintiff's demand, for which the suit was instituted.

The statement of facts shows many letters and telegrams which passed between the plaintiff and defendant, giving their respective constructions of the meaning of the contract and their respective contentions of the amounts due for oil thereunder; plaintiff insisting that the prices posted by the Texas Company, plus 25 cents per barrel, were the amount which the defendant was bound by the contract to pay for the oil, and the defendant insisting that the prices so posted by the Texas Company would not be controlling if the same were higher than the market prices of the oil when purchased in open market in the same field. The testimony further showed that, after plaintiff received for the third time the check first mentioned, together with the other two checks, the same were collected by it without any further communication with the defendant, and, therefore, without any further contention that the same were insufficient to cover the amounts due under the contract, and with full knowledge of the notations upon the checks already referred to.

At the conclusion of the evidence the court peremptorily instructed the jury to return a verdict in plaintiff's favor for the amount sued for, and a judgment was rendered in accordance with the verdict returned in obedience to that instruction. From that judgment the defendant has prosecuted this appeal.

It is apparent from the record that the trial court reached the conclusion that under the contract between the parties the prices posted by the Texas Company would control, even though such prices were in excess of those prevailing in the same oil field and for which the Texas Company could have purchased the same grade of oil in open market; in other words, that the prices paid by the Texas Company would be the market prices intended by the parties in using the term "posted market prices." In view of testimony introduced and already referred to, we believe that ruling was erroneous. In 38 Corpus Juris, 1261, it is said:

"The term `market price' has no hard and fast meaning. It has not a fixed and definite meaning which must attach to it invariably, in whatever contract it may occur, irrespective of the context or the surrounding circumstances. There is no magic in the term. When the term becomes a subject of legal controversy, it will be given that meaning which will best serve the purpose and intent of those who use it."

Many authorities are cited in support of that text, and also supporting the further statement that the term "market price" implies price or value in an open market, or prices at which a commodity is commonly sold in the usual and ordinary course of trade and competition. The term "posted market price" we think sufficiently ambiguous to warrant the introduction of testimony to show the meaning of the parties in using it, since the term "market price" might mean what the Texas Company paid for oil on the market, or it might mean the price paid by the public in open market and posted by the Texas Company; and we are of the opinion that under the testimony introduced the defendant was entitled to have the jury pass upon the question which of those constructions were intended by the parties. Kirk v. Brazos County, 11 S. W. 143, 73 Tex. 56; Smith v. T. & N. O. Ry. Co., 108 S. W. 819, 101 Tex. 405; San Jacinto Oil Co. v. Ft. Worth Power & Light Co., 93 S. W. 173, 41 Tex. Civ. App. 493; Long v. McCauley (Tex. Sup.) 3 S. W. 689; Quanah, A. & P. Ry. Co. v. Cooper (Tex. Civ. App.) 236 S. W. 811; Quarry Co. v. Clements, 38 Ohio St. 587, 43 Am. Rep. 442; Kilby Mfg. Co. v. Hinchman Co., 132 F. 957, 66 C. C. A. 67; Keller v. Webb, 125 Mass. 88, 28 Am. Rep. 209; Fayter v. North, 83 P. 742, 30 Utah, 156, 6 L. R. A. (N. S.) 410; Chaplin v. Griffin, 97 A. 409, 252 Pa. 271, Ann. Cas. 1918C, 787; Hudson v. McGuire, 223 S. W. 1101, 188 Ky. 712, 17 A. L. R. 148.

It is also apparent from the record that the trial court adopted the contention urged by the appellee here that plaintiff's cause of action was a liquidated demand, and, since the amount paid to the plaintiff by the three checks mentioned was less than the amount sued for there was no consideration for the accord and satisfaction pleaded by the defendant, and that therefore there was no merit in that defense. After a careful consideration of the many authorities cited by counsel for appellant and appellee, we have reached the conclusion that...