Amoco Production Co. v. Stauffer Chemical Co. of Wyoming

• Decision Date: 09 June 1980
• Docket Number: No. 5257,5257
• Citation: 612 P.2d 463
• Parties: AMOCO PRODUCTION COMPANY, a Delaware Corporation, Appellant (Plaintiff), v. STAUFFER CHEMICAL COMPANY OF WYOMING, a Delaware Corporation, Appellee(Defendant).
• Court: Wyoming Supreme Court

Page 463

612 P.2d 463

AMOCO PRODUCTION COMPANY, a Delaware Corporation, Appellant (Plaintiff), v. STAUFFER CHEMICAL COMPANY OF WYOMING, a Delaware Corporation, Appellee(Defendant).

No. 5257.

Supreme Court of Wyoming.

June 9, 1980.

Rehearing Denied July 7, 1980.

William T. Schwartz, Cameron S. Walker of Schwartz, Bon & McCrary, Casper, and R. H. Landt, Denver, Colo., an attorney in good standing of the State Bars of Texas, Oklahoma, and Colorado, admitted specially for the purposes of this case, for appellant.

Blair J. Trautwein of Hathaway, Speight & Kunz, Cheyenne, and Frederick S. Waiss of O'Donnell, Waiss, Wall & Meschke, San Francisco, Cal., an attorney in good standing of the State Bar of California, for appellee.

Before RAPER, C. J., and McCLINTOCK, THOMAS, ROSE and ROONEY, JJ.

ROONEY, Justice.

Appellant-plaintiff filed an action against appellee-defendant: (1) to recover money, with interest, allegedly due under a written contract for the sale of natural gas, and (2) for declaratory relief as to the proper price to be paid by appellee for gas sold by appellant under the contract. Both parties moved for a summary judgment. The trial court denied appellant's motion and granted appellee's motion.

We reverse.

The controversy arose over the application of § 12.3 of the contract, which provides:

"12.3 If at any time and from time to time during the term hereof, the Federal Power Commission or any successor governmental agency shall at any time hereafter prescribe or approve a ceiling price or prices, however determined, which is generally applicable to gas being sold from the area in which the gas subject hereto is sold, which when adjusted for heating value, is higher than the then applicable price under Section 12.1 or Section 12.2 ¹ hereof, the price of gas sold hereunder shall be increased to equal such higher price effective on the date such price is prescribed or approved.

"This Section 12.3 shall not apply in event of decontrol by the Federal Power Commission of the wellhead price of gas."

The Federal Power Commission (hereinafter referred to as FPC) ² regulates the sale of gas in interstate commerce. The contract with which we are here concerned involves intrastate sale of gas and is not subject to FPC regulations or control. The parties agree that the reference to FPC pricing in § 12.3 of the contract does not recognize authority of the FPC to officially fix the sale price of the gas to be sold under the contract, but is only a price setting gauge agreed upon by the parties.

The contract was entered into in June of 1975 with an effective date of April 9, 1975. At the time the contract was negotiated, the price fixed by it was in excess of the price set by the FPC for sale of gas from the area in interstate commerce; but, effective July 27, 1976, the price set by the FPC for such gas (hereinafter referred to as the July 27, 1976 Order) exceeded the price otherwise set by the contract. The operation of § 12.3 of the contract was, thus, triggered.

There would not have been a dispute between the parties if the FPC order had set a single price without vintaging. However, it established a ceiling rate of 93cents/MCF (plus adjustments and annual increases) for gas from wells spudded between January 1, 1973 and January 1, 1975, and a ceiling rate of $1.42/MCF (plus adjustments and quarterly increases) for gas from wells spudded on or after January 1, 1975. ³ The gas presently being furnished under the contract was from wells spudded between January 1, 1973 and January 1, 1975.

Appellant contends that § 12.3 of the contract fixes $1.42/MCF as the price of the gas as a result of the FPC July 27, 1976 Order. Appellee contends that the section fixes 93cents/MCF as such price. Appellee has paid the lower price and this lawsuit was commenced by appellant to secure payment of the difference between the lower (93cents/MCF) and the higher ($1.42/MCF) price for gas already sold and to establish the higher price as that to be paid for gas sold in the future under § 12.3 of the contract at least until the price is further changed thereunder.

The parties have stipulated to facts which are material to this case, including the fact that the FPC July 27, 1976 Order established the "ceiling prices generally applicable to the gas being sold from the area" in which the gas in controversy was sold.

Our basic purpose in construing or interpreting a contract is to determine the intention and understanding of the parties. Fuchs v. Goe, 62 Wyo. 134, 163 P.2d 783 (1945); Shellhart v. Axford, Wyo., 485 P.2d 1031 (1971); Oregon Short Line Railroad Company v. Idaho Stockyards Company, 12 Utah 2d 205, 364 P.2d 826 (1961). If the contract is in writing and the language is clear and unambiguous, the intention is to be secured from the words of the contract. Pilcher v. Hamm, Wyo., 351 P.2d 1041 (1960); Fuchs v. Goe, supra; Hollabaugh v. Kolbet, Wyo., 604 P.2d 1359 (1980); Wyoming Bank and Trust Company v. Waugh, Wyo., 606 P.2d 725 (1980). And the contract as a whole should be considered, with each part being read in light of all other parts. Shepard v. Top Hat Land & Cattle Co., Wyo., 560 P.2d 730 (1977); Rossi v. Percifield, Wyo., 527 P.2d 819 (1974); Shellhart v. Axford, supra; Quin Blair Enterprises, Inc. v. Julien Construction Company, Wyo., 597 P.2d 945 (1979). The interpretation and construction is done by the court as a matter of law. Hollabaugh v. Kolbet, supra; Bulis v. Wells, Wyo., 565 P.2d 487 (1977); Shepard v. Top Hat Land & Cattle Co., supra.

If the contract is ambiguous, resort may be had to extrinsic evidence. J. W. Denio Milling Co. v. Malin, 25 Wyo. 143, 165 P. 1113 (1917); Kilbourne-Park Corporation v. Buckingham, Wyo., 404 P.2d 244 (1965). An ambiguous contract "is an agreement which is obscure in its meaning, because of indefiniteness of expression, or because a double meaning is present." Bulis v. Wells, supra, 565 P.2d at 490. Ambiguity justifying extraneous evidence is not generated by the subsequent disagreement of the parties concerning its meaning. Homestake-Sapin Partners v. United States, 10th Cir. 1967, 375 F.2d 507.

Appellee contends this contract to be clear and unambiguous. The trial court so found, and appellant does not contend otherwise. Whether ambiguity exists is a question of law. Redding Foods, Inc. v. Berry, Tex.Civ.App., 361 S.W.2d 467 (1962); Bosler v. Coble, 14 Wyo. 423, 84 P. 895 (1906). We are, therefore, at liberty to make a determination as to the existence of ambiguity whether or not the parties here agree thereto one way or the other, and whether or not the trial court has reached a conclusion thereon one way or the other.

In any event, we agree that the intent of the parties was adequately expressed in, and can be determined from, the language of the whole contract. Even if there be an ambiguous term or portion of the contract, extrinsic evidence is not considered if the meaning of the ambiguous term or portion of the contract can be ascertained from other language of the contract, i. e., from the contract as a whole. Quin Blair Enterprises, Inc. v. Julien Contruction Company, supra; In re Pirie's Estate, 116 Vt. 159, 71 A.2d 245 (1950); Ullman v. Chicago & N. W. Ry. Co., 112 Wis. 150, 88 N.W. 41 (1901). ⁴

The intent of the parties as expressed in this contract is to increase the price paid for the gas sold under it in an amount to equal the highest ceiling price approved by the FPC as generally applicable to gas sold from the area. This conclusion results from practical application of all of the language used in the contract which pertains to setting of price for the gas. Consideration is given to contract language as follows:

1. An intention that there be a single price for all gas sold under the contract is manifested by the language of §§ 12.1 and 12.2. A "base price" of a specified amount is there set out. The contract covers sale of gas from additional wells not yet drilled into the "common source of supply," and the price for gas from such wells is set at the same amount as that from the existing wells per §§ 2.12, 2.2, 4.1, 5.7 and 7.1 of the contract. Vintaging with reference to these new wells was not intended. Yet vintaging would result as to them if the contract were construed as contended by appellee, and one price would be set for the new wells and another for the present wells all contrary to the single price language of the contract.

2. An intention to set the price at the highest price authorized by the FPC without reference to vintaging exists in use of the words "prescribe or approve" in § 12.3 of the contract. Repeating pertinent portions of that section:

"12.3 If * * * the Federal Power Commission * * * shall * * * prescribe or approve a ceiling price or prices, however determined, which is generally applicable to gas being sold from the area * * * which * * * is higher than * * * (the price being paid under the contract), the price for gas sold hereunder shall be increased to equal such higher price effective on the date such price is prescribed or approved." (Bracketed material and emphasis supplied.)

Vintaging was prescribed by the July 27, 1976 Order. If "prescribe" was the only verb used by the parties, it might be easier said that vintaging prices were intended to apply to the gas sold under the contract. However, the verb "approve" was used in the contract as an alternate to "prescribe." The higher price ($1.42/MCF) was approved as a price of gas "generally applicable" to gas being sold from the area. Thus, the contract price is not restricted to that prescribed to be paid for the gas sold under the contract if it were sold in interstate commerce pursuant to the July 27, 1976 Order.

Appellee has argued that use of the words "generally applicable" negate the higher vintage price ($1.42/MCF) as being within the expressed intention of § 12.3 of the contract inasmuch as it was "generally applicable" only to gas from wells spudded after...