Apex Oil Co. v. Vanguard Oil & Service Co. Inc., 436
| Decision Date | 18 April 1985 |
| Docket Number | D,No. 436,436 |
| Citation | 760 F.2d 417 |
| Court | U.S. Court of Appeals — Second Circuit |
| Parties | , 40 UCC Rep.Serv. 1221 APEX OIL COMPANY, Plaintiff-Appellee, v. VANGUARD OIL & SERVICE CO. INC., Defendant-Appellant. ocket 84-7532. |
Steven E. Levitsky, New York City (Charles E. Simpson, Lihn Menaker & Simpson, New York City, on brief), for defendant-appellant.
Donald F. Mooney, New York City (Thomas M. Eagan, New York City, on brief), for plaintiff-appellee.
Before FEINBERG, Chief Judge, and OAKES and NEWMAN, Circuit Judges.
This diversity case involves an alleged oral contract for the sale of $8.8 million of fuel oil. Following a bench trial, the District Court for the Southern District of New York (John F. Keenan, Judge) found that plaintiff-appellee Apex Oil Company ("Apex") and defendant-appellant Vanguard Oil & Service Company, Inc. ("Vanguard") had entered into such a contract, under which Vanguard was to sell and Apex to buy. Finding that Vanguard's failure to deliver the oil to Apex constituted a breach of the contract, the District Court awarded Apex damages of $1,049,983.00, plus prejudgment interest.
On appeal, Vanguard primarily attacks the District Court's findings of fact. Conceding that the "clearly erroneous" standard governs our review of those findings, Vanguard nonetheless urges us to hold that the parties' agreement, if any, placed Vanguard under only a conditional obligation to deliver oil to Apex. Vanguard also argues that, if a contract of sale did exist, it is unenforceable under the statute of frauds. Our review of this record does not persuade us to reject the District Court's determination that these parties entered into an unconditional contract of sale and
that the record contains a document satisfying the statute of frauds.
Vanguard and Apex are engaged in the business of buying and selling petroleum products. Prior to the course of dealing surrounding the disputed contract, which the District Court found was formed on April 7, 1982, the parties had successfully negotiated and fully performed one other agreement for the sale of oil. The prior contract was formed on December 29, 1981, when Arthur Walston, a Vanguard trader, and Edwin Wahl, an Apex trader, had a telephone conversation in which they agreed that Vanguard would sell and Apex would buy approximately 200,000 barrels of fuel oil. 1
The December 29 agreement was documented in the following way. On December 30, 1981, Vanguard sent a telex to Apex to which Apex responded by telex. Both telexes expressly "confirm[ed] our telephonic agreement of 12/29/81," under which "Vanguard will sell" and "Apex will purchase" approximately 200,000 barrels of oil. Both telexes also listed key terms of the agreement, including arrival date of the oil, its price, and payment terms requiring Apex to wire transfer funds on receipt of Vanguard's invoice and a report from a named inspector. In addition to the telex, Apex signed and sent to Vanguard a "Product Purchase Agreement," which confirmed the parties' "understanding" and listed some terms of the agreement, including a term designating New York Harbor as place of delivery, not contained in either telex. Wahl, the Apex trader, sent the Product Purchase Agreement to Vanguard as part of Apex's "normal procedure" when dealing with another company for the first time. Though the Product Purchase Agreement expressly requested that a copy of the agreement be returned to Apex and contained a line for Vanguard's signature, Vanguard did not sign or return a copy of the agreement to Apex.
The December 29, 1981, contract was fully performed in late January 1982 when Vanguard delivered the oil to Apex in New York Harbor. Vanguard's president sent invoices and the inspector's report to Apex and instructed Apex to wire transfer payment to Chase Manhattan Bank ("Chase"). Apex complied with these instructions. Following the January 1982 delivery, Vanguard contacted Apex on another occasion to solicit the sale to Apex of petroleum products. Apparently, Apex expressed no interest in making further purchases from Vanguard until Walston, the Vanguard trader, called Wahl, the Apex trader, on April 7, 1982.
In that call, the District Court found, Walston and Wahl entered into a binding contract of sale on behalf of Vanguard and Apex respectively. The following circumstances led up to the April 7 telephone call. On April 6, Common Energy International ("CEI") offered to sell to Vanguard 357,000 barrels of fuel oil meeting certain specifications at 80.50 cents per gallon. Vanguard accepted this offer and then prepared to arrange financing for the CEI deal. In order to obtain a letter of credit from Chase, Vanguard had to demonstrate that it had a contract to resell the oil it was buying from CEI. Since Vanguard planned to use 100,000 barrels of the CEI shipment to satisfy a preexisting obligation to sell oil to Conrail, there were 257,000 barrels from the CEI shipment that Vanguard had to sell before Chase would arrange a letter of credit. These 257,000 barrels of oil were the topic of the April 7 telephone conversation between Walston of Vanguard and Wahl of Apex.
The District Court credited Wahl's testimony concerning the April 7 conversation. Wahl stated that Walston called him, informed him that Vanguard had a cargo of oil scheduled to arrive in New York Harbor by April 24, and offered to sell to Apex 257,000 barrels from that shipment at 84 cents per gallon. Wahl testified that he offered to pay 82 cents per gallon and that Walston eventually agreed to a price of On April 7, 1982, Wahl sent the following telex addressed to Walston at Vanguard:
82.254 cents per gallon. According to Wahl, Walston then stated, "[W]e have a done deal. We are done." Wahl asked Walston if Vanguard needed "anything for [its] books." Walston responded by requesting Wahl to send him a telex for Vanguard's "in-house purposes." 2
THIS IS TO CONFIRM APEX WILL PURCHASE 257,000 BBLS. OF NO. 2 FUEL OIL 77 GRADE, (OTHERWISE MEETING N.Y. HARBOR) BY APRIL 24, 1982.
REGARDS,
ED WAHL
APEX OIL CO.
Vanguard received the telex but never objected to its contents or responded to it in any way.
A day or two after the conversation between Walston and Wahl, Vanguard submitted to Chase an application for a $12 million letter of credit to be opened for the account of Vanguard in favor of CEI. Accompanying the application were certain documents, including a letter from Vanguard to Chase stating "we are selling" 100,000 barrels to Conrail and 257,000 barrels to Apex, three telexes between Vanguard and CEI, the April 7 telex from Apex to Vanguard, and a letter from Conrail to Vanguard. In accordance with Chase's requirement that approval of the letter of credit was subject to Vanguard's assignment to Chase of its accounts receivable from Conrail and Apex, a Chase official sent a letter to Vanguard requiring Vanguard to "execute and return" a Uniform Commercial Code ("UCC") filing in order to accomplish such assignment. Vanguard's president testified that Vanguard assigned to Chase "the Conrail and tentative Apex receivables."
Throughout the latter part of April, the parties were in almost daily contact. An Apex scheduler testified that, starting in the middle of April, he called Vanguard on many occasions endeavoring to arrange for delivery of the 257,000 barrels of oil. The scheduler acknowledged that Apex never made final arrangements to receive the oil at a particular terminal or located a customer willing to buy the oil. Though he stated that Apex's supply sheets contained no entry concerning Vanguard's obligation to deliver oil, he claimed that his own supply notes did reflect such obligation. However, the scheduler further testified that he destroyed these notes on May 13, 1982.
On April 23, Walston informed the Apex scheduler that the oil would be arriving on a tanker within five or six days. After receiving this information from the scheduler, Wahl called Walston to discuss delivery of the oil. In that conversation, Walston explained that Vanguard was having problems with its supplier and requested extension of the delivery date. Walston did not indicate that Vanguard was under only a conditional obligation to sell to Apex, but rather assured Wahl that the oil would be delivered. Wahl agreed to give Vanguard more time to deliver.
When Vanguard failed to deliver the oil on May 7, Wahl called Walston to question him about such failure. Walston explained that Vanguard needed still more time to make the delivery, but Wahl advised him that Apex required the oil immediately and insisted that Vanguard should obtain it in the spot market. At this time Walston did not say anything to indicate that Vanguard's obligation to deliver was conditional. Following further discussion, Wahl agreed to allow Vanguard an additional six days, to May 13, 1982, to deliver the oil. The oil was not delivered on May 13. Wahl Both parties called expert witnesses who described industry practice. Apex's expert testified that the vast majority of petroleum contracts are entered into over the telephone and confirmed by telex. Though he testified that it was important to create memoranda accurately reflecting the parties' oral agreement, he stated that traders might not consider documentation to be "crucial" when dealing with a company they knew from experience to be reliable. Vanguard's expert witness agreed that it was customary in the oil industry for parties to negotiate binding contracts over the telephone and that most oil contracts were so negotiated. He testified that the practice followed by the parties with respect to the December 29, 1981, contract was regular industry practice, that is, one party sends a telex confirming the terms of the contract and the recipient responds in a telex that confirms or corrects the terms of the...
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