Cockburn v. O'MEARA

• Decision Date: 28 April 1944
• Docket Number: No. 10783.,10783.
• Citation: 141 F.2d 779
• Parties: COCKBURN v. O'MEARA.
• Court: U.S. Court of Appeals — Fifth Circuit

141 F.2d 779 (1944)

COCKBURN v. O'MEARA.

No. 10783.

Circuit Court of Appeals, Fifth Circuit.

March 29, 1944.

As Amended April 27, 1944.

Rehearing Denied April 28, 1944.

Jesse L. Webb, Bernard A. Golding, and Leslie Moses, all of Houston, Tex., for appellant.

Clement M. Moss, of Lake Charles, La., and Jack Blalock and Clarence Lohman, both of Houston, Tex., for appellee.

Before HUTCHESON, HOLMES, and LEE, Circuit Judges.

LEE, Circuit Judge.

This suit was brought by James F. O'Meara, a citizen of Cook County, Illinois, against H. C. Cockburn, a citizen of Harris County, Texas, for damages arising out of an alleged breach of contract to drill a well on land in Avoyelles Parish, Louisiana.

The contract was made, executed, and delivered in Houston, Texas, and provided that O'Meara, as owner of certain oil and gas leases covering lands in Avoyelles Parish, Louisiana, in consideration of the sum of $1 and the further consideration stated, "does hereby bargain, sell, transfer, assign, and convey all rights, title and interest * * * in and to said leases and rights thereunder, to H. C. Cockburn, a resident of Harris County, Texas, * * * subject to the following reservations and conditions":

1. Assignor reserved to himself an overriding royalty of one-eighth (1/8) of all the oil, gas, and other minerals produced from the leases until the receipts amounted to $23,000.00, and thereafter an overriding royalty of one-sixteenth (1/16).

2. Assignee agreed to commence the actual drilling of a well on said property in search of oil and gas, not later than twelve o'clock midnight, April 25, 1940, and to prosecute such drilling with reasonable diligence until a depth was reached equal to the depth of the producing horizons of wells already completed on adjoining acreage unless oil or gas was found in paying quantities at a lesser depth.

3. If for any reason actual drilling of a well was not begun before midnight, April 25, 1940, then assignee should immediately forfeit all of his rights, title, and interest in the assignment, or in any way incident thereto, unless such failure was due to order of court or to order of the Louisiana Department of Conservation.

The obligation to commence actual drilling on or before midnight, April 25, 1940, was conditioned upon:

A. Assignor securing from Frank T. Turner a ratification of the lease granted by him;

B. Assignor securing from the Department of Conservation, before April 11, 1940, an extension of permit to drill on the property covered by the leases, which permit had been previously granted to O'Meara Brothers; and

C. Assignor securing a valid order from the Department of Conservation transferring to appellant the permit so extended.

By letter simultaneously executed, it was agreed that said contract of assignment could be assigned by assignee to the H. & F. Oil Company, and that in the event assignor failed to secure the drilling permit or the ratification which he had obligated himself to procure, his liability would cease and the obligation of all parties concerned would thereupon terminate.

James F. O'Meara in his petition, in substance, alleged that H. C. Cockburn had failed and refused to commence and to drill said well as required by the contract; that said contract was to be performed entirely in Louisiana, and that the contract, its breach, and the measure of damages therefor, should be determined by the law of Louisiana; that under the law of that State, petitioner was entitled to recover damages in the sum of $93,950:

1. $60,000.00 — The reasonable cost of drilling said well;

2. $33,950.00 — The value of the overriding royalty reserved in said contract.

He prayed for judgment in said amount, with legal interest at the rate of 5% per annum from April 25, 1940, and costs.

The case was tried to the court without a jury and resulted in a judgment in favor of the plaintiff, O'Meara, in the sum of $35,000. Cockburn prosecutes this appeal.

In this court, appellant relies for reversal on the following points:

1. The cause was not decided consistently with the law of Texas.

2. The measure of damages applied was contrary to the settled jurisprudence of Texas.

3. The judgment of the court awarding damages was based on evidence of one witness.

4. The documentary evidence revealed that appellee had no title to the leases he assigned.

5. The contract providing for immediate forfeiture in the event appellant failed to begin drilling a well before April 25, 1940, without imposing any other penalty for failure to drill, was potestative and unenforceable.

6. The assignment lacked mutuality and conveyed no title and was without consideration.

7. The weight of factual and circumstantial parole and documentary evidence established that performance had been waived by appellee, and the contract had been abandoned.

8. The weight of the parole evidence, as well as the documentary evidence, supported the conclusion that appellee had failed to perform conditions assumed by him under the contract.

9. The documentary evidence established that it was impossible for appellant to perform.

10. The weight of the documentary evidence showed that appellant had been induced to enter the contract through misrepresentation and fraud.

11. The evidence established that appellee led and induced appellant to act as he did and put him in a position where he could not protect himself; therefore, appellee was estopped to prosecute this action.

12. The finding and conclusion of the Court below that the assignment was delivered was unsupported by and against the overwhelming weight of evidence.

Points 3, 4, 7, 8, 9, 10, 11, and 12 involve questions of fact on which the findings of the court below are adverse to appellant. As these findings are supported by substantial evidence, we may not disturb them.¹ We shall confine ourselves, therefore, to a consideration of points 1, 2, 5, and 6, and shall consider them in the order named.

Points 1 and 2

In awarding judgment to appellee, the court below held that the law of Louisiana was applicable and measured the damages (1) by the cost of drilling the well and (2) by the profit which would have been realized from the overriding royalty had the well been drilled. Appellant contends (1) that in so doing the court did not decide consistently with the law of Texas, as required in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, and Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477, and (2) that the measure of damages applied was contrary to the jurisprudence of Texas.

Erie R. Co. v. Tompkins makes it the duty of federal courts to apply the law of the state, "except in matters governed by the Federal Constitution or by acts of Congress." 304 U.S. 64, 58 S.Ct. 822, 82 L.Ed. 1188, 114 A.L.R. 1487. Klaxon Co. v. Stentor Electric Mfg. Co. extended and applied the doctrine to the realm of Conflict of Laws. In the Stentor case, the Supreme Court said 313 U.S. 487, 61 S.Ct. 1021, 85 L.Ed. 1477:

"We are of the opinion that the prohibition declared in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, against such independent determinations by the federal courts extends to the field of conflict of laws. The conflict of laws rules to be applied in the federal court in Delaware must conform to those prevailing in Delaware's state courts."

Since, under these authorities, this case must be decided in accordance with the law of Texas pertaining to Conflict of Laws, it becomes necessary to determine whether, under the Texas rule in such case, the contract is governed by the law of the state where it was made, or by that of the state where it is to be performed.

In Ryan & Co. v. Missouri, K. & T. R. Co., 65 Tex. 13, at page 16, 57 Am.Rep. 589, Chief Justice Willie said:

"It is admitted law that when a contract is to be wholly performed within a state, the laws of that state must furnish the rule as to its validity. The parties have their attention drawn to the law of the state in which alone the contract can be broken and liability incurred, and it must be presumed that they intended that their rights and obligations should be determined by the laws prescribed by that state upon the subject."

In J. R. Watkins Co. v. McMullan, Tex. Civ.App., 6 S.W.2d 823, 824, the Court said:

"It is immaterial, we think, that the contract sued upon was valid in Minnesota. It was performable in Oklahoma, and the general rule is that, unless a contrary intention of the parties appears, the validity of the contract is determined by the laws of the state where it is to be performed, and not by those of the state in which it was entered into. Fidelity Mut. Life Ass'n v. Harris, 94 Tex. 25, 57 S.W. 635, 86 Am.St.Rep. 813; Hall v. Cordell, 142 U. S. 116, 12 S.Ct. 154, 35 L.Ed. 956; 12 C. J. 450; 5 R.C.L. § 26, p. 936. Thus the validity of the contract in question is to be tested by the laws of Oklahoma and not those of Minnesota."

See also Byers et al. v. Brannon, Tex. Civ.App., 30 S.W. 492, error refused; Shreck v. Shreck, 32 Tex. 578, 588, 5 Am.Rep. 251.

Appellant next contends that the award of damages in accordance with the rule prevailing in Louisiana, when that rule was contrary to the Texas rule, was in violation of the public policy of the State of Texas. In 10 Tex.Jur. 190, the rule is stated:

"The public policy of the state is the law of the state as evidenced by and deduced from its Constitution, statutes and judicial decisions. The term presupposes the existence of a valid contract, and, by its very meaning, relates to the interest of others than the parties.

"Generally speaking, a contract which is not in itself immoral or in contravention of any law is not contrary to public policy. * * *

"Public policy permits utmost freedom of contract between parties of full age and competent understanding and requires that their contracts, when freely and voluntarily...