Humble Oil & Refining Co. v. Cox

• Decision Date: 13 June 1966
• Citation: 148 S.E.2d 756,207 Va. 197
• Court: Virginia Supreme Court
• Parties: HUMBLE OIL & REFINING COMPANY v. Henry T. COX.

Page 756

148 S.E.2d 756

207 Va. 197

HUMBLE OIL & REFINING COMPANY v. Henry T. COX.

Supreme Court of Appeals of Virginia.

June 13, 1966.

H. Merrill Pasco, Richmond (Jack Spain, Jr., Hunton, Williams, Gay, Powell & Gibson, Richmond, on brief), for appellant.

Paul M. Shuford, Richmond (Wallerstein, Goode, Adamson, & Dobbins, Richmond, on brief), for appellee.

Before EGGLESTON, C.J., and SPRATLEY, SNEAD, I'ANSON, CARRICO and GORDON, JJ.

GORDON, Justice.

Henry T. Cox brought this suit against Humble Oil & Refining Company for a declaratory judgment and accompanying equitable relief. He asked the court to void a lease agreement, dated April 13, 1964 (which we will refer to as the 'Lease'), between Humble and him. The trial court decreed the Lease 'rescinded, cancelled and of no further effect' because it 'was procured by overreaching on the part of * * * (Humble's) agents amounting to constructive fraud and undue influence upon * * * (Cox)'. We have the case on errors assigned by Humble and cross-error assigned by Cox.

The evidence shows without contradiction that Cox signed the Lease voluntarily, and that his signing was not induced by any misrepresentation made or deception practiced by Humble's agents. The evidence affords no basis, moreover, for finding that at the time Cox signed the Lease he lacked mental capacity to understand the nature of the proposed transaction or lacked mental capacity to agree to the provisions of the instrument he was signing. The trial judge erred, therefore, in cancelling the Lease on the grounds set forth in his opinion and decree. See McGrue v. Brownfield, 202 Va. 418, 117 S.E.2d 701 (1961). Findings of fact by a judge who heard the evidence Ore tenus, though entitled to great weight, must be overturned if not supported by the evidence. Moyer v. Moyer, 206 Va. 899, 147 S.E.2d 148 (1966).

We can sustain the trial judge's decision to cancel the Lease, then, only if Cox's assignment of cross-error is well taken. A brief statement of the facts will suffice for consideration of the cross-error. These facts are uncontradicted except where otherwise noted.

The Lease, which may be characterized as a customary agreement for the leasing of a gasoline service station, is set forth on a printed form prepared by Humble, with certain typewritten and handwritten additions and certain deletions. Its salient provisions are Cox's demise of described property to Humble and Humble's agreement to pay a specified rental. The Lease contains mutual covenants and agreements in usual form.

Cox signed and acknowledged two counterparts of the Lease on April 14, 1964. ¹ His signature appears on the Lease:

'/s/ Henry T. Cox (L.S.)

Lessor'

Cox then handed the counterparts of the Lease to Barden, who had negotiated the Lease for Humble. Barden had no authority to bind Humble to the terms of the Lease. He took the counterparts to his office for processing and, if approved, signing by an authorized officer of Humble.

On the morning of April 15 Cox's attorney, pursuant to authorization by Cox, advised Humble that Cox was cancelling the Lease. ² Later on April 15 the Lease was executed on behalf of Humble, and one counterpart was filed for recording in the appropriate clerk's office and the other counterpart was delivered to Cox.

The trial judge held the attorney's attempted cancellation of the Lease on the morning of April 15 legally ineffectual. As stated in the judge's opinion, he reasoned 'that the lease in question, when signed and sealed by * * * (Cox) and delivered to Barden, * * * (Humble's) agent, constituted an offer of lease, * * * which being in the nature of an option, and under seal was irrevocable * * * at least, since no specific time of acceptance was therein specified, until * * * (Humble) had had a reasonable time within which to accept or reject'. Because the trial judge viewed Cox's 'offer' as irrevocable until Humble had been afforded a reasonable time to accept or reject it, he held that Humble's acceptance created a contract. ³ Cox assigned cross-error to this holding.

We must bear in mind that Humble admittedly was not bound by the provisions of the Lease when Cox's attorney gave notice of cancellation on the morning of April 15. Humble was free to accept or reject the Lease or to propose modifications of its terms. The trial judge relied, and Humble now relies, upon legal rules concerning sealed instruments to preclude Cox's right to withdraw his offer on the morning of April 15.

Cox's 'offer' can only be inferred from his actions in signing the Lease and handing the counterparts to Barden. The Lease contains no language indicating any intention to make an offer, and it contains no language indicating the time within which Humble could complete the agreement by executing the Lease. The Lease, after Cox signed it, purported to be merely a partially-executed instrument, which would confer mutual rights and duties upon the parties when fully executed. Moreover, Cox did not agree, in writing or orally, that Humble should be afforded a reasonable time to determine whether it would execute the Lease.

We accept this premise stated by Williston and relied upon by Humble:

'Thus where both parties sign a written agreement, the first signer necessarily proposes that the writing shall represent the bargain between the parties.' 1 Williston on Contracts (3rd ed.) § 23, p. 52.

Acceptance of the premise that the first signer of a contract makes a proposal, however, does not lead to the conclusion advocated by Humble. Williston's statement is quoted in Cohen v. New England Mut. Life Ins. Co., 140 F.2d 1 (7th Cir.1944), a case cited in the trial judge's opinion in this case. The issue in Cohen was whether delivery in escrow was a prerequisite to the effectiveness of a contract. The contract had been signed by both parties, and the first signer was so notified before the other party attempted to withdraw his acceptance. The court held that a valid contract had been created before the attempted rescission. Both the Cohen opinion and Williston's statement relate to contracts signed by both parties before attempted rescission by one party. Neither supports Humble's position that the signing and sealing of a proposed bilateral contract by one party constitute an inrrevocable promise. ⁴

Humble relies principally upon Watkins v. Bobertson, 105 Va. 269, 54 S.E. 33, 5 L.R.A.,N.S., 1194 (1906), to support its argument that Cox, by signing and sealing the Lease, made an irrevocable offer in the nature of an option. Watkins involved a sealed instrument containing an express offer to sell shares of stock for a specified price and an express promise to hold the offer open until a certain date. The offeree accepted the offer before that date; but the offeror refused to perform, contending the promise was not supported by consideration and was therefore unenforceable. This Court rejected the offeror's contention, holding that the sealing of the instrument conclusively imported consideration.

In Watkins v. Robertson, supra, we were dealing with an agreement to grant an option the language of the instrument evidenced a clear intent to grant an option. As is true in option contracts generally, the parties contemplated two different contracts. By entering into the option contract, Robertson bound himself to enter into a second contract if the optionee should make timely acceptance of his continuing offer. Robertson was so bound because he had committed himself by the terms of the option contract to hold the offer open for a stated period of time. The second contract, it consummated, would impose mutual obligations--the obligation of the optionor-seller to deliver shares of stock and the obligation of the optionee-buyer to pay the agreed purchase price.

Admittedly, an option contract may be evidenced by a writing signed and sealed by the offeror only, as well as by a writing signed and sealed by both parties (the case in Watkins). A promise contained in an express written offer, signed and sealed and unconditionally delivered by the offeror, is a binding unilateral contract in jurisdictions that follow the common law rule respecting sealed instruments. Restatement, Contracts, §§ 46, 110 (1932); Restatement (Second), Contracts, §§ 24A, 95 (Tent.Draft No. 2, 1965).

Any proposal or offer implied by Cox's signing the Lease cannot be properly equated, however, with an option contract. Cox proposed to enter into only one contract, a bilateral contract imposing mutual rights and obligations. It is clear, moreover, that Humble's agents so understood Cox's proposal or offer.

Furthermore, we must recognize the obvious reason why Humble prepared the Lease in the form of a sealed instrument: The Lease purported to demise property for a term of more than five years, and Virginia law requires that such a demise be made in the form of a deed (Va.Code Ann. § 55--2 (Repl. vol. 1959)). Humble did not contemplate any unilateral promise that would be legally binding because of consideration imported by a seal. Humble contemplated an exchange of promises that would of themselves furnish consideration. The intended function of the seal was to give legal effect to Cox's promise or demise when the instrument became fully effective. Humble and Cox made no bargain for a binding option, and Cox sealed no such bargain.

It is one thing to enforce a one-sided promise made with the solemnity evidenced by a seal. It is quite another thing to enforce an implied promise that was never intended by giving to a seal an effect that was never intended.

No case is cited in the briefs that disposes of the precise issue raised by Humble. ⁵ Text writers, however, have dealt directly with the issue. And they appear to be unanimously against Humble's position in this case.

The applicable law is stated and illustrated in Restatement (Second), Contracts, Explanatory Notes § 105, comment a, at 228 (Tent.Draft No. 2, 1965):

'a. Exchange...