Island Service Company v. Perez

• Decision Date: 05 November 1962
• Docket Number: No. 17908.,17908.
• Citation: 309 F.2d 799
• Parties: ISLAND SERVICE COMPANY, Inc., a corporation, Appellant, v. Joaquin A. PEREZ, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

309 F.2d 799 (1962)

ISLAND SERVICE COMPANY, Inc., a corporation, Appellant, v. Joaquin A. PEREZ, Appellee.

No. 17908.

United States Court of Appeals Ninth Circuit.

November 5, 1962.

Schofield, Hanson, Bridgett, Marcus & Jenkins, and Thomas M. Jenkins, San Francisco, Cal., E. R. Crain, Agana, Guam, for appellant.

Spiegel, Turner, Barrett & Ferenz, Walter S. Ferenz, Lyle H. Turner, and W. Scott Barrett, Agana, Guam and San Francisco, Cal., for appellee.

Before JERTBERG, MERRILL and BROWNING, Circuit Judges.

JERTBERG, Circuit Judge.

Before us is an appeal from a judgment of the district court adjudging that appellant take nothing by its counterclaim and decreeing that the counterclaim be dismissed with prejudice.

The judgment was entered pursuant to a motion made by appellee under Rule 41(b), Federal Rules of Civil Procedure, after appellant had completed the presentation of his evidence in the trial before the district court and following the entry by the district court of findings of fact and conclusions of law wherein the district court found the facts specially and stated separately its conclusions of law thereon and directed the entry of the judgment, as required by Rule 52(a), Federal Rules of Civil Procedure.

In order to understand why this appeal relates only to a counterclaim, it is necessary to review the prior history of this litigation.

On and prior to September 30, 1952, appellee was the owner of Lots Nos. 5143 and 5144. Prior to September 30, 1952, appellee leased a portion of said lots to the firm of Corn & Murray and another portion of said lots to the firm of Koster & Wythe. On September 30, 1952, appellee and appellant entered into a written contract under the terms of which appellant was granted an exclusive license for a period of five years next ensuing the date of the agreement, to remove sand from that portion of said lots lying between the area leased by appellee to Corn & Murray and the area leased to Koster & Wythe, said area being approximately 150 feet wide and running from lot line to lot line. Thus the entirety of said lots was divided into three areas which were, from north to south, the land leased to Corn & Murray, the strip of land described in the written contract, and the area leased to Koster & Wythe. Under the terms of said written contract, appellant agreed to pay for the sand taken at $3.50 per load of three cubic yards. Appellant was required to keep a tally of the number of loads removed monthly, furnish such tally to appellee, and make payment not later than the 10th day of each month for all sand removed during the preceding month.

On October 31, 1955, appellee instituted an action against appellant to recover judgment for the agreed price of sand taken by appellant under the written contract. Appellant answered appellee's complaint and filed a "Cross-Complaint" against appellee on a common count of debt in the amount of $35,868.21, allegedly due from appellee. Following trial on May 21, 1956, judgment in favor of appellee was entered against appellant for $7,873.31. However, the district court ruled that the issue presented by the "Cross-Complaint" and answer thereto was not before the court. Appellant appealed to this Court from the judgment entered in favor of appellee. Appellant's appeal was dismissed because the judgment made no mention of the counterclaim and on the ground of failure to comply with the provisions of Rule 54(b), Federal Rules of Civil Procedure. See Island Service Company v. Perez, 255 F.2d 559 (9 Cir., 1957). Thereafter and on the 27th day of January, 1958, the district court entered an order directing the entry of the judgment in favor of appellee and certified that there was no just reason for delay in the entry of said judgment. The district court ordered that trial on the counterclaim be had at a future date. Again appellant appealed to this Court from the judgment in favor of appellee. On August 3, 1959, this Court dismissed such appeal on motion of appellee that the judgment appealed from did not comply with the requirements of Rule 54, Federal Rules of Civil Procedure.

Trial of the issue presented by the "Cross-Complaint" and answer thereto was had on November 22, 1961, resulting in the judgment now under review that appellant take nothing by its counterclaim and decreeing that the counterclaim be dismissed with prejudice.

The counterclaim is based on the written contract of September 30, 1952, and, in particular, paragraph 5 thereof which reads as follows:

"5. Perez hereby grants to Corporation an exclusive license for a period of five (5) years next ensuing the date of this agreement, to take sand from that portion of Lots No. 5143 and 5144, lying and situate in Tumon Bay, Municipality of Dededo, Territory of Guam, lying between the area presently leased by Perez to Corn & Murray and that presently leased by Perez to Koster & Wythe, being an area approximately one hundred fifty (150) feet wide and running from lot line to lot line. It is agreed that a sketch will be made of said area and attached hereto subsequently, marked `Exhibit A,\' and initialed by counsel for the parties for identification, the price of which sand shall be Three Dollars Fifty Cents ($3.50) per load of three (3) cubic yards. Corporation shall keep a tally of the number of loads removed and monthly give an account thereof, together with payment to Perez, no later than the 10th day of the following month."

Insofar as we can determine from the transcript of the evidence, it appears that appellant removed sand from appellee's land and disposed of the same primarily to Koster & Wythe until sometime in the late summer or early fall of 1955 for $7.00 per load of three cubic yards. The Corn & Murray lease was terminated on June 3, 1955. Sometime in August of 1955, appellee served upon appellant a written notice dated August 11, 1955, wherein appellee notified appellant that it was violating the provisions of paragraph 5 of the agreement by "removing sand from areas outside of and beyond that to which said corporation was given an exclusive license under said Paragraph 5 * * *" and notified appellant to cease and desist from so doing. It appears that the controversy was amicably settled and appellant continued to remove sand from appellee's land during the remaining term of the license. It also appears that sometime after the late summer or early fall of 1955, Koster & Wythe removed from appellee's land over an undisclosed period of time a large and undisclosed quantity of sand for which payment was made to appellee.

The theory underlying appellant's counterclaim is that appellee's sale of sand to Koster & Wythe was in violation of the exclusive license granted to appellant thus depriving appellant of the profit which it would have made if the sand had been purchased from appellant by Koster & Wythe instead of from appellee. The counterclaim seeks to recover as damages the claimed loss of profits.

The pretrial order dated the 30th day of January, 1961, signed by the district judge, states:

"Defendant appellant herein contends that the parties entered into an agreement on the 30th day of September, 1952 wherein Plaintiff appellee, for a valuable consideration, gave to Defendant appellant an exclusive license to remove sand from a certain area of Plaintiff\'s appellee\'s real estate for a period of five years; that Defendant appellant, by reason of the terms of paid sic license, was to pay to Plaintiff appellee a royalty of $1.50 per cubic yard for all sand removed from said area; that Defendant appellant lived up to the terms of the agreement and for a period of approximately three years removed and sold sand from the area and paid Plaintiff appellee the agreed royalty therefor; that thereafter, while said license was in full force and effect, Plaintiff appellee, in violation of its express terms, gave to Koster and Wythe, contractors, permission to take sand from the area under license to Defendant appellant, for a valuable consideration, which consideration should have belonged to Defendant appellant herein, less the $1.50 royalty due to Plaintiff appellee; that Defendant appellant alleges that Plaintiff appellee sold to the said Koster and Wythe sand to the value of Thirty Five Thousand Eight Hundred Sixty Eight Dollars and Twenty One Cents ($35,868.21).

"Defendant appellant requested permission to file an amended cross-complaint, but the Court held that the present complaint was satisfactory and could be amended to conform to proof after trial if that were found necessary.

"Plaintiff appellee denies that he sold any sand from the area licensed to Defendant appellant to any third party. Plaintiff appellee further denies by way of general denial any indebtedness to defendant appellant."

At the trial, appellant contended that the area of appellee's land described in the agreement was not the area which the parties intended to be subject to the exclusive license. In this connection appellant states:

"As appellant\'s exclusive area was described in the written agreement of September 30, 1952, the use of the Corn & Murray lease instrument and the written agreement of the parties resulted in obtaining a different area from that intended by appellant and appellee as appellant\'s exclusive area, * * *."

Appellant explains this discrepancy by stating that it "* * * consists in the placement by the Corn & Murray lease instrument of the southern boundary of the Corn & Murray lease area (and hence the northern boundary of the 150-foot strip) farther to the south than this boundary was established by the parties on the ground."

Appellant called appellee as an adverse witness. Although many of the answers given by appellee were evasive and contradictory, and while his examination as an adverse party by appellant was unduly restricted contrary to the provisions of Rule 43(b), F.R.Civ.P., we summarize as follows: Appellee testified that appellant had removed sand...