Magna Oil & Refining Co. v. White Star Refining Co.

• Decision Date: 07 March 1922
• Docket Number: 2749.
• Citation: 280 F. 52
• Parties: MAGNA OIL & REFINING CO. v. WHITE STAR REFINING CO.
• Court: U.S. Court of Appeals — Third Circuit

280 F. 52

MAGNA OIL & REFINING CO. v. WHITE STAR REFINING CO.

No. 2749.

United States Court of Appeals, Third Circuit.

March 7, 1922

[Copyrighted Material Omitted]

The charge was as follows, the parts covered by the syllabus being the parts assigned as error:

Gentlemen of the jury: The plaintiff, White Star Refining Company, a Michigan corporation, seeks by this action to recover from the defendant Magna Oil & Refining Company, a Delaware corporation, damages for an alleged breach of a contract made between the plaintiff and the defendant on the 22d day of October, 1919, for the sale by the defendant and the purchase by the plaintiff of 100,000 barrels of Burkburnett crude oil under the terms and conditions therein mentioned. That contract provides:

'That, for and in consideration of one dollar ($1.00) in hand paid, each to the other, receipt of which is hereby acknowledged the seller hereby agrees to sell, and the purchaser hereby agrees to purchase one hundred thousand (100,000) barrels of fresh Burkburnett crude oil for delivery at the seller's wells to the gathering line of the Empire Pipe Line Company, in approximately equal daily quantities during the period of ninety (90) days beginning November 1, 1919, and ending January 28, 1920, the price for said Burkburnett crude oil to be one dollar and sixty cents ($1.60) per barrel of forty-two (42) gallons each at the seller's wells. It being understood that this is a flat price and not based upon the fluctuations of the crude oil market. It being further understood that the terms of payment for such crude oil are cash upon presentation of signed delivery receipts, and time being the essence hereof, the seller may at its option, on failure of the purchaser to make prompt payment, terminate this contract forthwith. Before this contract shall become binding, as security for the prompt payment of all amounts due the seller from the purchaser, the purchaser will deposit, in escrow, with the First National Bank in St. Louis, of St. Louis, Missouri, the sum of sixteen thousand ($16,000.00) dollars, subject to the terms of this contract, and will cause written notification by United States mail to be given by the escrow holder to the seller of such deposit for such purpose; it being understood that all current payments are to be made by the purchaser without recourse to the escrow fund, leaving the escrow fund intact for the payment of any delinquency.

'The purchaser is to make all necessary arrangements for receiving said crude oil during the period mentioned and to use their utmost endeavor to prevent delay. The seller agrees to deliver all oil promptly, but the seller shall not be liable for failures to make deliveries where such failures arise on account of fires, strikes, or any other causes beyond its control, and the purchaser agrees to accept said crude oil promptly and without delay, but will not be liable for not accepting same when inability to do so is the result of fires, strikes, or other cause beyond its reasonable control.'

The making and execution of the contract is admitted, as is also the fulfillment by the plaintiff of the provision therein touching the deposit of $16,000 in the First National Bank in St. Louis, Mo. It is also admitted that of the 100,000 barrels of oil specified in the contract the plaintiff did not receive 97,972 barrels thereof. Consequently the main question for your determination is whether the fact that the plaintiff did not get the full quantity of oil to which it was entitled under the contract was due in whole or in part to its failure to observe the terms and conditions of the contract, or was, on the other hand, due to the failure of the defendant to observe in whole or in part such terms and conditions. This is the crucial question for your determination. But inasmuch as the contract provides, not only for the delivery and acceptance of 100,000 barrels of oil, but also for delivery thereof, 'at the seller's wells to the gathering line of the Empire Pipe Line Company in approximately equal daily quantities during the period of 90 days beginning November 1, 1919, and ending January 28, 1920,' and further that 'the purchaser is to make all necessary arrangements for receiving said crude oil during the period mentioned, and to use their utmost endeavor to prevent delay,' and as it is conceded by the plaintiff that the gathering lines of the Empire Pipe Line Company were not connected with any storage tanks at the defendant's wells until a few days after November 1, 1919, and that they were then connected, not with the tanks on each of the leases of the defendant company, but only with the tanks on lease No. 2, otherwise designated as the Taylor tract, or lot No. 12, in block 98, and as no further pipe line connections were made until on or about the 2d day of December when connections were made with the wooden tanks on lease No. 1, otherwise known as the Lanier tract, and as no oil was received by the pipe line company from the defendant for many days after the original pipe line connections had been made, the problem, Who broke the contract? becomes and is, even without reference to contentions of the parties not supported by admitted facts, a complex one, the solution of which depends in large measure upon the determination of subordinate problems of both law and fact.

Let us first consider the effect of the nonconnection of the pipe line with the tanks of the defendant company until some days after the 1st day of November. The plaintiff asserts that the only effect thereof was to increase the amount of the daily deliveries of oil during the unexpired portion of the contract period, and bases its assertion upon that clause of the contract which provides that the 'purchaser is to make all necessary arrangements for receiving said crude oil during the period mentioned, and to use their utmost endeavor to prevent delay,' and upon its contention that the evidence discloses that it, the plaintiff, did use its utmost endeavors to prevent delay in the installation and connection of the pipe lines, and that such delay as did occur was beyond its reasonable control. The defendant, on the other hand, contends that each day's delay after November 1 in making the pipe line connection with the tanks of the defendant had the effect of striking a day's installment of oil out of the contract and finally discharging the defendant from its obligation to that extent. These contentions make it necessary that the meaning of the clause of the contract relied upon by the plaintiff in this particular be stated to you for your guidance.

While it is true that the contract provides that the plaintiff should make all necessary arrangements for receiving the oil during the contract period, yet as it also provided that the plaintiff was to use its utmost endeavor to prevent delay, and as it further designated the particular pipe line to be connected and to which delivery of the oil was to be made, namely, the gathering line of the Empire Pipe Line Company, and as the Empire Pipe Line Company is an independent company, not owned or controlled by either of the parties to the contract, the plaintiff was not bound absolutely and at all events to have the connections made on the 1st day of November, but was obligated merely to use its utmost endeavor to prevent delay in the making of the pipe line connections. Any other construction would deprive the words of the contract 'to use their utmost endeavor to prevent delay' of any meeting, a construction to be avoided. Consequently, if you find from the evidence that the plaintiff did use its utmost endeavor to prevent delay in having the Empire Pipe Line Company connect its lines with the tanks at the defendant's wells, you must find that the delay in making the pipe line connection did not constitute a breach of the contract by the plaintiff.

In such event the only effect of such delay was to increase the daily quantities of oil deliverable under the contract during the period of the contract remaining after the making of such connec- tions. But, if you should find from the evidence that the plain- tiff did not use its utmost endeavor to prevent delay in this respect, then you must find that there was a breach-a partial breach-by the plaintiff of the contract on each of the days of the contract period that elapsed before the first pipe line connection was made. the effect of such breach or breaches on the part of the plaintiff, if any there were, was to discharge the defendant from its obligation under the contract to make delivery of the oil that would have been deliverable during the period in question had the pipe lines been connected on the 1st day of November.

The remaining question touching the installation of the gathering lines of the pipe line company is whether adequate or sufficient connections were made with the defendant's tanks at its wells. The contract is silent as to the number of leases or the number of tanks with which the gathering lines of the Empire Line Company should be connected. Consequently, it was not incumbent upon the plaintiff to have a connection made with each tank on each of defendant's leases; but it was incumbent upon the plaintiff to have connections made only with such number of tanks upon any one or more of defendant's leases as would enable the defendant to deliver through its tanks to those lines, in the usual course of business and without unreasonable inconvenience to it, oil in the quantity and man- ner called for by the contract. Hence, if you find that the defen- dant could have made delivery of the contract quantity of oil through the tanks with which connections were in fact made and could have made such delivery in the usual course of business without...