Smith Engineering Co. v. Rice
| Decision Date | 13 March 1939 |
| Docket Number | 8401.,No. 8400,8400 |
| Citation | 102 F.2d 492 |
| Parties | SMITH ENGINEERING CO. v. RICE. SMITH ENGINEERING CO. et al. v. SAME. In re LAUREL OIL & REFINING CO. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Sterling M. Wood, of Billings, Mont., and William H. Hunt and Wallace Sheehan, both of San Francisco, Cal. (Albert I. Beach, of Kansas City, Mo., of counsel), for appellants.
H. J. Coleman, of Billings, Mont., and M. S. Gunn and Carl Rasch, both of Helena, Mont., for appellee.
Marshall Beach, of Kansas City, Mo., for appellants on petition for rehearing.
Charles De Y. Elkus, Tadini Bacigalupi, and Herbert H. Salinger, all of San Francisco, Cal., for appellee on petition for rehearing.
Before GARRECHT, MATHEWS, and HANEY, Circuit Judges.
Appeal has been taken from a decree dismissing a suit brought by Smith Engineering Company, a Pennsylvania corporation, hereinafter referred to as the company, to foreclose a mechanics lien on real property in Montana, and from a judgment for plaintiff in an action brought by Laurel Oil and Refining Company, hereinafter called the refiner, against the company and American Surety Company of New York, hereinafter called the surety, to recover damages for breach of two contracts, hereafter called the contract and the supplemental contract, made and entered into by the company and one Will F. Lipman on August 2, 1929.
Because of the conclusion we have reached it is unnecessary to relate evidence and facts pertaining to a number of the questions raised.
Prior to 1910, gasoline was obtained from crude oil by what is known as the "topping process" exclusively. By that process, vapors arising from the crude oil when heat is applied to the same were condensed at atmospheric pressure, and the condensed vapors are referred to as "straight-run" gasoline. Thereafter, a process known as "cracking" was perfected, by which the yield of gasoline from a given crude oil is increased. By that process the part of the crude oil remaining after the straight-run gasoline is separated, is subjected to operations, including a time-temperature and pressure treatment, by which the molecules are broken down and rearranged, resulting in a so-called "synthetic" crude, which also produces gasoline.
It is apparent that vapors arise from the crude oil at low and high temperatures. It became necessary to designate an arbitrary temperature up to which gasoline was obtained by condensation of the vapors arising from the crude oil and temperatures up to the one arbitrarily fixed, called the "end-point". The standard commonly accepted is the one promulgated by the Bureau of Mines, Department of Commerce of the United States. The first specification was issued October 2, 1918, and contained no provision regarding the sulphur content of gasoline. There were many revisions of such specification. A revision in 1924 first contained a provision regarding the sulphur content in gasoline. The specification as revised in 1927 stated that "Gasoline purchased under this specification shall be described as `U. S. Government Motor Gasoline' * * *" Part of the specification provided:
One Will F. Lipman of Portland, Oregon, being engaged in the production of oil, in 1927 and 1928 became interested in the refining of Oregon Basin crude oil. After various inquiries and negotiations he entered into a contract with the company, which was engaged in the business of designing and constructing oil refineries.
The contract was signed on August 2, 1929, by Lipman as trustee for the refiner, which had not then been organized, and by the company's president. It consisted of a contract and a supplemental contract.
By the contract, the company agrees to construct "a complete operating oil refinery to process Oregon Basin crude, otherwise designated as charging stock, for the production of products as specified" therein, near Billings, Montana, for the total sum of $433,845, payable in installments.
The contract provided that the company should "assume all responsibility for the design, construction and operation of the refinery"; that the capacity of the refinery would be: "* * * to handle Fifteen Hundred (1500) barrels (42 gallons) per day of twenty-four (24) hours of the above mentioned charging stock, when operating on a cyclic time efficiency of 90%, it being assumed that the normal charge stock fed to the refinery will be 70° F. or higher, as taken from storage."
It was provided that the yields from the crude oil would be:
It was also provided that "all material and equipment will be of the best quality and that the entire refinery" would "be designed and constructed in a sound workmanlike manner"; that the complete distillation and cracking unit was of the company's individual design and would be engineered and constructed for its particular service to meet Lipman's requirements, that "* * * the distillation and cracking unit will be built in accordance with the best engineering practice known to the industry and that the remaining units will be built in an entirely sound and satisfactory manner for the character and the work contemplated, and will be so constructed that the routine maintenance and repairs will be maintained at lowest level."
With respect to time, the contract provided that the company "* * * estimates that the complete refinery can be made ready for initial operation in from 150 to 175 working days from the date on which the Purchaser turns over the refinery site clear and ready for the erection of the equipment.
The company guaranteed the following:
The supplemental contract provided that the company would construct a "complete fire protection equipment and standby water tower facilities at the proposed refinery" and to provide "coking operation" for the treatment "of a minimum of 375 barrels per day of residuum to asphalt or coke", which would be "a component part of the complete distillation and cracking unit", for the total sum of $48,700 payable in installments. It was provided that "the time of completion and guarantees as to quality will conform to those given in the" contract.
The particular units to be built were a combined topping and cracking unit, a treating plant, and a shell type coking unit. The treating plant was not designed to remove large amounts of sulphur from the gasoline, but was designed to stabilize the gasoline as to color.
Certificate of Incorporation of the refiner was filed in Delaware on October 4, 1929. On October 7, 1929, the company wrote Diescher at Winfield wherein they confirmed a verbal agreement to modify the supplemental contract by substituting in the coking unit "a radiant type high velocity pipe still" for the "conventional shell stills" provided in the supplemental contract. Diescher approved the modification by letter dated October 14, 1929.
On October 14, 1929, Lipman assigned his rights under the contract and supplemental contract to the refiner, which assumed his obligations thereunder. Actual construction of the refinery began about this time. On December 17, 1929, the company and the surety executed a bond to the refiner for the faithful performance of the contract in the total amount of $482,545. On the same day, the refiner assigned the bond to trustees as additional security for a bond issue of the refiners, disposed of by the investment bankers.
Construction work had been practically completed by May 17, 1930. Operations began about that time and continued...
To continue reading
Request your trial
-
State v. Dietz
...Also see R.C.M.1947, Sec. 12-104; State ex rel. Cornwell v. District Court, 122 Mont. 266, 273, 200 P.2d 706; Smith Engineering Co. v. Rice, 9 Cir., 102 F.2d 492, 497, certiorari denied Rice v. Smith Engineering Co., 307 U.S. 637, 59 S.Ct. 1034, 83 L.Ed. 1519, rehearing denied 308 U.S. 632,......
-
Commissioner of Int. Rev. v. Chase Manhattan Bank
...we think would be an erroneous decision, because the applicable law was not insisted upon by one of the parties." Smith Engineering Co. v. Rice, 9 Cir., 1938, 102 F.2d 492, 499. Cf. Erie v. Tompkins, 1938, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. Tax liability as to the testamentary trust depend......
-
Pacific RiversCouncil v. U.S. Forest Serv.
...was not insisted upon by one of the parties.” United States v. Miller, 822 F.2d 828, 832 (9th Cir.1987) (quoting Smith Engineering Co. v. Rice, 102 F.2d 492, 499 (9th Cir.1938)). “The rule has been repeated in a variety of circumstances. Even if a concession is made by the government, we ar......
-
Gila River Indian Cmty. v. United States
...was not insisted upon by one of the parties.” United States v. Miller, 822 F.2d 828, 832 (9th Cir.1987) (quoting Smith Engineering Co. v. Rice, 102 F.2d 492, 499 (9th Cir.1938)). “The rule has been repeated in a variety of circumstances. Even if a concession is made by the government, we ar......