United Concrete Pipe Corp. v. Spin-Line Co.
| Decision Date | 26 June 1968 |
| Docket Number | No. B--642,SPIN-LINE,B--642 |
| Citation | 430 S.W.2d 360 |
| Parties | UNITED CONCRETE PIPE CORPORATION, Petitioner, v.COMPANY, Inc., et al., Respondent. |
| Court | Texas Supreme Court |
Stigall, Maxfield & Collier, Banjamin Raye Collier, Dallas, for petitioner.
Woodruff, Hill, Bader, & Kendall, David M. Kendall, Jr., Dallas, for respondent.
This is an action brought by the payee of a nonnegotiable note with a contract affixed thereto against the maker and endorsers thereon. The trial court rendered judgment for United Concrete Pipe, payee, on a jury verdict against both the maker, Spin-Line Corporation and the endorsers. The court of civil appeals affirmed the judgment against the maker and S. Mort Zimmerman, one of the endorsers, but reversed and rendered judgment that plaintiff, United, take nothing as to the other endorsers. 420 S.W.2d 744. From that judgment both parties, i.e., Spin-Line and S. Mort Zimmerman, as well as United have sought relief by writ of error. Our disposition of United's application renders the points raised by Spin-Line and Zimmerman immaterial.
The opinion of the court below affords a detailed discussion of the facts involved, but due to their complexity a re sume is in order. In 1963 Shell Pipeline Corporation was awarded a contract to construct a pipeline to furnish water to the Permian Basin area of Texas for a water flooding project. The name of the project is the El Capitan Water System. Shell then invited competitive bids to secure the requisite supply of concrete pipe to fulfill their contract. Of the bids submitted Spin-Line was the lowest and United was the next. Spin-Line was awarded the contract, and on November 22, 1963 entered into a written contract with Shell pursuant to which Spin-Line agreed to furnish concrete pipe at unit prices set forth in an exhibit attached to the contract; the number of units was not exactly ascertainable, because the total length of the line was not fixed. Delivery was to be effected on or before January 15, 1964.
Spin-Line's pipe manufacturing facilities were not complete when it contracted with Shell to furnish the pipe. Therefore, Shell required that the eight individual stockholders of Spin-Line indemnify Shell, and that they execute individual indemnity agreements with a maximum of $300,000 liability.
Some time between the date of the contract November 22 and December 17, 1963, it became apparent that Spin-Line would not be able to perform. Zimmerman went to Houston and met with the president and purchasing head of Shell, who affirmed that they were going to hold Spin-Line and the endorsers to the contract. Zimmerman then suggested that United might be induced to assume and perform the contract. On December 17, Lloyd R. French, the president of Spin-Line, wrote Shell a letter and stated that they were unable to perform the contract; but, that with the consent of Shell, Spin-Line would assign the whole contract to United. The following day Shell replied by telegraph that they would prefer a contract direct with United on the same terms as their original one with Spin-Line, and that if such a contract were executed, they would release Spin-Line and the endorsers from the November 22 agreement. On December 27, Spin-Line sent a telegram to Shell which authorized Shell to negotiate directly with United for furnishing the pipe contemplated by the Shell-Spin-Line contract. On or about January 9--10, Messrs. Young and Fenton, the sales representatives of United, went to the office of Mr. Galbraith, Shell's purchasing head in Houston, Texas. A purchase order contract containing exactly the same unit prices as the Shell-Spin-Line contract was agreed on by United and Shell. This contract, as the former, provided that the number of units supplied could fluctuate although the price per unit was fixed. Either contemporaneous with or immediately after the execution of the purchase order contract, Shell sent a letter to Spin-Line declaring their contract in default and releasing and discharging the endorsers from any further obligation under their indemnity agreements to Shell. No claim has been asserted by Shell against any of them or Spin-Line.
Zimmerman initially contacted George Curtiss, President of United, by phone, and he eventually went to California to discuss the assumption of the contract by United. On December 30, Spin-Line by Zimmerman sent a 'Memorandum of Understanding' to Curtiss. The pertinent portions are as follows:
* * *
'It is the intent of Spin-Line to dispose of its concrete pipe fabricating facilities located at Odessa, Texas, For use in a foreign country.' (Emphasis added.)
This memorandum was executed by Curtiss, who sent a letter in reply that United was in agreement with the proposed terms. On January 9, Russell Bergman, House Counsel for United, and Mr. Young came to Dallas and met with Messrs. Zimmerman, French and Marsh, Zimmerman's attorney. The purpose of the meeting was to enter into negotiations looking toward the consummation of an agreement whereby United would take over the Shell contract from Spin-Line. Mr. Young participated in the meeting on the 9th, but had to return to Houston where he proceeded with the purchase order contract with Shell on Bergman's instruction telephoned from Dallas.
At the termination of the Dallas negotiations Bergman returned to California with an instrument denominated 'Agreement' signed Spin-Line Company Inc., by Lloyd French. This 'Agreement' is set out in its entirety at 420 S.W.2d 747. We quote the pertinent provisions:
'WHEREAS, Spin-Line has heretofore entered into a contract dated November 22, 1963 with Shell Pipe Line Company * * *; and
'WHEREAS, the parties hereto are in mutual agreement that United should be substituted for Spin-Line in aforesaid agreement; and
'WHEREAS, Spin-Line desires to obtain the assistance of United in completing its concrete pipe fabricating facilities located at Odessa, Texas, primarily for the purpose of selling the same for use in a foreign county; and
'WHEREAS, It is deemed in the best interest of United to cause the completion of these facilities in order that they shall be sold out of the United States; (Emphasis added.)
'Spin-Line will cause Shell to enter into a contract with United covering the same work as specified in aforesaid contract dated November 22, 1963 and thereafter to release Spin-Line from all obligation and responsibility under said contract.
'3.
'In the event that Shell agrees to increase the Contract price of the new contract with United to an amount in excess of the Contract price to Spin-Line, the amount which Spin-Line shall be obligated to pay to United * * * shall be reduced by the amount of such increase in Contract price, and aforesaid promissory note shall be modified accordingly. (Emphasis added.)
'4.
'(b) Upon the consummation of a sale outside of the United States, United will grant to said purchaser a royalty-free use of the pertinent United patent rights and processes. United requires under the terms of this contract that Spin-Line sell these facilities outside the United States. (Emphasis added.)
When Bergman arrived in California, Curtiss examined the instrument. He testified that the emphasized language was different from what he had previously agreed to. He, therefore, had the first three pages retyped and omitted the emphasized portions of the preamble and the fourth provision. To the preamble he added the language 'WHEREAS, United desires to assist Spin-Line in the sale of its facilities,' and changed the third provision from 'contract price' to 'unit price'. This instrument was then signed by Bergman and a copy of it was sent to Zimmerman with a cover letter dated January 27, 1964.
On January 25, 1964, Zimmerman sent the original of the note that is the basis of this action to Bergman. Since the several endorsers lived in various locales, it had been necessary to circulate it for their signatures, hence there was no delivery of this note on January 10. The note read as follows:
(Signatures and addresses of the eight endorsers.)
Thereafter, United performed its contract to the satisfaction of Shell; and while Spin-Line asserted that United did not assist in the completion of the plant nor aid them in securing a purchaser for those facilities, the evidence indicates that Spin-Line's employees were shown through United's facility--no demonstration was refused them--and that on...
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