United States Potash Co. v. McNutt

• Decision Date: 30 March 1934
• Docket Number: No. 893.,893.
• Parties: UNITED STATES POTASH CO. v. McNUTT.
• Court: U.S. Court of Appeals — Tenth Circuit

70 F.2d 126 (1934)

UNITED STATES POTASH CO. v. McNUTT.

No. 893.

Circuit Court of Appeals, Tenth Circuit.

March 30, 1934.

Gurney E. Newlin, of Los Angeles, Cal. (Paul Speer, of New York City, and J. D. Atwood and L. O. Fullen, both of Roswell, N. M., on the brief), for appellant.

Carl A. Hatch, of Clovis, N. M., and James E. Taylor, of Kansas City, Mo. (James A. Reed, of Kansas City, Mo., on the brief), for appellee.

Before LEWIS, PHILLIPS, and McDERMOTT, Circuit Judges.

McDERMOTT, Circuit Judge.

Appellee recovered a judgment upon a verdict of a jury for $238,666.66 for services rendered between January 1, 1927, and October 30, 1930. Sixty-four reasons are advanced, by as many assignments of error, why the judgment should be reversed.

1. The Pleadings. The complaint is on the common count in indebitatus assumpsit; it alleges that, at the special instance and request of defendant, McNutt rendered valuable services to the defendant from January 1, 1927, until October 30, 1930, as a geologist, mining engineer, technical expert and business adviser; that such services were accepted by defendant, and were of the reasonable value of $400,000. A bill of particulars alleged that Snowden and Shannon were the agents of defendant who requested such services, in July and November, 1926, while the corporation defendant was in process of formation; that such requests were renewed from time to time until late in the year 1930.

In its answer, defendant admitted that plaintiff did render services during the period in suit, but alleged that such work was done in pursuance of an agreement made in July, 1926, between Snowden and his associates on the one hand and McNutt on the other, that McNutt should receive 10 per cent. of the stock of the corporation then contemplated for all of such services. That the corporation — the defendant — was later formed; that its Board of Directors, with full knowledge of the July, 1926, agreement, recognized and accepted such agreement, accepted plaintiff's services thereunder, and has issued to plaintiff 10 per cent. of its stock as agreed, which plaintiff retains, and which was and is payment in full for the services sued for.

The reply was a general denial.

2. The Evidence. The facts, in their aspect most favorable to appellee, are:

McNutt, a geologist of learning and experience and a business man of skill and acumen, had had satisfactory business relations for some time with Snowden and McSweeney who represented a group of eastern investors; McNutt had located and developed oil territory with moneys advanced by the Snowden group, sharing with them in the profits of the ventures. In 1925 McNutt discovered a potash deposit of great value in New Mexico; he submitted his find to Shannon, a western representative of the Snowden group, and was told to go ahead with the necessary work of blocking out the acreage and core-drilling at their expense, and was promised that satisfactory arrangements would later be made to compensate him for his services. Federal permits for a block of acreage were procured by McNutt, and the core-drilling demonstrated the existence of a large bed of potash. McNutt went to New York in July, 1926, to arrange for his compensation and to determine upon plans for further development.

McNutt and Shannon are the only living witnesses to what occurred at that conference. Both testified that it was agreed that a corporation — defendant — should be formed and development continued by that corporation; that the Snowden group would contribute $100,000 in cash to the corporate capital, and that McNutt should have 10 per cent. of the issued stock. The corporation was later formed, its $100,000 capital paid in cash, and McNutt received and retained 10 per cent. of the stock. Both testified that McNutt was to continue his services to the corporation until the project was proven or condemned, and that an agreement was concluded that day for the amount of compensation he should receive. But there the way divides. McNutt testified that the stock was in payment for the work he had already done on the project, and for nothing else. Shannon testified that the stock was in payment for past services but also that, in consideration thereof, McNutt was "to continue in the project the same as he had in the past." McNutt testified, as to services to be performed after the corporation was organized, that Snowden offered him a salary, which McNutt declined; McNutt then offered to continue to put up his time against their money; that since it appeared that more than the original $100,000 would probably necessarily be expended before the project was either proven or condemned, he would accept for future services 10 per cent. of such additional advancements, conditioned upon their being repaid. To this proposal, Mr. Snowden replied, "that was all right, that was satisfactory." Snowden made no present agreement to advance more funds; but later $606,539.80 was so advanced and repaid.

McNutt continued on, rendering valuable service to the company; he testified that in May, 1929, at a directors' meeting, he brought up the question of this 10 per cent. of additional advancements and asked for a note therefor, as the Snowden associates had been given notes for such advancements. Whereupon McSweeney, one of the original associates and President of the corporation, disclaimed any knowledge of such an understanding; Snowden said he did not understand that such was the agreement he and McNutt had in July, 1926, but that McNutt could rest assured that "the matter would be adjusted in a satisfactory manner." With that assurance, the matter was presently dropped, and McNutt continued on. All others present at that meeting deny in toto that any such proceedings were had, and this conflict in the testimony was not submitted to the jury.

On September 23, 1930, appellant's stockholders sold half their stock to the Pacific Coast Borax Company in consideration of $2,000,000, out of which sum the sellers agreed to discharge most of the corporate debts; the buyer agreed to develop and operate the corporation properties, to assist in financing such development, and to market its products, all upon terms satisfactory to the corporation. The success of the venture having been demonstrated by the sale, and the advancements repaid, McNutt demanded in writing his 10 per cent. of such advancements — "this amount is roughly $60,000" — and reiterated his contention that by his agreement of July, 1926, he was entitled to such sum. He closed his demand with the statement that if he was mistaken as to that agreement, "then I contend that I am entitled to be paid for the reasonable value of my services." Appellant refused payment of any sum on the ground that the stock issued to McNutt was in full payment for all services rendered both before and after the date of its issuance. This action followed.

3. The Main Issue. From the above, it is clear that the one overshadowing issue, in the pleadings and the proof, is as to what agreement was made in July, 1926. Both parties plead that agreement; both parties introduced proof of it. If, as Shannon testified, McNutt was to receive 500 shares of stock for past and future services, the defense pleaded has been established, and McNutt is entitled to nothing. If, as McNutt testified, he was to receive in addition 10 per cent. of moneys later advanced by the associates and repaid, then he is entitled to recover $60,653.98. That issue is all there is to this lawsuit. The jury heard the testimony and believed McNutt. Under this record, and his own testimony, which the jury found to be true, he was entitled to $60,653.98 and no more.

Appellee advances several reasons why he should be entitled to $178,000 more than he agreed to do the work for. We have examined them all, and find them to be without substance.

Appellee claims that because he elected to sue in indebitatus assumpsit instead of upon the special agreement he testifies he made, he should not be held to his agreement. While a recovery may be had upon the common counts for services fully performed under a special contract, both reason and authority limit the recovery to the amount which the parties agreed should be paid for the services. Where one has agreed to perform services for a stipulated sum, he should not be permitted to evade his contract by any device of pleading. In Dermott v. Jones, 2 Wall. 1, 9, 17 L. Ed. 762, the Supreme Court held that in an action on the common counts, the plaintiff "must produce the contract upon the trial, and it will be applied as far as it can be traced," and that:

"While a special contract remains executory the plaintiff must sue upon it. When it has been fully executed according to its terms, and nothing remains to be done but the payment of the price, he may sue on the contract, or in indebitatus assumpsit, and rely upon the common counts. In either case the contract will determine the rights of the parties."¹

The contention is then made that there never was a contract because a misunderstanding arose in 1929 as to the terms orally agreed upon three years before. Where, as here, unambiguous language is used in an offer, and it is unconditionally and unequivocally accepted, a contract results. Its obligation is not discharged by a subsequent disagreement. Contracts are made by what parties say, and not what they intend to say. If one were permitted to avoid a bargain, fairly and clearly made, by the statement that he meant one thing when he said another, the obligation of contracts would be a myth. National Bank of Metropolis v. Kennedy, 17 Wall. 19, 21 L. Ed. 554; Motter v. Patterson (C. C. A. 10) 68 F.(2d) 252, 258; Milliken-Tomlinson Co. v. American Sugar Refining Co. (C. C. A. 1) 9 F.(2d) 809; Star-Chronicle Pub. Co. v. New York Evening Post (C. C. A. 2) 256 F. 435; Hotchkiss v. National City Bank (D. C.) 200 F. 287, 293, affirmed (C. C. A.) 291 F. 664, affirmed 231 U. S. 50,...