Worth Petroleum Co. v. Callihan

• Decision Date: 19 April 1935
• Docket Number: No. 1438.,1438.
• Citation: 82 S.W.2d 1060
• Parties: WORTH PETROLEUM CO. v. CALLIHAN.
• Court: Texas Court of Appeals

82 S.W.2d 1060

WORTH PETROLEUM CO. v. CALLIHAN.

No. 1438.

Court of Civil Appeals of Texas. Eastland.

April 19, 1935.

Rehearing Denied May 17, 1935.

Appeal from Shackelford County Court; Homer T. Bouldin, Judge.

Suit by George Callihan against the Worth Petroleum Company. From a judgment for plaintiff, defendant appeals.

Reversed and rendered.

Cantey, Hanger & McMahon, of Fort Worth, for appellant.

F. L. Kuykendall, of Austin, for appellee.

FUNDERBURK, Justice.

George Callihan sued Worth Petroleum Company to recover $194.45 and interest, same being the alleged balance due upon a note for $3,592.57, dated April 15, 1933, due on or before two years after date, but which note, as to the time payable, also recited: "This note is payable in monthly payments according to contract and assignment from Worth Petroleum Company to George Callihan." The amount sued for was recovered both in the justice court and, upon appeal, in the county court. The pleadings were oral, but are set out in the statement of facts. About May 3, 1933, the terms of the obligation evidenced by said note were so modified by mutual written agreement that in effect the balance of the debt to be paid became payable only from the proceeds of oil and/or gas from a certain lease if and when produced, an assignment of such proceeds, as well as the lease itself, for the purpose of such payment being made to Callihan. From the proceeds of oil received under the assignment, the principal of the note had up to September 11, 1933, been reduced to the sum of $2,544.45. On the last-mentioned date, a new agreement was made by the parties, whereby Worth Petroleum Company paid Callihan in cash the sum of $2,350 in satisfaction and discharge of the pre-existing obligation, the consideration for which, as found by the trial judge, being an agreement that Callihan would be awarded the contract for drilling future wells, if any, by the said Worth Petroleum Company in Shackelford county so long as his bid was in line with other bids. Upon the payment of said $2,350, Callihan marked the note paid and delivered it back to the said Worth Petroleum Company, together with a reassignment of the oil and gas lease. The instrument by which the lease was reassigned recited in part as follows: "And the said undersigned, George Callihan, hereby declares said lease and all personal property thereon or thereunder fully released and discharged from any and all indebtedness due said George Callihan by Worth Petroleum Company." The recited consideration for the reassignment was "for and in consideration of the payment of said note and all interest thereon, and all other sums due him." Thereafter in January, 1934, Worth Petroleum Company let a contract for drilling another well in Shackelford county. Callihan submitted his bid for drilling the well, but the contract was let to another bidder for a greater sum than that bid by Callihan. Callihan thereupon brought this suit, as aforesaid, to recover, as the balance, on September 11, 1933, due on the pre-existing obligation after crediting such balance with the said sum of $2,350 paid under the new agreement on that date.

The judgment of the court, as disclosed by the findings of fact and conclusions of law, was based upon the theory that the agreement under which the $2,350 was paid was one of accord and satisfaction, and that the failure of the appellant to award to Callihan the contract for the subsequent drilling of a well showed that, although there was an accord, there was no satisfaction, the effect of which being to leave in force the original obligation to pay the balance of the note due at the time the agreement was made. From the judgment, Worth Petroleum Company has appealed.

The pleadings being oral, and, therefore, not required to be so formal or complete as written pleadings, present a matter of some difficulty in determining with certainty what was the cause of action attempted to be recovered upon. In other words, it is not entirely clear whether plaintiff by his suit sought judgment for a balance due upon the contract evidenced by the original note dated April 15, 1933, for the principal sum of $3,592.57, which was an absolute obligation to pay a certain sum of money, or whether it was the contract which resulted from the modification of the terms and provisions of said note on or about May 3, 1933, by which it was agreed the debt was to be paid wholly out of the proceeds from oil and/or gas from a certain lease assigned to the payee in said note for the purpose of making such payment, and which provided that the payee was to "look for payment solely and wholly from said oil runs from said Clark lease." If the cause of action was one to recover a balance due on the original note without reference to the subsequent modification of the original obligation, then no right of recovery existed. The contract represented by the original note was wholly executory on May 3, 1933, and the parties could substitute any other agreement they should choose in lieu of the existing agreement, and did substitute an entirely new agreement. One of the well-known ways by which a contract may be discharged is by substitution of a new agreement. 13 C. J. 588, § 594; Foley v. Storrie, 4 Tex. Civ. App. 377, 23 S. W. 442; City of Galveston v. Galveston City R. Co., 46 Tex. 435. "Parties to an unperformed contract may, by mutual consent, modify it by altering, excising or adding provisions, provided the modifications do not make it illegal or violative of public policy." 13 C. J. 589, § 604; Caples v Port Huron Engine & Thresher Co., 61 Tex. Civ. App. 646, 131 S. W. 303 (holding that the parties to an unexecuted contract may get together and abandon it any time if they want to for any reason they deem sufficient, and substitute for it any contract they please); Washington Life Ins. Co. v. Reinhardt (Tex. Civ. App.) 142 S. W. 596; Nations v. Williams (Tex. Civ. App.) 203 S. W. 1176; Bell v. Self (Tex. Civ. App.) 210 S. W. 304; Old River Rice Irr. Co. v. Stubbs (Tex. Civ. App.) 137 S. W. 154.

The contract at the time of said subsequent agreement being wholly executory, the modification constituted a novation of the contract by which the new promises were substituted for the original promises, and a failure to perform the new promises would not revive the original obligations. A novation accomplishes a discharge of the former contract, regardless of whether the new promise be performed or not. This proposition is well supported by authorities, of which it is deemed sufficient to cite the following decisions: Gulf, C. & S. F. Ry. Co. v. Harriett, 80 Tex. 73, ...