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Oil Trading Associates Inc. v. Texas City Refining Inc.

June 1, 1962

OIL TRADING ASSOCIATES, INC., PLAINTIFF-APPELLANT,
v.
TEXAS CITY REFINING, INC., DEFENDANT-APPELLEE.



Author: Moore

Before MOORE, SMITH and MARSHALL, Circuit Judges.

LEONARD P. MOORE, Circuit Judge.

Plaintiff, Oil Trading Associates, Inc. (OTA), appeals from a final judgment entered by express direction of the court pursuant to Rule 54(b), F.R.Civ.Proc., 28 U.S.C.A. dismissing on motion for partial summary judgment the First Claim of the complaint against defendant, Texas City Refining, Inc. (TCR). Jurisdiction is based upon diversity of citizenship and the requisite amount is in controversy.

Although an affidavit and excerpts from depositions of both parties were submitted on the motion, for purposes of this appeal only the undisputed facts are considered.

On May 1, 1952, OTA and TCR entered into a contract whereby OTA was employed to act as exclusive sales agent for the entire output of TCR's oil refinery. Paragraph 6 of this contract provided:

"This contract shall terminate on or upon any date after December 31, 1953, upon twelve (12) months' written notice by either party to the other, provided that prior to the giving of such notice the parties have not been able, within a period of not more than ninety days of negotiations, to agree upon a renewed or revamped contract or a mutually satisfactory termination date."

On July 16, 1954, TCR's president wrote to the president of OTA as follows:

"This will notify you that we desire immediately to commence negotiations with you, looking toward agreement upon a renewed or revamped contract in accordance with the provisions of paragraph 6 in the letter agreement between us dated May 1, 1952."

Subsequently, on November 15, 1954, TCR informed OTA that since the negotiations had been unsuccessful TCR desired to terminate the existing agreement on November 15, 1955.

For a First Claim, OTA alleged the contract of May 1, 1952; that on November 15, 1954, TCR wrongfully discharged OTA effective on November 15, 1955; that since November 15, 1955, TCR refused to permit OTA to carry out the contract; and that it had failed to pay to OTA the amount of the agreed compensation under the contract.

OTA contends that the notice of termination mentioned in paragraph 6 of the contract could not have been effectively given unless prior thereto the parties had negotiated in good faith during a 90-day period in an effort to agree upon "a renewed or revamped contract" and that, absent proof of such good faith negotiation and an honest failure to agree on terms, the notice of termination was ineffectual. Thus, OTA would have us reverse the district court's grant of summary judgment on the ground that the question whether TCR negotiated in good faith was one of fact which could not be decided on a motion for summary judgment.

TCR, on the other hand, argues that the words "negotiate in good faith" are not in the contract; that no affirmative duty to negotiate is set forth; and that at most a period of 90 days was provided in which the parties could negotiate if they so desired. TCR contends that by giving notice of its desire to negotiate on July 16, 1954, and by giving notice of termination on November 15, 1954, it had complied with the requirements of paragraph 6 and was entitled to terminate the agreement on November 15, 1955, and therefore the district court properly granted its motion for summary judgment.

The meaning which OTA would have us read into the proviso of paragraph 6 (as stated in the OTA brief):

"is that the parties were required to use reasonable and continuing efforts to agree on the terms of a new contract or termination date of the existing ...


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