Construcciones Ind v. Searex Inc ( 1999 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 98-20898
Summary Calendar
_____________________
CONSTRUCCIONES INDUSTRIALES DEL GOLFO,
S.A. DE C.V.,
Plaintiff-Appellant,
versus
SEAREX, INC.,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Southern District of Texas, Houston
(H-97-CV-3588)
_________________________________________________________________
May 28, 1999
Before JOLLY, SMITH, and WIENER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:*
The dispositive issue in this appeal is whether the parties
entered into a binding contract. We conclude that they did not,
and we therefore affirm the district court in all respects.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
I
The facts relevant to our decision are undisputed. During
1997, Searex, Inc. and Construcciones Industriales Del Golfo, S.A.
de C.V. (“CIGSA”) entered negotiations over a proposed joint
venture. The object of this joint venture would have been to
construct and charter several new vessels for use in oil and gas
exploration. Searex possessed the proprietary design for these new
vessels. Eventually, however, the negotiations over a joint
venture failed. Soon thereafter, on July 24, 1997, the two parties
executed a document entitled “Agreement to Time Charter and
Subcharter Vessels.” This document’s preamble expressed CIGSA’s
“desire[] to time charter the first two vessels” produced using
Searex’s proprietary design. The document also expressed Searex’s
willingness to charter the vessels to CIGSA under certain
conditions, and the document contains the following provisions:
[T]he parties hereto agree to the following basic terms:
1. Upon delivery of each of the Vessels by Alabama Shipyard
Inc. (“Builder”), it will be chartered by SEAREX to CIGSA
under the Master Time Charter Agreement in similar form
of Exhibit 1 attached hereto.
2. Each initial vessel time charter will be for a period of
not less than two years on a 365-day “Hell or high Water”
basis at the charter hire rate of not less than $12,500
per day, plus 25% of the net remaining charter hire, up
to $25,000 per day, received from PEMEX1 or other company
1
Pemex is Petroleos Mexicanos, the Mexican national oil
company. As is evident from the document, the parties initially
thought that Pemex would be the third party to whom CIGSA would
subcharter the vessels.
2
or under the PEMEX Subcharter or other company subcharter
of the vessels.
3. CIGSA will subcharter each of the vessels to PEMEX or
other company acceptable to MARAD,2 under a subtime
charter in similar form to Exhibit B attached hereto.
4. This agreement will become effective upon MARAD approval
and shall terminate if such approval is not obtained by
October 31, 1997.
These provisions mention several non-existent documents.
Although provision (3) contemplates a subtime charter form, no such
form was ever attached to the document. Furthermore, a subtime
charter agreement involving CIGSA has never been entered. The
Master Time Charter form, mentioned in provision (1), was attached
to the document. This form, essentially a red-lined, working
draft, stated (in Article 3 of the form) that “Each vessel Vessel
shall be delivered to CHARTERER at the time and place and for the
duration and subject to the extensions specified in the applicable
Short Form.” The parties, however, never created a Short Form.
After executing the document, the parties continued to
negotiate over the terms of a Master Time Charter Agreement. In
the midst of these negotiations, on August 8, 1997, Searex sent
CIGSA proposed changes to the Agreement form. The relevant changes
were indicated in a new, draft version of the proposed Agreement:
Article 2 - Charter
Subject to the conditions set forth herein OWNER
agrees to charter the Vessels to CHARTERER, and CHARTERER
2
MARAD is the federal government’s Maritime Administration.
Searex sought financing for the vessels from MARAD.
3
agrees to hire the Vessel Vessels from OWNER on the terms
and conditions set forth herein. Each Vessel shall be
subjected to this Agreement by the execution by the
parties of a Short Form. Each Vessel shall be subjected
to this Agreement upon delivery of the Vessel to the
Owner by its builder, Alabama Shipyard, Inc. (the
“Builder”). OWNER shall give CHARTERER at least 30 days
notice of the delivery date proposed by the Builder, but
OWNER shall have no liability to CHARTERER or any one
claiming by, through or under CHARTERER for failure to
deliver the Vessel as per any notice given by OWNER or
for any delay in delivery of either Vessel for any reason
whatsoever. CHARTERER’s sole and exclusive remedy for
any delay in delivery shall be to cancel this Agreement
in accordance with the provisions of the last sentence of
Article 1 hereof.3
OWNER shall have no obligation to charter any Vessel
to CHARTERER hereunder unless, (i) at least 90 days
before the projected delivery date of a Vessel (of which
delivery date OWNER shall have notified CHARTERER),
CHARTERER has secured a subcharter of the Vessel to PEP;
and a Permitted Subcharterer; (ii) prior to the
commencement of the term of the charter of such Vessel,
OWNER shall have received the consent of MarAd to charter
the Vessel to CHARTERER and to subcharter it to PEP. such
Permitted Subcharterer; and (iii) MarAd shall have
approved proceeding with the construction and financing
of the second Vessel pursuant to the terms of the
Commitment to Guarantee referred to in the second recital
of this Agreement.
In response to Searex’s proposed changes, CIGSA sent a reply
memorandum on August 11, 1997, with the following language:
We have received your last form of the charter agreement
between Searex and CIGSA and are in agreement with its
terms. However there is a point that has to be clarified
. . . . Regarding delivery date of the Vessel, according
to the information we had originally received from
Searex, we have negotiated with Pemex to prepare a tender
3
The referenced sentence states, “Each party may cancel the
this Agreement upon the giving of thirty (30) days prior written
notice to the other, provided, however, that any unexpired Short
Form shall continue in effect subject to the terms and conditions
hereof until expiration of such Short Form.”
4
for the contract of the Vessels with a delivery of no
later than April 30 of next year. Said delivery must be
guaranteed with a performance bond equal to 10% of the
total value of the contract.
As you can understand we must comply with said date, and
therefore can not accept your proposal that owner shall
have no responsibility whatsoever in regard to late
delivery. . . . In short, we must insert language that
explains that both Searex and CIGSA, will make its best
efforts to guarantee delivery in Mexico by no later than
April 30, and in case of fault to that deadline, if such
is pertaining to any other party, they in turn shall face
the responsibilities that may arise.
What must be clearly understood is that the tender will
be published in the next 10 days, and we are not in a
position to negotiate deliveries later than April 30.
The remaining conditions of the charter . . . are acceptable.
No other relevant communication occurred between Searex and
CIGSA until October 1, 1997, when Searex sent CIGSA a letter
stating that the parties had not reached an agreement sufficient to
pursue “the SEAREX/CIGSA project,” and that Searex would explore
other opportunities for the use of its vessels. One last,
important fact to note is that MARAD never gave its approval (see
provision (4)).
II
After receiving Searex’s letter, CIGSA filed suit against
Searex for breach of contract.4 CIGSA sought damages and specific
performance as relief for the alleged breach. The district court
issued a very able, comprehensive opinion addressing Searex’s
4
CIGSA also included other claims, none of which CIGSA
presents on appeal.
5
motion for summary judgment and CIGSA’s partial motion for summary
judgment and its motion for leave to amend its complaint. The
district court concluded that Searex and CIGSA never entered a
binding contract. Accordingly, the district court found that
Searex could not be held liable under any of CIGSA’s breach of
contract theories. The district court then reviewed CIGSA’s
proposed waiver and estoppel arguments (which CIGSA sought to add
to an amended complaint), and concluded that those arguments had no
merit. The district court therefore decided to deny CIGSA’s motion
to amend its complaint as futile. In its final judgment, the
district court granted Searex’s motion for summary judgment,
denied CIGSA’s motion for partial summary judgment, denied the
motion to amend the complaint, and dismissed the complaint.
III
We review the grant of summary judgment de novo, using the
same standard as the district court. Burditt v. West American Ins.
Co., 86 F.3d 475, 476 (5th Cir. 1996). We will affirm the grant of
summary judgment if the record shows “that there is no genuine
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). Upon
our thorough review of the record, and with the standards for
granting summary judgment well in mind, we conclude that the
district court was exactly correct in granting Searex’s motion for
summary judgment after finding that the parties did not enter a
binding contract.
6
A
We begin by noting that the parties never agreed on a Master
Time Charter Agreement. Contrary to CIGSA’s arguments on appeal,
CIGSA did not accept the Master Time Charter Agreement proposed by
Searex on August 8. CIGSA’s August 11 letter effectively rejected
the proposed agreement by rejecting various terms and demanding
that any Agreement contain newly suggested language. See, e.g.,
Restatement (Second) of Contracts § 59 (“A reply to an offer which
purports to accept it but is conditional on the offeror’s assent to
terms additional to or different from those offered is not an
acceptance but is a counter-offer.”); Blackstone v. Thalman, 949
S.W.2d 470, 473 & n.4 (Tex. Civ. App. 1997, no writ). For example,
CIGSA’s August 11 letter stated that CIGSA “[could] not accept
[Searex’s] proposal that owner shall have no responsibility
whatsoever in regard to late delivery.” The CIGSA letter then went
on to say that “we must insert language that explains that both
Searex and CIGSA will make its best efforts to guarantee delivery
in Mexico no later than April 30, and in case of fault to that
deadline . . . they in turn shall face the responsibilities that
may arise.” Thus, although CIGSA did begin its letter by informing
Searex that CIGSA was in agreement with the proposed Agreement’s
terms, CIGSA clearly did not accept all of those terms and demanded
the inclusion of others.
Given that the parties never agreed to a Master Time Charter
Agreement, we are left to consider whether the July 24 document
7
binds Searex to enter a charter agreement with CIGSA. CIGSA argues
that the document does exactly this because it contains all of the
necessary terms, including price (see provision (2) of the July 24
document) and delivery date. The document specifies the date,
CIGSA argues, in provision (1): “Upon delivery of each of the
Vessels by Alabama Shipyard Inc. (“Builder”), it will be chartered
by SEAREX to CIGSA . . .” Although the document does not specify
a date that one can locate on a calendar, CIGSA argues that this
provision indicates that the parties agreed to the condition--i.e.,
delivery by Alabama Shipyard, Inc.--that would fix that date at
some time in the future.
This argument has no merit. The undisputed evidence shows
that the parties did not, in fact, intend for the statement in
provision (1) to bind the parties to any preordained delivery date.
First, the attached Master Time Charter Agreement form stated that
the exact delivery date would be specified in a “Short Form”
(which, again, was never created). Second, CIGSA’s own statements,
in its August 11 letter, reveal that it did not intend for the
July 24 document to fix a binding delivery date. In its letter,
CIGSA stated that it was “not in the position to negotiate
deliveries later than April 30.” Obviously, CIGSA thought that the
delivery date was open to negotiation.
But we need not rest our decision on the fact that the July 24
document was defective for failing to contain essential elements of
an agreement. The July 24 document, by its own terms, would not
8
become effective until MARAD approved the agreement (see provision
(4)). MARAD never granted its approval and the document,
therefore, never had any legal effect. CIGSA argues that Searex
should not be able to defend itself by pointing to this provision
because Searex ended its attempts to come to an agreement (as
stated in Searex’s October 1st letter) before the October 31
deadline. Therefore, CIGSA argues, it was still possible for
Searex to obtain MARAD approval, but Searex prematurely gave up; in
legal terms, CIGSA argues that Searex anticipatorily repudiated the
contract. Searex counters this argument by pointing out that CIGSA
did not cooperate with Searex (by supplying necessary documents) in
gaining MARAD approval. But all of this is beside the point: the
July 24 document had absolutely no effect--and could not,
therefore, bind Searex in any way--until MARAD approved the
document. In other words, and as the district court’s incisive
opinion notes, Searex could not anticipatorily repudiate a contract
when there was no contract. See Texas Dept. of Housing and
Community Affairs v. Verex Assurance, Inc., 68 F.3d 922, 928 (5th
Cir. 1995) (“‘When a promise is subject to a condition precedent,
there is no liability or obligation on the promisor and there can
be no breach of contract by him until and unless such condition or
contingency is performed or occurs.’ Reinert v. Lawson, 113 S.W.2d
293, 294 (Tex. Civ. App.--Waco, 1938, no writ).”); Valencia v.
Garza, 765 S.W.2d 893, 898 (Tex. Civ. App. 1989, no writ) (“[A]
9
valid contract must first be established in order to prove
repudiation.”).
In sum, the July 24 document never became effective. As no
contract existed, CIGSA’s breach of contract claim must fail.
B
Finally, we consider whether the district court abused its
discretion in denying CIGSA the opportunity to amend its complaint
by adding arguments based on waiver and estoppel. See Ashe v.
Corley, 992 F.2d 540, 542 (5th Cir. 1993) (stating that district
court’s denial of leave to amend a complaint is reviewed for abuse
of discretion).
Aside from the fact that the deposition testimony CIGSA points
to, see CIGSA Br. at 42-44, does not, in any way, support its
stated characterizations of the alleged nefarious behavior by
Searex, we are able nevertheless easily to conclude that the
district court was correct in finding that amendment would be
futile. To support its arguments, CIGSA cites the same two cases
that it cited in the district court and does not attempt to explain
why the district court’s plain reading of Fifth Circuit precedent
is somehow erroneous. CIGSA cites Wheeler v. White, 398 S.W.2d 93
(Tex. 1965), for the proposition that “a party can be estopped by
its conduct from claiming that a contract is not sufficiently
specific to be enforced.” CIGSA Br. at 45. CIGSA thus argues that
Searex’s conduct estops it from denying the existence of a contract
based on alleged indefiniteness.
10
As we have explained above, however, the July 24 document is
not a contract that has failed for indefiniteness. Instead, it is
a document that never went into effect--not because of legal
indefiniteness, but because of its own terms (in provision (4)).
As the district court explained, we have recognized that “[i]t is
a well-established principle in Texas that ‘contract rights cannot
be created by estoppel [but estoppel can] prevent a parties conduct
and actions from operating as a denial of the right of enforcement
of a contractual obligation already created.’” Oliver Resources
PLC v. International Finance Corp., 62 F.3d 128, 131 (5th Cir.
1995) (bracketed phrase in original) (quoting Roberts v.
California-Western States Life Ins. Co., 470 S.W.2d 719, 726 (Tex.
Civ. App. 1971)). Furthermore, and, again, as the district court
noted, we have said that Wheeler does not contravene the basic
principle that estoppel does not affirmatively create contract
rights. Oliver Resources, 62 F.3d at 131 n.5. Wheeler does not
contravene this basic principle because “Wheeler involved a
contract between the parties that was later found defective.” Id.
See also Wheeler, 398 S.W.2d at 96 (“[Promissory estoppel] does not
create a contract where none existed before, but only prevents a
party from insisting upon his strict legal rights when it would be
unjust to allow him to enforce them. The function of the doctrine
of promissory estoppel is, under our view, defensive in that it
estops a promisor from denying the enforceability of the
promise.”). As CIGSA has cited no other authority to support its
11
arguments, we are certain that the district court has not abused
its discretion.
III
For the foregoing reasons, we AFFIRM the district court’s
judgment in all respects.
A F F I R M E D.
12