Osage Oil Corp. v. McGuire

DUNKLIN, J. H. B. McGuire entered into a written contract with the Osage Oil Corporation to drill for the corporation a test well for oil and gas to a depth of 3,300 feet, unless oil or gas in paying quantities should be discovered at a shallower depth, and to furnish the derrick, rig, tools, water, machinery, fuel tanks, and all labor necessary to the completion of the well on the D. C. Clayton farm, being a part of the Lewis Knight survey in Jack county. The corporation agreed to furnish the necessary casing, casing shoes, and clamps, and to [250] use due diligence to place the same at the location of the well whenever needed by the contractor. The contract further provided that the oil corporation should have the privilege of testing out any sands at a shallower depth than 3,300 feet, such testing to be done by McGuire; and for the time actually employed in testing such sands the contractor would be entitled to receive $50 per day, on a basis of 12 hours a day. The contract price for the drilling, of the well was $4 per foot, aggregating $13,200. for the 3,300-foot depth. It was further provided in the contract that, in the event the well should prove to be a dry hole, or nonproductive, then McGuire should plug the well and should receive for such work a consideration of $500. The well was drilled to a depth of 3,315 feet, which, according to the contract price, amounted to $13,260. The oil corporation then mailed to McGuire its check for that sum, which check was accepted and collected by him. That check bore date of March 4, 1929, with this indorsement at the time of its receipt by McGuire: “It is hereby understood that this payment is made .with the express understanding between H. B. McGuire and Osage Oil Corporation that all labor and material bills in connection with the drilling hereinafter referred to, have been paid. Endorsement of this check will constitute acknowledgment by H. B. McGuire as being in full settlement of all claims and demands of every kind and character growing out of or relating to the drilling and completion of our Olayton No. 1, on the D. O. Clayton farm southeast of Bryson, being a part of the Lewis Knight Survey in Jack County, Texas, excepting and reserving $500.00 to be paid for pulling the casing and plugging the well when same is required under the terms of our contract dated September 7, 1929 — 3,315 feet @ $4.00, $13,260.00.” Upon receipt of the check, McGuire wired the corporation as follows: “Cheek received. Thanks for same. Endorsement of check signifies full settlement but I have an item of testing sands ordered by Vacuum and Mr. Russell which I did not itemize yet but Russell understands. Will you allow charge as per contract and order when convenient to take up same. Never worry about claims or bills I always pay them all.” In reply to that telegram, the oil corporation wired McGuire as follows: “Surprised at your telegram concerning additional charges as Russell informed us you would not insist on same. Upon his return from Missouri will see you. Meanwhile write us full all of your demands.” There was no further communication between the parties respecting the check, but McGuire proceeded to collect the same, after adding another indorsement thereto without the knowledge or consent of the oil corporation, to the effect that he accepted the check with reservation of the right to demand further payment for testing sands that had been ordered by the corporation under the terms of the contract. Thereafter the oil corporation mailed to McGuire another check for the sum of $6S5, bearing the following indorsement written on the back thereof: “In full payment of all claims and demands whatsoever, including pulling of easing and plugging of our No. 1 Clayton, Lewis Knight Survey, near Bryson, Jack County, Texas, as provided in contract dates September 6, 1928 —$500.00, and including drilling of above well and testing of sands covered by our check No. 1351, dated March 4, 1929, but as bonus for testing Strawn sand series we allow .$100.00 For bailing hole and mudding February 20, 1929. 85.00 Total $685.00” This cheek was held but not collected by McGuire. This suit was instituted by McGuire to recover the sum of $1,590.30 as a balance claimed to be due on an itemized account attached to his petition. The'account shows several items for testing sands, aggregating $972.50; also $500 for plugging the well and an interest charge of 6 per cent., amounting to $117.80, all aggregating the sum of $1,590.30. The account also shows a charge of $13,260 for drilling the well to a depth of 3,315 feet, and a credit for the same amount paid by check. As noted, the account did not give credit for the second check which had been received by McGuire, aggregating $6S5.00, which the record shows McGuire received but had never collected, although he never offered to return the same to the drawer. The defendant pleaded accord and satisfaction of all claims asserted by the plaintiff in his pleading. • The basis of that plea was the acceptance by the plaintiff of the checks noted above with the indorsements thereon, which amounted to a contract in writing by the plaintiff for the full settlement of all claims and demands growing out of the contract. There was a further allegation that, before these checks were given and accepted by McGuire, there was a bona fide controversy between the parties with respect to the amount to be paid by the oil corporation to McGuire, and that the checks were given to settle those controversies. In plaintiff’s pleadings, he tendered back to the defendant the second check mentioned above, for the sum of $685, and he also pleaded a lack of consideration to support the purported contracts of settlement indicated by the indorsements on the two checks. The case went to trial, and, in accordance with testimony introduced by plaintiff, the [251] jury returned a verdict showing the number of days employed by the plaintiff in testing the sands, and, upon the verdict so returned, the court entered judgment in favor of plaintiff for the sum of $1,387.50. The judgment recited a finding by the court that plaintiff was entitled to $500 for plugging the well and $8S7.50 for testing the sands. Defendant has prosecuted this appeal and has assigned error to the action of the court in sustaining the plaintiff’s exception to the defense of accord and satisfaction, indicated above; and in that ruling the court committed reversible error. There can be no room for doubt that the acceptance of the first cheek with the indorsement thereon constituted on its face a valid and binding agreement that the $13,260 covered by that check was a full settlement for every demand accruing to the plaintiff under the drilling contract, save and except the item for plugging the well; and that contract could not be varied by any testimony of a mere understanding or intention on the part of plaintiff to the contrary. Nor would a plea of failure of consideration he available to overcome the binding force and effect of that written agreement if it be true, as alleged in defendant’s plea, that, before the check was given, there was a bona fide controversy between the parties as to the amount owing by the oil corporation to McGuire. Nor could McGuire’s attempted restriction of the force of that in-dorsement attached to the check by him without the knowledge or consent of the drawer be given any effect. Authotities almost without number support the foregoing conclusions, only a few of which will be cited, to wit: 1 Texas Jurisprudence, pp. 245-277; 1 R. C. L. p. 177; Little v. Allen, 56 Tex. 133; Simms Oil Co. v. American Refining Co. (Tex. Com. App.) 288 S. W. 163; Ferguson-McKinney Dry Goods Co. v. Garrett (Tex. Com. App.) 252 S. W. 738; Hunt v. Ogden, 58 Tex. Civ. App. 443, 125 S. W. 386, writ of error refused; Clopton v. Caldwell County (Tex. Civ. App.) 187 S. W. 400, writ of error refused. It is also well settled that the acceptance of the check for $685 with the indorsement thereon with no offer to return the same is likewise binding upon the plaintiff as accord and satisfaction for the balance of plaintiff’s claim which had not theretofore been settled by the first check. Nor Could the plaintiff avoid the binding effect of the indorsement on that check by merely tendering the same back in his pleading. Especially is this true in view of the further allegation by the defendant that, after the check for $685 was received by the plaintiff, the defendant notified him to return the check if he did not accept it in final settlement and received no reply to that demand. Willis v. City National Bank of Galveston (Tex. Civ. App.) 280 S. W. 270; 1 Texas Jurisprudence, p. 282; Fuller v. Kemp, 138 N. Y. 231, 33 N. E. 1034, 20 L. R. A. 785; Washington Natural Gas Co. v. Johnson, 123 Pa. 576, 16 A. 799, 10 Am. St. Rep. 553. Other authorities. cited above with respect to the first cheek given by defendant are also applicable in principle to the second check’ Accordingly, the judgment of the trial court is reversed, and the cause is remanded.