United States v. Standard Oil Company of California, a Corporation

545 F.2d 624 UNITED STATES of America, Plaintiff-Appellant, v. STANDARD OIL COMPANY OF CALIFORNIA, a corporation, Defendant-Appellee. No. 72-2782. United States Court of Appeals, Ninth Circuit. May 4, 1976. As Modified on Denial of Rehearing Dec. 13, 1976. Dirk D. Snel and David W. Miller, Attys. (argued), of Lands & Natural Resources Div., Dept. of Justice, Washington, D.C., for plaintiff-appellant. Turner H. McBaine (argued), of Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant-appellee. Before BROWNING and SNEED, Circuit Judges, and SHARP, * District Judge. PER CURIAM: 1 This lawsuit is the result of contractual disputes between the United States Navy, plaintiff-appellant, and the Standard Oil Company of California, defendant-appellee. The case involves three separate claims arising out of two contracts between Navy and Standard relating to their respective rights and obligations as the participants in the unit operation of Naval Petroleum Reserve No. 1 (Elk Hills). These contracts are the Unit Plan Contract of June 19, 1944 (hereinafter the "UPC") and the Amendatory and Supplemental Agreement of December 22, 1948 (hereinafter the "A & S Agreement"). 2…

This lawsuit is the result of contractual disputes between the United States Navy, plaintiff-appellant, and the Standard Oil Company of California, defendant-appellee. The case involves three separate claims arising out of two contracts between Navy and Standard relating to their respective rights and obligations as the participants in the unit operation of Naval Petroleum Reserve No. 1 (Elk Hills). These contracts are the Unit Plan Contract of June 19, 1944 (hereinafter the “UPC”) and the Amendatory and Supplemental Agreement of December 22,1948 (hereinafter the “A & S Agreement”).

Navy’s first claim is for a declaratory judgment that certain lands outside the present boundaries of the Reserve, some owned by Navy and some by Standard, be brought within the unit operation. Navy’s second and third claims are for approximately $500,000 each, plus interest, as alleged overpayments of its proper share of particular costs during the periods July 1, 1947, to May 8,1948, and March 13,1949, to December 1, 1957.

Upon completion of an extended nonjury trial, the district court entered findings of fact, conclusions of law, and judgment denying each of Navy’s claims. The three claims are…

(concurring in part and dissenting in part):

I concur with the majority’s affirmance of the second and third claims and with its conclusion that Section 4 of the A & S Agreement is inapplicable to the first claim, but I disagree with its conclusion that the lands in question may be included in the Reserve under Section 15(b) of the Unit Plan Contract.

The question is one of contract interpretation. Section 15(b) of the U.P.C. provides that

This is interpreted by the majority as if it read:

I can find nothing in the contract language, or in the language and legislative history of *639 the enabling statute, 10 U.S.C.A. § 7426 , which justifies rewriting the contract to this extent.

The apparent rationale for the majority’s interpretation is the parties’ conflict of interests: Standard’s interest is to produce oil when it is to Standard’s economic advantage to do so, while Navy’s interest is to conserve oil in the ground. The existence of such divergent interests hardly provides an appropriate basis for ignoring the language agreed on by the parties. Phrases such as “Navy and Standard shall, . “the ownership interests of Navy and Standard, respectively, . . . “either Navy or…