Tri-State Petroleum Corp v. Saber Energy Inc. 845 F.2d 575 1988

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    Westlaw Delivery Summary Report for PATRON ACCESS,-

    Date/Time of Request: Monday, August 30, 2010 12:34 EasternClient Identifier: PATRON ACCESS

    Database: FEDFIND

    Citation Text: 845 F.2d 575

    Lines: 474

    Documents: 1

    Images: 0

    11.8 Sellers Right to Recover Lost Profits Contract Sales and Lease Contracts: Performance and Breach

    The material accompanying this summary is subject to copyright. Usage is governed by contract with Thomson Reuters,

    West and their affiliates.

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    United States Court of Appeals,Fifth Circuit.

    TRI-STATE PETROLEUM CORPORATION,

    Plaintiff-Appellant,

    v.

    SABER ENERGY, INC. d/b/a Saber Refining Co.,

    Defendant-Appellee.

    No. 87-2705.

    May 24, 1988.

    In buyer's suit against seller under principal con-

    tract, seller filed counterclaim for buyer's failure tohonor gasoline purchase contract. Seller conceded

    liability on principal contract, and upon trial of

    counterclaim, the United States District Court for

    the Southern District of Texas, at Houston, Karen

    K. Brown, United States Magistrate, awarded seller

    damages for lost profits and attorney fees, but

    denied buyer's claim for attorney fees on principal

    contract claim, and buyer appealed. The Court of

    Appeals, Thornberry, Circuit Judge, held that: (1)

    magistrate's findings supported conclusion that can-

    cellation clause inserted by buyer never became

    part of gasoline purchase contract, and (2) seller's

    rights of setoff under principal contract did not pre-

    clude award of attorney fees to buyer on claim un-

    der principal contract.

    Affirmed in part; reversed in part and remanded.

    West Headnotes

    [1] Frauds, Statute Of 185 144

    185 Frauds, Statute Of

    185IX Operation and Effect of Statute185k144 k. Waiver of Bar of Statute; Estop-

    pel. Most Cited Cases

    Sales 343 87(1)

    343 Sales

    343II Construction of Contract

    343k87 Evidence to Aid Construction

    343k87(1) k. Presumptions and Burden of

    Proof. Most Cited Cases

    Seller's failure to make written objection within ten

    days of receipt of gasoline purchase contract to

    which buyer had added cancellation term precluded

    seller from asserting defense of statute of frauds but

    did not relieve buyer of burden of proving that can-

    cellation term was orally agreed to prior to written

    insertion. V.T.C.A., Bus. & C. 2.201, 2.201(b),

    2.201 comment, 2.207, 2.207(a, b).

    [2] Federal Civil Procedure 170A 2261

    170A Federal Civil Procedure

    170AXV Trial

    170AXV(K) Trial by Court

    170AXV(K)2 Findings and Conclusions

    170Ak2261 k. In General. Most Cited

    Cases

    Decisions on credibility and weight of testimony

    are integral parts of findings of fact, rather than

    mere comments on weight of evidence. Fed.Rules

    Civ.Proc.Rule 52(a), 28 U.S.C.A.

    [3] Federal Courts 170B 850.1

    170B Federal Courts

    170BVIII Courts of Appeals

    170BVIII(K) Scope, Standards, and Extent

    170BVIII(K)5 Questions of Fact, Verdicts

    and Findings

    170Bk850 Clearly Erroneous Findings

    of Court or Jury in General

    170Bk850.1 k. In General. Most

    Cited Cases

    (Formerly 170Bk850)

    Federal Courts 170B 854

    170B Federal Courts

    170BVIII Courts of Appeals

    170BVIII(K) Scope, Standards, and Extent

    170BVIII(K)5 Questions of Fact, Verdicts

    Page 1

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

    2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

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    and Findings

    170Bk854 k. Nature ofEvidence Other

    Than Oral Testimony. Most Cited Cases

    Magistrate's finding that testimony was ambiguous

    and unreliable was finding of fact subject to clearly

    erroneous standard of review, even though some

    testimony discounted by magistrate was from de-

    positions, rather than trial. Fed.Rules Civ.Proc.Rule

    52(a), 28 U.S.C.A.

    [4] Sales 343 389

    343 Sales

    343VII Remedies of Seller

    343VII(F) Actions for Damages

    343k385 Trial

    343k389 k. Verdict and Findings. Most

    Cited Cases

    Magistrate's findings that, although two of buyer's

    executives believed seller had agreed to cancella-

    tion clause that buyer added to gasoline purchase

    contract, only nontestifying employee had taken

    part in negotiations with seller, and that testimony

    that either executive overheard or participated in

    conversations with seller was ambiguous and unre-

    liable supported conclusion that cancellation clause

    never became part of contract; affirmative finding

    that there was no agreement as to cancellationclause was not required. V.T.C.A., Bus. & C.

    2.207, 2.207(a, b).

    [5] Sales 343 384(1)

    343 Sales

    343VII Remedies of Seller

    343VII(F) Actions for Damages

    343k384 Damages

    343k384(1) k. In General. Most Cited

    Cases

    Jobber or reseller who, due to buyer's breach,never obtains goods from his supplier, is entitled to

    lost profit damages from breaching buyer under

    Texas Uniform Commercial Code. V.T.C.A., Bus.

    & C. 2.708(a, b).

    [6] Sales 343 383

    343 Sales

    343VII Remedies of Seller

    343VII(F) Actions for Damages

    343k380 Evidence

    343k383 k. Weight and Sufficiency.

    Most Cited Cases

    Testimony that seller could have located sufficient

    gasoline to supply both buyer and customers to

    whom gasoline was resold upon buyer's breach of

    gasoline purchase contract supported award of dam-

    ages for lost profits to seller as lost volume seller

    and jobber; buyer presented no evidence to support

    claim that there was seller's market in gasoline

    making seller's lost volume or jobber status un-

    likely. V.T.C.A., Bus. & C. 2.708(a, b).

    [7] Federal Courts 170B 634

    170B Federal Courts

    170BVIII Courts of Appeals

    170BVIII(D) Presentation and Reservation in

    Lower Court of Grounds of Review

    170BVIII(D)2 Objections and Exceptions

    170Bk634 k. Amount or Extent of Re-

    lief; Costs; Judgment. Most Cited Cases

    (Formerly 170Bk34)

    Buyer's failure to object to calculation of damages

    waived any complaint upon appeal from judgmentawarding seller damages for buyer's breach of gas-

    oline purchase contract.

    [8] Sales 343 384(1)

    343 Sales

    343VII Remedies of Seller

    343VII(F) Actions for Damages

    343k384 Damages

    343k384(1) k. In General. Most Cited

    Cases

    Damages recoverable by seller for buyer's breach ofgasoline purchase contract would not be reduced to

    credit buyer with broker's commission and adminis-

    trative costs allegedly saved as result of breach,

    absent any evidence by buyer that broker planned

    to forego commission on unsold gasoline or that ad-

    ministrative costs were in fact saved. V.T.C.A.,

    Page 2

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

    2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

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    Bus. & C. 2.708(a, b).

    [9] Federal Courts 170B 859

    170B Federal Courts170BVIII Courts of Appeals

    170BVIII(K) Scope, Standards, and Extent

    170BVIII(K)5 Questions of Fact, Verdicts

    and Findings

    170Bk855 Particular Actions and Pro-

    ceedings, Verdicts and Findings

    170Bk859 k. Contract Cases in

    General. Most Cited Cases

    (Formerly 170Bk959)

    Interpretation of contract is question of law and is

    subject to clearly erroneous standard of review only

    when ambiguities require reviewing court to con-

    sult extrinsic evidence.

    [10] Federal Civil Procedure 170A 2737.5

    170A Federal Civil Procedure

    170AXIX Fees and Costs

    170Ak2737 Attorneys' Fees

    170Ak2737.5 k. Particular Types of

    Cases. Most Cited Cases

    Seller's rights under principal contract to withhold

    sums from buyer to set off amount buyer might owe

    under other contracts did not preclude award of at-

    torney fees to buyer as prevailing party on claim

    under principal contract, even though seller pre-

    vailed against buyer on counterclaim for breach of

    gas purchase contract; buyer was forced to institute

    litigation to collect amount rightfully due under

    principal contract.

    [11] Federal Courts 170B 945

    170B Federal Courts

    170BVIII Courts of Appeals

    170BVIII(L) Determination and Disposition

    of Cause

    170Bk943 Ordering New Trial or Other

    Proceeding

    170Bk945 k. Determination of Dam-

    ages, Costs or Interest; Remittitur. Most Cited

    Cases

    Upon determination that buyer was entitled to

    award of attorney fees for prevailing on claim

    against seller under principal contract, remand was

    required for reconsideration of magistrate's determ-

    ination that buyer had incurred $14,737.50 as reas-

    onable attorney fees; seller had conceded liability

    on buyer's principal claim and most of litigation in

    case concerned counterclaim, on which seller pre-

    vailed.

    *577 John E. Rapier, Dallas, Tex., for plaintiff-ap-

    pellant.

    Thomas M. Farrell, Gerald L. Bracht, Houston,

    Tex., for defendant-appellee.

    Appeal from the United States District Court for the

    Southern District of Texas.

    Before THORNBERRY, WILLIAMS, and DAVIS,

    Circuit Judges.

    THORNBERRY, Circuit Judge:

    This appeal concerns the interpretation of a contract

    that required Tri-State Petroleum to buy gasoline

    from Saber Refining. Tri-State asserts that it suc-cessfully incorporated a clause in the contract that

    allowed it to cancel the agreement. The magistrateFN1

    held, however, that the clause never became

    part of the contract. Tri-State also asserts that the

    magistrate erred in calculating Saber's damages be-

    cause of Tri-State's breach of the contract, and in

    refusing to award attorneys' fees to Tri-State. We

    affirm the magistrate's decision on Tri-State's liabil-

    ity under the contract and on the amount of Saber's

    damages. We reverse the magistrate's failure to

    award attorneys' fees to Tri-State, and remand for a

    calculation of the amount of the fees.

    FN1. This case was tried by the consent of

    all parties before a U.S. magistrate. See 28

    U.S.C. 636(c).

    Page 3

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

    2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

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  • 8/9/2019 Tri-State Petroleum Corp v. Saber Energy Inc. 845 F.2d 575 1988

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    I.

    Because of an agreement with Texaco, Tri-State

    Petroleum in 1981 needed to secure delivery of gas-

    oline into the Colonial Pipeline in Pasadena, Texas.

    In accord with custom in the industry, Tri-State ar-

    ranged for Lawrence Dorr, an independent broker,

    to locate a source for the gasoline and to negotiate a

    contract. Dorr arranged an agreement between Tri-

    State and Saber Refining. Dorr sent telex messages

    confirming the agreement's negotiated terms, such

    as price, place of delivery, date of delivery, and

    quantity, to both parties. The telex messages called

    for Saber to deliver 110,000 barrels of gasoline into

    the pipeline per month from July 1981 to December

    1981.

    After receiving the telex message, Saber prepared a

    formal contract expressing the agreement of the

    parties. The contract incorporated the terms of the

    telex messages, but also contained several standard

    provisions. One provision was that Except as oth-

    erwise provided on the face hereof, buyer may not

    cancel this Agreement under any circumstances

    without Saber's express written consent. Another

    provision conditioned the contract on Buyers Ac-

    ceptance of the terms and conditions expressed in

    this Agreement, additional or *578 conflictingterms proposed by Buyer are rejected. Saber

    signed its draft and sent it to Dorr, who forwarded

    it to Tri-State.

    When Tri-State received the agreement, Donald

    Book, Tri-State's general manager, had a cancella-

    tion clause typed on the first page. The clause gave

    Tri-State the right to cancel the contract if Texaco

    ever canceled its agreement with Tri-State. The dis-

    trict court found that Book, as well as Edward

    Coyne, Tri-State's president, at the time thought

    that Saber had orally agreed to the cancellationterm. But the court also found that neither Book nor

    Coyne had participated in any discussions with

    Saber. The district court found that the only Tri-

    State employee to negotiate with Dorr and Saber

    was James Peyton. Neither party, however, offered

    any testimony by Peyton.

    Book signed the modified contract for Tri-State and

    forwarded it, along with a cover letter, to Dorr. The

    letter told Dorr that Tri-State had added the cancel-

    lation provision pursuant to an oral agreement with

    Saber. Dorr forwarded the modified contract to

    Saber, but the district court found that he neglected

    to forward Book's cover letter explaining the

    change in the contract. Saber did not notify Tri-

    State of any objection to the new cancellation

    clause.

    The gasoline purchase for July 1981 was without

    dispute. In August, however, Tri-State told Saber

    that Texaco had canceled its agreement with Tri-

    State, and that therefore Tri-State would exercise its

    option to cancel the Saber contract. Saber objectedand set off its claim against an amount that Saber

    owed Tri-State under another, unrelated contract.

    When Tri-State sued under the unrelated contract,

    Saber filed a counterclaim seeking damages for Tri-

    State's failure to honor the gasoline purchase con-

    tract.

    After an initial dispute over whether Tri-State had

    properly named Saber as a defendant, Saber con-

    ceded its liability on the unrelated contract, and the

    district court granted Tri-State partial summary

    judgment. The parties agreed to try Saber's counter-claim before a magistrate. The magistrate held that

    the cancellation clause never became a part of the

    contract. As a result, Tri-State had breached the

    agreement when it attempted to cancel. The magis-

    trate awarded Saber, as a lost volume seller and

    jobber, damages for lost profit. She also awarded

    Saber, as the prevailing party in the litigation, its

    attorneys' fees. But she denied Tri-State's claim for

    its attorneys' fees in winning the partial summary

    judgment on the unrelated contract.

    II.

    [1] Tri-State first argues that the magistrate erred in

    concluding that the cancellation clause never be-

    came part of the contract. The magistrate's holding

    was based on the view that this dispute is governed

    Page 4

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

    2010 Thomson Reuters. No Claim to Orig. US Gov. Works.

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    by Tex.Bus. & Comm.Code Ann. 2.207 (Tex.

    UCC).

    (a) A definite and seasonable expression of ac-

    ceptance or a written confirmation which is sent

    within a reasonable time operates as an accept-

    ance even though it states terms additional to or

    different from those offered or agreed upon, un-

    less acceptance is expressly made conditional on

    assent to the additional or different terms.

    (b) The additional terms are to be construed as

    proposals for addition to the contract. Between

    merchants such terms become part of the contract

    unless:

    (1) the offer expressly limits acceptance to

    the terms of the offer;

    (2) they materially alter it; or

    (3) notification of objection to them has

    already been given or is given within a reason-

    able time after notice of them is received.

    The magistrate concluded that Saber's sending the

    contract to Tri-State was an offer. By signing the

    contract and returning it to Saber, Tri-State accep-

    ted Saber's offer, even though Tri-State added anadditional or different term-the cancellation

    clause-to the contract. See Tex. UCC 2.207(a).

    That term did not become part of the contract, the

    magistrate concluded, because all three of subsec-

    tion (b)'s requirements had been met: Saber's offer

    *579 limited acceptance to the express terms of the

    offer; adding a cancellation term materially altered

    the contract; and Saber had already given notice to

    Tri-State of its objection to the additional term.

    Tri-State contests the magistrate's conclusion that

    section 2.207 governs the dispute. Its argument is inessence that Saber had agreed orally to the insertion

    of the cancellation clause. Therefore, Tri-State's in-

    sertion of the cancellation term in the contract, and

    its sending of the letter to Dorr explaining its reas-

    on for inserting the term, operated as mere written

    confirmations of the oral agreement. As a result,

    Tri-State claims, not section 2.207 but section

    2.201(b) governs this case:

    (b) Between merchants if within a reasonable

    time a writing in confirmation of the contract and

    sufficient against the sender is received and the

    party receiving it has reason to know its contents,

    it satisfies the requirements of Subsection (a)

    against such party unless written notice of objec-

    tion to its contents is given within ten days after

    it is received.

    It is unquestioned that Saber failed to make any ob-

    jection to Tri-State's cancellation term within ten

    days of receipt, and Tri-State therefore argues that,

    as a matter of law, the cancellation clause became a

    part of the contract in accordance with the terms of

    section 2.201(b).

    We reject Tri-State's argument concerning section

    2.201. That section is merely the UCC's statute of

    frauds. Subsection (b) provides an exception to the

    normal rule that a writing must be signed by the

    party against whom enforcement is sought. Section

    2.201 does not apply in the present case because

    neither party is asserting that any oral contract is in-

    valid because of the statute of frauds. As Comment

    3 to section 2.201 makes clear, the only result offailing to object within ten days as required by sub-

    section (b) is to take away from the party who fails

    to answer the defense of the Statute of Frauds; the

    burden of persuading the trier of fact that a contract

    was in fact made orally prior to the written con-

    firmation is unaffected.

    This issue was squarely addressed in Hurricane

    Steel Industries v. Maurice Pincoffs Co., 464

    S.W.2d 387 (Tex.Civ.App.-Houston [14th Dist.]

    1971, no writ). In Hurricane, the seller contended,

    as does Tri-State in the present case, that the buy-er's failure to object under subsection (b) made it

    bound by the terms of a written confirmation letter

    sent by the seller. The court commented that the

    failure to object to [the letter] in writing within ten

    days would not make [the buyer] bound by its lan-

    guage. The only effect ... was to constitute the letter

    Page 5

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

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    a compliance with the statute of frauds requirement

    of Subsection (a). Id. at 389.

    [2][3][4] A deeper problem than Tri-State's mis-

    taken reliance on section 2.201 is its failure at trial

    to prove that Saber orally agreed to the insertion of

    the cancellation clause. The magistrate did find that

    Book and Coyne, Tri-State executives, believed

    that Saber had agreed to the clause. But the magis-

    trate also found that Peyton, alone among Tri-State

    employees, took part in negotiations with Dorr and

    Saber. In particular, the magistrate held that

    [t]estimony that Coyne or Book overheard or par-

    ticipated in these conversations is ambiguous and

    unreliable. With no credible evidence that Book or

    Coyne had any direct knowledge of what Saber did,their belief about Saber's position is naturally no

    evidence of what Saber agreed to. Because Peyton

    did not testify, the magistrate's findings compel the

    conclusion that there was no credible evidence that

    Saber ever agreed to the cancellation clause.

    Tri-State attacks the magistrate's finding that

    Book's and Coyne's testimony was ambiguous and

    unreliable. Tri-State argues that this statement is

    a comment on the weight of the evidence and not a

    finding. We disagree. Decisions on the credibility

    and weight of testimony are integral parts of find-ings of fact. See Fed.R.Civ.P. 52(a) (Findings of

    fact ... shall not be set aside unless clearly erro-

    neous, and due regard shall be given to the oppor-

    tunity of the trial court to judge of the credibility of

    the witnesses. ) (emphasis added); cf. *580Ander-

    son v. City of Bessemer City, 470 U.S. 564, 105

    S.Ct. 1504, 1512, 84 L.Ed.2d 518 (1985) (When

    findings are based on determinations regarding the

    credibility of witnesses, Rule 52(a) demands even

    greater deference to the trial court's findings....).

    Furthermore, even though some of the testimony

    discounted by the magistrate is from depositions,

    the clearly erroneous standard nonetheless applies.

    See id. 105 S.Ct. at 1511-12 (holding that the stand-

    ard applies even when the district court's findings

    do not rest on credibility determinations, but are

    based instead on physical or documentary evidence

    or inferences from other facts). Our review of the

    record disclosed no reason to think the finding

    clearly erroneous, and we therefore reject Tri-

    State's argument.

    Although the magistrate's findings compel the con-

    clusion that there was no credible evidence that

    Saber agreed to the cancellation clause, Tri-State

    argues that Saber had the burden to obtain an

    affirmative defensive finding that no agreement

    existed. Presumably, Tri-State is arguing that Saber

    is guilty of a procedural default in failing to obtain

    an explicit ruling on this issue, and, as a result, the

    appeals court should decide the issue against it. Tri-

    State, however, cites no authority for this proposi-

    tion and its argument contradicts the general federalrule that the only findings required are those suffi-

    cient for a clear understanding of the basis of the

    decision. 9 C. Wright & A. Miller, Federal Prac-

    tice and Procedure, 2577, at 697 (1971). In this

    case, we think the magistrate's findings are suffi-

    cient for an understanding of the basis of decision.

    III.

    [5] Tri-State next argues that the magistrate erred in

    awarding Saber its lost profits as a result of Tri-

    State's breach. First, Tri-State argues that no lost

    profits should have been awarded because Saber

    was not a lost volume seller. Second, it argues

    that the magistrate failed to include in the calcula-

    tion of Saber's lost profits some of the costs that

    Saber avoided by Tri-State's breach.

    The general measure of damages for the seller be-

    cause of the buyer's breach is provided by UCC

    2.708(a): the difference between the market price at

    the time of tender and the unpaid contract price.

    But section 2.708(b) provides that when subsection

    (a)'s measure is insufficient to put the seller in as

    good a position as performance would have done,

    then the seller may recover his lost profit. Subsec-

    tion (b)'s measure of damages is appropriate when

    the purchaser at resale would have been solicited

    Page 6

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

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    by the seller had there been no breach, the solicit-

    ation would have been successful, and the seller

    could have performed the additional contract.

    The reason for the rule is based on the idea that

    the lost volume seller would have received two

    profits, not just one....

    Malone v. Carl Kisabeth Co., 726 S.W.2d 188, 190

    (Tex.App.-Fort Worth 1987, no writ). Similar to a

    lost volume seller is a jobber, a reseller who, be-

    cause of the buyer's breach, never obtains the goods

    from his supplier. Nobs Chemical, U.S.A., Inc. v.

    Koppers Co., 616 F.2d 212, 215 (5th Cir.1980). A

    jobber is also entitled to lost profit damages from a

    breaching buyer. Id.

    [6] The magistrate concluded that Saber was a lost

    volume seller for the gasoline that Tri-State should

    have bought in August. This gasoline had already

    been purchased by Saber, and Saber was able to sell

    it to other buyers. The magistrate also held that

    Saber was a jobber for the September gasoline,

    which Saber never bought because of Tri-State's

    breach.

    Tri-State's main attack on the magistrate's findings

    is to argue that a seller's market in gasoline exis-

    ted at the time of Saber's purchases. In a seller'smarket, there is insufficient gasoline available for

    buyers at the price that buyers wish to pay. Such a

    market would make lost volume or jobber status

    less likely because Saber, which did not produce

    gasoline but only bought it for resale, would have

    found it more difficult to obtain product.

    There is no doubt that evidence of the status of the

    market for gasoline would have been relevant, al-

    though not necessarily*581 conclusive, to the

    court's determination that Saber was a lost volume

    seller. But Tri-State chose not to introduce suchevidence. The only evidence before the magistrate

    was Hofer's testimony that Saber could have loc-

    ated sufficient gasoline to supply both Tri-State and

    the customers to whom Tri-State's gasoline was

    resold. Under those circumstances, Tri-State cannot

    legitimately fault the magistrate's decision to credit

    Hofer's testimony and award Saber damages as a

    lost volume seller.

    [7][8] Tri-State also claims that the magistrate erred

    in failing to credit it with certain costs that Saber

    avoided because of the breach. First, Tri-State

    points to the commission of Dorr, the broker for the

    sale. His commission for the unconsummated Au-

    gust and September purchases would have been

    $9,900. Tri-State argues that Saber saved this ex-

    pense because of the breach. Tri-State also notes

    that we have no idea what other administrative

    expenses that Saber might have saved because it

    did not have to purchase and ship gasoline to Tri-

    State.

    Tri-State's argument is without merit. As an initial

    matter, it appears that Tri-State never objected to

    the calculation of damages. As a result, it waived

    any complaint. Pickle v. International Oilfield

    Divers, Inc., 791 F.2d 1237, 1241 (5th Cir.1986).

    But in any case, because Tri-State introduced no

    evidence on damages and failed even to cross-

    examine Saber's witnesses on the subject of dam-

    ages, the magistrate was justified in crediting

    Saber's evidence on damages.

    For example, Tri-State did not introduce any evid-ence that Dorr planned to forgo his commission on

    the unsold August and September gasoline. Thus,

    the magistrate was entitled to conclude that this ex-

    pense was not saved as a result of the breach. In

    addition, while Hofer acknowledged that Saber in-

    curred some administrative costs in supplying the

    gasoline to Tri-State, the magistrate could have in-

    terpreted this reference as overhead, which Saber

    would not save as a result of the breach. In any

    case, Tri-State introduced no evidence that com-

    pelled the magistrate to reach a different conclu-

    sion.

    IV.

    [9] Tri-State's last argument on appeal is that the

    magistrate erred in failing to award attorneys' fees

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    for its successful prosecution of the contract that

    was the subject of its principal claim. Both that

    contract and the contract that was the subject of

    Saber's counterclaim contained the following para-

    graph:

    E. If either party hereto institutes litigation con-

    cerning this Agreement against the other party

    and such litigation is ultimately resolved through

    adjudication in a court of law, the prevailing

    party shall be entitled to reimbursement from the

    other party for reasonable attorneys fees ... as a

    result of such litigation.

    The district court before trial entered an uncon-

    tested partial summary judgment for Tri-State on its

    principal claim. The magistrate later awarded Saber

    judgment on its counterclaim and attorneys' fees for

    its counterclaim. The magistrate also found that

    Tri-State incurred reasonable and necessary attor-

    neys' fees in prosecuting its principal claim against

    Saber in the sum of $14,737.50. But the final judg-

    ment awarded a net amount to Saber that failed to

    include Tri-State's attorneys' fees in the calculation.

    The magistrate did not explain her decision to deny

    Tri-State's attorneys' fees.

    Saber argues that the decision to deny Tri-State itsattorneys' fees under the contract was justified be-

    cause Tri-State was not the prevailing party in the

    entire litigation in view of the net judgment entered

    against Tri-State. Saber also argues that the contract

    in the principal claim gave it the right to withhold

    sums from Tri-State to set off any amount that Tri-

    State might owe Saber under other contracts. In any

    case, Saber argues, Tri-State cannot show that the

    magistrate's decision was clearly erroneous.

    We disagree with Saber about the standard of re-

    view. The interpretation of a contract is a questionof law and the appellate*582 court is not bound by

    the clearly erroneous standard of review unless am-

    biguities require the court to consult extrinsic evid-

    ence. Paragon Resources, Inc. v. National Fuel Gas

    Distribution Corp., 695 F.2d 991, 995 (5th

    Cir.1983). If extrinsic evidence is necessary to the

    interpretation, of course, then the court of appeals

    is required to accept facts found by the district

    court unless they are clearly erroneous. See id. We

    think, however, that no extrinsic evidence is re-

    quired to interpret this contract.

    [10] The best interpretation of these contracts is

    that each unambiguously awards attorneys' fees to

    the party that prevails on each. Although Saber is

    correct in noting its set-off rights under the contract

    that formed the basis of Tri-State's principal claim,

    its linkage of those rights to Tri-State's right to ob-

    tain attorneys' fees is tenuous. Despite the set-off

    rights, Tri-State had to institute litigation to collect

    an amount rightfully due it under the principal con-

    tract, and that seems to us sufficient under the lan-guage of the contract to allow it to recover its attor-

    neys' fees. As a result, while Saber properly was

    awarded attorneys' fees on its counterclaim, Tri-

    State also should have been awarded attorneys' fees

    on its principal claim.

    [11] We are troubled, however, by the amount of

    Tri-State's attorneys' fees. The magistrate held that

    Tri-State incurred $14,737.50 as reasonable attor-

    neys' fees. But nothing in the record explains the

    magistrate's reasoning in arriving at this figure. In

    addition, the amount appears excessive in view ofthe fact that Saber conceded its liability on Tri-

    State's principal claim; most of the litigation in this

    case concerned Saber's counterclaim. To resolve

    these difficulties, we remand to the district court for

    a new and more complete determination of the

    amount of Tri-State's attorneys' fees, in accordance

    with Johnson v. Georgia Highway Express, Inc.,

    488 F.2d 714 (5th Cir.1974) (setting forth the

    factors that courts are to use in this circuit in de-

    termining an award of reasonable attorneys' fees).

    V.

    For the above reasons, we AFFIRM the magistrate's

    decision except insofar as it failed to award attor-

    neys' fees to Tri-State for the prosecution of its

    principal claim, and REMAND to the district court

    Page 8

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    (Cite as: 845 F.2d 575)

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    for a new determination of the amount of the fees.

    C.A.5 (Tex.),1988.

    Tri-State Petroleum Corp. v. Saber Energy, Inc.

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    END OF DOCUMENT

    Page 9

    845 F.2d 575, 6 UCC Rep.Serv.2d 368

    (Cite as: 845 F.2d 575)

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