Before GOODRICH, McLAUGHLIN and FORMAN, Circuit Judges.
McLAUGHLIN, Circuit Judge.
In this complex factual situation, two issues are presented for disposition. First, whether through the negotiations of the parties a binding contract was entered into, thereby giving the appellant a right to participate in the bankrupt's estate. Second, if no contract was proven, is the bankrupt's estate entitled to restitution of certain sums expended in contemplation of the alleged contract.
The referee after extended hearings, found that there was no evidence of an enforceable contract and disallowed appellant's claim. On the counterclaim for restitution, he held the trustee in bankruptcy could not assert it because of a lack of proof and because the parties were in pari delicto. The district court affirmed the finding that there was no contract, but allowed the trustee's claim for restitution.
The bankrupt, ABC-Federal Oil & Burner Co., Inc., (hereafter referred to as ABC) had a short but spectacular life. It came into being in February, 1956. In May, 1957, a petition for reorganization under Chapter X of the Bankruptcy Act, 11 U.S.C.A. § 501 et seq. was filed and in December, 1957, ABC was adjudicated bankrupt.
The creation of ABC was largely the work of the promoter, Eugene Callis. Through his efforts, two independent companies, ABC Oil & Burner Co., Inc. (a Pennsylvania corporation) and Federal Oil Burner Co. (a Delaware corporation) were consolidated. Callis then installed one David Gilbert as Executive Vice President and Treasurer to take over active management of the new corporation, Gilbert's investment therein being $7,500. Soon afterwards the Board of Directors of ABC granted Gilbert power to negotiate a thru putting and blending contract*fn1 under the following resolution:
"Resolved: That the officers of the Company be and they are hereby authorized and empowered to conclude whatever throughput contract they deem advisable for the storage of product at the Peltz Street terminal at rates not to exceed those presently being paid by other tenants of the terminal."
It is at this point Stanley Jacobs, who controlled the claimant, Peltz Street Terminals, Inc. (hereafter referred to as Peltz) comes into the pattern. Again through the efforts of Callis, Jacobs became interested in purchasing control of CFM Terminal, Inc., which was for sale. Callis informed Jacobs that if he would purchase this terminal, ABC would make a thruputting contract with him.
On several occasions Jacobs, Callis and Gilbert went over proposed arrangements between the parties. It is out of these talks that appellant claims a binding contract arose. As primary support for this theory appellant relies upon the testimony of Callis, Gilbert and Jacobs, together with the following letter sent Jacobs by Gilbert:
"On behalf of this company, should you be successful in concluding an arrangement of purchase of all or any part of the stock of CFM Terminals, Inc., 3000 Peltz Street, Philadelphia, Pa., we will:
"a. Enter into a 15-year lease for light oil and black oil throughput at an annual guaranteed yearly volume of 600,000 barrels; maximum light oil throughput to be made available, 600,000 barrels per year, maximum 5 and 6 fuel oil throughput to be made available, 600,000 barrels per year. We will pay 7 a barrel for light oil and 8 1/2 a barrel for ...