Hart v. Cort

Hotchkiss, J.: The action is for royalties under a contract by which plaintiff licensed defendant to present the play “La Tosca” within the [584] United States and Canada. The license is not expressed to he exclusive, nor is there anything in it from which an exclusive license may be inferred. The defense was that, by custom, the license was in fact exclusive; but defendant’s evidence to prove such custom was excluded, and the competence of such evidence is the sole question raised on this appeal. The respondent claims that in a contract such as the present there is no presumption of exclusiveness (Warne v. Routledge, L. R. 18 Eq. Cas. 497; Willis v. Tibbals, 33 N. Y. Super. Ct. 220), and that custom may not be proved to create doubt where otherwise none exists, and this principle was applied to the contract in question by the Appellate Term on a previous appeal to that court, where a judgment in defendant’s favor was reversed and a new trial granted. (83 Misc. Rep. 44.) Although the rules governing the proof of custom as bearing on the interpretation of contracts are in the main well settled, in their application the cases are in many respects conflicting, if not irreconcilable. That custom may not be shown to contradict the express terms of a contract is conceded. Is it competent to contradict those terms which attach to it by implication of law ? I think, both on principle and authority, this question must be answered in the negative. It has been held that the test of repugnancy is whether or not the custom, if written into the contract, will make it insensible or inconsistent. (Per Campbell, Ch. J., Humfrey v. Dale, 7 E. & B. 266, 275.) In Hopper v. Sage (112 N. Y. 530) there was a contract for the sale in futuro of shares of corporate stock, on which a dividend had been declared prior to the date of the contract, but which dividend was not payable and was not paid -until after such date. The' contract provided that the defendant (purchaser) “ is entitled to all dividends or extra dividends declared ” between the date of the contract and the day' when the stock was to be delivered, but was silent as to dividends declared before the contract was made. Defendant laid claim to the dividend in question, and in support of such claim offered evidence of a custom of the Stock Exchange, but the court held that the contract was not “ made under such circumstances that those rules * * * could have any legal effect * * * ; so far as the case shows, he [the vendor] was [585] not a member ” of the Exchange. Perhaps the decision of the case might well have been put solely on this ground, but it was not. After referring to the rule of law which gives to the owner of shares all dividends declared during the period of such ownership, the court, per Peckham, J., said: “Usage and custom cannot be proved to contravene a rule of law or to alter or contradict the express or implied terms of a contract free from ambiguity, or to make the legal rights or liabilities of the parties to a contract other than they are by the terms thereof. When the terms of a contract are clear, unambiguous and valid, they must prevail, and no evidence of custom or usage can be permitted to change them.” In the earlier case of Higgins v. Moore (34 N. Y. 417) the same learned judge who wrote for the court in Hopper v. Sage (supra), in an opinion reviewing many cases, clearly expressed and unmistakably applied the principle upheld in the latter case. That custom may not be invoked to alter or impeach the “ implied terms of a contract, or to make the legal rights or liabilities of the parties * * * other than they are by the common law,” was expressly said by Earl, 0., writing for the court, in Bradley v. Wheeler (44 N. Y. 495, 504), which is among the cases cited and relied on in Hopper v. Sage (supra). In Lawrence v. Maxwell (53 N. Y. 19) the court, per Allen, J., said (p. 21): “ The counsel for the appellant does not controvert the elementary principle that custom or usage cannot avail to vary or alter the terms of an agreement as made, or its legal effect. Evidence may be given of a custom or usage in explanation and application of particular words or phrases, and to aid in the interpretation of the contract, but not to derogate from the rights of the parties, or to import into the contract new terms and conditions, or vary the legal effect of the transaction. ” (See, also, Home Ins. Co. v. Continental Ins. Co., 180 N. Y. 389, 397.) The principles on which courts have been moved to receive evidence of custom are closely analogous to those on which the parol evidence rule is based. (See Thomas v. Scutt, 127 N. Y. 133, 141.) The limitations of this rule were explained in Trustees of Southampton v. Jessup (173 N. Y. 84) and.in my judgment, what was there said has an important bearing on the case in hand. The trustees had passed a resolu [586] tion authorizing defendant “to make a roadway and to erect a bridge.” On a previous appeal (162 N. Y. 122) the court had held (113 N. Y. 88) that.the resolution “authorized two different structures, to wit, a solid roadway and a drawbridge, not a bridge on piles with a drawbridge in it.” On the trial under review evidence had. been received tending to show that both parties intended that the roadway should be of wood, which evidence was held to be incompetent. Eeferring to evidence admissible under the parol evidence rule, the court said (pp. 89, 90): “ ‘It is received where doubt arises upon the face of the instrument as to its meaning, not to enable the court to hear what the parties said, but to enable it to understand what they wrote as they understood it at the time. Such evidence is explanatory and must be consistent with the terms of the contract.’ * * * What ambiguous word or expression of doubtful meaning is there in the resolution relating to the material out of which the roadway was to be constructed ? Hone whatever, for the writing is silent upon the subject. The defendant was given liberty to make a roadway, but nothing was said as to how it should be made or what it should be made out of. An ambiguity, in order to authorize parol evidence, must relate to a subject treated of in the paper, and must arise out of words used in treating that subject. Such an ambiguity never arises out of what was not written at all, but only out of what was written so blindly and imperfectly that its meaning is doubtful. Hothing is said in the resolution before us upon the subject of the material to be used, or the method to be employed in making the roadway, and hence there is no ambiguity arising out of the words used with reference to that subject. Witnesses cannot be permitted to swear something into the instrument, which neither explains nor interprets any language used therein. They cannot swear a wooden roadway into a franchise which is silent, even to the exclusion of implication, as to the substance out of which the roadway is to be made. That would be making anew contract instead of explaining an old one, and would violate the prin ciple upon which parol evidence is received to aid in interpreting an ambiguous word or expression. Since the plaintiffs gave the defendant'the right to make a roadway, but did nor [587] restrict him to the use of wood, he was not obliged to use wood. As we held on the last appeal: ‘ In the absence of specifications in the grant, the defendant had the right to make a roadway out of the materials in common use for the construction of roads, such as earth and stone.’ ” In the late case of Loomis v. N. Y. C. & H. R. R. R. Co. (203 N. Y. 359) the parol evidence rule was applied in an action at law to exclude evidence of instructions to ship by a particular route where a hill of lading was silent as to the route, hut was otherwise complete, the court saying (p. 368): “The effect of not specifying the route was simply to leave that subject open to the choice of the carrier, which could select any route that it chose.” In other words, the law itself controlled that feature of the contract. I do not think the case is one for the application of the “ well-established rule of law that parties to a contract on a subject-matter concerning which known usages prevail are deemed to have incorporated such usages by implication into their agreement if nothing is said to the contrary.” (Per Rumsey, J., Schipper v. Milton, 51 App. Div. 522, 525; affd., sub nom. Smith v. Milton, 169 N. Y. 583.) I conceive that the above rule is subsidiary and subordinate to the controlling principle of necessity from which it springs and that it can only he applied when there is need to interpret that which is ambiguous or to supply that which is lacking. Where there is neither ambiguity nor failure to express completely the terms of a contract and the rights of the parties are fixed by law, no custom may he shown. In Bradley v. Wheeler (supra, 504) Commissioner Earl refers to the particular rule of custom which was the subject of the decision in Schipper v. Milton and refused to apply it for the reasons I have noted. The determination of the Appellate Term should be affirmed, with costs. Ingraham, P. J., and Scott, J., concurred; Clarke and Dowling, JJ., dissented.