National Cable & Manufacturing Co. v. Filbert

POEEEY, J. This action grew out of a contract entered into between the plaintiff, a corporation doing business at Niles,-Mich., and the defendant, a hardware an-d implement dealer at Twin Brooks, S'. D. The contract was1 entered into on the 18th day of December, 1907, and provided for the sale, by the plaintiff to the defendant, of a quantity of copper -cable and other material and fixtures that enter into the construction an-d equipment of lightning rods. The contract provided for the delivery, by the plaintiff, of th-e goods at the railway station at Niles, Mich. The contract gave the defendant the exclusive right to sell the merchandise described in the contract, and' other merchandise of a similar character to be purchased from1 the plaintiff, but restricted the territory within which he might sell to Twin Brooks, Milbank, Corona, and Marvin and limited the time within which he might sell to the period between the acceptance of the contract by the plaintiff and the 1st day of December, 1908. The defendant was also bound by the contract, during the above period, not to- purchase any similar goods from any other manufacturer.. It contained a covenant fixing the minimum price for which he should sell said copper cable, and also contained the following -covenant, to-wit: “That said first party [plaintiff] agrees to furnish a salesmaú to assist in- starting the business as soon as possible after requested by said second party, and that -said second party, in case a salesman is furnished at his request, agrees that on arrival of the said salesman, he, said second party, will furnish a man and team and at once proceed to canvass jointly with said salesman, exclusively for the sale of lightning rods, and that, as soon as said canvas's is terminated, he, said second party, hereby agrees to pay said salesman, as compensation for his services, an amount equal to -one-half of the profits arising from the sale -of the goods during said canvass.” Plaintiff’s agent, also, in addition to the numerous restrictions contained in the written contract, gave defendant positive instructions not to at — 249 — tempt to put up any rods until they (meaning some of plaintiffs agents) were there to show him how to put -them up. In consideration of the many restrictions placed upon the defendant in regard to the price, the use, and the disposition defendant was to make of these goods, (he was little more than an agent of' .the plaintiff for the purpose of selling plaintiffs goods for a limited period of time within restricted territorial limits. Blank spaces in the contract providing the terms of payment were never filled out; but the treasurer and assistant treasurer of the plaintiff corporation both testified that the goods were to be paid for on the I'st of June, 1908. The goods were shipped by the plaintiff and received by defendant at his place of business in Twin Brooks, S. D. No question was ever raised as to the value of the goods, or that they were not shipped according to contract; but defendant claims that, the plaintiff never furnished him with a salesman to assist in starting the business, as provided for in said contract, and justifies •his refusal to pay the 'bill solely upon that ground. The defendant alleged and proved by the evidence that he did not understand or know anything at all about selling lightning rods, or how to put them up, at the time of entering into^ the 'contract. That, in order to sell them, it was -nécessary to go out and put them up for the purchasers on the buildings to be protected thereby, and that it’ required some expert skill and experience to do this properly. That these facts were well known to the plaintiff, and that it was in contemplation thereof that the agreement to furnish a salesman was inserted in the contract. He also alleged and proved that he made repeated requests upon the plaintiff to furnish such salesman, or expert, as he was termed at the trial, but that plaintiff wholly failed to comply with said request, and thereby rendered the goods wholly valueless to him. He retained the goods until the 10th day of May, 1909, when he attempted to rescind the contract and- returned the goods to the plaintiff at Niles, Mich. The case was tried to a jury. The plaintiff, on the trial, treated the agreement to furnish the éxpert as one of the “conditions precedent” to be preformed by it, and directed the greater part of its somewhat voluminous testimony to an attempt to> prove that it had complied with this requirement of the agreement. At the close of all the testimony, the plaintiff moved the court to — 250 — direct a verdict for it “for the reason that the undisputed evidence in this case fails to show that the defendant has established any. facts sufficient to constitute a defense, and for the further reason that the evidence offered and received itself show-s that the plaintiff has done all things by it required under the terms of the contract in evidence, and that the undisputed evidence in this case shows that there has not been a failure of consideration, and that the furnishing of a salesman to assist in the starting of the business, by the .plaintiff, was not an element of the consideration of the contract, -but that it affirmatively appears in the agreement that the defendant therein agreed to pay the salesman, as a compensation for his services, an amount equal to one-half of the profits arising from the sale of said goods during said canvass, and that the evidence offered by the defense relates to a matter which does not constitute a defense, but -simply a condition, and that the measure of damages, if at all, should arise under altogether a different remedy from that which appears from the pleadings in this case.” This motion was granted, and defendant took exceptions. The appellant assigns as error: First, the admission of the original contract in evidence; second, the direction of the verdict by the court; and, third, the entry of the judgment upon the directed verdict. The first ‘assignment seems to have been abandoned by appellant in Shis brief; and, as a disposition of the third depends upon the determination of the second, it will be necessary to consider the second assignment only. [1] As the case appears o'n appeal, the question involved depends wholly upon the construction to be put upon the above-quoted clause of the contract. It is strenuously contended by the respondent that this clause in the contract is an independent covenant to be performed by -the plaintiff at some subsequent time, and without reference to defendant's liability, and that -therefore the court was justified in taking the case from the jury. On the other hand, it is just as strenuously contended by the appellant that this covenant is one of the material elements of the contract, or was a “mutual and dependent condition,” to be performed by it to entitle it to the purchase -price. If this contention is correct, then the question should have been submitted to .the jury'. [2] We may state, at the outset, that the fact that the defendant undertook to -rescind by returning the goods to the plaintiff — 251 — would ordinarily be wholly immaterial ito a determination of the issues in the case. If it were necessary, as contended by defendant, that -the plaintiff must comply with the disputed condition in the contract before it became enititleid to the purchase price, it was unnecessary for him ito rescind in order to avoid liability. He would have a perfect right to wait until the plaintiff had performed all of its obligation* before he became liable for the purchase price. On the other hand, if the disputed clause in the .contract was an independent covenant or “condition subsequent,” ithen the ^defendant became fully liable upon plaintiff’s delivery of the goods, and his attempted rescission would have been of no avail. In this case, defendant returned the goods pursuant to directions given by one of plaintiff’s agents. This agent was in Twin Brooks, and defendant informed him that plaintiff had not lived up to its agreement in furnishing defendant with the assistance it had promised. The agent admitted “that they had not got round as they ought to,” but that they had been terribly rushed, and would try to do better another year, “if you want to keep it” (meaning the merchandise in question). Defendant informed him that he intended to return the goods, whereupon the agent replied: “Well, we will find a place ito ship it to, and, if we don’t give you shipping directions, you can ship it in.” Under these conditions, it became incumbent upon defendant to return the goods. The contract does not specifically state upon its face that this provision is a condition precedent, and, therefore, whether it is such or not is a matter of construction for the court, and depends upon a consideration of the entire contract and the intent and understanding of the parties themselves, as disclosed by their conduct relative thereto. [3] The court having directed a verdiot for the plaintiff, all the evidence of the defendant must be taken as true, and he must be given the benefit of all legitimate inferences therefrom. Marshall et al. v. Harney Peak Tin M. M. & M. Co., 1 S. D. .350, 47 N. W. 290; Bohl v. City of Dell Rapids, 15 S. D. 619, 91 N. W. 315; Ernster v. Christianson, 24 S. D. 103, 123 N. W. 711; Walklin v. Horswill, 24 S. D. 191, 123 N. W. 668. Provisions in contracts like the one in dispute in -this case have been much litigated in the courts; but, owing to the peculiar nature of the question, each case must be determined in accordance — 252 — with the facts involved. No definite rule, other than to determine the real intent of 'the parties, where the same is not clearly expressed by the terms of the contract, can be laid down; and it is rarely that the conclusions reached in one case can be decisive of another. As was said by Foot, J., in Grant v. Johnson, 5 N. Y. 255: “So many decisions have been made on the vexed question of what are, and what are not, dependent covenants, and so many of them are irreconcilable that they rather perplex than aid the judgment in determining a given case. One rule is universal, and that is that the intent of the parties is to> control.” While this is true, the principles and reasoning .that have been applied in the adjudicated cases are helpful in determining this vexed question, and the following cases are instructive: Wood v. Code, 13 Pick. (Mass.) 279; Coos Bay Wagon Co. v. Crocker (C. C.) 4 Fed. 577; Williams v. Healey, 3 Denlo (N. Y.) 369; Fester v. Jewett, 11 N. Y. 453; Clark v. Weis, 87 Ill. 438, 29 Am. Rep. 60; Dunham & Dimon v. Pettee & Mann, 8 N. Y. 508. In the case of Oliver v. Oregon Sugar Co., 42 Or. 276, 70 Pac. 902, the count, in considering the severability of contract, say: “Whether a contract is entire -or severable is a question of construction, depending upon the intention of the parties, to- be ascertained. and determined from .the language employed, the subject-matter, and the surrounding circumstances. ‘If the part to be performed by one party,” says Mr. Justice Prim, ‘consists of several 'distinct and separate items, and the price to be paid by the other is apportioned to each item to be performed, or is left to be implied by law, such a contract will generally be held to be sever-able. And the same rule holds where the price to be paid is dearly and distinctly apportioned to different parts of what is to be performed.’ ” The suit was one brought for the recovery of the purchase price of several car loads of sugar. beets, which defendant had purchased from plaintiff at a stipulated price per ton.The weight of some of the cars had not been determined at the time of the suit, and the defendant defended on the ground that the contraot was an -entirety, and recovery could not be had for any of the beets until the weight of the whole was known.' The court held, and rightly, that, inasmuch as the price of the beets was fixed at so much -per ton, the contract was severable, and that the plaintiff was entitled to recover for the quantity of which the — 253 — weight was known. There was no express agreement that none of the beets should be paid for until the weight of the whole had been determined. In Ink et al. v. Rohrig, 23 S. D. 548, 122 N. W. 594, this court announced the rule as follows: “ The universal rule laid down under the authorities concerning the construction of covenants in contracts, as to whether they are dependent or independent, is that the relation of covenants is to be determined according to the intention and meaning of the parties as the same appears in the 'instrument, and by the application 'of common sense to each particular case, to which intention, when once discovered, all technical forms of expression must give away. It is further held under the authorities that, in case of doubt, the courts will construe such covenants as dependent, rather than independent.” And, quoting from Bank v. Hagner, 1 Pet. 464, 7 L. Ed. 219, the court said: “In contracts of this description, the undertakings of'the respective parties are always considered dependent, unless a contrary intention -clearly appears. A 'different construction would, in many cases, lead to the greatest injustice, and a purchaser might have payment of the consideration money forced upon- him, yet be disabled from procuring the property for which he paid it. Although many nice distinctions are to be found in the •books upon the question as to whether the covenants are promises of the respective parties to the contract or to be considered independent or dependent, yet it is evident the inclination of the courts strongly favored the latter construction as being obviously the most just. The seller ought not to be compelled to part with his property without receiving an equivalent in return.” In the case of Davis et al. v. Jeffris, 5 S. D. 352, 58 N. W. 815, this court used the following language: “Whether or not a covenant is dependent or independent must be ascertained from the contract and attending circumstances; the rule being that such covenants will foe construed as dependent, unless a contrary intention appears -from the terms of the contract.” This was an action to recover on a contract for the construction of a creamery and cold storage plant, according ito plans and specifications contained in the contract.' The contract provided that the cold storage department -should be constructed' under the McCray Cold Storage and Refrigerator patents, and contained the following — 254 — covenant: “We agree to furnish with said contract a patent deed from the McCray Refrigerator Company, conveying- all the rights under said patents.” The provisions of the contract, so far as the erection and equipment of the plant is concerned, were carried out by the plaintiff, but the patent deed for the McCray Cold Storage and Refrigerator patents was riot furnished; plaintiff contending that the stipulation to furnish the said patent ,cleed was an independent stipulation or covenant, and that the plaintiffs were not required to prove that they had furnished or tendered 'such deed to entitle them to recover on the contract. The contract provided that the defendants should pay for the creamery and cold storage when “completed.” The court held that the completion of the plant without the patent deed was not a “completion of the contract” and that proof that the patent deed had been furnished was essential*to plaintiff’s right of recovery, holding that, although the contract, so far as the completion of the plant is concerned, had been fully complied with by the plaintiff, still it would be of no value, and could be made of no use to the defendants, unless the patent deed conferring upon defendants the right to use the McCray Cold Storage and Refrigerator process was furnished; that they contracted for something that they knew would be valueless to them when they got it, or else the covenant to furnish the patent deed was one of the essential elements of the contract. This case is directly in point with the case at bar. When all the surrounding and attending circumstances are taken 'into consideration, it cannot, but appear that, when the defendant entered into the contract sued upon, the furnishing of a salesman to help defendant dispose of the goods contracted for was as important an element in the transaction as the goods themselves. The goods sued for were not staple goods; they could not be placed upon the shelves in defendant’s store "and sold in the ordinary course of business. In order to dispose of them, it was necessary to canvass the territory over which they were to be sold, - and to attach them to the buildings of purchasers as they went along. Again, the goods did not become the property of defendant, in the full sense of the word. While, technically, the title passed with the delivery to him, 'still he could not exercise that unrestricted dominion over them that a person may exercise over that which belongs to him. The plaintiff, despite the fact that they had been — 255 — delivered to the 'defendant in another state, still retained almost complete control over them. It fixed the price under which they could not be sold: it 'limited the time beyond which defendant could not sell them; and it limited the territory within which they might be sold. It was- known to both parties that the defendant had had no experience in handling this class of goods; that he did not know how to attach lightning rods ¡to buildings that were to be protected thereby, which was necessary to do in order to dispose of them. It was fully understo.od and contemplated by both parties, at the time of the making of the contract, that it was necessary that some person, who had had the requisite skill and experience, assist defendant in starting the business; and defendant was given positive- instructions not -to attempt to* put up any rods until they (meaning plaintiff’s agents) were there to show him how to> do if. Thfe goods were contracted for in December, delivered during the following March, but were not to be paid for until the first of the following month of June, thus affording the plaintiff ample time and opportunity to send its salesman and furnish the defendant the-requisite information. Again, a careful examination of the disputed clause in this contract, in view of the attending circumstances, will be instructive. It will show that the covenant contained in this provision was as much in contemplation of the parties thereto, at the time of entering into the contract, as the shipment of the merchandise itself. If was the inducement that led defendant to enter into the transaction; it was not an afterthought nor a mere gratuitous act on the part of plaintiff, to be performed only at the option of defendant. Plaintiff agrees absolutely to di> it. True, it is to be done so soon as possible after requested, but it is to be done whether requested or not; and the only option -the defendant had in the matter was by making the request to fix the time, or rather to hasten ..the time, of his coming. Neither is the condition requiring the defendant to furnish a man and team to- assist such agent and to pay his compensation out of the profits from sales they jointly made an absolute condition to be performed at all events. He is to do this only in case he has made the request to have the agent sent. If 'plaintiff sent him in compliance with the terms of his agreement, it would be without cost to the defendant. It was to the pecuniary interest of the plaintiff -to have the — 256 — goods shipped to defendant disposed of at as early a date as possible; and it was also to its pecuniary interest to have the lightning rods, when sold,' properly attached to the buildings for the purchasers, in order that a market for other similar goods might be created as contemplated by the terms of the agreement. It was for this reason that plaintiff, through its agents, instructed the defendant not to try to put up any lightning rods until they were there to show him how 'to do it, and for this reason defendant could not dispose of the goods nor derive any benefit whatever from the purchase until this assistance was furnished. Thus, it will appear that the furnishing of the assistance provided for in the disputed clause of 'this contract is one of the most important and essential elements of the entire agreement. And this is the view taken by 'both plaintiff and defendant. Ample time for its performance was allowed between the sale of the goods and 'the time the purchase price was to become due., During this time, one or two of plaintiffs agents visited the defendant, and plaintiff claimed they 'had complied with the agreement. Defendant claimed they did not, and refused payment on that account. Later on plaintiff ’ sent other of its agents to defendant, who they claimed rendered defendant i„.e assistance provided for in the contract, but this was disputed by defendant; and whether they did or not was the principal and practically the only issue raised at the trial. That plaintiff so regarded this condition is apparent from the fact that it assumed the burden on its main case of showing that this clause in the contract had been fully complied with. If the intent of the parties, when entering into the contract, is to be gathered from their understanding of and conduct relative thereto, then certainly the agreement to furnish the defendant this assistance in starting the business was one of the essential elements-of the contract; and the question whether it had been complied with or not should have been submitted to the jury. The judgment and order appealed from should be reversed, and a new trial awarded.