Livesley v. Johnston

76 P. 13 | Or. | 1904

Mr. Justice Wolverton,

after stating the facts in the foregoing terms, delivered the opinion of the court.

2. In support of the demurrer it is first insisted that the contract or agreement set out, upon which the suit is founded, and which it is sought to have specifically performed, is lacking in the essential of mutuality of obligations between the contracting parties, and is therefore without validity or binding effect. The plaintiffs stand upon the agreement, and, of course, assert its legal efficacy. They insist, first, that it does contain mutual obligations which alone render it binding upon both parties; but, if not, that it at least has the force and effect of an option accorded the plaintiffs to purchase the hops, founded upon a sufficient consideration to support it. A promise founded upon a good consideration rendered at the time is obligatory and enforceable. A loan of money and simple-contract debts are familiar instances of the kind. The promise to repay the money or to discharge the-debt becomes binding and obligatory by reason of the promisor having received a consideration for making it. When, however, a promise, by whatsoever reason, has become binding, it is more aptly termed an “obligation.” But a promise of material import will support a counter promise and vice versa. When mutually entered into, they operate one as a consideration for the other ; thus constituting an agreement binding and obligatory upon both parties. Where the agreement is wholly executory, it is essential that the obligations be mutual; else there is no consideration for its support, and it is but a mere nudum pactum. These simple principles, aptly applied, will aid us largely in the present controversy.

The contract is between a producer of hops, on the one part, and dealers in that commodity, upon the other. Its terms unmistakably import a sale of the hops to the amount of 20,000 pounds, to be grown by Johnston in each of the five years designated, and an agreement upon his part to deliver them at Woodburn, on board the cars, free of charge, at such time during the month of October as the second parties may direct. The manner in which the hops shall be baled and their quality are specifically defined. This is a clear and absolute undertaking on the part of the seller. The correlative and reciprocal promises on the other part are that the second parties will advance to the first party .$250 on or about April, May, and. June of each year for cultivating purposes, and 4i cents per pound for picking purposes during picking time, in September, and, upon delivery and acceptance of the hops, that they will pay the balance due thereon at 9-J- cents per pound, that being the agreed price for the product; all moneys advanced to be deducted from the purchase price. If the contract rested here, nothing else being said, no other provisions made, there could be no cavil or controversy touching its validity and binding effect. It would have then simply been a sale of the hops tu be grown, with an agreement to deliver on the one part, and an undertaking on the other part to advance $250 for the purpose of cultivating, 4y cents per pound for picking purposes, and to pay 9-¿-cents per pound for the hops upon delivery and acceptance ; reserving the right, as was natural, to deduct advances made from the purchase price, paying merely the balance due. The promises of the parties would then have been mutual - — that upon the one hand supporting those upon the other, and vice versa, thus creating correlative and reciprocal obligations — and the contract would unquestionably have been perfectly valid and binding upon both parties. But the promises upon the part of Livesley & Co. to advance picking money and accept the hops are materially qualified by subsequent conditions of the contract, and all its provisions must be construed together to arrive at its true intendment. They are interdependent in character, and none can be eliminated without destroying the contractual intendment and relationship of the parties. Should the hops be, from any cause, of lesser quality than choice, or not delivered in the condition agreed on, “according to the judgment” of Livesley & Go. or their agent, the contract accords them the privilege, nevertheless, of taking the same, or so many thereof as would be sufficient to cover the advances made on the crop, at a reduction in price of the difference in value between such hops and choice; and it was further stipulated that Livesley & Co. should, through their agent, have the right to determine at picking time whether or not the growing crop was in proper condition, and, if found not to be so, then that they should be relieved from making the stipulated advances of picking money. Thus analyzed, we are enabled to comprehend at a glance the essential features of the contract.

Now, the strong contention of counsel for defendants is that the stipulation that if the hops should be of lesser quality than choice, or not in condition as agreed upon, “according to the judgment” of Livesley & Co. or their agent, accorded to them the right or privilege of taking the crop, or not, subject to their mere will or caprice; thus nullifying their promise to purchase, and rendering it of no appreciable obligatory or binding effect upon them. ' And so with the contemplated advances of picking money. They assert that it was left entirely to their consideration, to be governed by their mere choice or pleasure in the premises. Ordinarily the purchaser of a commodity has the right of inspection upon delivery before acceptance, and, if it does not correspond in kind, quality, condition, or amount to that which is purchased or contracted for, he may reject it: Benjamin, Sales (7 ed.) §§ 695, 701; 2 Mechem, Sales, §§ 1210, 1211, 1375, 1376. The purchaser is conceded the exercise of his judgment, but he exercises it at his peril, and, if he rejects the commodity, which nevertheless comes up to the stipulated standard, he is yet bound for the purchase price, and the seller may recover it of him on proof that he has complied with the terms of the sale. Many cases are to be found where work is agreed to be done, articles furnished, or goods delivered upon sale, to the satisfaction of another, and it is uniformly held that the person to be benefited may exercise his choice of rejection or acceptance without assigning any reason therefor. That he ought to be satisfied, or that the work, articles, or goods would be satisfactory to a reasonable man or to a court or jury, will not avail as against the exercise of his convictions of sentiment. It is sufficient that he is not satisfied, and his own determination must be taken as final and conclusive. The cases proceed upon the assumption that the buyer has thus reserved to himself an unqualified option, not being willing to leave his freedom of choice to any contention or subject to any investigation whatever, and whatever decision he arrives at determines the controversy. If the question is one appealing to taste, sentiment, or artistic sensibility, as where the undertaking is to supply a portrait, bust, suit of clothes, musical instrument, article of furniture, or the like, it is, of course, the duty of the buyer to examine the subject of the purchase, and not to reject it unseen, but his determination upon examination cannot be questioned. Where, however, the agreement is to supply a machine which is to work to the satisfaction of the vendee, a'reasonable test is required, and he must act in good faith and with honesty of purpose, and cannot be heard to express dissatisfaction which is wholly feigned or simulated. So it has been held in this class of cases that where the purchaser was in fact satisfied, but fraudulently and in bad; faith declared that he was not, he is bound nevertheless, and must respond for the purchase price. “ It is quite permissible,” says Mr. Justice Bryan, of the Supreme Court of Maryland, “to parties to enter into such contracts; and where the approval or satisfaction of the party is made a condition precedent to the right to receive compensation, or the contract price, for the article to be delivered, the court has no right or power to dispense with the condition”: Baltimore & Ohio R. Co. v. Brydon, 65 Md. 198, 226 (9 Atl. 126, 127, 57 Am. Rep. 318). And their validity seems to be unquestioned: 1 Mechem, Sales, §§ 663-668; Campbell Print. Press Co. v. Thorp, (C. C.) 36 Fed. 414, (1 L. R. A. 645); Silsby Mfg. Co. v. Town of Chico, (C. C.) 24 Fed. 893 ; Zaleski v. Clark, 44 Conn. 218 (26 Am. Rep. 446); McCarren v. McNulty, 7 Gray, 139 ; Brown v. Foster, 113 Mass. 136 (18 Am. Rep. 463); Gibson v. Cranage, 39 Mich. 49 (33 Am. Rep. 351); Wood R. & M. Mach. Co. v. Smith, 50 Mich. 565 (15 N. W. 906, 45 Am. Rep. 57); Manufacturing Co. v. Brush, 43 Vt. 528 ; McClure v. Briggs, 58 Vt. 82 (2 Atl. 583, 56 Am. Rep. 557).

There is another class of cases where the article sold or the work to be done or performed is to be subject to the approval of, or to be satisfactory to, some third person, and in many instances that person is the agent or employe of one or the other of the parties to the contract. In cases of this character the approval of the .party so designated becomes a condition precedent to a recovery for the price. He must, however, have acted in good faith and with an honest purpose, and cannot arbitrarily or capriciously exercise his judgment. If he violates his duty in this regard, a recovery may be had, in the absence of his approval, for the nonacceptance of the articles furnished. But in the absence of fraud or bad faith in the conduct of such party in respect of his approval or the withholding of it, his judgment or determination is to be accepted as final and conclusive. No mere error or mistake of judgment will vitiate his determination, the object of his appointment being to prevent and exclude contention and litigation. Such is said to be now the settled doctrine touching this class of contracts in the courts both of this country and England: Baltimore & Ohio R. Co. v. Brydon, 65 Md. 198 (57 Am. Rep. 318, 9 Atl. 126). See also, Lynn v. Baltimore & Ohio R. Co. 60 Md. 404 (45 Am. Rep. 741); Kihlburg v. United States, 97 U. S. 398; Sweeney v. United States, 109 U. S. 618 (3 Sup. Ct. 344); Martinsburg & Potomac R. Co. v. March, 114 U. S. 549 (5 Sup. Ct. 1035). We have had occasion to consider cases of this kind, of which North Pac. L. & M. Co. v. East Portland, 14 Or. 3 (12 Pac. 4); Chance v. City of Portland, 26 Or. 286 (38 Pac. 68); and Vanderhoof v. Shell, 42 Or. 578 (72 Pac. 126), are instances. In the latter case a building contract Was involved, whereby it was stipulated that the builder should perform his work subject to the approval of the architect. Contracts of this nature are usual and frequent. The two former cases were concerning certain street improvements in the City of Portland, which were to “be completed to the satisfaction of the common council.” In the first of these cases Mr. Justice Thayer, commenting upon the effect of the contract, says: “I think there must be a distinction between a contract in which the work is not to be paid for until a certificate is produced from some third person, showing that it has been performed in accordance with the provisions of the contract, and one in which it is to be paid for upon its approval and acceptance by the party for whom it is performed. In the former case the production of such certificate is a condition precedent to the right to demand the payment, and the party seeking to enforce payment must aver and prove its performance. In the latter case it is the duty of the party to approve and accept the work, if performed substantially as required by the contract, for certainly the law will not permit such party to capriciously withhold his approval in such case, and thereby avoid the payment of a just claim.” In Baltimore & Ohio R. Co. v. Brydon, 65 Md. 198 (57 Am. Rep. 318, 9 Atl. 126), the defendant agreed to furnish coal to the plaintiff of a quality that should be satisfactory to plaintiff’s master of transportation and master of machinery, virtually its agent, and the stipulation was upheld, which is coming very near to the condition of the present contract. But in Campbell Print. Press Co. v. Thorp, 36 Fed. 414 (1 L. R. A. 645), Mr. Justice Brown, who is now on the supreme bench of the United States, says, “We know of no reason of public policy which prevents parties from contracting that the decision of one or the other shall be conclusiveand such was practically the case in Fletcher v. New Orleans & N. E. R. Co. (C. C.) 19 Fed. 731, and Dustan v. McAndrew, 44 N. Y. 72.

Within the undoubted doctrine of these cases, the contract under consideration was one which the parties had a right to enter into, and the clause leaving the quality and condition of the hops at the time of delivery to the judgment of the buyer does not render it void of mutuality. Livesley & Co. could not reject the hops upon mere whim or sheer volition, but must in good faith exercise an honest judgment in the premises, and unless they, by themselves or through their agent, so rejected them, they would nevertheless he bound for the price! Being a party and passing judgment upon their own case, good morals and decent propriety would suggest that they act with circumspection and a considerate regard for the rights of the seller as well as their own, and the law will look with greater scrutiny upon their determinations than if they were wholly disinterested arbiters. While this condition qualifies to a certain extent the promise to accept and pay for the hops, if choice in quality and in good condition, as agreed upon, it does not, by negation, destroy the efficacy of the promise. If the sale had been the ordinary one of goods or chattels, the buyer, as we have seen, would have exercised his judgment as to rejection at his peril, and the goods or chattels could be shown notwithstanding to be of the quality and condition agreed upon. In a sale like the one at bar, the buyer must also accept, unless, in his honest judgment, exercised in absolute good faith, the commodity is not such as was contracted for. If so exercised, his determination becomes final, because the parties have so agreed ; but if he exercises his judgment arbitrarily, capriciously, or fraudulently, with the sheer purpose of avoiding his obligation to accept, it will not avail him, as the actual quality and condition of the hops may then be inquired into, notwithstanding his adverse determination. The undertaking of Livesley & Co. is not, therefore, a mere option to take the hops or not, but a positive obligation to purchase, unless, in their honest judgment, fairly exercised, they are not of the quality or in the condition contracted for. In the respect considered, we are firmly of the opinion that the contract is mutual and binding. .If the hops are not, in their honest judgment, up to the agreed standard, then they are accorded the privilege or option of purchasing, or not, as they may desire; and this provision, when compared with the one just discussed, indicates very clearly the distinction that exists, and that which the parties themselves declared, between the agreement to purchase and a mere option to purchase, as may suit the wish of the buyer.

The same considerations apply alike to the obligation to advance picking money. It was not left to the mere option of Livesley & Co. to advance such funds as and when they saw fit, but they or their agent must pass an honest judgment as to whether or hot the crop is in the proper condition; that is, for the production of such hops as is bargained for. The purpose of this stipulation is apparent. Livesley & Co. would hardly be expected to advance money upon a contemplated product when it was manifest that it would not come up to the standard in quality contracted for, and would furnish, at best, doubtful security for the repayment of the advances. But aside from these considerations, there is the obligation to advance $250 on or about April, May, and June of each year for cultivating purposes, which is unconditional; and when all the conditions are construed together, including the chattel-mortgage element, which is intended as security for repayment of advances made in case a sale is not consummated, we are impelled to the conclusion that the contract is mutual, and therefore valid and binding upon the respective parties. In view of these considerations, it is not necessary for us to determine whether or not, if the contract of Livesley & Co. was a mere option to purchase, it is supported by a sufficient consideration. Nor have we considered what would be the effect on the sale had Livesley & Co. declined to advance picking money, as it does not seem to be involved in the present controversy. ■

3. The next question presented is whether a court of equity has jurisdiction to decree a specific performance, by requiring a delivery of the crop of hops produced for the year 1903, to the amount of 20,000 pounds. It may be said that equity will not ordinarily grant relief for the specific delivery of chattels, because it is generally considered that the plaintiff has a plain, speedy, and adequate remedy at law for damages for withholding them. The interposition of equity is not withheld except upon this particular ground, as its jurisdiction is as ample to decree the specific performance of an agreement relative to personalty as it is one relative to realty: Sullivan v. Tuck, 1 Md. Ch. 59; Frue v. Houghton, 6 Colo. 318; Duff v. Fisher, 15 Cal. 376; Mechanics’ Bank v. Seton, 26 U. S. (1 Pet.) 299; Mason v. Patterson, 74 Ill. 191; Kirksey v. Fike, 27 Ala. 383 (62 Am. Dec. 768); Barnes v. Barnes, 65 N. C. 261. The reinedy at law, however, which will bar such relief, must be as practical and efficient to the ends of justice and its prompt administration as in equity, or, to employ the language of Mr. Chief Justice Fuller in Gormley v. Clark, 134 U. S. 338, 339 (10 Sup. Ct. 554, 557): “ The jurisdiction in equity attaches unless .the legal remedy, both in respect to the final relief and the mode of obtaining it, is as efficient as the remedy which equity would afford under the same circumstances”: South Port. L. Co. v. Munger, 36 Or. 457 (54 Pac. 815, 60 Pac. 5); Benson v. Keller, 37 Or. 120 (60 Pac. 918); Wollenberg v. Rose, 41 Or. 316 (68 Pac. 804); Brett v. Warnick, 44 Or. 511 (75 Pac. 1061). When, therefore, an award of damages would not put the party seeking equitable relief for the delivery of personalty in a situation as beneficial as if the agreement were specifically performed, or where compensation and damages would fall short of the redress to which he is entitled, the jurisdiction is properly invoked ; otherwise not: Frue v. Houghton, 6 Colo. 318; Avery v. Ryan, 74 Wis. 591 (43 N. W. 317); McGowin v. Remington, 12 Pa. 56 (51 Am. Dec. 584).

4. And it may be further observed that the insolvency of the party against whom relief is sought, standing alone, will not confer jurisdiction to enforce specific performance in this class of cases. There must be some other element or principle of equitable cognizance upon which the remedy is invoked: Gillett v. Warren, 10 N. M. 523 (62 Pac. 975); McLaughlin v. Piatti, 27 Cal. 451; Cincinnati & C. R. Co. v. Washburn, 25 Ind. 259. The fact of insolvency, when combined with other causes for equitable interposition, may, however, become a potent or even controlling factor in determining the fact of jurisdiction. The principle is well stated by Mr. Justice Thompson in Heilman v. Union Canal Co. 37 Pa. 100, 104, as follows: “The fact, if it be so, that this remedy may not be successful in realizing the fruits of a recovery at law, on account of the insolvency of the defendants, is not of itself a ground of equitable interference. The remedy is what is to be looked at. If it exist, and is ordinarily adequate, its possible want of success is not a consideration. It is not intended here to say that insolvency is never a consideration moving a chancellor. It frequently does, but not alone. The equitable remedy must exist independently. In balancing cases, it is a consideration that gives preponderance to the remedy.” To the same purpose, see Clark v. Flint, 22 Pick. 231 (33 Am. Dec. 733); Parker v. Garrison, 61 Ill. 250.

5. Now, turning to the contract in question, and considering the situation and relation of the parties, do we not find independent grounds for equitable interference to grant relief by way of specific performance? We have already discussed the salient features, terms, and conditions of the contract, and have found it to be valid and binding between the parties. It covers a period of five years, and was made at a time, presumably, when Johnston was obtaining fair value for his hops — otherwise we must assume that he would not have entered into the relationship — and there is only one reason at this date why it may be considered to be a hard contract as to him, and that is that hops are worth more now in the market than they were then. Another suggestion in this connection: The commodity fluctuates greatly in the'market, and it may have been a controlling circumstance that Johnston considered that 9-]- cents per pound for the hops raised by him during the five years designated would be a good average price for the time, and hence, upon the whole, a profitable undertaking. But the undertaking to produce the hops was not solely his own. Under the agreement,.Livesley & Co. were to contribute to the expense of their production; that is to say, they were to advance money for the purposes of cultivating and picking, amounting to more than one half of the agreed value of the product, which was to become a lien thereon. In a sense, the venture was a joint one between the parties, where one was to provide the ground and bestow his labor, and the other to furnish the necessary funds for carrying it on ; the latter to be reimbursed their advances, with interest, in any event, however. The condition suggests a trust relationship between the parties, whereby the producer becomes, in a manner, a trustee of the buyer for the delivery of the product of the joint enterprise to the amount designated, and the contract has reference to the specific property to be produced under its terms. Further than this, it is alleged that plaintiffs surrendered to Johnston his promissory notes to the amount of $650 as part consideration for his entering into the contract, and an award of damages would not fully compensate them. Coupling these conditions with the fact alleged that the defendant is insolvent, so that a judgment at law against him would be bootless and utterly insusceptible of enforcement, we are constrained to resolve the question in favor of the equitable jurisdiction to enforce the specific performance of the contract.

It is further urged that the remedy is not reciprocal, and ought not, therefore, to be sanctioned. But it seems clear that Johnston would also have a remedy to enforce specific performance, should Livesley & Co. capriciously and fraudulently refuse to approve of the hops, as to quality and condition, or to accept them, as there would be involved the question of fraud, which is especially within the cognizance of equity, and the procedure would be more efficient to the ends of justice than an action for damages for a breach of their obligation.

We are not to be understood as holding that the defendant may be required to perform the labor or carry on the project of producing the crops, but, after they have been produced, and the plaintiffs have contributed to their production as required by the terms of the agreement, or have at all times been ready and willing to do so, and have only been deterred therefrom by the acts of Johnston, they are entitled to have specific performance in delivery of the amount of the crop so agreed to be delivered.

6. Another point is made — that the complaint does not show that Johnston owned the land upon which the hops were grown, or held it under a lease, so as to give him a potential interest in the crop produced. But the reasonable inference is that he had it rented. The agreement shows that it was owned by Frank and Melane Chappelle and Peter Deltaur, and Johnston must have acquired some right from them to cultivate it — presumably by lease.

7. And still another — that the complaint does not allege that hops of the kind were grown or owned by the defendant Johnston. If, however, the plaintiffs are willing to accept the hops he has produced as of the quality and condition agreed upon, the defendants cannot be heard to complain.

In view of these considerations, the decree of the trial court will be reversed, the demurrer overruled, and the cause remanded for such further proceedings as may seem proper. Reversed.