Opinion
12-23-1954
CALIFORNIA LETTUCE GROWERS, Inc., a corporation, Plaintiff and Respondent, v. UNION SUGAR COMPANY, a corporation, Doe Company, a corporation, Roe Company, a copartnership, et al., Defendants and Appellants. * Civ. 20213.
Richard E. Guggenhime, Eugene S. Clifford, Heller, Ehrman, White & McAuliffe, San Francisco, Twitchell & Rice, Santa Maria, for appellants. Schauer, Ryon & McMahon, by Robert W. McIntyre, Santa Barbara, for respondent.
CALIFORNIA LETTUCE GROWERS, Inc., a corporation, Plaintiff and Respondent,
v.
UNION SUGAR COMPANY, a corporation, Doe Company, a corporation, Roe Company, a copartnership, et al., Defendants and Appellants. *
Dec. 23, 1954.
Rehearing Denied Jan. 11, 1955.
Hearing Granted Feb. 16, 1955.
Richard E. Guggenhime, Eugene S. Clifford, Heller, Ehrman, White & McAuliffe, San Francisco, Twitchell & Rice, Santa Maria, for appellants.
Schauer, Ryon & McMahon, by Robert W. McIntyre, Santa Barbara, for respondent.
MOSK, Justice pro tem.
This is an appeal by the defendant-appellant, Union Sugar Company, a corporation, from a summary judgment granted to the plaintiff-respondent, California Lettuce Growers, Inc., a corporation, by the Superior Court of Santa Barbara County after the sustaining of a demurrer to an answer and counterclaims without leave to amend.
The pleadings refer to a series of transactions, generally denominated leasing contracts and growing contracts, between the parties over a period of years. On November 1, 1945, Union Sugar leased to California Lettuce approximately 1000 acres in Santa Barbara and San Luis Obispo counties for a three year term ending October 31, 1948, providing specified rental for the first two years, rental for the third year to be fixed by arbitration in the event the parties failed to agree thereon. By an additional provision the lessee agreed to apply a minimum of fourteen tons of steer manure per acre on the leased land. On the same date, a growing agreement was executed by the parties covering the same three years and providing that California Lettuce would grow and sell to Union Sugar 500 acres of beets in 1946, 500 in 1947 and 400 in 1948. This agreement, however, did not specify the price, terms of payment, place and manner of delivery and contained no express promise on the part of Union Sugar to purchase the beets. In its first counterclaim appellant asserts that 'the parties knew and understood that it was the standard practice of defendant to enter into separate supplemental and specific sugar beet contracts with each of its growers for the respective years in which beets were to be grown'.
On April 10, 1946, a complete contract for the purchase and sale of the 1946 crop of beets was executed by the parties, and on March 7, 1947, a similar agreement was executed for the 1947 crop year. On March 3, 1948, the parties again executed a contract concerning the growing of beets, but this instrument differed from those executed in 1946 and 1947, as will be discussed hereinafter.
On November 1, 1947, the parties entered into an agreement fixing rental for the 1948 crop under the lease and extending the lease an additional year to cover the crop period of 1948, leaving the rent to be paid for the latter period to subsequent determination.
On November 1, 1948, the parties entered into a further agreement concerning the rental under the lease and on the same date entered into a growing contract for 1949. This latter instrument, upon which the first counterclaim is based, was silent as to price to be paid for the beets or terms of payment, did not specify the time or place of delivery, and contained no obligation on the part of Union Sugar to accept and pay for the beet crop.
California Lettuce delivered 117 acres of 1949 crop sugar beets to Union Sugar for the price of which it brought suit against Union Sugar. The latter conceded its indebtedness for the beets received, but has maintained California Lettuce should have delivered a full 239 acres of sugar beets, the deficiency allegedly damaging Union Sugar in the sum of $7,412.45. In addition, Union Sugar contended that California Lettuce was indebted to it in the sum of $14,529.94 for failure to apply additional manure as required by the agreement of November 1, 1947, for the sum of $1,395.21 for certain manure sold and delivered, $21.50 for certain pumping plant charges, and $115.74 on account of holding certain leased acreage. These deductions left a balance of $2,355.09, which Union Sugar tendered in full settlement of its obligations. California Lettuce accepted it merely on account.
The original complaint filed by California Lettuce on January 11, 1950, contained four counts, two in assumpsit and two for breach of contract, seeking a judgment in the sum of $27,300.78. Union Sugar filed an answer and counterclaims, to which demurrers were sustained thrice.
California Lettuce thereafter amended its complaint, alleging in the first count in assumpsit the reasonable value of sugar beets sold and delivered in the sum of $45,000 and it acknowledged receipt of $2,355.09. In its second and third causes of action, California Lettuce alleged breach of contract and damages therefor in the sum of $29,655.37, less $2,355.09, paid, leaving a balance due of $27,300.78 (sic).
To the amended complaint. Union Sugar filed an answer and counterclaim, admitting liability for $29,655.37 less the $2,355.09 paid on account and less certain setoffs claimed in five counterclaims.
California Lettuce demurred to the answer and first and second counterclaims, admitting the amounts claimed in the third, fourth and fifth counterclaims. The demurrer was sustained this time without leave to amend. On motion, summary judgment was granted on the pleadings in favor of California Lettuce in the sum of $25,768.34, together with interest thereon at the rate of seven percent from December 13, 1949.
On this appeal, Union Sugar contends that the first and second counterclaims state facts sufficient to constitute a valid setoff against the claims contained in the first amended complaint, and that the finding that the answer does not state facts sufficient to constitute a defense to the amended complaint is contrary to law. In addition, Union Sugar challenges the finding that the indebtedness was fixed by its account to California Lettuce dated December 13, 1949, and finally it maintains that in any event the award of interest is improper.
Cutting through the maze of pleading gymnastics the crux of this controversy revolves primarily about the validity of the first counterclaim, and that in turn depends upon the legal sufficiency of the agreement of November 1, 1948. This brief contract provides that California Lettuce 'agrees to personally grow, on suitable land in the Santa Maria Valley, and deliver to First Party two hundred and thirty-nine (239) acres of beets during the year 1949.'
It was first contended by respondent that the agreement was unenforceable because it imposed no obligation on Union Sugar to purchase the beets which respondent was obligation to grow and deliver. We are not impressed with this argument. Such a rule has been recognized in some jurisdictions, Cold Blast Transp. Co. v. Kansas City Bolt & Nut Co., 8 Cir., 114 F. 77, 57 L.R.A. 696; American Cotton Oil Co. v. Kirk, 7 Cir., 68 F. 791; Joliet Bottling Co. v. Joliet Citizens' Brewing Co., 254 Ill. 215, 98 N.E. 263; Hoffman v. Maffioli, 104 Wis. 630, 80 N.W. 1032, 47 L.R.A. 427; Velie Motor Car Co. v. Kopmeier Motor Car Co., 7 Cir., 194 F. 324, but not in California. Where a written contract is signed by both parties requiring one to sell and deliver to the other a specified commodity, there is an implied covenant on the part of the other to purchase and receive the commodity. King-Keystone Oil Co. v. San Francisco Brick Co., 148 Cal. 87, 82 P. 849; Preble v. Abrahams, 88 Cal. 245, 26 P. 99.
More significant here, however, is the omission from the contract of any reference to price.
The law does not favor, but on the contrary leans against the destruction of contracts because of uncertainty, and if at all possible will construe agreements so as to carry into effect the reasonable intention of the parties if it can be ascertained. The description of the subject matter of an agreement may be indefinite, but if it is capable of being identified and rendered definite and certain by evidence aliunde the contract is enforceable. McIllmoil v. Frawley Motor Co., 190 Cal. 546, 549, 213 P. 971; Sutliff v. Seidenberg, Stiefel & Co., 132 Cal. 63, 64 P. 131, 469; Mebius & Drescher Co. v. Mills, 150 Cal. 229, 88 P. 917.
Where no price is fixed in a contract for the payment of a commodity, the law, upon a delivery and acceptance of the thing sold, implies an understanding between the parties that a reasonable price is to be paid, and in such a case the contract will be deemed to be executed. However, where the price of the commodity called for but not delivered is to be subsequently ascertained and fixed by the valuation of others, by future agreement of the parties, or by future determination in any manner, the contract of sale is incomplete and unenforceable until the price is agreed upon. Jules Levy & Bro. v. A. Mautz & Co., 16 Cal.App. 666, 117 P. 936; Stone Drill Corp. v. Stoody Company, 4 Cal.App.2d 367, 40 P.2d 945. As stated in Avalon Products, Inc., v. Lentini, 98 Cal.App.2d 177, at page 180, 219 P.2d 485, at page 487: '* * * the general rule is that a provision in a contract which leaves open the terms of payment for future negotiation renders the contract incomplete and uncertain in one of its material features and for that reason unenforceable in equity. Morris v. Ballard, 56 App.D.C. 383, 16 F.2d 175, 49 A.L.R. 1464 and cases cited. In California the rule is the same and no action will lie to enforce the performance of a contract or to recover damages for its breach unless it is complete and certain.'
It is clear that this contract made no provision whatever for price, terms, manner or time of payment. But, contends appellant, the price may be ascertained by the course of dealing between the parties. Civ.Code, § 1729. It was understood between the parties, insists appellant, that the price would be determined in accordance with the custom of the parties, the same terms as were uniformly made available by Union Sugar to all sugar beet growers from whom it purchased beets.
If previous contracts between the parties had contained consistent provisions for or reference to the price to be paid for beets there might be a determinable course of dealing between the parties to which we could properly look for contractual guidance. Here we have attached to the pleadings all of the prior agreements executed by the parties. The agreements of April 10, 1946, and March 7, 1947, include specific price provisions in terms of dollars per ton in accordance with the sugar content of beets to be delivered. But the agreement of March 3, 1948, adopted a completely new price structure and if we may properly refer to prior contracts between the parties we would of necessity be obliged to examine that latest preceding document with particularity. No more than a cursory examination of this instrument is necessary to demonstrate its unilateral and illusory price fixing features.
The provision for payment in the contract of March 3, 1948, was as follows: 'Company (Union Sugar) will pay Grower (California Lettuce) for beets delivered by Grower and Accepted by Company, at the times and in the manner hereinafter provided, a price per ton computed in accordance with the Schedule of Beet Payments, set forth below, on the basis of net return of Company as hereinafter defined.' Thereafter the contract states 'The 'net return of Company' as used herein means the average net selling price actually realized by Company per 100 lbs. for 1948 crop sugar sold and delivered during the period August 1, 1948, to July 31, 1949, and shall be computed in accordance with the established system of accounting of Company by deducting from the gross selling price actually realized by Company for such sugar all such charges and expenditures as are regularly and customarily deducted by, and as determined by Company.' The agreement further provided for deduction by the Company of 'the excess cost of packaging over cost of packaging in basis (sic) 100-pound bag,' and various taxes. The average net selling price was to be 'verified' by accountants 'chosen by the Company, which verification shall be conclusive.'
Stripped of excess verbiage, the contract provided Union Sugar was to determine, unilaterally, the price to be paid California Lettuce. It could sell at any price and under and conditions, be responsible only for sums actually realized from the sale, make deductions in accordance with its system of accounting, and conclusively verify its methods and conclusions of accountants of its own choice. By no rationalization may this be called mutuality.
Appellant has urged that in the contract there are mutual promises. It is true that a promise may be a consideration for a promise. But this applies only to an enforceable promise. If, from lack of mutuality, the promise is not binding, it cannot form a consideration. Wickham & Burton Coal Co. v. Farmers' Lumber Co., 189 Iowa 1183, 179 N.W. 417, 14 A.L.R. 1293.
No California cases directly reviewing a comparable contract have been called to our attention. However, in Puryear-Meyer Grocer Co. v. Cardwell, Bank, Mo.App., 4 S.W.2d 489, there was an instrument requiring the price to be determined by the amount received on resale of the commodity involved. This was held to be void and judgment was granted on the pleadings. A provision setting the price at the resale sum realized plus a 'nice' profit was deemed unenforceable in Gaines & Sea v. R. J. Reynolds Tobacco Co., 163 Ky. 716, 174 S.W. 482. Also see discussion in Brooks v. Federal Security Co., 58 App.D.C. 56, 24 F.2d 884, 57 A.L.R. 747.
The contract involved, and the contentions made herein, are similar to those discussed in Weston Paper Mfg. Co. v. Downing Box Co., 7 Cir., 293 F. 725. Said the court, 293 F. at page 727: 'We see nothing in this contract which takes from the seller the absolute right to fix the price in the future. Certainly defendant had no voice in fixing this price. Nor did any third party have any immediate influence upon plaintiff in determining the price. True, plaintiff may, in acting, have been governed by a desire to hold future business, or have been prompted by other laudable motives. But plaintiff could have arbitrarily changed the price each quarter, and from such arbitrary fixation defendant had no appeal. Upon the ground of uncertainty, and also for want of consideration, we conclude the agreement as drawn was unenforceable.' But, argued the seller in that case, some of the goods were actually accepted by the purchaser. Under those circumstances the 'goods shipped under contracts void because of uncertainty as to price, yet accepted by the purchaser when delivered, must be paid for, * * *' but this 'part performance, however, does not validate the entire agreement. To the same effect is Wickham & Burton Coal Co. v. Farmers' Lumber Co., supra.
In Brooks v. Federal Surety Co., 58 App.D.C. 56, 24 F.2d 884, 885, 57 A.L.R. 745, 'The parties to the present contract did not themselves agree upon the price of the coal sought to be sold, but they agreed that the price should be the same price (less 10 per cent.) as that for which plaintiffs should sell the coal.' Said the court, 'The plaintiffs would be entitled to accept any price for it satisfactory to themselves, and in effect the transaction would be the same as if the mining company had agreed to sell and deliver the coal to plaintiffs, leaving it to them alone to determine the price to be paid for it. Such an agreement lacks mutuality, and cannot be enforced.'
A somewhat comparable contract was held invalid and unenforceable in Hass v. Alpert, 111 Cal.App. 26, at page 29, 295 P. 66. In that instance it was contended that the contract had been partially executed through payment of a part of the purchase price and for that reason the instrument became valid and binding. The court, however, referring to the Levy case, supra, held that "Where, however, the price of the commodity called for but not delivered is to be subsequently ascertained and fixed by the valuation of others or by the agreement of the parties, the contract of sale is incomplete, and nonenforceable until the price is so fixed or agreed upon."
As urged here, in Canadian Nat. Ry. Co. v. George M. Jones Co., 6 Cir., 27 F.2d 240, 241, it was said that the parties understood all sellers in the area would receive comparable payment. In fact, the contract specifically provided the price should be 'the same as paid seller by other railroads on contract for mine run coal from the Hocking district at the time this contract becomes effective.' The court held, at page 242, '* * * the clearly intended method and means for fixing price failed, the provision as to price became ineffective and inoperative, and the contract became unenforceable by reason of the indefiniteness of this controlling element and the necessity for further agreement thereon.'
There are numerous other examples of purported price formulae held to lack mutuality and enforceability: 'the average rates', City of Des Moines v. Des Moines Waterworks Co., 95 Iowa 348, 64 N.W. 269, 271; 'the customary and usual price', Childs v. City of Columbia, 87 S.C. 566, 70 S.E. 296, 297, 34 L.R.A., N.S., 542; 'the best price obtainable', Schreiner v. Shanahan, 105 Neb. 525, 181 N.W. 536, 537; a division of profits 'upon a very liberal basis', Butler v. Kemmerer, 218 Pa. 242, 67 A. 332, 333; a promise to bequeath 'as much as to any relation on earth', Graham v. Graham's Executors, 34 Pa. 475; a fixed salary plus 'a part of profits that should mean from twenty-five dollars to fifty dollars per month extra', Hubbard v. Turner Department Store Co., 220 Mo.App. 95, 278 S.W. 1060, 1061; 'part of the money', Burney v. Jones, 140 Ga. 758, 79 S.E. 840; 'a satisfactory amount', Mackintosh v. Kimball, 101 App.Div. 494, 92 N.Y.S. 132, 133; 'fair share' of the profits, Varney v. Ditmars, 217 N.Y. 223, 111 N.E. 822; a commission on profits, the method of computing 'to be agreed upon later', Petze v. Morse Dry Dock & Repair Co., 125 App.Div. 267, 109 N.Y.S. 328, 329; '25 per cent of the net profits * * * after all the expenses of operating the department have been deducted', Faulkner v. Des Moines Drug Co., 117 Iowa 120, 90 N.W. 585, 586; 'a contingent commission of five percent', Van Slyke v. Broadway Inc. Co., 115 Cal. 644, 47 P. 689, 690, 928.
We do not mean to hold or infer that a contract may not relate the purchase price to an ascertainable market price. An agreement of such nature would be enforceable. Moore v. Shell Oil Co., 139 Or. 72, 6 P.2d 216; Dixie Industrial Co. v. Benson, 202 Ala. 149, 79 So. 615. 'The general view', says Williston (Rev.Ed. § 41, p. 119), 'is that where the price of goods is to be fixed in relation to the official quotation of a designated market, or to the price set by a dominant seller of the particular kind of goods on a certain day or on delivery, the provision controls if there is such a quotation or price set, but in the absence of such a quotation or set price the contract is inoperative to the extent that it remains executory.' A price to be fixed by re-sale would, it seems, always be determined in futuro, and therefore the contract would remain executory and inoperative. Parties to a contract are bound by its terms and not by subsequent developments. Turman Oil Co. v. Sapulpa Refining Co., 124 Okl. 150, 254 P. 84.
Appellant has cited a number of cases holding contracts enforceable that based the purchase price on 'cost of production', Pacific Portland Cement Co. v. Westvaco Chlorine Products Corp., D.C., 77 F.Supp. 406, 407; 'net list price', Buggs v. Ford Motor Co., 7 Cir., 113 F.2d 618, 620; 'average net high price', Hunt Foods v. O'Disho, D.C., 98 F.Supp. 267, 269; 'manufacturer's list prices', Ken-Rad Corporation v. R. C. Bohannan, Inc., 6 Cir., 80 F.2d 251, 253; 'tank wagon price', Shell Oil Co. of California v. Wright, 167 Wash. 197, 9 P.2d 106, 109; 'list prices', Moon Motor Car Co. v. Moon Motor Car. Co., 2 Cir., 29 F.2d 3, and comparable phrases. These contracts are distinguishable from the one involved herein, however, for in each the price was ascertainable with certainty on the date of delivery of the commodity.
We have been discussing the preceding contract of March 3, 1948, and its pricing features. While they lacked mutuality, the subsequent agreement of November 1, 1948, involved herein, has even less claim to validity, since it is utterly silent as to price. As stated in the case of United Press v. New York Press Co., 164 N.Y. 406, 58 N.E. 527, 53 L.R.A. 288, 'If this were a case where the contract of the parties was merely ambiguous in its terms, it might be permissible to explain them by evidence of their acts, and thus to show a practical construction; but the difficulty with this instrument lies deeper. It lacked support in one of its essential elements,--in the absence of a statement of the price to be paid. That was a defect which was radical in its nature, and which was beyond the reach of oral evidence to supply'.
We pass now to its second counterclaim in which Union Sugar sued for damages in the amount of $14,529.94, resulting from the alleged failure of California Lettuce to apply manure to the leased land according to the agreement of November 1, 1947. In the three-year lease of November 1, 1945, California Lettuce obligated itself to apply fourteen tons of steer manure per acre on the lands leased. In the November 1, 1947 agreement, California Lettuce undertook to apply 'a minimum of seven tons of steer manure per acre upon the leasehold premises in addition to the minimum fourteen tons per acre required in the existing lease, * * *.'
Union Sugar attempts to require California Lettuce to apply the manure between November 1, 1948, and October 31, 1949, this being the period for which the lease extension was to apply. The agreement does not so provide. On the contrary it states that 'the amount of manure to be applied to any particular area and the time of its application to be at the sole discretion of the lessee.'
The trial court apparently construed the agreement of November 1, 1947, merely to require the addition of seven to the fourteen tons of manure to be applied pursuant to the previous contract. In none of its pleadings has Union Sugar alleged failure of California Lettuce to apply a total of twenty-one tons. Since the time of application was to be at the sole discretion of California Lettuce, we agree with the conclusion of the trial court that there was no binding obligation for application of seven tons between November 1, 1948, and October 31, 1948, or any other specific dates. The second counterclaim therefor did not state facts sufficient to constitute a valid cause. It thus becomes unnecessary to discuss the additional question raised as to whether the counterclaim set forth a proper measure of damages.
Finally we come to the propriety of the assessment of interest at seven per cent from December 13, 1949, in the amount of $6,942.49. Interest is to be added to a judgment when the prevailing party is entitled to recover damages certain, or capable of being made certain by calculation, as of a particular day. Civ.Code, § 3287.
In this instance respondent's amended complaint contained a first cause of action in assumpsit, alleging the reasonable value of sugar beets sold and delivered to be $45,000. This, urges appellant, constitutes an unliquidated and non-interest bearing claim, despite counts two and three which called for a calculated sum.
Where the causes of action are based on the same facts, the law is clear that the common count survives or falls upon the strength of the other counts. Hays v. Temple, 23 Cal.App.2d 690, 73 P.2d 1248; Spencer v. Crocker First Nat. Bank, 86 Cal.App.2d 397, 194 P.2d 775; Fruns v. Albertsworth, 71 Cal.App.2d 318, 162 P.2d 666. It is no answer to point out that the foregoing authorities were cases involving pleading. For it must be borne in mind that the instant case never progressed beyond the pleading stage. It was determined entirely on demurrers and motions.
Interest will be allowed where damages are capable of ascertainment by calculation, or where they may be determined by reference to well-established market values. Interest is not allowable where the damages depend upon no fixed standard and cannot be made certain except by accord, verdict or decree. Lineman v. Schmid, 32 Cal.2d 204, 211, 195 P.2d 408, 4 A.L.R.2d 1380. The reason for such denial of interest is that the person liable does not know what sum he owes, and therefore can be in no default for not paying. Cox v. McLaughlin, 76 Cal. 60, 67, 18 P. 100. When, therefore, the exact sum of the debtor's indebtedness is known to him, the reason suggested for the denial of interest does not exist. Counteney v. Standard Box Co., 16 Cal.App. 600, 615, 117 P. 778.
There can be no doubt in this instance that the precise amount of the indebtedness was well known to appellant. Not only was it reflected in appellant's books and in a statement submitted to respondent, but it was admitted in the answer. Thus the reason for denying interest does not exist.
But, insists appellant, the third, fourth and fifth counterclaims, to which respondent confessed his obligation only when seeking summary judgment, were unliquidated claims. Being so undetermined, appellant maintains it could not know what deductions were allowable from the sums due under the amended complaint.
However, the authorities uniformly hold that where the claim is ascertainable, the addition of interest thereto will not be denied by the setting up of unliquidated claims in defense. Lineman v. Schmid, supra, 32 Cal.2d at page 212, 195 P.2d at page 413. The rule is that under those circumstances the plaintiff is given interest on the full amount and the defendants' unliquidated demand is treated as a discount and not as a payment. Hansen v. Covell, 218 Cal. 622, 629, 24 P.2d 772, 89 A.L.R. 670; McCowen v. Pew, 18 Cal.App. 482, 123 P. 354.
After consideration of the pleadings, and the points and authorities ably presented on appeal, we have concluded that trial court properly terminated the proceedings.
The judgment is affirmed.
WHITE, P. J., and DORAN, J., concur.
Hearing granted; SCHAUER, J., not participating. --------------- * Opinion vacated 289 P.2d 785.