Milton v. Hudson Sales Corp.

• Decision Date: 15 July 1957
• Citation: 313 P.2d 936,152 Cal.App.2d 418
• Court: California Court of Appeals Court of Appeals
• Parties: John M. MILTON, Plaintiff, Appellant and Respondent, v. HUDSON SALES CORPORATION, a corporation, Defendant, Appellant and Respondent, Frank J. Lawson, W. E. Young, N. K. Van Derzee, Defendants, Respondents and Appellants, Donald C. Reath, Defendant and Respondent. Civ. 16833.

Page 936

313 P.2d 936

152 Cal.App.2d 418

John M. MILTON, Plaintiff, Appellant and Respondent, v. HUDSON SALES CORPORATION, a corporation, Defendant, Appellant and Respondent, Frank J. Lawson, W. E. Young, N. K. Van Derzee, Defendants, Respondents and Appellants, Donald C. Reath, Defendant and Respondent.

Civ. 16833.

District Court of Appeal, First District, Division 1, California.

July 15, 1957.

Hearing Denied Sept. 11, 1957.

Stanley E. Sparrowe, Stark & Champlin, Oakland, for John M. Milton.

Pillsbury, Madison & Sutro, Eugene M. Prince, John B. Bates, San Francisco, for Hudson Sales Corporation, W. E. Young and N. K. VanDerzee.

Fernhoff & Wolfe, Cameron W. Wolfe, Oakland, for Frank J. Lawson and Donald C. Reath.

PETERS, Presiding Justice.

In 1949 John Milton, a former Hudson automobile dealer in East Oakland, filed the complaint that ultimately resulted in the judgments and orders from which the appeals here involved have been taken. The fourth amended complaint, upon which the cause proceeded to trial, alleges two causes of action, the first for breach of contract, and the second for damages for a violation of the Cartwright Act. §§ 16700-16758, Bus. & Prof.Code.

The first cause of action names Hudson Sales Corporation, a wholly owned subsidiary of the corporation that manufactures Hudsons, as the sole defendant. It charges that from September 15, 1948, to September 30, 1949, Hudson, in bad faith, failed to supply Milton with his reasonable requirements of new cars in violation of the terms of the contract between them.

The second cause of action is a double damage claim under the Cartwright Act, alleging a conspiracy to restrain trade by not continuing Milton as a Hudson dealer after his contract expired in 1949. It names as defendants Hudson; two of its employees--Young and VanDerzee; a former employee--Lawson; the Walter W. Anderson Co.--another Hudson dealer in East Oakland; Walter W. Anderson--the former manager and chief owner of that company; and Conald C. Reath, a former employee of Anderson.

Prior to trial Anderson and his company secured a dismissal of the action against them for lack of prosecution. The jury awarded Milton $35,750 against Hudson on the first cause of action. Hudson appeals from the judgment entered on that verdict. On the second cause of action the jury's verdict was in favor of defendant Reath, and Milton appeals from the judgment on that verdict. As to the other four defendants, Hudson, Lawson, Young and VanDerzee, the jury found a conspiracy to restrain trade, and fixed Milton's damages as $50,000 (which, doubled, means an award of $100,000). Judgment was entered on these verdicts. Thereafter, the trial court, as to the second cause of action, granted the four defendants a new trial. Milton appeals from the order granting the new trial. The four defendants against whom judgment had been entered on the second cause of action, appeal from that judgment. Thus, there are four appeals before us. The Reporter's Transcript totals nearly 2,500 pages, while the briefs exceed 300 pages.

The Contract Action

The first cause of action alleges that prior to 1948 Milton had been a dealer for an independent distributor of Hudson automobiles in East Oakland; that on September 15, 1948, Milton, as dealer, and Hudson, as distributor, executed a 'Hudson Distributor-Master Dealer Sales Agreement'; that said agreement was to expire July 31, 1949, but was later extended to September 30, 1949; that this agreement contained an obligation on the part of Hudson to sell Milton new Hudson automobiles sufficient to meet the requirements of his dealership; that Hudson, in bad faith, breached that obligation. Hudson's defense was that the contract expressly provided that Hudson should not be liable for any failure on its part to deliver automobiles for any reason, and that, in any event, it did not act in bad faith.

The trial court ruled that the interpretation of the contract was a question of law, and instructed that Hudson 'by its contract impliedly agreed to sell to * * * [Milton] at the latter's specific request or order periodically new Hudson automobiles in quantities sufficient to meet * * * [Milton's] need and requirements thereof for resale by * * * [Milton] at retail during the period covered by the contract.'

The court also instructed that '[i]f, after determining what * * * [Milton's] needs and requirements were, you find * * * that * * * [Milton] actually attempted to buy from * * * [Hudson] his needs and requirements, and that * * * [Hudson] not acting in good faith refused to sell * * * [Milton] his needs and requirements, then, in such event, * * * [Hudson] would be guilty of a breach of his contract, and would be liable for any damages proximately caused by such breach.'

The principal question presented on this appeal is whether the contract, properly interpreted, did contain an implied obligation on the part of Hudson to fill, except as excluded by the contract, the reasonable needs and requirements of Milton for new cars.

The contract is in two parts. The first part is quite short and is entitled 'Hudson Distributor-Master Dealer Sales Agreement.' It incorporates a 'Supplement,' which is quite lengthy and contains most of the major terms and conditions of the contract.

It was the theory of Hudson at the time of trial, and it now urges on this appeal, that this contract not only did not contain an implied or express obligation on the part of Hudson to sell to Milton enough cars to meet his requirements, but, in fact, contained a provision expressly excluding any such obligation. The provision relied upon is paragraph 2(a) of the Supplement. It reads: '2(a) Notwithstanding acknowledgment or acceptance by Distributor * * * [Hudson] of any order placed by Master Dealer [Milton], Distributor shall in no event be liable to Master Dealer for any loss or damage because of failure of Distributor to ship or fill such order, regardless of any express or implied provision to the contract in this agreement.

It is Hudson's position that by this clause, by express agreement, the two contracting parties agreed that, regardless of the reason, and regardless of whether Hudson acted in good or bad faith, Hudson was not to be liable for failing to ship cars to Milton. The trial court, by its instructions, determined that, as a matter of law, there was an implied obligation to furnish cars to Milton. It is argued that in view of paragraph 2(a), under the law, an implied obligation cannot be raised. Hudson relies on cases to the effect that an obligation can never be implied that is contrary to the express terms of the contract, and on cases which hold that by implication the court cannot supply a covenant convering a matter intentionally excluded from the contract. See Stockton Dry Goods Co. v. Girsh, 36 Cal.2d 677, 227 P.2d 1, 22 A.L.R.2d 1460; Cousins Inv. Co. v. Hastings Clothing Co., 45 Cal.App.2d 141, 113 P.2d 878. It is argued that is is absurd to say that the language used in the entire contract shows so clearly that this was to be a 'requirements' contract that it was unnecessary to express it, particularly when section 2(a) repudiates the concept of a 'requirements' contract.

Milton does not quarrel with the general rule that no promise may be implied against the express terms of a contract, or with the other rules cited by Hudson, but contends that the contract, when read as a whole, compels the implying of the promise. He cites many well-reasoned cases holding that the right to sell cars conferred by contract implies a promise to supply those cars, and that a promise to buy and promote the sale of cars implies a correlative promise by the other party to supply the cars. Hudson replies that, under the contract, Milton was not obligated to take or order any cars from Hudson, and therefore it would be one-sided and unreasonable to imply a duty to supply cars to Milton.

These contentions require an examination, of the terms of the contract and its supplement. The supplement, in particular, is much too long to quote at length, but there are many provisions that demonstrate that the parties contracted on the theory that Hudson would supply, and be required to supply, cars to Milton, unless in good faith it asserted a good excuse.

The contract itself in section 1 provides: 'The purpose of this agreement is to provide a working arrangement under which Distributor and Master Dealer will carry on their business relations with each other.'

Section 3(b) provides: 'No verbal understandings or representations of any nature, relating to this agreement or to any of the subject matter of this agreement, will be recognized or considered valid.'

Then follow providions limiting the power of each contracting person to represent the other. Next follows a section requiring Milton 'to the best of his ability promote the sale and servicing of Hudson products, and will perform under this agreement to the satisfaction of Distributor.' Hudson products will be purchased by Milton, and he agrees to keep on hand at all times eight new Hudsons.

The supplement is divided into seven main divisions. The first of these is entitled 'Sales and Shipment Conditions'; the second is headed 'Price Provisions'; the third, 'Infringements'; the fourth, 'Service, Parts and Accessories'; the fifth, 'Operating Requirements'; the sixth, 'Termination'; and the seventh, 'Limitations, Laws, Definitions, etc.' These main divisions are divided into 50 subdivisions, and many of the subdivisions are again divided into sub-subdivisions. Many of these provisions have no relevancy to our present problem, but several of them do. Section 1 of the supplement provides that Hudson will not ship any automobiles to Milton except upon Milton's specific order. Subdivision 2(a) has been quoted above. Section 2(b) provides that if Milton orders a car with optional equipment that Hudson does not have readily available, Hudson may cancel...