Commercial Credit Co. v. Insular Motor Corporation, 2051.

• Decision Date: 21 February 1927
• Docket Number: No. 2051.,2051.
• Citation: 17 F.2d 896
• Parties: COMMERCIAL CREDIT CO. v. INSULAR MOTOR CORPORATION.
• Court: U.S. Court of Appeals — First Circuit

17 F.2d 896 (1927)

COMMERCIAL CREDIT CO. v. INSULAR MOTOR CORPORATION.

No. 2051.

Circuit Court of Appeals, First Circuit.

February 21, 1927.

Duane R. Dills, of New York City (O. B. Frazer, of San Juan, Porto Rico. and Frank H. Towsley and Chas. E. Hirsimaki, both of New York City, on the brief), for plaintiff in error.

Albert Levert, of New York City (John Thomas Smith, of New York City, Weld A. Rollins, of Boston, Mass., and Cayetano Coll y Cuchi and Gustavo Cruzado Silva, both of San Juan, Porto Rico, on the brief), for defendant in error.

Before JOHNSON and ANDERSON, Circuit Judges, and LOWELL, District Judge.

ANDERSON, Circuit Judge.

In this action for breach of contract the court below sustained the demurrer and entered judgment for the defendant. The written contract sued upon is set forth in the margin.¹ The gist of it is that the plaintiff agreed with eight San Juan automobile distributors to open an office in San Juan for financing their retail sales paper in consideration of these dealers agreeing to sell to plaintiff the time sales obligations of their customers for two years from January 1, 1925. The defendant's business was the largest of the eight.

The complaint, filed October 8, 1925, alleges that the plaintiff fully complied with this contract; that the defendant in September, 1925, without legal excuse, broke the contract by turning all such business over to the General Motors Acceptance Corporation. The amended demurrer sets up two grounds:

(1) That no cause of action is stated, in an alleged breach of contract in which the anticipated profits depend upon uncertain and changing conditions, such as market fluctuations, the chances of business, and the possibility of continuing with the business both by the plaintiff and the defendant.

(2) That the only remedy for any breach is found in the following clause contained in the contract:

"That should, for any reason, any of the above distributors or dealers discontinue, fail or refuse to offer all such obligations to us for purchase during said two (2) years, such respective dealer or distributor will, at our option and upon demand by us, within thirty (30) days thereafter, repurchase from us for cash for the unpaid amount thereof, any and all obligations, or purchases acquired by us from such distributor or dealer, and remaining unpaid even though not then due or endorsed by such distributor or dealer."

The court below sustained the demurrer on the second ground alone. But in this court the defendant has argued broadly that the contract is void for lack of mutuality, and that, if not void, the damages are speculative and remote, and not recoverable. It is desirable, even if not technically necessary, for this court now to deal with those contentions.

1. We are unable to adopt the view of the court below that the paragraph quoted is an exclusive remedy provided by the contract itself for any damage arising from a breach. Such a construction practically nullifies the two-year provision in the previous paragraph. Looking at the contract as a whole (as, of course, we must), it is plain that the plaintiff agreed to embark on an enterprise obviously involving substantial expense, in consideration of the agreement of the eight named dealers to give plaintiff for this reasonable two-year period all their business of the described kind. The optional provision is entirely distinct from the general obligation of each dealer to furnish plaintiff business for two years. It simply gives the plaintiff an option for speedy liquidation of all the obligations of the customers of any dealer who has severed the fundamental relation created by the contract. The word "discontinue" seems broad enough to cover even an agreed severance. But this repurchase provision is not in its nature, or in its financial result, a measure of damages for a wrongful severance of the business relation created by the contract.

It would be enough to dispose of the demurrer that there is nothing in this record to show that the plaintiff has exercised its option. But we do not put our decision on that narrow ground. We hold that the repurchase provision is not exclusive of the ordinary right for damages arising out of a breach.

2. Defendant's broader contention — that the contract is void for lack of mutuality — is untenable. The undertaking evidenced by this contract is a natural, honest, and useful business enterprise. The contract is plainly bilateral. It imports that the automobile dealers of San Juan desired banking services of the special kind required by the modern method of selling automobiles under conditional sales contracts on the installment plan, and that the plaintiff agreed that, if these named dealers would turn their banking business of this sort over to it for a period of two years, it would establish such a banking concern in San Juan and furnish the usual facilities of such a concern.

Plaintiff's agreement to purchase "acceptable retail time sales obligations" of the customers of the contract dealers is to be given its normal business meaning, bearing in mind that the plaintiff would have a natural business motive to find all such obligations acceptable, if reasonably sound and fit to be handled by such a financing concern. Acceptable does not mean acceptable by whim; it means acceptable within the usual business meaning of the word as applied to this kind of business dealings. Failure or arbitrary refusal by the plaintiff to furnish the banking credit reasonably contemplated by the contract would plainly have been a breach of a legal duty, grounding a valid claim for damages by any dealer thus injured.

3. It is not necessary for this court to go so far as some courts have gone — Randall v. Peerless Motor Car Co., 212 Mass. 352, 380, 99 N. E. 221; Gagnon v. Sperry & Hutchinson Co., 206 Mass. 547, 92 N. E. 761; Hanson & Parker v. Wittenberg, 205 Mass. 319, 91 N. E. 383; John Hetherington & Sons v. William Firth Co., 210 Mass. 8, 21, 95 N. E. 961; Maynard v. Royal Worcester Corset Co., 200 Mass. 1, 8, 85 N. E. 877; Dennis v. Maxfield, 10 Allen, 138 — in order to hold unsound defendant's contention that the damages are too remote and speculative to ground a recovery. The loss arising from a breach of such a contract is much less difficult of approximately accurate assessment than are damages in cases of personal injury, not to resort to such difficult problems as valuations involving good will and going concern claims.

4. Groundless is the suggestion, rather faintly made, that the complaint is bad because the other seven dealers are not parties. Though in one paper, there are really eight contracts. This appears, not only from the nature of the agreement, but by the repeated use of the word "respective," both in the body of the contract and in the acceptance clause signed by Hitchman and Smallwood.

5. None of the cases cited by defendant are in point. Citation and analysis of them would not be useful. Stated as a generalization, we hold the contract plain in terms and enforceable according to its terms.

The judgment of the District Court is reversed, and the case is remanded to that court for further proceedings, not inconsistent with this opinion, with costs to the plaintiff in error in this court.

1 December 19, 1924.

To the Motor Vehicle Distributors and Dealers in San Juan, Porto Rico:

Gentlemen: We have had the pleasure of spending some time here with Messrs. Hitchman and Smallwood of your city. These gentlemen tell us that they represent the following motor vehicle distributors and dealers in Porto Rico, whose approximate annual gross sale of new motor vehicles appears opposite each name:

                  Zorrilla, Saenz & Co., San Juan, P.R.            $100,000
                      Overland-Willys-Knight
                  Insular Motors, Inc., San Juan, P.R.              800,000
                      Buick-Chevrolet
                  Sanchez Morales & Co., San Juan, P
                        R. ..................................       500,000
                      Lincoln, Ford, Fordson
                  Porto Rico Automobile Co., San Juan
                      Nash-Cadillac P.R
                  Smallwood Brothers, San Juan, P.R. ........       500,000
                  Ford, Lincoln, Fordson
                  Andreu Aguilar & Co., Inc., San Juan
                        P.R. ................................       250,000
                      Dodge
                  Adrian Nelson, San Juan, P.R. .............       100,000
                      Maxwell-Chrysler
                  Santiago Panzardi, Limited, San Juan
                        P.R. ................................       400,000
                      Hudson-Essex-Packard
                  Panzardi (Ponce), San Juan, P.R. ..........       100,000
                      Hudson, Essex, Packard
                

In addition, they state there are a few more dealers on the island representing Studebaker, Hupmobile, and some other cars, but on behalf of whom they are not authorized to speak or to make a commitment.

Messrs. Hitchman and Smallwood desire to interest our company in the opening of an...