Cream of Wheat Co. v. Arthur H. Crist Co.

• Court: New York Court of Appeals Court of Appeals
• Writing for the Court: HOGAN
• Citation: Cream of Wheat Co. v. Arthur H. Crist Co., 222 N.Y. 487, 119 N.E. 74 (N.Y. 1918)
• Decision Date: 15 February 1918
• Parties: CREAM OF WHEAT COMPANY, Appellant, v. THE ARTHUR H. CRIST COMPANY, Respondent. SAME, Appellant, v. SAME, Respondent.

222 N.Y. 487

119 N.E. 74

CREAM OF WHEAT CO.

v.ARTHUR H. CRIST CO.

Court of Appeals of New York.

Feb. 15, 1918.

Appeal from Supreme Court, Appellate Division, Third Department.

Suits by the Cream of Wheat Company against the Arthur H. Crist Company. From an order of the Appellate Division (166 App. Div. 870,152 N. Y. Supp. 407, 417), affirming by a divided court two judgments entered on report of referee dismissing the complaints in each case on the merits, plaintiff appeals. Reversed and rendered for plaintiff in each case.

Rome G. Brown, of Minneapolis, Minn., for appellant.

James F. Hubbell, of Utica, for respondent.

HOGAN, J.

The plaintiff is a manufacturer of cereal products. The defendant is engaged in the printing business and publishes a monthly magazine known as American Motherhood.

August 27, 1910, the parties entered into a contract wherein defendant undertook to insert in a magazine published by defendant a full-page advertisement to be furnished by plaintiff during each month of the year 1911, in consideration of a stated sum to be paid therefor by plaintiff. The contract provided:

‘Party of the first part [defendant] does hereby guarantee that the average circulation of the above-mentioned publication shall be not less than 63,000 copies per issue for the time during which the above advertisement shall run, and it is understood and agreed that the term ‘circulation’ for the purposes above mentioned shall be construed as follows: The total number of copies of each issue of the publication above mentioned which shall be published and sold and delivered by the publishers thereof both to paid subscribers and to news agencies, exclusive of all returns from news agencies and copies given away in any manner whatsoever.'

The plaintiff was by said contract at any time to be permitted access to the books of defendant to ascertain the circulation of the magazine, not oftener than twice in each year. In the event that such examination or examinations did not bear out the circulation embodied in the contract and should be found to have averaged materially less than 63,000 copies per issue during the term for which the advertising was to run, the expense of the examination was to be borne by defendant, otherwise by plaintiff. Should such examination disclose the circulation to be materially less than stated in the contract, defendant agreed to make a pro rata rebate in cash for such shortage in circulation.

About September 1, 1912, the plaintiff caused an examination to be made of the books of the defendant for the year 1911, which audit disclosed, as asserted by plaintiff, that the total net paid circulation per issue was 25,975 as compared with 63,000 as provided for in the contract. The rebate upon such examination would amount to $423.14, the cost of the examination was $326.05, making a total of $749.19, and to recover that sum plaintiff brought an action.

A second contract was entered into between the parties, identical in terms with the contract above referred to, save that the second contract covered the year 1912. An audit of the books of defendant was made by plaintiff between May 20 and July 1, 1913, which disclosed that the average circulation per month during the year 1912 was 27,428 instead of 63,000 as guaranteed by the contract, and by reason thereof plaintiff in the second action sought a recovery for the rebate of $328.28, and the further sum of $809.06 cost of the audit, a total of $1,137.34.

The two actions were tried together before a referee and resulted in the dismissal of the complaint in each case.

[1] The referee found as matter of fact that at the time the plaintiff entered into the contract there was a general usage and custom existing in this country known to plaintiff, and which prevailed among advertisers and between advertisers and publishers, to the effect that, in determining the number of subscribers to a magazine in a given year for the purpose of calculating its value as an advertising medium, the subscribers were divided into two classes, namely, paid and unpaid; that the first class or paid subscribers should and did include those who had paid their subscriptions for the year in question and also those who had subscribed and paid for some years prior to the year in question who had not discontinued their subscriptions, who had not been omitted or written off by the publishers, but to whom the publisher had regularly mailed each issue for the year in question; that the second class or unpaid subscribers included all other copies of the magazine given away in any manner whatsoever, and, as conclusions of law, that the words ‘paid subscribers' in said contract included the subscribers who at the time of said audit had paid their subscriptions for the year 1911 or some previous year and all subscribers who...