Ford v. Norton

• Decision Date: 17 September 1927
• Docket Number: No. 3068.,3068.
• Citation: 32 N.M. 518,260 P. 411
• Parties: FORDv.NORTON et al.
• Court: New Mexico Supreme Court

32 N.M. 518

260 P. 411

FORD

v.NORTON et al.

No. 3068.

Supreme Court of New Mexico.

Sept. 17, 1927.

Syllabus by the Court.

Where, as a controlling consideration for a lease of a filling station, the lessee consented, in addition to payment of rent, to purchase gas exclusively from the lessor, the latter covenanting to supply it at current market prices, a rescission of the lessee's covenant to buy because of a breach of the lessor's covenant, leaving the lease otherwise in force, is inequitable; the contract not being so separable as to permit of partial rescission.

The parties being bound by a mutual covenant to buy and sell gasoline, during a long period, at current market prices-

(a) The seller is obligated to deliver at the price current in the market when the buyer demands delivery.

(b) The best proof of such price is actual sales made.

(c) The seller's obligation is not affected by the fact that the current market price is the result of a temporary trade war.

(d) The seller's obligation is not affected by the fact that the buyer encouraged the trade war to the extent of purchasing of a concern invading the market and breaking the price, he having first given the seller an opportunity to meet the price.

(e) The buyer, by the encouragement mentioned in (d), has not rendered the seller's obligation impossible of performance.

Additional Syllabus by Editorial Staff.

“Current market price,” used in covenant to buy and sell gasoline, means that contract price shall run or flow with market, following its fluctuations.

“Market price” of commodity is exchange value determined by demand for it in relation to supply.

Appeal from District Court, Union County; Leib, Judge.

Suit by C. N. Ford against William Norton and another, copartners doing business as Norton & Wood, for an injunction and for damages. From a decree for defendants, plaintiff appeals. Reversed and remanded, with directions.

The buyer, by the encouragement of a trade war to the extent of purchasing a concern invading the market and breaking the price, did not render the seller's obligation impossible of performance.

Crampton & Darden, of Raton, for appellant.

Easterwood & Thompson, of Clayton, for appellees.

WATSON, J.

C. N. Ford, plaintiff below, is the owner of a wholesale oil and gasoline business at Springer. He is also the assignee of the lessee's interest in a lease made in January, 1922, of land in Springer for a period of 10 years, for the purpose of erecting and maintaining a retail oil and gasoline filling station to be constructed by the lessee according to specifications set forth, and to revert to the lessor at the end of the term. He is also the assignee of the lessor's interest in a sublease of the same premises. The sublessee, appellees' assignor, undertook performance of all the covenants assumed by his sublessor (lessee in the original lease), including the erection of the filling station and payment of the monthly rent and for the whole of the original term. In addition to these covenants and others usual to leases, the sublease contained paragraphs 9 and 10, which are particularly in question here, and which are as follows:

“IX. That said lessee covenants and agrees with said lessors that during the life of this lease he will purchase all gasoline, oil, and greases usually handled by an automobile station from said lessors, which are or shall be used or sold on said demised premises in and about the operation of the said automobile filling station, and will pay to the said lessors the current market price therefor, and that he will not directly or indirectly buy, use, handle, distribute, or sell any gasoline, oil, or greases usually handled by an automobile filling station at, about, or on said premises which are not purchased from said lessors, nor will he suffer or permit the same to be used, handled, distributed, or sold thereon.

X. That the said lessors covenant and agree with the said lessee that said lessors will, at all times during the life of this lease, reasonably endeavor to keep and maintain a supply of gasoline, oil, and greases usually handled by a wholesale oil station, and will sell and deliver to the said lessee such items and quantities thereof as may be reasonably required by said lessee for use and sale upon said demised premises and in and about the operation of said automobile filling station at current market prices.”

Though both parties are assignees, their rights may be here determined as if they were the original contracting parties.

Up to September 24, 1924, Norton and Wood, the defendants, purchased all of their gasoline, etc., from the plaintiff according to the agreement; but on that date, and thereafter, until the hearing, they purchased a substantial portion of their gasoline from the Clayton Coal & Oil Company. This led to the filing of a complaint by Ford October 6, 1924, in which he set forth the contracts above mentioned; alleged that he had always been able and willing to furnish gasoline, etc., to the defendants according to the contract, and that he had in all respects performed the terms of the contract binding upon him, notwithstanding which, defendants had ceased to purchase their supplies of gasoline, etc., entirely from him, and were buying a substantial portion of such supplies from others, and praying that the defendants be enjoined from so doing, and for damages for the breach of the contract. The defendants, by their answer, treated by court and counsel as a counter claim, defended as against the claimed breach by them on the ground that the plaintiff, in violation of paragraph 10 of the contract, had refused to sell them gasoline at the current market price, but, on the contrary, had demanded from 3 to 5 cents per gallon in excess of such market price. They prayed that the plaintiff “be required to perform and carry out the said contract, or that paragraphs 9 and 10 of the said lease be decreed null and void and be stricken from the said contract,” and that defendants recover damages.

The trial court, after hearing, found that the current market price of gasoline at Springer during the time in question was 17 cents per gallon, and that the plaintiff had refused to sell the same to defendants at such price, but had demanded, and had received, for such quantities as he had sold them during that time, from 18 1/2 to 20 cents per gallon; denied any relief to plaintiff; and, because of the breach of paragraph 10 of the contract, decreed that “the said defendants are hereby relieved from buying gasoline, oil, or greases from the plaintiff for use and distribution in and about their filling station at Springer.” No damages were awarded. From this decree plaintiff has appealed.

Appellees do not deny that they made large purchases of gasoline from the Clayton Coal & Oil Company during the time in question, nor question that such fact, standing alone, would have entitled appellant to the injunction which he sought. They seek to support the decree entirely upon the proof and finding that plaintiff had breached the contract by demanding more than the current market price for gasoline.

[1] It will be convenient, first, to consider the affirmative relief awarded to the defendants. The effect of this action was to leave the sublease in full effect and the defendants in possession of the premises for a long term of years, relieved of the obligation contained in paragraph 9. Appellant contends that, as the parties contemplated no such situation as this, the result is to make a new contract, which the court was without power to do. He urges that for a breach of the contract by appellant, appellees are limited to the remedies of rescission in toto or of damages.

Appellees take the position that the contract is divisible; that paragraphs 9 and 10 constitute a subsidiary or collateral agreement, separable from the remaining covenants; and that in such a case partial rescission, as here awarded, is a recognized and proper remedy. They first cite 6 R. C. L. 926, to the proposition that under the facts in the present case they were not entitled to rescission in toto. This may be conceded without affecting the result. They next cite 6 R. C. L. 936, where it is said:

“As a general rule the right to rescind must be exercised in toto. The contract must stand in all its provisions, or fall together. Accordingly, a party cannot repudiate a contract or compromise so far as its terms are unfavorable to him and claim the benefit of the residue. As a partial rescission is not allowed by law, one who has sufficient cause to rescind a contract for fraud must rescind the whole or none. But it is not to be overlooked that this is a rule of construction, based upon the intention of the parties to the contract, and not a rule of law controlling that intention. A partial rescission may therefore be allowed where the contract is a divisible one.”

The illustrative case cited to this text is Bank of Antigo v. Union Trust Co., 149 Ill. 343, 36 N. E. 1029, 23 L. R. A. 611. It was there held that the transaction of discounting three notes was separable, so that there might be a rescission as to one without a total rescission. Johnson Forge Co. v. Leonard, 3 Pennewill, 343, 51 A. 305, 94 Am. St. Rep. 86, 57 L. R. A. 225, and Kauffman v. Raeder (C. C. A.) 108 F. 171, 54 L. R. A. 247, the decisions cited by appellees, are clearly not in point. It is unnecessary to question the abstract proposition that, if paragraphs 9 and 10 constituted an independent or collateral contract, separable from the remainder of the lease, the judgment would be correct. Appellees themselves admit that, if not so separable, the judgment is erroneous. They advance no argument to support their view of the divisibility of the contract, except to say:

“Covenants 9 and 10 of the lease contract are not the entire consideration for which said contract was given.”

That is true. But the fact does not aid appellees. The contract...