H. P. Hood and Sons v. Heins

• Decision Date: 01 December 1964
• Docket Number: No. 310,310
• Citation: 205 A.2d 561,124 Vt. 331
• Court: Vermont Supreme Court
• Parties: H. P. HOOD & SONS v. John HEINS, Mrs. A. S. Hill, L. W. Howe, F. R. O'Brien, J. A. and W. A. Sutton, U. A. Wheelock, M. Keith Wright and E. H. Chittenden.

Page 561

205 A.2d 561

124 Vt. 331

H. P. HOOD & SONS v. John HEINS, Mrs. A. S. Hill, L. W. Howe, F. R. O'Brien, J.

A. and W. A. Sutton, U. A. Wheelock, M. Keith

Wright and E. H. Chittenden.

No. 310.

Supreme Court of Vermont.

Dec. 1, 1964.

Ryan, Smith & Carbine, Rutland, for plaintiff.

Latham & Eastman, Burlington, for defendants.

Before HOLDEN, C. J., SHANGRAW, BARNEY and SMITH, JJ., and HILL, Superior Judge.

HOLDEN, Chief Justice.

The plaintiff, H. P. Hood & Sons, has invoked equity jurisdiction to obtain declaratory relief from an agreement it made with the several defendants, or their predecessors. The case was submitted on an agreed statement of facts which include the context of the undertaking which the plaintiff seeks to have declared null and void.

The contract is dated March 13, 1945. The plaintiff, a Massachusetts corporation is designated as the 'Dealer'. The defendants are described as being various farmer residents of Chittenden County, referred to in the instrument as 'Local Producers' and 'Boston Producers' according to their membership in certain marketing co-operatives in the area of Burlington, Vermont.

The contract recites that the plaintiff, as the dealer, 'contemplates the acquisition by purchase, of the assets of Burlington Co-operative Milk Products Co., Inc. and Burlington Co-Operative Creamery Association, Inc.' The contracting members of the first named co-operative signed the agreement as 'Local Producers'. The members of the creamery association signed as 'Boston Producers'.

The contract states that the plaintiff desires to enter into a contract for the purchase of milk produced by both groups. The writing goes on to recite--'in consideration of the unanimous agreement of the parties hereto, as stockholders of the said co-operatives, to a sale of the assets of the respective co-operatives to DEALER and in further consideration of the mutual promises and agreements' which follow.

The contract then provides that the plaintiff will purchase the milk produced by the defendants and pay the Boston price as established by Milk Market Administrator, plus a sum equal to the difference between the Boston price and the State of Vermont control price. As the plaintiff requires additional milk for the Burlington market, it agreed to select producers by lot from the Boston group. The plaintiff also agreed not to purchase from other sources until all of the Boston Producers had been transferred to the Local group. The agreement stipulated a premium would be paid of nine cents per hundredweight on all milk with a bacteria count of less than one hundred thousand raw and three thousand heat resistant.

The termination clause is of particular importance in this appeal. It provided that the agreement should remain in full force and effect until terminated by any producer by giving ninety days notice of his election to end his participation in the contract. It was specified that such an election by a particular producer would not affect the remaining parties to the agreement.

As to the plaintiff, it provided: 'The DEALER may terminate this agreement only as to all PRODUCERS whenever it shall discontinue its wholesale and retail business in the burlington Market.'

The contract was signed by the plaintiff as the Dealer. The other parties were the milk producers in Chittenden County and included the defendants Heins, Hill, Howe and Wheelock. These defendants signed the writing as 'Local Producers'. The defendants Sutton and O'Brien signed the agreement as 'Boston Producers'. There were some twenty-one other producers who were parties to this undertaking. For one reason or another these original parties to the contract do not presently supply milk to the plaintiff Hood & Sons.

In addition to the written contract, additional facts were stipulated:

'2. The defendant, M. Keith Wright, is the son of M. J. Wright, now deceased, who was a party to the original agreement. M. Keith Wright claims benefit of said agreement as the successor in title and heir of his father. He has delivered milk to plaintiff since the death of his father and has been paid therefore on the basis of the quality premium set forth in Paragraph 7 of the contract.

'3. The defendant, E. H. Chittenden, is the son of E. S. Chittenden, now deceased, who was a party to the original agreement. E. H. Chittenden claims benefit of said agreement as the successor in title and heir of his father. He has delivered milk to Plaintiff since the death of his father and has been paid therefore on the basis of the quality premium set forth in Paragraph 7 of the contract.

'4. That for a long time prior hereto each of the Defendants has been delivering large quantities of milk to Plaintiff which has a bacteria count of no more than one hundred thousand raw and three thousand heat resistant and each of said defendants have been demanding the quality premium referred to in Paragraph 7 of the contract.

'5. It is reasonable to anticipate that each of the Defendants will continue to produce milk with bacteria counts below one hundred thousand raw and three thousand heat resistant for an indefinite time in the future.

'6. The plaintiff has attempted on several occasions to give each of the defendants notice of termination of the 1945 contract. The defendants have always insisted that the attempted termination was nugatory and of no legal validity. Each has asserted his right to the quality premium referred to in Paragraph 7 of the contract.'

The chancellor enlarged upon the agreed facts from evidence presented at the time of hearing. He reports in his findings that the plaintiff purchased the assets of the Burlington Co-operative Milk Products Co., Inc. and the Burlington Co-operative Creamery Association, Inc., at approximately the same time of its agreement with the defendants. On May 28, 1963, the plaintiff notified the defendants that it would discontinue payments of the nine cent premium after June 1, 1963. At the time of this notice, none of the producers had elected to terminate the agreement under the option afforded them in paragraph 8 of the contract. Payments under this clause were halted on June 1, 1963. Since March 12, 1945, the plaintiff has, and presently is, engaged in the wholesale and retail milk business in the Burlington market.

On these facts, a decree was entered which adjudged the instrument of March 12, 1945 'a legal and valid Agreement and remains in full force and effect according to its terms and conditions as to all defendants except M. Keith Wright, E. H. Chittenden and Mrs. A. S. Hill.' The plaintiff was discharged of liability to Wright and Chittenden by order of the chancellor for the reason that they were not original parties to the agreement. Liability to Mrs. Hill was declared discharged by her death on September 2, 1963. The plaintiff and the defendants Wright and Chittenden appeal.

The plaintiff challenges the contract on several specific points. Each contention bears directly on the central issue of consideration. The controlling question presented by the plaintiff's appeal is whether the obligations imposed on the defendants are sufficient in law to require the plaintiff to continue to purchase the defendants' milk production at the rates established by their agreement.

We are concerned with a contract dealing with commercial transactions, formally undertaken by all of the parties. 'There is the strongest reason for interpreting a business agreement in the sense which will give it a legal support * * *.' Martin v. Meles, 179 Mass. 114, 60 N.E. 397, 398 (Holmes, C. J.). And at the outset, at least, we must presume that the parties intended to make a valid and binding engagement. G. Loewus & Co. v. Vischia, 2 N.J. 54, 65 A.2d 604, 605.

This instrument, as with other written agreements, must be construed to give effect to the intention of the parties as stated in their writing. And the language used must be interpreted with reference to the purpose sought to be accomplished and the conditions prevailing at the time the instrument was executed. Davidson v. Vaughn, 114 Vt. 243, 246, 44 A.2d 144; Hill v. Bell, 111 Vt. 131, 135, 11 A.2d 211; Vermont Kaolin Corp. v. Lyons, 101 Vt. 367, 376, 143 A. 639. Where the language is clear, the intention and understanding of the parties must be taken to be that which their agreement declares. Davidson v. Vaughn, supra, 114 Vt. at 246, 44 A.2d 144; Stratton v. Cartmell, 114 Vt. 191, 194, 42 A.2d 419; Freeguard v. Bingham, 108 Vt. 404, 406, 187 A. 801.

The contract itself speaks at some length of the consideration afforded by the several parties. We agree with the plaintiff that these recitals in the contract are not the equivalent of true findings. They do not determine the facts. The findings establish that these statements were integrated into the written memorial of the transaction. They became a part of the contractual act and were not opened to dispute in the record before us. See Wigmore, Evidence § 2433 (3rd Ed.). In this proceeding for a declaratory decree, they are of first importance in explaining the motives of the parties and the inducement for the promises that were exchanged by the several parties.

The contract recites that H. P. Hood & Sons 'contemplates the acquisition, by purchase, of the assets' of two Burlington milk co-operatives whose membership was composed of the producers who signed it. The contract also recites that the Hood company desires to enter into an agreement for the purchase of the milk produced by both groups of producers.

The consideration defined in the writing is specifically related to the two objectives of the plaintiff, previously stated. In substance the contract declares that the market agreement was extended by the plaintiff for two reasons: (1) the defendants' unanimous agreement, as stockholders, to the plaintiff's purchase of their co-operatives; and (2) to obtain a milk supply for its new market.

The...