J. K. Armsby Co. v. Grays Harbor Commercial Co.

• Decision Date: 16 April 1912
• Citation: 62 Or. 173,123 P. 32
• Parties: J.K. ARMSBY CO. v. GRAYS HARBOR COMMERCIAL CO. et al.
• Court: Oregon Supreme Court

123 P. 32

62 Or. 173

J.K. ARMSBY CO. v. GRAYS HARBOR COMMERCIAL CO. et al.

Supreme Court of Oregon

April 16, 1912

Appeal from Circuit Court, Multnomah County; Robert G. Morrow Judge.

In an action by the J.K. Armsby Company against the Grays Harbor Commercial Company and others. From a judgment for defendants, plaintiff appeals. Affirmed.

This is a suit against defendants, who were joint parties in the organization of a commercial agency, to recover damages for failure of the Agency to deliver contracted goods. Fourteen of the defendants, as principals, being corporations engaged in the manufacture of boxes and box materials, in March 1902, formed an association and entered into an agreement among themselves to maintain an agency at Portland, to be known as "Northern Box Manufacturers' Agency," for the purpose of facilitating the sale of boxes and box materials manufactured by them, and appointed A.A. Courteney as its general agent and manager. On March 3, 1906, the Agency entered into an agreement with plaintiff, a corporation, engaged in packing fruit in California and Washington, by which plaintiff agreed to purchase all box materials used by it from the Northern Box Manufacturers' Agency for the term of three years, and the Agency agreed for that period of time, to fill all orders promptly, namely within 10 days from the time the orders were received, at prices named, and plaintiff to pay for the same within 10 days after the arrival of the shooks. The complaint states that defendants executed the contract in part, but alleges that it failed to deliver large numbers of boxes ordered, and that on October 13, 1906, gave plaintiff notice that it canceled the contract, and alleged that $8,946.76, due defendants for goods delivered, was retained by it to indemnify it against damages by reason of defendants' failure to deliver all the materials ordered. It also alleges that it has been damaged by defendants' default in the sum of $58,233.91 by reason of the increased price it was required to pay in the open market for shooks required by it, on account of defendants' failure to fill orders during the years 1906, 1907, and 1908.

Seventeen defendants are named in the complaint, but service was had upon five, namely, Multnomah Box & Lumber Company, Astoria Box Company, Davidson Fruit Company, Standard Box & Lumber Company, and A.A. Courteney. Each answered separately, denying that the Agency had any authority to make contracts for the defendants jointly; that plaintiff rescinded and annulled the contract on October 12, 1906; that plaintiff had violated the contract in neglecting and refusing to pay the Agency the amounts due for shooks received by it, namely, in the amount of $8,946; and that, on account of such failure of plaintiff to pay the sums due, the Agency, on its own behalf and that of its principals, rescinded the contract. The Multnomah Box & Lumber Company further denies that it was a party to or member of the Agency. It seems that plaintiff was in default of payment for shipments made in June, July, August, and September, though frequently demanded; and on October 13, 1906, the Agency wired plaintiff as follows: "On account of your failure to pay for shooks shipped in accordance with provisions of contract, we hereby notify you, no further shipments will be made and that the contract is rescinded." This telegram is confirmed by a letter of the same date. On the day previous (October 12th), plaintiff wrote to the Agency as follows, the envelope being postmarked October 13th: "Replying to your letter of October 1st and your wires of Oct. 10th and 12th reading, respectively: 'Need money badly eight thousand over due, have you remitted or when will you? Answer immediately' and 'Please give me reply to my telegram of tenth inst. and letter of first.' We beg to say that we have not made remittance, and that the situation in which you have placed us is a very serious one. *** The J.K. Armsby Co. is ready and able at all times to absolutely live up to the letter and spirit of every agreement and contract it makes, and has lived up to and is willing even now to maintain this agreement which you have so flagrantly broken, if you can give us a satisfactory guarantee, that the shipments due, and the order placed herewith, will be from now on, delivered in accordance with the terms of the contract, but unless you can and do give us such satisfactory assurance for the future faithful performance of this agreement and immediate shipment of all unfilled orders and order placed herewith, we most respectfully decline to make any further payments thereunder and hereby notify you that unless you comply with our requirements aforesaid, that having broken your contract with us by your failure to live up to and carry out the terms thereof, we shall consider the contract at an end and hold you liable," etc. The case was tried before a jury, and at the close of plaintiff's evidence each defendant moved for a judgment of nonsuit, which motions were granted by the court.

F.W. Mulkey and Wirt Minor, both of Portland (Titus & Creed and W.A. Johnson, on the brief), for appellant.

H.G. Platt, of Portland (Platt & Platt, on the brief), for appellee Multnomah Lumber & Box Co.

C.W. Fulton, of Portland (G.C. Fulton, of Astoria, on the brief), for appellee Astoria Box Co.

J.T. McKee, of Portland (Cake & Cake, on the brief), for appellee Davidson Fruit Co.

H.H. Riddell, of Portland, for appellee A.A. Courteney.

A.F. Flegel and J.W. Reynolds, of Portland, for appellee Standard Box & Lumber Co.

EAKIN C.J. (after stating the facts as above).

The motion for judgment of nonsuit, filed by Courteney, specifies six grounds therefor; the third being that "plaintiff's evidence shows that on October 12, 1906, plaintiff was in default for nonpayment of the moneys due for shooks purchased and delivered under said contract, and that while in default plaintiff canceled and rescinded the contract and refused to be further bound by it, and refused to make payment of the sums then due thereunder, to wit, the sum of $8,900." Others of the motions followed the language of the statute in assigning the grounds of the motion, namely, "for the reason that the plaintiff has failed to prove a cause sufficient to be submitted to the jury."

We will first consider the motions for nonsuit. By the terms of plaintiff's letter of the 12th of October, and the telegram and letter sent by the Agency on October 13th, the contract was repudiate by each at approximately the same time, each claiming to have canceled it on account of the default of the other, and the cancellation was acquiesced in by both, as neither recognized the contract as in force thereafter. The trial court recognized these acts as amounting to a cancellation of the contract, and excluded evidence relating to matters occurring after October 12th.

The term "rescission," in relation to contracts, can only apply to the unmaking of the contract, the revoking of it by mutual agreement of the parties; or it may be effected by an attempt to revoke the contract by one party, acceded to by the other, or a breach by one which precludes him from any remedy thereon, and for which the other party revokes it. Miller v. Shelburn, 15 N.D. 182, 107 N.W. 51; Bannister v. Read, Gilman (Ill.) 92.

In the case before us, the cancellation was not mutually accomplished, as each party acted independently; but each recognized the contract as at an end. When a contract is mutually rescinded, the parties are placed in their original position, as if it had not been made. Each party is entitled to be placed in statu quo. Upon a renunciation of the contract by one party, the other, being guilty of no breach, may elect to treat it as still in force, in which case his remedy is upon the contract; or he may treat it as a rescission, in which case payments made may be recovered, or compensation had for property delivered.

In Lake Shore & M. S. R. Co. v. Richards, 152 Ill. 59, 38 N.E. 773, 30 L. R. A. 33, it is said: "It is well settled that, where one party repudiates the contract and refuses longer to be bound by it, the injured party has an election to pursue either of three remedies: (1) He may treat the contract as rescinded, and recover upon quantum meruit, so far as he has performed; or (2) he may keep the contract alive for the benefit of both parties, being at all times himself ready and able to perform, and at the end of the time specified for performance sue and recover under the contract; or (3) he may treat the repudiation as putting an end to the contract for all purposes of performance," and sue for damages for a breach. This question is discussed in the dissenting opinion in Livesley v. Krebs Hop Company, 57 Or. 352, 97 P. 718, 107 P. 460, 112 P. 1.

Leake, on Contracts (4th Ed.) 618, says that the "renunciation of a contract will operate as a present breach only, if accepted and acted upon as such by the other party, who may, if he pleases, disregard it and insist upon performance according to its terms. 'The promise may treat the notice of intention as inoperative and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of nonperformance. But in that case he keeps the contract alive for the benefit of the other party, as well as his own; he remains subject to all his own obligations and liabilities under it, and enables the other party, not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it.' " See, also, United States v Behan, 110 U.S. 338, 4 Sup.Ct. 81, 28 L.Ed. 168; Meacham v. Gardner, ...