Magnolia Provision Co. v. Coleman

• Decision Date: 07 March 1928
• Docket Number: (No. 898-4731.)
• Parties: MAGNOLIA PROVISION CO. v. COLEMAN et al.
• Court: Texas Supreme Court

Page 412

3 S.W.2d 412

MAGNOLIA PROVISION CO. v. COLEMAN et al.

(No. 898-4731.)

Commission of Appeals of Texas, Section B.

March 7, 1928.

Error to Court of Civil Appeals of Sixth Supreme Judicial District.

Suit by W. L. Coleman and others against the Magnolia Provision Company. From a judgment of the Court of Civil Appeals (287 S. W. 294), reversing a judgment of the district court, defendant brings error. Reversed and judgment of trial court affirmed.

Baker, Botts, Parker & Garwood, Walter, H. Walne, J. L. Shepherd, Jr., and S. H. German, all of Houston, for plaintiff in error.

Franklin & Blankenbecker, of Houston, for defendants in error.

LEDDY, J.

Defendants in error brought this suit for the recovery of damages claimed to have resulted on account of an alleged breach by plaintiff in error of three contracts under which it was obligated to sell and deliver to defendants in error 409 bales of cotton linters, which it was alleged it failed and refused to deliver in accordance with the terms of the purchase contract. It was averred that the sale contracts were made originally by the plaintiff in error with Hughes-Coleman Linters Corporation, and that the latter subsequently sold the same to defendants in error.

It appears from the pleadings that the contract was made subject to the rules of the Texas Cottonseed Crushers' Association, which required the buyer upon default of the seller to deliver the cotton contracted, to buy in the open market an equivalent number of bales of linters through a broker who was a member of such association. The petition affirmatively showed a failure to comply with this provision. The trial court sustained a general demurrer and certain special exceptions, which in one form or another raised the question of defendants in error's right to recover because the petition showed a noncompliance with the provisions of the purchase contract, which required them at the time and manner set out in the contract to actually purchase the 409 bales of linters in the open market.

The contracts in question contained a provision that they were made subject to the rules of the Texas Cottonseed Crushers' Association, thereby making such rules a part of the contract as much so as if they had been specially written therein. The provisions of the rules, pertinent to the question under consideration, are as follows:

"Rule 205. Section 3. Failure or Refusal of Seller to Ship. — Failure or refusal on the part of the seller for ten days after receipt of buyer's instructions to ship in accordance with section 1 of this rule or to ship within the period set out in section 2 of this rule in the case of the products therein specified, shall give the buyer the option to treat the contract as breached by seller and if he elects so to do, he must proceed as required by rules 210-213. Such option must be exercised not later than five days after the expiration of contract period."

"Chapter VIII. Remedies for Breach of Contract. —

"Rule 210. Options to Party Not in Default on Breach of Contract. — * * * Whenever under these rules, a buyer elects to treat a contract as breached by the seller, he must either cancel the contract, or buy the product for the account of whom it may concern."

"Rule 212. Purchases or Sales for Account of Whom it May Concern. — In those cases where the buyer or seller elects to buy or sell a product covered by a contract for account of whom it may concern, he must when his right so to do has accrued, all rights of the opposite party having been forfeited, give immediate notice of his intention, by telegram, to opposite party. Such repurchase or resale must then be made through a recognized broker, a member of the association in good standing, in not less than 24 hours and not more than 72 hours after such notice, and shall be for a period of shipping conforming as nearly as possible to the original contract. As soon as such broker has received his order to buy or sell he must immediately notify the interested party by telegraph. The broker will note on his confirmation contract the fact that the sale or purchase was made for account of whom it may concern, and will note thereon the name of the interested party in addition to the names of the buyer and seller in the transaction which he is confirming. He will send a copy of such confirmation contract to each of the three parties named herein.

"Rule 213. Method of Fixing Damages Exclusive. —The methods of fixing damages for breach of contract outlined in the foregoing rules are exclusive, and failure to follow the procedure there required will defeat a claim for breach of contract."

It appears that defendants in error, after the alleged breach of the contract, sought to fix the measure of damages in a different way from that provided in the contract. Upon bids being called for by a broker of Texas Cottonseed Crushers' Association, they bid lower than any other bidder and were declared the purchaser under such sale. This method was pursued under each of the contracts involved.

Plaintiff in error contends that the contracts specifically required defendants in error on default of the seller as to delivery to buy by actual purchase the equivalent of the linters covered by the contract, and that such rule was not complied with by having a broker write a memorandum reciting that the buyer had purchased from themselves an equivalent of the commodity covered by the contracts.

Defendants in error insist that the purpose of the insertion of this clause in the contract was to fix the measure of damages, and that when the broker called for bids, they having bid several hundred dollars lower than any other bidder, including plaintiff in error, who submitted a bid, it was a substantial compliance with the contract; that as plaintiff in error was benefited instead of injured by such procedure, a recovery should not be denied on account of the failure to perform the contracts in...