Alf Bennett Lumber Co. v. Walnut Lake Cypress Co.

151 S.W. 275, 105 Ark. 421, 1912 Ark. LEXIS 446

• Court: Supreme Court of Arkansas
• Decided: November 11, 1912
• Status: Published

Opinion

Hart, J.,

(after stating the facts). The right of appellant to recover in this case depends upon the construction of the ninth clause of the contract, which is as follows: “This contract shall be and remain in force and effect as long as the party of the first part is operating their plant at that point, and until all the timber they now own and shall in future purchase shall have been cut into lumber.”

The purpose of all interpretation is to ascertain and give effect to the intention of the parties to the contract as expressed by their writing, and in doing this it is necessary to consider the circumstances surrounding the making of the contract, its subject, the situation and relation of the parties and the sense in which, taking these things into consideration, the words used would be commonly understood; for it fairly may be assumed that the parties used and understood them in that sense. Applying this fundamental rule of construction, it is contended by counsel for appellee that the Walnut Lake Company in making this contract foresaw that it might wish to sell or be forced to quit business at any time, and therefore embodied in the contract the provision that the contract should remain in force only so long as it was “operating their plant at that point.” They insist that the further words, “and until all the timber they now own and shall in the future purchase shall have been cut into lumber,” were added to cover the possible contingency that the Walnut Lake Company, in case of fire or other casualties to its plant, might wish to rebuild at some other point and cut the timber at a new mill site. They contend that the evident intention of the parties, as expressed by the language of the contract, was that the contract should be in force only so long as both of the conditions may continue to exist, viz: While the Walnut Lake Company operates its plant at Walnut Lake, and its timber remained uncut. We can not agree with their contention. The Bennett Company was not engaged in the business of loaning money, but was engaged in the business of selling lumber for those who manufactured it. The lending of money to its customers was merely an incident to its principal business. It was principally engaged in the business of selling pine lumber at the time the contract was entered into, and, in order to carry out the contract with the Walnut Lake Company, it was necessary to make some changes in the conduct of its business in order to enable it to successfully sell cypress lumber. Under these circumstances, it is unreasonable to suppose that the parties to the contract contemplated an agreement which could be terminated by the Walnut Lake Company ceasing to operate its mill at Walnut Lake before its timber was sawed into lumber. Such a construction would not give any meaning to the clause, “and until all the timber they now own and in the future shall purchase shall have been cut into lumber.”

We are of the opinion that the contract as made clearly indicates that it was not intended that the contract should be terminated until the timber owned by the Walnut Lake Company, tributary to the site of the mill at Walnut Lake, should have been cut into lumber. As illustrative cases sustaining our contention, we cite the following: Mississippi River Logging Co. v. Robson, 69 Fed. 773; Lewis v. Atlas Mutual Life Insurance Co., 61 Mo. 534; Ford Hardwood Lumber Co. v. Clement, 97 Ark. 522.

2. The next question we shall consider is whether or not the Walnut Lake Company was induced to make the contract by the fraudulent representations of the Bennett Company. To sustain the finding of the chancellor in behalf of the appellee, it is claimed that Bennett misrepresented his ability to sell cypress lumber. Concerning this matter, Ladd testified that some time-before the contract was entered into he met Mr. Bennett on the train, and they got into a conversation in regard to malting a contract to give Bennett the exclusive sale of the output of the saw mill when it was erected and put in operation. Nothing definite was arranged about the contract at that time. Bennett explained to Ladd that his company had a large selling force, and that they understood the handling of cypress lumber to good purpose; that they could handle it to better advantage than the manufacturers of the lumber. Craft conducted the negotiations leading up to the making of the contract. In regard to this he testified as follows: “We were desirous of a line of credit, and I went to see Mr. Bennett, and he represented that he had special ability to sell our stock, for the reason that he had a large selling force, and had experience in selling cypress, and represented that he would be able to help us out to the extent that we would probably need money until such time as we could make other arrangements. We insisted on . his going into the matter thoroughly, and he explained that he had had some four or five years' experience in selling cypress, and that, while he did not have any one in his office that had had more experience than he had, he would give the matter his personal attention. He related the experience he had had, and stated why he wished to make this contract with us; said that he had found our stock, that is, the stock that the old concern had turned out, to be a very superior grade; that he had found us hard competitors to get over, and for these reasons he specially desired the selling contract. In view of these representations and believing that he had the ability, we considered making the contract with Mr. Bennett, and Mr. Bennett and I went into the terms of the contract together. I made the contract with him under the representations made by him.”

In addition it is shown that, after the Bennett Company began to sell the lumber for the Walnut Lake Company, Ladd and Craft at different times each went to St. Louis and assisted Bennett in making sales of some lumber. At none of these times, however, did they go to St. Louis for that purpose. They went there for the purpose of borrowing money with which to run the mill, and while there went with Bennett to some old customers of Ladd who had bought lumber from him while he was engaged in the saw mill business prior to the time the Walnut Lake Compnay was organized. There is nothing in the testimony to indicate that Bennett’s corporation was not competent to handle, as sales agent, the putput of the Walnut Lake Company’s saw mill. The testimony shows that Alf Bennett, the president of the company, had had several years’ experience in the sale of cypress lumber, and that he employed another person to take charge of a department of the company for the sale of cypress lumber, and that the man so employed had had several years’ experience in selling cypress lumber. If it can be said that the representations made by Bennett amounted to anything more than a mere expression of opinion as to his company’s ability to act as sales agent for the Walnut Lake Company in the sale of the output of its mill, certainly it can not be said that the testimony is sufficient to sustain the charge of false representations as to the ability of the Bennett Company to act as sales agent under the contract.

3. It is also claimed that the decision of the chancellor should be upheld because the appellant committed certain breaches of the contract. One of these is that it failed to make certain remittances of the proceeds of the sales within the time specified in the contract. Another is that a customer who had purchased lumber put in a claim for damages due to the fact that the lumber shipped to it did not correspond with the grade mentioned in the order. The Bennett Company allowed this customer a reduction, but the deduction was not not large enough according to the contention of the Walnut Lake Company. It claimed that the Bennett Company damaged its reputation for fair dealing by not allowing the claim in full. Another alleged breach of the contract is that the Bennett Company did not sell the lumber in all instances according to the grades' of the Walnut Lake Company. The testimony shows that the Walnut Lake Company graded its lumber according to its own rules, and that its grading did not correspond with the grading rules of the Southern Cypress Manufacturers’ Association, which were considered standard throughout the territory in which the Walnut Lake Company’s stock was sold. To illustrate, the Walnut Lake Company’s number three common was equivalent to the association’s grade of number two common. In other words, the Walnut Lake Company graded its lumber one grade higher than the association’s corresponding grades. Old customers of Ladd understood this difference in the grading and purchased accordingly. New customers did not understand the difference in the grading, and on that account it was difficult to sell them. So in some cases the Bennett Company, in order to make sales to new companies, billed the lumber to them according to the grades of the association, but remitted the full amount of the proceeds, less its commission, to the Walnut Lake Company. Still another alleged breach of the contract is, that at one time the Bennett Company employed a sub-agent to sell some lumber and endeavored to charge up the Walnut Lake Company with his commission in addition to its own, but the testimony shows that when the Bennett Company’s attention was called to the matter it rectified the mistake. In regard to these alleged breaches of the contract but little need be said, for the reason that, if it be conceded they were breaches of the contract, the Walnut Lake Company waived them. The testimony shows that in the latter part of September, 1908, Mr. Ladd made a trip to St. Louis for the purpose of inducing Mr. Bennett to cancel the contract. At that time Mr. Ladd was in possession of all of the facts and circumstances connected with these alleged breaches of the contract. He told Mr. Bennett that he had not been living up to his contract, and that he wanted him to cancel it. He told Bennett that they needed more money. Bennett refused to cancel the contract but offered to secure for the Walnut Lake Company five thousand dollars, in addition to the fifteen thousand already loaned it. Ladd told Bennett that they had to have the money, and that, if he would not release them from the contract, they would take that. Bennett after-wards did arrange it and raised the five thousand dollars for the Walnut Lake Company, as he had agreed to do.

Thus it will be seen that Ladd acted with the full knowledge of all the facts and circumstances connected with the alleged breaches of the contract, and will be deemed to have waived them. Grayson-McLeod Lumber Co. v. Slack, 102 Ark. 79; Thomas-Huycke-Martin Co. v. Gray, 94 Ark. 9.

4. Can the appellant recover its prospective profits as damages? In the case of Ford Hardwood Lumber Co. v. Clement, 97 Ark. 523, it is held: “Where plaintiff agreed to perform certain work for defendant which he was prevented from doing by defendant’s fault, he is entitled to recover the profits which the evidence makes it reasonably certain that he would have made, had defendant carried out its contract.” See also Singer Mfg. Co. v. W. D. Reeves Lumber Co., 95 Ark. 363; Spencer Med. Co. v. Hall, 78 Ark. 336.

The burden was on the appellant to prove the amount of its alleged damages. Gay Oil Co. v. Muskogee Refining Co., 97 Ark. 502. In the present state of proof, as abstracted, the testimony for the appellant does not aid us in arriving at a correct conclusion as to the amount of damages suffered by appellant. It is true that Alf Bennett, the president of the company, testified as to the gross amount of profits his company would have earned, but, according to the terms of the contract, this would not be the compensation due it. In arriving at the prospective profits -we must look principally to the testimony of Mr. Craft, who was the secretary of the Walnut Lake Company, and who was introduced as a witness by it. Section 7 of the contract is the one which provides for the amount of commissions to be paid. Craft testified that, considering the invoices, appellant would not have made more than a gross profit of eighty cents per thousand feet. He also testified that it would cost appellant fifty cents per thousand feet to sell the lumber. This would leave it a net profit of thirty cents per thousand feet. Under clause 11 of the contract, local sales of lumber in less than carload lots were exempt from the commission. Lumber used by the Walnut Lake Company in the erection of its building was also exempt. Then, too, it will be remembered that appellant had been paid for the lumber sold by it up to the time that the Walnut Lake Company refused to permit it to continue to act as sales agent. Again, Craft says that in sawing up lumber a certain amount of stock is always accumulated, which can not be shipped at a profit. When all of these matters are considered, he estimates that no more than thirteen million feet of lumber could have been shipped by the Walnut Lake Company after the time it cancelled the contract. The net profits that would have accumulated to appellant from the sale of this lumber would be thirty cents per thousand feet on thirteen million feet, which amounts to $3,900, and this is the amount appellant is entitled to recover as damages ■in this case.

5. Section 958, Kirby’s Digest, provides that when any corporation has surrendered its charter the chancery court shall have jurisdiction to pay its debts and to distribute its assets among the stockholders according to their several interests. Pursuant to this section of the Digest, a receiver was appointed for the Walnut Lake Company when it surrendered its charter. During the pendency of the proceedings to wind up its affairs appellant filed its intervention claiming damages for the breach of the contract with it.

Inasmuch as we have held that the Walnut Lake Company had no right to cancel , the contract and that appellant was entitled to recover damages under it, it follows that the claim of appellant for damages was a debt of the corporation, and the assets of the corporation in the hands of the receiver are liable for the amount of this claim.

The decree of the chancellor will therefore be reversed, and judgment entered here for appellant in the sum of $3,900.