Alaska Salmon Co. v. Standard Box Co.

The action was for damages for breach of contract. The case was tried before a jury whose verdict was given for plaintiff. From the judgment which followed and from the order of the court denying defendant's motion for a new trial it appeals.

The complaint charged that in October, 1905, plaintiff and defendant entered into a contract whereby defendant agreed to manufacture for plaintiff one hundred thousand wooden boxes to be delivered during the canning seasons of 1906 and 1907 as called for by plaintiff for its use in the business of manufacturing and selling canned salmon. Defendant supplied plaintiff for the canning season of 1906 with forty-four thousand boxes and plaintiff prior to the commencement of the canning season of 1907 demanded of defendant that it furnish the remaining boxes, to wit, fifty-six thousand, for use during the canning season of 1907. It is alleged that plaintiff has always been ready and willing to receive the said fifty-six thousand boxes and to pay for them at the price called for by said contract, and in accordance with the terms thereof, but that defendant has refused to deliver the boxes, whereby plaintiff has been damaged in the sum of $3,920. The answer was by general denial and for a special defense it is alleged "that the plaintiff is and for more than three years last past has been a corporation, organized, existing and doing business under and by virtue of the laws of the state of California." That plaintiff has at all times since its incorporation wholly failed to comply with the provisions of the act imposing a license-tax upon corporations and has wholly failed to pay the license or any of the licenses required by this act. The jury's verdict was for $3,640.30.

1. It is asserted that the complaint wholly fails to state a cause of action because it does not allege that the contract of October was in writing. The law will presume the contract to be valid and not invalid and thus, where required by the statute of frauds will presume it to be evidenced by writing. (Nunez v.Morgan, 77 Cal. 427, [19 P. 753]; Bradford Investment Co. v.Joost, 117 Cal. 204, [48 P. 1083].) If the defendant relies upon the statute of frauds against such a complaint he must plead it. (Broder v. Conklin, 77 Cal. 330, [19 P. 513].) Moreover, the execution of the contract was not denied and in the answer the written agreement is expressly set out in a counterclaim for damages; and finally, the contract was, in fact, in writing and was proved and legally evidenced by an interchange of business letters between the two corporations.

2. It is argued that because plaintiff did not affirmatively show the payment by it of the license-tax required, it cannot be permitted to maintain this action. It will be remembered that the defense pleaded such non-payment by plaintiff, but no evidence was introduced in support of the plea. The answer itself avers that the plaintiff is a corporation and is engaged in business as a corporation. This is an admission of the plaintiff's corporate capacity to sue and is a waiver of the proof contemplated by section 297 of the Civil Code to the effect that a certified copy of the articles of incorporation "must be received in all the courts of this state and in other places as prima facie evidence of the facts therein stated." The corporate existence and general capacity of the plaintiff thus being established by the admission of the pleadings it was a matter of affirmative defense for the box company to have shown the extraneous fact that plaintiff had failed to comply with the corporation license-tax law and therefore should not be permitted to proceed further. The burden of proving a negative thus being cast upon the defendant only slight evidence would be required. But, as has been said, defendant never undertook to furnish any evidence at all, and here rests merely upon the proposition that every corporation must itself affirmatively show a compliance with the corporation license-tax act before being permitted to prosecute an action. This view of the law, for the reasons given, cannot be upheld.

3. To the better understanding of the other propositions advanced by appellant, comprehension of the facts becomes necessary. Plaintiff is engaged in the business of canning salmon in distant Alaska. It sends its ships equipped with the necessary supplies to its canneries. Its success for any year is absolutely dependent upon its ability to have its men and supplies at its canneries in time to handle the salmon run. It was important, therefore, that its supplies should be on board the ship and the ship started for the Arctic as early as practicable. As part of its supplies it required for the years 1906 and 1907 each fifty thousand wooden boxes in which were to be packed the tins of salmon. These boxes the defendant undertook to furnish, "50,000 to be delivered f.o.b. ship at wharf in San Francisco during the first week of April, 1906" and fifty thousand to be delivered at the same time in 1907. "Boxes to be of standard size and quality, guaranteed to be perfectly dry. The price of shook 10 1/2c. each; cases nailed up 12 1/2c. each, all cash less 2 per cent." In fact, defendant did not deliver all of the first lot of fifty thousand boxes and complaint was made by plaintiff to defendant both of the shortage and of the quality of the boxes which it actually delivered in that they were wet and not dry. The effect of the wet boxes would be to rust the tin cans of salmon and so impair the value of the pack. The ship started north on April 12th and demand for payment was made by defendant upon plaintiff for the boxes already delivered. The earthquake and fire with the consequent confusion and disturbance of all business occurred on April 18th. Plaintiff insisted that the payment should be made only after adjustment because of the inferior quality of the boxes and the failure to furnish the full fifty thousand contracted for. Finally an agreement was reached evidenced by a writing signed by the Standard Box Company to the effect that upon the payment of three thousand dollars by plaintiff the box company would leave a balance which it claimed to be due, of $1,175.57, in the hands of plaintiff "until such time that the ship ``Big Bonanza' arrives from the north at about September next, when you can ascertain damage sustained, if any, on account of delivery not being in accordance with contract dated October 26, 1905. Also on account of quality which you claim to be below standard and we hereby appoint James Madison the sole arbitrator in this matter, and his decision to be final and binding upon this company." The plaintiff then paid the three thousand dollars and James Madison, upon his return, declared that there was $754.40 still due to defendant, the remainder being deducted for damages. Upon October 6, 1906, defendant was paid this $754.40 in full satisfaction of its claim and defendant receipted without protest, never intimated its dissatisfaction with the settlement or its desire to terminate the contract. Subsequently, on February 19, 1907, plaintiff made demand for the fifty-six thousand boxes for the year 1907 to be delivered during the first week in April in accordance with the contract. Then, for the first time, on February 20th the box company replied: "As to cutting your order for 56,000 cases, we would say that if we can agree upon new terms and conditions and prices we are willing to fill same, as we consider your treatment of us an abrogation of your contract, in withholding our money for such a long time." Upon this refusal plaintiff bought boxes from a northern box factory in Astoria, Oregon, and lays damages for the difference between the defendant's contract price and the price which it was thus compelled to pay.

It was not error for the court to refuse to instruct the jury as requested by defendant to the following effect: "As a matter of law, the contract in this case required payment to be made by plaintiff for each lot of boxes delivered, as the same should be delivered, or, at the very latest, upon the collection day following each lot of deliveries, and it was the duty of the plaintiff to pay the defendant at the very latest on April 13, 1906, if that was a collection day, the amount due for all boxes delivered by collection day; I mean, of course, collection day as known to the business world generally in San Francisco." Such instruction would have made it mandatory for the jury to find that the failure or refusal of plaintiff to pay for all the delivered boxes on April 13th was a violation of the contract, notwithstanding the fact that the refusal to pay might have been fully and completely justified by a delivery of an insufficient and inferior quantity without opportunity for counting and inspection. There is no question but that this contract contemplated a cash payment. It is equally true that it contemplated delivery in the first week in April, a delivery which defendant did not make. The defendant was aware that the boxes were to go north on shipboard under the circumstances noted. The general line of cases to the effect that it is the duty of plaintiff to inspect goods when delivered and reject them if not up to specification, and that the plaintiff cannot accept goods in part and reject them in part, and that having kept the goods it is too late for plaintiff to contend that they did not conform to the contract, are none of them apposite. Each case must be governed by its conditions and facts. A plaintiff, where a defendant has violated his contract, is charged with the general duty of doing every reasonable thing to minimize his own loss and thus reduce the damages for which defendant has become liable by his breach. The time for examination was extremely short. Whatever goods were rejected as not up to quality involved, in their rejection, trouble and difficulty, if not absolute inability, for their replacement. Plaintiff was, therefore, justified in doing as it did, namely, taking on board the boxes furnished, even though deficient in number and not up to standard in quality. That they were of inferior quality was noted by plaintiff and made known to defendant during delivery. Under these circumstances, the instruction actually given by the court was all that defendant was entitled to ask. It was as follows: "When a contract for the manufacture and delivery of certain goods, provides for the payment of the contract price in installments, as the goods are delivered, it is the duty of the party who is to pay for the goods to pay each installment as required by the contract; and if when, under the contract, an installment becomes due, the party who is to pay refuses or fails to pay such installment, the other party to the contract has the right to cease the manufacture and delivery of the goods, and to consider the contract at an end; and the other party to the contract who has so failed to make payment of an installment, when the same became due, cannot, under such circumstances, complain of the refusal of the contractor to proceed further with the manufacture and delivery of the goods, and cannot maintain any action against the contractor for damages because of such refusal of the contractor to proceed with the manufacture and delivery of the goods."

4. The contract was not terminated before this action was brought. The argument herein seems to be based upon the law of the preceding rejected instruction, that the failure to pay upon delivery operated to avoid the contract. But neither then nor thereafter, until its letter of February, 1907, did defendant ever treat the contract as abrogated, annulled, or rescinded. It never gave notice of rescission. To the contrary, it entered into an arbitration agreement for the adjustment of its differences with the plaintiff under the contract. Regardless of the question as to whether or not that arbitration agreement was in strict legal form, it was accepted by both parties and fully executed by the judgment of the arbitrator and by the payment and acceptance of his award, without sign of protest from either party.

5. It is contended that plaintiff failed to prove that it was ready, able, and willing to perform the contract on its part. Such proof is, of course, required. (Barron v. Frink,30 Cal. 486; McGehee v. Hill, 4 Porter (Ala.) 170, [29 Am. Dec. 277];Grandy v. McCleese, 2 Jones (47 N.C.) 142.) But where the insolvency of plaintiff is not charged, and where the defense is not in any way based upon such inability, very slight proof will fill the requirement. The complaint alleged that the plaintiff has always been ready and willing to receive the fifty-six thousand boxes and pay for them under the contract. No question in the case arose over any previous inability of the plaintiff to pay. To the contrary, it plainly appears by defendant's letter of February 20th that its refusal to furnish the boxes involved no question of plaintiff's ability, but arose simply from the defendant's demand that new terms, conditions, and price be fixed. The price of such boxes at this time had risen. We hold the evidence to have been sufficient.

6. The court instructed the jury to the following effect: "The plaintiff claims to have paid 7 cents in excess of this contract price, for each box of the remaining 56,140, making $3,920, and, if you find that it did make such payment, then plaintiff is entitled to a judgment for this amount, unless the contract was by some act or omission of the plaintiff, rescinded or terminated." It is contended that this instruction does violence to the provisions of section 3354 of the Civil Code, to the effect that in estimating damages, the value is deemed to be the price at which one might have bought an equivalent thing in the market nearest to the place where the property ought to have been put in his possession. It is asserted that a purchase from the Astoria Box Factory was not a purchase in the nearest place, and that the purchase by plaintiff of the boxes at seven cents advance of the contract price in no way tended to show the market value. Still further it is said that the boxes for which plaintiff paid the advanced price were not the kind and quality of boxes called for by the contract, but were better boxes, of better material. The evidence on the last point is that the boxes "were the same boxes called for by the contract here, only much better boxes and better material," which is fairly open to the construction that what the witness meant to convey was that the boxes were of the same size and standard make, and general quality, but that the boxes which they received from the Astoria factory were of better material and workmanship. It is in evidence, moreover, that the price obtained from the Astoria Box Company was the cheapest price for which the plaintiff could get the boxes from any one anywhere. The bids of the San Francisco box companies were higher, and therefore if plaintiff had bought the boxes in San Francisco, defendant's damage would have been greater. The provision for the purchase of property in the market "nearest to the place" is a provision designed wholly for the protection and benefit of the vendor in default. It is to prevent any exorbitant or extortionate charge being made against him by the unnecessary purchase of the goods in a distant or foreign market. But where, as here, it is shown that the damages for which defendant was liable were decreased, and the consequent award against him lessened by the purchase in a northern market, it will not be said that the purchase was to his injury or in violation of the law.

7. The plaintiff clearly showed that it had sustained damage, and from all that has been said it is apparent that the court was justified in refusing an instruction to the jury to the effect that it was the duty of the plaintiff to have accepted the full quantity of fifty thousand boxes if they were delivered on the wharf before the vessel put out into the stream. No evidence sustains the proposition that the fifty thousand boxes were in fact delivered at the wharf. Indeed, it appears that the delivery of the final boxes to complete the fifty thousand was made after the ship had left. The contract called for delivery in the first week in April. Defendants were engaged in supplying other ships, the time was extended to April 12th, and when the ship put forth into the stream delivery then was not completed.

For these reasons the judgment and order appealed from are affirmed.

Lorigan, J., and Melvin, J., concurred.

Hearing in Bank denied.

In denying a hearing in Bank the court in Bank rendered the following opinion on December 17, 1910: —