GREAT WESTERN DISTILLERY PRODUCTS v. JOHN WATHEN DISTILLERY CO

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District Court of Appeal, Second District, Division 2, California.

GREAT WESTERN DISTILLERY PRODUCTS, Inc., v. JOHN A. WATHEN DISTILLERY CO. et al.†

Civ. 11277.

Decided: March 25, 1937

Goldenhorn & Komins, I. Faerber Goldenhorn and Robert Komins, all of Hollywood, and Solomon Rosenbaum, of Los Angeles, for appellant. Michael F. Shannon and Thomas A. Wood, both of Los Angeles, for respondents.

A general demurrer to the plaintiff's first amended complaint was sustained without leave to amend and judgment was entered accordingly. The appeal is taken from said judgment.

Under the allegations of one of the counts of the complaint the parties entered into an agreement which, when boiled down, reads as follows: The defendant enters into an agreement with the plaintiff whereby the defendant agrees with the plaintiff that as long as the plaintiff purchases and continues to purchase from the defendant all of its John A. Wathen Distillery Company warehouse receipts for whisky that it may require and sells and exploits in California said warehouse receipts, and refrains from selling and exploiting warehouse receipts from any other distillery, the defendant will not sell in California any of the said warehouse receipts to any other person except one in San Francisco. The complaint further alleges that the plaintiff, relying upon the said agreement, purchased from the defendant a quantity of said warehouse receipts at the time of entering into said contract and that thereafter the plaintiff continued to purchase quantities of said receipts from the defendant and at all times has been and now is and will continue to be ready, willing, and able to purchase additional receipts and will refrain from purchasing receipts from other distilleries; that in reliance upon said agreement the plaintiff expended large sums of money for the purpose of advertising, circularizing, and exploiting the defendant's warehouse receipts, and further large sums of money for opening branch offices in California for the purpose of carrying on the business contemplated by said contract, stating the amounts; that the defendant breached said contract, stating the facts, and that by reason thereof the plaintiff was damaged in certain sums, naming them.

In another count plaintiff, in addition to the above, alleges that the defendant did willfully, falsely, and fraudulently enter into said contract with intent to deceive and defraud the plaintiff and to induce the plaintiff to purchase and agree to purchase in the future and sell, advertise, circularize, and exploit said warehouse receipts. That said representations, agreements, and covenants of the defendant were fraudulent and false and known by the defendant to be fraudulent and false in that the defendant never intended to perform the same, and that defendant did, during the term of said representations, willfully, and maliciously and with intent to injure the plaintiff's business sell and dispose of large numbers of said warehouse receipts to others.

The first contention of the defendant is that the foregoing contract is void as a contract and unavailing as a representation, in this, that it violates section 1673 of the Civil Code, which provides, in effect, that every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void. In our view of the contract its terms indicate that it was entered into, not for the purpose of restricting any trade or business, but for the purpose of promoting one. It is true the contract makes the plaintiff, except one other, the exclusive purchaser in California of the defendant's warehouse receipts, but obviously, both the purpose and effect of the contract are, not to restrict the sale of the defendant's receipts, but to create an instrumentality by which the receipts will be exploited and sold. The contract does not restrain any one from exercising a trade or business of any kind within the purview of section 1673 of the Civil Code.

Statutes are interpreted in the light of reason and common sense, and it may be stated as a general rule that courts will not hold to be in restraint of trade a contract between individuals, the main purpose and effect of which are to promote and increase business in the line affected, merely because its operations might possibly in some theoretical way incidentally and indirectly restrict trade in such line. This view has often been sustained by the Supreme Court of the United States in analogous cases. See numerous cases cited and digested in Ripy & Sons v. Art Wall Paper Mills, 41 Okl. 20, 136 P. 1080, 51 L.R.A.(N.S.) 33.

The defendant's next contention is that the contract was fatally uncertain in that there is no agreement as to the price of the merchandise to be sold by the defendant and purchased by the plaintiff. There is no fatal uncertainty in this respect. The rule is that when no price is specified in a contract for the sale of goods, whether executory or executed, the price is supplied by the implication that a reasonable price is intended. Dickerman v. Ohashi Importing Co., 63 Cal.App. 101, 218 P. 458; Williston on Sales (2d Ed., 1924), § 171. This rule was adopted in the Uniform Sales Act and has been incorporated into our law by section 1729 (4) of the Civil Code, which provides as follows: “Where the price is not determined in accordance with the foregoing provisions the buyer must pay a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case.”

The final contention of the defendant is that the contract was for an indefinite time and therefore was terminable at the will of either party thereto. The failure to specifically limit the duration of the contract did not fatally affect it and did not give rise to a right to terminate the contract at will without a liability for damages. Even where a contract for the sale of goods is silent as to its duration, the party seeking to terminate it must give the other party reasonable notice thereof, and such termination cannot be effected until at least a reasonable time has expired. Southern Pacific Co. v. Spring Valley Water Co., 173 Cal. 291, 159 P. 865, L.R.A.1917E, 680; 13 Corpus Juris 604, § 630.

In the instant case the contract is not silent with regard to its duration. On the contrary, it provides that “as long as the plaintiff purchases and continues to purchase, * * *” etc., the contract will remain in effect. The contract is very similar to the one involved in the case of Noble v. Reid–Avery Co., 89 Cal.App. 75, 264 P. 341, 342. In that case the agreement was that the plaintiff was to purchase for resale from the defendant a large quantity of welding rods, and would, from time to time, purchase additional amounts as necessity required and “it was distinctly understood at the time of the first order of goods * * * that [the plaintiff] should have the exclusive right to sell the goods and represent the [defendant] in * * * Southern California, as long as they were able to give faithful service and a business management to the trade and produce the trade that was warranted in the territory allotted to them, and no longer.” The court said, “Such provisions for the duration of the contract are sufficiently certain and valid. As a general proposition the failure of an executory contract to state a time presently definite for its termination does not render it void for uncertainty.” Citations for the rule are given, and the question is rather fully discussed.

Since these are the only points raised against the validity of the contract, and since there is no merit in any of them, it is our decision that the complaint is not vulnerable to general demurrer and that the judgment should be reversed.

Judgment reversed.

CRAIL, Presiding Justice.

I concur: WOOD, J.

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