Reset A A Font size: Print

District Court of Appeal, Second District, Division 3, California.


Civ. 15486.

Decided: April 29, 1947

Clyde E. Cate, of Fresno, and Alfred E. Cate, of Los Angeles, for appellant. Ogden, Crocker, & Steelman, of Los Angeles, for respondent.

The defendant corporation is engaged in selling hay and grain, with its place of busincess at Fresno, California. The plaintiff and the witness Peters, at the times in question, were grain brokers with adjoining offices in Los Angeles. Defendant appeals from a judgment in plaintiff's favor in the sum of $1,421.50.

Plaintiff's complaint alleges, and the court found to be true, that on the 4th day of June, 1943, defendant agreed by written instrument to sell to plaintiff, and plaintiff agreed to buy from defendant, 10,000 to 12,000 sacks of barley at the price of $1.95 per hundred weight, to be delivered to plaintiff f.o.b. Los Angeles, California, at the completion of the harvest season of 1943, and to be paid for upon delivery; that although plaintiff has always been ready and willing to receive and pay for the barley, defendant delivered only 6,612 sacks thereof and, on August 25, 1943, upon completion of the 1943 harvest season, refused and still refuses to deliver the minimum balance of 3,388 sacks; that the reasonable market value of such barley was $2.42 1/212 per hundredweight at the time delivery should have been made, and plaintiff has therefore lost profits and sustained damage in the sum represented by the judgment.

Defendant, by its answer, conceded the delivery of only 6,612 sacks to plaintiff but claimed that was all it was required to deliver under the terms of the agreement. It further alleged, by way of affirmative defense, that on June 4, 1943, by telephonic conversation from Los Angeles, plaintiff was told by defendant's representative that the barley to be sold was by a sample and grade ‘H–10’ which sample plaintiff had seen; that this sample represented certain grain which was being produced from the ranch of one Pedro Erro of Fresno County, California; that the sack count was indefinite due to harvesting, but defendant believed from the grower's assurances that this particular lot of grain would amount to in excess of 10,000 sacks at 88 1/414 pounds per sack. Defendant further alleged that it thereupon caused to be executed and forwarded to plaintiff the following written instrument:

‘Phone 3–2281

‘Postal Phone

No. 382

Date 6/4/43

‘J. B. Hill Company


‘Poultry and Stock Feeds

‘315 No. H. Street Fresno, California

‘To D. L. Taylor

‘I. W. Hellman Bldg.

‘Los Angeles, Calif.


‘We confirm sale to you this day through your

Mr. Taylor

By Peters

By our Mr. Hill

The following:

F. O. B. L. A. S. S. Pd. Payment Cash

Shipment WHR

To Sack Count Indefinite acct.

Remarks Now Harvesting May be More or Less

‘There are no conditions, representations or warrants except as herein stated, and no agent or representative has authority to modify the printed terms of this contract. This merchandise is sold for food or manufacturing purposes only.

‘It is agreed that The J. B. Hill Company shall not be liable for any damages or delays caused by or resulting from embargoes, strikes or labor disturbances, fires, floods, earthquakes, actions of the elements, invasion, war, riot, insurrection, rebellion or interferences by civil or military authority. We do not guarantee weights closer than 1%.

‘J. B. Hill Company

‘By Roland D. Hill

‘Accepted: _____’

Defendant further alleged by way of affirmative defense, that upon the harvesting of the barley on Erro's ranch there was delivered to defendant a total of only 6,612 sacks, being that referred to as ‘H–10’ in the agreement, which was promptly delivered to plaintiff and therefore it has fully complied with the contract. The court found these allegations to be untrue excepting that defendant did agree in writing to sell plaintiff 10,000 to 12,000 sacks at the price specified in its agreement to be delivered to plaintiff at Los Angeles at the completion of the harvest season of 1943, and to be paid for upon delivery; that defendant did inform plaintiff that the barley which was being sold to him was represented by a sample and grade ‘H–10’ and that this sample was procured from certain grain which was being produced and raised from the ranch of Pedro Erro in Fresno County, California; that it was not impossible at the time of the transaction to agree to deliver any definite or specific amount of sack count of barley pursuant to sample ‘H–10’ and that this sample represented a kind and type of barley that could be duplicated and purchased in many parts of the United States.

It was agreed by the parties at the trial that the above set forth written contract embodies all the terms of their agreement relative to the grain in question, and that the market price of the kind of barley covered by the agreement f.o.b. Los Angeles, at delivery time, was $2.42 1/212 per hundredweight. The court found that the measure of plaintiff's damage was the difference between the agreed purchase price of $1.95 and the above subsequent market price, being the sum of 47 1/212 cents per hundredweight, which, at 88 1/313 pounds per sack, aggregates the allowed sum of $1,421.50.

The issue was tendered as to whether defendant agreed to sell and deliver from 10,000 to 12,000 sacks of barley or only the proceeds of the crop of one Pedro Erro. This called primarily for an examination of the contract, that is, the confirmation of sale executed by defendant. If its terms had been found to be unambiguous, they would have been controlling. They were regarded by the court and counsel as ambiguous, as we think they were in several respects. Plaintiff introduced the expert testimony of a dealer in grain as to the custom of selling barley by sack, as to whether there was a standard weight per sack, as to usual weight per bushel, and other irrelevant matter. He was asked to explain what the letters ‘sked’ meant and replied that they meant ‘sacked.’ He was questioned as to what the symbol ‘H–10’ meant and replied that it would represent the seller's sample or designation number of that particular lot of barley; also, that ‘as a matter of trade significance’ the symbol did not indicate the source of the barley.

There can be no doubt that the symbol ‘H–10’ as used in defendant's confirmation of sale to Taylor, appearing beneath the words ‘sample and grade,’ was clearly meant to identify the grain sold with the sample theretofore furnished by the seller, which it appears was in the form of one sack of barley. But the symbol could have meant more to the buyer and the seller than mere identification of the sample. The undisputed evidence is that Taylor alone was not the purchaser. One W. E. Peters was a grain broker in Los Angeles. Defendant was intending to purchase the barley crop of Pedro Erro on the west side of San Joaquin Valley. Grover B. Hill, president of defendant corporation, contacted Peters with a view to finding a purchaser for the crop and he sent to Peters a sack of barley labeled ‘H–10.’ Peters contacted plaintiff Taylor and an agreement was reached between Peters and Taylor that they would purchase the crop jointly, and Peters advised Hill of the joint purchase and requested that the confirmation of sale be sent to Taylor. In addition to the symbol ‘H–10,’ there were other expressions which were sufficiently indefinite as to at least accentuate the ambiguity of the symbol ‘H–10’ and to open the door for the introduction of extrinsic evidence. Both Peters and Hill testified at length as to conversations they had both before and at the time of their telephone agreement of purchase and sale. Both testified, and their testimony was undisputed, that the symbol ‘H–10’ meant to them a particular crop of barley. Peters testified that in his first talk with Grover Hill respecting the barley, Hill referred him to the sample number ‘H–10,’ which Peters had on file and, said the witness; ‘He told me that he was negotiating with a man over on the west side who had this lot of grain but had not as yet gotten to the point where he could give me a firm price on it * * *. That ‘H–10’ represents a specific lot of grain which Mr. Hill sent to me as a lot of grain from a certain farmer which he was negotiating with. * * * Mr. Hill made a reference to him as a sheep herder or a Frenchman or something of that sort, but I did not at the time known the particular name of the farmer. * * * I later heard the name of the farmer. * * * Erro. * * * Well, my knowledge of that [H–10] would mean that that H–10 represents a certain specific lot of grain. * * * That is Mr. Hill's sample number of that particular lot of grain. * * *

‘Q. And that particular sample, you say, referred to a specific lot? A. Yes, sir.

‘Q. Rather than barley generally? A. That is right.

‘Q. And when you had your negotiations with Mr. Hill by telephone how much grain did you expect to recover or receive, if any, after he had delivered all that he got from this H–10 lot? * * * Did you feel that you were entitled to any other grain than this lot H–10? A. I didn't expect it, no, sir.’

This witness testified that he repeated to Taylor the conversations he had had with Hill. Grover Hill testified that he had told Peters by phone about the lot of grain that was being thrashed at Mendota and asked him to get a bid on it so that he, Hill, could arrange to buy it; that he told Peters the grain was being thrashed and that it was impossible to get any number of sacks but the farmer estimated he would have about 10,000 or 12,000 scaks of barley, and that Peters called back later and said that he and Taylor were going to buy the lot at $1.95.

‘The Court: How much barley did you think you were selling to Mr. Taylor?

‘The Witness: Well, I thought I was selling him the lot H–10, the Pedro Erro crop, estimated by Erro to be 10,000 to 12,000 bags.

‘The Court: Did you tell Mr. Taylor that there might be only 6,000 sacks?

‘The Witness: I told Mr. Peters. I never discussed it with Mr. Taylor.

‘The Court: Did you tell Mr. Peters that you thought it might run as low as 5,000 or 6,000?

‘The Witness: No, I did not estimate it that way. I told Mr. Peters it was impossible for me to tell how much grain there would be, but we would give him all that was raised and delivered to us by Pedro Erro represented by lot H–10.’

The witness further testified that Pedro Erro's crop was dry-farmed on the west side of Fresno County, was practically all the dry-farmed grain in the vicinity, and that it would have been difficult to have bought any of that class of grain in that vicinity. Both Hill and Peters understood that the symbol ‘H–10’ referred to Pedro Erro's crop and to nothing else. That particular crop was further identified to the satisfaction of Hill and Peters by the statement on the confirmation of sale, ‘Sack Count Indefinite, acct. Now Harvesting May be More or Less.’ The figures ‘10–12,000’ under the word ‘Quantity’ were understood to be only the grower's approximation of what the crop would amount to. Although it clearly appeared by undisputed evidence that the sale was understood by Peters and Hill to relate only to the Pedro Erro crop and not to any definite quantity of grain, and that they also understood the symbol ‘H–10’ to relate only to such crop, the court made no finding as to what they understood the symbol to mean. The only purpose of extrinsic evidence was to enable the contracting parties to testify as to their understanding of the meaning of the ambiguous language of the writing. Inasmuch as no finding was made upon this point, it must be assumed that the court disregarded this testimony. That this is a reasonable assumption is borne out by the theory upon which the case was decided, which was, as we shall see, that it was immaterial what understanding Peters had of the contract unless Taylor had the same understanding. If Peters had bought the crop for himself he would have had no claim against defendant for damages for failure to deliver more than 6,612 sacks, inasmuch as that was the total of the Erro crop. Taylor could have no greater rights. Peters showed the sample to Taylor, explained to him what was being offered for sale and they agreed to buy the grain jointly, which fact Peters reported to Hill. The confirmation of sale went to Taylor. The arrangement between Peters and Taylor was that they would share equally in the profits, if any, on the purchase. It is true that Taylor denied that Peters had told him the grain was coming from a particular farm or that the amount of grain to be delivered depended upon the amount produced from a particular farm, but the knowledge of Peters at the time he and Taylor agreed to purchase the grain must be imputed to Taylor. Although Peters afterwards withdrew from the purchase arrangement and Taylor acquired the grain, we are concerned only with the relationship which existed at the time of the purchase.

We are unable to distinguish the relation of Peters and Taylor in the transaction from that of partners, but whether they be called joint adventurers or partners is immaterial. As joint purchasers, each became obligated to defendant for the purchase price. As between themselves, each obligated himself to pay half of the purchase price, each was to receive his share of the profits, and if a loss had been sustained, half of it would have fallen upon each. Their rights and liabilities were those of partners. Keyes v. Nims, 43 Cal.App. 1, 184 P. 695; Menefee v. Oxnam, 42 Cal.App. 81, 183 P. 379; McSherry v. Market Corporation, 129 Cal.App. 330, 18 P.2d 776. They attached as of the date when the purchase was made. Section 2406 of the Civil Code reads as follows: ‘Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.’ Section 2403 declares that every partner is an agent of the partnership for the purpose of its business, and notice to an agent is of course notice to the principal. Carstensen v. Gottesburen, 215 Cal. 258, 9 P.2d 831. The rule is stated in 40 Am.Jur. 236, sec. 150, as follows: ‘One partner is usually considered as affected by any knowledge possessed by his copartners in reference to partnership matters, and therefore information acquired by one member while transacting business of the firm and relating thereto is constructive notice to the other members of the firm.’ Peters, acting for himself and Taylor, communicated to defendant their acceptance of his offer to sell. He did so with the knowledge that defendant was intending to sell only the Erro crop. The trial judge was evidently of the opinion that Peters' knowledge of this fact was not to be imputed to Taylor, for he stated: ‘There seems to be required only one question and that is whether or not Mr. Taylor ever had a conversation with either Grover Hill or Roland Hill. As I understand it, however, those two witnesses have testified that they had no conversation with Mr. Taylor.’ It was evidently the court's theory that Taylor was not chargeable with knowledge of facts which Peters had acquired prior to the agreement to purchase the crop jointly. The rule of the Restatement on that point is found in Agency, sec. 276, reading: ‘Time, Place, or Manner of Acquisition of Agent's Knowledge. Except as stated in section 281, the time, place, or manner in which knowledge of an agent or servant is obtained is immaterial in determining the liability of a principal or master because of it.’ Comment a reads as follows: ‘Relevant knowledge may have been acquired by the agent before the time of his employment or after he becomes agent, either while acting for himself or for the principal. In any case, except where the knowledge is acquired confidentially (see section 281), the important matter is not how the agent acquired it, but whether or not he has the knowledge at the time when it becomes relevant in his work for the principal. If he has the information in mind, the principal is bound, under the rule stated in this Section, equally where it was not acquired because he was acting as an agent, as where he obtained it as such agent. In this respect the rule stated in this Section differs from that stated with respect to notification in section 269.’ (Section 281 relates to confidential information acquired by the agent.) This rule obtains in California. In Cooke v. Mesmer, 164 Cal. 332, 338, 128 P. 917, 920, it was stated by Mr. Justice Angellotti as follows: ‘While the decided weight of authority is in favor of the rule that knowledge possessed by an agent while he occupies that relation and is executing the authority conferred upon him, as to matters within the scope of his authority, is notice to his principal, although such knowledge may have been acquired before the agency was created, it is universally recognized that this rule is subject to the qualification that ‘knowledge acquired by an agent before the commencement of the agency is not notice to the principal unless it is shown or appears that knowledge was present in his mind at the time he acted for the principal.’ 1 Clark & Skyles on Agency, § 482. In Christie v. Sherwood, 113 Cal. 526, 45 P. 820, in discussing the question whether knowledge acquired by the cashier of a bank while he was acting as agent for another was notice to the bank in a subsequent transaction, this court said: ‘But whether it is notice to the bank depends upon whether the previous transaction was present in his mind at the time the loan was made by the bank.’ See, also, Wittenbrock v. Parker, 102 Cal. 93, 102, 103, 36 P. 374, 24 L.R.A. 197, 41 Am.St.Rep. 172.' The evidence clearly established facts which called for application of the rule, and it was undisputed. In the very conversation between Peters and Hill, in which defendant's offer of sale was orally accepted, the grain being sold was referred to as a specific crop. In making the purchase for himself and his co-adventurer, Peters could have acquired for the latter no greater rights than he could have acquired for himself. There is no question as to a conflict of evidence or of inferences. The defense that the subject of the sale was Erro's crop of barley and nothing more was established by unconflicting evidence. The record shows beyond question that judgment rests upon an erroneous application of rules of law to admitted facts.

The judgment is reversed.

I dissent. Defendant concedes that with the exception of mailing the contract to plaintiff it had no direct dealings with him as to the transaction. Defendant relies upon the fact that, prior to the execution by it of the agreement to sell the barley, oral negotiations for such sale were completed by telephonic conversation with W. E. Peters, defendant's then grain broker who became plaintiff's joint adventurer in this particular grain purchase transaction.

Plaintiff denied that Peters ever told him the grain covered by the contract with defendant was coming from a particular farm, ever mentioned the name of any particular farmer or that the amount of grain to be delivered under the contract depended upon the amount of grain produced from a particular farm. The trial judge was not required to believe the testimony of Peters and Grover B. Hill as to the nature of the claimed conversations between them, that they in fact ever occurred, nor that Peters ever related them to plaintiff. This is particularly true in the light of the evidence that Peters and Hill had known each other for 30 years, Peters was a grain broker and had been in the business for 25 years, had done work for defendants and was acting in the capacity of broker for them in the sale of the very grain in question at the time at least part of the alleged conversations were claimed to have been had. The court was further entitled to take into consideration the fact that Peters withdrew from the joint adventure agreement with plaintiff shortly thereafter, never put any money into the transaction and, notwithstanding defendant's reliance upon the prior oral conversations with Peters, it chose to sell the grain to plaintiff individually under a written contract prepared by it in specific terms. As a part of this writing defendant caused to be inserted the following clause: ‘There are no conditions, representations or warrants except as herein stated, and no agent or representative has authority to modify the printed terms of this contract.’ By this provision, as well as the facts surrounding the transaction in question, it seems evident that defendant intended that all the conditions, prior negotiations and understandings of the parties should be merged therein and that the wording of the written contract itself should govern and be looked to in ascertaining the terms of the sale and purchase.

Under the circumstances here existing the court cannot be aided by the declarations of the parties as to their understanding of the meaning and construction of the terms of the contract. The parties will be taken to have meant precisely what they have said unless, from the whole tenor of the instrument, a definite meaning can be collected, which gives a broader interpretation to specific words than their literal meaning would bear. 6 Cal.Jur. 275, par. 170. The intention of the parties is to be ascertained from the writing alone if possible. Purdy v. Buffums, Inc., 1928, 95 Cal.App. 299, 303, 272 P. 770; Civ.Code, sec. 1639. ‘In the absence of fraud, confidential relations, or circumstances indicating excusable mistake, one will be presumed to know the meaning of unambiguous language and will be bound by the solemn execution of a written instrument.’ Fraters Glass & Paint Co. v. Southwestern Const. Co., 1930, 107 Cal.App. 1, 6, 290 P. 45, 47. ‘The terms of the contract are to be understood in their ordinary and popular sense and as a man of average intelligence and experience would understand them.’ Burr v. Western States Life Ins. Co., 1931, 211 Cal. 568, 575, 296 P. 273, 276; see also Restatement of Contracts, Vol. 1, p. 310, par. 230.

The only provision in the contract which may seem ambiguous is ‘Sample & Grade H–10.’ The evidence shows, however, that this symbol was marked on the sample which the defendant had forwarded to Peters, as a broker, in order that he might exhibit it to any prospective purchasers as a sample of the kind and grade of grain which was being offered for sale. Nothing was written thereon which would advise any ordinarily intelligent and experienced man that such symbol carried with it any additional meaning. The evidence seems clear, and the trial judge was entitled to believe, that the words and figures represented by this symbol carried no special significance in the grain trade, but were merely an identification number of the sample which was delivered to plaintiff for the convenience of both the seller and the buyer. Had the defendant seller intended otherwise it could very easily have so stated both on the sample and in the contract.

No ambiguity may properly be claimed by the use of the terms ‘Quantity 10–12000 sacks' and ‘May be More or Less' in the written contract. The leading cases on the construction of such terms are cited in New York Oversea Co. v. Warfield-Pratt-Howell Co., 1925, 70 Cal.App. 724, 234 P. 405, and, taken together are settled authority for holding such terms to here mean that the defendant seller can be required to deliver the minimum of 10,000 sacks, but that the plaintiff buyer can be required to accept delivery of the maximum of 12,000 sacks. Since the defendant delivered less than the minimum number required by the contract the court correctly based its measure of damages upon the difference between those delivered and such minimum.

SHINN, Acting Presiding Justice.

WOOD, J., concurs.

Copied to clipboard