Alexander Mcmurphy v. Martin v. Garland, et al., 47 N.H. 316 (1867) - Opinion

The first question is, what is the true construction of defendants’ promise to pay over the proceeds of the wood and timber as fast as the same should be sold and paid for ? Is it the net proceeds after deducting the cost of cutting, hauling, and selling, or is it the gross proceeds without such deduction?

It appears that the plaintiff on his part covenanted that defendants might cut, carry away and dispose of all the wood and timber on a certain lot of land, provided they paid over to plaintiff the proceeds of the same as fast as sold and paid for with plaintiff’s approval; and defendants agreed to pay over such proceeds to the amount of §6000, and interest annually, from Oct. 19, 1863. The transaction apparently was a sale by the plaintiff to the defendants of a large lot of wood and timber standing upon a certain lot of land, with permission to cut and sell it, paying the proceeds of it to the plaintiff as fast as received, to the amount of §6000; and it was evidently contemplated by the parties that defendants would cut and carry the wood and timber to market and sell it. They might, it is true, sell it, with plaintiff’s approval, while standing upon the land, and then the price received would be the smn to be paid; but in endeavoring to ascertain the sense in which the parties used the term "proceeds,” it is fair to assume that the parties contemplated the cutting of the wood and timber and a sale in market. That being the case, the term "proceeds of the wood and timber” is broad enough to include the gross amount of sales, and unless controlled by the apparent intention of the parties to be collected from the whole instrument, we think this would be the true interpretation, although it must be admitted that the terms are not so explicit or free from ambiguity as to remove from the mind all doubt as to that interpretation. Had it been the purpose, however, of the parties to require the payment only of the net proceeds of the wood and timber after deducting the cost of getting it to market, it would have been most natural to have used some such qualifying terms, and the want of them leaves it fairly open to the inference that no such qualification was intended, especially when a sale in market was contemplated, and a payment of the proceeds when the wood and timber was sold and paid for agreed upon.

It is urged by defendants’ counsel that it would be oppressive to require them to pay the gross proceeds of the wood and timber without retaining anything for the expenses of the operation, and therefore such a construction ought to be avoided if it may be, and it is very true that the circumstances of the defendants might be such as to make it very injudicious to enter into such a contract; how that was in this particular case we neither know, nor can know, the only inquiry being what is the fair construction of the language used. Upon the face of the contract there is nothing unreasonable in this view of defendants’ stipulations. They had bought the wood and timber of the plaintiff, and were to pay him a large sum for it; and we see nothing unreasonable in their agreeing to pay him the first gross proceeds of the wood and timber to the amount of $6000, if they could command the means to take it to market, any more than to agree to advance to him a part of the price before cutting any of the wood and timber. Indeed, we can easily imagine there might be some embarrassments of a serious nature arising out of a contract to pay only the net proceeds after deducting the expenses, such as determining the amount of those expenses, including, perhaps, the cost of manufacturing lumber, involving the necessity of keeping careful accounts, losses from bad debts, commissions for making sales, and the like; and, besides, the payments to the plaintiff might be postponed until all the expenses upon the entire quantity had been reembursed. Upon the grounds taken by the defendants’ counsel this would.be so, and it might well be supposed that a prudent man would hesitate to enter into an arrangement involving such difficulties.

On the other hand, the payment of the gross proceeds of the sales would be attended with no such embarrassments, and would naturally be recommended to the parties as the most simple and efficient means of preserving the plaintiff’s security, and when the $6000 was paid the remainder of the wood and timber would be free from incumbrance. In Caine v. Horsfall & al., 1 Exch. 519, the plaintiff was in the employment of the defendants as captain and supercargo in the African trade, and the question was upon the construction of defendants’ letter to the plaintiff, in winch they say, "your commissions are £6 per cwt. on the net proceeds of your homeward cargo, after deducting the usual charges as arranged by the African association, on £4 per ton from the gross sales of the oil when taken from the quay, and £4 15s when warehoused; no commissions allowed on watered oil.” It was decided that the term "net proceeds” in mercantile language means the sum actually received after making all deductions, and that the commission was payable only on the sums actually realized after deducting bad debts as well as other charges. In reaching this conclusion much stress was placed upon the word "net,” indeed, the case turned upon it; the court, as it was, entertaining some doubts whether a commission should not be allowed on the whole without deduction for bad debts.

In the case before us, there is nothing to qualify or restrict the term "proceeds,” and as it is evident that the wood and timber were to be cut and taken to market, and when sold and paid for, the proceeds to be paid to the plaintiff, we are of the opinion that he was entitled to the whole without deductions for cost of cutting, manufacturing, and taking to market.

We have examined the case of the Briggs Iron Co. v. Richardson, 4 Allen 371, cited for defendants. That was a sale of the wood and timber on the Gove lot for $3000, of which $500 was paid at the time by an endorsed note, and the rest by the notes of the vendee, and it was stipulated in substance that the vendee should not remove any wood or timber from the lot beyond the value of $500, but that all wood and timber so cut beyond that amount should remain the property of the vendor until paid for.

In substance it was an agreement that having paid $500, he might remove wood and timber to that amount, but no more, until paid for, although it is to be inferred that he was at liberty to cut more. The purpose, obviously, was to allow the vendee to take away the wood and timber so fast as he paid for it, and there is nothing to show that the value was to be estimated otherwise than as it was when sold, that is, standing. In this respect, it differs from the case before us, and does not govern it.

The remaining question is, whether the evidence offered of a subsequent parol agreement to the effect that plaintiff was to receive the proceeds of the wood and timber after deducting the cost of cutting, hauling and loading it, ought to have been received.

Upon this point it will be remembered that the contract was under seal; that as now construed the defendants covenanted to pay to plaintiff' the gross proceeds of the wood and timber, and that the offer was to prove a subsequent parol agreement that there should be paid only the net proceeds, after deducting the expenses.

In respect to a specialty, the general doctrine is well established that such a contract can be discharged or modified only by an instrument of as high a nature. Unum quod que dissolvi eo ligamine quo ligatum est. Broome’s Legal Maxims, sec. 683, and note 5, and cases cited; Head v. Wadham, 1 East. 619; Roe v. Harrison, 2 T. R. 425; Kayes v. Waghorne, 1 Taunt. 428; Cocks v. Wash, 9 Bingh. 341, which holds that the legal effect of an agreement under seal cannot be altered by parol averment; and so is Davrey v. Prendergrass, 5 B. & Ad. 187, where it was held to be no defence to a suit on a bond against a surety that time was given to the principal. Much the same are Hardin v. Clifton, 1 Adol. & Ellis, N. S. 522, and Rippinghall v. Lloyd, 5 B. & Ad. 742; Rogers v. Payne, 2 Wils. 376. To this general principle there are some exceptions, and among them these; that, after a breach, an accord and satisfaction of the damages, though by parol, may be pleaded; although it is held that accord and satisfaction before breach cannot be pleaded. Kayes v. Waghorne, 1 Taunt. 428. So, where the performance of a covenant has been prevented by the act of the covenantee, or a condition of forfeiture has been waived by him. 1 Greenl. Cruise Dig. Tit. 13, ch. 2, sec. 25; Leather v. Bullard, 8 Gray 545. And it has also been held that the time of performance may be subsequently extended by parol, and in some cases the place of performance also; see 3 Cowan’s Phillips Evid. 148, and cases collected; and Mill Dam Foundry Co. v. Hovey, 21 Pick. 417.

As to the waiving of a condition by parol, it is often put upon the ground of saving a forfeiture; and where the time of performance has been extended and the covenanter has acted upon it, the covenantee ought to be estopped to claim that the contract was broken, for it would be a fraud for him to make such claim. It would stand, indeed, upon much the same ground as if he had himself for his own convenience prevented performance at the day. The case of a building contract where the time, and even the mode of performance, are changed by mutual consent, and those changes acted upon, furnish ample illustrations of these views.

We find, however, no cases that sustain the principle involved in the defendants’ offer of proof in the case before us; on the contrary, the authorities, as we understand them, are strongly against it.

In Blake’s Case, 6 Co. Rep. 436, the doctrine is thus laid down: Where a duty accrues by a deed in certainty, as a covenant to pay money, although the duty be merely in the personalty, a discharge must be by deed; but where no certain duty accrues by the deed, but a wrong or default subsequent, together with the deed, gives an action to recover damages which are only in the personalty, for such wrong or default, accord with satisfaction is a good plea, and such plea was held good in covenant for not repairing. In West v. Blakeway, 2 M. & G. 729, there was a covenant in a lease to yield up all erections made by the tenant during the term, and it was held that the covenant was broken by the removal of a greenhouse built by the tenant with the assent of the landlord, and his agreement that the tenant might remove it at the end of the term. The case was much considered, and distinguished from a case where an act was done by the lessor which prevented the lessee from performing his covenant. The court say that cases where conditions in bonds have been waived, or performance prevented by the act <of the obligee, do not apply; that here is a covenant under seal which could be discharged only by an instrument of as high a nature; but that the attempt here is to set up an executory agreement by parol, in answer to an action for breach of a covenant committed at the end of the term; and Bosanquet, J., says, that no rule of law is more fully established than this, that a contract under seal cannot be waived by parol. This decision was in 1841, and following it in 1845, is the case of Muston v. Gladwin, 6 A. & E. 953, where the lessee covenanted to "insure and keep insured” the buildings in the joint names of himself and the lessor, with a proviso for re-entry for breach of the covenant, and the lessee insured in his own name alone, but showed it to the lesssor who assented to it and was satisfied, continuing to receive the rent; afterwards the lessor’s assigns brought ejectment, and the court held that this was a continuing covenant, and the assent of the lessor would not bind the assignee, and that the waiver by acceptance of rent would not operate beyond the time up to which it was accepted; and this being a continuing covenant, a subsequent breach entitled the lessor of the plaintiff to re-enter. -The court say that this ejectment must be considered as unusually harsh, and it is impossible for any court to lend itself willingly to enforce the proceeding; but the court say that no case has gone to the length of intimating that a breach of covenant can be justified by a parol license to break it. This, they say, would be to confound well established legal principles.

In the case of Barnard v. Darling, 11 Wend. 30, it was held to have been settled once that a sealed contract could not be discharged by parol, but that it is not now entirely clear.

In Delacroix v. Bulkeley, 13 Wend. 71, the cases on this subject are reviewed by Savage, C. J., and tiie conclusion reached that there has been no innovation upon established principles, and that the law remains as it always has existed, that a sealed executory contract cannot be released or rescinded by a parol executory contract, but that after a breach, a right of action may be waived or released by a new parol contract in relation to the same subject-matter, or by any valid parol executed contract.

In this case there was a lease of a store, and a covenant to put it in order and repair, and afterwards the lessor found it better to rebuild, which he did with the lessee’s assent, he making suggestions as to fitting it up and speaking of it as the store he was to have; but afterwards he refused to execute his covenants, and was sued on them by the lessor, but it wuis held that evidence of this parol assent was not admissible.

In Ch. on Con. sec. 105, and notes, it is laid down that a subsequent parol agreement to vary or dispense with a sealed contract is not good, and such is supposed to be the law in Lawrence v. Dole, 11 Vt. 549. In Broome’s Legal Maxims the law is summed up thus: "That, in order to relieve a party liable on a specialty, there must be either an agreement under seal, or an accord and satisfaction as to damages.”

Upon a careful consideration of the adjudged cases, we are of the opinion that the evidence in question was rightly rejected. The authorities are numerous, and some have been cited in this case, to the point that a written contract may be varied or altered by a subsequent parol contract, but these are cases of contracts not under seal, and therefore a subsequent verbal contract is of the same nature. We do not find any adjudged case of that character where the contract was a sealed one, unless it comes within some of the exceptions before indicated.

In the case before us, the covenant was to pay the avails of wood and timber sold from a certain lot of land, and this was an executory contract; the offer of defendants was to show a subsequent parol executory contract to pay such proceeds, only after deducting expenses of cutting, taking to market and selling, and upon this point we think the authorities cited are decisive against the defendants.

Case discharged.