Opinion
No. 4386.
Argued May 3, 1955.
Decided June 22, 1955.
In equity proceedings to rescind a lease for a term of years under which the defendant distributor was granted the right to sell its products at the plaintiff's gasoline retail station, the fact that the defendant cancelled its contract with a wholesaler and was unable to furnish the trade name products expected to be retailed at plaintiff's station did not as a matter of law entitle the plaintiff to cancellation of its lease which contained no provision obligating the defendant to market those products exclusively.
The mere fact that the substituted products have less sales value and the plaintiff would realize less profit under the contract does not warrant rescission.
Where under the contract defendant may still sell the products provided by the agreement though under a different trade name the doctrine of commercial frustration does not apply to give rise to a right of rescission.
In a bill for rescission of a contract, the exclusion of proffered testimony bearing directly on the principal issue and competent as tending to show the mutual understanding of the parties at the time the contract was entered into was error; and where its exclusion may have affected the result a new trial was ordered.
Such error was not cured by the admission of the testimony for the purpose of contradiction only.
BILL IN EQUITY, to rescind and cancel a lease of a gasoline filling station. Trial by Court which made certain findings and rulings and dismissed the bill. The plaintiff duly excepted to the admission and exclusion of evidence, to the failure of the Court to grant certain requests for findings and rulings, to certain findings and rulings as made, and to the dismissal of his bill.
It appears on July 5, 1950, the parties signed a fifteen-year lease wherein it was agreed that the plaintiff was to build at his own expense a filling station and the defendant distributing company was to have the right to use the premises "as and for a gasoline or oil service and filling station and as a general automobile service station." The defendant was to pay as rent to the plaintiff one cent for each gallon of gasoline delivered on the premises and in no single month was the rent to be less than $75 nor more than $125. At the time of the preliminary negotiations and the signing of the lease, the defendant distributed Sun Oil Company, or so-called Sunoco, products only and the filling station was built according to that company's station plan. After approximately seven months the defendant without the plaintiff's consent ceased to distribute Sunoco products, severing its connection with that concern, and became a distributor for Cities Service gasoline and oil. The plaintiff claims as Cities Service products are substantially less in demand than Sunoco that this caused a material failure of consideration and he seeks to cancel the lease. Further facts appear in the opinion. Transferred by Sullivan, J.
Upton, Sanders Upton (Mr. Richard F. Upton orally), for the plaintiff.
Wyman, Starr, Booth, Wadleigh Langdell and Philip G. Peters (Mr. Peters orally), for the defendant.
The plaintiff's argument according to his brief is based upon three principal propositions. First, that it is an implied provision of the lease that the defendant will do nothing to materially diminish the value of its performance and this implied provision the defendant has breached. Second, that it is an implied provision of the lease that the defendant will distribute Sunoco products to the plaintiff's station as a Sun Oil Company station and that the impossibility of so doing gives the plaintiff a right to rescind. Third, that the cancellation of the defendant's distributorship of Sunoco products caused a material commercial frustration of the objectives of the lease, giving rise to a right of rescission.
Taking up these propositions in order, it appears the Trial Court found that the cancellation of the agreement between the defendant and the Sun Oil Company was necessary because of business conditions and that the parties did not intend that the defendant be bound to market Sunoco products exclusively at the plaintiff's station. We believe there was evidence to sustain the finding that the defendant acted reasonably in cancelling its contracts with Sun Oil Company since, among other facts, the latter had made it plain that it was going to cancel its contracts with the defendant and sell gasoline products directly without employing any distributor. The defendant's representative testified as a result of this his company would be "out of business" unless it could obtain another source of supply. It seems clear that a finding of a breach of the "implied covenant of good faith and fair dealing" necessary to sustain the plaintiff's position on this issue (Williston, Contracts, s. 670, p. 1926) was not compelled.
While it is true that the interpretation of written contracts is for this court (Lynch v. Grundy, 97 N.H. 286, 288, and cases cited), the writing is to be interpreted in the light of all the surrounding circumstances which are facts to be found by the Trial Court. Irwin v. Company, 95 N.H. 20, and cases cited. That Court has found that the terms of the lease did not restrict the defendant exclusively to the sale of Sunoco products and that while the parties intended and expected Sunoco products to be sold, neither "contemplated a subsequent failure" of the Sunoco supply and the defendant "could not guarantee" that such products would be supplied to the station during the terms of the fifteen-year lease. These findings are sustainable and in the light of them and other facts we are content with the Trial Court's interpretation that the defendant was not restricted by the lease to sell Sun Oil products exclusively at the plaintiff's station. Hogan v. Lebel, 95 N.H. 95. Other courts faced with similar situations have come to the same conclusion. Caldwell Taylor Corporation v. Nieberhelman, 39 Ohio App. 136; Barnett v. Clark, 225 Mass. 185. We do not believe there has been such impossibility of performance of the agreement as to give the plaintiff a right to rescind. The authorities cited in his brief on this point make it clear that "to justify the termination of a contract on account of impossibility of performance, the impossibility must be complete and permanent." Black, Rescission and Cancellation, s. 208, p. 586; see also, Williston, Contracts, s. 670. The mere fact that the performance on the part of the defendant has lost value is not ground for rescission. Bourn v. Duff, 96 N.H. 194. "But the risk of losing the profits of the bargain rests on both parties alike." 6 Corbin, Contracts, s. 1339.
The plaintiff also argues persuasively that the doctrine of "commercial frustration" applies here to give rise to a right of rescission. However, again the cases he cites are distinguishable on their facts from the one before us. In such instances as the English Coronation cases where the defendant hired seats in certain houses to watch the coronation procession, the route of the procession was changed. Krell v. Henry (1903), 2 K. B. 740. There the defendant was deprived of "the sole inducement for entering into the contracts." (Emphasis supplied). Williston on Contracts, s. 1954. Here the defendant may still sell the products provided for by the agreement at the plaintiff's station though they are produced by a different concern. Other cases cited by the plaintiff are similarly distinguishable on their facts from the situation here, as in the case of Wilson v. Clark, 60 N.H. 352, where; certain buildings which a party had agreed to buy were burned and the Court held in effect that the main purpose of the contract having been destroyed, the plaintiff was relieved of her obligation to complete the transaction. It is plain that each case must rest upon its own facts, and that the degree of frustration is the decisive factor. Restatement, Contracts, s. 288, comment a, illustrations 1, 2 and 3. On the evidence which the court considered here we believe the implied finding (York v. Misiak, 95 N.H. 437) that the main purpose of the agreement had not been frustrated would be sustainable, except for an error in the exclusion of testimony hereinafter discussed.
As bearing on the intent of the parties that the defendant continue to market Sunoco products exclusively at the plaintiff's station, the latter offered evidence that when he expressed concern over the $75 minimum rent, the defendant's representative reassured him by telling him that "with Sun gas in there that they would after a year or two be doing a volume of one hundred and twenty to one hundred and thirty thousand gallons per year, and he needn't worry about it . . . ." The plaintiff claims that relying on the strength of this, he signed the lease. This offer was rejected, although the testimony bore directly on the main issue in this case and was competent as tending to show the mutual understanding of the parties. Kann v. Company, 85 N.H. 41, 46, and cases cited; Hunt v. Company, 94 N.H. 421, 423, 424; Berke Company v. Bridge Company, 98 N.H. 261, 266. This error was not cured by the admission of the testimony for the purpose of contradiction only. Since it cannot be denied that its exclusion may have affected the result, it follows that there must be a new trial. There being no other exceptions of merit, the order is
New trial.
All concurred.