
    No. 83
    MIDLAND LINSEED PRODUCTS CO. v. SARGENT CO.
    U. S. Circuit Court of Appeals, 6th Circuit
    No. 3645,
    June 6, 1922
    For full opinion see 281 Fed. Rep. 704.
    CONTRACTS — Narrative—(1) Seller may exercise its express option to demand cash without releasing buyer’s obligation — (2) Court will not destroy reciprocal obligations and substitute optional — (3) Plaintiff should have been required to prove its good faith as to buyer’s credit.
   DONAHUE, JUDGE.

Epitomized Opinion

This case was brought in the U. S. District Court at Cleveland, and tried before Judge D. C. Westen-haver. Another case brought by Sargent against the Midland Co. was heard and submitted with it.

The action was brought by plaintiff, the Midland Co., to recover damages for the breach of five separate like contracts for sale of oil on • the seller’s printed forms, and a 6th cause of action for recovery on an account for oil sold and delivered. The ■defendant admitted the contracts, but denied the breach. Defendant filed a cross-petition for breach of the same contracts by plaintiff. The trial court on,the first five causes of action directed a verdict for defendant, and plaintiff seeks, by petition in error in this court, to have the judgment reversel.

The dispute arises over the construction of that part of the contracts of purchase, relating to payments. The buyer agreed to pay the invoices within 10 days from the date of shipment, less one per cent, or to give a 30-day trade acceptance for the full amount, and in case of default, or if the credit of the buyer became unsatisfactory to the seller, the whole debt became due at once, and further deliveries were to be made only for cash. Later the seller became dissatisfied with buyer’s financial conditions, and so advised it, and finally refused to deliver except for cash. Then the buyer refused to buy further and pay in cash. The seller claimed this refusal was a breach of the contract. The buyer claimed that the election of the seller to demand cash released it from its contract to accept deliveries. The Court of Appeals held:

1. That the failure of the buyer to maintain its credit did not relieve either party, the one to deliver, and the other to accept, the full quantity of oil contracted for.

2. It is a canon of construction that the courts will not destroy the mutual and reciprocal obligations of the contracting parties and substitute therefor an optional contract, unless the language used imperatively requires such a construction.

3. That the contract does not confer upon the seller the authority to declare arbitrarily that the buyer’s credit is unsatisfactory to it. That the burden was on the plaintiff to establish this by a preponderance of the evidence which it must do.

The court reversed the judgment of the district court, directing a verdict for the defendant upon the first five causes of action, and in directing a verdict for plaintiff on its cross-petition and remanded the cause for a new trial.  