APPEAL from a judgment of the Superior Court of the County of Pima. E. W. McFarland, Judge. Judgment reversed and cause remanded with instructions.
Messrs. Baker & Whitney and Mr. Lawrence L. Howe, for Appellant.
Mr. Stanley Samuelson, Mr. Henderson Stockton and Mr. Emmett R. Feighner, for Appellees.
[50 Ariz. 531] LOCKWOOD, J.
This is an appeal by Rio Grande Oil Company, a corporation, hereinafter called defendant, from a judgment in favor of O. O. Pankey and J. T. Pankey, hereinafter called plaintiffs, for damages resulting from the breach of a contract by defendant. Taking the evidence in the strongest manner in support of plaintiffs' theory of the cases, as under our oft-repeated rule we must consider it, the ultimate facts necessary for a determination of the case may be stated as follows:
From 1922 to 1926 plaintiffs had been engaged in selling gasoline, oil, and automobile accessories, in the city of Tucson, and had built up and created a well-established business and a regular line of customers, both cash and credit. For some time the defendant had urged plaintiffs to construct a larger and better service station, and offered to finance them to a certain extent in such construction. Plaintiffs accepted the offer and started construction of the new station in the month of February, 1926, completing it [50 Ariz. 532] about the first of June. In order that they might secure funds for this purpose, defendant allowed plaintiffs to purchase gasoline and oil from it on credit, and use the proceeds of the resale of such supplies by plaintiffs to complete the station rather than applying the money so received in payment for the gasoline and oil which they had purchased. About the 4th of November, 1926, plaintiffs and defendant took an account of their situation, and the former executed in favor of the latter a promissory note in the sum of $9,160, which was to be paid at the rate of $250 per month, secured by a chattel mortgage covering all the buildings and equipment of the new station, and in such mortgage it was agreed that thereafter plaintiffs would sell only the gasoline produced by defendant, thus transferring their indebtedness for supplies already purchased into a long time promissory note secured by a mortgage. At the same time, and as a part of the transaction, plaintiffs and defendant entered into the agreement upon which this action is predicated. It recited the making and execution of the note and mortgage aforesaid, and then continued:
"Whereas, the parties hereto have agreed that under certain conditions a line of credit will be extended to the Second Parties by the First Party;
"It is therefore understood and agreed that when the said Second Parties shall have paid upon the principal of said promissory note an amount sufficient to reduce the principal of said note to the sum of Three Thousand and 00/100 ($3,000.00) Dollars, then and in that event the Second Parties shall be entitled to a line of credit to the extent of the value of petroleum products at that time purchased each month by the Second Parties from the First Party, and it is further understood and agreed that the Second Parties shall, at that time, pay an amount in cash equal to said monthly purchases which amount shall be applied upon the principal of said note rather than upon the open account of said Second Parties, and that thereafter [50 Ariz. 533] the Second Parties shall be entitled to the advantage of what is commonly termed 'a current open account.'"
In pursuance of the conditions of the note, mortgage, and agreement, the plaintiffs made payments on the notes so that by the 30th of April, 1929, the principal had been reduced to less than $3,000, and during all this time thay purchased for resale only gasoline produced by defendant, paying
cash therefor. When the note had been reduced as aforesaid, plaintiffs demanded from defendant many times that it extend to them credit on the purchase of gasoline and oil products in accordance with the terms of the agreement. This, however, defendant wholly failed and refused to do, and required plaintiffs to pay cash on delivery for all gasoline and oil furnished them. Plaintiffs, in addition to their cash business, had a large number of customers to whom they extended credit of from thirty days up, and from whose accounts they claimed they had been making a considerable profit. In order to pay the note down to the $3,000 aforesaid, plaintiffs had not only turned in all of the profits made from their gasoline and oil business, but had reduced their stock of automobile accessories to practically nothing, and exhausted their credit in the community, relying upon defendant's promise that, when the note was so reduced, they would then have credit in the purchase of gasoline and oil extended to them, in accordance with the agreement, so that they might continue carrying their credit customers as aforesaid. As a result of defendant's refusal to extend credit, in accordance with the terms of the agreement, plaintiffs were compelled to discontinue the large majority of their credit customers, and thus lost a profit from them which they otherwise would have made. This situation continued for nearly four years, when plaintiffs were finally compelled to go out of business. [50 Ariz. 534] Thereafter this suit was brought to recover damages for the breach of the contract aforesaid, and the jury returned a verdict in favor of plaintiffs for the sum of $12,000, the full amount prayed for.
There are some ten assignments of error, which defendant has grouped under four propositions of law, and we shall consider them in the same manner. The first is that, since the legal effect of a contract is always a question of law for the court, the latter should have instructed the jury as to the meaning of the contract sued on. It is, of course, the law that the legal effect of a contract is a question of law for the court, and not for the jury, and, if requested, it was the duty of the court to instruct the jury as to the meaning of the contract under consideration. It appears, however, from the record in this case that the only request made on this point was that the following instruction be given:
"Defendant's requested instruction No. 5: You are instructed that the agreement set forth in plaintiff's complaint provides that after the principal of the $9,160.83 note has been reduced to $3,000.00 that then in that event the plaintiffs would be entitled to a line of credit to the extent of the value of petroleum products at that time purchased each month by (from) defendant and provides further that the plaintiff shall at that time pay an amount in cash equal to said monthly purchases which amount so paid shall be applied upon the principal of said note and that thereafter the plaintiffs shall be entitled to the advantage of what is commonly termed 'a current open account.' Under the ...