Case Name: CREAM OF WHEAT CO. v. ARTHUR H. CRIST CO.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-03-18
Citations: 152 N.Y.S. 407
Docket Number: 
Parties: CREAM OF WHEAT CO. v. ARTHUR H. CRIST CO.
Judges: 
Reporter: West's New York Supplement
Volume: 152
Pages: 407–417

Head Matter:
CREAM OF WHEAT CO. v. ARTHUR H. CRIST CO.
(Supreme Court, Appellate Division, Third Department.
March 18, 1915.)
1. Contracts <@=>147—Construction—Intent of Parties.
In the construction of contracts, the first and main rule is that the intent of the parties is to govern, and greater regard should be had to ' the question of intent than to the literal meaning of any particular words.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 730, 743; Dec. Dig. <@=>147.]
2. Contracts <@=>152—Construction—Meaning of Language Used.
The words used in a contract are generally to be taken in their ordinary and popular sense as applied to the subject-matter of the contract.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 732, 733, 738; Dec. Dig. <@=>152.]
3. Contracts <@=>147—Construction as a Whole.
The intention of the parties to a contract is to be gathered from the whole instrument, and not from any detached part of it.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 730, 743; Dec. Dig. <@=>147.]
4. Contracts <@=>169—Construction—Ambiguity.
When the meaning of a contract is not clear, regard should be had to the nature of the instrument and the language used by the parties, as applicable to the subject-matter, and especially to the objects which the parties had in view.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. § 752; Dec. Dig. <@=>169.]
5. Customs and Usages <@=>15—Construction of Contract—Parol Evidence.
Where the words or the terms of a contract are not clear and explicit on the face of the instrument, or are made obscure by proof of extrinsic circumstances leaving a doubt as to their meaning, interpretation, or application to the subject-matter, evidence of custom and usage is admissible to explain such meaning or application.
[Ed. Note.—For other cases, see Customs and Usages, Cent. Dig. §§ 30-33 ; Dec. Dig. <S=>15.]
6. Evidence <@=>456—Parol Evidence—Meaning of Language Used.
Where, in reference to the subject-matter of a contract, particular words and expressions have by usage and custom acquired a meaning different from their plain, ordinary, or popular meaning, the parties must be taken to have used such words in their peculiar sense, and parol evidence is competent to prove their peculiar meaning, though the words in their ordinary meaning are unambiguous.
[Ed. Note—For other cases, see Evidence, Cent. Dig. §§ 2105, 2106; Dec. Dig. <@=>456.]
7. Contracts <@=>204—Advertising Contracts—Construction—“Circulation”—“Paid Subscribers. ”
An advertising contract provided for a rebate to the advertiser if the circulation of the other party’s magazine should be found to be materially less than 63,000 copies, and defined “circulation” as including the total number of copies published, sold, and delivered to paid subscribers and news agencies, exclusive of all returns from news agencies and copies given away in any manner whatsoever, where by the established custom of the trade the term “paid subscriber” included, not only those whose subscriptions had been prepaid, but subscribers to whom the paper was sent, and who had once paid, though the subscription had not been prepaid for the years in question. Held, that the advertiser was not entitled to have deducted, in ascertaining the circulation, copies sent to subscribers who had not paid for several years, especially where the magazine was only sent upon the written request of the subscriber, renewed each year, upon which there was a legal liability to pay, and it was the custom to give away copies to employes, advertisers, etc., which copies were apparently those intended to be excluded, and the advertiser’s general manager, who negotiated and signed the contract, while the contract was in force, was upon the circulation committee of an association of advertisers, which committee, in determining the circulation of certain newspapers, included as paid subscribers those who had once paid and to whom the paper was being sent, though no subscription had been paid for years.
[Ed. Note.—For other cases, see Contracts, Cent. Dig. § 916; Dec. Dig. <@=>204.]
Woodward, J., dissenting.
Appeal from Judgment on Report of Referee.
Action by the Cream of Wheat Company against the Arthur H. Crist Company. From a judgment on the report of a referee dismissing plaintiff’s complaint, it appeals. Affirmed.
The opinion of the trial judge, who failed to render a decision until after the expiration of his term as Justice of the Supreme Court, and to whom the case was thereafter referred as referee, was as follows:
This controversy arises over the proper construction to be given to a contract executed by the parties. The plaintiff is a manufacturer and vendor of a cereal called “Cream of Wheat.” The defendant is the proprietor and publisher of a monthly magazine called “American Motherhood.” On the 7th day of August, 1911, the parties entered intoi a written contract by which the defendant agreed to insert in the magazine, in each of its 12 issues during the year 1912, an, advertisement of plaintiff’s product, for which plaintiff agreed to pay $60 per page.
The contract also contained the following provisions: “The party of the first part [the defendant] does hereby guarantee that the average circulation of the above-named publication shall not be less than sixty-three thousand (63,000) copies per issue for the time during which the above advertisement shall run, and it is understood and agreed that the term ‘circulation,’ for the purposes above mentioned, shall be construed as follows: The total number of copies of each issue of the publication above mentioned which shall be published and sold and delivered by the publishers thereof, both to paid subscribers and to newsi agencies, exclusive of all returns from news agencies and copies given away in any manner whatsoever.”
The contract further provided that the plaintiff might examine the defendant’s books to ascertain the extent of the magazine’s circulation, and “that in case said examination or examinations do not bear out the circulation claimed and embodied in said contract, and shall be found to have averaged materially less than sixty-three thousand (63,000) copies per issue * * * the expense of this examination shall be borne by the said Arthur H. Crist Company, otherwise by the said Cream of Wheat Company ; * * * that in case said examination shows the circulation to be materially less than above stated the Arthur H. Crist Company will make a pro rata rebate to the said Cream of Wheat Company for such shortage in circulation.”
The magazine was published, and the advertisement was inserted and published in each monthly issue, during the year 1912, as contemplated by the contract. In May and June, 1913, one John C. Rink, at the request of the plaintiff, examined the books and papers of the defendant, with a view of ascertaining whether the average circulation was equal to or “materially less” than the 63,000 guaranteed by the contract. The plaintiff claims that such examination shows the circulation to have been materially less than 63,000, and brings this action to recover the expense of such examination and a pro rata rebate of the amount paid for the advertisement, basing the claim upon the report and evidence of said Rink as to the average number of “paid subscribers” to the magazine during the year 1912.
It is the plaintiff’s contention that the words “paid subscribers” in this contract should be construed as covering only those subscribers who had paid in advance for the year 1912, or for that portion of the year for which they should be counted, and under the evidence in this case the plaintiff would not be entitled to recover unless a proper construction would exclude all subscribers who had not paid the subscription for 1912 prior to or at some time during that year, or at any rate before June, 1913. The proofs are insufficient to warrant a finding in plaintiff’s favor upon any other construction. The defendant claims that the words last quoted should include all genuine subscribers who received the magazine during 1912 and became legally obligated to pay for it for that year, and excluding those who received the magazine gratuitously or by way of exchanges, without incurring any obligation to pay for it.
It seems to me that, in view of the situation of the parties, the subject-matter of the contract, the object and purpose of the advertisement, and the benefit to be derived by the plaintiff therefrom, also the custom of advertisers and publishers, as disclosed by the evidence, that the contention of the defendant, perhaps with some limitation or change, is the more reasonable construction. The parties attempt, in their contract, to agree upon a construction for the term “circulation,” and say it shall be construed to include “the total number of copies * * * published, sold, and delivered * * * to paid subscribers * * * exclusive of all * * * copies given away in any manner whatsoever." Their words, defining the copies distributed that should be excluded from the circulation—that is, “copies given away in any manner whatsoever”—lend probability to the claim that it was not intended to exclude a subscriber who had received the magazine during 1912 and became indebted to the defendant therefor simply because he had not paid in advance.
In the construction of contracts, the first and main rule is that the intent of the parties is to govern, and greater regard should be had to the ■question of intent than to the literal meaning of any particular words; and generally the words used are to be taken in their ordinary and popular sense, as applied to the subject of the contract. This intention is to be gathered from the whole instrument, and not from any detached part of it.
If the meaning is not clear, regard should be had to the nature of the instrument, the language used by the parties as applicable to the subject-matter, and especially to the objects which the parties had in view.
These general rules, aided by the custom clearly established by the evidence in respect to auditing a publishers’ circulation, and which custom was known to the parties, seem to warrant a construction in accordance with the ■defendant’s contention.
It is well settled that where the words or the terms of a contract are not clear and explicit on the face of the instrument, or are made obscure by proof of extrinsic circumstances, leaving a doubt as to their meaning, interpretation, or application to the subject-matter, evidence of custom and usage is admissible to explain such meaning or application; also if, in reference to the subject-matter of a contract, particular words and expressions have by usage and custom acquired a meaning different from their plain, ordinary, ■or popular meaning, the parties using those words in their contract must be taken to have used them in their peculiar sense, and parol evidence is competent to prove their peculiar meaning, even though the words in their ordinary meaning are unambiguous. 12 Cyc. 1081-1086.
The testimony respecting the custom and usage prevailing in such cases is substantially without dispute, and clearly establishes that it was the custom between advertisers and publishers, in seeking to ascertain the number of subscribers to a magazine for advertising purposes, to divide them into two classes, viz., “paid subscribers” and “unpaid subscribers,” and that in the paid class this custom included paying subscribers—i. e., those obligated to pay, as distinguished from those who received the publication gratuitously— even though such passing subscribers had not paid in advance, or had not paid at the time of the audit or count, for the particular time covered by the advertisement.
Within this rule the evidence does not disclose, with a degree of certainty sufficient to warrant a finding, the number of “paid subscribers,” except that it may be safely determined that the number was not “materially less than 63,000,” which is the basis of the plaintiff’s case.
In reaching the conclusion that the words “paid subscribers” in this contract should be construed as I have herein indicated, I am reminded of an English case (Gether v. Capper, 15 Common Bench Reports, 701, 702; s. c., 29 Eng. Law and Eq. 242), wherein the contract provided that the owner of a vessel should receive for carrying specified freight the highest price which he could prove to have been paid to other ships for the same voyage, and it was held the word “paid” was satisfied by proof of contracts to pay and by proof of what other shippers had become contractually obligated to pay.
Argued before SMITH, P. J., and KELLOGG, LYON, HOWARD, and WOODWARD, JJ.
Rogers, Locke & Babcock, of Buffalo (Evan Hollister, of Buffalo, of counsel), for appellant.
Arnold & Cooke, of Cooperstown (Lynn J. Arnold, of Cooperstown, of counsel), for respondent.

Opinion:
SMITH, P. J.
These judgments might well be affirmed upon the opinion of the learned trial judge. To this opinion we have only a few considerations to add. Under the contract, which is here for interpretation, the plaintiff is entitled to recover if it appears that the defendant in 1911 and 1912 had materially less than 63,000 "paid subscribers." Upon the wording of the contract alone the court might interpret the expression "paid subscribers" to mean those only who had prepaid their subscriptions. The trial court has found that by an established custom of the trade the term "paid subscriber" has a broader meaning, and includes, not only those whose subscriptions had been prepaid, but any subscriber to whom the paper was sent, and who had once paid, although the subscription had not been prepaid for the years in question. This finding is abundantly supported in the record.
First. The purpose of the contract is to advertise the plaintiff's product. The actual circulation of the defendant's magazine was confessedly over 70,000 copies per month, although some of these subscribers had not paid for several years. The magazine was only sent upon the request of the subscriber, renewed in writing each year, upon which the trial court has found that there was legal liability to pay. The purpose of the insertion of the advertisement would therefore seem to be fully accomplished, whether or not the subscriber had in fact paid the. subscription price in advance.
Second. The contract itself in effect defines a paid subscriber as one to whom the paper was not sent as a gift. The term "circulation" is therein described as:
"The total number of copies of each issue of the publication above mentioned which shall be published and sold and delivered by the publishers thereof, both to paid subscribers and to news agencies, exclusive of all returns from news agencies and copies given away in any manner whatsoever."
It appears that it was the custom of the different magazines to give away to employés, to advertisers, to advertising agents, to exchanges and for other purposes, what are called "service copies." These would seem to be the part of the circulation that was intended to be excluded by the terms of the contract.
Third. The term "paid subscriber" has been construed by the plaintiff's general manager and secretary, who negotiated and signed the contracts .in question. In 1912 E. Mapes, who for the plaintiff negotiated and signed these contracts, was upon the circulation committee of the Association of American Advertisers, which was an association composed of about 70 or 80 prominent advertisers, which at its own expense had audits made of magazines and newspapers to determine the extent of their circulation, for the purpose of ascertaining their value as advertising mediums. Among the papers thus examined by this association were the Knickerbocker Free Press and the Albany Times Union in the city of Albany. In that year a contest arose between those two papers as to which had the larger "paid circulation." This contest was referred to a committee of this association, of which Mr. Mapes was a member. That committee decided that in ascertaining the paid subscription list all those subscribers should be counted who had once paid and to whom the paper was then being sent, although no subscription had in fact been paid for 14 years. The record does not show whether or not Mr. Mapes assented to that decision, but as he was on the committee which made the decision, and it could easily have been shown if he dissented therefrom, it is fair to assume that it was his interpretation, as well as that of the committee, of the term "paid circulation." It is true that this was the interpretation of the term as that applied to the circulation of a newspaper, and not of a magazine. As the audit of a newspaper circulation, however, was .for the same purpose as the audit of a magazine circulation, it is difficult to see why the term-should have a different meaning when applied to the circulation of a magazine, in a contract for advertising. This interpretation of the term made in 1912 by the man who negotiated and signed this contract for the plaintiff is most cogent, if not controlling, evidence of what was intended in the contract to be included in the term "paid subscriber."
Fourth. The witness Turner is an expert accountant, who for four years before the trial had done nothing except examine the circulation of magazines and newspapers. He had done this work under employment from-the plaintiff and other individual advertisers, and also of the Association of American Advertisers before mentioned. Of this association said Mapes is now the president and was then upon the circulation committee. He swears that in making those audits the entire circulation of the paper was divided into two branches, paid and unpaid; that there was included in the paid class the entire mailing list and the news agencies, and in the unpaid class the advertisers and advertising agents, exchanges, service copies, and employés ; that in the class of paid subscribers was included all subscribers to whom the magazine was sent, whether or not payment had been made in advance or the subscriber was in arrears. It is true that few magazines continue to send, the paper where the payment of the subscription is far in arrears. That, however, was a matter entirely within the policy of each magazine, and some were more liberal than others, and since 1912 the tendency had been to draw the lines still closer. The plaintiff produced two experts, who made the audits of the defendant's magazine for the year 1911 and 1912, in order to ascertain whether the plaintiff was entitled to any rebate under the contract. This audit was made, however, at the request of the plaintiff, and with a strict construction of the term "paid subscriber" as only those who had paid in advance it was found the circulation was substantially less than 63,000 copies a month. The testimony of plaintiff's main expert, Rink, as to what was understood to be included in the term "paid subscriber" is unsatisfactory and evasive, and in view of the purposes to be accomplished by the contract in question the trial judge was abundantly authorized to find that in the custom of the trade the term "paid subscriber" was not limited to those subscribers who had paid in advance. An examination of the evidence of the two experts called for the plaintiff will be found to contain no substantial dispute of the evidence of Turner, the defendant's expert, as to what was understood to be embraced within the term "paid subscriber" in an audit made for the purpose of determining its value as an advertising medium.
Fifth. It appears that the price of this magazine was normally $1 a year, and that the receipts for the years in question from the subscription list were only between $20,000 and $30,000. This disparity between the circulation and the receipts therefrom undoubtedly casts some suspicion upon the good faith of this circulation. There is no question made, however, that the circulation in fact exceeded 70,000 copies per month. Moreover, while the subscription price was ordinarily $1 a year, it is suggested in the evidence that clubs were formed with a subscription price of 50 cents, so that the actual paid subscriptions were not fairly represented by the actual amount of cash received. It appears from the evidence that other magazines, by offering prizes, send their numbers to many who in fact pay for the magazine much less than the subscription price. Presumably the increased price received from advertisements inserted compensates for loss in the subscription price. These facts were all known to Mapes when he made this contract, and with knowledge of these facts, and of the fact that audits made for the purpose of these associations included in the list of paid subscribers many whose subscriptions were not prepaid, it is a fair inference that, if he had intended to-provide only for prepaid subscriptions, he would have used more specific language to that end. There was no finding by the trial court of any bad faith on the part of the defendant in padding its circulation list, nor was there any request by the plaintiffs so to ñnd.
The judgment dismissing the complaint must therefore be affirmed.
Judgment affirmed, with costs. All concur, KELLOGG, J., in result, except