Court Opinion

ID: 9698749
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:58:55.333212+00
Date Added: 2024-06-11T12:30:01.570688
License: Public Domain

Clinton, J.,
dissenting.
I respectfully dissent from the majority opinion because I believe it misuses, in a manner which is without precedent, the principles of law pertaining to application of payments, and it does so in such a way as to change and modify the plain and unambiguous terms of the written contract between the parties.
The majority opinion, in its second and third paragraphs, summarizes the contractual provisions relative to payment and the right to terminate for unremedied delay in payment.
The trial court instructed the jury as follows: “The Court has determined, as a mátter of law, and you must accept it as such, that the contract required plaintiff to ‘pay promptly’; that ‘pay promptly’, in this case, means pay each invoice no later than 30 full days from shipping date; that if plaintiff, on January 27, 1975, owed defendant on an invoice 30 full days or more past its shipping date and if plaintiff, on the 61st day following its receipt of the demand letter of January 27, 1975, owed defendant on an invoice 30 full days or more past its shipping date, *389even though it not he an invoice owed on January 27, 1975, plaintiff is deemed to have breached the contract and defendant was entitled to terminate the contract unless (a) Its right to so terminate had been waived, or, (b) Its exercise of its right to terminate was in bad faith in furtherance of or pursuant to a conspiracy as alleged by the plaintiff.” That instruction correctly interprets the contractual provision and the majority does not contend otherwise. Rather, the majority in effect says that the manner in which the defendant kept its books changed the terms of the contract.
The issues of whether the right to terminate had been waived and whether the termination was in bad faith and in furtherance of a conspiracy were submitted to the jury and on these factual issues the jury found for the defendant, Accessory Sales, Inc. Likewise, there was submitted to the jury the factual determination of whether the plaintiff had failed to pay promptly and in accordance with the terms of the contract as interpreted by the court and that factual issue was resolved in favor of the defendant.
The contract clearly provided that each invoice was to be paid within 30 days of date. It also provided that if default was not remedied within 60 days, then the party not in default could give notice of termination. Termination was effective 10 days after notice.
The plaintiff so understood the contract. The testimony of the plaintiffs owner was as follows: ‘‘Q. So you understood that you were to pay 30 days after the date of the invoice? A. Yes. Q. And the contract so provides? A. The contract provides, that was the way we understood it. ’ ’
The record clearly establishes that the plaintiff was delinquent in its payments during most of the period of the dealings of the parties and that the amounts were substantial. It supports the conclusion that the defendant determined it could no longer *390continue in effect to finance the plaintiff’s operations by prolonged extensions of credit beyond contract terms. This factual issue, as we noted, was decided by the jury in favor of the defendant. It found that there was no waiver and there was no bad faith in termination.
The record shows that the defendant kept only one ledger for the plaintiff’s account. On that record, each sale to the plaintiff was separately listed by date, invoice, and the charges for each invoice. The record indicates that when the plaintiff paid, it seldom paid by single invoice but paid them in groups, for example, three invoices at a time. When the defendant entered the payment on the ledger, it recorded the date and amount of the total payment but did not identify the invoices paid. The ledger showed a running balance of the total owed.
It was possible, however, to relate the payments to the invoices by adding invoices and comparing the amounts of the payments. This the accountant did in preparing the exhibits supporting his testimony. The plaintiff in no way relied upon, nor was it prejudiced by, the way in which the defendant recorded the payments. It acknowledged that it was in default more than it was current.
The instruction left to the jury the determination of whether there was a default within the meaning of the contract as the court had interpreted it. The instruction merely states what the unambiguous terms of the contract were. The interpretation of an unambiguous contract is for the court as a matter of law. Smith v. Wrehe, 199 Neb. 753, 261 N. W. 2d 620; Grantham v. General Tel. Co., 191 Neb. 21, 213 N. W. 2d 439.
Neither the plaintiff nor the majority opinion cites any authority for the use it makes of the application of the payment doctrine in this case. The sole authority cited by the court is State v. Hill, 47 Neb. 456, 66 N. W. 541. That case involved several differ*391ent debts and the rights of third parties, and there was no agreement of the contracting parties as to application. In this case, the contract specifically provided that payments were to be made by invoice within 30 days. Payments were, in fact, made by invoice. The failure of the defendant in this case to record invoice numbers at the time payments were made did not change the fact. In any event, the factual determination was left to the jury and it decided adversely to the plaintiff. The plaintiff did not suffer by the way the defendant made the records. The plaintiff had its own records and knew what it had paid and how it was delinquent.
The rule applying payments to the oldest items has no application when the parties have contracted otherwise. The court must, in that case, apply payments in accordance with the intentions of the parties. 70 C. J. S., Payment, § 72 b, nn. 87, 88, p. 277.
In Ford Hardwood Lbr. Co. v. Bryant, 178 Ark. 807, 13 S. W. 2d 1, the court said: “The doctrine as to the application of payments is stated by this court as follows: ‘The general rule is that, where neither debtor nor creditor , makes an appropriation at the time of payment, the law applies it to the liabilities of earliest date. The reason is because that course is presumed to' conform to the intention of the creditor. Kline v. Ragland, 47 Ark. 119, 14 S. W. 474. If there is any particular reason for a different appropriation, the rule does not apply. Thus, where cotton covered by a mortgage is delivered to the mortgagee, with authority to sell and retain the proceeds, the . law appropriates the payment to the discharge of the mortgage debt, because the parties have impliedly agreed in advance how the proceeds shall be disposed of. * * * Whenever the relation of the parties or the nature of the account or transaction between them shows that an appropriation of payments to the earliest items of the account would do injustice between them or fail to conform to their *392understanding or agreement, another application is made.’ Faisst v. Waldo, 57 Ark. 270, 21 S. W. 436.” The first in, first out rule has no application where it would produce inequitable results. Lowden v. Northwestern Nat. Bank & Trust Co., 84 F. 2d 847.
In this case, inequitable results come about because the defendant is deprived of the benefit of its contractual provisions and no equity on the plaintiff’s behalf requires a different application than that provided for by the contract. The record shows that the defendant extended credit to the plaintiff for a considerable period of time in a more generous fashion than the contract provided. This gives the plaintiff no equities. This is not a case of an ordinary open account where there was no antecedent agreement as to how payment was to be made.
I would affirm.