1. The contract referred to and described the notes sued upon and stated the terms and provisions of the sale, and the notes referred to the contract and stated that they were given subject to its terms. In these circumstances the notes and the contract are to be construed together as constituting one contract.
2. The contract was entire and indivisible and contained a condition precedent to the plaintiff's right to collect the notes; it was pleaded and introduced in evidence by the defendant; and before the plaintiff would *Page 671 be entitled to recover in this action, it must appear that it complied with the terms of the contract in furnishing the milk, or had sufficient legal excuse for nonperformance in this respect.
3. (a) The uncontradicted evidence showed that the plaintiff had failed to fully comply with the provisions of the contract in respect to the delivery of the milk.
(b) The evidence was not sufficient to show any waiver on the part of Irvindale Farms as to the grade and quality of milk that was required to be delivered under the terms of the written contract, and the court erred in charging the jury in this respect as complained of in ground 6 of the motion.
4. The contract was not ambiguous, and the court should have construed it and instructed the jury as to its terms and meaning, and left it to the jury to determine whether or not the parties had complied with its terms.
5. The provisions in the contract for the cancellation and surrender of the notes in the event of a failure to comply with paragraph 4 of the contract, relating to the furnishing of a certain quantity and quality of milk, should be upheld and given effect as a provision for liquidated damages, rather than as a penalty or forfeiture.
6. The contentions of the defendant in error in respect to the effect of the agreement effective June 1, 1944, which modified certain provisions of the original contract of November 30, 1943, are without merit.
7. The trial court erred in overruling the defendant's motion for a new trial for the reasons stated in the opinion in this case.
DECIDED FEBRUARY 3, 1949. REHEARING DENIED FEBRUARY 26, 1949. W. O. Pierce Dairy Inc. sued Irvindale Farms Inc. in Fulton Superior Court to recover the unpaid principal, plus interest and attorney fees, on a series of notes.
In count 1 of the petition it is alleged: (2) that on November 30, 1943, defendant purchased from the plaintiff 15 trucks, 1 trailer, 2 billing machines, and the entire supply and inventory of bottles and crates owned by the plaintiff; (3) that the articles were purchased for an agreed consideration evidenced by a series of 23 notes, due monthly, each for the principal sum of $833, with interest at 5% per annum from November 30, 1943; (4) that the above articles were delivered to the defendant; (5) are now in possession of and have been used by the defendant; (6) that the defendant is indebted to the plaintiff in the sum of $3332 principal upon notes number 11, 12, 13, and 14 of the series, each of which is past due, $194.37 interest to February 1, 1945, and the agreed interest rate of 5% thereafter, plus 10% of principal *Page 672 and interest as attorney fees; (7) that a copy of note number 11 is attached to the petition, and that notes number 12, 13, and 14 are similar, except as to date of maturity; (8) that each note provides for payment of the principal sum of $833 with interest and all costs of collection including 10% attorney fees if collected by law; (10) that the plaintiff has given 10 days' previous written statutory notice of its intention to file suit; (11) and that a copy of the attorney fees' notice, sent to and received by the defendant on January 8, 1945, is attached. In count 2 it is alleged: (13) that in count 1 the plaintiff had sued for recovery on notes number 11 through 14 of the series, and that count 2 is for the recovery on notes number 15 through 23 of the same series; (14) that the failure to pay notes number 11, 12, 13, and 14 constituted an anticipatory breach of the defendant's contract to pay for the property, the consideration of said notes; (15) that each note contains a provision for the payment of 10% attorney fees if collected by law; (16) that the defendant has given statutory notice of the intention to file suit and ask for attorney fees; and recovery is sought in count 2 for the principal sum of $7497, interest of $437.33 to February 1, 1945, future interest at the rate of 5% per annum, and 10% of principal and interest as attorney fees.
Note number 11, a copy of which is attached to the petition, and which, except as to date of maturity, is the same as the other notes of the series, is as follows: "On or before the 1st day of November, 1944, Irvindale Farms Inc., for value received, promises to pay W. O. Pierce Dairy Inc. eight hundred thirty-three dollars, with interest from date until paid at the rate of 5% per annum, at the office of the Peachtree Road Office of the Fulton National Bank, with all costs of collection including ten percent attorney's fees if collected by law. This note is one of a series of twenty-three, due monthly, serially and consecutively and aggregating $19,159.00, given in pursuance and subject to the terms of a contract even date herewith. Witness the makers name and seal. Irvindale Farms, Incorporated, by Richard Hull President. No. 11."
A copy of a letter from the plaintiff to the defendant, dated January 5, 1945, signed by the plaintiff's attorney, notifying the defendant of its intention to bring suit on the notes, including *Page 673 10% of principal and interest as attorney fees, is also attached to the petition. The notes and the above letter were introduced in evidence on the trial.
The defendant in its answer to the petition denied that the equipment described in the petition was purchased for an agreed consideration evidenced by the series of 23 notes; or that the equipment was now in the possession of or had been used by the defendant; or that the plaintiff had given 10 days' statutory notice for attorney fees as required by law (although admitting the receipt of the letter described above); and admitted the other allegations of the petition. Further answering the petition, the defendant alleged: "that the notes sued upon are not unconditional promises to pay the indebtedness therein mentioned, but that each of said series of notes contains the provision that it is `given in pursuance and subject to the terms of a contract even date herewith'; that simultaneous with the execution of said series of notes the parties executed a contract . .; that the plaintiff not only sold to the defendant certain trucks and a trailer, two billing machines and a supply of bottles and crates, but also sold to the defendant the business of selling milk at retail, which business was theretofore owned and operated by the plaintiff and which sale under . . the contract carried with it the right of the defendant to the free and unrestricted use of the name `W. O. Pierce, singly or in combination,' in the business of the sale or distribution of milk at retail and wholesale"; that "the plaintiff agreed to discontinue that type of business for a period of five (5) years within a radius of twenty-five (25) miles of the center of the City of Atlanta"; that "the plaintiff . . agreed to deliver daily to the defendant certain milk . . which plaintiff has failed and refused to do . . that said series of notes under the terms of said contract were delivered to the Fulton National Bank, Peachtree Road Office, with the authority to collect the same as and when each note became due and payable, but with the particular proviso that the plaintiff fully comply with the obligation set forth in paragraph four of said contract and with the further proviso that if the plaintiff failed to comply therewith said bank was authorized to return such note or notes to the party of the second part as cancelled"; that "by reason of this provision in the contract, the *Page 674 plaintiff does not have the legal title and possession to said note or series of notes sued upon, nor does it have the legal right to recover thereon, inasmuch as the contract provides for the cancellation of said notes upon the breach of the conditions in paragraph four of the contract; . . that the plaintiff did not deliver the number of gallons required nor of the grade and butter fat required, and plaintiff failed and refused to bottle, cap, and hood the milk which was to be sold at retail," and "in addition thereto, the plaintiff's milk was not according to the standards approved by the Health Department of the City of Atlanta and of the State of Georgia; . . that the plaintiff was found, on several occasions, to have adulterated the milk with condensed skim milk"; that "the defendant as a result of the findings . . advised the plaintiff on innumerable occasions . . that it would discontinue accepting milk from the plaintiff unless there was a strict compliance with the contract"; that "the defendant attempted in every way possible to avoid refusing to take any further milk from the plaintiff, because the defendant, after purchasing the business from the plaintiff, had expended large sums of money in enlarging its business . .; that in spite of its having used all means to require the plaintiff to live up to the terms of the contract, the plaintiff did, on November 1, 1944, deliver to the defendant at its plant on Spring Street, in the City of Atlanta, a shipment of milk consisting of approximately seventy (70) ten-gallon cans which were received at two o'clock p. m. on that date; that the defendant immediately tested said milk, and such test revealed that from fifteen percent (15%) to twenty percent (20%) thereof was added water"; that "the defendant advised the plaintiff verbally and by letter, dated November 2, 1944, that this action on the part of the plaintiff was considered a breach of the contract and no further milk would be accepted . .; that the defendant as a result of the grade of milk that was delivered by the plaintiff lost a great many of its customers and . . had to spend large sums of money in the purchase of cows and other capital expenditures in order to acquire sufficient milk to supply its customers; . . that the adulteration by the plaintiff of the milk, is . . a violation of said [Atlanta milk] ordinance as well as a violation of the State's laws, and as such was a violation of the contract with the defendant by reason *Page 675 of this state of facts, together with the breach on the part of the plaintiff of the other parts of the contract to the extent herein mentioned, said notes referred to in the petition should be canceled and surrendered, and the plaintiff has no right to recover thereon."
Exhibit A of the answer to the petition consisted of the alleged contract between the parties. This contract was introduced in evidence, and is as follows:
"This Contract made this 30th day of November, 1943, by and between W. O. Pierce Dairy Inc., a corporation of DeKalb County, Georgia, and W. O. Pierce, as parties of the first part, and Irvindale Farms Inc., a corporation of Fulton County, Georgia, Witnesseth: Whereas W. O. Pierce Dairy Inc. is presently a producer and distributor of milk and proposes to withdraw from the business of selling and distributing milk at retail and wholesale, and whereas said Irvindale Farms Inc. is a distributor of milk, and the parties propose, upon conditions herein stated, for said Irvindale to take over from W. O. Pierce Dairy Inc. the latter's business of selling and distributing milk at retail, and wholesale — Upon the consideration and covenants hereinafter assumed by the respective parties hereto, it is agreed between them as follows: 1. Said W. O. Pierce Dairy Inc. has bargained, sold and conveyed and hereby bargains, sells and conveys to Irvindale Farms Inc. fifteen automobile trucks and a trailer, a more particular description of which is set forth and contained in Exhibit A hereto attached and made a part hereof; also two billing machines and its entire supply and inventory of bottles and crates. The parties of the first part represent each and all of the foregoing chattels as being free of all liens of any kind whatsoever. The within transfer is made in fee simple and title warranted as good and merchantable. 2. The business of selling milk at retail heretofore owned and operated by said parties of the first part, or either of them, is hereby sold and conveyed to said party of the second part. 3. The parties of the first part agree and respectively bind themselves unto said party of the second part for a period of five years from date hereof not to engage in the business of retailing milk at any place within a radius of twenty-five miles of Five Points of the City of Atlanta, Georgia, and the said W. O. Pierce individually agrees neither *Page 676 himself to engage in such business within such time and in said area not to accept employment from anyone else who may be so engaged. Furthermore, parties of the first part agree that within said period of five years Irvindale Farms Inc. shall have free and unrestricted use of the name `W. O. Pierce,' singly or in combination, in business of the sale and distribution of milk at retail and wholesale. 4. Parties of the first part agree and bind themselves to deliver daily to Irvindale Farms Inc. at its place of business now located at 1139 Spring Street, N.W., Atlanta, Georgia, nine hundred gallons of Grade A raw milk, four percent butter fat, as per standards approved by the health departments of both the City of Atlanta and of the State of Georgia, for the period beginning December 1, 1943, and ending with the cessation of hostilities between the United States of America on the one part and both Germany and the Japanese Empire on the other. It is agreed between the parties hereto that the obligation to deliver nine hundred gallons daily admits of a tolerance of 15 percent. Parties of the first part reserve the option of delivering two hundred of the nine hundred gallons in the form of certified milk, four percent minimum butter fat guaranteed, in bottles, capped, hooded, and ready for retail distribution, same to be full standard quality as prescribed by said health departments. After such cessation of hostilities, the contract for delivery of milk shall continue for an additional period of twelve months thereafter, except that, in lieu of the nine hundred gallons specified above, the agreement shall apply only to the actual production from the dairy herds actually owned and operated by parties of the first part or either of them; however, Irvindale shall in no event be obligated to receive in excess of nine hundred gallons daily, said tolerance considered. 5. Said Irvindale Farms Inc. has paid W. O. Pierce Dairy Inc. the sum of $841.00 even date herewith, and has executed a series of twenty-three monthly notes, aggregating $19,159.00, each note being in and for the sum of $833.00 payable to W. O. Pierce Dairy Inc., same maturing serially and consecutively beginning January 1, 1944. Said notes by agreement of the parties have been delivered to the Peachtree Road Office of the Fulton National Bank with instructions as follows: (a) To collect the same as and when each becomes due and payable (applying the proceeds thereof *Page 677 according to the instructions of parties of the first part or either of them), provided on maturity date the first parties shall have fully complied with the obligations set forth in paragraph 4 hereof. (b) If the parties of the first part shall have failed fully to comply therewith, said bank is instructed by the parties hereto to return such note or notes as then may be due and payable to the party of the second part as canceled. 6. Irvindale Farms Inc. agrees to accept delivery of milk as heretofore specified and will pay parties of the first part or either of them on same, as may be mutually agreeable, to them as per the following terms: for Grade A raw, 66 2/3 percent of the retail selling price established for the Atlanta area; for the certified raw, four (.04) cents under established regular retail selling price; all settlements to be made weekly by the end of each week for deliveries hereunder made during the week, five days' grace. 7. It is mutually agreed: (a) that the parties of the first part may not assign this contract without the prior written consent of the party of the second part; (b) in the performance by them or either of them of this contract, parties of the first part shall comply with all pertinent laws, ordinances, and public rules and regulations. If for failure to comply said parties or either of them shall be deprived of their license or business permit, the obligations of the second party thereafter to accept delivery of milk shall terminate."
A modification of this contract was introduced in evidence on the trial of the case. This modification, in its material parts, is as follows: "1. Beginning as of June 1, 1944, the Party of the First Part [W. O. Pierce Dairy Inc.] is to deliver, daily except Sunday, to Party of the Second Part [Irvindale Farms Inc.], at its place of business, 1139 Spring Street, N.W., Atlanta, Georgia, two hundred (200) gallons of certified milk of the quality and type referred to in the original contract. The same is to be bottled and capped and hooded by Party of the First Part, but the caps and hoods are to be furnished to Party of the First Part by Party of the Second Part. 2. The price to be paid by Party of the Second Part for the milk referred to in the preceding paragraph is to be Sixty Cents (60c) per gallon. 3. In the event the Party of the First Part is able to supply to Party of the Second Part additional milk of the type and quality referred *Page 678 to, the Party of the Second Part agrees to accept an additional amount up to, but not to exceed, one hundred twenty-five (125) gallons per day, and the price of the said additional amount shall be Fifty Cents (50c) per gallon. 4. This agreement is to continue in force, from day to day, subject to cancellation by either party upon thirty (30) days' written notice in advance of the date said cancellation is to take effect. 5. It is the purpose of this amendment that it shall vary the original contract, dated November 30, 1943, only to the extent herein mentioned, and only during the time that this amendment is in operation, said original contract to otherwise remain in full force and effect. This amendment shall not detrimentally affect the claims or rights of the parties hereunder, in the past or future, except for the time herein modified."
Exhibit B of the answer consists of a letter from the defendant, signed by Joel Eidson, Assistant Manager, addressed to the plaintiff, and dated November 2, 1944, which was introduced in evidence. This letter informs the plaintiff of violations concerning the quality of the milk, and other violations of the contract, and refers to the delivery of milk on November 1, 1944, informing the plaintiff that lactometer tests revealed that from 15% to 20% water had been added, which was a violation of the contract that the defendant would not tolerate, and that the defendant would accept no further delivery of milk or have any further business transactions with the plaintiff.
The plaintiff, in reply to the answer, alleged: "(1) That the notes sued upon were executed for the purchase-price of the equipment, the physical property other than milk, described in paragraph 1 of the contract . . ; (2) that there was a separate and distinct consideration for the sale of milk, namely, a price per gallon set forth in the contract, between different parties including plaintiff and defendant; (3) that paragraph numbered 5 and in particular 5 (a) and (b) provide for a penalty and forfeiture and are void as between plaintiff and defendant, as said provisions are without consideration and would work a forfeiture of the purchase-price of the trucks and equipment sold and delivered, for which the notes sued upon were executed; (4) defendant having accepted and used the articles sold, the consideration for the notes sued on, and made no offer to return *Page 679 said articles or their value, is now estopped to deny liability on the notes given as part of the purchase-price therefor or plead breach of milk contract; (5) milk under a separate contract from the purchase of equipment was sold under a universal general and recognized custom of the dairy business to cut or reduce the butter fat content of raw milk to 4% butter fat content by the addition of condensed skim milk, a wholesale product condensed from raw milk" and that "this custom was generally known to and practiced by dairymen within this, Atlanta, milk shed and became a part of the contract."
W. O. Pierce testified: "This series of notes numbered 1 through 23, totaling $19,159, were executed at the time the contract between me and Irvindale Farms was executed, and these notes were given to me at the time of the execution of this contract. These notes were given for the purchase of customers, these trucks, these billing machines, and the business. This equipment, which I have described, was delivered to Irvindale Farms. . . My interpretation was that there was a separate price set for the milk. That was one of the inducements for signing the contract. In other words, I was getting in addition to the $20,000, 7 1/2 cents a gallon premium on this milk, which amounted to more than the contract would over a period of years. . . After this contract was signed, after we agreed to sell the equipment and the milk, we undertook to perform under the contract and to deliver milk, and we definitely complied with the contract straight through. . . I am not positive whether the milk delivered to Irvindale on November 1, 1944, had condensed skim added to it or not, but I think it did so."
Dr. Tim Brice Clower, Chief Veterinarian of the Department of Agriculture of the State of Georgia, testified: "The Department of Agriculture has standards for Grade A raw and pasteurized milk. These standards are affected by condensed milk because Grade A milk could not be Grade A if condensed milk had been used in it. It would have been adulterated milk. There has been no change in this law, as I would have no authority to have changed it."
H. A. Anderson, Chief of the Bureau of Milk Sanitation of the City of Atlanta, testified: "I can say that permission was never given for the use of condensed skim milk in standardizing *Page 680 Grade A sweet milk. . . My department never did approve the use of condensed skim in Grade A sweet milk."
Frank Taylor, a former employee of the plaintiff, testified: "I made deliveries to Irvindale Farms that had condensed skim milk in it. Some of it had a little, and some other had more. I put in five cans, then one with more condensed skim in it. I told the person receiving the milk at Irvindale Farms that it had condensed skim milk added to it, and that person made no objection. . . The employees of Irvindale knew that some of the cans contained condensed skim, but I do not know the boy's name, except one of the employees of Irvindale was Bill Mims. I don't know the other boy's name."
Richard Hull, the owner of Irvindale Farms Inc., testified: "I never permitted Mr. Pierce to deliver to my company any milk with condensed skim and water added to it and treat this milk as satisfactory and in accordance with the contract. . . We had been trying to get this boy that just testified, Mr. Taylor, to make him admit this. Mr. Eidson and I had questioned him on several occasions. We never did get any definite proof until one afternoon when we went out there and someone put a stirrer in one of the cans and on the bottom of the can there was about that much condensed skim milk. We sent that milk back and never took any more. That was the first occasion on which I had been positively able to satisfy myself that the milk had been treated, watered, or that condensed skim milk had been added to it. . . As to what was the moving consideration in the execution of the contract between me and Mr. Pierce, we sold all of the equipment we got from him as fast as we could. I think everything was gone within ninety days after we purchased it. We didn't use any of it, maybe a few days, but most of the equipment, except the bookkeeping machines, bottles, and crates, were sold. . What I was buying was his business and good will. My business had been built from one hundred gallons a day sixteen years ago to the largest milk distributor in Atlanta today through quality. Mr. Pierce had been our competitor, our next-door competitor and principal all of the time. We thought that in the past he had produced a quality milk. He had produced most of it on his place there in Chamblee, and we had been over and seen him produce it. In the contract *Page 681 we agreed to pay more for the milk than we had to pay in some instances for milk when we bought it, because we thought we were buying a quality product. Mr. Pierce's dairy has customers lined alongside ours. He would have one house and we would have the other. . . Their business fitted right in with ours, and what we bought was to get Mr. Pierce off the street and to get his customers. The trucks and equipment was something we had to take over to get the other part of it."
Joel Eidson, Vice President and Assistant Manager of Irvindale Farms Inc., testified: "The fair market value at the time this equipment was delivered to Irvindale Farms, of all this truck equipment, was $8123.50. The fair market value of the bottles and crates at the time they were delivered to Irvindale Farms was $1250. The billing machines would have cost $1340 new. The machines which were delivered to Irvindale Farms were originally sold in 1940, that is, they were three years old at the time they were delivered to Irvindale Farms. I never knew Mr. Pierce or anyone in his company was delivering milk to Irvindale to which had been added water and condensed skim milk. . . We did need the milk. We had to lose some sales on it because we didn't have enough milk."
After this W. O. Pierce was recalled as a witness and testified: "I recall Mr. Hull and Mr. Eidson testifying that they did not know that condensed skimmed milk was being used to cut Grade A raw milk to 4%. I heard the testimony of Mr. Eidson with regard to the value of the trucks, the billing machines. [I have] enough experience to express an opinion as to the market value of them. I consider that the prices of the trucks was the value set out in the contract. That is what we agreed on. That value was $20,000. Mr. Hull never did tell me what his object in entering into this contract was, to get Pierce Dairy off the streets, but I suspected that that was his purpose. . . In the course of my business I have never been prohibited from selling 4% Grade A raw milk just as I was delivering to Irvindale. . . The billing machines cost $2600 apiece. I would say that they were not more than a year old at the time they were sold to Irvindale Farms." He then testified that he re-entered the retail milk business within a radius of 5 miles of Atlanta around the last day in May, 1945, but was out of this business at the time of the trial. *Page 682
The jury returned a verdict for the plaintiff, judgment was rendered accordingly, and the case is here on exceptions to the judgment overruling the defendant's motion for a new trial. 1. Each of the notes sued on contained the following provision: "This note is one of a series of twenty three, due monthly, serially and consecutively and aggregating $19,159.00, given in pursuance and subject to the terms of a contract even date herewith." The contract referred to is set out in full in the above statement of facts. It was between W. O. Pierce Dairy Inc. and W. O. Pierce, individually, of the first part, and Irvindale Farms Inc., of the second part, and paragraph 4 thereof provided: "Parties of the first part agree and bind themselves to deliver daily to Irvindale Farms Inc., at its place of business now located at 1139 Spring Street, N.W., Atlanta, Georgia, nine hundred gallons of Grade A raw milk, four percent butter fat, as per standards approved by the health departments of both the City of Atlanta and of the State of Georgia, for the period beginning December 1, 1943, and ending with the cessation of hostilities between the United States of America on the one part and both Germany and the Japanese Empire on the other. It is agreed between the parties hereto that the obligation to deliver nine hundred gallons daily admits of a tolerance of 15 percent. Parties of the first part reserve the option of delivering two hundred of the nine hundred gallons in the form of certified milk, four percent minimum butter fat guaranteed, in bottles, capped, hooded, and ready for retail distribution, same to be full standard quality as prescribed by said health departments." Paragraph 5 of the contract is as follows: "Said Irvindale Farms Inc. has paid W. O. Pierce Dairy Inc. the sum of $841.00 even date herewith, and has executed a series of twenty-three monthly notes, aggregating $19,159.00, each note being in and for the sum of $833.00 payable to W. O. Pierce Dairy Inc., same maturing serially and consecutively beginning January 1, 1944. Said notes by agreement of the parties have been delivered to the Peachtree Road Office of the Fulton National Bank with instructions as follows: (a) To *Page 683 collect the same as and when each becomes due and payable (applying the proceeds thereof according to the instructions of parties of the first part or either of them) provided on maturity date the first parties shall have fully complied with the obligation set forth in paragraph 4 hereof. (b) If the parties of the first part shall have failed fully to comply therewith, said bank is instructed by the parties hereto to return such note or notes as then may be due and payable to the party of the second part as canceled." Paragraph 1 of the contract stated that W. O. Pierce Dairy Inc. had sold and was thereby conveying to Irvindale Farms Inc. its trucks, trailer, billing machines, bottles, and crates; and in paragraph 2 the parties of the first part conveyed their business of selling milk at retail to the party of the second part; and in paragraph 3 the parties of the first part agreed not to engage in the business of retailing milk within a radius of 25 miles of Five Points in Atlanta for a period of 5 years; and paragraph 6 stated the prices to be paid by Irvindale to the parties of the first part for the delivery of milk as specified in paragraph 4 of the contract.
The plaintiff in error contends that the defendant in error failed to comply with the provisions of paragraph 4 of the contract, in that it failed to furnish the grade and quality of milk as therein specified, and therefore it is not entitled to recover on the notes. The notes were executed contemporaneously with and in pursuance of this contract, and it is specifically stated in the notes that they are subject to the terms of the contract. The notes though payable to W. O. Pierce Dairy Inc., were not delivered to it, but, by agreement of the parties as stated in the contract, they were delivered to the Fulton National Bank with instructions to collect the notes as they became due, provided the parties of the first part had fully complied with the obligation set forth in paragraph 4 of the contract. But if said parties of the first part had failed to comply with the provisions of paragraph 4 of the contract (the delivery of the quantity and quality of milk as therein specified), the bank was instructed by the parties to return the note or notes then due to the party of the second part as canceled. This was all expressly agreed to by the parties to the contract, and it clearly appears that the provision for the delivery of milk was of vital importance to *Page 684 this contract. The Pierce Dairy was selling its physical property, its business, list of customers, name and good will to Irvindale Farms, and obligated and bound itself to deliver the quantity and quality of milk as specified in the contract. It seems that the furnishing of the milk was considered by the parties as one of the most important things contained in the contract, so important, in fact, that a failure on the part of the parties of the first part to fully comply with this provision would cancel the notes due and payable and require their surrender by the bank to Irvindale. The obligation of the plaintiff to furnish the milk was expressly tied in and bound up with the obligation of the defendant to pay the notes. The contract referred to and described the notes and stated the terms and provisions of the sale, and the notes referred to the contract and stated that they were given subject to its terms. In these circumstances the notes and contract are to be construed together as constituting one contract. Wardlaw v. Woodruff,175 Ga. 515, 517 (12) (165 S.E. 557); Montgomery v. Hunt,93 Ga. 438 (2) (21 S.E. 59). The consideration of the notes, among other things, included the right to have Pierce Dairy deliver 900 gallons of milk, as specified in the contract.
2. Irvindale was to pay for the milk as specified in paragraph 6 of the contract, and this, of course, was in addition to the cash payment and the amount of the notes stated in the contract, but the furnishing of the milk by Pierce Dairy was made absolutely essential by the express terms of the contract, before it was entitled to collect the notes. This was a condition precedent to the plaintiff's right to collect the notes. Irvindale Farms was taking over the entire retail business of Pierce Dairy, with its list of customers, and it was necessary for Irvindale to have the milk specified in the contract in order to supply its new customers. Irvindale, from a small beginning, had built up its business until it was the largest milk distributor in Atlanta, and it had done this, according to the record, by furnishing its customers with a quality product of milk, and, in order for it to keep this up, it was necessary for it to have the grade and quality of milk specified in the contract. To further illustrate and show how important the parties considered the provision and obligation in the contract for furnishing the milk, they not only *Page 685 provided for the cancellation and surrender of the notes for a failure by the parties of the first part to fully comply with the obligation in this respect, but they went further to safeguard and preserve their rights and obligations by expressly providing that the contract could not be assigned by the parties of the first part without the written consent of the party of the second part, and the notes were delivered to the bank with instructions to hold and handle as specified in paragraph 5 of the contract. We think that the parties clearly intended for the contract to be entire and indivisible (Code, § 20-112), and they conditioned the payment of the notes on the delivery of the milk as specified. The contract was pleaded by the defendant and introduced in evidence; and before the plaintiff would be entitled to recover in this action, it must appear that it complied with the terms of the contract in furnishing the milk, or had sufficient legal excuse for nonperformance in this respect. "When a plaintiff's right to recover on a contract depends on a condition precedent, to be performed by him, he must allege, and prove the performance of such condition precedent, or allege a sufficient legal excuse for its non-performance." Griswold v. Scott, 13 Ga. 210 (2). This is a well-established principle of law and has been followed in numerous decisions of this court and the Supreme Court since the decision just quoted from was rendered about one hundred years ago. See Mutual Benefit Health Accident Assn. v. Hulme, 57 Ga. App. 876, 883 (197 S.E. 85), where some of these cases are cited; and Code, § 20-110, which provides: "Conditions may be precedent or subsequent. In the former, the condition must be performed before the contract becomes absolute and obligatory upon the other party. In the latter, the breach of the condition may destroy the party's rights under the contract, or may give a right to damages to the other party, according to a true construction of the intention of the parties."
3. The uncontradicted evidence shows that Pierce Dairy delivered to Irvindale Farms approximately 700 gallons of milk, on November 1, 1944, and that this milk had condensed skim milk and water added to it, and, according to the evidence, such milk was not Grade A raw milk as specified in the contract, but was adulterated milk. The plaintiff in error, Irvindale, refused to accept this milk and notified the defendant in error, Pierce, *Page 686 that this was a breach of the contract and that no further delivery of milk would be accepted by Irvindale from Pierce. But it was contended by Pierce Dairy that, if there was any variation in the milk delivered by it to Irvindale Farms from the grade of raw milk as specified in the contract, such variation was waived by Irvindale Farms by reason of its knowledge that condensed skim milk and water had been added to the milk so delivered. The only evidence in the record which could have possibly indicated any knowledge on the part of Irvindale that the milk delivered by Pierce under the contract had condensed skim milk and water added to it was that of the witness Taylor, who delivered milk for Pierce Dairy Inc. to Irvindale Farms Inc. He testified: "I told the person receiving the milk at Irvindale Farms that it had condensed skim milk added to it, and that person made no objection. . . The employees of Irvindale knew that some of the cans contained condensed skim, but I do not know the boy's name, except one of the employees of Irvindale was Bill Mims. I don't know the other boy's name." Taylor did not even know the name of one of these boys, the one he said he told about the adulterated milk, and there is no evidence to indicate that either of them had any authority to alter, waive, or vary the terms of the written contract here involved, or that notice to either of them as to the grade of milk delivered would be knowledge to or binding on the Irvindale corporation. Richard L. Hull, President and owner of Irvindale Farms, testified that Pierce was never permitted to deliver and treat as satisfactory and in accordance with the contract any milk with condensed skim milk and water added to it. Joel Eidson, Vice-President and Assistant Manager of Irvindale Farms, testified that he never knew that the milk delivered to Irvindale by Pierce had condensed skim milk and water added to it until the afternoon in November, 1944, when he secured positive proof, which prompted him to write the letter dated November 2, 1944. The evidence was not sufficient to show any waiver on the part of Irvindale Farms as to the grade and quality of milk that was required to be delivered under the terms of the written contract. Consequently, the court erred in charging the jury that, "if you find from the evidence, under the rules given you in charge, that the defendant, Irvindale *Page 687 Farms, Incorporated, knew that the milk furnished by W. O. Pierce Dairy, Incorporated, was cut to four percent butter fat content by the use of condensed skim, and participated in the cutting of said milk and in that event the provision of the contract providing that milk should be furnished as per standards approved by the Health Department of both [the] City of Atlanta and the State of Georgia, and according to the requirements of the contract, would be waived; that is, if you believe that they participated in this transaction, or in this cutting of the milk, to such an extent that it ratified or acquiesced in this act, then I charge you that the defendant would have waived this requirement, and would be liable on the notes, if you believe this contention, that the notes were given in consideration of the furnishing of the milk, as well as for the physical property, which is denied by the plaintiff," as complained of in special ground 6 of the motion.
4. Error is assigned in ground 7 of the motion on the charge of the court which submitted to the jury the matter of construing the contract and determining what was the consideration of the contract. We do not think that the contract was ambiguous, and the court should have construed the contract and instructed the jury as to its terms and meaning, and left it to the jury to determine whether or not the parties had complied with its terms. "The construction of a contract is a question of law for the court. Where any matter of fact is involved (as the proper reading of an obscurely written word), the jury should find the fact." Code, § 20-701. "The construction of contracts is a prerogative of the courts which is delegated to the jury only when there are ambiguous expressions in the contract and resort must be had to aliunde testimony in order to clarify the meaning of the language used, as it was understood by the parties, and thus make plain their real intention." Ludden Bates SouthernMusic House v. Dairy Farm Supply Co., 17 Ga. App. 581 (1) (87 S.E. 823). The court erred in submitting to the jury the matter of construing the contract.
5. It is contended by the defendant in error that the provisions of the contract for the cancellation and surrender of the notes for a failure to comply with the provisions of paragraph *Page 688 4 of the contract, relating to the furnishing of a certain quantity and quality of milk, constitute a forfeiture and penalty and should not be given effect. By the provisions of the contract a supply of a certain quantity and quality of milk over a continued period of time was secured by Irvindale Farms, and Pierce Dairy secured a continued market for its milk (and, according to the testimony of Pierce, at a premium price) Apparently, it would be difficult, if not impossible, to determine accurately the amount of the actual damages in the event of a breach of the provisions of paragraph 4 of the contract; and the parties in making the contract evidently realized this, for they agreed and expressly provided in the contract what the damage was to be, if Pierce Dairy failed to comply with that portion of the contract as to the delivery of milk, that is, the notes as they became due were to be canceled and surrendered to Irvindale. We think it is clear from the contract that the parties intended for this to be the liquidated damages in the event of such breach. "Damages are given as compensation for the injury sustained. If the parties agree, in their contract, what the damages for a breach shall be, they are said to be liquidated, and unless the agreement violates some principle of law, the parties are bound thereby." Code, § 20-1402. In Allison v. Dunwody, 100 Ga. 51, 55 (28 S.E. 651), the court said: "`The cases upon the subject of penalty or liquidated damages are very numerous. The result of them seems to be this, that what the courts look at is the real intention of the parties as it is to be gathered from the language they have used. No case that I am aware of has decided that, if it be manifest that the parties meant the sum fixed to be liquidated damages, the court will interfere to frustrate that intention.'" The above principles of law have been applied in numerous cases by this court and the Supreme Court. See also Tuten v.Morgan, 160 Ga. 90 (127 S.E. 143); Martin v. Lott,144 Ga. 660 (87 S.E. 902); Mion Murray Co. v. World WidePictures, 49 Ga. App. 539 (176 S.E. 83), and citations. We think that the parties intended for the provision in the contract for the cancellation and surrender of the notes in the event of a failure to comply with paragraph 4 of the contract, with respect to the furnishing of milk as therein specified, to mean just *Page 689 what it says; and this provision of the contract as made by the parties should be upheld and given effect, as a provision for liquidated damages, rather than as a penalty or forfeiture.
6. The parties to this action modified and clarified the original contract in certain respects in regard to certified milk in an agreement, effective June 1, 1944, which is set out in the statement of the case, and this agreement expressly provided that its purpose was to vary the original contract of November 30, 1943, only to the extent therein mentioned, said original contract to remain otherwise in full force and effect. The contentions of the defendant in error that this agreement shows an abandonment of the provisions of the contract relating to the furnishing of milk, that it shows the intent of the parties to treat the furnishing of milk as a separate and distinct agreement from the other provisions of the contract, and that it shows that the agreement relating to the furnishing of milk has no relationship to the present action, and similar contentions in respect to this latter agreement, are without merit.
7. The trial court erred in overruling the defendant's motion for a new trial for the reasons stated in the preceding opinion.
Pursuant to the act of the General Assembly, approved March 8, 1945 (Ga. L. 1945, p. 232; Code, Ann. Supp., § 24-3501), requiring that the full court consider any case in which one of the judges of a division may dissent, this case was considered and decided by the court as a whole.
Judgment reversed. Sutton, C. J., MacIntyre, P. J., Gardnerand Parker, JJ., concur. Felton and Townsend, JJ., dissent.