Opinion
December, 1915.
Louis Halle (Oswald N. Jacoby and Samuel J. Levinson, of counsel), for appellant.
Henry A. Rubino, for respondent.
The plaintiff and the defendant on the 22d day of April, 1913, entered into a contract whereby the plaintiff agreed to manufacture ice at its ice manufacturing plant to the full capacity of the plant and the defendant agreed to purchase the total output until the 31st day of December, 1913, at certain agreed prices. The contract provided that the ice should be satisfactorily frozen and of a merchantable character. The contract further provided that the defendant should deposit the sum of $3,000 in cash for the faithful performance of the conditions of the agreement and that in the event of failure, to comply with all the terms and conditions of the agreement, the "plaintiff" may apply the said sum as liquidated damages and not by way of penalty. The plaintiff has now brought this action for the agreed price of ice delivered between September 1 and September 13, 1913.
The answer sets up three counterclaims of which the second was withdrawn before the trial. The first counterclaim seeks to obtain damages for an alleged breach of warranty in that the ice delivered prior to September fifteenth was not satisfactorily frozen and of a merchantable character.
The third counterclaim is for the return of the $3,000 deposited under the contract and sets forth that on September 15, 1913, the defendant notified the plaintiff that it, the defendant, would not accept any future deliveries under the said agreement unless they were satisfactorily frozen and of a merchantable character. That the plaintiff notified the defendant it could not and would not make deliveries in the future other in quality and character than those made up to that date. That the next deliveries after said notification of September fifteenth were not satisfactorily frozen and of a merchantable character and that this defendant thereupon rejected and refused to accept the same and terminated the agreement; that the defendant has received or accepted no deliveries of ice from the plaintiff since September 15, 1913.
At the trial the defendant practically conceded the plaintiff's case and then presented evidence to sustain its counterclaims and at the close of its case the learned trial justice dismissed the counterclaims. Upon a previous appeal ( 83 Misc. 119) this court had occasion to consider the answer and held that the counterclaims were properly pleaded. Upon that appeal the law of this case was settled in the following particulars:
First. That where a seller has failed to comply with his warranty in deliveries under a contract and then broken the agreement by refusal to perform according to its terms the buyer has a right to sue both for the breach of warranty upon the deliveries he has accepted and for the breach by refusal to perform.
Second. That if the seller refuses to carry out his contract, the buyer has an immediate right to the return of the deposit.
The appellant now claims that at this trial the trial justice did not follow the law of the case as laid down upon the previous appeal, but I find nothing in the record to bear out this contention, and we are bound now to consider that the counterclaims were dismissed because in the opinion of the trial justice the defendant's evidence was insufficient to establish the counterclaims as pleaded. For this reason it is necessary to consider the evidence in detail to determine whether or not the defendant has established a prima facie case upon either or both counterclaims.
The pleadings have been somewhat amplified by a bill of particulars and under the pleadings so amplified, the defendant was called upon to prove under his fied the defendant was called upon to prove under his first counterclaim:
First. That the ice delivered was not satisfactorily frozen or of a merchantable character for the following reasons: It was cloudy, of the color of dirty snow and it contained human or animal waste together with unwholesome growth of bacteria and was unfit for human consumption.
Second. That the defendant was obliged to sell this ice at the price of forty-five cents per cake instead of the market price of sixty cents per cake.
Upon the first issue the defendant attempted to prove that a bacteriological examination was made of ice taken from plaintiff's factory on September eighteenth or three days after the last delivery of ice and that this examination disclosed the presence of dangerous bacilli. I think that the trial justice properly excluded this evidence. Although the defendant proved that neither the plant nor the operation of the plant was changed in these three days, yet the presence of bacilli in water may be due to so many different causes that the condition of the ice on September eighteenth allows no fair inference of the same condition previous to September fifteenth. The defendant, however, did show through its treasurer that he was present at the plaintiff's plant "about every day" and that the ice was throughout that time yellow, cloudy, dirty and salty, and that it was unmerchantable. The defendant further showed, though part of this evidence was erroneously stricken out, that in June the plaintiff's manager and the chairman of the executive committee had admitted that the ice was defective and agreed to an allowance of fifteen cents per cake. Moreover, the largest retail dealers who bought this ice from defendant testified without objection to its defective condition.
There is therefore ample evidence to warrant a submission to the jury that the warranty was in fact broken and that this breach applied to all the ice delivered, and in the court below the plaintiff never moved to dismiss for failure to prove this breach. The more serious claim, however, is that the defendant has failed to prove his alleged damages. The conceded market price was sixty cents a cake. The plaintiff delivered the ice to the defendant's customers and received from them for defendant's account the sum of sixty cents per cake. Therefore, the plaintiff urges, it affirmatively appears that the defendant has suffered no damages. The defendant, however, produced evidence that its large customers bought from it both artificial and natural ice and that it was obliged to arrange with these customers that it would furnish fifteen cents worth of natural ice without charge as an allowance upon each cake of artificial ice delivered to them by plaintiff. In effect therefore if this testimony is true these customers did pay only forty-five cents for the artificial ice as alleged in the bill of particulars. The plaintiff also claims that this testimony is palpably fabricated but obviously it is not for us to weigh the probability of the testimony corroborated by several witnesses and not denied. Upon the dismissal of the counterclaim we of course may consider only a prima facie case has been established. Finally the defendant urges that inasmuch as the defendant has accepted the ice it has waived the defects. Under section 130 of the Sales Act it is expressly provided that, "In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract to sell or the sale. But, if, after acceptance of the goods, the buyer fails to give notice to the seller of the breach of any promise or warranty within a reasonable time after the buyer knows, or ought to know, of such breach, the seller shall not be liable therefor." In view of the fact that the defendant has testified that it gave notice to the plaintiff immediately and continued to take the ice only because the plaintiff's chairman of the executive committee agreed to make to it exactly the same allowance which it is now claiming as damages, it cannot of course be contended that it did not give prompt notice.
The plaintiff, however, contends that the alleged agreement which the defendant claims to have made does constitute an "express agreement" (within the meaning of this section) by which the acceptance of the goods was to constitute a waiver of all right to damages, and that the defendant could thereafter sue only upon this agreement. If the plaintiff actually conceded this agreement and was willing to carry it out, then there might be serious question whether the rights of the parties would not be fixed by it. The plaintiff, however, even objected to any proof of this agreement, on the ground that there was no proof that the chairman of the executive committee had power to make such an agreement and secured a ruling in its favor on this ground. Since plaintiff either denies the making of the agreement or repudiates any obligation thereunder if made, the defendant has a perfect right to consider the agreement if made as rescinded and sue upon the original agreement. It follows that the dismissal of the first counterclaim was error.
The plaintiff seeks to sustain the dismissal of the third counterclaim on the ground that the defendant had no right to terminate its contract by reason of any breach of warranty on installments actually accepted and that there was no proof of any rescission after the defendant had served notice on September fifteenth that it would insist upon the plaintiff fulfilling its contract and delivering merchantable ice.
Of course the defendant had no right to rescind the contract by reason merely of breaches of warranty on previous deliveries but it had an absolute right to refuse to take other installments if these installments were also defective. In this case on September fifteenth the plaintiff stated in effect that it could not furnish better ice. The defendant then had a right to consider this refusal so material a breach of the contract as to justify it in refusing to receive any further installments. Its subsequent letter of the same day was, however, a waiver of this breach to the extent that it was bound to give the plaintiff at least a further opportunity the next day and the plaintiff again offered ice which was claimed to be unmerchantable. The defendant was then justified in refusing to proceed further and suing for its deposit. See Sales Act, § 126.
The plaintiff urges various other alleged defects in defendant's proof, but I do not think these other contentions sufficiently serious to require detailed examination. Judgment should be reversed and a new trial ordered with costs to appellant to abide event.
BIJUR and FINCH, JJ., concur.
Judgment reversed and new trial ordered with costs to appellant to abide event.