Summary
In Sorenson v. Keesey Hosiery Co. (244 N.Y. 73) the court said that freight charges, insurance, crating and loss of profits might be recovered.
Summary of this case from Ganoung v. Reeves, Inc.Opinion
Argued December 2, 1926
Decided December 31, 1926
Appeal from the Supreme Court, Appellate Division, First Department.
Herbert R. Limburg, Morse S. Hirsch and Louis B. Davidson for appellants.
Charles J. Lane for respondent.
In January of 1918 the defendant sold to the plaintiffs 5,000 dozen ladies' mercerized hose, quality 62, at $2.60 per dozen. The goods were to be packed in strong new cases, iron strapped for export to the plaintiffs' customer at Buenos Aires, Argentine Republic. The plaintiffs had made the purchase, relying upon samples displayed by the defendant. Shipments were made in the latter part of 1918 to the plaintiffs, and by the plaintiffs in the course of time to Buenos Aires. On arrival at the South American port, the goods were found to be defective, and were returned to the plaintiffs at New York. After the plaintiffs had received word from their customer that the goods would not be received, they notified the defendant of its breach, and thereafter various negotiations were had between the plaintiffs and the defendant's agent regarding the use and disposition to be made of the hosiery. At one time the plaintiffs notified the defendant that they would return the goods, but they were persuaded from doing this by the defendant's agent, who assured them that the goods could be disposed of on a rising market at a profit. Apparently relying upon the defendant's statement, the plaintiffs wrote them, or rather their agent, The J.M. Given Co., on July 23, 1920, as follows:
"Confirming the conversation between your Mr. Given and our Mr. Sorenson, this afternoon by telephone, we hand you herewith a memorandum of the hosiery about which we had been treating with you lately. * * *
"We confirm the understanding arrived at between your Mr. Given and Mr. Sorenson, to the effect that you are authorized to make efforts to dispose of this hosiery for our account at $4.75 per dozen. We are prepared to pay to you a brokerage of 5% should you effect the sale."
Given Co. failed to sell these goods and the plaintiffs thereafter disposed of them at a loss.
The plaintiffs did not rescind this contract of sale. Their offer to return was a mere statement made in the course of negotiations while the parties were determining what to do with the goods. Acting on the representations and persuasion of the defendant's agent, the plaintiffs kept the goods and disposed of them. The plaintiffs' remedy at law for this breach of warranty was not on the ground of rescission, as there had been no rescission, and subdivision 3 of paragraph (d) of section 150 of the Personal Property Law (Cons. Laws, ch. 41) had not been complied with. This reads: "Where the goods have been delivered to the buyer, he cannot rescind the sale * * * if he fails to notify the seller within a reasonable time of the election to rescind, or if he fails to return or to offer to return the goods to the seller." The plaintiffs did not notify the defendant within a reasonable time of their rescission of the contract, nor did they offer to return the goods in such a decisive way as to evidence an election to rescind. The offer to return was merely a tentative suggestion or statement made in the process of negotiation for a settlement of the difficulty, which culminated in the plaintiffs' keeping the goods. If the offer were made, subsequent dealings indicated that it was withdrawn.
The plaintiffs did have a remedy, however, and this was an action for damages on breach of warranty, which under section 130 of the Personal Property Law survived acceptance, provided the seller was notified within a reasonable time. There is no question in this case about notice. The plaintiffs notified the defendant immediately upon hearing from their customer that the hosiery was defective and of a lower grade than the sample.
Whether this action is one in rescission or for damages upon breach of warranty has been somewhat difficult to determine. The complaint is by no means as clear and as definite as it should be. It contains allegations both ways, and might be read as it has been by the courts below, as one for rescission, or as one for breach of warranty and for damages, as we think it may be construed. While it is true that an action for rescission and an action for damages for breach of warranty are inconsistent and cannot be included in the same complaint as separate and distinct causes of action ( Joannes Brothers Co. v. Lamborn, 237 N.Y. 207), yet where a defendant is in doubt whether the allegations of the complaint alleging one cause of action plead rescission, or action for damages, his remedy is to move to make the complaint more definite and certain, or else to require the plaintiff at the opening of the trial to elect or to state his ground of action. (Rules of Practice, 102-105.) In other words, a complaint may not be bad as failing to state any cause of action, and yet be so redundant, confused and obscure as to create doubt as to the remedy the plaintiff has chosen. The law provides a method whereby such doubt may be removed. The defendant in this case made no motion before trial to straighten out the complaint, and at the trial proceeded as did the plaintiffs, upon the assumption or theory that the action was for damages for breach of warranty. Much of the testimony which was introduced would have been entirely incompetent if this were not the remedy the court and lawyers had in mind. At the very opening of the trial, when the plaintiffs introduced evidence as to the profits which under the special circumstances they would have made on a resale to their customer in Buenos Aires, the defendant's counsel objected, making this statement: "I object to that because this is not the measure of his damage under the law. The law is specific — section 150 of the Personal Property Law — as to what his measure of damage is. It is the difference between the contract price and the market price." The provision that counsel referred to is included in paragraphs 6 and 7 of section 150:
"6. The measure of damages for breach of warranty is the loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.
"7. In the case of breach of warranty of quality, such loss, in the absence of special circumstances showing proximate damage of a greater amount, is the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty."
This is not the measure of damages in an action for rescission or on the ground of rescission. The property being returned to the defendant, or tendered back, the action is brought to recover the purchase price paid. (Personal Property Law, sect. 150, par. 4.) The plaintiffs, however, were permitted to prove the value of the hosiery at the time of delivery, if in accordance with sample, and its value as delivered. In fact, the defendant's counsel cross-examined one of the plaintiffs' witnesses regarding the market price of hosiery at the time and place of delivery, although nothing had been asked of this witness on direct examination regarding the market. This brief reference to the record indicates, I think, that the parties considered this as an action to recover damages for breach of warranty, or else there was some confusion as to the measure of damages which did apply. At one point, when ruling as to admission of evidence of damage, the court stated that he ruled so as to be in a position at the end of the case to pass on all the questions of law. At no point do I find that the defendant's counsel objected to the plaintiffs' evidence of market values, as being a wrong or improper measure of damage, or as attempting to prove a cause of action not alleged in the complaint. It is true that at one time he objected on the ground that such evidence was incompetent and irrelevant, but failed to state why it was incompetent. Most of the objections were to the incompetency of the witness as an expert. No claim was made that the proof in any way varied from the cause of action set forth in the complaint.
At the end of the plaintiffs' case a motion was made to dismiss on the ground of failure to give notice of rescission and failure to offer to return the goods. The motion was granted.
The plaintiff concededly failed to prove a cause of action based upon rescission. As stated by me, the trial did not proceed upon this theory. The plaintiffs did prove sufficient to make out a cause of action for damages sustained through a breach of warranty. They proved the warranty, a breach, notice and damage. Even though the complaint were indefinite and uncertain as to what the plaintiffs were seeking to recover, the court might very well have considered at the end of the case that the complaint conformed to the proof showing a cause of action for damage on breach of warranty. It appears as if the defendant's counsel had acquiesced in this view of the case and of the complaint. However that may be, and without so holding, an examination of the complaint we think shows sufficient allegations to sustain it as an action for damages for breach of warranty, especially when the parties have apparently tried the case upon that theory. The complaint, narrowed down, alleges a contract of sale, a breach of warranty, damages resulting from the breach, and demands judgment for a sum of money which is apparently the purchase price, and also damages for all other losses. The other losses alleged included the freight charges to Buenos Aires and back, insurance, carting, also loss of profits on the rejection of the goods by the plaintiffs' South American customer. These items if within the contemplation of the parties might be recovered in an action for damages resulting from a breach of warranty ( Swain v. Schieffelin, 134 N.Y. 471) but could not be a part of the recovery in an action of rescission, at least not all of them. (Personal Property Law, sect. 150; Williston on Contracts, vol. III, sect. 1464, p. 2609; Gerli Co. v. Mistletoe Silk Mills, 80 N.J. Law, 128.) The party who rescinds can claim nothing beyond restitution.
While it is not necessary that the word "rescission" should be used, yet this complaint nowhere states that the contract of sale was rescinded, or that the plaintiffs ever gave notice of rescission, or claimed rescission. That it is a poorly drawn complaint must be conceded, yet a cause of action for damages for breach of warranty may be spelled out of it. A demand for the wrong measure of damages in the prayer for judgment is not fatal, provided damage be shown and the cause of action otherwise sufficiently alleged. The prayer for relief sometimes is helpful, but is not always conclusive in determining the nature of the cause of action attempted to be stated. As an action for rescission, or based upon rescission, and for the recovery of the purchase price, the complaint fails to state that the plaintiffs gave notice of their election to rescind.
Taking into consideration all the matters which I have here stated and the uncertainty which even counsel appeared to be in at the time of the trial as to the proper measure of damage to be applied under the complaint, we think that the dismissal of the action at the end of the plaintiffs' proof cannot be sustained. Therefore, the judgments should be reversed and a new trial granted, with costs to abide the event.
HISCOCK, Ch. J., CARDOZO, POUND, McLAUGHLIN, ANDREWS and LEHMAN, JJ., concur.
Judgments reversed, etc.