Townsend and others vs. Shepard

Townsend and others vs. Shepard. A Contract provided for the purchase by the plaintiffs, and the sale by the defendant, of 1,000 bales of cloves, at five cents per pound, to arrive; “ deliverable sound and in good order.” The cloves arrived, soon after the making of the contract; and on examination, part of them proved to be sound, and part not sound or in good order. The plaintiffs offered to receive the whole invoice—the unsound as Well as the sound—and pay therefor the contract price. The defendant delivered the sound cloves, but refused to deliver the unsound. The unsound cloves were proven to be worth only two and a half cents per pound. They were sold at auction, under the direction of the insurers, and realized three and one quarter cents per pound. Held that the plaintiffs could not have been required to receive the damaged cloves; but that they might waive the objection that they were unsound, and the vendor must then deliver. That sound cloves were deliverable, •unsound not deliverable. That this construction embraced the whole meaning of the words “ Deliverable sound and in good order;” that provision being for the benefit of the purchasers, and against the seller. But that it was not a warranty that the cloves should arrive sound and in good order; nor was it an agreement that the vendor would deliver 1,000 bales of cloves “ sound or in good order.” That when, the plaintiffs offered to receive the whole invoice, and pay therefor the price named in the contract, the defendant was bound to deliver; and his refusal subjected him to the payment of such damages as the plaintiffs sustained thereby. But that there was no proof of any damage sustained by the plaintiffs, by reason of the defendant’s refusal to deliver the unsound portion of the cloves; the price for which they sold, although greater than the market value, being less than the plaintiffs were required to pay, by the contract, and less than their offer. APPEAL by the defendant from a judgment entered upon the report of a referee. The action was brought to recover damages for the non-delivery, by the defendant, of 691 bales of cloves, which arrived at the port of Salem, Massachusetts, in' February, 1868, and which had been sold by the defendant to the plaintiffs on the 38th of June, 1868, by a contract in writing, expressed in writing, expressed in certain bought and sold notes. The bought note was as follows: “New York, January 30, 1868. Sold to Messrs. Townsend, Clinch & Dike, for account of Michael W. Shepard, Esq., of Salem, through Messrs. Silsbee & Fowler, about .1,000 bales of cloves, to arrive, per Jennie Ousfwian, from Zanzibar, at Salem, at five cents, gold, per pound, in bond, cash on delivery, within four months from date of landing; the cloves to be stored by sellers, free of all expenses and charges to buyers until paid for. Deliverable sound and in good order from store in Salem; the terms of purchase to remain private. J. Herman Recknagel, Broker.” On the 5th of February, 1868, the plaintiffs entered into an agreement with Rufus Story & Co., as follows: “We, the undersigned, herewith agree to pay to Townsend, Clinch & Dike, in settlement of the contract of purchase of cloves in the Jennie Cushman, from Zanzibar, purchased of them through J. H. Recknagel, broker, on éach and every pound of cloves delivered to us from said vessel, (by M. Shepard,) one cent, gold, in TJ. S. coin, (viz., 1 cent, gold, per lb.,) cash on receipt of the cloves. And we furthermore agree to pay to M. W. Shepard, of Salem, the bill this party has against Townsend, Clinch & Dike, for above shipment of cloves, cash in full on receipt of the cloves. This bill being at the rate of (5) five cents, gold, per pound, net. New York, February 5, 1868. (Signed) Rufus Story & Co. Signed and approved in my presence this day, 5th Feb., 1868. J. H. Recknagel, Broker.” On the 6th February, 1868, the plaintiffs were apprised by the broker through whom the sale of the cloves had been made, of a disaster occurring to the vessel, in Boston harbor, and were asked by him if they wanted the damaged cloves at an allowance made therefor. Rufus Story & Co. agreed with the plaintiffs to receive, under their contract with them, ah the cloves that were landed from the vessel. The plaintiffs, on the same day, advised the defendant, by letter, that they should want a delivery of all the cloves) and wished them delivered to Rufus Story & Co., to whom the same had been sold by them. . The defendant replied by letter to the plaintiffs, on the 7th of February, stating that the cloves were to be delivered as the plaintiffs desired to R. Story & Co. On the 10th of February the plaintiffs wrote again to the defendant,- acknowledging the receipt of his letter of the 7th February, and again stated that they wanted all the cloves, sound and damaged, and that, as they made no claim, they supposed there would be no difficulty with the underwriters. On the same day the plaintiffs also ■wrote a letter to the defendant, directing him to deliver to the order of Rufus Story &Oo., the 1,000 bales of cloves, upon their paying to him therefor five cents per pound, cash, in gold, in bond, from the vessel. In consequence of an advertisement of the damaged cloves at auction, the plaintiffs, on the 11th of February, again wrote to the defendant, stating that they wanted all the cloves delivered, as per contract. On the ensuing day, the defendant telegraphed to the plaintiffs that the underwriters decided to sell all damaged merchandise at auction ; to which letter, on the same day, the plaintiffs replied by telegram, stating that they should claim from the defendant the delivery of 1,000 bales of cloves, and reiterated the same by two letters written on the same day. On the same day the plaintiffs wrote to-the defendant stating that they had received information of a sale of the cloves by the underwriters; that they wished unequivocally to say that they claimed the delivery of the loose bales, or damages for the non-fulfillment of the contract. On the same day the plaintiffs also wrote another letter to the defendant, stating that the order given by them to Rufus Story & Co., for the delivery of the cloves, was for 1,000 bales, and that they did not authorize a delivery of any less quantity. Of the 1,000 bales of cloves that arrived by the Jennie CusTiman, 309 were sound and in good order, and 691 bales were unsound, being damaged by salt water. R. Story & Co. received from the defendant the sound cloves, and made no claim on Mm for the damaged cloves. They paid for the sound cloves, five cents per pound, in gold. At the same time that they bought the unsound cloves at three and a quarter cents per pound, in bond, the market value of the sound cloves was six and a half cents, gold, and the damage to the unsound cloves being estimated at fifty per cent, these latter cloves were sold at one-half the sound price. The specific duty , on cloves is twenty cents per pound, gold, being equal to 400 per cent ad valorem. The defendant having neglected and refused to deliver to the plaintiffs, under the contract of sale, the 691 bales of cloves, this action was brought to recover damages. The defendant, by his answer, alleges that the 309 bales of cloves, mentioned in the sold note, arrived; that, the same were duly delivered to Rufus Story & Co., to whom, he alleges, the plaintiffs had assigned the contract, and that the same were received by the latter in fulfill - ment of the contract; that there also arrived 691 bales of cloves, which were not agreed to be sold, inasmuch as they did not arrive, and were not delivered sound, in good order, and that the assignees of the contract—■ Rufus Story & Co.-—did not deem said damaged cloves as sound, under the contract, but agreed that the same were not sound. The issues were referred to a referee, to hear and determine the same. The referee found, as matter of fact, the arrival of the vessel with the 1,000 bales of cloves, consigned to the defendant, of which 309 were sound and in good order, and that the remainder, 691 bales, had been damaged, and were not sound and in good order at the time of arrival. He further found that notwithstanding the damaged condition of said 691 bales, the plaintiffs offered to receive the same as sound and in good order, and that the defendant refused to deliver the same to the plaintiff; but on the 25th of February, 1868, delivered the 309 bales; that the plaintiffs, before the arrival of the vessel, made a resale of the said cloves to Rufus Story & Co., but had not assigned their contract or parted with then interest in the cloves. That the 691 bales of cloves not delivered, if sound, would have been worth in the market six cents per pound, gold. The referee found, as matter of law, that the plaintiffs having offered to deliver the 1,000 bales as sound and in good order, the fact that a portion had been damaged, and were not sound and in good order, did not excuse the defendant .from delivery of the same. The referee also found that the vessel having arrived with the 1,000 bales of cloves, the plaintiffs were entitled to a delivery of the same in good order and condition, and were entitled to recover damages as if the said 691 bales were sound and not damaged, to the amount of $1,329.20, for which sum, with interest and costs, he ordered judgment. Judgment was so entered, and from said judgment an appeal was taken to this court, by the defendant. Joseph H. Choate, for the appellant. I. The referee erred in construing the contract as an absolute warranty on the part of the seller, that the cloves should arrive sound and in good order, and violated the settled law in regard to contracts for the sale of merchandise to arrive, by which they have been uniformly held to be conditional, and that the arrival, by the vessel named, of the goods of the kind, quality and description specified in the contract is a condition precedent on which the sale is to depend. (Russell v. Nicoll, 3 Wend. 112. Shields v. Pettee, 2 Sandf. 262. Boyd v. Siffkin, 2 Campb., N. P., 326. Hawes v. Humble, Id. 327, n. Idle v. Thornton, 3 id. 274. Lovatt v. Hamilton, 5 M. & W. 639. Johnson v. McDonald, 9 id. 600. Vernede v. Weber, 1 H. & N. 311.) 1. Even without the special clause providing that the cloves should be sound and in good order, the subject of the contract is for merchantable cloves, and of that subject only 309 bales arrived; but to remove all doubt that the parties were dealing not for a damaged article, if damage should occur, the description of “sound and in good order” is expressly inserted by the parties. 2. There is nothing in the contract indicating anything more than an expected arrival; no clause amounting to a covenant or warranty that they were on board, which in some cases has been held to remove the conditional character of the agreement. Here the parties were dealing in the usual mode about merchandise, subject to all the contingencies of navigation upon which its arrival depended. 3. Even if the 691 bags, instead of being damaged by the perils of the sea, had been actually lost by the same perils, the referee’s conclusion of law would hold the seller liable for them non-delivery, for he holds that the contract bound the seller to deliver them sound, although they arrived damaged, which is one of the contingencies contemplated by the parties in every sale of goods to arrive. 4. The referee goes far beyond the utmost claim of the plaintiffs, either in their correspondence or the complaint. What they insisted upon was, admitting that the contract was for cloves, “ sound and in good order,” that it was the right of the buyer to pass upon order and condition, and that he accepting them on the contract, the goods must be delivered; and in their complaint they base their claim upon the non-delivery of the cloves as they were, sound and damaged; but the referee holds the defendant liable for not delivering them all sound, although in fact damaged. 5. It is submitted that this decision is not only contrary to the. settled law, but also to good sense. For it cannot be conceived that any consignee, by whom goods were only expected to arrive from a distant country by ship, would sell them, except subject to the actual chances of arrival, which were no more within his own control than within that of the purchaser. As was said by the court, in Idle v. Thornton, (3 Campb. 274,) the parties treat for the goods, provided they arrive in the ordinary course of navigation. But the referee makes the seller an insurer of the goods' against the perils of the seas. 6. The referee seems to admit that the contract was conditional upon the arrival of the goods, but.an absolute warranty that they should arrive sound—an inexplicable inconsistency. He appears to hold that the defendant would have satisfied the contract by delivering the 691 bags damaged, and yet condemns him in damages for not delivering them sound. 7. The plaintiffs, by their letter of February 6th, made Story & Co. their agents to receive the goods, and settle with the defendant. They executed the agency under the order by accepting the sound and rejecting the damaged, and the plaintiffs were bound by that settlement. II. There is no authority for the effect given by the referee to the option expressed by the plaintiffs, to take the damaged cloves under the contract as if they were sound. The contract must be construed mutually; and if the plaintiffs were not bound, by its terms, to take the damaged portion, then the defendant was not bound to deliver them, and mee versa, if the defendant was bound to deliver, then the plaintiffs were bound to take them. There is no option reserved to either side, by the contract ; and if the purchaser may choose to accept, then, certainly, the seller may, on the same principle, choose to refuse them. 1. The rights of both parties were defined by the contract, but the referee makes them depend upon the subsequent will or caprice of the purchaser— after an inspection of the goods upon arrival. If the 691 bags, instead of being damaged one-half, had been, by the same perils, damaged to the extent of nine-tenths of their value, and the purchaser had declined to take them, will it be pretended that the seller could have held him for the contract price % 2. Again, if the obligation of the seller and the right of the purchaser did depend upon the option of the latter to take them damaged, then why punish the former for not performing the impossibility of delivering the damaged cloves sound and in good order ? 3. The eagerness of the plaintiffs to get the damaged cloves was, that they might speculate upon the chances of getting from the government an undue allowance in the duty upon them. But there cannot be one law for goods in bond, and another for goods dnty paid; one construction in respect to contracts of sale to arrive, for goods subject to duty, and another for free articles. These incidental circumstances cannot affect the rights of the parties, which are regulated solely by the terms of the contract, and must be in ah respects mutual and reciprocal. III. But on the point of damages, the error of the referee is equally glaring and inconsistent. If the defendant was actually bound to deliver the damaged 691 bales, upon the option of the plaintiffs to take them as sound, the settled rule for damages for non-delivery would be the excess of their actual value beyond the contract price, but the proof is undisputed that their fan value, damaged, as they were, was not more than three cents per pound, while the contract price was five cents, so that in no point of view did the plaintiff sustain any damage. 1. The rule of damage is, that the party in default, by non-delivery, must put the injured party in as good position as he would have been in if the goods had been delivered. But here the proof is clear that the plaintiffs, had they got the damaged cloves at the contract price, would have lost at least two cents a pound upon them. And, in fact, the party who actually bought them from the underwriter at three and a quarter cents, found that they realized no profit. 2. Itwas claimed below that if the plaintiffs had got them they might have delivered them under their contract with Rufus Story & Go. at six cents. But that contract was in writing, and under it no one can pretend that the purchaser could be compelled to take damaged cloves. The plaintiffs attempted to show a verbal promise on the part of Story to take, under that contract, all the cloves that should be landed,’ but this was denied by Story, and no such fact is found by the referee. Besides, such a verbal agreement, if made, would be void by the statute of frauds, and could not, if valid, be brought home to or affect the defendant, whose liability for damages depends npon the general and settled rule of damages, to wit, the difference between the contract price and the market price of the damaged article, and not upon any accidental luck of the plaintiffs in bargaining for its resale. 3. So, too, the accidental circumstance of a speculative chance of getting an unfair. advantage out of the United States in settling for duties, cannot enter as an element into the legal adjustment of damages, which is uniform for all descriptions of goods. IV. The exceptions to the referee’s report are well taken, and the judgment appealed from should be reversed, with costs. Henry Nicoll, for the respondents. I. The provision in the contract of sale, that the cloves were “deliverable in good order” was in no respect a condition, but a collateral warranty, made solely for the benefit of the purchaser, and which the latter might waive, if he saw fit. The language of a mercantile contract should always be construed according to the manifest intention of the parties. The stipulation in question was, in effect, that the purchaser should not be obliged, under the contract, to accept an unmerchantable article. It was clearly inserted for the benefit and protection of the purchaser, and might be waived by him. (Canfield v. Westcott, 5 Cow. 270.) When ambiguous words in a contract are those of the promissor, and when it is doubtful whether they are used in an enlarged or restricted sense, the construction to be adopted is that which is most beneficial to the promisee. (Hoffman v. The Ætna Ins. Co., 32 N. Y. 406.) Upon sales of merchandise to arrive, where the article contracted for has not arrived, the seller, in the absence of fraud, is absolved from liability. The arrival is made a condition precedent, by both parties; but this has never been held to apply to .quality—the distinction between which and kind, is recognized in numerous cases in the books. (Hichol v. Godts, Exch. R., [10 Hurlst. & Gord.,] 191. Henshaw v. Robins, 9 Metcalf, 83. Toshing v. Kingsford, 17 Com. Bench, N. S., 448. Azemar v. Casilla, 2 Law Rep. 451.) So in Shields v. Pettie, (4 Comst. 122,) which is relied upon by the defendant as a decisive authority in his favor, the contract was held to be not obligatory upon the vendor, on the sole ground that the specified article, “ G-artsheim, Pig Iron No. 1,” had not arrived. The case would have been very different if the described kind of iron, contracted for, had arrived, and being unsound, or of inferior quality, the purchaser had been willing to take it without abatement or reduction in price. See also Havemeyer v. Cunningham, (35 Barb. 515.) In that case, which was upon a contract for the sale of merchandise to arrive, the time of arrival being stated to be on or before the 1st of August, it was held, the vessel not arriving within the time, that the provision in respect to arrival was not a condition, but only a designation of a time, before which the defendant could not be called on to deliver; and that the vessel having arrived after the 1st of August, the contract was binding on the seller. The defendant’s argument in this case is simply this: that inasmuch as the vendor could not compel the vendee to take an unsound article, the latter can have no right to compel a delivery of it, even at a sound price. The want of mutuality, it is claimed, discharges both parties from liability. In executory contracts for the sale of merchandise, there is always an implied warranty of merchantability, that is of soundness. (Hargous v. Stone, 1 Seld. 73. Reed v. Randall, 29 N. Y. 358.) The insertion in a contract of what the law implies, adds no force to the undertaking, and hence the position of the defendant, if true, must apply equally to all executory contracts of sale, and if any portion of the subject matter, at the time of the performance, is not merchant-able, the contract must be held to be of no force as against the seller. II. If, under a contract for the sale of merchandise to arrive, the seller is not bound to deliver the unsound portion, what obligation can there be on his part to deliver, or on the part of the purchaser to accept, so much of the merchandise as is sound. The purchaser having bargained for the specified quantity, cannot be compelled to accept less, and the seller must, therefore, be absolved from any liability under his contract. If the proposition, maintained by the defendant, be carried out to its legitimate result, the unsoundness of a merely fractional part of merchandise sold to arrive, would relieve the seller from all liability. The law will not sustain so unjust, an application of its principles, by permitting a party to avoid his contract, by means of an undertaking which, whether expressed or implied, is only for the protection of the other. III. The evidence in the case that the plaintiffs would have received the whole of the cloves, and waived all claim for allowance or reduction as to price, and of the refusal of the defendant to make delivery, is undisputed, and the conclusion of law by the referee, that the fact that a portion of the cloves were damaged and not sound and in good order, did not excuse the defendant from a delivery of the same, was, for the reasons already given, in all respects correct. IV. The finding of the referee that the plaintiffs had, before the arrival of the vessel, made a resale of the cloves to Rufus Story & Co., but had not assigned their contract to the defendant, or parted with their interest in the same, is fully sustained by the testimony. The contract itself, made with Rufus Story & Co., the action . of all parties as detailed in the correspondence, and the evidence of Putnam, one of the members of the firm, demonstrate that it was perfectly understood that Rufus Story & Co. should stand in relation to the plaintiffs, as purchasers of the cloves from them; that this firm had no authority whatever to discharge the original contract made between the plaintiffs and the defendants; and that the latter had no right to treat with Rufus Story & Co. as assignees or representatives of the plaintiff, except so far as to deliver to them the entire 1,000 bales of cloves purchased. The defendant deliberately violated his agreement with the plaintiffs, and now attempts to escape the consequences by a pretence which cannot be supported. V. The ground taken by the defendant, that there was no obligation on his part, under the contract, to make a delivery of the cloves until the expiration of four months from their landing is equally fallacious. The obvious meaning of the provision of the contract in this respect is, that the purchaser was to have the privilege of paying for the cloves at any time within the four months. Any other construction of the provision involves an obvious absurdity. The terms were cash, and the cloves were to be stored at the sellers’ expense, and to be delivered free of all charge; the interest of the seller, under such circumstances, to save interest and expenses, clearly shows that this provision could not have been inserted in the contract for his benefit, but only that for the purchaser. Moreover the action of the parties in respect to the performance of the contract, manifests that no such interpretation of the provision as now claimed was given at the time, and lastly, the defendant having deliberately disabled himself from making a delivery cannot now avail himself of this technical defence. The title of the property passed, undoubtedly, on arrival, and the refusal to deliver set up was a waiver on the part of the defendant of the ground-now set up, and gave the plaintiffs an immediate right of action. VI. The referee has found, as a conclusion of law, that the plaintiffs are entitled to recover, as damages, the value of the unsound cloves, as if the same were a sound article. He has accordingly awarded the plaintiffs the difference, being one per cent per pound, gold, between the contract and the market price of sound cloves at the time. Under the contract of sale in this case, this is a valid conclusion. But if this court shall be of opinion that this conclusion of the referee is erroneous, it is submitted that the plaintiffs are at least entitled to recover, as damages, the difference between, the market price of the sound cloves and the actual value of the unsound cloves. The cloves were damaged to the extent of half their value, as already stated, and were sold by the defendant to Rufus Story & Co. at three and a" quarter cents per pound, gold. The market value at the time, is proved by the defendant’s own witness, Putnam, to have been six and a half cents per pound, gold. The plaintiffs would have been entitled to these unsound cloves at half their contract price, that is, at two and a half cents per pound, gold. The difference between this and the actual value of the cloves was, therefore, three-quarters of a cent per pound, gold. This is the most favorable measure of damages for the defendant, and the plaintiffs are at least entitled to recover from him at this rate, for the non-delivery of the unsound cloves. There being no dispute as to the evidence on this point, it is competent for this court, upon appeal, in furtherance of justice, to modify the judgment in this respect, by deducting from the plaintiffs’ recovery one-fourth thereof. (Code of Procedure, § 330. Chouteau v. Suydam, 21 N. Y. 185. Brownell v. Winnie, 29 id. 400. The People v. Supervisors of Richmond Co., 28 id. 112.) VII. The judgment for the amount awarded by the referee, or modified as suggested in the preceding point, should be affirmed, with costs. [MAJORITY — By the Court, Leonard, J.] By the Court, Leonard, J. The contract provides for the purchase and sale of 1,000 bales of cloves, at five cents per pound, to arrive, payable in cash on delivery within four months from them arrival. Deliverable sound and in good order. The cloves arrived soon after the contract was made; and on examination part of them proved to be sound, and part not sound' or in good order. The plaintiffs offered to receive the whole invoice—the unsound as well as the sound—and pay therefor the contract price. When this offer was made, they knew.that part of the cloves had been injured on the voyage, and were not in good order. The defendant delivered the sound cloves, but refused to deliver the unsound. The unsound cloves were proven to be worth only two and a half cents per pound. They were sold at auction, under the direction of the insurers, and realized three and one quarter cents per pound. It appears to be entirely clear that the plaintiffs could not have been required to receive the damaged cloves. It was .the purchasers’ option to receive, or to refuse, the damaged or unsound cloves. The vendor could not compel the purchasers to receive them, but they might waive the objection that they were unsound, and the vendor must then deliver. Bound cloves were deliverable, unsound not deliverable. This construction embraces the whole meaning of the words: “Deliverable sound and in good order.” The provision is for the benefit of the purchasers, and is against the seller. It is not, however, a warranty that the cloves shall arrive sound and in good order; nor is it an agreement that the vendor will deliver 1,000 bales of cloves “sound or in good order.” The plaintiffs offered to receive the whole invoice, and pay therefor the price named in the contract. The defendant was then bound to deliver. His refusal subjected him to the payment of such damages as the plaintiffs sustained thereby. [First Department, General Term, at New York, November 4, 1872. Ingraham, Leonard and Gilbert, Justices.] The proof fails, however, to show that the plaintiffs sustained any damage. The market value was only one half the price they would have paid under their contract, and the price for which the cloves sold, although greater than the market value, was less than the purchasers were required to pay by the contract, and was less than their offer. They must have lost money had their offer been accepted, unless they had insured the cloves to such an extent as to cover their expected profit. According to the evidence, the plaintiffs were saved from a loss on the damaged cloves, which has fallen upon the defendant by reason of his refusal to accept the price offered by the plaintiffs. It may be, also, that there was some advantage to be derived from a reduction of the duty, in such a case. Whatever the facts, in these respects, may be, we are without proóf of any damage sustained by the plaintiffs, by reason of the defendant’s refusal to deliver the unsound portion of the cloves. The case was decided upon the theory that the defendant agreed to deliver the 1,000 bales which were on board the vessel then about to arrive, in good order. I can find no such obligation in the terms of the contract. The judgment should be reversed, and a new trial ordered, with costs to abide the event; unless the plaintiffs consent to nominal damages; and in that case the judg- . ment will be affirmed for that amount.