Edward P. Bates, Respondent, v. Fish Brothers' Wagon Company, Appellant

Edward P. Bates, Respondent, v. Fish Brothers’ Wagon Company, Appellant. Wa/rranty of a steam-heating plant—its use without complaint, after knowledge of a breach of the warranty, precludes a rescinding of the contract of sale — when special damages are not recoverable — damages, how determined — an additional allowance based on a counterclaim only partially sustained. A vendee of a heating plant sold under an express warranty, who continues to use the plant without complaint after acquiring knowledge that it does not comply with the warranty, cannot rescind the contract, but is limited to his remedy for damages resulting from the breach of the warranty, viz., the difference between the actual value of the plant and its value had it conformed to the warranty. The vendee is not entitled to recover special damages resulting from the breach of the warranty, where it appears that the vendor could have removed the difficulty if he had been notified thereof. The method of determining the damages resulting from the breach of a warranty that a steam-heating plant would heat a building to a certain degree under certain conditions, considered. Where a defendant succeeds in part upon a counterclaim interposed by it, the court, in granting an extra allowance to the plaintiff, should not compute it upon the entire amount of the counterclaim set up in the answer. Appeal by the defendant, Fish Brothers’ Wagon Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Onondaga on the 22d day of April, 1898, upon the report of a referee, and also from an order made at the Onondaga Special Term, bearing date the 19th day of March, 1898, and entered in said clerk’s office, granting the plaintiff an extra allowance of costs. This action was commenced May 18,1894, against the defendant, a manufacturing corporation, to recover the balance alleged to be unpaid on contracts for the furnishing and installation of a steam-heating apparatus in the buildings comprising the defendant’s manufactory in Racine, Wis. The heating system was put in in pursuance of two contracts made in the fall of 1892, and the price complete to be paid the plaintiff was the sum of $5,900. The system was completed February 15, 1893, and was tested and accepted at that time. Payments had been made to the plaintiff during the progress of the work, and on the 22d day of May, 1893, a promissory note of $500 was given to apply on the contract price, due in six months, which was paid at maturity by the defendant. This left unpaid $650, and this action was brought to recover that sum and $74.83 for goods sold to the defendant during the setting up of the plant. Accompanying the written contracts were specifications as to the heating system and the manner of doing the work, and they also contained a guaranty among other things : “ That the apparatus shall be of ample capacity to heat all of the rooms with which it is connected to the following temperature, when the thermometer outside registers teii degrees below zero, with a pressure of steam not exceeding three (3) pounds at the tank : “ Work rooms sixty (60) degrees Fahr. “ Living and sleeping rooms to .........(..) degrees Fahr. “ Other rooms to..........(..) degrees Fahr. “ Office rooms to seventy (70) degrees Fahr. “ Trimming rooms to seventy (70) degrees Fahr. “ Paint and varnish rooms to seventy-five (75) and eighty (80) degrees Fahr.” The defendant interposed, in addition to denials, a counterclaim alleging a breach of this guaranty and that the system failed to supply heat according to the warranty, and also for special damages, which it is claimed the defendant incurred by reason of the failure of the plaintiff to comply with his contract. The referee allowed the defendant on its counterclaim the sum of $450, and. the same was deducted from the amount unpaid on the contract price. The Special Term granted an extra allowance to .the plaintiff for and computed the same upon the entire sum claimed on the counterclaim in the answer, thus making the sum allowed at five per centum $313.74, although the sum actually recovered by the plaintiff was only $274.79. Other facts are contained in the opinion. Thomas M. Kearney and Daniel A. Pierce, for the appellant. Frank Hiscock, for the respondent. [MAJORITY — Spring, J.:] Spring, J.: The plan of the plaintiff required the heating of the defendant’s factory buildings with live steam coming automatically and directly from the boiler. The engine and boiler were furnished by the defendant, and it, therefore, devolved upon it to supply sufficient steam to make the system of the plaintiff a success. The hot steam came to the furnace rooms through pipes and was distributed by coils of pipe placed near the ceiling of each room. If ample steam was furnished and if the plant was free from inherent defects the capacity of the apparatus depended upon the radiating surface of these coils. The apparatus involved no especial novelty, either in design or mechanism, but was of a kind in quite general use, and this system had been installed successfully in many factories and buildings. The plant was evidently satisfactory to the defendant when completed, but it is contended that at that time, and during the residue of that winter season, no proper test could be given of the efficiency of the system, as there was no severe cold weather; that it was not until the succeeding winter that the weather was sufficiently cold to show the lack of capacity in the system to furnish adequate heat, according to the warranty accompanying the contract. It is plain that the burden was upon the plaintiff to establish that he had substantially performed his contracts precedent to any recovery of the purchase price. This he did primarily by showing the putting in of the system, its test to the satisfaction of the defendant, the acceptance by the latter and the payment on the purchase price several months after it began using the apparatus. This, however, was not an absolute acceptance, preventing the defendant from rescinding the contract and returning the machinery and appliances to the plaintiff, if, at the time of the first test, the quality and capacity of the plant could not have been determined. But if later on the defendant ascertained this system was insufficient, it was in fairness charged with the duty to apprise plaintiff of the defective condition, if it sought either to rescind the contract or to hold him for special damages. It could not, after discovering the insufficiency of the plant, continue its use without complaint to the plaintiff, and then claim there was no acceptance on its part. (Chambers v. Lancaster, 160 N. Y. 342 ; Ellison v. Creed, 34 App. Div. 15; Brown v. Foster, 108 N. Y. 387.) If the inadequacy were not attributable to inherent defects, or to an inefficient system, but could be remedied by the addition of a few coils, or some other slight addition involving no impairment of the plant, then plaintiff should be given an opportunity to supply what was required. The defendant could not accept and enjoy the use of the plant and still repudiate the agreement. The rule of damages for breach of express warranty in cases where there has been an acceptance of the goods warranted, adopted in Wisconsin, where the contract was made and performed, as well as in our own State, is that the vendee is entitled to recover the difference between the actual value of the article delivered and what its value would have been had it conformed to the warranty. (Boothby v. Scales, 27 Wis. 626 ; Bank of North Collins v. Carry Safe Co., 42 App. Div. 233.) There is no controversy over this rule of damages, and the referee recognized its existence. He found that the defendant accepted the plant and that is justified by the testimony, as it continued to use it Avithout complaint to the plaintiff after the defendant understood fully that the system had failed to give forth adequate heat. This left the defendant to its remedy for damages accruing by reason of the breach of the express warranty. (Brigg v. Hilton, 99 N. Y. 517.) The referee found specifically that the plaintiff “ fully performed said contract in all respects, said heating apparatus works properly, a circulation of steam is maintained throughout the pipes with a pressure at the tank, as provided by the contract; ” that the number of coils “ have been substantially supplied; ” that the failure to get the required heat is due either to the failure by the defendant to furnish sufficient steam or its lack of coils; that the radiating surface can be augmented by the addition of coils without disturbance to the operation of the plant, and this would bring the heating capacity up to the guaranty and at a cost of $450. The appellant’s counsel criticises this finding in that it is in the alternative and does not find specifically to what the inadequate heat is chargeable. The criticism technically is a just one, but the defendant cannot complain, for the award of damages on the counterclaim is on the hypothesis that the defective condition was due to the lack of coils. If it is on account of the omission of the defendant to furnish steam, then no damages should be imposed, upon the plaintiff. Then the referee finds that the “ apparatus is worth $450 less than it would be if it were of ample capacity to heat all the rooms with which it is connected as provided by said contracts,” and "under the steam pressure and with the temperature outside covered by the guaranty. These findings involve no serious infringement upon the elementary rule referred to, fixing the measure of damages in this class of cases. To paraphrase his report, he, in effect, finds: That the .system installed complied with the specifications in that it was free from inherent fault and that the work was well done; that perhaps through a misconception of the rigor of the climate or the poor construction of the defendant’s frame buildings he miscalculated the extent of the radiating surface required to heat them properly. This underestimate did not signify any impairment of the efficiency of the plant itself, but additional coils were required to bring it up to the guaranty, and that addition was a simple matter, the expense of which was readily ascertainable. The situation confronting the referee demanded that he allow the defendant the full measure of damages accruing to it by reason of the breach of the express warranty and still enable plaintiff to recover what the plant was fairly worth. That rule was fair to the defendant. It recognized its acceptance of the system, but held that the cause of action for failure to comply fully with the guaranty survived such acceptance, and the referee certainly endeavored to mete out that justice to both parties. What it will cost to bring the plant up to the full measure of the plaintiff’s guaranty covers the loss to the defendant, and is in effect making the basis of the damages the difference between the actual value and the value if it had corresponded to the guaranty. That measure is no more speculative than the opinions of the witnesses in any case, who fix a value upon an article of this cumbersome kind in actual use. Mr. Savage, an expert on behalf of the defendant, had testified that it would require an expenditure of $1,500 to $2,000 “ for the apparatus to do the work,” while the cost was way below this if the plaintiff’s witnesses are correct in their estimates. In any event, the referee has taken the highest sum given by the witnesses for the plaintiff, and it is hot for this court to interfere with his deduction as long as it is supported fairly by the evidence. Competent experts may have a different and yet proper way of arriving at the difference between the value of an article actually and if as represented. In thiá case the plaintiff’s witnesses made the basis of that difference the costs of supplying sufficient coils to bring the system up to the requisite standard. The witnesses on the part of the defendant testified to the value respectively of the proposed and of the actual plant. Each was endeavoring to reach the same result, but not by the same methods. That the learned referee saw fit to take the evidence of one class of witnesses in preference to another does no violence to the rule of damages. The proper measure was stated by the referee during the trial, and was perfectly apparent, and he has substantially adhered to it in his decision, only he gives the method by which he arrived at it. Nor do we think the defendant was entitled to special damages. It kept the plant in operation and without information to the plaintiff that it intended to claim substantially a rescission of the contract. Had plaintiff been advised of the difficulty he could have remedied it, and this is especially true in view of the conclusion of the learned referee that a few coils would have made it comply with the guaranty. Losses and expenditures which are the normal outgrowth of a breach of contract are often allowable, but not where the person incurring the expense has been remiss in giving to the one responsible for the breach an early opportunity to make reparation either by remedying the defective article or by money compensation. The judgment should be affirmed, with costs. The defendant succeeded in part on its counterclaim, and yet the Special Term granted an additional allowance as if the plaintiff had been successful to the full extent of this counterclaim. If the plaintiff sues on an unliquidated demand, claiming to recover $10,000 — and recovers $1,000 — the defendant would not be entitled to an extra allowance of costs on any sum, much less on $10,000. The order granting the extra allowance should be ■ modified by allowing the same at thirteen dollars and seventy-four cents, with ten dollars costs and the disbursements of the appeal from the order to the appellant. All concurred. Judgment affirmed, with costs, and order granting extra allowance modified by reducing the extra allowance to the sum of thirteen dollars and seventy-four cents, and, as thus modified, affirmed, with ten dollars costs and disbursements to appellant.