Worth-Huskey Coal Co. v. Columbia Malting Co.

Mr. Presiding Justice Taylor

delivered the opinion of the court.

Upon the breach of an instalment contract the rights of the vendor and vendee are now to be determined by the Uniform Sales Act. By section 45 of that Act [Cahill’s Ill. St. eh. 121a, [¶] 48] the following rule is announced:

“Where there is a contract to sell goods to be delivered by stated installments, which are to be separately paid for, and the seller makes defective deliveries in respect of one or more installments, or the buyer neglects or refuses to take delivery of or pay for one or more installments, it depends in each case on the terms of the contract and the circumstances of the case, whether the breach of contract is so material as to justify the injured party in refusing to proceed further and suing for damages for breach of the entire contract, or whether the breach is severable, giving rise to a claim for compensation, but not to a right to treat the whole contract as broken.”

Whether the law is now as it used to be is, therefore, unimportant. Since the passage of the aforesaid act it seems to be necessary in an equitable way to consider the substance of the alleged default, its effect, and to give a remedy according to the substance of the wrong. Helgar Corporation v. Warner’s Features, Inc., 222 N. Y. 449.

As the statute states, “it depends in each case on the terms of the contract and the circumstances of the case,” whether the breach is sufficient to justify the injured party in refusing to proceed further and sue for damages for a breach of the entire contract, or, on the other hand, “whether the breach is severable, giving rise to a claim for compensation, but not to a right to treat the whole contract as broken. ’ ’ So it would seem that what the court must do necessarily varies according to the particular facts in each instance. (Williston on Sales, p. 810.)

The first letter, urging the Malting Company to pay, was dated November 25, 1916, only a month after the contract was made; and that letter gave as a reason that it, the Coal Company, had “to advance considerable money * * * to buy outside” of their mine and was in need of funds. On January 8, 1917, the Coal Company wrote that since December 30, 1916, there had been a railroad embargo and the yards in Chicago were blocked. No other correspondence on the matter thereafter occurred until March 3, 1917, when the Malting Company wrote the Coal Company directing it to withhold shipments until further orders, and directing the Coal Company to ship nothing but from the Knox County mine. And by that letter the Malting Company then asked what shipments might be expected under those conditions.

Of course, the Malting Company could not change the written contract by merely requesting the Coal Company to ship coal only from the Coal Company mine when that contract provided that when necessary the Coal Company could purchase and ship outside coal. The letter, therefore, of March 3, 1.917, might have been considered by the Coal Company, if it had so chosen, to put an end to the contract, but on March 6, 1917, the Coal Company, in answer to the letter of the Malting Company of March 3, 1917, wrote: “These instructions will be strictly adhered to but we cannot comply with your request to advise you what shipments you may expect, because we do not know.” That letter then informs the Malting Company that there was a railroad embargo as to coal for Chicago and that the division, in which the Coal Company is, was limited to twenty-five cars per day. In that letter the Coal Company also writes: “We would very much appreciate a check for your past due account and trust you will let us have it so that it will reach us not later than the 8th.” On March 23, 1917, the Coal Company again wrote the Malting Company, calling the attention of the latter to its past due account and also to the terms of the contract providing for payment on the 15th of the month following shipment and requesting payment for January and February. In that letter the Coal Company also writes that it has shipped the Malting Company its full proportion of coal, based upon the number of tons the Coal Company was able to produce, and closes: “We must insist upon' immediate settlement of the amount due us unless you wish to consider yourself in default in carrying out your part of said contract.” In that letter there was a statement of account for $3,332.84, for coal which was due on February 15 and March 15, 1917.

The correspondence then shows, for the first time, in a letter dated March 26, 1917, by the Malting Company, some claim on the part of - the Malting Company on account of alleged inferior coal. That letter was to the effect that the Malting Company was surprised “to hear nothing from you as to what reduction you are willing to make, because of the very inferior coal you shipped us.” That letter states also that the Malting Company had complained frequently as to the quality of coal and contains the words, “We do not see why we should stand this loss when it was no fault of ours.”

Owing to the failure of the Malting Company to pay its account, matters came somewhat to a climax when on March 29, 1917, the Coal Company wrote that as the Malting Company had failed to comply with the demand for payment of the January and February invoices, amounting to $3,332.83, “we do not consider ourselves obligated to make further shipments” and shall insist that the March account be paid promptly on or before April 15 “as specified in the contract” or we shall be obliged to institute suit. At that time the evidence shows that the Malting Company had not paid its account from time to time according to the terms of the written contract. It had made some payments but the Coal Company was constantly insisting that the express terms of the contract that the account should be paid on the 15th of the succeeding month should be lived up to.

After March 29, 1917, six letters passed between the Coal Company and the attorney for the Malting Company. The attorney for the Malting Company in a letter dated April 3, 1917, sent a check for $431.32, stating that that was in full for coal that had been received that was satisfactory as to quality. That letter announced that $2,024.39, which was for outside coal “of an exceedingly inferior quality,” the company would not be responsible for. That letter also made a proposition to the effect that the Malting Company would pay the $2,024.39 provided the Coal Company would agree “to ship at contract price”— which would be $1.97 per ton — and satisfactory quality the balance of the contract requirements. That letter also stated that the Malting Company would “not only not pay you the $2,024.39 for the very inferior coal you shipped until their damages are adjusted” but if the Coal Company considered itself no longer bound by the contract then the Malting Company would go into the market and buy their requirements and sue the Coal Company for the difference between the market price and the contract price.

The two letters, one by the Coal Company on April 9, in answer to that of the attorney for the Malting Company of April 3, and the letter of April 11, by the attorney for the Malting Company, discuss further the account and the subject of inferior coal. The Coal Company in its letter of April 9 writes: “The coal so delivered and billed by us was the best obtainable and was not rejected, but was accepted and used by them, and for which they are clearly liable. As a matter of fact, they ought to be thankful that we were able to procure coal for them at all under the adverse conditions which have prevailed in the coal business and with which they are thoroughly familiar.”

The letter of the attorney for the Malting Company, dated April 11, takes issue with the Coal Company on the question whether the outside coal that was shipped was the best obtainable in the market. In that letter the attorney writes: “We think we will have no difficulty whatever in showing that there were large quantities of good coal obtainable at the time you shipped the inferior coal, which could have been purchased by you at the price you charged. We note what you say that the Company accepted the coal and used it. Our answer to that is, that they did not know how poor the coal was until they used it. * * * Poor as this coal was, it was better than nothing and a shut-down,” etc. The letter further states that if the Coal Company wishes to try out in the courts the question of the quality of the coal and the efforts that were made to get good coal the Malting Company is willing to do that. And recites further: “And you can continue to furnish coal under the contract without prejudice to either side for which my clients will pay promptly.” The matter still remained in dispute and the account unpaid when on April 17 the Coal Company reiterated its contention as to the liability of the Malting Company for the January and February shipments. That letter is a cancellation of the contract by the Coal Company on account of the failure of the Malting Company to pay its account. Two other letters passed between the parties but they are negligible as pertaining merely to the rectification of a small item of account.

The twelve cars of “outside coal” that were shipped during the months of January and February, 1917, were never paid for. The contract did not prescribe the kind of ‘1 outside coal, ’ ’ but it was provided that the Coal Company should be allowed, in the event it became necessary, to furnish 1 ‘ outside coal” and bill it to the Malting Company at cost price. Quite obviously, the Coal Company could not take any advantage of the Malting Company unless it refrained from giving that company its proper proportion of the current production of the Coal Company or failed to exercise reasonable care in providing 11 outside coal” of a proper quality. There is no substantial evidence that the Coal Company did not send the Malting Company its proportionate share of the Coal Company’s output.

The Coal Company could have no interest in ordering inferior ‘‘outside coal” to be shipped to the Malting Company; it had to pay for outside coal out of its own pocket in the first place, and we must assume that it was anxious to carry out its contract with the Malting Company so that it could get back at least the money it had already advanced. It would be a very different situation if the Coal Company was charged with shipping inferior coal from its own mine. Although it is charged by the Malting Company in its pleadings that the Coal Company did not ship the former its share of coal from the Knox County mine, that evidently was abandoned as there is no evidence of any particular value on that subject which favors the Malting Company.

Not only is there no evidence that the Coal Company did not send its share of Knox County coal to the Malting Company, but what evidence there is on that subject is to the opposite effect. In the letter of the Coal Company of March 23, 1917, the Coal Company wrote, “the fact remains that we have shipped you the full proportion to which you were entitled, based upon the number of tons we were able to produce as compared with our total contract obligations. This we are able to prove by our records,” etc.

The evidence shows that the Malting Company did not have to shut down owing to lack of coal, so under the circumstances it is only fair to say that the Malting Company was not entitled to be rigorous as to ‘‘outside coal” which the Coal Company had to order and pay for and upon which it could make no profit. Further, there is no evidence whatever that the Coal Company did not exercise reasonable care in ordering and obtaining “outside coal” for the Malting Company.

The evidence shows that matters came gradually to a climax, the reason on the Malting Company’s side being its claim that the “outside coal” which was furnished and used was not satisfactory, and the reason on the Coal Company’s side being that the Malting Company refused to pay for what it had received and used, and would from its attitude refuse to pay for any future “outside coal.”

It was admitted that the Coal Company was financially sound, but that is not necessarily a justification for refusing to pay, as the contract provided, on the 15th of each month. Where the seller over and over again informs the buyer that he wants his money, according to the express terms of the contract, the rigor of the law applies; and having given notice to that effect, no equity arises from former indulgence.

The chief difficulty in the case arises because on the one hand there is the express phraseology of the contract as to payment and “outside coal,” and on the other qualifying circumstances which under the Uniform Sales Act must be considered and given weight. It is harder to resolve and balance the equities than to interpret the written words. It is only fair to say that as to the actual circumstances each party was quite tenacious of its supposed rights and likewise unyielding. The evidence is just as strong that the Malting Company was trying to put off paying for “outside coal” which it had received and consumed and endeavoring' to obtain assurance that it would get Knox County coal in the future, as that' the Coal Company was trying to get its money for “outside coal” that had been delivered and used, without giving an assurance as to the quality of future deliveries.

The Coal Company had the right, “in the event of it becoming necessary,” to furnish “outside coal” during the life of the contract. The president of the Malting Company testified that there were conditions that probably warranted putting in the conditions. The reason for that right as stated in the contract- was given in these words: “This condition will no doubt arise during the coming winter on account of the acute car shortage and the shortage of motive power on the Railroads.” And, as a matter of emphasis, uses these words: “We will furnish you with that proportion of our production which your contract bears to our other contract obligations. After this has been done of course our legal obligation ceases, but we are writing this letter so that we may be clearly on record and contract taken with this express understanding.” The question then arises, the Coal Company having bought and paid for “outside coal” and shipped it to the Malting Company and the latter .having received it and used it, and admitting in its pleadings that it had some value, did the Coal Company fail in its obligation to the Malting Company?

The latter company claims that the “outside coal” was inferior. That, however, in itself is not a sufficient defense. As to the twelve cars of “outside coal” that the Malting Company did not pay for, seven were, according to Huskey, mine run from Clinton, Indiana; two, mine run from Little, Indiana; one, mine run from Virden, Hlinois; one, a car of lump from Benld, Illinois; and one, kind not stated, from Newberg, Illinois.

Huskey says he did the best he could and the contrary is not shown. There is no substantial evidence even tending to show that the Coal Company in buying and paying for and shipping “outside coal,” which it had a contract right to ship, if the situation made it necessary, failed in such a way to fulfill its contract obligation that the Malting Company was entitled to conclude that the contract had been broken. Titley v. Enterprise Stone Co., 127 Ill. 457.

If the Malting Company undertook to prove that the Coal Company failed to perform, it must show some material omission, some dereliction, on the part of, the Coal Company. None was shown, save that certain witnesses testified that some “outside coal” was inferior. But that does not prove or necessarily tend to prove a breach on the part of the Coal Company. As far as the record shows the Coal Company, owing to the car disturbance, found it necessary to avail itself of one of the provisions of the written contract and furnish “outside coal” and accordingly did so. Harber Bros. Co. v. Moffat Cycle Co., 151 Ill. 84.

The claim that the Coal Company should have shown affirmatively that it shipped the Malting Company its proportionate share of Knox County coal and failed to do so was not made upon the trial and, even if it had been, as the pleadings and evidence now stand it would have been untenable. When the Malting Company took the “outside coal” and used it, that maintained the contract, and merely created in the Malting Company a possible right to recoupment as to the price, a right to a counterclaim measured by the difference, if any, between the market price of what it got and what it should have received. Dalton v. Bunn & Allison, 137 Ala. 175; American Theatre Co. v. Siegel-Cooper & Co., 221 Ill. 145. In the latter case the court said the law does not permit a person to receive goods under a contract, appropriate them for his own use, and then defeat an action for the purchase price on the ground that the goods were not of the exact quality or description called for by the contract. Trippe v. McLain, 87 Ga. 536; Barkalow v. Pfeiffer, 38 Ind. 214.

As the Malting Company in a letter' of its attorney, dated April 3, 1917, announced positively that it would not pay the $2,024.39 which the Coal Company had charged for the cars of “outside coal” which had not been paid for, and as the Coal Company had bought that coal from outside sources and paid for it and the contract expressly provided that the coal furnished each month should be paid for by the 15th of the next month, and as the Coal Company had been insisting over and over again that the account be settled, and as the Malting Company had received and used the “outside coal,” it would seem that under all the circumstances the Coal Company was justified in notifying the Malting Company that the contract was canceled. Brown Coal Co. v. Carterville Washed Coal Co., 221 Ill. App. 659.

Some contention is made that the Malting Company was justified in delaying making certain payments because it had been in the habit generally of paying the freight and then deducting it from the price of the coal, and that as the freight bills did not come in with any regularity and not generally until sometime after the middle of the month, payments were made later than the contract expressly provided. We do not think, however, that that is material in the view we take of the evidence of the Malting Company as to its liability for the twelve cars of “outside coal” which it received in January and February, 1917, and* for which it refused to pay.

There is some contention on the part of the Malting Company that the Coal Company bought outside coal and furnished it to the Malting Company so that it, the Coal Company, could sell its own coal at a higher price and thereby make a greater profit. In support of that, however, there is no evidence but merely suspicion.

In our judgment, the Malting Company failed to prove that the Coal Company had broken the contract, and, further, the evidence shows that the Coal Company was justified in canceling the contract.

With the evidence as it is, making all reasonable inferences favorable to the Malting Company, there is such a failure to show a breach by the Coal Company that it becomes a question of law; and in answering that question, we hold, as said above, that no breach by the Coal Company was proven.

As the Coal Company in its original statement of claim sued for the contract price of the twelve cars of “outside coal,” and in its amended statement of claim alleged its claim to be for the fair and reasonable market value of that coal, it follows, considering the pleadings and the issue precipitated, and our judgment upon the evidence as expressed above, that the judgment 'of the trial court must be reversed and a new trial had, in order merely to determine what amount, if any, is due the Coal Company for the fair and reasonable market value of the twelve- cars of “outside coal.” Uniform Sales Act, secs. 48, 49 [Ca-hill’s HI. St. ch. 121a, []][ 51, 52]. Harber Bros. Co. v. Moffat Cycle Co., 151 Ill. 85.

It may well be that the jury in arriving at their verdict gave the Coal' Company credit for the fair and reasonable value of the twelve cars of coal and it, therefore, becomes necessary to remand the cause in order to allow the Coal Company to have its claim adjudicated. Even if there were evidence in the record as to the fair and reasonable value of the twelve cars of coal, it would still be necessary to remand the cause for a new trial as we have not the authority and power of a jury.

The judgment, therefore, will be reversed and the cause remanded for a new trial.

Reversed and remanded.

O’Connor, J., concurs.