Denton Bros. v. Gill & Fisher

The appellants brought suit in the Superior Court of Baltimore City against the appellees. The declaration contains three of the usual common counts and a fourth count in special assumpsit. To the common counts the appellees pleaded and issues were joined thereon; to the special count they demurred and the lower Court sustained the demurrer. The trial then proceeded before a jury on the issues of fact framed on the general issue pleas, and, under the instructions of the Court, resulted in a verdict for the appellees, who were the defendants. From the judgment on that verdict this appeal was taken. The questions here involved are, first, the one raised by the demurrer to the fourth count, and secondly, those arising on the prayers for instructions to the jury. As the question raised by the demurrer and the one arising on the fourth prayer of the appellees, which was granted, and the second prayer of the appellants — which was rejected — are identical, they will be considered together. By doing so but one other inquiry of any consequence will remain to be disposed of, and that is the one presented by the fifth prayer of the appellees which was also granted, and the first prayer of the appellants, which was rejected. To simplify the discussion and with a view to avoid repetition the facts appearing in the record will now be concisely stated.

The appellants, Denton Brothers, are grain merchants in Leavenworth, Kansas. On September the twenty-sixth, 1899, they sold to the firm of Bowring Archibald, of New York, five thousand quarters of No. 2 corn at forty-three cents per fifty-six pounds "cost, freight and insurance to Liverpool," to be shipped in January or February, 1900. Bowring Archibald then cabled to C.T. Bowring Company, Limited, of Liverpool, an offer of five thousand quarters of corn of the same quality on cost, freight and insurance terms, and the last-named company placed the offer with Montgomery, Jones Company who accepted the terms, and C.T. Bowring Company cabled Bowring Archibald of the sale, but C.T. Bowring Co. did not actually buy the corn. Bowring Archibald then drew, with the documents attached, on C.T. Bowring Company in the usual way for the price of the whole 5,000 quarters sold by Denton Brothers to Bowring Archibald and sold the draft to bankers. On January the 20th, 1900, the appellees, Gill Fisher, through Parker McIntyre, brokers, sold to Denton Brothers "three thousand quarters (5 per cent more or less as per London contract) of No. 2 corn" at forty-six cents per fifty-six pounds "cost, freight and insurance to Liverpool;" to be shipped during February by first-class steamer from any Atlantic port "Payment by sellers' draft at sight on buyers with documents attached as customary." In February the steamship "Indore" received on board in hold 5 at Baltimore and Ohio Elevator C at Locust Point the corn sold by Gill Fisher to Denton Brothers, and upon the faith of a certificate from the railroad company's elevator foreman that three thousand quarters of corn of the grade sold had been loaded aboard the "Indore" for account of Gill Fisher, the agents of the Johnston Line of steamships issued to Gill Fisher three bills of lading for the three thousand quarters of corn, each bill of lading being for one thousand quarters. For three cents per bushel of the forty-six cents agreed price Gill Fisher drew on Denton Brothers who paid the draft on presentation, and for the balance of the contract price, viz., forty-three cents, at the request and by the direction of Denton Brothers, Gill Fisher drew on Bowring Archibald, with the bill of lading indorsed in blank, the insurance policies and inspection certificates attached, and the draft was paid on presentation. These directions to the appellees were given by Denton Brothers in part performance of their contract with Bowring Archibald, though no proof was offered that the appellees knew of the existence of that contract. Montgomery, Jones Company paid C.T. Bowring Company for the whole five thousand quarters. When the "Indore" reached Liverpool, about March the seventh, Montgomery, Jones Company claim that the corn delivered to that vessel on account of Gill Fisher at Baltimore and Ohio Elevator C weighed out 215,992 pounds short. For the amount of that alleged shortage at the then value of corn in Liverpool, viz., eighteen shillings sterling per quarter, Montgomery, Jones Company made demand for reimbursement on C.T. Bowring Company and were paid by that company the full amount; namely, 349 pounds, 17 shillings and 3 pence. C.T. Bowring Company then made claim for the same amount on Bowring Archibald and were allowed therefor in accounts between them. In April, 1900, C.T. Bowring Company took over the business of Bowring Archibald as a going concern and assumed all its assets and liabilities. On February the first, 1901, Denton Brothers made to C.T. Bowring Company as assignment of any claim they might have against Gill Fisher. The record also contains a copy of the "London Contract" referred to in the memorandum of the sale of the 3,000 quarters of corn for account of Gill Fisher to Denton Brothers; and the following clauses appear in that contract: "Two per cent more or less," and "Seller has the option of shipping a further 3 per cent, more or less, on contract quantity, the excess or deficiency over the 2 per cent to be settled at the c.f. i. price on date of bill of lading; value to be fixed by arbitration, unless mutually agreed;" and again "Any deficiency on bill of lading weight to be paid for by seller, and any excess over bill of lading weight to be paid for by buyer at contract price." It is denied by the appellees that there was any shortage in the weight of the corn; but with that contention we have nothing to do as it is conclusively a matter for the jury to determine.

Compressed into the narrowest compass the situation presented is this: Denton Brothers purchased from Gill Fisher 3,000 quarters of corn, and sold the same corn to Bowring Archibald; Bowring Archibald through C.T. Bowring Company sold the same corn to Montgomery, Jones Company. The last-named purchasers paid C.T. Bowring Company in full. It is alleged that there was a material shortage in the weight when the corn was delivered. Montgomery, Jones Company were refunded the amount of that shortage by C.T. Bowring Company; C.T. Bowring Company were refunded the same amount by Bowring Archibald, and the latter have made a demand on Denton Brothers to refund the same amount. Denton Brothers have not paid back that amount but have sued Gill Fisher, their vendors, to recover the sum which they, Denton Brothers, are liable to pay on account of the same shortage to their vendee. The question on these facts is can Denton Brothers maintain this suit until they actually pay back to their vendee the amount claimed by the latter from Denton Brothers on account of that shortage? This question is the one raised by the demurrer to the fourth count of the narr. and by the fourth instruction granted at the instance of the appellees and the second rejected prayer of the appellants. We will dispose of that question before stating or considering the other or remaining inquiry.

If Denton Brothers had not resold the grain to Bowring Archibald and if, after they had paid Gill Fisher the agreed price for the entire three thousand quarters of corn purchased from the latter, it had been discovered that the vendors had in fact failed to deliver over two hundred thousand pounds of the corn sold and paid for, it could not be questioned that Denton Brothers would have a sustainable cause of action against Gill Fisher for a breach of the latter's contract. How can the resale of the corn by Denton Brothers extinguish Gill Fisher's obligation to comply with their contract, or exonerate them from the consequences of a breach which occasions a failure of consideration? The right of the vendee to recover from the vendor for a failure of consideration is founded on the simple fact that the former has not received from the latter what the vendor sold and agreed to deliver and what the vendee paid for and contracted to get. The breach consists in the failure of the vendor to live up to his contract and no subsequent sale of the grain by the vendee can obliterate or condone that breach. If a sale of the same commodity by the vendee to a sub-vendee extinguishes the responsibility of the vendor to make good a shortage to his vendee, then a payment to the sub-vendee by his vendor of the damages caused by the shortage, would revive the first vendor's responsibility to his vendee; and thus the obligation of the first vendor to make good a deficiency to his vendee would depend, not upon his own breach of the contract of sale, but upon a collateral and independent transaction between the vendee and a third party who is a total stranger to the original contract of sale. The adjudged cases do not support that view. Allusion will now be made to some of them. Perhaps the most apposite isRandall and another v. Raper, Ellis, Black Ellis, 84. The defendant in that case by warranting 30 quarters of seed barley to be then chevalier seed barley, sold the same to the plaintiff at and for 1l. 2s. 6d. per quarter which the plaintiffs paid him. The plaintiffs were corn factors and purchased the seed barley for the purpose of reselling it in the way of their trade. The seed barley delivered was not chevalier seed barley. Without any knowledge of the breach of the warranty and believing the seed to be chevalier seed barley the plaintiffs sold to several sub-vendees the same seed barley delivered to them by the defendant and sold it under a like warranty given by the defendant to the plaintiffs. The sub-vendees sowed the seed and the seed not being chevalier seed barley, as it had been warranted to be, produced inferior crops whereby the sub-vendees were damnified and injured. The plaintiffs then became liable to compensate and make good to the sub-vendees, respectively, the damages by them so sustained and incurred. The plaintiffs — the original vendees — thereupon sued the vendor to recover the amount for which they were liable but had not yet paid to the sub-vendees. Judgment went by default and the damages were assessed under a writ of inquiry before the Deputy Sheriff of Essex. A verdict was directed for 261l. 7s. 6d. reserving leave for the defendant to move to reduce the verdict to 15l. Upon a motion to reduce the verdict, heard by the Court of Queen's Bench it was contended that the verdict should be reduced because the jury were misdirected; and it was argued by Bovill that there ought not to have been any allowance for the damages in respect to the plaintiffs having agreed to make compensation to their sub-vendees because the amount of the compensation to be paid by the plaintiffs to their vendees had not been ascertained and was not definite. LORD CAMPBELL, C.J., after remarking that if the plaintiffs had paid the sub-vendees the amount of the damages claimed by them there would have been no doubt as to the right of the plaintiffs to recover from the defendant the sums thus paid to the sub-vendees, observed: "But then it is contended, secondly, that even if the damages could be recovered in the event of the actual payment, they cannot be recovered upon a mere liability. I think we cannot lay down a rule that the mere liability cannot be the foundation of damages; if it can, the amount may be estimated by a jury. The demand is made, and is a just one; and, though it is not yet satisfied, yet the jury may find to what extent the plaintiffs are damnified by their having become liable to it." And ERLE, J., said: "But then it is said that here the plaintiffs have made no actual payment; so that, if they recovered such damages in this action, they might put them into their own pockets without paying the sub-vendees. But I think that the true rule is that a liability to loss is sufficient to give the party liable a title to recover." And CROMPTON, J., observed: "Taking the narrowest rule as to the probable and necessary consequences of a breach of contract, these damages fall within it. It is said, however, that the plaintiffs have here only incurred a liability, and have made no payment. But I entirely deny that payment is necessary to entitle a party to recover. Liability alone is sufficient. It has always been customary to state in the allegation of special damages ``whereby the plaintiff became liable to pay,' I recollect a discussion once arising whether an allegation ``whereby the plaintiff paid,' was sufficient without an allegation ``whereby the plaintiff became liable to pay;' but I do not recollect a discussion whether the latter allegation was sufficient without the former. In actions for bodily injuries the liability to pay the surgeon's bill is always allowed as an item of damages. In an action for breach of contract you can recover only once; and the action accrues at the moment when the breach occurs. A liability to payment, which has been incurred by a plaintiff in consequence of the breach of a defendant's contract may well form a part of the damages, though it may be difficult to estimate them." In Josling v. Irving, 6 Hur. Nor. 512; Randall v.Raper was referred to with approval but distinguished. Dingle v. Hare, 7 C.B.N.S. 145, is also directly in point. In Muller v. Eno, 14 N.Y. 597, the syllabus states: "The purchaser may recover for breach of a warranty although he has sold the goods and no claim has been made upon him, and he is liable to none on account of the alleged defect. Nor in such action is he required to prove the price at which he re-sold the goods. That price may be evidence of the amount of damages, but does not furnish the rule." In the judgment of the Court it is said: "The vendor is simply required to make good his own contract, and I do not see how he can discharge that obligation by inquiring into relations between other parties * * * The promise is not one of indemnity against loss on a re-sale," See also Passenger v. Thornton,34 N.Y. 637, where Randall v. Raper is cited with approval. In Western Twine Co. v. Wright, 11 S. Dak. 521; s.c. 44 L.R.A. 438, suit was brought by the vendor of binder twine to recover from the vendee the amount of a promissory note given for the price thereof. Some of the twine had been sold by the vendee to numerous farmers for cash and they made no claim on the vendee for reimbursement. It was held that the vendee could defeat a recovery on the note at the suit of the vendor to the extent of the actual difference between the real value of the twine and what it would have been worth had it corresponded with the warranty, even though "a part of it had been sold for cash, and no claim has been made by any of the purchasers on account of defects." The case of Wheelock v. Berkely, 138 Ill. 153, was cited with approval. In the last-mentioned case it was ruled that in an action for breach of a warranty it is of no consequence what the purchaser may have received from a re-sale.

The cases cited by the appellees' counsel do not conflict with those above referred to. They arose either upon indemnity bonds or grew out of the evictions and depended upon entirely different principles. In California Dry Dock Co. v. Armstrong, 17 Fed. Rep. 221, no question between vendor and vendee was involved at all.

We hold, then, for the reasons and upon the authorities already alluded to that Denton Brothers, the legal plaintiffs, were entitled to recover from Gill Fisher the amount for which they, Denton Brothers, were liable to the sub-vendee, notwithstanding the fact that Denton Brothers had not paid over the sum for which they were so liable to the sub-vendees. It follows therefore, that there was error committed in sustaining the demurrer to the fourth count of the narr., and that the Court was wrong in granting the appellees' fourth prayer and in rejecting the appellants' second prayer.

Secondly. The appellees contended and the Court by granting their fifth prayer and by rejecting the appellants first prayer ruled, that the appellants were not entitled to recover if the jury should find from the evidence that there existed among grain merchants a general and well established usage or custom to the effect that in sales and purchases of corn for shipment to a foreign port, the shipping weights taken at the port of shipment upon loading the vessel, as stated in the bill of lading, should be final; and that in case of shortage in the out-turn at the port of discharge, the purchaser or his assigns should have no claim upon the seller for the value of the shortage. To support that contention and to sustain the rulings upholding it, there must be written into the "London Contract," by force of the usage or custom relied on, some such term as "bill of lading weights final or conclusive." "To be regarded as part of a contract, however, the usage or custom must have both of the following elements: (1) It must be actually or constructively known, and (2) it must be consistent with the contract. If either of these elements is lacking the usage or custom cannot be regarded as part of the contract." 2 Page on Contracts, sec. 604. And this Court said in Foley Woodside v. Mason Son, 6 Md. 49, "And although evidence of usage is sometimes admissible to add to, or to explain the terms of an agreement, yet it will never be permitted to vary or contradict the clear and manifest signification of the terms which the contracting parties may think proper to employ to express their meaning." By the express terms of the London contract the usage or custom invoked by the appellees, is excluded. If the bill of lading weights are final and conclusive according to the custom, how can that custom be imported into the contract in the face of the explicit provision that "any deficiency on bill of lading weights to be paid for by seller?" The custom set up is absolutely inconsistent with the contract, and can only constitute a term of that contract by expunging a diametrically opposite term. When the parties to the contract have distinctly agreed that the bill of lading weights shallnot be final — as they have done by stipulating who shall be liable if the weights are erroneous — a custom that they shall be final, cannot override the contract, because such a custom is flatly inconsistent with the contract. There was error, thefore, in granting the appellees' fifth prayer and in rejecting the appellants' first prayer. The appellants' third prayer should have been granted. It told the jury that if the whole amount of grain called for by the contract — viz: the three thousand quarters — was not in fact delivered by the railroad company at its elevator to the steamer "Indore," then the surrender by Gill Fisher of elevator receipts calling for that quantity of corn, is, under the pleadings, no defence to this action. The proposition announced is self-evident. If the quantity of grain for which Gill Fisher were paid was not delivered to their vendee, then, their surrender of the warehouse receipts did not relieve them from their liability to their vendee for the shortage in delivery. We do not discover any error in the rejection of the appellants's fourth prayer. It undertook to define the rights of Gill Fisher against the railroad company, but as the rights of the former against the latter and the liabilities of the latter to the former with respect to the alleged shortage in the weight of the corn, are not in any way involved in the pending case, they were not matters with which the jury had any concern. The appellants' fifth prayer was correct and ought to have been granted. It merely told the jury that the appellants had no cause of action against the railroad company on account of the shortage, as there was no contract between that company and them. The appellees' first prayer related to the burden of proof and was properly granted.

It results from what has been said that the judgment in favor of the appellees must be reversed because of the errors committed in sustaining the demurrer, in granting the appellees' fourth and fifth prayers and in rejecting the appellants first, second, third and fifth prayers, and a new trial will be awarded.

Judgment reversed with costs above and below, and new trialawarded..

(Decided December 7th 1905.)