Baker v. J. C. Watson Co.

GIVENS, J. August 25, 1941, respondent, fruit grower at Home, Oregon, sold appellant, of Parma, Idaho, five carloads of peaches at an agreed price. Pursuant to the contract, the peaches were delivered to appellant f.o.b. cars at Home, Oregon, and billed to Laramie, Wyoming. Upon receipt of the bills of lading at appellant’s place of business at Parma, Idaho, checks aggregating the contract price of $6053.25 were sent in payment thereof. In transit the cars were diverted by appellant from Laramie to LaMantia Bros. Arrigo Co., at Chicago. Upon their arrival there, appellant, contending they did not conform to the grade of peaches allegedly purchased, namely, U. S. No. 1, rescinded the contract, notified respondent thereof, and asked for instructions as to the disposition of the peaches as perishable. Respondents refused to accept rescission and dis *576 claimed further responsibility; whereupon appellant sold the peaches to respondent’s account and, after deducting expenses and freight, sent, the proceeds ($3964.91) to respondent, who refused acceptance. This suit was instituted by respondent to enforce the full purchase price. By the answer appellant urged rescission and tendered the amount of the proceeds into court. Respondent introduced no affirmative evidence challenging appellant’s defense of breach of warranty and rescission and secured in his favor an instructed verdict — hence this appeal. Respondent’s complaint contained no statement as to the grade or quality of the peaches. Appellant in its answer alleged as to the said contract of sale “that it was understood and agreed that said peaches were to grade as U. S. No. ones”, and that upon their arrival in Chicago they were “found to fail to grade U. S. No. one on account of Curculio injury, split pits and misshapen stock,” which defects, according to the evidence, existed in the peaches at the time of their shipment and were not incurred during transit; further, that at that time appellant notified respondent “that the defendant [appellant] could not accept the peaches on account the plaintiff failed to deliver U. S. No. ones as agreed”; and, again, “the plaintiff [respondent] failed, neglected and refused to deliver to the plaintiff f.o.b. the cars at Home, Oregon, or at all, the five cars of peaches of U. S. No. 1 quality or grade agreed to be purchased by the defendant [appellant] from the plaintiff.” Appellant in its brief states: “The evidence all tended to establish the facts alleged in the said pleadings, and there is very little conflict, in the evidence except as to the one question, namely, whether or not the parties understood and agreed that the contract covered upon U. S. No. 1 peaches, and whether or not defendant resold the peaches to LaMantia Bros. Arrigo .Co.” “(c) The evidence shows that the plaintiff failed to fully perform his agreement in that he failed to deliver U. S. No. 1 peaches as agreed and promised; that to load and ship U. S. No. 1 peaches was a primary obligation •resting upon the plaintiff and the essence of the whole transaction * * “(f) That the peaches did not grade U. S. No. l’s on account of curculio injury, split pits, etc., defects which occur in growth upon the trees and would be readily apparent in packing.” *577 “If the contract was for the delivery of U. S. No. 1 peaches, and the seller failed to deliver that grade or quality of peaches, there certainly was a breach of promise on his part, and the defendant, as the buyer, even after acceptance, still had the remedy of damages or other legal remedy for such breach.” Respondent in his brief states: “Its [appellant’s] entire defense was predicated upon the contention that when the peaches were purchased there' was an agreement amounting to a warranty that they should grade U. S. No. 1, and that inspection certificates should be furnished the purchaser. “The record can be searched from beginning to end and there is no testimony by anyone to the effect that Watson either asked or that Baker ever promised to furnish peaches which would grade U. S. No. 1, particularly on their arrival at Chicago, Illinois, or at any other place.” “There being, therefore, neither a warranty nor a promise nor even a request that the peaches would grade U. S. No. 1, or that an inspection certificate would be furnished, the entire case fails and everything else becomes immaterial.” • Thus, there is a sharp dispute between the parties concerning the contract to purchase the peaches in that there is absolute disagreement between them as to the grade or quality of peaches to be furnished, the appellant contending at all times that they were to be U. S. grade No. 1, and the respondent without specific designation as to the agreed grade contending that at least U. S. No. 1 was not the grade or quality agreed to be sold, merely contending apparently that they were to be fine or fancy peaches. Aside from the text of the conversation between James Watson and respondent on Watson’s second trip to respondent’s orchards, when the contract was finally concluded, with regard to the grade or quality, there is other significant evidence which made it a jury question as to whether or not the contract was for the sale of U. S. No. l’s. First, all the boxes were before shipment labeled “U. S. No. 1”, and before sale in the Chicago market, because they did not grade U. S. No. 1 (according to the evidence of the federal inspectors who examined the fruit at Chicago), these labels had to be taken off and were scratched off. “In addition to the marks required to be placed upon any closed package of fruit grown in this state, as herein- *578 above provided [includes apples, peaches, or pears], the grower thereof [it is conceded respondent was the grower of these peaches], or association or organization of growers packing the same, shall mark upon the outside of such package the grade of the fruit contained therein * * (Sec. 22-801,1. C .A.) “Any person who violates any provision of this chapter shall, upon conviction thereof, be adjudged guilty of a misdemeanor and shall be fined not less than twenty-five dollars nor more than $200.00, or shall be imprisoned in the county jail not less than ten days nor more than six month, or shall be punished by both fine and imprisonment.” (Sec. 22-804,1. C. A.) Furthermore, H. C. Dwight, an employees of appellant, visited respondent and showed him the telegram from the LaMantia Brothers to appellant indicating the peaches were not up to grade, detailing the latter part of the conversation as follows: “He [Baker] said they were not out of grade. 'Well, I said, I didn’t see the peaches but the government inspectors say they were, and I said, Mr. Baker isn’t it a fact the peaches I looked at the day I — the first time I was out here, the peaches you were shipping that day had all printed U. S. No. 1 on the box, and he said, they did, and I said, isn’t it a fact that all the peaches that you shipped to J. C. Watson Company were labelled U. S. No. 1, and he said, yes, and by God they were No. 1. Well, I said, there seems to be a difference of opinion between you and the inspectors.” If the contract was for U. S. No. l’s, appellant was required to accept only peaches of such grade. (Peck v. Nixon, 47 Ida. 675, 277 P. 1112.) It is urged appellant is liable for the full purchase price on the ground that there had been such acceptance under 62-308, I. C. A., as to prevent its being entitled to the defense of breach of warranty and rescission therefor, because the peaches were sold by appellants through LaMantia Brothers, and that such resale was conduct inconsistent with rescission. Such contention overlooks Sec. 62-507, I. C. A. Appellant having made its election of remedy under 62-507 (1-d) and (2), I. C. A., subd. 5 of that section defines its rights and liabilities as the buyer thus: “62-507. Remedies for breach of warranty. — 1. Where *579 there is a breach of warranty by the seller, the buyer may, at his election: “d. Rescind the contract to sell or the sale and refuse to receive the goods, or if the goods have already been received return them or offer to return them to the seller and recover the price or any part thereof which has been paid. “2. When the buyer has claimed and been granted a remedy in any one of these ways, no other remedy can thereafter be granted. “5. Where the buyer is entitled to rescind the sale and elects to do so, if the seller refuses to accept an offer of the buyer to return the goods, the buyer shall thereafter be deemed to hold the goods as bailee for the seller, but subject to a lien to secure the repayment of any portion of the price which has been paid, and with the remedies for the enforcement. of such lien allowed to an unpaid seller by Sec. 62-402.” Sec. 62-307, I. C. A., gives a right of inspection: “62-307. Right to examine the goods. — 1. Where goods are delivered to the buyer, which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. “2. Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with thecontract. The evidence shows appellant’s employees looked over some peaches in the orchards and in the packing house at respondent’s place and complained of some of the peaches packed; respondent stated these should not have been and would not be included. Upon receipt of the peaches at, Chicago and ascertainment there, by reason of the federal inspector’s report that the peaches were not U. S. grade No. 1, two telegrams were sent on September 4, as follows: *580 “W. E. Baker, Home, Oregon. Talked Chicago. Second car arrived out of grade similar first car. Our buyer refuses car account never graded U. S. One. Unable to get accept any allowance. Will either handle for your account or turn over to your representative. For your information Chandler-Allen placed your car 52325 auction. Sold Hales .45 — .80. So you can see condition peaches. Advise. J. C. Watson Co.” “W. E. Baker. Absolutely cannot accept peaches account you didn’t give us U. S. One with certificate as agreed and stamped on boxes. Advise disposition of five cars. J. C. Watson Co.” A further telegram was sent September 5, as follows: “W. E. Baker, Home, Oregon. We are not accepting peaches. Have stopped payment all checks account your failure deliver peaches as labeled U. S. One. Unless hear contrary immediately will handle for your account only. J. C. Watson Co.” Respondent replied by wire as follows: “J. C. Watson Co., Parma, Ida. Peach deal is out of my hands and I cannot make any changes. W. E. Baker.” “J. C. Watson Co., Parma, Ida. It’s up to you to dispose of those peaches to your best advantage. W. E. Baker.” After the receipt of the first car and inspection thereof at Chicago, and ascertainment of the fact that the peaches did not come up to the grade appellant contends it purchased, the bank was notified to stop payment on the checks theretofore given respondent in payment of said fruit. Respondent was notified of such order to stop payment of all the checks on the 5th of September, the day the last car arrived in Chicago. Respondent urges the peaches should have been examined at Laramie, 'Wyoming, and that consequently their not being there examined and rejected constituted an acceptance. Conceding that the buyer should examine *581 goods and notify of rejection and rescission because of breach of warranty as soon as reasonably possible, the question of what was reasonable as to time and place was a jury question. (55 C.J. 420, et seq.; Brennan & Cohen v. Nolan Laundry Co., 209 Iowa 922, 229 N. W. 321; Laganas Shoe Mfg. Co. v. Sharood, 173 Minn. 535, 217 N. W. 941; Rotary Shirt Co. v. Meltzer, 197 App. Div. 102, 188 N.Y.S. 663; Union Paint etc. Co. v. Dean, 48 R.I. 288, 137 Atl. 469; Gladstein v. Manhattan Swiss Embroidery Co., 183 N.Y.S. 16; Belmont Silk Co. v. Naschkes, 189 N.Y.S. 112; Emerson-Brantingham Implement Co. v. Ware, 71 Okla. 19, 174 P. 1066.) Inspection is to be made at the destination, and a reasonable time therefor is allowed. (Rivers Bros. Co. v. Putney, 27 N. M. 177, 199 P. 108, 27 A. L. R. 520, and cases in note at 524.) It is urged, however, that even though it be conceded that inspection should have been made at the destination _ rather than at the point of delivery, because the original billing was to Laramie, and thereafter the cars were diverted by appellant to Chicago, the right of inspection should have been exercised at Laramie, and since it was not, there was complete, final, and absolute acceptance under Sec. 62-308, I. C. A., as a matter of law, which deprived appellant of the right to rescind because the peaches were not of the quality ordered. It will be noticed that there are a number of independent clauses in Sec. 62-308, the occurrence of any one of which constitutes acceptance; acceptance, however, not being final or conclusive because of Sec. 62-309,1. C. A. “62-309. Acceptance does not bar action for damages.— In the absence of express or implied agreement of the parties, acceptance of the goods by the buyer shall not discharge the seller from liability in damages or other legal remedy for breach of any promise or warranty in the contract to sell or the sale. But, if after acceptance of the goods, the buyer fail to give notice to the seller of the breach of any promise or warranty within a reasonable time after the buyer knows, or ought to know such breach, the seller shall not be liable therefor.” That section includes in the phrase “other legal remedy” the buyer’s right of rescission under Sec. 62-507. (55 C. J. 268.) *582 “The purchaser who concludes that the article purchased is not what is was represented to be, or what he had a right to believe it was or should be, cannot, after such discovery, go on using the article and thereafter refuse to pay the agreed purchase price. He’ may after such discovery repudiate the contract, return the article and demand return of any consideration paid. This is a rescission. He may, on the other hand, retain the article and claim such damages as he has sustained through breach of the contract by the vendor.” (West v. Prater, 57 Ida. 588, at 596, 67 P. (2d) 273.) While there is no dispute that appellants diverted. the shipment from Laramie to Chicago, the effect of this diversion and the conclusions to be drawn therefrom are, at most, questions of fact. (Moyer v. Hyde, 35 Ida. 161, at 165, 204 P. 1068, 28 A. L. R. 695.) In Kitterman v. Eagle Pine Co., 122 Ore. 137, 257 P. 815, there was a diversion from the original point of delivery. A similar contention was made as herein. The court stated the proposition as follows: “Was it the duty of defendant to inspect the lumber at Waters Creek, the point of shipment; or Grants Pass, Ore., designated as the place of f.o.b. delivery; or at the point of final destination? “The contract makes no express provision relative to inspection. * * * “The lumber mentioned in the contract of sale was specifically described and the minimum prices therein quoted were ‘on bright lumber only.’ It is clear that a warranty existed that the lumber shipped would comply with the description and specifications of the contract of sale, and was of a merchantable quality. (Sec. 8178, Or. L.) “The right of inspection is to enable the buyer to ascertain whether the goods delivered conform to the contract of sale. Where and when this right is to be exercised depends on the nature of the contract, the character of the goods, the manner in which they are shipped, and any other fact or circumstance tending to show what was within the contemplation of the parties, as expressed in their contract, or by their conduct in reference thereto. The law applicable to such right is in keeping with reason and common sense. It is apparent that a higher degree of_ diligence should be exercised in reference to the inspection of perishable *583 goods than those which are not of such character. Furthermore, in determining the time of inspection, it is important to take into consideration the manner in which the goods were packed or shipped. It is the purpose of the law to give the buyer a reasonable opportunity to examine the goods delivered before there is a completed sale. “In the instant case it is well to bear in mind that the lumber was placed on board the cars by the plantiff and did not come into actual possession of the defendant until it was finally delivered upon order to its customers. When and at what place, therefore, did the defendant have a reasonable opportunity to examine this lumber. Certainly it was not its duty to inspect the lumber before it was shipped, as no part of the payment of the purchase price was due until it had been delivered at Grants Pass. We may well eliminate under the authority of Eaton v. Blackburn, 52 Or. 300, 96 P. 870, 97 P. 539, 20 L. R. A. (N. S.) 53, 132 Am. St. Rep. 705, 16 Ann. Cas. 1198, Waters Creek as a place of inspection. “Was it the duty of defendant to inspect the lumber at Grants Pass while in transit to its final destination? We answer: No; the parties to the contract did not so contemplate. Ten per cent of the purchase price was reserved to be paid ‘upon the receipt of arrival (of lumber) and acceptance by their (defendant’s) customers.’ Plaintiffs specifically agreed to deliver this lumber upon order of defendant. It would be unreasonable to unload the cars at Grants Pass for the purpose of inspection and reload them in order to make final delivery. The delay and expense thereby incurred would tend to defeat the very object of their common enterprise, viz., the securing of a profit upon resale. “The rule is well stated in 23 R. C. L. 1433: “ ‘It is the general rule that, where goods are ordered of a specific quality, which the seller undertakes to deliver to a carrier to be forwarded to the buyer at a distant place, the right of inspection, in the absence of any specific provision in the contract, continued until the goods are received and accepted at their ultimate destination; in such a case the carrier is not the agent of the buyer to accept the goods as corresponding with the contract, although he may be his agent to receive and transport them’ — citing numerous cases, among which are Eaton v. Blackburn, sup *584 ra, and Pope v. Allis, 115 U. S. 363, 6 S. Ct. 69, 29 L. Ed. 393, which support the text. “Relative to the place of inspection, see Williston on Sales (2d Ed.) Sec. 480, wherein it is said: “ ‘Difficult questions may arise here, especially where the contract requires shipment of the goods on the buyer’s order. An important line of distinction seems to be this: If the goods are delivered to the buyer, even though he immediately ships them to another destination, and it is expected that he shall do so, the general rule that the place of delivery is the place of inspection applies, unless having regard to the nature of the goods, or the way in which they are packed, it is unreasonable that the goods should be examined there. On the other hand, if the seller is to ship the goods, the place, of inspection in the absence of agreement to the contrary is the destination of the goods, even though shipping directions may be given to the seller to send the goods to places other than the buyer’s residence” — citing Holt v. Pie, 120 Pa. 425, 14 A. 389, which is particularly in point.” See also Industrial Lbr. Co. v. Northside Lbr. & Bldg. Co., (Tex.) 254 S. W. 512; Eaton v. Blackburn, 52 Ore. 300, 96 P. 870; Struthers-Ziegler Cooperage Co. v. Farmers’ Mfg. Co., 233 Mich. 298, 206 N. W. 331; Standard Paint & Lead Works v. Spruill, 186 N. C. 68, 118 S. E. 891; Brown v. Price, 207 Ky. 8, 268 S. W. 590; Browning-Ferris Mach. Co. v. Thomson, (Tex.) 58 S. W. (2d) 183; Rosenbaum Hardware Co. v. Paxton Lbr. Co., 124 Va. 346, 97 S. E. 784; N. W. Helm Feed & Coal Co. v. Butler County Milling Co. , (Mo.) 269 S. W. 630; Olsen v. McMaken & Pentzien, 139 Neb. 506, 297 N. W. 830; Hostler Coal & Lbr. Co. v. Stuff, 205 Iowa 1341, 219 N. W. 481; Gorman v. Kennedy, 126 Mich. 182, 85 N. W. 458; Rivers Bros. Co. v. Putney, 27 N. M. 177, 199 P. 108; Turlock Merchants & Growers v. Smith, 80 Cal. App. 263, 251 P. 683; Holt v. Pie, 120 Pa. 425, 14 Atl. 389. These peaches were perishable, and the only showing made is that appellant promptly notified respondent that it refused to accept the peaches because they did not conform to the contract and offered to return them or hold them for the seller’s disposition. (J. I. Case Co. v. Bird, 51 Ida. 725, 11 P. (2d) 966; 95 A. L. R. 764n, 774n; 127 A. L. R. 141n, 143n. Under these circumstances, in addition to the statutory authority making the buyer the bailee, *585 there operated the rule that the buyer should do everything to lessen injury or damage, which, of course, required the immediate sale of these peaches since they were perishable; and such sale did not amount to an acceptance under Sec. 62-308, as a matter of law. It presented a jury question which should not have been foreclosed against appellant by an instructed verdict. “It was midsummer when the cargo of peaches, from Georgia, inferior in quality to those for which the defendant had contracted and hád a right to expect, arrived in Providence, where there was no market for such fruit. The defendant forthwith notified the plaintiff by telegraph of its refusal to accept them, and asked for instructions concerning the disposal of the peaches in Boston, where there was a market for that grade and quality of fruit. The plaintiffs refused to instruct the defendant in the matter, and claimed performance of their part of the contract. The defendant confronted this condition: A car load of perishable goods, abandoned by the owner, had been left in its charge by the railroad company, which looked to the defendant for payment of the freight. In order to save the goods and protect the owners to any extent, immediate action was imperatively necessary. Ample notice had been given to the owners without aváil. Evidently they had doubts as to the sincerity of the defendant’s refusal, and were too far away to investigate for themselves. Moreover, they made no attempt to employ any agent to look after their interests in Providence. The defendant could have rested upon its rights and remained inactive, with the result that, unless the plaintiffs changed their views regarding the matter and took some steps looking toward the disposition of the fruit, or the railroad company sold the same to pay freight charges, or something unlooked for intervened to prevent it, the peaches would have perished without benefit to any one. In the absence of the plaintiffs, unrepresented, the defendant, having knowledge of the existing conditions, and having the goods cast upon it in this emergency, not only had the right to protect itself from the freight charges, but also to prevent the owners from needlessly sacrificing their goods without benefiit, and at a total loss to themselves, with additional freight charges, through ignorance and obstinacy. Tt not infrequently happens that the seller, when notified that the goods are not in conformity with the contract, and when requested to remove *586 them, fails to do so, claiming that the contract has been properly fulfilled. Under these circumstances it may be clearly the best thing to do, from a business standpoint, for the buyer, in whose possession the goods are, to sell them at once and leave the question whether the goods fulfilled the terms of the contract or not to subsequent determination. Where goods are perishable, or expensive to keep, or of fluctuating value, any other course is attended with loss to one party or the other. Accordingly it has been held, and it seems reasonable, that the buyer, though refusing to take title because the goods are not what he bargained for, may, after notifying the seller of his rejection and requesting him in vain to remove the goods, resell them on account of the seller.’ [Citing authorities.] “An application of the Golden Rule is indicated in cases like the present, and for such application the defendant ought not to be penalized through a technicality. As the absent plaintiffs had no agent to take care of their interests, and as it was necessary that their interests should be cared for to save them from loss, the defendant had a right to act as agent for them ex necessitate rei.” (Descalzi Fruit Co. v. William S. Sweet & Son, 80 R. I. 320, 75 Atl. 308, 27 L. R. A., N. S. 932.) (Sorensen v. Webb, 37 Ida. 13, 214 P. 749; White v. Schweitzer, 221 N. Y. 461, 117 N. E. 941; Barnett v. Perrine (Tex.) 250 S. W. 1111.) An enlightening case which construes the uniform sales act the provisions being identical with our statute, and under circumstances very similar to the instant situation is Wilson & Co. v. Werk Co., 104 Ohio 507, 136 N. E. 202, 24 A. L. R. 1438; and the note thereto appended at 1445 contains cases supporting the proposition contained in the statute that where the seller refuses to receive the property rejected by the buyer on account of breach of warranty, the resale by the buyer to the account of the seller of the perishable property is the proper and, in fact, the only procedure to be followed. (Sorensen v. Webb, supra.) It must be kept in mind that the question involved is the correctness of the order of the trial court giving an instructed verdict, which amounts to a nonsuit. We are passing only upon the question of whether or not there was sufficient evidence to go to a jury. Under the above authorities it was clearly contrary to the sales statute and its construction to refuse to permit the case to go to the *587 jury. (Walker v. Idaho Lettuce Co., 44 Ida. 478, 258 P. 931; Thiessen Land Co. v. Metz Livestock Co., 61 Ida. 161, 99 P. (2d) 50.) The facts in Gross Mfg. Co. v. Redfield, 48 Ida. 399, 282 P. 487, so clearly distinguish it from the situation herein that further elucidation as to its inapplicability is unnecessary. Appellant’s conduct has been entirely consistent under the sales statute in its insistence that, first, the peaches were not of the grade contracted for, second, and on account thereof, rescission, prompt notice thereof, and offer to return, rejection and renunciation of further responsibility by respondent necessitated the third step, sale by the buyer and tender of the proceeds, which, though rejected, is all that respondent is entitled to if appellant makes its case before a jury and secures a verdict. On the other hand, of course, these contentions are disputed by respondent. The cause should have been submitted under proper instructions to a jury to determine the issues as above outlined and presented. The cause is reversed and remanded with directions to grant a new trial. Costs to appellant. Budge, J., and Koelsch, D.J., concur.