Cadillac Machine Co. v. Mitchell-Diggins Iron Co.

171 N.W. 479, 205 Mich. 107, 1919 Mich. LEXIS 470

• Court: Michigan Supreme Court
• Decided: April 3, 1919
• Docket: Docket No. 17
• Status: Published

Opinion

Brooke, J.

(after stating the facts). Broadly speaking, the plaintiff makes the following contentions:

“(1) A completed sale was made of each of the January, February and March installments of iron and the title to such iron passed to the plaintiff.

“(2) The neglect and failure of the plaintiff to make prompt payment of the February, March and April invoices covering the quotas of iron for January, February, and March was not a material breach of the contract which justified the defendant in rescinding the entire contract.

“(3) The February installment was paid for by defendant’s acceptance of plaintiff’s check of July 7, 1917, for $2,660 which was directed by the plaintiff to be applied in payment of this item and therefore plaintiff was entitled to such iron upon demand.

“(4) There was no error in admitting in evidence checks and documents passing between the parties bearing date after June 30,1917, and in admitting testimony relative to transactions taking place after that, date.”

On behalf of the defendant it is contended that:

(1) The plaintiff’s default in payment according to the terms of the contract clothed the defendant with the right to cancel the entire contract.

(2) That there was no completed sale of the February and March quotas.

(3) That the retention by defendant of plaintiff’s check of July 7th was not a waiver of cancellation or rescission. Q

(4) That the letters, checks and tenders of payment since made by the plaintiff after July 1, 1917, were not material to the rights of the parties hereto and that defendant’s objection to testimony relative thereto should have been sustained.

It is asserted by counsel for plaintiff that section 3 of the uniform sales act (3 Comp. Laws 1915, § 11834) provides that all sales and contracts to sell, whether verbal or written, are subject to the provisions of the act, and, based upon this assertion counsel for plaintiff seek to secure rights in the plaintiff and impose liabilities upon the defendant under the provisions of the act rather than under the terms of the contract. The contract itself, it seems to us, is very simple, and all of its terms are such as the parties had a legal right to make. The terms of the contract, therefore, must govern the rights of the parties thereunder. The statute may properly be considered in determining the bearing of the acts of the parties upon those terms. The case is somewhat peculiar in that, in essence, there is no dispute between the parties upon questions of fact. The only difference between counsel arises when legal conclusions are to be drawn from undisputed facts.

The first important question presented upon the record is in our opinion whether under the terms of the contract and the acts of the parties in relation thereto, there was a completed sale of the January, February and March allotments of iron, the title to which as a result of the contractual relations, and the acts of the parties passed from the defendant to the plaintiff. Bearing upon this question the books of the defendant show that it invoiced the January quota on February 1st; the February quota on March 15th and the March quota on April 21st and on the date of each invoice charged to the plaintiff in its regular account the contract value of each monthly quota. At the time the March quota was invoiced no payment had been made by plaintiff on the January and February quotas although both were then past due. Following the making of the invoice for the March quota on April 21st, defendant on May 1, 1917, rendered a general statement to plaintiff in the following terms:

“Statement.

“Cadillac, Mich., May 1, 1917.

“Cadillac Machine Co.

“In account with

“Mitchell-Diggins Iron Company,

“Manufacturers

“Lake Superior Charcoal Pig Iron.

Date. Car No. Invoice. Freight. Net.

Balance $5,320.00

Apr. 2 2925 .................. $1,120.00

Apr. 12 Analysis, etc.....$20.95

Apr. 21 .......................... 2,660.00

Apr. 24 .......................... 920.00

4,700.00

$10,020.00

20.95

$10,040.95

Cr. 20.95

$10,020.00

Interest.

Jan. quota $2,660.00 2% Mo. 6 per cent. $33.25

Feb. quota $2,660.00 1% Mo. 6 per cent. 19.95

Mar. quota $2,660.00 % Mo. 6 per cent. 6.65

$59.85

$10,079.85”

It will be noticed in this statement that .defendant charged the plaintiff two and one-half months’ interest on the January quota, and one and one-half months on the February quota and one-half month on the March quota. On May 19th after the receipt of this statement by the plaintiff, plaintiff sent to defendant and defendant credited the plaintiff with the sum of $2,660 which paid for the January quota, if interest is disregarded. For six weeks thereafter the matter stood unchanged by any act of either party except that on one or two occasions an officer of the plaintiff company suggested to an officer of the defendant company that the account should be liquidated by a payment in promissory notes in place of cash which suggestion was not complied with by defendant. On June 30, 1917, defendant issued to plaintiff a credit memorandum for $5,320, covering the February and March quotas which had theretofore been charged to plaintiff on the books of the defendant company. Immediately after the receipt of the said credit memorandum plaintiff attempted to protect its rights by the course detailed in the finding of facts. Under the terms of the contract default on the part of the plaintiff gave to the defendant the right to do one of two things: To cancel the contract, or to postpone shipments of future installments until prior shipments were paid for. So far as the record discloses the defendant availed itself of neither of the rights provided in the contract until June* 30, 1917, unless its failure to invoice the quotas of April, May and June, shall be eonstrued as an intention on its part to notice plaintiff’s failure to pay in accordance with, the contract terms. This act so far as it has any bearing upon the rights of the parties against each other, it seems to us, indicated on the part of the defendant the intention to—

“postpone shipments of future installments until prior shipments are paid for,”

—rather than to cancel the contract. We reach the conclusion, therefore, that up to the 30th of June there was on the part of the defendant no cancellation of the contract because of plaintiff’s default in payment. The authorities, as well as the provisions of the uniform sales act, are to the effect that the question of when title to property passes is one of intention to be ascertained from the terms of the contract and from the circumstances of the case. Illinois Glass Co. v. Horse-Radish Co., 166 Mich. 520, and Germain v. Loud, 189 Mich. 38. Looking at the matter in the light of the situation of the parties and their acts in relation thereto, we think that it was the intention of both parties to the contract that the property in each monthly quota should pass from the vendor to the vendee at the time it was invoiced. As bearing upon this question it should be remembered that the character of the product sold was such that segregation from the common stock was not necessary in order to effectuate the transfer of title. Defendant was producing about one hundred tons of iron daily, a large percentage of which was of the grade covered by this contract. While it did not actually set apart in its yard — appropriate—133 tons of iron each month to cover the invoices to plaintiff, it nevertheless had agreed so to do and it had rendered to plaintiff, on May 1st, a statement of account in which it had charged plaintiff with interest on the overdue payments for such invoices. This course followed by the defendant at a time when plaintiff was in default was wholly inconsistent with an assertion of its right to cancel under the contract for such default. It was, in effect, an affirmance of the sale and a notice to plaintiff of its abandonment of its right to cancel for such default as had occurred up to that time. Thereafter, and on the 19th day of May, it credited plaintiff with $2,660 upon the contract although the payment was long overdue. This act, too, is not without significance when the situation of the parties at that time is considered.

We are unable to find anything in the record touching the acts of the plaintiff with reference to the contract which tends to indicate on its part abandonment or the desire to be released from the legal obligations imposed thereby. Plaintiff had some difficulty in financing the payments as they matured of which defendant was advised. Such a situation, however, arises not infrequently in commercial affairs and of itself affords no ground for cancellation. Plaintiff’s ■failure to pay according to the contract terms was a ground for cancellation, as to the January and February quotas; this remedy, however, was not invoked by defendant.

We now come to a consideration of the effect of the credit memorandum issued by defendant to plaintiff on June 30th. In the light of the acts of the parties with reference to the account up to that time we are of the opinion that the issuing of this credit memorandum was ineffectual to change the rights of the plaintiff as they had theretofore been fixed with reference to the January and February quotas. While the act in itself was perhaps equivocal it seems to us that it can only be fairly construed as an attempt on the part of the defendant to notify the plaintiff that it considered itself relieved from any further obligation under the contract, and that it was cancelled. Whether this is true or not it is' undisputed that on July 10th the parties in interest had an interview at which it was made clear to plaintiff’s representative that defendant considered the contract cancelled. This notice, like the credit memorandum, could not affect the rights of the parties with reference to the first two quotas which had become fixed. What effect did it have upon plaintiff’s rights under the contract to the March, April, May and June quotas? The contract recites:

“If shipment is made in installments, this contract for all purposes shall be treated as separate for each installment.”

On behalf of the plaintiff .it is asserted that inasmuch as the contract, as modified, provides that invoices for each month’s quota should be issued and as defendant never invoiced the quotas for April, May and June, there was on the part of the plaintiff no default as to those quotas, and therefore no right on the part of the defendant to cancel, growing out of a failure to pay for those quotas. It is further urged that this being a sale of goods, by installment the seller cannot rescind or refuse performance unless the buyer’s default is made under such circumstances as justifies an inference that he repudiates the entire contract, citing West v. Bechtel, 125 Mich. 144 (51 L. R. A. 791), and Welsh v. Michigan Maple Co., 161 Mich. 16. The difficulty with this position is that the contract provides for more than a mere sale of goods by installment. It preserves definitely in the vendor the absolute right of cancellation:

“If the buyer fails to make payment when due.”

In neither of the cases cited did the contract contain any such provisions. Leaving out of the question plaintiff’s default as to the April, May and June quotas, it was nevertheless clearly in default on the March quota, when on July 10th the contract was definitely repudiated by the defendant. We are unable to see how the provision that:

“This contract for all purposes shall be treated as separate for each installment,”

—deprives the defendant of its right to cancel. This language must be read in conjunction with the earlier provision of the contract providing for cancellation of the contract or postponement of shipment of future installments. It is true that because of its own acts such cancellation cannot be made effective as to the February quota, but wé can see no reason why the plaintiff’s default as to the March quota cannot be made the basis, of a valid cancellation as to the balance of the contract. Defendant’s acts in billing for the three quotas, January, February and March on May 1st aiid adding interest thereto and subsequently crediting defendant with $2,660 on May 14th while conclusive as we have seen against defendant’s contention as to the February shipment cannot affect its rights as to the March shipment because at that time no default as to said March shipment had occurred. Under our view of the case plaintiff is entitled to recovey by reason of the failure of defendant to deliver the February quota, but cannot recover for failure to deliver the March, April, May and June quotas because the defendant cancelled the contract for a valid reason on or about July 10th. This conclusion renders it unnecessary to consider the question of the misapplication of payment by plaintiff to defendant of the $2,660 on July 7th because whether applied to the February quota or not plaintiff would be entitled to recover for that shipment.

The judgment is affirmed.

Bird, C. J., and Ostrander, Moore, Steere, Fellows, Stone, and Kuhn, JJ., concurred.