Texas Star Flour Mills Co. v. Moore

177 F. 744, 1910 U.S. App. LEXIS 5345

• Court: District Court, W.D. Michigan
• Decided: March 21, 1910
• Status: Published

Opinion

PHILIPS, District Judge

(after stating the facts as above). As the dealings between the parties, resulting in the contract tof sale of the wheat in question, is evidenced by telegrams and letters between them, •they must determine what the contract was.

The first correspondence, beginning on the 3d day of February, 1908, pertained to No. 2 wheat, and resulted in n,o contract, for on the 4th day of February, 1908, the plaintiff wrote the defendants saying:

“Your message quoting soft wheat received, but sorry we are unable to trade with you. Do not anticipate placing further orders in Kansas City for the present.”

On the' 5th day of the month, and evidently before the letter above quoted was received, the defendants telegraphed the plaintiff:

. “Oiler 10,000 bushels No. 2 red winter wheat 97% within 10 days. Answer by telegraph immediately.”

The plaintiff did not answer by telegraph, but on that date wrote to the defendants saying:

“As previously advised it is not necessary for you to wire us these quotations unless we request them, as we are not buying anything from your market in soft wheat now. We are of course always glad to hear from you, but telegrams are an unnecessary expense. Will be pleased to have you write us conditions frequently.”

Evidently before the receipt of the last above letter, the defendants wrote the plaintiff, in answer to its letter of February 4, 1908, saying, in substance, that, whenever the plaintiff was in the market for any red wheat, they would be pleased to take up the matter by wire and then would endeavor to trade. It was in this letter the defendants stated the red wheat, then offered, was like the 20,000 bushels shipped in November previously. As there was no response to this by plaintiff, the defendants’ proposal was at an end. Thus matters stood until the 18th day of February, 1908, when the defendants sent to the plaintiff a telegram offering sample red wheat at iy2 cents over Chicago May f. o. b. Kansas City. “Our weights and inspection within 10 days. Shipment subject to your immediate reply by telegraph.” To which, on that day, the plaintiff replied by telegram, directing to express sample and make price 10,000 bushels No. 2 winter wheat. From which it is manifest that the proposals made by the defendants embraced two distinct features: (1) That it was on defendants’ weight and inspection. (2) That it was subject to the plaintiff’s immediate reply by telegram. The reply sent was to express sample and make price 10,000 bushels No. 2 red wheat. The defendants did not accept such counter proposition to ship No. 2 red wheat. But their proposal was a sale to be made by sample; and, as no price was fixed, the contract was yet incomplete. Thereafter the defendants answered: “We booked you 10,000 bushels sample red wheat 93% Kansas City” — enquiring as to what routing the plaintiff wished.

Thus the purchaser was again advised that what the defendants were offering and selling was sample red wheat at the price of 93% at Kansas City f. o. b. The answer made to this by the plaintiff was simply a direction as to the routing of the cars.

The additional 10,000 bushels of wheat was sold on telegram of February 19, 1908, which offer the plaintiff then accepted. As the defendants had sold 5,000 bushels of the 15,000 bushels offered, they shipped only 10,000 bushels, which the plaintiff accepted.

The only difference, therefore, in the two transactions of the 18th and 19th days of February, is that the first shipment was “on our inspection,” and the second named Hiddleston as the .inspector. Both sales were by sample and on inspection on Kansas City Board of Trade. While the sample sent was not a large express sample as requested by the plaintiff, the sample sent was received by the plaintiff without objection made at the time to the smaller quantity; and the inspection was made as proposed at Kansas City. The official certificate thereof was made by the duly ’constituted and recognized inspector at Kansas City according to the rules and regulations of the Board of Trade, with which the plaintiff, as a dealer, was familiar. Confirmations of these sales were duly forwarded by the defendants; the first on the 38th day of February, 1908, reciting on its face that “this contract is subject to the rules and regulations of the Kansas City Board of Trade,” and further stating on its face, “Subject approval J. J. Hiddleston.” The other sent on the 20th day of February, 1908, contained the same recitations on its face. These confirmations were accepted by the plaintiff on receipt, and returned to the defendants without objection.

These confirmations with the acknowledgement thereof were a clear recognition by the plaintiff: (1) That the transaction was subject to the rules and regulations of the Kansas City Board of Trade: and (2) that it was subject to Hiddleston’s inspection. If the plaintiff did not so understand the telegrams and letters, the time for it to say so was on receipt of the confirmations. No more wholesome rule for the interpretation and application of such contracts between parties is to observe the construction placed thereon by them before any litigation arises between them respecting the same. This rule was expressed as follows in Moore v. Beiseker et al., 147 Fed. 367, 77 C. C. A. 545:

“There lias never been any rule of construction of contracts more instinct with the spirit of justice and practical sense than that which declares that, where the provisions of a contract become the subject of controversy between the parties, the practical interpretation placed thereon by their acts, conduct, and declarations is of controlling force. This for the reason that the interest of each leads him to a construction most favorable to himself, and, when differences have become serious and beyond amicable adjustment, it is the better arbiter.” *

So it was said in Long-Bell Lumber Company v. Stump. 86 Fed. 578, 30 C. C. A. 264:

“Courts may use the actual construction put thereon by the conduct of the parties under the contract as a controlling circumstance to determine the construction which should be put upon the contract in enforcing the rights of the parties. The most satisfactory test of ascertaining the true meaning of a contract is by putting ourselves ‘in the place of the contracting parties when it was made, and then considering, in view of all the facts and circumstances surrounding them at the time it was made, what the parties intended by the terms of their agreement.’ And when this intention is made clear by the course of their subsequent dealing and action thereon, it must prevail in the interpretation of the instrument, regardless of inapt expressions or careless recitations.”'

See, also, District of Columbia v. Gallaher, 124 U. S. 505, 8 Sup. Ct. 585, 31 L. Ed. 526.

26. As shown by the testimony of its manager, the plaintiff was quite familiar with the rules of the Kansas City Board of Trade, among which was the following:

“The certificate of any inspector, etc., appointed by the said board as to the quality, etc., of any such article, etc., shall be evidence between buyer and seller of the quality, grade or quantity of the same, and shall be binding upon the members of this association, and others interested or requiring or assenting to the employment of such inspector, etc.”

That inspection was made by the sample furnished by the defendants to the inspector, and the part sent by them to the plaintiff.

There is no charge preferred in the petition of any fraud respecting the sample that was sent, or respecting the inspector’s certificate. This action is a' simple suit at law for breach of contract. The plaintiff would have been required to resort to a suit in equity surcharging the certificate and sample with fraud, to avoid the certificate. The authorities are all one way touching this proposition. Accordingly', Mr. Justice Harlan, in Martinsburg & Potomac R. R. Co. v. March, 114 U. S., loc. cit. 553, 5 Sup. Ct. 1037 (29 L. Ed. 255), said:

“Upon tbe supposition that the engineer made such a certificate as that provided by the contract, there is no allegation that entitled the plaintiff to go behind it; for there is no averment that the engineer had been guilty of fraud, or had made such gross mistake in his estimates as necessarily implied bad faith, or had failed to exercise an honest judgment in discharging the duty imposed upon him. The first count of the declaration was, therefore, defective for the want of proper averments showing plaintiff’s right to sue on the contract,” etc.

. It would have been utterly unbusiness like and abnormal for the vendee to expect, or for the parties to have intended, that the inspection of the wheat should be committed to the vendee at Galveston. The well-established rule of law is that the contract f. o. b. means a delivery at Kansas City, and that that was the place of inspection. Fraser v. Ross, 1 Pennewill (Del.) 348, 41 Atl. 204; Stafford v. Pooler, 67 Barb: (N-Y.). 143; Armsby v. Blum, 137 Cal. 552, 70 Pac. 669; Western Construction Co. v. Romona, etc., Stone Co., 41 Ind. App. 229, 80 N. E. 856; Brownlee v. Bolton, 44 Mich. 218, 6 N. W. 657.

Counsel for the plaintiff has cited the court to a number of authorities based upon rules of law respecting implied warranties as to soundness and quality of a commodity or article sold. They have no application here, as the plaintiff has declared upon an alleged expressed warranty. On such a declaration no recovery can be had upon a claim of implied warranty. Pemberton v. Dean, 88 Minn. 60, 92 N. W. 478, 60 L. R. A. 331, 97 Am. St. Rep. 503; Duncan v. Fisher, 18 Mo. 404; Irwin v. Chiles, 28 Mo. 578; Harris v. Railroad Co., 37 Mo. 307.

The petition, for instance, counts upon the statement made in the first letter written by the defendants February 3, 1908, “You know the quality of our red wheat,” etc. It would be sufficient of this to say that, as the plaintiff expressly declined to enter into any contract based thereon, it ought not now to fall back on that representation. Two weeks intervened thereafter before the defendants renewed by telegram proposals, and the contract was closed upon what supervened, which was not for the sale of No. 2 wheat such as had been sold the fall before, but was by sample, and subject to inspection. It is too absurd for serious consideration for the representatives of the plaintiff company now to put forth the claim that they understood the defendants -were selling them the wheat as No. 2 hard, the same as that delivered in the preceding fall, when the evidence shows, without contradiction, that the market price of such wheat at the time was approximately 3 cents per bushel more than the price at which they were offering the wheat in question. As alert millers, running such business at Galveston, they were well advised from the daily market quotations of the current price of such No. 2 hard wheat.

I know of no recognized rule of law by which a statement made respecting the quality of an article offered for sale, where the offeree had declined to accept the proposal, can be carried forward and attached to a subsequent convention between the parties evidenced in writing which does not mention such former assurance as an integral part of the present agreement. - The law, I think, is to the contrary. Benjamin on Sales, § 610, succinctly states—

“that antecedent representations made by the vendor as an inducement to the buyer, but not forming part of the contract when concluded, aro not warranties.”

See, also, 1 Lawson on Rights & Remedies, § 212; Ashcom v. Smith, 2 Pen. & W. (Pa.) 211, 21 Am. Dec. 437; Iron Works v. U. S., 34 Ct. Cl. 174.

4But counsel for plaintiff says that in one of the subsequent letters, wherein the defendants were trying to renew negotiations, they used the expression this is “good wheat.” Aside from the testimony of witnesses, commission grain dealers on the Board of Trade, that .such term has no defined significance in the trade, it is not too much to say that it has no legal force, as it is mere puffing. In Hogins v. Plympton, 11 Pick. (Mass.) 97, the writing adverted to “good fine wine,” and “good Hermitage.” Of this Chief Justice Shaw said;

“We are of opinion that the writing in question cannot be considered as a warranty that the wine was of any particular description or quality. One objection is that the words are too uncertain and indefinite.”

In Holden v. Dakin, 4 Johns. (N. Y.) 421, paint was sold as good paint, which proved to be useless. The court held that it constituted no express warranty, saying:

“Here was no express warranty as to the quality of the paints. All that was proved upon the trial was that the clerk of the vendor sold the paints for good paints and at a fair price; but this was not sufficient to raise a warranty.”

Likewise, in House v. Fort, 4 Blackf. (Ind.) 293, in an action for breach of warranty for the soundness of a horse, it was held that the court should have directed the jury:

“That if the defendant at the time of the exchange, on being questioned as to the horse’s eyes, said ‘they are as good as any horse’s eyes in the world,’ this does not amount to a warranty.”

The rule is well stated in Mason v. Chappell, 15 Grat. (Va.) 572, loc. cit. 583, as follows:

“No affirmation, however strong, will constitute a warranty unless it was so intended. If it is intended as a warranty, the vendor is liable if'it turns out to be false, however honest he may be in making it; but, if it is intended as a mere expression of opinion or simple praise and commendation of the article, he is not liable, unless it can be shown that he knew at the time it was untrue. And in that case it is inaccurate to say that he is liable for a breach of his warranty. His liability arises from the fraud which he was guilty of and should be enforced in an action on the case for deceit.”

Plaintiff’s counsel relies much upon the ruling in Columbian Iron Works v. Douglas, 84 Md. 44, 34 Atl. 1118, 33 L. R. A. 103, 57 Am. St. Rep. 362, which holds that, in a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and, therefore, the delivery of some other similar article is a substitution and a breach of the contract. In which case, no question of warranty is involved. That was the sale of certain quantity of steel scrap, consisting only of clippings, etc., from the steel plates of cruisers built by the defendant for the United States navy. After the steel scrap was delivered and paid for, it was found that, of the total 159 tons shipped, 89 tons were cruiser steel and 70 tons were not, and the plaintiff was obliged to sell the 70 tons for a much less sum than he paid for it. It was held that plaintiff was entitled to recover the difference between the price paid and the value of the article delivered. It was further held that where there is a sale of goods by description, subject to inspection by the buyer, the description is not subordinated to the inspection, unless the parties-both agree to substitute an inspection by the buyer for the description furnished by the seller.

That is not this case. The concrete case here involved is .this: The sale was made by sample subject to inspection at Kansas City. The plaintiff so understood it, for it asked that sample be forwarded. It accepted the defendant’s offer, and acted thereon, which stated “on :our inspection” and “inspection by Hiddleston.” It approved the confirmation of the sales sent by the defendants, expressly reciting the fact respecting such inspection. As applied to such state of facts, the later ruling by the Maryland court in Lawder Co. v. Mackie Grocery Co., 97 Md. 1, 54 Atl. 63 1L. 63 L. R. A. 795, is more in point. This was an action for breach of contract on the sale of shipment of cases of tomatoes. The contract was made in Baltimore, Maryland. “Buyer to give shipping instructions when required by seller. To be delivered as packed during season of 1901, f. o. b. Baltimore.” Touching the question raised by the purchaser as to the right to have the articles inspected before acceptance, the court said:

“The mere fact (hat the buyer has the right to Inspect goods before acceptance does not necessarily mean that the inspection is to be made at the residence or place of business of tlie buyer. He might inspect at the seller’s place of business; but, if the contract provides for the delivery at a particular place, he must accept or reject at that place, unless otherwise provided for in the contract. In short, a contract to deliver at one place cannot be made to mean delivery at another place, because the buyer lives Hiere and has a right to inspect Hie goods, and there is no uncertainty as to the place of delivery in this contract as would justify the court in holding that it was at New Orleans, because the appellee had its place of business there.” •

Further on the court said:

“If they determine that by their contract it must control, and if it is silent as to inspection, but it is as clear as this is as to delivery, any inspection that is desired pro tern must be made before or at the time of delivery, when the terms are cash.”

In short, it was held that the words “f. o. b.” indicated that the seller was to deliver the goods at Baltimore, free on board, to the carrier. The goods went thenceforth at the risk of the buyer, and, even without any specification as to the place of inspection, the implication of law is that it was to he Baltimore, the place of the shipment. In the case at bar, it is manifest from the correspondence that Kansas City was the place of delivery, and the inspection was to be made there, and by a designated person, to determine whether or not the wheat corresponded with the sample. Ilis certificate was to be the evidence of that fact, and, until set aside for fraud, it is conclusive. Cook v. Foley, 153 Fed. 41, 81 C. C. A. 237; Wood v. Railway, 39 Fed. 52. And, in addition to this, the defendants were not selling wheat on a written description, but by sample. In their letter of February 18, 1908, to the plaintiff, they expressly stated:

“You of course, understand that we are not selling this as 2 red wheat, but are selling it like sample and guarantee it to be fully equal to same.”

That was before the wheat was received by the plaintiff, and it received it with knowledge of that statement by the defendants. By its silence — making no protest — it acquiesced in and recognized that that was the contract the defendants were acting under.

In the absence of any charge of fraud upon the part of the defendants in not having submitted the proper sample to the inspector at Kansas City, and in the absence of any charge that the sample sent by the defendants to the plaintiff did not correspond with the sample submitted to the inspector at Kansas City, 1 inust rule that the plaintiff cannot recover.