
    Charles W. G. E. Schipper and Pierre J. Smith, Composing the Firm of Smith & Schipper, Respondents, v. William F. Milton and Gustavus A. Morgenroth, Jr., Composing the Firm of William F. Milton & Company, Appellants.
    
      •Contractfor the sale of merchandise — its construction affectedby custom — purchasing agents may sue as trustees of an express trust for its breach.
    
    Where a contract for the sale of “four thousand 'hales current quality Manila Hemp,” and of “one thousand, bales current Leyte, guaranteed equal good current quality Manila Hemp,”'provides that there shall be “no red Hemp.” “The Hemp to be of above described quality, sound and in. good order.” “Any dispute on quality to be settled by arbitration in usual manner,” the vendors may show that it is well known to all dealers in Manila hemp that each bale contains a considerable quantity of hemp of a quality different from that marked on the bale and that it is impossible for the vendor of a cargo of •hemp to deliver the precise quality specified in'the contract, and that, for this reason, there has arisen among dealers in hemp a well-established custom by which the quality specified in the contract is regarded simply as a measure of the value of the hemp to be sold; that if the parties to the contract of sale cannot agree upon the valuation, it is the custom to refer the question to arbitrators who inspect the hemp and fix the allowance to be made to the purchaser for the inferior hemp.
    Such a custom is not unreasonable and does not contradict the terms of the con- . tract, especially as the provisions of the contract that there should be “ no red Hemp ” .(which was the poorest quality), and that in case of any dispute as to the quality it should be settled by arbitration “in usual manner,” appear to contemplate the existence of the custom. -
    The provision of the contract relative to the Leyte hemp, namely, “ one thousand bales current Leyte, guaranteed equal good current quality Manila Hemp,” is not a guaranty that the Leyte hemp should be all good current quality Manila hemp, but is a guaranty that in 1,000 hales of Leyte hemp there should be found thé same quality of Hemp as would be found in 1,000 bales of Manila hemp.
    McLaughlin, J., dissented.
    'Where a sold note provides, “Sold for account of Mess. Smith & Schipper, agents for W. F. Stevenson & Ccl,” Smith & Schipper may, under section 449 of the Code of Civil Procedure, maintain an action for the breach of the contract in their own name without joining Stevenson & Co. with them. Per Van Brunt, P. J., and Rcmset, J.
    Appeal by the defendants, William F. Milton and another, composing the firm of William F. Milton & Co., from, a judgment of the ¿Supreme Court in favor of the plaintiffs, entered in the office of the •clerk of the county of New York on the 8th day of April, 1899, .upon the report of a referee.
    
      Edmonds Putney, for the appellants.
    
      Austen G. Fox, for the respondents.
   Rumsey, J.:

The action was brought to recover damages for the refusal of the defendants to accept a quantity of Manila hemp which the plaintiffs had sold to them. It was referred to a referee who found for the plaintiffs and directed a judgment for- the damages which they had sustained because of the failure of the defendants to accept the hemp, and from the judgment entered Upon that report this appeal is taken.

The first objection made by the appellants is, that the plaintiffs had no standing in court to maintain this action. The allegation of the complaint was, that on the 29th of January, 1894, the plaintiffs entered into an agreement with the defendants whereby they agreed to sell and the defendants agreed to buy a certain quantity of hemp ; that the terms of the contract would more fully appear from the sold note of a broker, a copy of which is hereto.annexed * * ■ and which is to be taken as á part of this complaint.” It appears by the sold note, which, by this allegation, is to be read as part of the complaint, that the contract was made by the plaintiffs as agents for Messrs. W. F. Stevenson & Co., Manila, and that this firm was in fact the seller of this hemp to the defendants and that the plaintiffs ■ made the contract for them. This brings the case precisely within section 449- of the Code of Civil Procedure, which provides that a trustee of an express trust may sue without joining with him the person for whose benefit the action is prosecuted, and defines a trustee of an express trust as a person with whom or in whose name a contract is made for the benefit of another. Within the plain reading of this section, of the Code, the plaintiffs- having made this contract for the benefit of W. F. Stevenson & Co., 'were entitled to maintain this action. (Considerant v. Brisbane, 22 N. Y. 389; Albany & Rensselaer Co. v. Lundberg, 121 U. S. 451, 454.)

Those portions of the contract' for the sale of the hemp which are material to the questions presented here are as follows : “ Sold for account of Mess. Smith. & Schipper, agents for W. F. Stevenson & Co.,. Manila. To Messrs. W. F. Milton & Co., about (4000) four thousand Bales Current quality Manila Hemp, at (5c) five cents H. S. Gold per lb. About (1000) one thousand Bales Current Leyte, guaranteed equal Good Current quality Manila Hemp, at (5£) five and one-.eighth cents H. S. Gold per lb. No red Hemp. * * * The Hemp to-be of- above described quality, sound and in good order. * * * Any dispute on quality to be settled by arbitration in usual manner.’’

The hemp arrived in due time at the port of New York, but when the vessel was discharged it was claimed" by the defendants that the quality of the hemp was inferior to that agreed to be delivered, and they refused to accépt it. That refusal was by letter, in which they said that they declined to accept the hemp by reason of inferior quality, but as this is a matter to be settled by arbitration, we suggest you store and insure the hemp for $ concerned pending result of arbitration.” The arbitration was.had and it was found that, a very considerable portion of the hemp was not of the-quality specified in the contract, and the arbitrators, according to..the usual .custom, reduced the price of the inferior hemp. After that had been done it was again tendered to the defendants at the price fixed by the arbitrators, but they again refused to accept it, and it was then sold, and this action is brought to recover the difference between the quice: brought at the sale and the amount which it is claimed was to-be paid by the defendants for the hemp, together with-storage and insurance.-

The plaintiffs claim that it was well known to all q>ersons dealing in Manila hemp that the quality of the.hemq) cannot be ascertained from the marks on the bales; that every bale is sure to contain a considerable quantity of hemp of a quality different from that marked on the outside of the bale, and that it is impossible for any one selling a cargo of hemp to deliver the precise quality which is specified in the contract; and, therefore, they claim that there has arisen among dealers in hemp a well-established custom by which the quality specified in the contract is regarded simply as a measure of the value of the hemp to be sold; and that whenever a cargo arrives, if the parties to the contract cannot agree upon the valuation, it is the custom to refer it to arbitrators, who shall inspect the hemp and fix the allowance to the purchaser to be made for the inferior hemp, and that upon such an arbitration the price to be paid is to be established and the rights of the parties depend.

The defendants claim that the evidence establishes no such custom, and that if it did the custom is unreasonable, unnecessary and contradicts the contract, and that for these reasons the rights of the parties cannot be affected by it.

The referee found that there was such a custom, and that the defendants, having resorted to arbitration pursuant to the terms of. the contract, they were bound to accept the hemp at the price fixed by the arbitrators. Whether the referee was correct in this conclusion is the question to be determined upon this appeal.

It is a well-established rule of law that parties to a contract on a subject-matter concerning which known usages prevail are deemed to have incorporated such usages by implication into their agreement if nothing is said to the contrary. (Hostetter v. Park, 137 U. S. 31; Newhall v. Appleton, 114 N. Y. 140; Brown v. Byrne, 3 El. & Bl. 703; Walls v. Bailey, 49 N. Y. 464; Humfrey v. Dale, 7 El. & Bl. 266.)

The first question presented is whether the facts established the existence of such a general and wmlbknown custom in this regard that the parties must be presumed to have contracted with reference to it. An examination of the contract will be of service in solving that question. The contract defines the quality of the liemp' and the number of bales of each quality and it prescribes that the hemp is to be of the above described quality.” So far it contains the usual and ordinary provision with regard to the quality of goods sold. It appears from the case, however, that the lowest quality of hemp in the market is red hemp, and the contract expressly provides that there shall be “no red Hemp,”. If the hemp was intended to be only of the prescribed quality and hemp of any other quality was under no circuinstances to be received, it is quite difficult to see .why there should be any provision' in the contract that no red hemp would be allowed; because if all the hemp was' to be-precisely of the quality prescribed it would necessarily follow that' red hemp was not to be received and could not be tendered as-a compliance with the contract, and when the parties to the contract take pains to say that there should be no red hemp it is almost necessarily to be inferred that they had in mind some-custom by which the particular quality which was specified in the-contract was not necessarily to be the quality which was to be deliv-. ered. In this connection, it is to be said that this is a mercantile-contract, and in getting at the construction of it,- it must be remembered that merchants are not in the habit of putting into their contracts stipulations to which they attach no importance or value. (Bowes v. Shand, 2 App. Cas. 455, 463; Browne v. Paterson, 36 App. Div. 167, 169.)

The contract also provides that any dispute as to the quality of the hemp shall be settled by arbitration in the usual manner. ■ The-meaning of these words is not absolutely plain, and parol evidence; may be fairly resorted to to explain them, and whatever the evidence establishes the fair intention of these words to be, may boused as controlling the construction of the contract to enable us to-get at the meaning of the provision.

Referring to the evidence, we find that all the witnesses sworn, for the plaintiffs were men accustomed to deal in hemp, and they testified that there was just such a custom as was found by the referee ;; that this custom is well established, is well" known, has existed for many years, and has been acted upon in contracts for the sale of hemp a very great many times. They testified further that every bale of Manila hemp contains hemp of varying qualities ;. that owing-to the way it is prepared for the market by the Philippines it is-practically impossible that any bale should contain the same quality throughout; that when it is put up it is marked as containing the; ■ quality of hemp that predominates in the bale, but that it is well known that such mark is not accurate; and, further, that it has. been the custom to provide in the contract of sale for arbitration upon the arrival of the hemp in port by which the actual quality of the hemp in the bale may be ascertained, if it is thought necessary to do so.' They testified that the price named in the contract is-intended to fix a standard for the price, which is to' be paid for the goods, and that When the arbitrator's find an inferior quality of-hemp in the bale they scale down the price so as to fix the value of the hemp in that bale, using the contract price as a basis for their valuation.

On the part of the defendants while Mr. Morgenroth, one of the junior partners of the defendants’ firm, testified that he was not aware of any such custom, yet it is quite clear that the referee would have been justified in refusing to rely upon his testimony, because it is entirely negative. He testified that he did not profess to have any large experience in the' business; and that is quite evident, because he could not remember that his firm had made any contracts between 1890 and 1893; he thought they made only'one in 1894, and was unable to tell when they made any other. The senior partner, Milton, who had been in. the business many years, was not in the country and was not sworn. One of the arbitrators, John Lund, who was sworn as a witness for the defendants, while he said that he. did not know of any custom that made it obligatory on the parties to accept the price fixed by the arbitrators, did testify that it was customary if the buyer thinks the hemp is inferior to the quality called for by the contract, to ask for an arbitration to fix the quality and price he is to take it at; that then arbitrators are named to examine the hemp, and he says that if they agree the buyer takes the hemp at the price they fix, but if they cannot agree an umpire is named and it is left to the umpire; if the hemp is only slightly inferior there is nothing more said about it, and the buyer takes it at the allowance fixed. If it is- very inferior then there is some more talk about it.

It is quite clear from all the testimony of Mr. Lund that there is substantially such a custom as the plaintiffs claim,- and that he himself was not only familiar with it, but that'he recognizes it as a well-established custom, so much so that he says “ we cannot get along without the system of arbitration. The necessity of that has been recognized ever since I have been in the trade. * * * As a matter of fact the cargoes do not arrive here of a uniform kind — uniform hemp.” The other witnesses sworn for the defendants know the general practice and say they do not recognize the exist, ence of a custom, yet upon a careful examination of their testimony it is quite clear that the difference between them and the witnesses for the plaintiffs is merely verbal, and that each, one, except Mr. Morgenroth, does substantially admit the existence, of the custom as testified to by the plaintiffs’ witnesses and as found by the referee.

But it is said that this custom is unreasonable, because it requires a party to accept goods of a different quality from that which he purchased. It must be remembered that all mercantile law is the result of well established customs. As is said by Mr. Justice Swayne in the case of Merchants’ Bank v. State Bank (10 Wall. 604, 651): The law merchant was not made. It grew. Time and experience, if slower, are wiser law makers than legislative bodies. Customs have sprung from the necessities and the convenience of business, and prevailed in duration and extent until - they acquired the force of law. This mass of our jurisprudence has thus grown, and will continue to grow, by successive accretions.” The men who deal in articles of this nature; who -are accustomed to large transactions, and seek to carry on business in such a way as to give them the least trouble and bring about the most satisfactory results, are certainly competent to fix the customs of their own trade ; and when it is found, as the referee in this case found, that men of that character, doing business "for along series of years, have agreed that a certain manner of doing business best suits their convenience, it almost necessarily results that the custom thus established is reasonable, because it is a manner of dealing between reasonable men which they have fixed upon as best adapted to promote their affairs. It is hard.to suppose that men who are dealing at arm’s length with each other, and who have the opportunity to know what is best for themselves,.would agree to any custom in their business which, on the whole, was not one which made it easier to transact it. The case might be very different if the custom was one established by an employer with his m'en, or a landlord with his tenant, for his own convenience, and where it is possible that he.may require the employee or the tenant to do business in some way not to his advam tage. In such a case the courts may well say.that a custom was unreasonable; but where a custom has been established by the consensus of independent men, who are so situated that they can deal with each other as they see fit, the presumption should be in every ease that the custom is a reasonable one unless the contrary, clearly appears. (Baxter v. Rodman, 3 Pick. 435; McMasters v. Pennsylvania R. R. Co., 69 Penn. St. 374.) It is said in the case of Cox & Co. v. Charleston, etc., Ins. Co. (3 Rich. 331, 333): “ Proof of a general custom furnishes a strong reason why we should regard it as reasonable. It must be sanctioned by general concurrence in its use for several years before it can be said legally to exist. ■* * * From proof of it as the general custom of the trade, we are bound, at least prima, facie, to conclude that it is reasonable.” The case of Crocker v. People's Mutual Fire Ins. Co. (8 Cush. 79) is to the same effect.

But it is said in addition that this custom tends to contradict the express terms of the contract. If there was in the contract anything more than an expression of the quality to be furnished, it might be said that that would be final and controlling, and that no other quality was to be delivered or accepted; but the provisions of the contract are that “ no red Hemp ” should be allowed, with the further provision that in case of dispute as to the quality it should be settled by arbitration in usual manner.” These provisions, coupled with the uncontradieted testimony as to what in the trade constitutes arbitration in the usual manner, indicate that the contract did not fix finally and once for .all the precise quality of hemp which was to be delivered. Mercantile contracts are not always to be strictly •construed. The intention of the parties is to be sought, and that intention would not infrequently be defeated if the" words were to be construed according to their usual import, and for that reason evidence is admitted to éxpound them and to arrive at the true meaning of the contract. When a custom has been proved to exist, the mere fact that it apparently varies the contract is not sufficient to exclude proof of the custom, because it is impossible, without changing to some extent its apparent effect, to add a material incident by showing that the words are not employed in their ■ usual meaning. (Brown v. Byrne, 3 El. & Bl. 703, 715.) So that unless as the result of the parol evidence the custom established, is contradictory to the express terms of the contract, it must be received for the purpose of explaining it, to enable the court to decide as to the rights of the parties as affected by the custom of which they were aware when the contract was made and which entered into 'then-agreement.

But it is said that while this may be so with regard to the 4,000’ ■ bales of current Manila hemp, it is not the case with regard to the 1,000 bales of current Leyte, as to which the contract guarantees the quality to be equal to “ Good Current quality Manila Hemp.” Undoubtedly if the word “ guaranteed ” was .to be understood as. meaning that the warranty was that the hemp in the 1,000 bales should all he good current quality of Manila hemp there would be great force in this argument. But a fair construction of the word does not warrant any such conclusion. It was not a guaranty that the hemp should be all good current quality Manila hemp, but it was a guaranty that the current Leyte should be equal to good current quality Manila hemp. That is to say, that there should be found in the 1,000 bales of ,Leyte the same quality of .hemp which would be found, in 1,000 bales of Manila. Giving this meaning to the provision,' and we think it is the only reasonable one, the construction is that the current Leyte would be accepted subject to the same Tules of arbitration as if it • had been good current quality Manila, and the contract was as a whole to be construed in view of the custom which the evidence established was understood by every one and which must be read into the contract.

For these reasons we conclude that the decision of the referee was correct and the judgment must be affirmed, with costs.

Van Brunt, P. J., concurred ; McLaughlin, J., dissented.

Ingraham, J. (concurring):

I concur with Mr. Justice Rumsey in the affirmance of this judgment, but it hardly seems to me necessary at this stage of the action to seriously discuss whether the complaint correctly describes the ■relation of the plaintiffs to the cause of action sued on. In the contract the plaintiffs state that they are agents for Messrs. W. F. Stevenson & Co., and while they do not in form make tlieir contract as such agents, they describe themselves as occupying that position. Under this contract the plaintiffs would have been personally liable to the defendants in case of a breach of the contract to deliver the hemp. Whether in fact they made the contract on their own behalf or as agents of W. F. Stevenson & Co., the evidence is uncontradicted that before the commencement of the action the plaintiffs had paid W. F. Stevenson & Co. what was due them as the proceeds of the whole of this hemp. The whole beneficial interest in the contract, therefore, had before the commencement of the action vested in the plaintiffs, and they were the real parties in interest in the enforcement of the contract, and clearly, I think, the ones entitled to maintain the suit to recover for a breach thereof by the vendee. If in the complaint they incorrectly described the relation that they occupied in bringing the' suit,-where it clearly appears that they were the real parties in interest and entitled tb recover, a case is presented where the complaint could be deemed to be amended to conform to the proof so as to sustain the judgment. The case has been fairly tried upon the merits and decided against the defendants, and there certainly is nothing in the record to justify a reversal of the judgment, because the plaintiffs have failed to suggest in their complaint that they were suing as trustee of an express trust, rather than in their individual capacity. As to the other questions discussed by Mr. Justice Rums by, I concur with him.

McLaughlin, J. (dissenting):

This action was brought to recover damages for the breach of a contract alleged to have been made between the plaintiffs and the defendants for the sale of Manila hemp.

The allegation of the complaint is : That on or about the 29th day of, January, 1894, these plaintiffs entered into an agreement with said defendants, through William S. Daland, broker in merchandise, whereby these plaintiffs agreed to sell to the defendants, and the defendants agreed to purchase from the plaintiffs, about four thousand (4,000) bales of current quality Manila Hemp, at five (5) cents, United States' gold, per pound, and about one thousand (1,000) bales of Current Leyte, guaranteed equal to Good Current quality Manila Hemp, at five and one-eighth (5£) cents, U. S. gold# per pound, excluding Red Hemp; and that the terms of the said agreement will more fully appear from the sold note of said broker, a copy of which is hereto annexed marked Exhibit A,’ and which is to be taken as a part of this complaint.” That portion of Exhibit .A which is- material to the question under consideration reads as follows:

“'Contract for Mamila Hemp.
“ New York, January 29j 1894.
“.Sold for account of Mess. Smith & Schipper, agents for W. F.. Stevenson & Co., Manila. To Messrs. W. F. Milton & Go., about (4000) four thousand Bales Current quality Manila Hemp at (5c) five cents U. S. Gold per lb, About (1000) one thousand bales Current' Leyte, guaranteed equal Good Current quality Manila Hemp at (5 1/8) five and one-eighth cents H. S. Gold per lb. No red Hemp. * *' * ”

The defendants, by their answer, denied the above allegations of the complaint ánd alleged as a defense, among others, that the contract referred to in the complaint was made with the firm of W. F. Stevenson & Co., of Manila, and not with the plaintiffs, whose only connection therewith was as an agent of Stevenson & Co. Upon the issue thus formed the parties went to trial, and it there appeared — . in fact, it does not seem to have been seriously questioned — that the contract referred to was made between the defendants and W. F. Stevenson &■ Co., and that the plaintiffs’ only connection .with it was as agent of Stevenson & Co. The referee has so found, and there is an abundance of evidence to sustain his finding. But, notwithstanding the fact that' the plaintiffs failed to prove' that they had ever made a contract with the defendants for the sale and delivery of the hemp, as allegéd in the complaint, nevertheless a recovery was permitted, which a majority of' this court is about to affirm, on' the ground that the plaintiffs are entitled, under section 449'of the Code of Civil Procedure, to maintain the action as the trustees of an express trust; Whether' the plaintiffs could originally have maintained an action in' their own name, under this section of the Code, as the-trustees of an express trust, it is not necessary to consider. That question is not now before us. They certainly could, not do so under the allegations of the complaint, or under the proof offered upon the trial. To maintain an action under this section, of the Code, as the trustees of an express trust, there must be appropriate allegations in the complaint showing that while the action is brought in the name of the plaintiffs personally, it nevertheless is prosecuted to and for the benefit of another. Otherwise, there is no meaning to the other portion of the section which provides that “Every action must be prosecuted in the name of the real party in interest.” The complaint, as already indicated, alleged that the contract, for the breach of which a recovery was sought, was made by the plaintiffs personally, and while the contract is referred to and made a part of the complaint it will be found upon examination that that shows, upon its face, that it was made with the plaintiffs personally and not with them as the representatives of Stevenson & Go. It is not even suggested in the complaint, either directly or inferentially, that the action is brought for the benefit of W. F. Stevenson & Go., and if there were appropriate allegations to that effect, the proof offered by the plaintiffs upon the trial establishes the contrary. The plaintiffs were allowed to prove-—against the defendants’ objection and exception •— that subsequent to the delivery of the hemp in Hew York, Stevenson & Co. was paid for it by the plaintiffs. One of the plaintiffs testified: “Before this suit was brought, Stevenson & Company had received all they were entitled to for the goods mentioned in this contract with Milton & Company, so that we did not 'bring this suit for their benefit. We arranged to become the owners of this hemp ourselves, sometime within a month after the contract was made.”

By the allegations of the complaint, therefore, as well as by the . proof, Stevenson & Co. have no interest in the subject-matter of the action. The plaintiffs alone are personally interested in it. How, then, can a recovery be permitted to stand, on the ground that in bringing the action they were acting as the trustees of an express trust ? It hardly seems necessary to answer the question. In bringing the action the plaintiffs were not,, and from the very nature of things could not be •— no one else having an interest in the subject-matter of the contract — the trustees of an express trust. The case relied upon. in the prevailing opinion (Considerant v. Brisbane, 22 N. Y. 389) has nothing to do with the question. It is not in point, and if it were, it would seem to be an authority against the position taken in the prevailing opinion. In that case the payment provided in the contract was, by express terms, made payable to the plaintiff as agent of the foreign corporation, and. the allegations of the complaint in that- action showed that the' action ■was brought, not for the benefit of the plaintiff, but his principal. Here the court deliberately allows the plaintiffs suing on one right to recover upon an entirely different right ’without allegations or competent proof of that other right. But even assuming that the action could be maintained by the plaintiffs as the trustees of an express trust, I am. still of the opinion that the judgment should be reversed, for the reason that the proof failed to. show that W. F. Stevenson & Co. performed the contract on their part to be performed. The contract, it will be noticed, among other things, provided that Stevenson & Co. were to deliver to the plaintiffs 1,000 bales current Leyte, guaranteed equal good current quality Manila hemp. It is said in the prevailing opinion that this portion of the • contract was in effect a guaranty that the current Leyte should be equal to good current quality Manila hemp; “ that there should' be found, in the 1,000 bales of Leyte the same • quality of hemji which would be found in 1,000 bales of Manila.” ■ I am inclined to the view that this construction is the proper one, and, if it be so, then it is difficult'to see upon what principle of law a recovery could be had. The fact is uncontradicted that neither Stevenson & Co., nor the plaintiffs, offered to perform their contract by delivering hemp of the quality guaranteed. The contract called for “about (1000) one thousand Bales Current Leyte, guaranteed equal Good Current quality Manila.” Of the 1,000 bales offered, the arbitrators found, and the fact is uhcontradicted, that only 25 bales corresponded to the guaranty, the other 975 being inferior in quality.

It is undoubtedly a settled rule of law that a usage or custom in a trade, profession or calling, when it is reasonable,- uniform, well settled, not in opposition to fixed rules of law, not in contradiction of the express terms, of a contract, is deemed to form a part of the contract and to enter into the intention of the parties, but I am unable to see. how this rule has any application to the 1,000 bales which Stevenson & Co. had guaranteed to be of a certain quality. Can it be that, notwithstanding that guaranty, a • custom can be resorted to for the purpose of showing that the parties did not intend to convey a meaning which the word “ guarantee ” imports ? If it can, then- a custom can be resorted to for the purpose of varying, contradicting and even destroying a contract which the parties themselves have made, and this, as Í understand it, all of the cases hold cannot be done.

For these reasons I dissent from the conclusion reached, by the other members of the court. I think this judgment should be reversed, and a new trial ordered, with costs to the appellants to abide the event.

J udgment affirmed, with costs.  