
    Henry L. Pierson et al., App’lts and Resp’ts, v. Robert Crooks et al., Resp’ts and App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed December 30, 1886.)
    
    1. Contract, for sale of goods—When delivery not complete upon loading of goods on the vessel.
    C. and Co , of Liverpool, entered into a contract, dated New York, certain specified quantities of three distinct and separate qualities of iron for different prices “ all free on board Liverpool, payment by sixty days sight bill of exchange against shipping documents here less two and one-half per cent.” Held, that the contract neither provided for nor eontemplated'an inspection or examination of the iron by P. & Co., at Liverpool. That no intervention on their part was provided for, but the obligation to deliver the quality of iron mentioned and described in the agreement free on board at tljfit- pjaqe'was wholly cast upon:'C. '&"Co.,'ánd"that "if they failed to perform -it, P. & Co. had the right upon, the discovery of that fact oji its.anStaTto..reject so much ,of tlie .iron, as failed to comply with the term of the5 contract"(cases cited and uisiinguished).
    
    3. Same—Acceptance—When examination must be made
    
      HM, that the law requires no more than reasonable diligence in the examination of property shipped, or offered to the purchaser after its arri\ al. That P. &Co., were not required to dispense with tlie other demands of their business and devote immediate attention to the iron as soon as it arrived; but that-it was their duty to proceed reasonably as they would" be expected to do with other urgent matters of business.
    3. Same—Right of inspection in executory contracts.
    . Held, that the light of inspection arid and" examination precedes the obligation to accept the property, where the sale is executory and the property itself is unascertained or separated.
    4. Same—When severable—When can be accepted in part and rejected in part.
    On a certain steamer was shipped by C. & Co. to P & Co.-, a lot of iron containing a certain quantity oí each of two kinds of the iron. The iron of one kind was accepted, hut that of the oth. r rejected, being of inferior quality. By the agreement these were distinct and separate quantities of iron, whi. h 0. & Go. agreed to sell and deliver for different prices. Held, that the contract of sale was not entire but severable in its nature alloy ing tile purchaser to receive that distinct part of the property complying with the terms of the contract and reject the other distinct part that failed ro he of the description of property agreed to he sold. That by so doing P. & Co. did not rescind the contract, but, were entitled to recover from 0. & Co., under the contract what they had paid upon the iron not accepted and for any loss . ustained in consequence of a change in its market price.
    5. Same—When part payment is not an acceptance.
    It was essential that P. & Co. should possess the “ shipping documents " in order to be able to obtain any control of the iron. Held, that the payment of money on the delivery as required by the contract on the supposition that the contract had been performed by C. & Co. was not a waiver of P. & Co. to insist upon the iron being according to agreement.
    6. Same—Shipment from a port other than agreed upon—Effect of.
    Part of the iron was shipped from a port other than Liverpool and refused for that reason. Held, that C. & Co. were bound to ship.the property as provided in the agreement and having failed to do so, P. & Co. were relieved from receiving or accepting the iron so shipped.
    Appeal from a judgment recovered on the report of a referee.
    
      George A. Black and James C. Carter, for pl’ffs; John L. Hill, for def’ts.
   Daniels, J.

The action was brought by the plaintiffs to recover back moneys paid by them for freight, duties and other charges, on iron which the defendants contracted to sell and deliver to them. The contract was made through the agency of brokers representing the defendants, who were merchants in the city of Liverpool. The conti'act is as follows:

£‘ New York, February 11, 1880.
Sold to Messrs. Pierson & Co., New Yox*k, for account of Messrs. Eobert Ci’ooks & Co., Liverpool:
One hundred (100) tons W. I. W., or equal hoop iron, at £10 per ton.
One hundred (100) tons W. I. W., or equal sheet iron, at £11 15s.
Fifty (50) tons E. GL, or equal sheet iron, at £16 5s. 0d., all free on board Liverpool; paymexxt by 60 days st. bills exchange against shipping documents here, less 2{- per cent. Immediate specification.
White & Drummond, Brokers.
Accepted. PIEESON & OO.”

And the one hundred tons of hoop iron mentioned in it were afterwards inci’eased to one hundred and fifty tons. Specifications were supplied by the plaintiffs for the shipments and delivery of the iron in three or. four different parcels. The defendants were not manufacturers of the iron, but it was designed that they should, as they after-wards did, obtain that from the manufacturers, which they afterwards shipped to the plaintiffs. The one hundred tons of sheet iron proved to be satisfactory and acceptable, and was received and paid for by the plaintiffs. And so was a certain portion of what is called the R. Gf. sheet iron, subject to certain allowances and deductions which were made. The controversy in the action has in this manner been limited to the hoop iron, and the final shipment of the R. G. sheet iron, amounting to nearly forty-one tons. As to all the hoop iron, and this residue of the R. G. sheet iron, the plaintiffs objected to receiving it upon its arrival in New York where the hoop iron was unladen, and in Brooklyn where the R. G. sheet iron was unladen. The objection taken to the acceptance of the hoop iron was that it was very much' inferior in quality to that which the plaintiffs were by the terms of the agreement entitled to receive. Two of the shipments which were made of the hoop iron were also accompanied with shipments of sheet iron. These were made upon the steamers Germanic and Arizona. Other shipments of hoop iron were made by the steamers City of Chester and Abyssinia. Upon these two steamers’ were laden no portion of either quality of sheet iron, and upon their arrival and the unlading of the iron, the plaintiffs, upon an examination of its quality and condition, rejected it as not in compliance with the agreement they had made with the defendants. And the referee by his decision concluded that the plaintiffs were justified in the objections made to this iron leading them to reject it. And for that reason they have been permitted by the judgment to recover against the defendants what they paid for freight, duties and other charges' or ádvances upon this iron. It appeared by the evidence that they were not perinitted to handle or remove the iron until it had been weighed by the officers of the custom house, and that after delaying'until' that-was done the portion of the iron coming by the Germanic was taken to the plaintiff’s place of business,'where an examination was made, of it resulting in their determination to reject it, of which notice was given to the defendants. The other was examined upon the wharf, and being found of the” same quality, that also was rejected." That the evidence justified the referee in concluding this iron to be of an inferior quality to that mentioned in ,the contract of sale is conceded by the case, and that relieves -it from the necessity of any examination of this fact which was disputed before the referee upon the •trial.

There appears to be nothing unreasonable in the delay which took place at the city of New York in the examination of the iron after its arrival. It was not done as speedily as that might be done, but, as the circumstances were made to appear, there was no unreasonable delay on the part of the plaintiffs in subjecting the iron to these examinations. And as the law has required no more than reasonable diligence in the examination of property shipped or offered to the purchaser after its arrival, its requirement was observed by the plaintiffs in this instance. They were not required to dispense with the other demands of their business and devote immediate attention to this iron, but it was their duty to proceed reasonably, as they would be expected to do with other urgent matters of business. And that duty does not seem to have been neglected, as the facts of this case have been disclosed.

It is insisted, however, on behalf of the defendants, that this right to examine the iron and reject or accept it as it was found not to conform with the contract, could not be made after it was received and shipped at the city of Liverpool; that the agreement designated that to be the place for its delivery, and impose the duty upon the plaintiffs of making their examination of it at that port. But that is not the construction which should be given to the agreement. It neither provided for nor contemplated an inspection or examination of the iron at that port, but what was to be there done was for the defendants to deliver the quality of iron mentioned and described in the agreement, free on board, at that place. This was the obligation that they undertook by the contract that was entered into. It was to deliver on board the ships at Liverpool, this, and no other quality of iron. And no intimation was given, or obligation indicated that the plaintiff, who were merchants doing business in the city of New York, should present themselves at Liverpool, either personally or by an agent to discover whether the defendants performed this obligation or not. No intervention on their part was provided for, but the obligation to be there performed was wholly cast upon the defendants themselves, and if they failed to perform it, the plaintiffs had the right upon the discovery of that fact, to reject so much of the iron as failed to comply with the terms of the contract. A point similar to this was considered in Allard v. Greasert (61 N. Y., 1), where the controversy arose under the Statute of Frauds. And while this statute is not brought in question in this case, what was there said concerning the obligation of the vendee to examine the property at the place of shipment for the purpose of ascertaining whether it compiled with the requirements of the contract, is applicable to this controversy. But if not, because of this distinguishable circumstance, as it was manifestly the intention of the parties from the agreement, that what was to be done at Liverpool, was to consist wholly of the acts of the defendants, the vendees were not obliged to present themselves there, either in person or by agent, to see whether they performed as they agreed to do that, or not. This point under a somewhat similar contract was considered in Mee v. McNider (39 Hun, 345), where it was held that the contract of sale obligated the vendor to deliver the property agreed to be sold in the condition required by the agreement, on ship board at the place of shipment. And if tie did that, his agreement was performed; while, if he failed to do so, he failed to perform his contract, and thereby place the property at the risk of the vendee. This point was also considered and a like conclusion reached in Pope v. Allis, (115 U. S. 363). And the authorities very clearly distinguish this case from those relied upon in support of this position by the defendants. For in Neaffie v. Hart (4 Lans., 4), the defective boiler was not only received, but knowing its defects it was retained and used as a .boiler by the vendee. And so was the cheese, which was the property sold in Pease v. Copp (67 Barb., 132), while-in Stafford v. Poolar (67 id., 143), the contract made the delivery of the hops personal to the defendant. These cases are consequently inapplicable to this controversy, and do not conflict in the principle they follow, with that maintained by the other authorities. Those authorities proceed upon the obligation of the vendor in an agreement of this character, to ship the property of the quality, and in the condition described in the agreement, reserving upon its arrival at the port of destination, to the vendee the right to examine and reject it if that obligation appears not to have been performed.

This right of inspection and examination preceding the obligation to accept the property, is maintained by all the authorities where the sale is executory, and the property itself is unascertained or separated as were the facts in this case. This was the conclusion of the court in Sprague v. Blake (20 Wend., 61), where it was said that “when the party come under such a contract, to deliver an inferior, unmerchantable commodity and it lies open to inspection, then is the time for the vendee to take his ground. He must then refuse acceptance, or at least so soon as he discovers what the quality of the article is, and offer to return it,”-(id., 64), and as much as this was held in Reed v. Randall (29 N. Y., 358). For there it was stated in the prevailing opinion that the vendee “isnot bound to receive and pay for a thing that he has not agreed to purchase, but if the thing purchased is found on examination to be unsound, or not to answer the order given for it, he must immediately return it to the vendor, or give him notice to take it back, and thereby rescind the contract, or he will be presumed to acquiesce in its quality. He cannot accept the delivery of the property under the contract, retain it, after an opportunity of ascertaining its quality, and recover damages if it be not of the quality or description called for by such contract,” (id,, 363). And Gurney v. Atlantic, etc., Railway Company (58 N. Y., 358), proceeds upon the same principle. There it was stated that “the general rule is, when articles are sold upon an executory contract * * * that the delivery and acceptance of the articles after examination, or an opportunity to examine them is a consent or agreement that the articles correspond with the contract and precludes a recovery for any defects w'hich'may exist,” (id., 304). And the plaintiffs fully complied with this rule in their examination of the iron, their refusal to receive it, and their notice of that refusal to the defendants. This examination was made when the opportunity first presented itself for observing and testing the make and quality of the iron. It was not required that this should be done before the arrival of the iron at its port of destination by anything contained m, or to be implied from, the agreement, and the right to subject it to the examination which was made, was under the authorities referred to, for the first time legally presented upon the arrival of the iron in the city of New York.

In the case of Pope v. Allis, the examination and inspection of the property was deferred to a much longer and more remote point of time, and still it was sustained by the court and the vendee was relieved from the obligation to recover and accept the property under the agreement. As to these two shipments therefore the plaintiffs clearly maintained their right to recover the amounts awarded to them by the referee in his report. For while the iron on the Abyssinia was not inspected, or examined by the defendants, the evidence in the case justifies the conclusion that it was of the same quality as that delivered from the City of Chester. It was not contended to be otherwise by the defendants, and the plaintiffs assuming from the three preceding shipments that the hoop iron was all of the same quality, notified the defendants of their refusal to receive any more of that quality of iron. And this was communicated to the defendants before the iron by the Abyssinia, was entirely laden, or the ship had left the city of Liverpool. In this refusal they certainly seem to have been justified by the principle proceeded upon in Pope v. Porter (102 N. Y., 366.) For as the defendants had shipped to them only this inferior quality of iron, the facts supported them in the conclusion that no better quality could be expected to be received under the agreement.

As to the hoops shipped by the steamers Germanic and Arizona, a further objection to the right of the plaintiffs to recover arises out of the fact that upon these steamers there were also shipped certain quantities of the sheet iron, the Germanic having on board upwards of fifteen tons and the Arizona upwards of forty-seven tons of the sheet iron. This iron was accepted and received by the plaintiffs, but the hoop iron arriving with it was rejected, and the objection has been taken that the plaintiffs could not accept one portion of these shipments and reject the other. But by the agreement these were two distinct and separate qualities of iron which the defendants agreed to sell and deliver for different prices. For the hoop iron they were to be paid £10 per ton, and for the sheet iron they were to be paid £11 15s. per ton. These sales were accordingly of two separate and distinct subjects for distinct prices pertaining and applicable to each of them. And when that is the case the contract of sale has not been considered to be entire but severable in its nature, allowing the purchaser to receive that distinct part of the property complying with the terms of the agreement, and to reject the other distinct part which fails to be of the description of the property agreed to be sold. This point was considered in Young, etc., v. Wakefield (121 Mass., 91), where it was held that different articles bought at the same time for distinct prices might be accepted so far as they conformed to the agreement of sale, and rejected where that proved not to be the fact. Id., 93. This was also held to be the law in Merrill v. Agricultural Ins. Co. (73 N. Y., 452), and the same principle is applied in Swift v. Opdyke (43 Barb., 274), and it is in no degree in conflict with the case of Secor v. Sturgis (16 N. Y., 548.)

This principle applied in this manner is entirely consistent with the general legal rule that where an agreement is to be rescinded, it must be rescinded wholly or not at all, for the plaintiffs did not undertake to rescind the agreement relating to the shipments of hoop iron except in the single instance of that which finally came by the Abyssinia. What they did was to refuse to receive the inferior quality of hoop iron shipped to them by the defendants for the purpose of performing their agreement. That did not rescind the contract or any part of it. It was still left as a subsisting agreement between these parties which the defendants might have fulfilled by supplying the plaintiffs with the proper quality of hoop iron. If they had done that, then the plaintiffs would have been liable for whatever damages might have been sustained by refusing to receive the iron. And as they failed to do that, the plaintiffs were at liberty to claim indemnity under the contract for what they had paid upon the iron, or for any loss they might have sustained in consequence of a favorable change in its market price. These rights legally grew out of the contract itself, and entirely distinguish the case from those where a rescission of an agreement has been attempted. There the law requires that it shall be wholly rescinded to make the act of the party effectual for the purpose of recovering back that which he may have parted "with under the agreement. This is not that case, but it is a case where the defendants agreed to deliver a special quality of hoop iron and failed to do so. By that failure they omitted to perform their agreement, and all that the plaintiffs did was to refuse to receive the inferior iron when they discovered this failure on the part of the defendants. It was not a rescission of the agreement in any respect whatever, but no more than a refusal to receive what they were not bound to accept as a part performance of the agreement. And they were accordingly entitled to recover upon the view which the referee was supported in adopting concerning the facts of this part of the controversy.

The payments which were made by the plaintiffs towards the purchase price of the iron did not have the effect of waiving their right to insist upon it that the quality should be the same as that mentioned in the agreement. For the first payment does not seem to have included any part of the hoop iron on the Germanic which had then been discovered to be defective in quality, and it was made as the agreement declared it should be, by a bill of exchange against the shiping documents produced and delivered to the plaintiffs, which it was essential they should possess in order to be able to obtain any control of. the iron. This payment including the invoice by the Arizona, as well as the succeeding payment were made on account, and on the supposition that the contract had been, or would be, so performed as to entitle the defendants to the money. It was not a voluntary payment in the sense excluding their right to recover so much of it back as would protect the defendants against the obligation to restore so much of the money, as the plaintiffs’ indemnity required to be restored by the failure to perform the agreement which they entered into. Neither these payments nor any other facts appearing in the case, deprive the plaintiffs of the right to recover, so far as it has been sustained by the conclusions of the referee.

It has, however, by the judgment, been determined that the plaintiffs were not justified in refusing to accept so much of the R. G. sheet iron as arrived by the steamer Rhubnia. This iron was not laden on the steamer at Liver-. pool, but it was put on board of her at Curdith, a port in Wales, on the Bristol channel. And because of its shipment in this manner, as well as objections taken to a slight excess in the quantity, the plaintiffs refused to receive it.

And the first of these objections certainly appears to have been warranted by the agreement, for the defendants agreed to ship this iron at Liverpool. They were not to insure it, but that was to be done according to the specifications by the plaintiffs. And as they were not aware of this change in this port of shipment, the insurance effected by them upon it if they did insure it would have been worthless if the iron had been injured or lost, by a peril of the sea. This variation from the port of shipment would render the insurance invalid and it did not create even a qualified delivery of the iron to the defendants, subject to their right of examination, under the rule sustained in Wilcox, etc., Plate Co. v. Green, 72 N.Y., 17. For to constitute even a qualified delivery of this description, the defendants were bound to ship the property as that had been provided for in their agreement. And having failed to do that and no acceptance of the iron being made by the plaintiffs after its arrival, there was not even a qualified delivery, of the.iron shipped in this manner. As to this iron the defendants failed to perform what the parties had agreed upon as one of the precedent attributes of their contract. And the peformance of that condition was not waived by receiving and paying for the iron shipped at the same port on the Rhiwinda, as that payment was made without information on the part of the plaintiffs that the iron had not been shipped at Liverpool, and the defendants accordingly had no legal right to claim that this iron should be received by the plaintiffs. A point of this description was considered in Filley v. Pope (115 U. S., 213), where it was held that such a departure, into the port of shipment, relieved the vendee from accepting or receiving the property so shipped. The referee accordingly erred in the conclusions arrived at by him, that the plaintiffs were legally liable to accept this iron, and not having done so, were chargeable with the difference between the price they agreed to pay for it, and the net proceeds of the sale which was after-wards made of it. This part of the judgment, therefore, requires to be reversed, and the amount deducted on account of it from the demands sustained by the proof in the plaintiff’s favor, should be restored. And as there is not the slightest ground for supposing, as suggested, that the defendants will be able to make any case upon which the plaintiffs would be legally chargeable for this difference, a further trial of this part of the action will not be necessary. This part of the judgment should accordingly be reversed and the counter-claim of the defendants including it, dismissed unless a further trial of this part of the action shall be made to appear to be desirable on the settlement of the terms of the decision, and the plaintiffs should have judgment for the amount found to be otherwise due and owing to them by the referee and included in the judgment, and as so modified the judgment should be affirmed.

Davis, P. j., and Brady, J., concur.  