
    I. Osgood Carleton and George B. Moffat, Respondents, v. Lombard, Ayres & Co., Appellant.
    
      Contract of sale — delivery of an unmerchantable article ■— a judgment for damages against thevend.ee is competent evidence against the vendor — proof of want of care — measure of damages — description of the article sold.
    
    An action was brought by plaintiffs, who dealt in oil, to recover from the defendant, which manufactured it, under a contract which required the defendant to deliver an article of refined petroleum that was free from latent or hidden defects that rendered it unmerchantable at the time and place of delivery, and that could have been avoided or guarded against in the process of refinement or in the selection of the raw material by reasonable care and skill, damages for a cargo of oil shipped to Calcutta to persons named Graham, which proved tobe unmerchantable on arrival. The Grahams, in an action of which the present defendant had notice, and in the defense of which it took part, recovered against the present plaintiffs a judgment which the.plaintiffs paid and subsequently brought the present action to recover the damages thus sustained.
    Held, that the judgment recovered by the Grahams against these plaintiffs was competent evidence in the present action;
    That proof that enormous quantities of this oil were refined yearly by the defendant and by others, and that there was no difficulty in procuring a grade of oil similar to that sold, free from latent defects, presented a question of fact for the jury as to whether the unmerchantable quality of the oil in question was not occasioned by a lack of care or skill on the part of the defendant;
    
      That the plaintiffs were entitled to recover the amount of the judgment which they had been compelled to pay in the Graham case and their legal expenses in defending that suit.
    Where an article is sold by the particular description by which it is known in the trade, the duty to furnish goods answering such description constitutes a con, dition precedent, a part of the contract of sale, and not the collateral obligation known as a warranty.
    Appeal by the defendant, Lombard, Ayres & Co., from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of ISTew York on the 30 th day of December, 1896, upon the verdict of a jury, and also from an order- entered in said clerk’s office on the 31st day of December, 1896,. denying the defendant’s motion for a new trial made upon the- minutes.
    
      B. F. Tracy, for the appellant.
    
      R. Burnham,-Moffat and James G. Garter, for the respondents.
   Ingraham, J.:

The judgment of' the Court of Appeals on the former appeal in this case has settled for us most of the questions involved. That was an appeal from-a decision of the General Term affirming a judgment dismissing the complaint, and in reversing that judgment the Court of Appeals discussed the admissibility and effect of the judgment in the case of Graham, against this defendant, determined that such judgment was competent as evidence in this action and determined what it was necessary for 'the plaintiffs to prove in addition to entitle them to recover. The facts of the case are substantially the same upon this trial as upon the trial which resulted in the judgment from which that appeal was taken, and as the opinion of the Court of Appeals in that case contains a statement of the facts of the case, with the' questions involved, it will not be necessary to repeat them here. What we have to determine is whether upon this trial the rules as formulated by the Court of Appeals were .correctly-applied, and the case tried-in accordance therewith. The Court of Appeals determined, that this was a “ contract by a dealer with a manufacturer, -and is subject to the' rules and principles that apply.to executory .contracts for the sale and delivery of goods when the parties occupy these relations to each other ; ” that in such- a case, where the article to-be delivered is sold by the owner or maker by the particular description by which it is known in the trade, it is a condition precedent to his ■ right of action that the thing which he has delivered, or offers to deliver, should answer this description. The tendency of the recent decisions in this court is to treat such words as part of the contract of sale descriptive of the article sold and to be delivered in the future, and not as constituting that collateral obligation which sometimes accompanies a contract of sale and known as a warranty ; and that in this case “ the plaintiffs intended to buy and the defendant to sell an article of refined petroleum which should not only correspond to the description in the contract, but should be free from latent defects arising from the process of manufacture, so as to constitute a thing which, in the commercial .sense, would be of some use or value.” ' Such being the obligation of the parties, the court then determined that the former judgment in favor of' Graham & Co. against these plaintiffs was competent evidence. As to its effect as evidence the court says: “ It is quite true that the record would not prove that the defects were latent or such as would not be disclosed by the inspection contemplated by the contract, since that question was not involved on the former trial, and the plaintiffs did not offer it for that purpose. It could not be excluded, however, because it did not prove the plaintiffs’ entire case. If it proved any material fact in support of it, it was admissible. It did, we think, establish, as against the defendant, the fact that the oil, when delivered alongside the Corby, was unmerchantable, since that was the groundmpon which the parties in Calcutta recovered the damages, as we must assume from the present condition of the record. The plaintiffs were of course bound to show by other proof that the defects which rendered the goods unmerchantable were latent, and such as would not be disclosed by the inspection.” The court then summarized its decision upon the questions presented as follows :

“ 1. The defendant was bound to deliver an article of refined petroleum that was free from latent or hidden defects that rendered it unmerchantable at the time and place of delivery and that could have been avoided or guarded against in the process of refinement or in the selection of the raw material by reasonable care and skill.
“ 2. This obligation survived the acceptance if the latent defects were such as would not appear upon an inspection to ascertain whether the oil delivered corresponded with that described in the contract. ...
“3. The judgment roll in. the former action was. admissible in evidence for the purpose and upon the ground already stated.
“4. The plaintiffs were entitled to show that the defendant knew the destination of the cargo of oil designated in the contract.” (149 K Y. 137.) '

Upon a motion for a reargument in • this case the learned judge who wrote the opinion upon the appeal reiterated the rule laid down upon the decision of the case, holding that the plaintiff was entitled to show that the defendant knew the destination of the cargo of oil designated in the contract as bearing upon the question of ordinary care: “ Since the defendant was bound, under the decision, to furnish an article free from such latent defects as could have been avoided by the exercise of ordinary care, that. question was not foreign to the case. Ordinary care must be determined with reference to the facts, and circumstances of the case, and it may well be that one degree of care might be exacted in casethe oil was intended for domestic use, .and another degree when intended to encounter the perils of transportation by a long sea voyage.” The coiirt then sums up the result of its decision as follows : “The defendant sold' and received pay for a cargo of oil. It appears that the plaintiffs, who were the buyers, sustained a very large loss in consequence of the transaction; by reason, as they allege, of secret defects in the article, due' to improper refinement, and which could have. been avoided or guarded against by the defendant in ■ the exercise of reasonable care, In holding that the defendant is bound to meet that issue of fact, we aré unable to perceive, as the defendant’s coum sel seems to, that any injustice has been done, or any strain-put upon reason or the rules of law governing the construction of contracts of this character.” (149 IN". Y.- 604.)

The liability of the defendant in this action must be measured- by this judgment of the Court of Appeals, and what we have to determine is Whether the facts that were. held to be essential to the plaintiffs’ right to recover were fixed. The contract was in evidence' and speaks for itself, and under that, as interpreted by the Court of Appeals, “the defendant was bound to deliver an article of refined petroleum that was free from latent or hidden defects that rendered it unmerchantable at the time and place of delivery, and that could have been avoided or guarded against in the process of refinement or in the selection of the raw material by reasonable care and skill.”

The burden is thus placed upon the plaintiffs to prove that the article that was delivered to them was not refined petroleum, free from latent or hidden defects that rendered it unmerchantable at the time "and place of delivery, and that could have been avoided or guarded against in the process of refinement or in the selection of raw material by reasonable care and skill. The plaintiffs proved a contract. They then proved the judgment in the case of Graham against these plaintiffs; and they proved also the charge to the j ary upon the trial of that case, which submitted the question presented as evidence tending to show the question settled by that judgment.

Looking at the pleadings in the Graham case, with a consideration of the questions submitted to the jury, in the charge of the court, it is perfectly apparent that the question in that case, which was determined by that verdict, was whether this oil, when it was delivered to the plaintiffs by the defendants, was a merchantable article, free from such impurities as rendered it valueless as oil.- The. question that was submitted to the jury was whether the condition of the oil, as ascertained when it arrived at Calcutta, was in consequence of some inherent defect in the oil as it was packed in the cans in Hew York; whether, in consequence of acid and water and other foreign substances in the oil, by reason of improper refining process, the oil had deteriorated after it was shipped, it was found in the condition it was when it arrived in Calcutta, then the plaintiffs had the right to reject it, and they are entitled to recover back the money they paid for it.” - Again, the court charged the jury that, if, on the other hand, considering the other testimony, the condition the oil was in, yon are not satisfied the water did get in on the ship, but that the condition it was in in Calcutta was -caused by the fact that it was improperly refined, or improperly purified after it was refined, or that the acid or any other substance that remained in the oil was the cause of the rusting of the cans, and the condition it was in when it got to Calcutta, then the defendants have never complied with their contract and never delivered to the plaintiffs the oil they agreed to deliver, and they are bound to repay to. the plaintiffs the ¡amount the plaintiffs paid them, assuming that the oil that they did deliver was according to the contract; ” and, at the request of the counsel for the .defendants, the jury were expressly instructed “ that, if the jury find that the condition in which the cargo was found at Calcutta was due to sea damage, they must find a verdict for the defendants,” and that the defendants were not chargeable for the result of any sea damage to the cargo on the voyage.

Now, in the'face of that instruction to the jury, a verdict was found for the; plaintiff, thus establishing the proposition that the oil was not of a merchantable character, because of the fact'that, in'the ■oil at the time it was delivered by the defendants to the plaintiffs, there was acid or water or other foreign substances, by reason of improper refining process, that had caused the oil to deteriorate,, and had thus, caused it to be in the condition in which it- was when it arrived in Calcutta. The verdict, therefore,, in. that case conclusively settled, as between these parties that the oil at the time it was delivered was defective and not according to the contract; but the Court of Appeals held that the plaintiffs must also prove- by independent evidence that such latent defects were of a character that would not be disclosed by an ordinary inspection provided for by the contract; that such defects could have been avoided or guarded against in the process of refinement'by reasonable care and .skill. .

We have examined the record in this case and think that the evidence amply ¡sustained the finding of the jury on that question. The judgment, in the Graham case being conclusive evidence that-the oil was" not merchantable and free from improper substances when it was-delivered in Rew York, the plaintiffs proved in the most satisfactory way that this condition of the oil could not be ascertained by inspection at the time of its delivery by the defendant. So this essential element of proof was supplied. The plaintiffs also proved that enormous quantities of this oil were refined yearly by the defendants’ refinery and the other refineries in this country"; that there was no difficulty in producing a grade of. oil similar to that ¡sold, free from those -latent defects, and from these substances which rendered the oil unmerchantable, and. that this defendant was engaged then and still continues to refine enormous quantities of this oil by the process, which it retained in a merchantable condition. This, we think, certainly presented a question for the jury to determine as to whether the unmerchantable quality of this oil was occasioned by lack of care or skill in superintending the process by which the refinement of the oil was accomplished. We have it conclusively established by the judgment that the oil was not of merchantable quality, and such as described in the contract, because in it there was contained water or acid, or some other substance which rendered it unmerchantable. We have the further proof that when the oil was delivered it was in such a condition that that defect could not be discovered by inspection, and thus whatever the defect was it was of such a character that the inspection provided for by the contract did not disclose it; and then we have also the fact that the process by which this oil was refined was in use by the defendants before and after the refinement of this cargo, and had produced oil in perfect condition and fully up to the requirements of the contract. This proof left it a question for the jury as to whether the condition of the oil was not caused by a lack of ordinary care on the part of the employees of the defendants when they refined this particular oil, leaving in it, instead of removing from'it, as they should have done, the substance which caused it to become unmerchantable. In the face of this evidence it is impossible to see what could have caused this condition of the' oil, but the fact that during the process of refining it, by some neglect of those engaged in the work, the acid or water was not removed. We have it thus satisfactorily established by evidence, which was sufficient to sustain the finding of the jury, that the oil, in the condition in which it was delivered to the plaintiffs, was not such oil as complied with the contract, and that such condition was caused by its having in it water or acid which rendered it unmerchantable ; that from the condition of the oil when delivered to the defendant such defects were not such as were disclosed • upon the inspection provided for by the contract; that such defects were caused by some negligence in the process of refining the oil which, if the same care and skill had been used as was used in the process of refining, both prior to and subsequent to the refinement of this cargo of oil, such defects would have been, removed and the oil would have complied with the contract, and thus, under the rules established by this decision of the Court of Appeals, entitled the plaintiffs to recover.

The only other question is as to the measure of damages. It is well settled that the plaintiffs were entitled to recover an amount sufficient to compensate them for what they had lost in consequence of a breach of their contract by the defendant. That would be an amount .that would put the plaintiffs in the same position that "they would have been in had the contract been complied with.

Row, if this contract had been complied with, this Graham suit would never have been brought, and the plaintiffs would not have been compelled to pay that judgment, and would not have been compelled to defend that lawsuit. What the plaintiffs were entitled to-recover, therefore, was the amount of the judgment they had to pay and their legal expenses in defending that lawsuit, this last becoming an item of damage because of the fact that the defendant had notice of the lawsuit and did take part in its defense. The plaintiffs presented their claim, showing the necessary disbursements in this lawsuit. A bill of items was presented by them, and after that had been marked, Mr. Moffat, the plaintiffs’ attorney, said: “ With the idea of further shortening the proof, of this mass of items, as every item of expenditure in the defense of this action, and before,, too, were made, under my personal directions as counsel, I would suggest that I may take the stand and testify from the memoranda which I have prepared from the books as to the items seriatim.” In response to that, .the defendants’ counsel stated, “ You need not go into detail; you just "take the stand and testify as to the necessity of these expenses.” 'Mr. Moffat took the stand and testified as to these expenses generally, and as to their necessity, without objection, and no point was at all made that the necessity of these expenses, or. that the actual making'of them, was not proved. When the court came-to charge the jury it said to them: “ If the plaintiffs, however, have made out a case within the rules laid down by me, they are entitled to a verdict at your hands, as follows: ” Then stating the plaintiffs’ claim, being the amount "of the judgment in the-Graham case, and interest "thereon, cash expenditures by them in defending the Graha/m case and interest, and cash expenditures by them prior to the commencement of the Graham case making a. total of $74,413.85. .

Row, there was no objection or exception to this- statement,, except that, after the.jury had retired counsel for the defendant-said : “We except to the charge of the court with reference to the rule of damages; claiming first, that the true rule of damages in this, case is the difference between the fair marketable value of the oil which was delivered to Carleton & Moffat under the contract, and the oil which should have been delivered at the time and place of deliveryand that, if that rule be not adopted by the court, the amount of damages, under proper instructions, should be left to the-, jury, and that the court should not instruct the jury that they must, either find for the defendant or find in favor of the plaintiffs for a. definite sum.”

Now it will be noted that there was no objection on the trial to the proof of the items of damage, and no claim that these amounts were not actually paid or were not necessary in the defense of the Graham action, and no request' was made by the court to submit any questions as to such items of such damage to the jury. It seems to us from the record that any objection to the various items, whether as to their being sufficiently proved or as to their being proper in the defense of the cases, was waived, and that the only objection taken was as to the rule of damage adopted by the court and as to the charge that the plaintiffs were to recover the amount paid in the defense of these actions which had been actually paid. We think it clear that the court adopted the proper measure of damages and that the exception of the defendant was not well taken.

Many other questions are presented upon the record, both as to. the charge as made, to the refusals to charge, and to the objections of the defendant. We have examined them all, and think that none of them are of sufficient importance to justify a reversal of the judgment. The questions submitted to the jury were the questions determined by the Court of Appeals as open in the case. They were submitted fairly by a charge which covered all of the case, and there was no error that affected any of these questions or that even called for any further discussion.

. We think that the verdict was sustained by the evidence and that the judgment should be affirmed,, with costs.

Van Brunt, P. J., Rumsey, Williams and Parker, JJ., concurred.

Judgment affirmed, with costs.  