
    The Interboro Brewing Company, Inc., Respondent, v. The Independent Consumers Ice Company, Inc., Appellant.
    (Supreme Court, Appellate Term, First Department,
    December, 1913.)
    Contracts— for delivery of goods with warranty of quality — deposit of money “ for faithful performance of conditions ” — delivery of goods when not in conformity with warranty — pleading — Sales Act, § 150(1, 2).
    There is nothing in the Sales Act (Laws of 1911, chap. 571, § 150, subds. 1, 2) which changes previously existing rules that in a contract for the delivery of goods with warranty of quality a purchaser may, as to goods already delivered and accepted by him, sue for damages for breach of the warranty, and where the seller refuses to deliver goods in the future according to the contract recover also from the seller, as in every case of breach of an executory contract, the damages resulting from such a breach.
    Plaintiff agreed to furnish defendant with ice “ satisfactorily frozen so as to be merchantable ” at an agreed price, the same to be delivered daily and paid for bi-monthly. Defendant deposited with plaintiff $3,000 "for the faithful performance of the conditions under this agreement ” which, if defendant “ faithfully carries out the terms and covenants in this agreement up to and including December 31, 1913,” plaintiff agreed to return to defendant. In an action to recover for ice delivered for the period September 1 to 13, 1913, defendant alleged as a first counterclaim that the ice delivered by plaintiff up to the time of their disagreement did not conform to the warranty to defendant’s damage of over $6,000, and that on September 15, 1913, when the parties disagreed, defendant notified plaintiff that it would not receive such unsatisfactory ice in the future and that plaintiff informed defendant that it would make no deliveries of other quality, that the next deliveries offered by plaintiff were not in conformity with the warranty and were rejected by defendant which then “terminated the agreement.” A second counterclaim asked damages for plaintiff's failure to perform the agreement for the remainder of the term and a third counterclaim sought the return of the $3,000' deposit.
    On appeal from an order sustaining a demurrer to each of the counterclaims, held, reversing said order, that there had been no rescission of the contract pursuant to paragraph d of subdivision 1 of section 150 of the Sales Act, and that the demurrer as to the first and second counterclaims should be overruled.
    That whether the contract be regarded as terminated and, therefore, the $3,000 in the hands of plaintiff as having become immediately the property of defendant entitling him to sue therefor as for money had and received, or as containing an implied covenant on the part of plaintiff to return the money forthwith if by its own act it prevented defendant’s performance of the agreement to secure which plaintiff was entitled to retain possession of the money until December 31, 1913, the demurrer to the third counterclaim should have been overruled.
    Appeal by defendant from an order of the City Court of the city of New York sustaining a demurrer to three counterclaims.
    Louis Halle (Oswald N. Jacoby, of counsel), for appellant.
    Henry A. Rubino, for respondent.
   Bijur, J.

The complaint sets out a cause of action for the agreed price of ice delivered by plaintiff to defendant for the period September 1 to 13, 1913, pursuant to an agreement between the parties, dated April twenty-second of that year. The counterclaims plead the agreement between the parties from which it appears that plaintiff agreed to furnish defendant with ice satisfactorily frozen so as to be merchantable ” at an agreed price, the same to be delivered daily and paid for bi-monthly. The defendant deposited with plaintiff $3,000 for the faithful performance of the conditions under this agreement ’ ’ which, if the defendant faithfully carries out the terms and covenants in this agreement up to and including December 31st, 1913,” the plaintiff agreed to return to the defendant.

Under the first counterclaim the defendant alleges that the ice delivered by plaintiff up to the time of their disagreement did not conform to the warranty to defendant’s damage of over $6,000. The defendant also pleads that on September 15,1913 (the time of the. disagreement), the defendant notified plaintiff that the defendant would not receive this unsatisfactory character of ice in the future, and that plaintiff informed the defendant that it would make no deliveries of other quality or character; that the next deliveries offered by the plaintiff were not in conformity with the warranty, and were, therefore, rejected by the defendant which then terminated the agreement.”

As a second counterclaim, defendant asks damages for plaintiff’s failure to perform the remaining term of the agreement (September 15 to December 31, 1913).

The. third counterclaim seeks the return of the $3,000 cash security.

The learned court below was evidently of opinion, and respondent now insists in its brief, that defendant has rescinded the contract, and that consequently it cannot successfully maintain the first and second counterclaims because, under Laws of 1911, chapter 571, section 150 (commonly known as the Sales Act), the buyer by rescinding has exercised its election and cannot now recover damages. Subdivision 2 of the act renders each of the four remedies exclusive.

The third counterclaim has been condemned as prematurely interposed.

I do not agree with any of these contentions. In the first place, although the defendant has unfortunately used a phrase likely to be misunderstood when claiming that it has “ terminated the agreement,” these words must be read in connection with the remaining allegations of the counterclaim from which it clearly appears that defendant alleges that as to the past deliveries plaintiff has broken the warranty, and as to future deliveries has, by its unequivocal declaration, broken the agreement by refusal to perform it according to the terms thereof, and that defendant is entitled to damages for these respective breaches. Although the contract has, in a sense, been thus terminated because it is no longer being performed by either party—not by the plaintiff because it has refused to perform and not by the defendant because plaintiff’s refusal has made defendant’s performance impossible—such termination, if that term be applicable, is in no wise equivalent to a rescission. The language of the Court of Appeals in Elterman v. Hyman, 192 N. Y. 113, 126, is directly in point. The court there said: ‘‘ The termination of a contract as to the future by one. party owing to the default of the other is a rescission neither ah initio, nor in any true sense.” Since, therefore, there has been no rescission of the contract pursuant to paragraph d of subdivision 1 of section 150 of the act, there is no need of discussing the effect of a rescission thereunder.

I can find nothing in the act to change the rules of law as they had previously existed, and as applicable to the case at bar, that in a contract for the delivery of goods with warranty of their quality a purchaser may, as to goods already delivered and accepted by Mm, sue for damages for breach of the warranty, and where the seller refuses to deliver goods in the future according to the terms of the contract recover also from the seller as in every case of breach of an executory contract the damages resulting from such a breach.

As to the third counterclaim, while it is true that plaintiff in the agreement promised to return the deposit only on December 31,1913, the deposit was solely to secure the performance by the defendant of the terms of the agreement, which performance has now been rendered impossible by plaintiff’s refusal to carry out the contract. For the purposes of this appeal it matters not whether we regard the contract as terminated, and, therefore, the money in the hands of the plaintiff as having become immediately the property of the defendant who is thereupon entitled to sue therefor as “ for money had and received ” or whether— which I regard as the more correct view—we treat the agreement upon familiar principles, as containing an implied covenant on the part of the plaintiff to return the money forthwith if by its own act it prevents defendant’s performance of the agreement to secure which plaintiff was entitled to retain possession of the money until December thirty-first. See Genet v. Delaware & H. Canal Co., 136 N. Y. 593; Risley v. Smith, 64 id. 576.

Order reversed, with ten dollars costs and disbursements, and demurrer overruled, with ten dollars costs, with leave to plaintiff to reply to the counterclaims witMn six days upon payment of costs in this court and in the court below.

Seabury and Guy, JJ., concur.

Order reversed, with ten dollars costs, and demurrer overruled, with ten dollars costs.  