
    The Norwich Light Company, Respondent, v. Leonard Ames and Others, Appellants. Leonard Ames and Others, Appellants, v. Norwich Light Company, Respondent.
    Third Department,
    November 20, 1907.
    Sale — counterclaim for breach of warranty — damages — erroneous award — warranty construed.
    When the seller of a power plant makes an express warranty as to its performance the buyer may keep the plant although not as warranted, and when sued for the purchase price may counterclaim damages for a breach of warranty,
    But in such action it is error to award the. defendant damages in an amount sufficient to.make a perfect plant as called for by the contract,, and at the same time to award another amount because the plant is imperfect when many of the same items are included in each amount.
    The award for putting the plant into condition to fulfill the contract should not include an item for enlarging the buyer’s building.
    The damages awarded should not include an item for a new smokestack when the first smokestack, built according to specifications and found to be insuf-. ficient, was with the buyer’s consent increased in height by thé seller at its own expense and added to the efficiency of the plant.
    In such action it is error to allow the seller nothing for the valué of the plant when the same has been retained and used by the buyer for several years.
    A guaranty that the engines of such plant would develop a certain power on a certain fuel consumption should not be construed to warrant t¡hat performance . under a variablé load.
    Appeal in both actions,- which were consolidated, by Leonard' Ames and others from a judgment of the Supreme Court in favor of the Norwich Light Company, entered in the office of the clerk of the county of Chenango on the 30th day of June, 1902, upon the report of a referee, and also from an order entered in said clerk’s office on Lie 23d day of May, 1902, denying the appellants’ motion to set aside the said report of the referee and for a new trial.
    The appellants entered into a contract April 30,1894, with the respondent, the Norwich Light Company, for the erection and installation of two engines of 115 horse power each, two tubular boilers, a water heater and a pump, and the necessary appurtenances therefor in the electric light plant of such company at Norwich, N. Y., for an agreed price of $5,621, payable $2,000 on arrival of machinery at Norwich, and the balance at end of thirty days’ run. The contract contained a guaranty that the “ engines shall develop rated horse power on a fuel consumption, not exceeding three lbs. of good anthracite coal (clean chestnut) per I. H. P. per hour this to be determined by a test covering one day’s run.” ■ The complete plant was also guaranteed against defects in material for a period of one year. The specifications for engines attached to the contract contained this further provision : “ Economy — that the efficiency and fuel economy shall be the best obtainable for engines of this type and horse power capacity, and that this high grade of economy an'd efficiency shall be maintained through a much longer period of time than is possible with any form of piston valve engines.” The appellants manufactured and set up in the respondent’s plant the materials mentioned in the contract, and put the plant in operation on or about the 15th day of November, 1894, and thereafter ran the same under the direction of their employee for a period of thirty days, which period expired on the 15th day of December,. 1894. On the arrival of the material at Norwich the respondent paid the appellants $2,000 on account of the contract. The appellants never made any test of the plant covering one day’s run, as provided in the contract. They undertook to make a test for fuel economy on December 6, 1894, and discovered that as the plant was in a valley the 60-foot smokestack mentioned in their specifications was not high enough to make a sufficient draught to burn the fuel effectually. They then lengthened the stack to the height of 100 feet, After that and on December 13, 1894, they made a test which was continued six hours, in the presence of one Wheeler, who was an employee of the respondent and who the. appellants claim was acting for the respondent as superintendent of this test with full authority in regard thereto. After six hours Wheeler expressed himself as satisfied with the test, and it was discontinued. The referee has found that Wheeler had no authority under his employment to bind the respondent with respect to this test. After this test was made the appellants demanded the balance of their pay, claiming the full completion of their contract. The respondent refused to pay, and within a few days served a summons in an action brought by it against the appellants. No complaint was'served with this summons, and it was not served until March 3, 1898. In it damages were claimed for' alleged breach of contract. In June, 1895, the. appellants commenced an action against the respondent to recover the amount unpaid upon the contract. Answers were interposed in each of these actions. The light company’s answer contained a counterclaim for $5,000 damages for breach of warranty with respect to fuel economy and for $5,000 damages for defective work. ■
    After the commencement of these actions the respondent employed an expert who about December 1, 1895, made a test of the plant of a day’s run, and he testified upon. the trial that upon such test the consumption of coal was three and eighty-seven one-hundredths pounds per indicated horse power per hour.
    The two actions above mentioned were consolidated by order of the court, and they were tried as one before a. referee who gave judgment in favor of the present appellants, which was reversed on an appeal to this court and a. new trial ordered. (Ames v. Norwich, Light Co., 22 App. Div. 249.) A new trial has been had before another referee who has awarded-judgment in favor of the respondent under a decision wherein he finds that the appellants should be charged with damages for the failure of the plant to perform the guaranty with regard to fuel consumption in the sum of $5,000; for damages for imperfect and improper construction of the plant $2,700; for the amount paid on account of the construction of the plant $2,000 ; or a total of $9,700, from which he deducts $5,600, instead of $5,621, for the contract price, and awards judgment in favor of the respondent for the balance," $4,100, besides costs. This judgment is brought here for review by the present appeal.
    
      George N. Burt, for the appellants.
    
      William L. Kiley and George S. Raley, for the respondent.
   Chester, J.:

The second trial of this case was held six years after the appellants had surrendered the plant to the respondent. So far as the evidence shows, it never returned or offered to return it to the appellants. On the contrary, it has ever since kept and used it, with knowledge of all its alleged defects. It undoubtedly had the legal right to do this and to rely upon the express warranty contained in the contract for protection. (Hooper v. Story, 155 N. Y. 171 ; Rust v. Eckler, 41 id. 488; Day v. Pool, 52 id. 416 ; Fair-bank Canning Co. v. Metzger, 118 id. 260 ; Brigg v. Hilton, 99 id. 517.) An action having been brought for the purchase price, the damages for a breach of the.warranty were a proper subject for counterclaim (Reab v. McAlister, 8 Wend. 109), and the. damage for a breach- of warranty is, under the authorities, the difference between the value of the plant if it had been as warranted and the actual value as it was at. the time of' delivery. (Hooper v. Story, supra ; Bates v. Fish Brothers' Wagon Co., 50 App. Div. 38 ; Isaacs v. Wanamaker, 189 N. Y. 122.)

The referee has found that the -appellants have not substantially performed their contract, and that they have been guilty of a breach of their guaranty as to fuel economy,

He has allowed, as-has been stated, $2,700 damages by reason of the improper construction of the plant, the items ■ aggregating which amount being specified in his report in detail. It would seem, that if this amount was expended in correcting the improper construction the plant would then conform to the requirements of the contract. ■ In addition to this sum the referee has found that at the time the plant was delivered to the light company it was worth $5,000-less than it would have been if it had been capable of performing the guaranty as to fuel consumption, and damages for this amount are also awarded. The $5,000 item is based apparently upon the testimony of Barrus, the light company’s expert, and his testimony shows that he has included in his estimate of this amount of damages many of the same-items going to make up the $2,700. This appears to be true as to the cost of a new stack, of resetting boilers, of putting in dampers, of new bases, of. new piping and of covering for pipes. There. has thus been a repetition of many of the same items of damage. It cannot be correct in an action of this kind to allow a sufficient amount of damages to make a perfect plant as called for by the contract .and at the same time award another amount as damages, because the plant is imperfect, when many of the same items aré included in each amount.

In the testimony of this expert where he gives the items making up the $5,000 required for putting the plant into condition to fulfill the contract he includes $500 for enlargement of the respondent’s buildings. On what theory the appellants can properly be made liable for this under the contract we are unable to see.

Another item which is not only duplicated, but which we think' was improperly included at all is the one for a new stack. . When it was found that the 60-foot stack specified in the contract gave ¡insufficient draft the appellants erected a stack 100 feet high. This was done at their own expense and by the knowledge and consent of the respondent. The respondent claims that the enlarged stack ncreased the fuel consumption, was not in accordance with the contract and not made of iron of sufficient weight. The findings of the referee in this respect were, we think, against the weight of the evidence. The first 60 feet were built in exact conformity with the specifications, and while the 40 feet were added without increasing the thickness of the 60 feet, the entire stack was standing and in good condition at the time of the second trial, six years after its erection. Whitam, an expert called by the appellants, testified that " the increase in height of the stack at this plant from 60 to 100 feet does not in the slightest impair the fuel economy of the plant.” Even Barras, the respondent’s expert, testified on cross-examination that “ the effect of a high stack in increasing coal consumption can be controlled by regulating the damper; by regulating the draft,” and in response to the question “ Cannot the effect of a 100-foot stack in increasing coal consumption be so far controlled by the dampers that it will not consume any more coal than a 60-foot stack to do the same work, other things being equal ” he answered, With proper care on the part of the fireman the result would be the same in one case as in the other; the two stacks would give identically the same result.” We think, therefore, that the damages were improperly increased by allowing anything on account of the stack which, as the evidence shows, was added in good faith, with the respondent’s consent, and without expense to it, to increase. the efficiency of the plant.

The referee’s report contains no finding as to what the plant was actually worth when put in. The recovery is based on the finding that its value was less by the sum of $5,000 than it would have been had it been properly constructed in accordance with the contract and had it been able to perform the guaranty in respect to fuel economy and on- the finding of $2,700 damages for improper construction, the two sums,- as-has. been stated-, containing many duplicated items. The appellants under this judgment get nothing for all the labor performed and all the material furnished in constructing a plant which has been kept and used by the respondent for upwards of ten.years, and in addition to this loss they are burdened with a judgment for $4,100 damages besides over $2,000 costs. The mere statement of these facts clearly indicates the injustice done to the appellants in the method of computing damages.

We think, too, that the learned referee has misconstrued the warranty. With the exception of the guaranty of the -completed plant against defects in material for a period of one year, the warranty related wholly to thé engines. Everything was covered by detailed specifications. In the pleadings of the respondent and in its proof the effort has been to show a breach of warranty that the engines would develop the rated horse power on a fuel consumption not exceeding three. pounds of good anthracite coal per one horse' power per hour actual running with variable load. The contract nowhere contains such an agreement. There is nothing said therein and there is no finding-to that effect. On the contrary, the guaranty as to fuel economy was that the engines would develop their rated horse power, i. e., 115 horse power each on the fuel consumption named. To develop that.amount of power there must be furnished a load requiring approximately the same amount of power, not a variable load, which at- one time w;ould require the rated' diorse power and at another time much less than that.

The proof is to the effect that the engines will not run with the same fuel economy at an under load as at the rated load, and when the test was made by the respondent’s expert a year after the delivery of the plant, according to his testimony the load at no time during his test was sufficient to require the rated horse power of the engines to carry it, and on the contrary was only about one-half of that amount. The appellants under the agreement did not guarantee the fuel economy of the engines when carrying any less- load than required to develop their rated horse power. ¡

For these reasons there must be a new trial.

We think the motion to set aside' the report of the referee for bias and prejudice against the appellants was properly denied, as there was no evidence to justify the granting of the motion.

The order denying such motion is affirmed, with ten dollars costs and disbursements, and the judgment reversed on the law and on the facts, the referee discharged and a new trial granted, with costs to the appellants to abide the event.

All concurred.

Order affirmed, with ten dollars costs and disbursements, and judgment reversed on law and facts, referee discharged and new trial granted, with costs to appellants to abide event.  