
    M. & E. Solomon Tobacco Company, Respondent, v. Benjamin F. Cohen and Mayer S. Auerbach, as Surviving Members of the Firm of Simon Auerbach & Co., Appellants.
    
      Contract of sale of goods in bond—meaning of words “Terms Duty Cash 70c if' appraised at less Diffce to be allowed” — the “appraisal” contemplated is that of the collector, not that finally determined by the courts.
    
    The owners of a quantity of tobacco imported in bond sold it under a written: contract providing as follows :
    “Terms Duty Cash 70c if appraised at less Diffce to be allowed — $5,000 4 & 5 mos—Balance less Discount for unexpired time — All to be taken in. 5 mo’.
    “ 37 Bales Deli My K S L I “At §2.25"
    At the time of the sale the tobacco had not been appraised by the customs officials, and the parties, judging from their experience, estimated that the appraisal would result in an average duty of seventy cents per pound. The only appraisal provided by law was that to be made by the collector of customs.
    June 12, 1890, two days after the sale the customs collector appraised the tobacco-as dutiable at sixty-one cents per pound, and on the following day the vendors, invoiced .the tobacco to the vendee at two dollars and sixteen cents a pound, thereby deducting from the price of two dollars and twenty-five cents a pound the nine cents which, represented the difference between the amount of the-estimated duty and the amount determined by the customs collector.
    June 17, 1890, the vendee delivered tó the vendors his promissory notes for §5,000-at four and five months as provided in the contract. Subsequently, and prior-to February 1, 1891, the vendee withdrew all the tobacco from the bonded warehouse and paid for it at'the rate of $2.16 a pound in cash according as. each delivery was made. .
    Subsequent to the appraisement and the liquidating of the duty at sixty-one cents per pound' levied upon the tobacco, the vendors filed a protest with the collector of customs claiming that the duty was excessive. In 1893 the United. States Circuit Court of Appeals decided that the vendors’ position was correct, and in 1900 the Treasury Department refunded to them the excess improperly-collected.
    
      
      Held', that the appraisement contemplated" by the written contract of sale was the one made by the collector, and that the purchase price- of the tobacco'was fixed by it;
    That the vendee was not entitled to recover from the vendors th"e difference between the amount of the duty paid by such vendee and the sum at which' the appraisal was finally made by the courts;
    That no duty rested upon the vendors to institute legal proceedings to obtain a - reduction of the duty levied upon the tobacco, and that the vendee had no interest in the moneys received by the vendors as a result of such proceeding.
    Appeal by the defendants, Benjamin E. Cohen and another, as surviving members of the firm of Simon Auerbach & Co., from a judgment of the Supreme Court in favor of the plaintiff, entered in the'office of the clerk of the county of New York on the 15th day of March, 1904, upon the decision of the court rendered after a trial at the New York Trial Term, a jury having been-waived.
    The action is brought to recover a sum of money refunded by the United States government to the defendants for, duties illegally' exacted upon an importation of tobacco.
    The complaint is in two counts. The first is upon an express agreement alleged to have, been made, "that in addition to the price of the said tobacco, the customs duties thereon on the importation' thereof into’ the United States of America were to be paid by the plaintiff to said firm; that the said firm should endeavor to have the said customs duties assessed at the lawful amount; that in case the appraisal of said customs duties should be excessive, the said firm should protest against the levying thereof and take such proceedings as should be necessary for the recovery from the government of the United States of America of such excessive customs duties; that the difference between the amount of customs duties paid by the plaintiff to the said firm and the amount of the appraisement as finally made was to be repaid by the said firm to the plaintiff;” that ' “ relying upon the said agreement, the plaintiff paid to the said firm the price of said tobacco, and in addition thereto paid as customs duties thereon to the said firm the sum of sixty-one cents per pound.” The second count in the complaint is for money had and received to the plaintiff’s use. . "
    The answer admits the sale to the plaintiff, the. payment by the vendors to the, government of duty at the rate of sixty-one cents per pound, and denies the other allegations of the complaint.
    
      The nature of the action and the questions involved may he briefly stated. The. defendants on the 10th of June, 1890, sold to the plaintiff in the city of New York thirty-seven bales of Sumatra tobacco while.in bond, under a written contract in the form of a broker’s bought and sold note of which the following is a copy :
    “ New York, June 10, ’90.
    “ Sold to M. & E. Solomon Toh. Co.
    “ For account of S. Auerbach & Co.
    “ Terms Duty Cash 70c if' appraised at less Diffce to be allowed — $5,000 4 & 5 mos — Balance less Discount for unexpired time — All to be taken in 5 mo.
    “ 37 Bales Deli My K S L I “At-$2.25 “ Examined & accepted
    “ Maurice Eller & Son,
    “ Brokers.”
    On June 12, 1890, two days after the sale was made, the thirty-seven bales were appraised by the customs collector as dutiable at sixty-one cents per pound. On June 13, 1890, the defendants, invoiced the thirty-seven bales to the plaintiff at two dollars and sixteen cents a pound, thereby deducting nine cents a pound from the price, which was the difference between the amount of the duty as estimated in the contract and the amount determined by the collector. On June 17, 1890, the plaintiff, in performance of the contract, delivered to the defendants two promissory notes for two thousand five hundred dollars each, one dated June 13, 1890, payable four months after date, and the other dated June 17, 1890, payable five months after date; and subsequently and prior to February' 1,1891, withdrew all the tobacco and paid for it at the rate of two dollars and sixteen cents per pound, paying the amount of the duty to the defendants in cash on each delivery as it was made.
    After the appraisement of the tobacco and the liquidating of the duty at sixty-one cents per pound, the defendants filed a protest with the collector of customs, claiming that the method of the appraisement was unlawful and that the duty was unlawfully liquidated, and that an excessive amount of duty had been exacted ; and subsequently, in April, 1893, the Circuit Court of Appeals of the United States for the Second Circuit decided that the collector erred in the manner of appraising the tobacco and liquidating the duty (See Matter of Blumlein, 55 Fed. Rep, 383); and the United States Treasury Department thereafter and on or about January 1, 1900, refunded to the defendants the excess of the duty paid. It is to recover this amount, less the sum paid 'for obtaining the refund, that this action is brought. Upon the facts the learned trial justice directed judgment for the plaintiff, and from such judgment the defendants appeal.
    
      B. F. Einstein, for the appellants.
    
      Abraham Benedict, for the respondent.
   O’Brien, J.:

The disputed question was whether the provision of the bought ■and sold note, “ Terms Duty Cash 70c if appraised at less Diffce to be allowed,” justified "the construction that the eventual and legal rate of duty fixed by the government was to be deducted from the arbitrary and experimental rate of seventy cents per pound fixed at the time of the sale, in order to. ascertain the difference to be allowed,” or whether the original and unlawful rate fixed by the collector on "June thirteenth of sixty-one cents per pound concluded the parties. The learned" trial justice decided that “ the contract provides substantially that the difference between the lawful duty and the sum arbitrarily fixed in the contract shall be refunded to the purchaser,”, which was in effect a determination that the contract did not contemplate as final the appraisement to be made by the collector, but contemplated the lawful duty as it might be ultimately assessed. Differently expressed, therefore, the question for our determination is whether, under this contract, the rights of the parties were fixed by the appraisement made by the collector in June, 1890, or whether the right of the plaintiff to a. refund of duties paid continued until, by a decision of the courts, the amount lawfully payable was determined.

It will be noticed in passing that the plaintiff was not entirely certain that under the terms of the bought and sold note its rights to have allowed it a rebate of duties paid continued after the appraisement by the collector. We say the plaintiff was not entirely ■certain, because, instead of relying upon the language of the bought and sold note, the first count of the complaint alleged an express agreement whereby the defendants undertook and agreed, for plaintiff’s benefit, to file the protest and to appeal to the courts, and if successful, to pay over to it. what ever might as the result of the litigation be obtained. This, though not controlling, is indicative of the construction which the plaintiff first placed upon the language •of the bought and sold note — a construction entirely different from that for which it now contends. No attempt was made on the trial to prove any such express agreement, the plaintiff falling back on the terms of the bought and sold note. Upon the trial, therefore, ■both parties stood upon the construction to be given to the written ■contract embodied in the bought and sold note; and the court, reading it in the light of the surrounding circumstances, placed that construction upon it which would conform it to the presumed intention and understanding of the parties.

We are constrained to adopt the samé method and to keep in mind the rule that, “ in the construction of contracts, it is the duty of the court to put itself as near as may be in the situation of the parties, and from a consideration of the surrounding circumstances and the •occasion and apparent object of the parties, determine therefrom the meaning and intent of the language employed in framing their agreement.” (Smith v. Kerr, 108 N. Y. 31.)

The question presented is a close one, the result depending as it does upon whether we view the contract as providing that the plaintiff was to pay for the tobacco, within the five months stipulated, an amount which included the sum fixed by the collector upon his appraisal to be made at the time, as the duty to be paid, or as providing that the plaintiff was to pay an amount which included the absolute legal duty that could be exacted, and that the plaintiff, upon its appearing subsequently that the duty had been erroneously assessed by the collector, could recover of the defendants money refunded to them by the government. This latter view would undoubtedly prevail if the understanding was that the plaintiff should purchase the tobacco at a price named, and in addition should pay the duty thereupon, and thus that the tobacco was sold subject to the payment of the duty which was paid by the plaintiff as such, exclusive of the price named by the defendants. In that case the money paid to the government as duty would be the money of the plaintiff

The contract, however, does not so provide, but instead names a price of two dollars and twenty-five cents per pound for the tobacco, which price was calculated as near as could be without an actual appraisement; and it further provides for a deduction from this price if the appraisal when made was less. The duty was thus part of the consideration; and the plaintiff was by the contract bound to accept delivery and pay for the tobacco within five months.. Nothing was said about securing a decision of the courts, and it may very well be that the defendants were confident of obtaining a refund from the government, and that the right to do so was, therefore, reserved to them and formed an element in determining the price named to the plaintiff. Whether this be so or not, it is as probable as is the suggestion that the price was fixed, not alone with reference to the appraisement as made by the collector, but with reference to the lawful duty as finally determined -by the court.

In addition to the contract, some evidence was admitted as to the conditions existing when it was made, from which it would appear that the tobacco had recently been imported and was in bond, and had not'yet been appraised by the customs officials, and. that the parties, from their experience and knowledge of the quality of the tobacco and the methods adopted by the customs official's, judged that the appraisal would result in an average duty of’ seventy cents per pound. This being the situation, the question presented is, what did they mean in using the language if appraised at less Diffce. to be allowed ?”

The only appraisal that the law provided for was that to be made by the collector of customs, and we think, considering the fact that the notes were payable and all the tobacco was to be delivered and-the contract performed within five months, that there is force in the suggestion, that the appraisement contemplated was the one which should, during that period, be made, and that it would be a strained construction to hold that the parties intended to defer the performance and completion of the contract beyond the appraisement by the collector and until the lawful duty was determined by the courts, "which determination, if it was ever obtained, might, and as here shown actually did, involve a delay of years. Nor do we think that there can he spelled out of the language employed any duty resting upon the defendants to take steps to obtain a further allowance from the government through the courts.

In this connection our attention is' directed by the appellants to the cases of Woodruff v. Woodruff (52 N. Y. 53) and Wadsworth v. Green (1 Sandf. 78). In the former the defendant was indebted to the plaintiff upon a bond and mortgage executed prior to the Legal Tender Act, and, after that act was passed, offered in payment legal tender notes, and, when the plaintiff insisted upon payment in gold coin, entered into a contract that the plaintiff should receive the legal tender notes, but that if at.any time thereafter the Supreme Cpurt of the United States determined that the act was unconstitutional, then payment should be made in gold coin. Thereafter the court decided the act unconstitutional, and an action was - brought to recover the difference in value of the notes and coin, and a judgment was obtained against the defendant. Upon appeal it was held that although subsequent decisions had reversed the one holding the Legal Tender Act unconstitutional, the plaintiff was entitled to recover upon the agreement, the court saying: “We think this contract had reference to the decision first made, and that there is nothing in the circumstances alluded to, or in the merits of the question, from which we have a right to'infer that the parties contemplated any further litigation.” And in the Wadsworth case it was said: “ The sole question * * * is whether * * * the agreement means an ultimate judicial decision in a court of final and last resort or the decision of a competent tribunal on the subject. * * * It is sufficient for the plaintiff’s purpose that there has been a judicial decision of a competent tribunal.”

It is conceded that it was due solely to the defendants’ protest and efforts subsequent to the appraisal by the collector that the fund was obtained over which this dispute has arisen. If it had been the intention of the parties that these steps should be taken after the sale by the defendants solely for plaintiff’s benefit, it would seemingly have been easy to express some such agreement in language similar to that employed by the plaintiff in the first count of the complaint. Therein a clear and explicit agreement was alleged, which, however, upon the trial the plaintiff abandoned because tillable to prove. As indicating the intention and understanding of the parties expressed in the bought and sold note, one of the most significant features is the facf that the ■ contract in its terms was to be performed, and the plaintiff agreed to pay for the tobacco within five months. ’ As the only appraisement that could' be made within that time was by the collector of customs, we think that the •appraisement which the parties had in hand when they signed the' -contract was that to be made' by the collector, which was the one provided by law. There was no -obligation imposed, upon the defendants by- the terms of the contract to take any ¡steps or to do anything .further towards securing from the government another appraisement or a determination through the courts of the duty which could lawfully be imposed'

Another argument in the appellants’ favor, we think, arises from the conduct of the parties. All the tobáceo and .the notes in pay-' ment having been delivered during the five months, both parties, so far as can be gathered from this record, regarded the transaction ■ between them as finally closed. . This inference is deduced from the fact that the plaintiff did nothing towards obtaining a review of the ■appraisement made by the collector.. On the other hand, the defendants took active steps to review the appraisement; and if they did not think it was for their own benefit, tlfen we are driven to the ■conclusion that, without any obligation resting upon them to do so and without the- prospect of deriving any benefit therefrom, they filed the protest and conducted the proceedings which resulted in the creation of the fund over which this dispute has arisen.

We think, therefore, that the appellants are right in contending that there never was any appraisement contemplated other than the one made by the collector. The United States Circuit Court of Appeals held that the appraisement made was illegal because the method of making it was illegal, but that fact is not controlling, because the appraisement made by the collector was the one which we think the parties provided for in their contract, and which was therein fixed by them as the basis for determining the price of the tobacco, the contract making' no provision for protesting against - that appraisement or appealing' from it, nor for the contingency of its being set aside.

Having reached the conclusion, therefore, that there was no pro: vision in the contract, that -the defendants should protest against the appraisement' or take proceedings to recover excessive duty, or that the defendants were to refund to the plaintiff the difference between the duty which might ultimately be determined to be the lawful duty and the sum arbitrarily name'd in the contract, and that neither under the terms of the contract nor upon the theory of money had and received was the plaintiff entitled to recover the moneys which the defendants obtained from the government, the judgment in plaintiff’s favor should be reversed and a new trial ordered, with costs to the appellants to abide the event.

Ingraham, McLaughlin and Hatch, JJ., concurred.

Patterson, J. (concurring):

I concur on the specific ground that by the contract the parties intended no other appraisement than that to be made by the customs authorities, and upon which duty was to be paid before the goods could be withdrawn.

Judgment reversed, new trial ordered, costs to appellants to abide event.  