Cadillac Machine Co. v. Mitchell-Diggins Iron Co.

1. Sales — Contracts—Passing of Title — Intent. The question of when title to property passes' from the seller to the buyer is one of intention to be ascertained from the terms of the contract and from the circumstances of the case. 2. Same — Default of Buyer — Rescission—Waiver. Where the seller of pig iron, to be shipped in equal monthly installments, on May 1st sent a statement of account in which it charged plaintiff, the buyer, with interest on overdue payments for invoices, such action was inconsistent with an assertion of its right to cancel under the contract for such default, and was in effect'an affirmance of the sale and a notice to plaintiff of its abandonment of its right to cancel for such default as had occurred up to that time. 3. Same — Default—Intent. Defendant’s action in failing to invoice the installments of iron to plaintiff, who was in default for prior installments, for April, May, and June, held, to amount to an intention on the part of defendant to “postpone shipment of future installments until prior shipments are paid for,” rather than to cancel the contract, as it had a right to do. 4. Same — Default—Waiver,—Rescission. Although defendant, by sending its statement of account to plaintiff on May 1st waived its right to cancel for the default in the February payment, it did not affect the' March payment, which was not then in default. 5. Same — Default—Rescission. Plaintiff, in an action for the value of undelivered shipments, having tendered the amount due for the February installment before the contract was canceled, was entitled to said shipment, but being in default for subsequent installments at the time of the cancellation, it could, not recover for the same.

Error to Wexford; Lamb, J. Assumpsit by the Cadillac Machine Company against the Mitchell-Diggins Iron Company for breach of a contract for the sale of certain pig iron. From the judgment entered, both parties bring error. This case was heard by the court without a jury. After such hearing the following findings of fact were made by the learned circuit judge: “On the 25th day of October, 1916, the parties hereto entered into a certain written contract for the purchase and sale of pig iron, which said contract reads as follows, viz.: “ ‘Pig Iron Contract. “ ‘Issued from the Office of “ ‘Mitchell-Diggins Iron Company, Cadillac, Michigan. “ ‘Buyer: Cadillac Machine Company, Cadillac, Michigan. “ ‘ Seller: Mitchell-Diggins Iron Co., Cadillac, Mich. “‘Quantity: Eight hundred (800) gross tons. “ ‘Grade: No. 2 “Cadillac” L. S. Charcoal Pig Iron. “‘Price: $20.00 per ton 2,240 lbs. F. O. B. cars furnace. “ ‘Payment: Freight cash by buyer, balance cash 80 days. The price is based on present tariff freight rate of per gross ton. In case tariff freight rate declines, the buyer is to have the benefit of such decline. In case the tariff freight rate advances, the buyer is to pay the advance. “ ‘If the buyer fails to make payment when due, the seller shall have the right to cancel the contract or to postpone shipments of future installments until prior shipments are paid for. Past due accounts shall bear interest at the rate of 6 per cent, per annum from date of maturity. “‘Shipment: Equal monthly quantities during the first half of 1917. “‘Route: Rate of freight XXXXX per gross ton from furnace to -. “ ‘Seller assumes no liability on freight rate. ‘“If shipment is made in installments, this contract for all purposes shall be treated as separate for each installment. ‘“The seller shall not he liable in damages for failure to deliver caused by strikes, accidents or other causes beyond its reasonable control. “ ‘The contract is completely set forth herein. “‘Accepted: Cadillac Machine Company. “‘W. A. K. “‘Accepted: Mitci-isll-Diggins Iron Company. “‘By D. C. Lamekeatjx.’ “In the month of January, 1917, the aforesaid contract was modified by a verbal arrangement then made by and between the parties thereto to the end and effect that the defendant company was to invoice^ to the plaintiff company each and every month, during the first half of 1917, 133 tons of iron, but was to retain said iron so invoiced in its yard for a reasonable length of time subject to the disposal of the plaintiff. “On the 1st day of February, 1917, the defendant in accordance with the contract as so modified invoiced to the plaintiff 133 tons of iron at $20 per ton to cover the January installments and charged the 'amount, $2,660, to plaintiff’s account on its books. March 15, 1917, the February installment of 133 tons of iron of the value of $2,660 was likewise invoiced, to the plaintiff and charged to the plaintiff on the; books of the defendant. And, on the 21st day of April,, 1917, the March installment of iron of 133 tons of the value of $2,660 was likewise invoiced to the plaintiff and charged to the plaintiff on the books of the defendant. “May 1, 1917, the defendant sent the plaintiff a statement of its account with defendant, which statement included the amounts covered by the invoices for the installments of iron for the months of January, February and March, 1917. No attention was given to this statement of account, so far as the three invoices were concerned, until May 14, 1917, when the plaintiff sent defendant a check for $2,660 without interest to cover the January installment of iron as invoiced under date of February 1st. This payment was credited to the account of the plaintiff on the defendant’s books under date of May 19, 1917. “After April 21, 1917, no further invoices were issued by the defendant to the plaintiff. “During the month of April, 1917, and again along the latter part of May, 1917, Mr. Kysor, of the plaintiff company had some talk with Mr. Lamereaux of the defendant company in which the question of permitting the plaintiff to pay cash for the February and March installments, to give notes for the installments for the months of April, May and June, was discussed but no arrangement to that effect was. made. “During the time the aforesaid contract was running and for some time prior thereto, the parties hereto had other dealings between them, which, while independent of the,contract, were kept along with the items under the contract and under one head or one account. “On the 1st day of July, 1917, the defendant sent the plaintiff a credit memorandum for the sum of $5,~ 320, bearing date June 30, 1917, covering the two items called for on the books of the defendant as charged for the installments of iron, invoiced for February and March, 1917. This, credit memorandum was accompanied-by a statement of the plaintiff’s account, after the said credit had been given. The balance then due and unpaid was $2,104.38. This memorandum and account were sent under the express direction of the vice-president, Wm. L. Saunders, with the avowed purpose of closing the deal under the contract. .“The plaintiff, on the 7th of July, 1917, returned the said credit memorandum and with it a check for $2,660 and a letter, directing that the check be applied to the payment of the February installment of iron as invoiced under date of March 15th, and stating that the plaintiff did not desire the defendant to take back the iron, invoiced for February and March, and that the installment for March, invoiced under date of April 21, 1917, would be taken up at an early date. • “This check for $2,660, the amount due on the February installment without interest as provided by the contract, was received by the defendant and passed to the plaintiff’s general account, under date of July 10, 1917. Later under date of July 19, 1917, the defendant rendered a statement of its account with the plaintiff to the plaintiff, wherein and whereby $2,-104.38 of the $2,660, the amount of the check, had been applied by the defendant to items not subject to the terms of the contract. Along with said statement defendant enclosed its check for $555.62, dated July 10, 1917, as the balance due the plaintiff to settle its account in full as of that date. This check for $555.62 had been received by the plaintiff some time beforel this date of July 19th. It was left with defendant, at the time of the conference held shortly after July 10, 1917, at Cobbs & Mitchell’s office, at which Mr. Kysor for the plaintiff and Mr. Mitchell, Mr. Saunders, and Mr. Ford for defendant were present, and during which conference it was made known to Mr. Kysor that contract deal No. 687 had been closed and was of no more force or effect. “Later, and on the 20th day of July, 1917, the plaintiff informed the defendant by letter that it, the plaintiff, did not concede the right of the defendant to cancel the contract, and asked for the delivery of 899 tons of the iron at once and that the balance be held in defendant’s yard in accordance with the verbal understanding, made in January, 1917. Accompanying this communication was a cheek of the plaintiff for $2,660 in payment of the March installment of iron as invoiced under date of April 21st, without interest. Under date of July 27th, the defendant returned this check declining to deliver any more iron under the contract. “August 13, 1917, the plaintiff served notice in writing on the defendant advising it, the defendant, that the plaintiff insisted on having its check No. 16,-415 for $2,660, dated July 7, 1917, applied in payment of the invoice of iron, bearing date of March 15, 1917, covering the February installment, as originally directed. With the above notice, the plaintiff returned the check of defendant for $555.62, dated July 10, 1917, and tendered the defendant a certified check for $2,696.38 in payment of the invoice, dated April 21, 1917, for the March installment of iron with the interest at 6 per cent, from May 21, 1917, to date of tender. In this notice was also a demand upon the defendant for the possession of 266 tons of iron, covered by the invoices of March 15th and April 21, 1917, being the February and March installments of iron under the contract. On the same day, August 13, 1917, the plaintiff made a formal tender to the defendant of the sum of $8,000 in the form of a certified check, with notice that such sum was in payment for the 400 tons of iron due under the contract as the April, May, and June, 1917, installments, and also made demand for the delivery of the said 400 tons of iron to the plaintiff. “On August 20, 1917, the defendant returned to the plaintiff all three checks, namely the check for $2,-696.33, the check for $555.62 and the one for $8,000, with notice that it, the defendant, declined to deliver any of the iron for which demand, had been made. “Under date of October 11, 1917, the plaintiff returned to defendant the check for $555.62, dated July 10, 1917. “The iron called for by invoice dated February 1, 1917, being the January installment under the contract, was delivered, at the request of the plaintiff, during the months of September, October and November, 1917. This installment had been paid for and credit given May 14, 1917. No further or other deliveries of iron to apply on contract No. 687 have been made by defendant, and delivery of any iron under said contract, other than the January, 1917, installment, has been refused by the defendant. “At no time, during the life of contract No. 687 was there any specific quantity of No. 2 ‘Cadillac’ Lake Superior charcoal pig iron set apart in its yard by the defendant to cover this contract or any part thereof. It was the intention of the parties to the contract as modified that, when the defendant invoiced a monthly installment to the plaintiff, such invoice was notice to the plaintiff that the defendant held itself in readiness to deliver such installment on request. “The market value of such iron as was covered by this contract, during the month of July, 1917, was $55 per ton.” Based on such finding the court reached certain conclusions of law which follow: “1. The written contract before the court, as modified by the verbal arrangement, made in January, 1917, is in its terms a contract to sell 800 tons of No. 2 ‘Cadillac’ Lake Superior pig iron, and is, by express terms, severable. “2. It was the intention of the parties to this- contract gathered from the instrument, its modification and what was done under it as modified, that the sale of each installment should be complete, when the invoice was issued to the plaintiff by the defendant and the amount thereof charged to the plaintiff on the books. The invoicing was notice to the plaintiff that the defendant then held the quantity of iron, called for by the invoice, in readiness to load out at the request of the plaintiff, and was a plain manifestation of an intention to appropriate such quantity of iron to the plaintiff within the meaning of the uniform sales act. The title then passed to the plaintiff. Nor was payment a condition precedent thereto. By the terms of the contract the plaintiff had thirty days from the date of the invoice in which to pay for the installment, and yet delivery of the same iron was demandable at any time, even within the thirty days. There was no reservation of title till payment was made, either expressed in or implied from the instrument. “3. Under the contract the plaintiff was to pay cash after thirty days from the date of the invoice of each and every installment. His neglect and failure to make any payment on any of the invoices issued under dates, February 1st, March 15th, and April 21, 1917, until May 14, 1917, and then only the February 1st invoice, was material breach of the contract and justified the defendant in rescinding it in its entirety. The plaintiff is presided over by a keen business man thoroughly conversant with business ways and the usages of trade. He must be held to have realized the fact that a credit of thirty days on each and every installment invoiced could not be reasonably construed, under a recognized trade usage, to mean a credit of 102 days on the January installment, a credit of 107 days on the February installment, and a credit of 70 days on the March installment. He must also, from like business experience, be held to have realized that long continued outward sufferance towards a debtor does not, ipso facto, indicate long continued inward satisfaction on the part of the creditor. Nor does it avail him to claim that the defendant should have made the plaintiff pay. The legal duty rested upon the plaintiff to pay when its obligations fell due under the contract or to make satisfactory arrangement for their extension, and not upon the defendant to urge or force it to do so. “4. It is well settled by the authorities that an unpaid seller has the right to rescind a completed sale and retake the title to the property sold. The uniform sales act makes provision for the exercise of such right in subdivision 2 of section 61 [3 Comp. Laws 1915, § 11892], which reads as follows: “ ‘The transfer of title shall not be held to have been rescinded by an unpaid seller until he has manifested by notice to the buyer or by some other overt act an intention to rescind. It is not necessary that such overt act should be communicated to the buyer, but the giving or failure to give notice to the buyer of the intention to rescind shall be relevant in any issue involving the question whether the buyer had been in default an unreasonable time before the right of rescission was asserted.’ “The act of the defendant in not issuing any further invoices of monthly installments of iron, after April 21, 1917, and the sending of the ‘credit memorandum/ dated June 30, 1917, to the plaintiff under date of July 1,1917, were overt acts within the meaning of said uniform sales act, and were sufficient to indicate to the plaintiff an intention on the part of the defendant to rescind the contract, both as to the installments where the sale must be held to have been complete as well as to those installments whereto title had not passed yet. This conclusion follows from the rule, that, where the seller is in possession of the property any dealings with it inconsistent with a recognition of the rights of the buyer in it will amount to an election. Under such condition notice to the buyer is not necessary, but in the instant case, the buyer must be held to have had notice of both overt acts, one by the presumption that it would obviously take notice of what, in the regular course of business under the contract in question, its books and records should show but failed to show, and the other by direct notice in the shape of the ‘credit memorandum/ “5. The sale of the installments for February and March was rescinded and title thereto reasserted by the defendant,' but having in mind the fact that the contract by its terms is severable, that the defendant, after its rescission of the contract accepted and applied the check for $2,660, dated July 7, 1917, in the payment of other items of indebtedness on the general account of the plaintiff than the one specifically directed by the plaintiff, and also having in mind the rule of law which gives the right to the debtor to direct the application of tendered payment, there is no inconsistency, in my judgment, in holding that, in accepting and applying said check for any purpose, the defendant must be held to have waived its. right to insist on its rescission of the contract in so far as it applies to the February installment of iron, and that said February installment must be considered as paid for by said check and that the iron so covered was subject to the demand for delivery made by the plaintiff, on July 20, 1917. “6. Judgment should be entered for the plaintiff against the defendant, under the first count of the plaintiff’s declaration, in the sum of $7,315, together with interest thereon at the rate of 5 per cent, from July 10, 1917. “7. Judgment of no cause of action should be entered under the second count in the plaintiff’s declaration, and it is so ordered.” Neither party to the controversy was satisfied with the legal conclusions, the plaintiff filing exceptions to the third, fourth, that part of the fifth which reads: “The sale of the installments for February and March'was rescinded and title thereto reasserted by the defendant,” —to the sixth and to the seventh. Defendant filed exceptions to the legal conclusions as follows: “1. To those parts of the second conclusion of law, which read as follows: “ ‘The invoicing was notice to the plaintiff that the defendant then held the quantity of iron, called for by the invoice, in readiness to load out at the request of the plaintiff, and was a plain manifestation of an intention to appropriate such quantity of iron to the plaintiff within the meaning of the uniform sales act.’ “2. To that part of the fifth conclusion of law, which reads as follows: “ ‘But Raving in mind the fact that the contract by its terms is severable, that the defendant, after its rescission of the contract, accepted and applied the check for $2,660, dated July 7, 1917, in the payment of other items of indebtedness on the general account of the plaintiff than the one specifically directed by the plaintiff, and also having in mind the rule of law which gives the right to the debtor to direct the application of tendered payment, there is no inconsistency, in my judgment, in holding that, in accepting and applying said check for any purpose, the defendant must be held to have waived its right to insist on its rescission of the contract insofar as it applies to the February installment of iron, and that said Ftebruary installment must be considered as paid for by said check and that the iron so covered subject to the demand for delivery made ■by the plaintiff on July 20, 1917/ “3. To the sixth conclusion of law, which reads as follows: “ ‘Judgment should be entered for the plaintiff and against the defendant, under the first count of the plaintiff’s declaration, in the sum of $7,315, together with interest thereon at the rate of 5 per cent, from July 10, 1917/ ”