Stillwell, Bierce & Smith Vaile Co. v. Biloxi Canning Co.

1. Sales. Machinery. Receipt. Acceptance. When goods are sent to a buyer under a contract of sale, he is not precluded from objecting to them on their receipt, but receipt will be acceptance if the right of rejection is not exercised in a reasonable time, or if any act be done by the buyer which he would have no rig-ht to do unless he were the owner of the goods. 2. Same. Use of goods. The use of machinery by the buyer, after testing it, is an acceptance, although he notified the seller of its defects, informing him that nothing- more would be paid on the purchase money and that it would be held as security for what had already been paid. 3. Same. Purchase money. Recoupment. Warranty. A buyer, after accepting machinery with a warranty of its capacity, cannot wholly escape liability for the purchase money by showing a breach of the warranty. Where the warranty survives the acceptance, he may recoup his damages, and it does so survive if the contract of sale do not provide otherwise. 4. Same. Burden of proof. The burden of proof is on the buyer who accepts machinery, notwithstanding a breach of warranty, to show the breach and the extent of his damages because thereof.

From the circuit court of Harrison county. Hon. Thaddeus A. Wood, Judge. The Stillwell Bierce & Smith Vaile Company, the appellant, was the plaintiff in the court below; the Biloxi Canning Company, appellee, was defendant there. The suit was for the recovery of the purchase money of an ice manufacturing plant, and the nature of the controversies is apparent from the opinion of the court. There was no provision in the contract that the acceptance of the machinery should be in satisfaction of the seller’s warranties. Appellee had either a right to return the machine as soon as he found that it was defective, rescind the contract and sue for his damages, or he had a right to keep the machine and recoup for his damages, by reason of defects in the machinery, in an action for the -purchase price, but he had no right to keep the machine and deny his liability either for the purchase price or , the actual value of the machine. There is an unbroken current of authorities, all holding that a purchaser cannot retain the property and deny his liability for the purchase money because of defects in the property. Gorom City Glass Go. v. Fried-louder, 84 Wis., 53; Brown v. Foster, 108 N Y., 387; Andrews v. Hensler, 6 Wall., 254, s.c. 18 L. Ed., 737; 21 Am. & Eng. Ene. L., 84; Add. on Contracts, 273; Yoories v. Earl, 2 Hill (N. Y.), 288; Story on Contracts, 1080; Chitty on Contracts, 815, 689, 691, 485; Ware v. Haughton, 41 Miss., 370; IGetler v. Miller, 119 N. C., 475; Phelps v. Piercy, 41 Kan.,. 763; McBride r. McGlv/re, 49 111. App., 612; Alimón v. Thierman, 34 Iowa, 272; White v. Hanchett, 21 Wis., 415; Dennis v. Staughton, '55 Yt., 371; Smith v. Estey Organ Go., 100 Ga., 628; Railroad Go. v. Richards, 30 L. R. A., 44; Hinson v. Dunn, 41 Am. Dec., 100; Brantley v. Thomas, 73 Am. Dec., 264; Pen'ley v. Bolch, 34 Am. Dec., 56; Burton v. Stewart, 20 Am. Dec., 692; Aultmon v. McFallen, 11 F. R., 836; 1 Parsons on Contracts, 593; Story on Contracts, sec. 977; McOuTloch v. Scott, 56 Am. Dec., 561; Saw Works v. Land Go., 42 S. W., 527; Cherry v. Gox, 45 S. W., 122; Saivfordv. Gates, 21 Mont., 277; Rice v. Gilbreath, 119 Ala., 424; Machine Go. r. Knoll, 57 Neb., 790; Johnson v. Jackson, 27 Miss., 498; Jagers v. Griffin, 43 Miss., 134; Bishop on Contracts, 679; Tiedeman on Sales, 163. The court did not submit to the jury the question as to whether or not this conduct on the part of appellee, using the machinery, constituted an acceptance, but, by the first instruction given for defendant, in effect, said to the jury that such conduct did not constitute an acceptance, and that, without considering any other question, if the plaintiff had failed to establish the fact that the machine came up to the contract, they should find for the defendant. There is no authority, for the proposition that, after the discovery of defects in the machine, the purchaser can exercise the right of ownership, even in making a test of the machine, without forfeiting his right to defend against a suit for the purchase money. BLe could not, after discovering the defects in the machine, even make a test to discover the extent of his damage by reason of the defects, and in no case that w.e have been able to find has it ever been held that he could use it after discovering its defects and deny liability for its actual value, but the universal rule is that, after the defects are discovered, any acts of ownership'by the purchaser, or any acts inconsistent, with the ownership of the seller, constitute a' waiver of the right to rescind and will be construed as an acceptance. We could multiply authorities acl infinitum in support of the rule above stated, but we deem it unnecessary, for we are confident that this court will not permit this judgment to stand, thereby depriving appellant of his property and also compelling him to pay back to appellee all that he has paid out on the machinery, while the appellee makes a clear profit of the machine and is permitted to retain both the machine and the purchase money. The defendant denied its liability on the ground that the machine, with its attachments as made, did not fill the warranties of the contract, and offered by way of recoupment, a statement of damages arising out of the breach of the contract to manufacture and deliver. The controlling stipulation in it is as follows: “We further guarantee that if only two of said storage rooms are run, the machine will cool two of said rooms and produce four tons of ice per day of twenty-four hours of continuous operation. We propose to furnish you the foregoing machinery, delivered on cars at Biloxi, Mississippi, including the services of one good man to superintend its erection and give instructions to your engineer for a period not exceeding ten days, for the net sum of $5,000, payable as follows: One-fourth on shipment of said machinery, one-fourth on completion of its erection and performance as herein proposed, one-fourth in four months from shipment, and one-fourth in six months from shipment, ’ ’ etc. The substantial defense in this case was and is that the plaintiff below did not fulfill its guaranty; that the machinery, as delivered and erected, was not capable of cooling the two storage rooms and also -of making four tons of ice per day as warranted; and, because of said breach of warranty, the defendant denied its liability, and offered to prove damages by way of recoupment. On this question of acceptance or nonacceptance, distinctions are to be taken. In the first place there is a distinction, and it is an exceedingly important one, between the liabilities in respect to the sales of chattels by a mere seller on the one hand and a manufacturer on the other. The liability of a manufacturer is much greater, and the law holds him to a stricter rule. The plaintiff in this case was a manufacturer and not a mere seller. In the second place, there is a distinction between classes of chattels. There are chattels (and this case falls within that category) where the test of quality can only be made by operation; this is especially true in regard to complicated and delicate and cumbrous machinery. It was impossible to tell whether the machine would make the product stipulated for without trying it. In a case like this a use by way of a test, merely to ascertain whether the guaranty of the contract was fulfilled, was not such a use, as the defendant had, under its contract, no right to make except as owner. The very contract itself made the second payment contingent on performance, and the contract on its face provided that the machinery was to be delivered at Biloxi on the ears, and contemplated evidently the erection of it by the defendant company, and only provided that the defendant company should have present an instructor to show the servants of the defendant how to operate it. According to the terms of the contract, any test that was made had to be made by the defendant, although in making such test the' defendant might make use of and employ the operatives of the plaintiff. But, even if the operation of the machinery under the circumstances could be and should be treated as an acceptance under the law, yet the consequence of that acceptance is very different from that attributed to it by appellant’s counsel. Acceptance is not a waiver of all objections. In this connection we must again point to the fact that' there is a distinction to be taken between chattels bought and sold, a distinction based upon the nature of the chattels themselves, and upon the conditions under which they are bought and sold. An acceptance of chattels purchased undeT some circumstances has the effect of a waiver, but not under conditions similar to the case at bar. Here is a case of an executory contract to manufacture and supply a complicated and ponderous machine with a certain capacity for the production of a certain product. There is no question of caveat emptor. There is not even a question of an implied warranty. There is an express warranty of quality, that quality being the capacity for the production of a certain output. In this sort of case, even if it be held that the machine had been accepted by its operation, yet that acceptance-would only operate to pass title from the plaintiff to the defendant, and to prevent the defendant front refusing to receive the machine and directing the plaintiff to take it away, repudiating the contract altogether. Even if the defendant accepted the plant, it still had the right to keep and use the property, and at the same time to recoup as damages the injury which it has suffered by the breach of guaranty or warranty in any action brought by the plaintiff for the purchase price; that the defendant had this right is perfectly well settled law. Tiedeman on Sales, sec. 197; Stillwell c& BiereeMfg. Co. v. Phelps, 130 U. S., 520; Pullman, etc., Oo. v. Railway Go., 157 U. S., 94. The property was seized under process in this case, and, therefore, it is not in appellee’s possession; appellee did not give bond to receive the property back from the sheriff; it is, therefore, in possession of appellant, either actually or constructively.