Amalgamated Gum Co. v. Casein Co. of America

• Decision Date: 24 July 1906
• Citation: 146 F. 900
• Parties: AMALGAMATED GUM CO. v. CASEIN CO. OF AMERICA.
• Court: U.S. District Court — Northern District of New York

146 F. 900

AMALGAMATED GUM CO. v. CASEIN CO. OF AMERICA.

United States Circuit Court, N.D. New York.

July 24, 1906

John T Norton, for plaintiff.

George J. Gillespie (T. E. Hancock, of counsel), for defendant.

RAY District Judge.

On the 3d day of September, 1903, the parties in this action entered into a written contract whereby, in consideration of $1 and of the covenants and agreements in the contract contained the plaintiff agreed with the defendant as follows:

'The said party of the first part agrees to sell its entire output of its paper coating products for the paper coating trade of the United States and Canada, covering all the products now made by it or which may be made in the future for the paper coating trade and any and all improvements thereon, unto the said party of the second part, upon condition that the said party of the second part shall accept from the said party of the first part for the year beginning January 1, 1904, three hundred and thirteen tons of the said paper coating products and for the year beginning January 1, 1905, six hundred and twenty-six tons of the said products, and for the year beginning January 1 1906, twelve hundred and fifty-two tons of the said products and for each of the two years beginning January 1, 1907 and January 1, 1908, fifteen hundred and sixty-five tons of said products upon the terms and conditions hereinafter set forth; but in case the said party of the second part shall not accept from the said party of the first part the quantity of said products hereinbefore set forth in any of the years above described, then, and in that case, it is understood and agreed that the said party of the first part shall be and is at liberty to sell its paper coating products in the United States and Canada without reference to the said party of the second part except to protect the said party of the second part with such customers of the party of the second part as shall be supplied with said products of the said party of the first part direct by the said party of the second part. The said party of the first part further agrees to supply the said party of the second part with reasonable quantities of said product within the manufacturing capacity of said party of the first part beyond the quantities above specified provided the said party of the second part shall give due and timely notice of such excess quantities required. The said party of the first part further agrees not to sell any of its paper coating products to the paper coating trade in the United States and Canada, either directly or indirectly, so long as the said party of the second part shall accept from the said party of the first part in the times above specified the quantities of said products above specified and that if any of said products shall reach any of the paper coating trade in the United States and Canada indirectly from the said party of the first part, the said party of the first party will immediately upon notice to that effect, cause its said products to be withdrawn from such trade and from all persons, firms and corporations who shall furnish said products indirectly to such trade and that the said party of the first part will do everything within its power to protect the trade, rights, and interest of the said party of the second part under this agreement. The said party of the first part hereby guarantees to furnish unto the said part of the second part goods of a quality at least as good as the carload of its said products shipped to the said party of the second part at Bellows Falls last previous to the date of this agreement; a sample of which is to be preserved by both parties as a standard.'

The defendant agreed with the plaintiff as follows:

'The said party of the second part agrees to pay for the said paper coating products to be furnished to it by said party of the first part the sum of five and one-half cents per pound f.o.b. cars Troy, N.Y., in carload lots, less freight to any point east of the Mississippi river, sixty days net or cash less 6 per centum per annum for unexpired time as a discount.'

The contract contained other clauses material to this controversy hereafter quoted or referred to.

A carload of the plaintiff's paper coating product had been shipped to and received by the defendant, and a sample was preserved by defendant as a standard for future deliveries and a barrel thereof sent to plaintiff as a standard. Deliveries under the contract commenced October 27, 1903, when 150 bags of 275 pounds each, or 41,250 pounds, were delivered. November 4th, 150 bags of 275 pounds, or 41,250 pounds were delivered. In all 82,500 pounds. These goods were accepted and paid for finally, but not without complaint as to quality that same were not of the quality of the sample, and not as good as contracted for and agreed to be delivered. Complaint was also made that delivery was not being made according to the terms of the contract. The defendant refused to take and pay for more, but the plaintiff continued to manufacture and store the product, notifying defendant it was on hand and awaiting delivery subject to the defendant's order. The plaintiff made a test as to quality by comparison and made the product not taken by defendant of the same materials and by the same process used in making the carload from which the sample was taken and retained under the agreement. The plaintiff described the test of the material as follows:

'Yes. We test our raw material first, to know when we start that the materials are all right. And then at the finish we test it by boiling it up, allowing it to stand, put it alongside of the previous lot which has been made, and treated in the same way. And decide for ourselves that it is up to the standard.'

The witness, then, under objection, gave his opinion the product not taken by defendant was as good as the sample. There was no pretense of a test by use. After the contract was made plaintiff enlarged its plant and facilities for making, so as to comply with its demands, at an expense of about $40,000. At the time the agreement was entered into the plaintiff had contracts with other parties. During 1904, and after the defendant refused to accept more of this product, which is made by a secret process not disclosed, the plaintiff tendered and has kept and has in store ready for delivery to defendant, 540,500 pounds of the value of $29,727.50, at the price named in the contract. The interest on this sum from January 1, 1905, to the day of the trial is $2,407.92; total, $32,135.42. While the agreement bears date September 3, 1903, it was not actually executed until October 5, 1903. The plaintiff is a corporation organized to make this special product under its secret processes, some of which are patented, and the plaintiff also knew when the contract was made the purpose for which defendant desired and intended to use it, and as an inducement to the making thereof, stated it was suitable and proper for the use and purpose intended. The defendant had also purchased of plaintiff, tested, and used for this purpose, quite a quantity of this material or product, and such tests had been satisfactory. The plaintiff on the trial elected under his complaint to stand on the proposition that under the proper construction of this contract the plaintiff had agreed and contracted to make and sell to defendant the several amounts of the product specified in the agreement, and that the defendant had contracted and agreed to take at or within the times mentioned such respective quantities, and that the plaintiff had an election of remedies and had elected to offer the product made, and, defendant refusing to take it, store and keep it in tender for the defendant and sue for the contract price. That this was its form of action, and that it was under no obligation to sell or reduce damages by selling and disposing of the product and bring action for the difference. The plaintiff also contends that as to the goods or product accepted by the defendant there was no warranty as to quality that survived acceptance, and that, however inferior in quality and worthless, defendant cannot counterclaim his damages on account thereof. The plaintiff also contends there was no market value for this product.

The defendant contends the contrary of this last proposition and evidence of the market value of the product of plaintiff mentioned in the agreement was admitted. The words, 'The said party of the first part hereby guaranties to furnish unto the said party of the second part goods of a quality at least as good as the car load of its said products shipped to the said party of the second part at Bellows Falls last previous to the date of this agreement,' are not words of description, but are express guaranty of the quality. October 29, 1903, the defendant wrote plaintiff as follows:

'We shall have to ask you to withhold shipments for the present, and until advised. The delay in shipments has caused us a great deal of trouble. We started out using your material on a large scale, and on your assurance that you could ship a carload a week. You were able, however, to ship only about half that amount, which compelled us to change off of it on some orders, and it is now impossible for us to resume its use as our customers are disgusted. We have also just received very adverse reports from one customer to whom we were sending the largest amounts, and with whom it had seemed to work satisfactorily on the initial trials; but later on developed objections, which he claims are very serious, and he has countermanded his orders, and will take nothing in the future but straight casein. We are investigating the matter, and shall try to overcome the difficulty, and hope for success. I do

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