Ernest E. Fadler Co. v. Hesser, 3574.

• Decision Date: 05 March 1948
• Docket Number: No. 3574.,3574.
• Parties: ERNEST E. FADLER CO. v. HESSER.
• Court: U.S. Court of Appeals — Tenth Circuit

166 F.2d 904 (1948)

ERNEST E. FADLER CO. v. HESSER.

No. 3574.

Circuit Court of Appeals, Tenth Circuit.

March 5, 1948.

Warren S. Earhart, of Kansas City, Mo. (D. Howe Moffat, of Salt Lake City, Utah, on the brief), for appellant.

Edward M. Morrissey, of Salt Lake City, Utah, for appellee.

Before PHILLIPS, HUXMAN and MURRAH, Circuit Judges.

PHILLIPS, Circuit Judge.

Ernest E. Fadler Company¹ obtained a reparation order against O. P. Hesser for the balance alleged to be due on a carload of mixed vegetables in a proceeding brought under the Perishable Agricultural Commodities Act of 1930,² 7 U.S.C.A. §§ 499a to r, inclusive. Hesser appealed from the reparation order. From a judgment setting aside the order, the Company has appealed.

On June 20, 1945, the Company advised Hesser it had been promised a carload of mixed vegetables out of Louisiana. Hesser requested the Company to communicate with him when it received further information respecting the vegetables. On June 22, 1945, the Company sent Hesser a telegram reading in part as follows: "Out from Hammond last night. WFEX 60628, 271 Bell peppers 2.65, 92 cukes 2.26, 43 squash 2.25, 156 eggplant 2.90, 4 Valentine beans 3.00, 50 crates Triumphs, 1.80 net FOB. * * *"

The vegetables were ordered by the Company from the R & G Auction Company at Hammond, Louisiana. They were shipped from that point on June 21, 1945, to the Company at Kansas City, Missouri. On June 22, 1945, the Company directed the carrier to divert the car to Hesser at Salt Lake City and sent Hesser an invoice which listed the number of bushels of the several kinds of vegetables in the car, the f.o.b. price per bushel, and the total price of $1,577.22. The invoice in part read: "Sold to O. P. Hesser Co. * * * Date sold 6/22/45 * * * Terms: Open — Please mail check." The invoice was received by Hesser before the car arrived in Salt Lake City on June 29, 1945. While the shipment was in transit, Hesser sold the vegetables to the Smedley Fruit Company in Salt Lake City and directed the carrier to deliver the shipment to the Smedley Company.

The vegetables were inspected by the United States Department of Agriculture before the shipment from Hammond. The report of that inspection justified the conclusion that the vegetables were merchantable at the time of their shipment from Hammond.

The car was due in Memphis, Tennessee, at 12:40 A. M., June 23, 1945, but was delayed and did not arrive at Memphis until 2:15 P.M., June 23, 1945. The car was due in Salt Lake City, June 28, 1945, at 8 A. M., but was delayed and did not arrive until 8:55 A. M., June 29.

The vegetables were inspected by the United States Department of Agriculture on their arrival at Salt Lake City and the report of that inspection showed a substantial portion of the vegetables were then unmerchantable. Witnesses who had examined the vegetables testified they were not in a merchantable condition on their arrival at Salt Lake City.

On July 1, 1945, Hesser wired the Company the substance of the inspection report at Salt Lake City. On July 2, 1945, Hesser advised the Company that he rejected the vegetables and requested instructions as to their disposition. Thereafter, on the same day, Hesser communicated with the Company by telephone and was instructed by the Company to dispose of the vegetables at the best price obtainable. Hesser then consigned the vegetables to the Hancock Fruit Company at Salt Lake City and so advised the Company. The Hancock Company sold the vegetables for $1,306.24. It deducted therefrom commission, freight charges, storage, and ice charges, amounting to $764.06, and remitted the balance of $542.18 to Hesser who transmitted it to the Company.

The trial court found that the vegetables were non-merchantable on their arrival in Salt Lake City; that Hesser rejected the vegetables and requested instructions from the Company as to their disposition, and that the Company instructed Hesser to dispose of the vegetables at the best price obtainable; and that Hesser, with the consent of the Company, consigned the vegetables to the Hancock Company for disposition.

The Company contends that Regulation 46.24(i) (j), promulgated by the Secretary of Agriculture, under § 15 of the Act (7 U.S.C.A. § 499o), supra, and set forth in note ³, governs the rights of the parties; that the sale was f.o.b.; that the vegetables were in suitable shipping condition at the time of the shipment from the point of origin; that the deterioration resulted from damage and delay in transit, the risk of which Hesser assumed, and that Hesser did not have the right to reject the vegetables on their arrival at Salt Lake City.

Section 499g(c), supra, provides that on an appeal from an order of reparation, there shall be a trial de novo in all respects like other civil suits for damages, except that the findings of fact and the order of the Secretary shall be prima facie evidence of the facts therein stated. The issue before the Secretary of Agriculture in the reparation proceedings was whether there was a sale of the vegetables by the Company to Hesser, or whether Hesser merely was to act as a broker for the sale of the vegetables on their arrival at Salt Lake City. The issues on the trial below were (1) whether Hesser had the right to reject the vegetables, and (2) whether, even though Hesser did not have the right to reject the vegetables, the company consented to such rejection and assented to a rescission. The fact that Hesser did not raise those defenses in the proceeding before the Secretary of Agriculture did not preclude him below. Any proper defense was open to him.⁴

The Act was not intended to repeal the law of sales or to destroy the rights and liabilities of the contracting parties thereunder.⁵

Here, the goods were sold by description furnished by the Company. Where the sale is by description, under the Uniform Sales Act,⁶ and in some jurisdictions apart from the statute,⁷ there is an implied warranty that the goods are of merchantable quality. The question arises as to the time the goods must meet the warranty of merchantable quality. The general rule is that the implied warranty relates only to the time of sale. In the sale of perishable property, where there is an implied warranty that the goods are suitable for shipment because the buyer justifiably relies on the seller to select goods suitable for shipment, the seller does not then assume the risk of deterioration due to abnormal delay in transit or other abnormal conditions, while the goods are in transit. His implied warranty is that the goods are fit for shipment at the time and place of sale.⁸ Ordinarily, both under the Uniform Sales Act and at common law, title to an f.o.b. sale passes on delivery to the carrier,⁹ but here there was no f.o.b. sale at the time the shipment left Hammond. The sale took place as the result of the telegram and invoice sent by the Company to Hesser on June 22, after the shipment had left Hammond, and Hesser's sale of the vegetables to the Smedley Company and his order to the carrier to divert the car to the Smedley Company. The sale, therefore, took place after the...