Hunter-Wilson Distilling Co. v. Foust Distilling Co.

• Decision Date: 24 June 1949
• Docket Number: Civ. A. No. 1163.
• Citation: 84 F. Supp. 996
• Parties: HUNTER-WILSON DISTILLING CO., Inc. v. FOUST DISTILLING CO.
• Court: U.S. District Court — Middle District of Pennsylvania

84 F. Supp. 996

HUNTER-WILSON DISTILLING CO., Inc. v. FOUST DISTILLING CO.

Civ. A. No. 1163.

United States District Court M. D. Pennsylvania.

June 24, 1949.

Douglass D. Storey, Harrisburg, Pa., Ezra Cornell, New York City, David P. Gordon, Baltimore, Md., for plaintiff.

William Hoffenberg, Baltimore, Md., Mark T. Milnor, Harrisburg, Pa., for defendant.

MURPHY, District Judge.

Plaintiff, a Maryland corporation,¹ in six counts sought damages from defendant, a Pennsylvania corporation engaged in this district in the business of distilling whiskey and as owner and operator of a United States Government bonded warehouse. The case was tried to the court without a jury.

The first three counts have been disposed of.² In Count Four plaintiff demands $534.80, a tax refund allegedly improperly withheld by defendant; and in Count Six $146.00, a duplicate payment admittedly due, subject to defendant's claim of set-off for $705.20 storage charges.

In Count Five plaintiff seeks $5000.00 damages as a subpurchaser and assignee for breach of warranty as to excess outage of whiskey sold by defendant to plaintiff's vendor and assignor.

Jurisdiction arises from diversity of citizenship and a controversy involving an amount in excess of $3000.00 exclusive of interest and costs. 28 U.S.C.A. § 41(1), Revised Code, § 1332.

Defendant charges plaintiff with bad faith and insists that the requisite amount is not in controversy. We disagree.

In determining the jurisdictional amount we consider the sum of all the claims which are properly joined. Gray v. Blight, 10 Cir., 112 F.2d 696, certiorari denied 311 U.S. 704, 61 S.Ct. 170, 85 L.Ed. 457.

"The rule governing dismissal for want of jurisdiction * * * is that, unless the law gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. The inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show his bad faith or oust the jurisdiction. Nor does the fact that the complaint discloses the existence of a valid defense to the claim. But if, from the face of the pleadings, it is apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount, and that his claim was therefore colorable for the purpose of conferring jurisdiction, the suit will be dismissed. Events occurring subsequent to the institution of suit which reduce the amount recoverable below the statutory limit do not oust jurisdiction." St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288, 289, 58 S.Ct. 586, 590, 82 L.Ed. 845.³

Defendant admits the tax was paid with plaintiff's money and that the refund when received by defendant belongs to plaintiff. Defendant contends, however, that it never received the check; plaintiff admits that defendant's books do not reflect such receipt. The evidence shows the government mailed the check to the defendant. Despite notice to the defendant that the check was mailed and not received, it is apparent defendant exercised no zeal in attempting to obtain the check or duplicate thereof. The money belongs to the plaintiff, subject, however, to defendant's claim of set-off.

Plaintiff is entitled to $146.00, the amount of the duplicate payment, subject to defendant's claim of set-off.

As to the claim for breach of warranty:

In March, 1940, defendant sold to Wilson Distilling Co., Inc., a Maryland corporation (herein Old Wilson), 2535 barrels of rye whiskey then on storage in defendant's warehouse. The warehouse receipts covering the whiskey had previously been pledged by defendant with the York Trust Company at York, Pennsylvania, as collateral security for a loan. The warehouse receipts were surrendered, properly endorsed, cancelled, and new receipts issued to Old Wilson under date of March 1, 1940. As a part of the transaction defendant gave to Old Wilson a warranty⁴ as to excess outage (an outage or loss beyond that allowed by the government for tax computation purposes) in the following terms:

"We also wish to advise that we will guarantee any excess outage on the above lot in accordance with the statutory allowance given by the government. It is further understood that when the allowance is to be allowed, it will be determined on a regauge basis as of the time tax payments or shipments are made, which will be at the Foust Distilling Co., Inc., Glen Rock, Pa."

December 28, 1940, Old Wilson sold and assigned all of its assets, except shares of its stock and that of others, to Wilson Distilling Co., Inc., a Maryland corporation (herein New Wilson).⁵

No notice was given to defendant as to the change in ownership. The warehouse receipts were apparently endorsed in blank by the president of Old Wilson. They contained no reference whatsoever to the warranty by defendant.⁶ The agreement between Old and New Wilson contained no specific reference to the letter of warranty.

The first notice to defendant of the change in ownership appears to be in a letter dated April 14, 1942, wherein Joseph E. Seagram and Sons, Inc., notified defendant the whiskey was owned by its subsidiary, Wilson Distilling Co., Inc.

October 29, 1942, when twenty-five barrels of the whiskey were regauged and tax paid, the regauge showed an excess outage of 438.3 proof gallons. Plaintiff as sub-vendee and assignee of Old Wilson seeks to recover for breach of warranty.

Since this case is in federal court on diversity grounds only, we look to Pennsylvania law to determine the rights of the parties, Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487; as to conflict of laws, Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477; as to the place of contracting, interpretation, etc., see Newspaper Readers Service, Inc. v. Cannonsburg Pottery Co., 3 Cir., 146 F.2d 963; Monticello Distilling Co. v. Dannenhauer, 46 Pa.Super.Ct. 485, 488; § 350, Restatement — Conflict of Laws.

Ordinarily recovery may be had for breach of warranty in making a sale only where there is privity of contract between the parties to an action.⁷ Bonenberger v. Pittsburgh Mercantile Co., 345 Pa. 559, 28 A.2d 913, 143 A.L.R. 1417; 6 Uniform Sales Act, § 12, 69 P.S. § 121; Post v. Burnham, 3 Cir., 1897, 83 F. 79, certiorari denied 169 U.S. 735, 18 S.Ct. 945, 42 L.Ed. 1215; Timberland Lumber Co., Ltd. v. Climax Mfg. Co., 3 Cir., 1932, 61 F.2d 391. See Wolstenholme, Inc. v. Jos. Randall & Bro., Inc., 295 P. 131, 144 A. 909; Loch v. Confair, 361 Pa. 158, 63 A.2d 24; see discussion Univ. of Pa. L. Rev. Vol. 97, No. 6, May 1949, p. 912; Dillon v. Wm. S. Scull Co., 164 Pa.Super. 365, 64 A.2d 525; Jones v. Boggs & Buhl, 355 Pa. 242, 49 A.2d 379. As we view the law the result would be the same under Pennsylvania or New York law, whichever is applied. As to New York, see Levis v. Pope Motor Car Co., 202 N.Y. 402, 95 N.E. 815; Chysky v. Drake Bros. Co., Inc., 235 N.Y. 468, 139 N.E. 576, 27 A.L.R. 1533; and see Ketterer v. Armour & Co., 2 Cir., 1917, 247 F. 921, L.R.A. 1918D, 798; Heggblom v. John Wanamaker, 178 Misc. 792, 36 N.Y.S.2d 777, 780.

"It is a well-settled rule of the common law that the benefit of a warranty on the sale of personalty does not run with the chattel on its resale and does not inure to the benefit of a subsequent purchaser of the chattel so as to give him any right of action on the warranty as against the original seller." 46 Am.Jur.Tit. Sales § 307, p. 489; Note 51 L.R.A.(N.S.) 1111, 8 A.L. R. 667, and see 35 Cyc.Law and Procedure, Tit. Sales § 5(c), p. 370; 55 C.J.Tit. Sales, § 679(b), p. 665, 666 and Id. § 796, p. 815; 4 Williston on Contracts, Rev.Ed. § 998, p. 2753; 1 Williston on Sales, Rev.Ed. § 244, p. 645. As to Maryland see Esbeco Distillery Corp. v. Owings Mills Distilling Inc., D.C.D.Md., 43 F.Supp. 381 at 388.

Was the warranty made to Old Wilson assignable to New Wilson? Did plaintiff acquire any greater rights merely because the agreement of sale also spoke in terms of assignment? It will be noted that there is no evidence of any excess outage having occurred until after title had passed from Old Wilson, so that Old Wilson suffered no loss from the breach of warranty. Similarly there is no question here of Old Wilson having made any new warranty to New Wilson.

"* * * a legal assignment is * * * `a transfer or setting over of property, or of some right or interest therein, from one person to another, and unless in some way qualified, it is properly the transfer of one whole interest in an estate, chattel, or other thing.' Griffey v. N. Y. Cent. Ins. Co., 100 N.Y. 417, 422, 3 N.E. 309, 311, 53 Am.Rep. 202. Schaefer's Estate, 194 Pa. 420, 45 A. 311; Johnson's App. 103 Pa. 373. See also Restatement on Contracts, Section 149, p. 179; 6 C.J.S., Assignments, p. 1045, § 1; 4 Am.Jur. p. 229, section 2." Purman Estate, 358 Pa. 187 at page 190, 56 A.2d 86, 88.

"The familiar doctrine that an assignee of a nonnegotiable chose in action takes all the rights of his assignor * * needs no citation of authority." Marsh v. Bowen, 335 Pa. 314 at 317, 6 A.2d 783, 785.

§ 151 of the Restatement of the Law of Contracts provides inter alia: "A right may be the subject of effective assignment unless (a) the substitution of the right of the assignee for the right of the assignor would vary materially the duty of the obligor, or increase materially the burden or risk imposed upon him by his contract * * *"

Wilson Distilling Co., Inc. v. Foust Distilling Co., D.C., 60 F.Supp. 373, in denying plaintiff's motion for summary judgment on Count Five, held at p. 375 that the rights under the letter of warranty were not assignable. The court relied upon § 41 of the Pennsylvania Warehouse Receipts Act, 6 P.S. § 161, "A...