Iowa Gas & Elec. Co. v. Wallins Creek Coal Co.

• Decision Date: 17 January 1928
• Court: United States State Supreme Court — District of Kentucky
• Parties: Iowa Gas & Electric Company v. Wallins Creek Coal Company.

222 Ky. 635

Iowa Gas & Electric Company v. Wallins Creek Coal Company.

Court of Appeals of Kentucky. Common Pleas Branch, Second Division.

Decided January 17, 1928.

1. Sales. — In suit for damages for defective quality of coal sold to plaintiff to be used in production of gas, petition, not alleging that plaintiff did not have full and free opportunity to inspect coal because of cars in which it was shipped, nor alleging that plaintiff did not have opportunity to inspect coal after it was unloaded, but showing that coal was open and visible and subject to inspection before placed in plaintiff's bins, failed to show that plaintiff exercised ordinary care or made ordinary inspection of coal before it was accepted, and hence plaintiff could not recover for defect discovered after acceptance of coal.

2. Sales. — Where goods are delivered to purchaser on executory contract of sale, and purchaser accepts goods after inspecting them, or after having fair opportunity for inspection, purchaser is held to have accepted goods as full compliance with contract, and cannot

maintain action for damages on ground that goods are defective or do not measure up to terms of contract.

Appeal from Jefferson Circuit Court.

BLAKEY, DAVIS & LEWIS for appellant.

GORDON & LAURENT and T.M. GALPHIN, JR., for appellee.

OPINION OF THE COURT BY JUDGE LOGAN.

Affirming.

This litigation grows out of the sale and purchase of coal in the year 1920. Appellant filed its suit for damages based on the alleged defective quality of the coal delivered by appellee. Appellee filed a counterclaim seeking to recover the balance due on the purchase price for the coal. A demurrer was sustained to the petition, and thereafter three amended petitions were filed, and each time a demurrer was sustained to the petition as amended. Appellant then filed a substituted petition covering the allegations in the original petition and the amended petitions, and a demurrer was sustained to the substituted petition. Appellant refused to plead further, and after the lapse of some years the case was submitted on the pleadings, when the court dismissed the petition and gave judgment in favor of appellee on the counterclaim.

The substituted petition shows that appellant is a public service company producing artificial gas and electric power in the state of Iowa. In July, 1920, by letters and telegrams, a contract was made by it with the appellee for the shipment of 12 carloads of gas coal at the rate of 3 cars per week. The total contract price of the coal was $8,757.52. Of this sum appellant paid $7,500, leaving a balance unpaid of $1,257.52. It is alleged in the petition that appellee knew of the purpose for which the coal would be used by appellant — that is, it knew that the coal was to be used to produce gas — and that it also knew of the quality of coal necessary for that purpose, and that it warranted the coal to be gas-producing coal of the quality theretofore supplied to appellant by appellee, and that because of the warranty the appellant relied upon appellee to furnish coal of that quality.

It is alleged that appellant knew, or by the exercise of ordinary care could have known, that the coal furnished under the contract was not coal of the quality ordered by appellant and warranted by appellee, but that appellant did not know, "and could not by the exercise of ordinary care have discovered, before using said coal that the same was not of the quality ordered by this plaintiff and warranted by this defendant, because when said coal was received said defective quality could not be discovered by ordinary inspection, but could be discovered only by chemical analysis or by the use of said coal."

It is further alleged that the first carload of coal shipped by appellee arrived on or about August 15, 1920, and that the rest of the coal arrived on dates between August 15, 1920, and September 30, 1920, and that all of coal arrived before appellant knew that any of the coal was of defective quality. It is alleged that appellant, without knowing of the defective quality of the coal, stored it in its regular bins for the purpose of use and commenced the use of it in the latter part of August, 1920, and that it had no notice of any difficulty in the production of its gas from the coal until the latter part of August, 1920, when it discovered that the normal output of gas was not being produced. It is also alleged that during the months of September and October appellant, not knowing of the defect in quality and not being able in the exercise of ordinary care to discover same, used gas oil and further tested the efficiency of its plant to see that the firing of the coal was properly done and inspected the retorts to determine if any leaks existed therein.

The petition then alleged that it was not until the latter part of October, 1920, that it discovered, or by the exercise of ordinary care could have discovered, that the difficulty was in the quality of coal which had been purchased from appellee, and that as soon as it discovered, or by the exercise of ordinary care could have discovered, that the coal was defective, it notified appellee that the coal was defective, and further notified it that no further payments on the purchase price of the coal would be made. It is alleged in the petition that it was October 29, 1920, when appellant discovered the defective character of the coal, and that it immediately notified appellee of that fact, and that appellee replied, advising that the coal was the same as had been shipped in the past; that after the notice was sent to appellee it advised that the fault must be with appellant and requested that further tests be made; that appellant made further tests and had a chemical analysis both of the coal shipped the plaintiff under the contract sued on and of the coke produced from said coal; and that the result of all experiments and tests showed that the coal was defective and not of the quality warranted by appellee.

It appears to us that the main question to be determined is whether the defective quality of the coal, if it was defective, could have been discovered by appellant by the exercise of ordinary care before it was placed in its bins and used by appellant. Counsel for appellant do not dispute the rule that the acceptance of an article is generally a bar to any claim in damages for breach of warranty of quality if the buyer inspects the goods or the defect is visible on such ordinary inspection as the law requires a buyer to make. But they insist that this court has recognized the right of a buyer to rely upon a warranty, either expressed or implied, as against a defect which is not visible on ordinary inspection, and that there is no duty on the purchaser in the absence of knowledge or suspicious circumstances to exhaust all the possibilities of scientific research under the penalty of being held to have waived any claim in damages for breach of warranty not apparent in the ordinary course of business. They rely on the case of Wallace, etc., v. Knoxville Woolen Mills, 117 Ky. 450, 78 S.W. 192, 25 Ky. Law Rep. 1445. The pleadings in that case showed that cotton yarn was bought by a knitting mill to be delivered in weekly installments. After receiving the first shipment and running it into the...