LeRoy Dyal Co. v. Allen

• Citation: 161 F.2d 152
• Decision Date: 15 April 1947
• Docket Number: No. 5578.,5578.
• Parties: LeROY DYAL CO., Inc., v. ALLEN.
• Court: U.S. Court of Appeals — Fourth Circuit

161 F.2d 152 (1947)

LeROY DYAL CO., Inc., v. ALLEN.

No. 5578.

Circuit Court of Appeals, Fourth Circuit.

April 15, 1947.

Thomas H. Middleton, of Charleston, S. C. (Hill, Rivkins & Middleton, of New York City, on the brief), for appellant.

Huger Sinkler, of Charleston, S. C., for appellee.

Before PARKER, SOPER and DOBIE, Circuit Judges.

SOPER, Circuit Judge.

By this appeal the LeRoy Dyal Company, Inc., seeks approval of a reparation order issued by the Secretary of Agriculture on March 25, 1946, under the Perishable Agricultural Commodities Act, 7 U.S.C.A. § 499a et seq., whereby Charles R. Allen, the appellee, was directed to pay to Dyal the sum of $5988.02 with interest, for damages caused by the breach of a contract for the sale of potatoes. The Secretary's order was reversed by the judgment of the District Court in proceedings taken under Section 7(c) of the statute, 7 U.S.C.A. § 499g (c). This section provides that such a suit in the District Court shall be a trial de novo and shall proceed in all respects as a civil suit for damages except that the findings of fact and orders of the Secretary shall be prima facie evidence of the facts therein stated. The case was submitted to the District Judge upon the proceedings, and testimony taken in the trial before the Secretary.

There is no dispute as to the facts. As shown by a memorandum issued on February 19, 1944, by Dyal, the broker who arranged the sale, twenty cars of potatoes were sold by A. P. Cohen Company of Fort Fairfield, Maine, to Charles R. Allen of Charleston, South Carolina, "at $2.45 cwt. fob Maine shipping point, fob acceptance final with Federal Inspection certificates to be furnished on each car as shipped." The cars were to be shipped with heater service paid for by Allen, and Cohen was to draft on Allen at Charleston for each car as shipped, attaching invoices and federal inspection certificates to each draft. The Dyal Company guaranteed the payment of the drafts. Shipping directions for the immediate shipment of two cars were given, and these cars were shipped and paid for. It was agreed that if Allen did not furnish shipping directions on the remaining cars between February 21 and February 26, Cohen was to ship them to Allen at Charleston on February 28 and 29. Allen furnished no shipping directions for the remaining eighteen cars. Eight cars were shipped between February 29 and March 2, and these were accepted and paid for.

The controversy relates to the remaining ten cars which Allen refused to accept and Dyal sold to minimize the loss. He was obliged to sell them below the contract price since the market had fallen. He paid the drafts in full and filed claim under the statute with the Secretary of Agriculture for the difference, which is the basis of this suit. Neither the amount of the loss nor the right of Dyal to sue for it in place and stead of Cohen is disputed.

The potatoes loaded in the ten cars in suit and subsequently sold by Dyal were of the kind, quality and grade called for in the contract. But even before the goods were shipped, Allen repented of the contract, asked to be relieved therefrom, and employed a lawyer to represent him. He was moved to take this action because the market for potatoes had fallen. He based his right to reject the shipments on the ground that Cohen had broken the contract in two respects which related to the dates of the inspection certificates accompanying the drafts and the dates when the ten cars were shipped. He contended that by these breaches of the contract he was released from all obligation to accept the shipments. He offered no evidence, however, to show that he was injured in any way by Cohen's departures from the precise terms of the contract. The District Judge pointed out that no particular damage had been shown and no attempt had been made to do so. He thought it was a hard case but since the market had changed and someone had to lose, he concluded that the loss should be borne by the party who had failed to comply strictly with the contract terms.

The nature and extent of the so-called breaches are shown by the following particulars in regard to the shipment of the ten cars. The contract called for the shipment of these cars on February 28 and 29, since Allen had given no shipping directions for them. These cars were shipped on February 26 and 27, and on this account Allen rejected them. Four of these cars were rejected for the additional reason that the inspection certificates as to them were dated from one to three days prior to the date of shipment. Four other cars, which were shipped on February 28 or 29, were rejected solely for like variation between the dates of the inspection certificates and the dates of shipment. Allen contends, and the District Judge held, that the requirement of the contract that the inspection certificates be furnished "on each car as shipped" means that the inspection must be made on the day of shipment and that strict performance is important because the buyer needs to be assured of the condition of the goods on the day of shipment when he pays the draft, especially as his right to reject shipment is severely limited by the contract terms defined in the statutory regulations to which we shall later refer.

We are not convinced that this is the proper interpretation of the contract. It is susceptible of the meaning that the certificates should be forwarded as the cars were shipped and that the inspection should be made within a reasonable time prior to shipment so as to show the true condition of the goods when shipped. What a reasonable time would be would naturally vary with the circumstances. In the case of potatoes shipped in winter time in heated cars, it would not seem to be of prime importance that the inspection be contemporaneous with the shipment. In any event, it was of no practical importance in this case since the goods arrived in good condition. For like reasons it was of no practical significance that some of the cars left the shipping point a day or two before the contract dates. Allen was in no way disadvantaged or injured by either fact.

The legal significance of these departures from the strict terms of the contract must be determined by considering the general law of sales and the provisions of the federal statute and the regulations issued thereunder. The buyer contends that we should apply the strict rule that in executory contracts of sale, time is of the essence in an action at law; and since the seller did not conform to the time specified in the contract either as to the inspection or shipment of the goods, the buyer was justified in refusing to accept them. The strict view, that a statement in a contract descriptive of the subject matter or of some material incident, such as the time or place of shipment, is ordinarily to be regarded as a condition precedent upon nonperformance of which the party aggrieved may repudiate the agreement, is taken in such cases as Norrington v. Wright, 115 U.S. 188, 6 S.Ct. 12, 29 L.Ed. 366; Filley v. Pope, 115 U.S. 213, 6 S.Ct. 19, 29 L.Ed. 372; Phillips & Colby Construction Co. v. Seymour, 91 U.S. 646, 23 L.Ed. 341; Cleveland Rolling Mill v. Rhodes, 121 U.S. 255, 7 S.Ct. 882, 30 L.Ed. 920; Oshinsky v. Lorraine Mfg. Co., 2 Cir., 187 F. 120; General Electric Co. v. Chattanooga Coal & I. Corp., 6 Cir., 241 F. 38; Connell Bros. Co. v. H. Diederichsen & Co., 9 Cir., 213 F. 737; National Bank of Commerce v. Lamborn, 4 Cir., 2 F.2d 23, 36 A.L.R. 509; Salmon v. Boykin, 66 Md. 541, 7 A. 701; Arons v. Cummings, 107 Me. 19, 78 A. 98, 31 L.R.A., N.S., 942. However, according to Williston on Sales, Vol. 2, § 453d and Williston on Contracts, Vol. 3, § 847, the rule in equity is different and the absorption of equitable principles has modified the severity of the rule even without the aid of statute in actions at law. Farris v. Ferguson, 146 Tenn. 498, 242 S.W. 873, 23 A.L.R. 624; P. J. Carlin Const. Co. v. Guerini Stone Co., 1 Cir., 241 F. 545, 551; New Jersey Co. v. Nathaniel Wise Co., 55 Misc. 294, 105 N.Y.S. 231; Colonial Sugars Co. v. Durand, 7 Cir., 286 F. 499; Bonney v. Blaisdell, 105 Me. 121, 73 A. 811; Strother v. Miller, Ky., 124 S.W. 358. Thus in Farris v. Ferguson, 146 Tenn. 498, 504, 242 S.W. 873, 874, it was said:

"* * * it will be noted that the growing tendency has been to modify the harsh and often inequitable rule of the common law, and the courts now determine each case upon its own peculiar facts, the question as to whether time is of the essence of the contract being one of construction controlled by the intention of the parties, and the courts, in the absence of an express stipulation making time as of the essence, are not disposed to so treat it, unless the surrounding circumstances make it apparent that the parties intended that it should be ineffectual unless performed within the time stated."

In New Jersey Co. v. Nathaniel Wise Co., 55 Misc. 294, 105 N.Y.S. 231, 233, it was said:

"The rule that time is to be regarded as of the essence was originally designed to carry out the presumed intention of the parties. When it is clear that the application of this rule would be contrary to the intention of the parties, the reason for the application of the rule no longer exists, and the rule itself is inoperative. The adoption of a reasonable construction, which gives effect to the original intention of the parties, is more in harmony with the spirit and reason of the general rule than is adherence to a narrow and literal interpretation, which does not effectuate such intention."

This amelioration of the strict rule brings the law of sales in closer harmony with the law of contracts generally where it is established that if a contract calls for a number of performances on both sides, and there is no clear intention as to what shall happen if default is made in a prior performance of slight importance, it does not follow that subsequent performance by the other party is...