Necho Coal Co. v. Denise Coal Co.

• Decision Date: 07 January 1957
• Citation: 387 Pa. 567,128 A.2d 771
• Parties: NECHO COAL COMPANY, a Pennsylvania corporation, v. DENISE COAL COMPANY, a Pennsylvania corporation, Appellant.
• Court: Pennsylvania Supreme Court

Page 771

128 A.2d 771

387 Pa. 567

NECHO COAL COMPANY, a Pennsylvania corporation, v. DENISE COAL COMPANY, a Pennsylvania corporation, Appellant.

Supreme Court of Pennsylvania.

Jan. 7, 1957.

Rehearing Denied Feb. 6, 1957.

Margiotti & Casey, Vincent M. Casey, Samuel L. Goldstein, Suto & Schuchert, Pittsburgh, for appellant.

C. John Tillman, Paul Kern Hirsch, Hirsch & Weise, Pittsburgh, for appellee.

Before STERN, C. J., and JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.

ARNOLD, Justice.

Defendant appeals from entry of judgment for plaintiff on the pleadings upon its motion under Pa.R.C.P. No. 1034, 12 P.S.Appendix.

As contended by defendant, on such a motion we must accept as true all facts well pleaded and inferences reasonably deducible therefrom; and judgment should be entered only where it is clear that no meritorious legal defense is raised: Toff v. Vlahakis, 380 Pa. 512, 514, 112 A.2d 340. So considered, the instant complaint establishes that in March, 1948, defendant purchased a dragline 'for an amount in excess of $100,000'; on April 14, 1948, defendant orally contracted to purchase for $30,271.46 'spare parts' to be used in the dragline; the spare parts were received by defendant on April 25, 1948; defendant made partial payments on June 12 and August 11, 1948, totaling $10,271.46; on August 11, 1948, defendant delivered to plaintiff four promissory notes of $5,000 each, payable respectively on the 15th day of each month, beginning October, 1948, and ending January, 1949. Defendant admits refusal to pay, but denies that the notes were given 'for value received.' It further alleges that they were given as the balance on the purchase price; that the parts were received, but 'were found to be used, obsolete, inadequate and wholly unsuited'; that these matters were brought to plaintiff's attention by defendant 'by telephone shortly after January 26, 1949, * * * and [plaintiff] * * * promised to remedy the situation * * * [but] wholly failed to do.'

By its pleadings, defendant raises the defense of failure of consideration. Failure of consideration occurs where the consideration bargained for does not pass, either in whole or in part, to the promisor. This is not the instant case. The pleadings admit receipt of the parts and aver only that they 'were obsolete, useless and otherwise unfit to be used.' The notes were given in payment of the balance due for the parts admittedly delivered some five months previously.

Obviously defendant must rely on a breach of vendor's warranty as to quality or fitness, rather than failure of consideration, as a defense to the action. Its pleadings seek to establish only that the quality, grade or nature of the parts was not as it should have been. Defendant contends, however, that the Sales Act of 1915, P.L. 543, 69 P.S. § 1 et seq., has no applicability to the instant case. This is based on Section 75 of the Act, 69 P.S. § 336, which provides: 'The provisions of this act * * * do not apply, unless so stated, to any transaction in the form of a contract to sell or a sale which is intended to operate by way of mortgage * * * or other security.' The contention is that the notes are 'other security.' But the provision applies only to the usual situation where collateral, e. g., stock, bonds or notes, is given as security until the purchase price is paid. It does not apply where, as here, the notes are delivered in actual payment for the goods, not as security for payment.

Section 49 of the Sales Act, 69 P.S. § 259, provides that notice of breach of warranty must be given, and that it must be '* * * within a reasonable time after the buyer knows or ought to know of...