Schenuit v. International Finance Corp.

• Decision Date: 11 June 1925
• Docket Number: 16.
• Citation: 130 A. 331,148 Md. 403
• Parties: SCHENUIT v. INTERNATIONAL FINANCE CORPORATION.
• Court: Maryland Court of Appeals

130 A. 331

148 Md. 403

SCHENUIT v. INTERNATIONAL FINANCE CORPORATION.

No. 16.

Court of Appeals of Maryland

June 11, 1925

Motion for Reargument Overruled Oct. 7, 1925.

Appeal from Superior Court, Baltimore City; Robert F. Stanton Judge.

"To be officially reported."

Suit by the International Finance Corporation against Frank G Schenuit, trading as the Schenuit Rubber Company. Judgment for plaintiff, and defendant appeals. Reversed, and new trial awarded.

Argued before BOND, C.J., and PATTISON, URNER, ADKINS, OFFUTT PARKE, and WALSH, JJ.

J. Le Roy Hopkins, of Baltimore, for appellant.

James Morfit Mullen, of Baltimore, for appellee.

PATTISON J.

The appellee, the International Finance Company, brought suit in this case against the appellant, Frank G. Schenuit, trading as the Schenuit Rubber Company, to recover the aggregate amount of certain invoices of tires sold to the appellant by the Delion Tire & Rubber Company, which invoices were assigned by the latter company to the appellee.

The declaration consists of six of the common counts and two special counts; the first of the special counts was for goods sold and delivered by the Delion Company to the appellant and assigned by it to the plaintiff; and the second for money found to be due from the defendant to the Delion Company on account stated between them, which it had assigned to the plaintiff.

To the declaration the defendant first pleaded "never indebted as alleged," and "never promised as alleged," and later filed in addition thereto a plea of set-off, containing the common counts and two special counts.

The case, when tried by the court sitting as a jury, resulted in a verdict and judgment for the plaintiff. From that judgment the appeal in this case is taken. In the trial of the case five exceptions were taken; one to the court's rulings upon the prayers and the others to his ruling on the evidence.

The tires above mentioned were manufactured and sold under a written contract made by the Delion Company with the appellant, dated June 15, 1922. The contract was to go into effect August 1, 1922, and was to end on the 1st day of August, 1923, though, by its provisions, it could be renewed "at the end of the term for one year, and every year thereafter for a yearly term" so long as it was mutually agreeable. It was, however, within the power of either of the parties thereto, if he or it so desired, to terminate the contract before the term expired upon giving the other party 60 days' notice in writing; but, as expressed in the contract, if it went over, the term should be understood "to run from year to year." It was during the second year of the contract, and while it was still in force, that the invoices mentioned were, in the month of December, 1923, assigned by the Delion Company to the appellee, the International Finance Company.

The contract between the parties contained, among others, the following provisions:

"That the party of the second part (the Schenuit Rubber Company) will furnish all the necessary equipment such as moulds, rings, cores, etc., as specially designed for the manufacture of his double grip cord tires at his own expense and maintain the same in repair."

"The party of the first part (the Delion Company) will manufacture for the party of the second part his double grip cord tires out of the same materials as it manufactures Delion cord tires at this date, the same to be manufactured at its plant at Fifth and Eager streets, Baltimore, Maryland, and to be the same quality as Delion cord tires in materials and workmanship."

"The party of the first part agrees to manufacture and deliver at its plant in Baltimore, Maryland, and the party of the second part agrees to purchase at least five thousand (5,000) tires during the twelve months term of this contract, and to purchase and take as minimum four hundred fifty (450) tires per month of the several sizes. The party of the first part will make and deliver a maximum of two thousand (2,000) tires per month, if the party of the second part desires the same to be made, the minimum amount to be manufactured and taken by the party of the second part being four hundred and fifty (450) per month and the maximum being two thousand (2,000) per month."

"The party of the first part will sell to the party of the second part upon terms of payment, as follows:

The party of the second part will pay for all goods manufactured in any month and sold hereunder on the 10th of the month following, but in order that the parties hereto may be helpful to each other in handling their mutual credits, the party of the first part agrees to take the trade acceptances or notes of the party of the second part, payable sixty and ninety days after date to the extent that it may be able to discount said notes either through its own bank or that of the party of the second part in the City of Baltimore, Maryland."

"All tires manufactured and sold under this contract are sold under the manufacturers' standard warranty clause approved by the Tire Manufacturers' Division of the Rubber Association of America, Inc., and are warranted to be free from defects in workmanship or materials."

Under the above stated contract tires were made and sold by the Delion Company to the appellant, and, as a rule, settlements were made therefor weekly by the appellant giving to the Delion Company trade acceptances for the amount then owing by him, payable in 60 days thereafter. These were assigned by the Delion Company to the appellee, the International Finance Company.

In arriving at the amount owing the Delion Company, at the time of such weekly settlement, the amount then known to be owing the appellant by the Delion Company on account of defective tires sold him was deducted from the amount owing by him for tires sold to such time and not paid for by him.

The written contract, which warranted the tires free from defects in workmanship and materials, provided no method for ascertaining the extent of such defects in the tires or the loss to the appellant caused thereby, but, as it appears from the evidence, the parties orally agreed at the time of the execution of the written contract that the distance a tire was warranted in its use thereunder was 10,000 miles, and it was upon that basis that the adjustments were made.

A tire, though defective in construction or in the materials used, which had gone that distance was not regarded by them as defective within the meaning of the contract, and no allowance was made therefor, but one found to be defective, for the causes stated, that had not gone so far, an allowance was made, that is to say, if it had gone 5,000 miles, there was an allowance to the appellant of one-half of the purchase price, or, if it had gone less than 5,000 miles, or more than 5,000 miles and less than 10,000 miles, an allowance in like proportion was made.

When tires sold by the appellant to his customers were returned to him by them, because defective, they were examined by the appellant to ascertain if the defect complained of was one of construction or one caused by the use of defective materials, and, if found to be defective from either of said causes, they were set aside by him, and thereafter examined and passed upon by an employee of the Delion Company, and the extent of the defect and the loss to the appellant was ascertained.

It was by such method that the adjustments in regard to defective tires were made, apparently with no disagreement between the parties, until a short while prior to December, 1923, when, it seems, the appellant could no longer get the Delion Company to act upon his claims for defective tires, in consequence of which no trade acceptances were thereafter given, inasmuch as the amount to be allowed the appellant for defective tires had not been agreed upon.

Thereafter, commencing with December 6, 1923, the invoices for tires sold by the Delion Company to the appellant, without any allowance thereon to him for defective tires, were assigned to the appellee.

These assignments of invoices, numbering six in all, dated December 6, 7, 8, 11, 12, and 13, 1923, and amounting in the aggregate to $3,514.44, represented the last sales of tires made by the Delion Company to the appellant, and closed the dealings between them. Thereafter, on December 27, 1923, the Delion Company was adjudicated a bankrupt.

The first formal notice to the appellant of these assignments was sent by the appellee to him through the mail on December 23, 1923, and received by him, as shown by post office receipt, on the 24th day of December, 1923.

This, however, was not the first notice that the appellant had of these assignments, for, as he says, when the Delion Company failed to send him the weekly trade acceptances, as they had been doing, he called upon its vice president at its office to ascertain why they had not done so, and was told that the company was assigning the invoices to the appellee, to whom they had previously been assigning the trade acceptances, without deducting therefrom any allowance to him for defective tires, although he had sent to them his claims therefor. He thereupon went to the International Finance Company's office at Washington, and there saw Mr. Herrell, its president, and explained fully to him the way he and the Delion Company had been handling the trade acceptances, with all of which Herrell was at the time fully familiar. He then asked what would happen to the credits to which he was entitled, for defective tires, and Herrell replied,

"That will be your funeral, and you had better watch your step; * * * that is your hard luck, we are going to continue to discount them."

The witness was further asked:

"Was there anything discussed, or did you tell Mr. Herrell

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