Schnell v. Perlmon

• Decision Date: 03 June 1924
• Citation: 238 N.Y. 362,144 N.E. 641
• Parties: SCHNELL et al. v. PERLMON.
• Court: New York Court of Appeals Court of Appeals

238 N.Y. 362

144 N.E. 641

SCHNELL et al.

v.PERLMON.

Court of Appeals of New York.

June 3, 1924.

Action by Harry Schnell and others, copartners under firm name of H. Schnell & Co., against Sol Perlmon, trading under firm name of Detroit Celery & Produce Company. From a judgment of Second Judicial Department of Appellate Division of the Supreme Court (208 App. Div. 812,203 N. Y. Supp. 951), unanimously affirming a judgment in favor of plaintiffs, entered upon a verdict directed by the court, defendant appeals by permission.

Judgments reversed, and judgment directed for defendant dismissing complaint.

Appeal from Supreme Court, Appellate Division, Second Department.

Joseph Kahn and Frederick Zorn, both of New York City, for appellant.

Harold S. Kohn, of New York City, for respondents.

CRANE, J.

This action is brought to recover an alleged balance due for goods, wares, and merchandise sold by the plaintiffs to the defendant. Defendant pleaded an accord and satisfaction.

The trial court directed a verdict for the plaintiffs for the full amount claimed, and the judgment entered thereon has been unanimously affirmed by the Appellate Division. That court, however, granted leave to appeal to this court, certifying that in its opinion there is a question of law involved which ought to be reviewed by us.

The question of law referred to arises through the payment by the defendant of an amount less than the agreed price, in full payment and satisfaction of the claimed debt. As in all like cases the result depends very much upon the facts of each case, it is therefore necessary at the outset to state fully the transaction between these parties. The plaintiffs, trading under the firm name of H. Schnell & Co., sold to Sol Perlmon, the defendant, trading under the firm name of Detroit Celery & Produce Company, 10 cars of Spanish onions, pursuant to the terms of a written contract dated November 14, 1921. These 10 carloads were to consist of 2,500 crates to be shipped by the Michigan Central Railroad from New York to Detroit; all goods sold f. o. b. New York, delivery to the common carrier being delivery to the purchaser. When the onions arrived in Detroit some of them were found to be in a defective condition due to decay consisting of fusarean rot, slimy soft rot, and a bacteria heart rot involving the greater portion of the onions. The defendant had the onions inspected by the food products inspector of the United States Department of Agriculture, who gave five separate certificates certifying to this condition of the onions examined by him and stating that the decay amounted in some of the containers from 10 per cent. to 35 per cent., in others from 15 to 25 per cent., of the contents. The percentage varied in these certificates, running as high, however, as 50 per cent. and as low as 3 per cent. The defendant notified the plaintiffs by letter regarding this condition, and sent them copies of the government official's report. On December 13, 1921, the defendant sent to the plaintiffs five checks in payment of five of the cars shipped and deducted a total of $425 for a percentage of the decay as covered by the government reports. Accompanying these checks was a letter in which an explanation of the deduction was made in the following words:

‘These deductions are made to cover the percentage of decay on each car. We mailed you, some time ago, the inspection reports covering each of these cars in order that you might satisfy yourself that we are making only reasonable deductions.’

Each of the checks was marked in full payment of the car number for which payment was remitted.

On December 16th the plaintiffs acknowledged receipt of checks totaling $4,575, which they stated they had placed to the credit of the defendant, but insisted that there was still a balance due $425 for which they demanded payment. In other words, they accepted the checks but rejected the proposed deduction.

On February 11, 1922, the defendant, who was still indebted to the plaintiffs for five cars, sent to them a check for $2,000 and a promissory note for $2,328.70 with interest payable in 30 days. On the back of this note there was this notation:

‘Payment in full of balance owing you on the following cars of Onions:’ (Giving numbers of cars).

A letter also accompanied this note, showing the reasons for the deductions mentioned therein, reading as follows:

‘We have already advised you the percentage of decay on cars NYC-138745 and NYC-138762 and have deducted off the first car two hundred and eight dollars ($208.00), representing twenty per cent. of the invoice which the government inspection shows as running from ten to thirty-five per cent. decay and an average of fifteen to twenty-five per cent. You know that decay of this particular kind, slimy soft rot, hurts the sale of the entire shipment, as the onions that are sound lose in value after being sorted over as they are never so bright and clean as when shipment is sound.

‘Car NYC-138762 also shows the same kind of decay, and we have deducted fifteen per cent. form the invoice, and this in no way represents what we should have deducted, as the bad onions affected the sale and condition of the others.’

The plaintiffs replied to this letter crediting these amounts on the account of the defendant and demanding all the balance due, $801.29, the amount sued for in this action. There is evidence that fusarean rot is a disease which does not develop as a result of transportation but is inherent in the plant itself. ‘Fusarean rot is a rot that is right inside of the onion.’ Testimony offered in behalf of the plaintiffs was to the effect that the onions were in good condition when delivered to the railroad. The government reports seem quite conclusive that a large part of the shipment was decayed when it reached Detroit. If the decay was in the heart of the onion it might have been overlooked on inspection in New York, and discovered by more careful examination or because of growth in the meantime, when the onions reached their destination.

The facts, briefly stated, therefore are: The plaintiffs sold to the defendant onions for an agreed price. The shipment in part was rotten and decayed. The defendant notified the plaintiffs of the fact, sending to them the government reports made by the good products inspector. The defendant paid for the goods which were in good condition, deducting $801.29 for those which he claimed to have been decayed. The payment was made by checks and notes and accompanying letters, notifying the plaintiffs that if accepted by them they would be in full payment of the amount due, and the balance, $801.29, the amount of the deduction, would thus be paid by agreement or by accord and satisfaction (to use the legal terms). The claim put forth by the defendant for deduction was apparently made in good faith, and in view of the government reports seems to be reasonable and fair. The percentage of the deduction made by the defendant was not as large as the percentage of decay reported by the government reports sent to the plaintiffs, and might be less than the amount which the defendant could have recovered if he had sued the plaintiffs for damages or upon their warranty. Under these circumstances, was the trial judge justified in holding as a matter of law that there had been no accord and satisfaction and that the plaintiffs were entitled to the balance claimed?

[1] The general rule is that a liquidated claim-that is, a claim which is not disputed, but admitted to be due-cannot be discharged by any payment of a less amount. In Jackson v. Volkening, 81 App. Div. 36, 43,80 N. Y. Supp. 1102, 1106, affirmed, 178 N. Y. 562, 70 N. E. 1101, we find the following language used:

‘The rule of law is well established, undoubtedly, that where a liquidated sum is due, the payment of part only, although accepted in satisfaction, is not, for want of consideration, a discharge of the entire indebtedness, but this rule is not looked upon with favor and is confined strictly to cases falling within it.’

In Fuller v. Kemp, 138 N. Y. 231, 237,33 N. E. 1034, 1035 (20 L. R. A. 785) it was said:

‘Where the demand is liquidated, and the liability of the debtor is not in good faith disputed, a different rule has been applied. In such cases the acceptance of a less sum than is the creditor'sdue will not of itself discharge the debt, even if a receipt in full is given.’

And in Simons v. Supreme Council American Legion of Honor, 178 N. Y. 263, 265,70 N. E. 776, the point was stated in these words:

‘Now it is the settled law of this state that if a debt or claim be disputed or contingent at the time of payment, the payment, when accepted, of a part of the whole debt is a good satisfaction and it matters not that there was no solid foundation for the dispute.’

And in Eames Vacuum Brake Co. v. Prosser, 157 N. Y. 289, 301,51 N. E. 986, 989, this court said:

‘It is only in cases where a dispute has arisen between the parties as to the amount due and a check is tendered on one side in full satisfaction of the matter in controversy that the other party will be deemed to have acquiesced in the amount offered by an acceptance and a retention of the check.’

[2] The term ‘liquidated,’ therefore, when used in connection with the subject of accord and satisfaction, has reference to a claim which the debtor does not dispute; a claim which he admits to be due but attempts to satisfy by the payment of a smaller amount. Thus in Nassoiy v. Tomlinson, 148 N. Y. 326, 42 N. E. 715,51 Am. St. Rep. 695, this court said:

‘A demand is not liquidated, even if it appears that something is due, unless it appears how much is due: and when it is admitted that one of two specific sums is due, but there is a genuine dispute as to which is the proper amount, the demand is regarded as unliquidated, within the meaning of that term as applied to the subject of accord and satisfaction.’

[3] In this case before us, the full amount...