Case Name: E. Heller & Brother, Respondent, v. Continental Mills, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1921-04-01
Citations: 196 A.D. 7
Docket Number: 
Parties: E. Heller & Brother, Respondent, v. Continental Mills, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 196
Pages: 7–18

Head Matter:
E. Heller & Brother, Respondent, v. Continental Mills, Appellant.
First Department,
April 1, 1921.
Sales — action for breach of contract to sell — failure of buyer to pay installments as they fell due constitutes defense for refusal to make further deliveries — waiver of time as to payment of installments — waiver pi prior breaches in time of payment by making subsequent delivery — when seller not bound to give notice after default in payment fixing future time for payment.
It is a defense to an action by a buyer against the seller of goods to be delivered in installments and to be paid for in the same way, based on the refusal of the seller to deliver a portion of the goods, that the buyer failed to pay for the installments delivered as they fell due and that at the time of the seller’s refusal to deliver further installments, payment for the installments delivered had not been made, and the seller was not" bound.to give notice to the buyer of its reasons for failure to continue deliveries.
The acceptance by the seller of payment for the first installment two days after it was due, and its delivery of the third installment on the next day, and the delivery of the fourth installment when the plaintiff was three days in default with respect to payment of the second installment did not, as a matter of law, constitute a waiver of the provisions of the contract with respect to the time for the payment of all subsequent installments.
The seller did thereby waive the breaches that had occurred prior to the delivery of the third and fourth installments and no longer had a right arbitrarily to terminate the contract on account thereof.
The seller was not bound to give notice to the buyer, after his default in paying installments when due, fixing a time for payment and notifying it that the contract would be canceled if payments were not so made, since the seller did not plead rescission but merely justification under subdivision 2 of section 126 of the Personal Property Law for not proceeding further.
On all the evidence, held, that a question of fact was presented as to whether plaintiff’s breaches of the contract were so material that the defendant was justified in refusing to proceed further with the contract.
Smith, J., and Clarke, P. J., dissent, with opinion.
Appeal by the defendant, Continental Mills, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 10th daw of March, 1920, upon the general verdict of a jury rendered, by direction of the court upon stipulation of the parties after a special verdict had been rendered by the jury by direction of the court, and also from an order entered in said clerk’s office on the same day granting plaintiff’s motion for the direction of a general verdict in favor of the plaintiff and against the defendant and directing the clerk to enter judgment accordingly.
Francis X. Carmody of counsel [Peale & McLaughlin, attorneys], for the appellant.
James Garfield Moses, for the respondent.

Opinion:
Laughlin, J.:
I am of opinion that the evidence presented a question of fact with respect to whether the plaintiff's breach of the contract in failing to make installment payments when due was so material as to justify the defendant in refusing to proceed further, which was properly submitted to the jury, and that, the court erred in setting aside the special and general verdict in favor of the defendant thereon and in directing a verdict in favor of the plaintiff, and that the exceptions thereto require a reversal. The action is by a domestic corporation, a buyer, against a foreign corporation, the seller, for breach of a contract in writing made by brokers for the parties on the 20th day of February, 1919, by which the defendant agreed to sell and deliver to the plaintiff 3,000 pieces, containing about sixty yards to the piece, of first quality grey cloth at the price of nine cents per yard, 250 pieces to be delivered weekly commencing May first, F. O. B. mill, and payments to be made in installments for each delivery within ten days after delivery. The defendant delivered four of the installments of 250 pieces each, the first on May first and second, the second on May eighth, the third on May fifteenth, the fourth on May twenty-second, and at the same times forwarded to the, plaintiff invoices therefor. The payment for the first installment fell due on May twelfth owing to the fact that the eleventh was Sunday, which was after the delivery of the first two installments; but payment therefor was not made until May fourteenth, the day before the delivery of the third installment. Payment for the second installment fell due on May nineteenth, which was after the delivery of the first three installments, but payment therefor was not made and the plaintiff was three days in default when the' defendant delivered -the fourth installment. The day after the delivery of the fourth installment the defendant mailed to the plaintiff a statement of the account with respect to the second installment which had not been paid, but no attention was paid thereto. On May twenty-sixth the third installment fell due but was not paid; and on May twenty-seventh or twenty-eighth the defendant mailed to the plaintiff another statement of the account due for the second installment with the request, " Please remit." The contract called for the delivery by the defendant of the fifth installment on May twenty-ninth, but at that time the plaintiff was in default ten days in paying for the second installment with respect- to which the defendant had sent two statements in addition to the original invoice to which the plaintiff had paid no attention, and the plaintiff was then in default three days with respect to the payment for the third installment which was due on May twenty-sixth, and for these reasons the defendant withheld delivery of the fifth installment as it had a right to do (Pers. Prop. Law, § 134, subd. 2, as added by Laws of 1911, chap. 571); but it did not give notice to the plaintiff of its reasons therefor and it was not required so to do. On May thirty-first the defendant sent a like statement to the plaintiff with respect to the account due for the third installment. The contract called for the delivery of the sixth installment on June fifth, but that was not delivered. The plaintiff was then seventeen days in default with respect to the payment for the second installment, ten days with respect to paying for the third installment and three days with respect to paying for the fourth installment; and on that day the défendant sent a like second statement of the account past due for the third installment with the request " Please remit." On June twelfth, when by the terms of the contract the seventh installment should have been delivered, the plaintiff was still in. default in páying for the second, third and fourth installments. - Plaintiff paid for the second installment on June thirteenth, which was twenty-six days late. On June sixth defendant sent like statements with respect to the account due for the fourth delivery and again on June eleventh, with the request, " Please remit," and again on June fifteenth with the request, " Kindly favor us with your check by return mail, and oblige." On June nineteenth the delivery of the eighth installment was called for by the contract, but it was not delivered. The plaintiff was then in default twenty-four days in paying for the third installment and seventeen days in paying for the fourth installment, and had given no attention to the defendant's requests for payments therefor. On June twenty-sixth the plaintiff paid for the third installment, which was thirty-one days overdue, and for the fourth installment, which was twenty-four days overdue. On the seventh of July the plaintiff wrote to the defendant drawing attention to the contract and to the fact that the last delivery thereunder was on May twenty-second and stating that it was urgently in need of the cloth and would like to know when deliveries would be resumed. On the tenth of July the defendant answered the letter stating that the plaintiff had failed to make any payment on time, and that the plaintiff was frequently notified thereof .both verbally and in writing and requested to pay but failed to do so, and that the defendant was justified in not making any further delivery, and that the plaintiff had acquiesced therein for six weeks without complaint and that the defendant, therefore, considered that the contract was abandoned by mutual consent; and. further stating that its mill was a contract mill, and it was its policy to have contracts on hand to keep the mill running, and that it was very much embarrassed when goods contracted for were not taken by buyers according to their agreements, and that the contract was to be fully performed by July seventeenth, and defendant considered that the failure of the plaintiff" to pay, notwithstanding the fact that its default in making payments was frequently drawn to its attention, and its acquiescence for over six weeks in the defendant's stopping deliveries warranted the defendant in considering the contract canceled as to the deliveries not made. The letter closed by stating that owing to the advance in the market price of the goods immediately after the making of the contract the defendant realized that the cancellation of the contract would be to its advantage and that for this reason, " as well as on general principles," it did not wish to be arbitrary in the matter and would be glad to consider anything the plaintiff had to say to show why the contract should not be considered canceled. To this letter the vice-president of the plaintiff replied on July eleventh expressing surprise at the contents of the letter and stating that he had been absent for eight weeks and unable to O. K. the invoices, which was necessary before payment could be made, and that he was unable to ascertain that there had been any verbal request by the defendant for payment or any request other than those consisting of the statements of the account, to which reference has been made, and protesting that the contract could not thus automatically be canceled and requesting the defendant to continue deliveries and promising to anticipate payment for future invoices as, he claimed, had theretofore been the plaintiff's usual custom in its dealings with the defendant for a period of some five years. Defendant did not reply to that letter. On the sixteenth of July plaintiff wrote defendant referring to its unaswered letter of July eleventh and stating that it was urgently in need of the goods and that unless immediate deliveries were resumed, it would purchase the goods in the open market for the account of the defendant. To this defendant replied on the nineteenth of , July, offering to deliver 2,000 pieces of the cloth for a cash payment according to the then market price of eighteen cents per yard with a discount at the rate of six per cent per annum for payment in cash instead of ten days after delivery, and, in effect, stating that it would do this without prejudice to the plaintiff's threatened suit, evidenced by a letter from its counsel. That ended the negotiations and the action was commenced on September eighth that year.
It was shown that the defendant on May 29, 1919, when the contract called for the delivery of the fifth installment of the goods, had them manufactured at its mill and ready for delivery and that it sold them in the market at eighteen and one-half cents per yard on July twenty-third; and sold the other goods, in so far as it manufactured them, for that price on that date, and that there was a ready market for them at a price in advance of the contract price at all times after the contract was made and prior to that date. Plaintiff showed that it was able to pay for the goods at all times in question and that it had an average in its bank account between May 29 and August 1, 1919, of $40,000 and that the delay in making payments was due to the fact that the plaintiff's vice-president was on a trip to the Pacific coast, stopping en route at various cities, and had left instructions that all invoices for goods delivered but not shipped and . held at the mill awaiting shipping instructions, which was the case with respect to the goods not paid for, should be sent to him for his O. K. before the goods were paid for. Plaintiff also showed that the defendant had an average cash balance in its bank account during this period of approximately $130,000. It appears, however, that the annual output of the defendant's mill was 16,000,000 yards, while this contract was for only 180,000 yards. It is argued in behalf' of the defendant that it regulated its bank account according to its needs and that it was essential that it-should adopt a policy of insisting upon prompt payments for otherwise a large bank balance would not last long. Defendant does not claim to have been financially embarassed but it insists that it had a right to regulate its business in its own way and to require its customers to live up to their contracts.
The only theory on which the recovery can be sustained is that the defendant's acceptance of payment for the first installment two days after it was due and its delivery of the third installment the next day and the delivery of the fourth installment," when the plaintiff was three days in default with respect to payment of the second installment, as matter of law, constituted a waiver of the provisions of the contract with respect to the time for the payment of all subsequent installments. That, I think, does not follow. (Gardner v. Clark, 21 N. Y. 399.) Defendant thereby of course waived the breaches that had occurred prior to the delivery of the third and fourth installments (Pipe & Contractors Supply Co. v. Mason & Hanger Co., 181 App. Div. 317; McDowell v. Starobin Electrical Supply Co., Inc., 190 id. 676), and no longer had the right arbitrarily to terminate the contract on account thereof and before that could be done, it would have been necessary for the defendant to have demanded payment for the past due installments within a reasonable time; but the waiver of that breach was no assurance, as matter of law; to the plaintiff that it would be permitted to disregard the provisions of the contract with respect to payments subsequently accruing for other installments. It must be borne in mind that this is an action at law predicated on full performance by the plaintiff- save as prevented by defendant and no waiver was alleged. Therefore, there could not be a recovery if plaintiff was guilty of a material breach of the contract. (McDowell v. Starobin Electrical Supply Co., Inc., supra.)
On the trial' the complaint was amended by alleging a waiver by accepting the payments of the overdue installments and by not giving notice to plaintiff fixing a time for payment and notifying it that the contract would be canceled if payments were not so made. There was no waiver by accepting what was past due and it cannot be held as matter of law that defendant was under an obligation to give such a notice. Notice or its equivalent is only required in cases of rescission. (Pers. Prop. Law, § 142, 146, as added by Laws of 1911, chap. 571; Rubber Trading Co. v. Manhattan Rubber Mfg. Co., 221 N. Y. 120.) The defendant did not plead rescission but merely justification under subdivision 2 of section 126 (as added by Laws of 1911, chap. 571) for not proceeding further, or in other words for not performing in so far as it had not performed. (See Williston Sales, p. 980; Daley v. People's Bldg., etc., Assn.. 178 Mass. 13; Anvil Mining Co. v. Humble, 153 U. S. 540.). The plaintiff made no attempt to explain its delay in making the payment until after the defendant ceased to make deliveries and claimed that the contract had been terminated; and the explanation then made was wholly insufficient, as matter of law at least, to justify or excuse its failure to pay as required by the contract. In view of the provisions of subdivision 2 of section 126 of the Personal Property Law, as construed in Helgar Corporation v. Warner's Features (222 N. Y. 449), I am of opinion that a question of fact was presented as to whether plaintiff's breaches of the contract were so material that the defendant was justified in refusing to proceed further with the contract.
The judgment and order should, therefore, be reversed, with costs to appellant, and the special and general verdicts in favor of the defendant reinstated and judgment directed to be entered thereon in favor of defendant, with costs.
Page and Merrell, JJ., concur; Clarke, P. J., and Smith, J., dissent.