Case Name: Knickerbocker Trust Company and William B. Randall, as Trustees, Respondents, v. O'Rourke Engineering Construction Company, Appellant. (Action No. 1.)
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1908-02-07
Citations: 124 A.D. 210
Docket Number: 
Parties: Knickerbocker Trust Company and William B. Randall, as Trustees, Respondents, v. O’Rourke Engineering Construction Company, Appellant. (Action No. 1.)
Judges: 
Reporter: Appellate Division Reports
Volume: 124
Pages: 210–215

Head Matter:
Knickerbocker Trust Company and William B. Randall, as Trustees, Respondents, v. O’Rourke Engineering Construction Company, Appellant. (Action No. 1.)
First Department,
February 7, 1908.
Bailment — breach oí warranty as to performance of leased cars — facts showing waiver by lessee.
' A lessee of cars warranted to carry and dump certain grades of excavated materials who wishes to rescind for breach of warranty by the lessor must act promptly upon the discovery of the fraud or breach of warranty. If it sleeps upon its-right, or expressly-affirms the contract, or does acts inconsistent with disaffirmance, it loses the. right to rescind.
When such lessee on discovering that the cars will not handle excavated rock, at warranted, informs the lessor that it is desirous of sub-leasing such cars as is cannot use, and the lessor without absolutely agreeing to procure sub-leaser undertakes to endeavor to do so for the benefit of the lessee, there is a waives by the latter of any right to disaffirm or rescind the'original lease because of o the breach of warranty as to performance.
Appeal 'by the defendant, the O’Rourke Engineering Construction Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the>office of the.clerk of the county of New York on the 23d day of January, 1907, upon the verdict of a jury rendered by direction of the court after a trial at the New York Trial Term, and also from an order entered in-said clerk’s office on the 25th day of January, 1907, denying the defendant’s motion for a. new trial made upon the minutes. . . '
L. Laflin Kellogg, for the appellant..
Herbert Barry, for the respondents.

Opinion:
Scott, J.
The defendant appeals from a judgment entered upon a verdict directed in favor of plaintiffs. The action is for the rental of certain dump cars leased to defendant and known as Goodwin cars. The defendant was the contractor for certain improvements proposed to be made by the Hew York Central and Hudson River Railroad Company at and about its terminal in Fourth avenue in the city of Hew York. The work to be done included a vast amount of excavation, it being contemplated that the excavated material should be loaded on cars and taken to. various points.on the line of the railroad where tilling was required. As it would be necessary to run these cars over the permanent tracks' in use for passengers and freight trains it was desirable that cars 'should be used which would carry loads of excavated material without spilling, and that would dump it on one side of, and clear of the track. After considering the comparative advantages of a number of patterns of cars the defendant finally selected the Goodwin car and leased sixty-nine of them at an agreed per diem rental. The present action is for the unpaid rental of thirty-one of these cars, and no question of amount is involved as it was stipulated at the trial how much the plaintiffs would be entitled to recover if so entitled at all. The leases to defendant were originally made by the Goodwin Car Company, the manufacturers of the cars, but subsequently in conformity with a trust agreement .between the plaintiffs and the Goodwin Car Company, and at the request of the latter substituted leases were executed by plaintiffs to defendant: The cars were received by defendant in October, 1903, and in a very few months they proved to '.be unfitted for defendant's purposes so far as concerned the handling of rock blasted during the course of the excavation. The defendant seems to have complained, as early as February, 1904, that the cars would not do the work expected of them, and from that time on, and especially from May, 1904, correspondence was carried on between defendant and the Goodwin Company respecting the inadequacy of the cars for the work required of them, which culminated in August, 1904, in the sub-leasir.g agreement to • be hereafter referred to. In considering whether or not a verdict against" defendant was rightly directed it becomes necessary to consider the affirmative defense as outlined in the answer, for it is upon this that defendant relies. It is alleged as to .each lease (for there are two involved in the action) that it was entered into " upon the false and fraudulent representation" by circulars, photographs, verbal statements and writings " that the Goodwin cars could handle all kinds of rock excavation of any size and could do the work of the defendant under its contract with the Hew York Centra,! and Hudson River Railroad . Company in the shortest possible time and at the least cost per cubic yard," and "that thereafter and upon a trial of the said cars it was found that the representations made by the said Goodwin Car Company were false and untrue, and that the said cars were wholly unable to remove rock of all sizes or to do the .work of the defendant" under its contract. Almost all of the record is taken up with evidence tending to show the statements and representations made by the officers of the Goodwin Car Company as to what their cars could do,,and to establish the fact that the cars could not do the work required of them. If the defense rested upon the question whether or not the representations, or more properly warranties, were made as alleged, and that the cars failed to do what they .had been represented or warranted to do, there would certainly be enough in the evidence to carry the case to the jury. This is not, however, the defense as pleaded. The defendant goes on toallege'thatuponthe discovery of the inadequacy of the cars and in Hay, 1904, he refused to proceed further under the lease., or to pay further therefor, and offered and tendered back to the plaintiffs'and the said Goodwin Oar Company the cars so leased; that thereafter and upon the 4th day of August, 1904, an-agreement.was entered into with the Goodwin Car Company (witli the consent and approval' of the plaintiffs) that fifty-six cars then in possession of defendant and including the cars on which rental is sought to be recovered in this action should' be sub-leased by the Goodwin Oar Company in the name of defendant, and the rentals received under the sub-lease be paid over to the plaintiffs; that it was further covenanted in said agreement that .the said Goodwin Car Company would not uiaiui facture any new cars for the purpose of leasing the same in competition with any of the cars made under said lease, and for which they had agreed to procure sub-leases and would have the right to build only such additional cars as would not fairly be considered to be put into competition with those cars covered under the leases; that thereafter and until the 16th day of June, 1905, the plaintiffs and the Goodwin Gar Company proceeded under said modified agreement and many of the cars were leased as therein provided and some of the rents received therefor applied as agreed; that the plaintiffs and the Goodwin Car Company have wholly failed to carry out and perform the agreement, and have not. performed and carried out the same in good faith, and have failed to sub-lease the said cars as called for in said agreement, and in attempting to lease the same; that they have manufactured new cars and have sold the same,, which have come into competition with those leased by defendant; that thereupon and upon learning the facts the defendant elected to treat the said contract as rescinded, and on or about June 16, 1905, duly notified plaintiffs to that effect and tendered back the cars. It will be observed that' the defendant does not rest its- defense upon a, rescission of the original contract of leasing alone, hut relies upon its right to have rescinded that contract and the breach of the subsequent agreement of sub-leasing. It is quite clear that it could not have successfully defended upon any attempted rescission of the original contract with plaintiff, for no such rescission was shown. If we assume that the evidence showed that the lease was induced by certain representations on the part of the Goodwin Company as to what the cars would do, and that those representations were not fulfilled, it may be that the defendant would have been justified in rescinding the contract and tendering back the cars, but it is elementary that a purchaser or lessee wishing -to rescind for such a reason must act promptly upon discovery of the fraud or of the breach of the warranty. If he sleeps upon his rights or expressly affirms the contract or does acts inconsistent with disaffirmance he loses the right to rescind. The allegations in the answer that in May, 1904, the defendant notified plaintiffs of the ascertained inadequacy of the cars, and that it refused to proceed further under the lease orto pay further therefor and tendered back the cars are not borne out by the proofs. On May 17,1904, defendant wrote to the Goodwin Car .Company as follows: "We have at the present time 69 of your cars in service, but in' -consequence of the large proportion of rock which we are handling we cannot keep them all employed. It would oblige us very much if you would arrange to take 25 of these cars off our hands, which I presume you can readily do, as the cars are most excellent for handling any kind of. material, excepting rock." To this the Goodwin Car Company replied: "While we cannot obligate ourselves in any manner to relieve you of any of the cars on hand, yet we will take the matter up promptly and any opportunity we have for leasing the cars we will present to you for consideration." The defendant replied to this letter as follows Tour favor of May 19tli, in regard to sub-leasing for us certain of your cars which we now have under lease, came duly to hand. Wge trust that you will give this matter your immediate attention, for as pointed out to you, you, the cars we are desirous of sub-leasing are of practically'no.use to us at present." In this correspondence there is certainly no attempt to rescind the lease, and no hint that any ground existed which Would justify a rescission. In August, 1904, the agreement as to subleasing the cars was made substantially as alleged in the answer. It was embodied in certain letters between defendant and the Goodwin Car Company, dated respectively August 2, 4 and 9, 1904. The Goodwin Car Company did not undertake absolutely to obtain subdeases, but merely undertook to attempt and endeavor to do so. It was agreed that thirteen of the cars should be retained by defendant on its work, and that as to the remaining fifty-six the leases, of them to defendant and its obligations thereunder were not altered, the defendant authorizing the Goodwin Company to procure sub-lessees to whom the defendant would execute sub-leases, arid the Goodwin Company on its part agreed as to the manufacture of new cars as alleged in the answer. If anything were needed to establish defendant's express waiver of any right to disaffirm or rescind the original contract it is furnished by this agreement as to subleasing.
As to this last agreement there is not the slightest evidence that the Goodwin Company did not- attempt in good faith to perform what it had undertaken to do, or that it violated its agreement not to put cars on the market in competition with the cars leased to defendant.
The defendant failed at every vital point to establish its defense, and tliere was nothing to submit to the jury. The verdict was, .therefore, rightly directed.
The judgment and order should be affirmed, with costs.
Pattebson, P. J., McLaughlin, Laughltn and Clabke, JJ., concurred.
Judgment and order affirmed, with- costs.