Court Opinion

ID: 5267329
Source: CourtListenerOpinion
Date Created: 2022-01-06 19:03:02.615328+00
Date Added: 2024-06-11T08:28:10.165770
License: Public Domain

Hasbrouck, J. (dissenting):
I find myself unable to assent to the conclusion of the presiding justice that the judgment dismissing the counterclaim ought to be reversed.
The counterclaim is based upon a contract between the plaintiff and E. F. Drew & Co., Inc., for the sale of a quantity of soya bean oil to be delivered f. o. b. San Francisco for shipment to the plaintiff at Kingston, N. Y.
The contract contained the following provisions: “ If before the completion of the contract either party thereto shall suspend payment, or become bankrupt or insolvent, the other party upon notice being given to the defaulter, shall close the contract forthwith, any difference to be for the account of the defaulter.”
It is the duty of parties to a contract to carry it out according to its terms and spirit and not to attempt to avoid it because the market for the commodity sold happens to be falling rather than rising. The plaintiff seeks to avoid the claim of the defendant that he should pay for the oil by maintaining that the contract contains terms excusing him.
Plaintiff asserts that before the completion of the contract the defendant became insolvent. This claim would constitute an excuse for refusal to receive the shipment and pay for it if it were well founded.
The defendant claims it is not well founded for two reasons: First, that the contract had been completed at the time of plaintiff’s refusal to pay the draft made upon it for its oil. There is no division of opinion upon the question as to whether by completion is meant completion of the making of the contract or embraces completion of performance. I incline to the view that there can be no completion of a contract between the makers until both sides have carried the contract through by performance, and agree with the view of the presiding justice that a party cannot claim a benefit under a contract by reason of his own failure to perform. That would simply amount to giving a reward to a party because of his own wrong.
The defendant claims and it is the law that, by a delivery of the subject of sale f. o. b., there was, under the Sales Act of New York *315State and the common law which is presumed in the absence of proof to be the law of California, passage of title from the defendant to the plaintiff. The bill of lading, however, did not run to the plaintiff; it was made out to the Koster Company, as consignees. But that incident of the case does not affect the rule with regard to the title, the effect of such action being merely to retain a property right in order to secure the purchase price of the goods. (Standard Casing Co. v. California Casing Co., 233 N. Y. 417.)
Wherever the title was, the possession and the right to possession of the property remained in the shipper and was so to remain until the property was paid for. (Pers. Prop. Law, § 101, subd. 2.)
Still stands the ancient legal monument, “ possession is nine points of the law.” But the defendant agreed that if he became insolvent before the completion of the contract, the plaintiff need not pay. Three things in order to complete the contract were necessary to be done. The tender of the goods and the offer of the money and the acceptance of both by the parties. It is the misfortune of the defendant that insolvency overtook it on October 30, 1920. The effect of that insolvency was the appointment of receivers by the decree of the United States District Court of the Southern District of New York filed that day. By the terms of that decree Lowenthal and Farleigh were appointed receivers, among other things, “ of all its [defendant’s] contracts', rights and choses in action; ” the defendant company, its officers, agents, directors and employees (were) forthwith commanded “ to turn over and deliver to the receivers * * * all * * * contracts bills, notes, accounts, moneys; ” the defendant, its officers and employees (were) enjoined from “ interfering with defendant’s property * * * or interfering with the possession or management thereof; and all persons * * * (were) enjoined from * * * taking possession of any property of the defendant.”
As a general rule the right of a receiver to the possession of property vests in him by virtue of his appointment and at the time of his appointment. (Tardy’s Smith Receivers, 128.)
If he is required to give bond, upon furnishing such bond his possessory rights relate back to the time of his appointment. (Id. 141.)
The goods in question reached Kingston November fourth, and by that time the plaintiff had become aware of the insolvency of the defendant. At the time of the notice to the plaintiff that the oil had arrived and that the draft was there, neither the defendant nor any agent of it had any right to present the draft and the plaintiff had no right to pay the money to the defendant for it was under injunction restraining it from receiving the money. Again the receivers had the right to the possession of the property *316and they had the right to say whether they would repudiate the contract or adopt it. They were not obliged to perform an executory contract entered into prior to their appointment. (Id. 154.)
Looking back to discover the purpose of placing the insolvency clause in this contract, it is not difficult to see that it was to save the party from the complications which grow out of dealing with insolvents. Here if the plaintiff had paid the draft of E. F. Drew & Co., Inc., and the money had been withheld from the receivers, they would have had a right to demand and to recover the oil or the money from the plaintiff. Plaintiff would have been in peril of having to pay twice.
If the plaintiff had paid the draft and the shipment turned out upon examination to be deficient in quantity or quality, the claim of the plaintiff would have had to hang upon the slow pace of an insolvency administration by the court — upon the law’s delay.
The instant case presents just such a situation as the contract was designed to cover. Again it is claimed by the defendant that plaintiff should not prevail for the reason that in attempting to avail itself of the provisions of the contract it pursued the wrong method. Defendant asserts that the trade significance of the word “ close ” is that the buyer should sell and “ credit the difference to the party who contracts.” This definition in the record seems unintelligible.
To claim that the purchaser should pay and then sell for whom it might concern is to take away from the purchaser the very privilege of escape from insolvent complication which the contract was designed to secure. The purchaser certainly could not sell until he possessed, for he could not deliver. The contract, therefore, does not contemplate that he could complete it in order to “ close ” for such action would amount to a contradiction of its terms.
Whatever “ close ” might mean with reference to the seller whose buyer had failed to pay; to the buyer it cannot mean anything but ending or canceling the contract.
Here the plaintiff by its letter of November fourth sought to accomplish such a result.
I agree with the trial court that plaintiff succeeded in its effort, and favor for the reasons assigned the affirmance of the judgment, with costs.
Judgment reversed on the law and facts and new trial granted, with costs to the appellant to abide the event. The court disapproves of finding of fact numbered ten, and of that part of the first conclusion of law which finds the fact that the plaintiff closed, terminated and ended the contract.