Court Opinion

ID: 5751669
Source: CourtListenerOpinion
Date Created: 2022-01-12 16:58:17.978605+00
Date Added: 2024-06-11T08:41:18.105439
License: Public Domain

Steuer, J. (dissenting).
I dissent upon the grounds that the weight of the evidence shows that defendant did not release its lien and that it did rescind the contract of sale.
The goods in question, consisting of duck fabric, were sold by defendant to Hession Textile Corporation (herein Hession) in the Summer of 1960. The goods were fabricated and invoices were sent to Hession. As to the portion of the goods in suit, Hession never called for delivery and never paid. Under the terms of the sale, defendant held the goods for Hession’s *592account. Until payment was made defendant had an unpaid seller’s lien on the goods (Personal Property Law, § 134, subd. 1, par. [a]).
Plaintiff has a division known as Doria Textile Company. Plaintiff appointed Michael Hession and Jack Kamen (who were the principal officers of Plession) as its exclusive purchase and sales agents for Doria. As such agents, they bought these goods for Doria from Hession. In this transaction the only real persons involved were the individuals Hession and Kamen, who sold as representatives of Hession and bought as agents of Doria. The trial court found that these individuals never revealed to anyone connected with plaintiff or its Doria division that the goods were subject to an unpaid seller’s lien. Generally speaking, the knowledge of an agent is not attributable to his principal in a transaction where the agent deals with the principal, either buying from or selling to him (Benedict v. Arnoux, 154 N. Y. 715). But this situation presents something more than that. While Doria, strictly speaking, was not a legal entity, it was treated by plaintiff, and perforce by the persons with whom it had any contact, as if it were. And Doria had no employees or anyone who spoke for it other than the two principals of Hession. If defendant had wished to inform anyone in Doria of its lien, it would have to give this information to these two. And this is so of any other information, lit is submitted that when a Corporation departmentalizes its business as this plaintiff did, and limits the knowledge that any department can have to certain individuals, the knowledge of those individuals must be the knowledge of that department and, hence, of the corporation itself, because in no other way can the department acquire information.
But in order to determine whether defendant has a lien, it is not necessary to reach this question. Defendant did not lose its lien by virtue of the sale made by Hession to Doria, whether or not plaintiff was an innocent purchaser for value (Personal Property Law, § 143). But the lien could be lost if defendant acknowledged the transfer (Personal Property Law, § 143). To establish such an acknowledgment plaintiff relies on an exchange of correspondence. On May 26, 1961, Hession wrote defendant stating that Hession’s records indicate .that defendant was holding the goods listed on the enclosed sheet ‘ ‘ for our account and for the account of Doria Textile Company.” Defendant was requested to sign and return the enclosed sheet if it was correct. Defendant did so. It is difficult to see how this can be construed as an acknowledgment of a sale. No particular goods were mentioned as being sold. *593At best, the letter would, convey the information that there was some undefined relationship between Hession and Doria which gave the latter some undefined interest in some part of the goods. A closer examination of the letter would confirm this. The letterhead is of the “ Hession Textile Company.” Beneath this is “Hession Textile Corp.” and “Doria Textile Company.” This would give the impression that these organizations were units of Hession. Six months later, in October, 1961, a letter was sent on Doria stationery with the same address as Hession’s, stating that to confirm Doria’s account, auditors wished to know whether defendant was holding the goods on the enclosed sheet for Doria. Defendant checked the quantities and returned the sheet acknowledged. One month later, defendant in a letter addressed to Doria advised that the acknowledgment was in error to the extent that the goods were held for Doria and that they were in fact being held for Hession.
It is not claimed that during this month there was any change of position in regard to these goods by plaintiff, Doria or Hession. Under the circumstances, if this be held to be an acknowledgment of the sale, it is not such an acknowledgment as under the statute would constitute a waiver of the lien. The waiver of an unpaid seller’s lien is a matter of expressed intent; that is, it is lost only if the lienor, by words or by conduct inconsistent with retention of the lien, shows such an intent (Capuano v. Italian Importing Co., 89 Miscx. 449; 3 Williston, Sales [Rev. ed.], § 516). Agreeing to a sale by the owner or lienee would be such conduct, and the statute merely codifies this particular instance of it. An inadvertent acknowledgment, corrected before any action was taken pursuant to it, would not constitute a waiver.
In addition, plaintiff urges that defendant waived its lien by allowing two small portions of the goods to be shipped. Examination of the facts refutes this contention. The goods were shipped only after a payment was made by Hession in excess of the contract price of the shipment. The payment was credited to the Hession account. Shipment was made on Hession’s instructions. These instructions, as to one shipment, were to ship in Hession’s name; as to the other, in Doria’®. Complying with this latter instruction constituted no acknowledgment of any sale to plaintiff.
Permeating the evidence in this case is the ambiguous relationship of Doria in all dealings with defendant. Plaintiff’s name never appears. And for all that does appear, Doria and Hession were identical. Not only did the same persons act for both, they were the only persons who acted for either. And the *594stationery and offices certainly gave the impression that if Doria was anyone’s subsidiary or department, that someone was Hession. Concededly, this impression was created by plaintiff. Under familiar principles, where one of two innocent parties must suffer from the delinquency of a third, the party to be charged is the one who allowed the delinquent party to take advantage of the situation.
So far the discussion has been of defendant’s defensive position, its right to hold onto the goods until its lien is satisfied. The conclusion is that this right is not impaired. Defendant, however, asserts an affirmative right. It claims to have rescinded the contract of sale to Hession and to be, not a lienor, but the owner of the goods.
Defendant bases its claim on the Worth Street Rules, which were incorporated in the sales contract with Hession, and on the statute. The statutory right is to rescind where there is a lien and the buyer is in default for an unreasonable time, provided the seller has expressly reserved the right to do so (Personal Property Law, § 142). Concededly, this right was reserved in the contract. The Worth Street Rules give the unpaid seller such a right when the buyer is in default for five days and the seller thereafter gives eight days’ written notice by registered mail. Such notice was given to Hession on November 22, 1961, at which time Hession had been in default some 13 months.
However, the right to rescind, as distinct from the lien, does not survive a sale by the buyer to an innocent purchaser for value (Personal Property Law, § 105). On this branch of the case, the issue of whether plaintiff was an innocent purchaser for value is consequently vital. As pointed out above, if Doria was an entity it must have known that Hession had not paid for the goods and hence had at best a voidable title to them. Under the particular conditions of the organization of plaintiff’s business, the knowledge of Doria, even though one and the same as the knowledge of an agent doing business with Doria, is the knowledge of the plaintiff. Hence, plaintiff knew of the defect in Hession’s title when it acquired the goods. Not being an innocent purchaser, the sale could not cut off defendant’s right to rescind.
I would vote to reverse and grant judgment to defendant.
Rabin, J. P., Valente, Stevens and Eager, JJ., concur in Per Curiam opinion; Steuer, J., dissents in opinion.
Judgment affirmed, with $50 costs to plaintiff.