Hutt v. Hausman

Mullan, J.

After plaintiff had demurred to a defense,. both §ides moved for judgment on the pleadings. The learned trial justice held that the complaint was good, and that the defense was bad. If I be right in my view that the complaint is bad, it will be unnecessary to discuss the defense.

As the complaint, as drawn, was ambiguous, and left in doubt whether the pleader intended to rely upon an anticipatory breach, or upon full performance except for a waived tender of delivery, plaintiff’s counsel, at our request, by informal written stipulation that is to be deemed a part of his brief and binding construction of his pleading, has removed the ambiguity and declared unequivocally upon an anticipatory breach.

On April 20, 1920, the plaintiff and defendants agreed in writing, the former to sell, and the latter to buy, nineteen cases of turkish towels, at agreed prices, to be delivered in May, June and July, 1920. At the time the contract was made five cases of towels were delivered to and physically received by the defendants. On May 6, 1920, the defendants notified plaintiff “ that they would not accept said goods (the entire order being here referred to) or pay therefor, or carry out the terms of said contract on their part.” On November 3, 1920, plaintiff brought suit in the City Court against the defendants for the “ agreed price and reasonable value ” of the five cases of towels delivered to defendants before their repudiation. That action resulted in a judgment for the plaintiff. The plaintiff, continues the pleader, would at all material times have been ready and willing to perform “ but for the defendants’ aforesaid cancellation, notification, and refusal.” The present action is for damages, in respect of the fourteen undelivered cases of towels, caused plaintiff by defendants’ breach by means of their repudiation and refusal to perform, prior to the time fixed for performance in the contract.

Two objections to the complaint are urged by defendants. The first is that the contract is entire, and that the City Court action and its result barred any further claim upon or under it. That objection would seem (Pakas v. Hollingshead, 184 N. Y. 211) to be well taken, but we are met by two cases in this court which appear to sustain plaintiff's contention that he may thus split his claim. Rusch v. Klausner, 117 N. Y. Supp. 1074; Peruvian Panama Hat Co. v. Marcus, 164 id. 821. We prefer, therefore, to pass on to less debatable ground, and so I shall proceed to consider the second objection of the defendants, which is, that the complaint should have contained an allegation that plaintiff, upon being advised by defendants that they would not perform, gave defendants the notice required by section 146 of the Personal Property Law. That section reads: . “ When seller may rescind contract or sale. Where the goods have not been delivered to the buyer, and the buyer has repudiated the contract to sell or sale, or has manifested his inability to perform his obligations thereunder, or has committed a material breach thereof, the seller may totally rescind the contract or the sale by giving notice of his election so to do to the buyer.”

On behalf of plaintiff it is contended that the statutory provisions quoted refer only to such a true rescission by the seller as would result in the complete abandonment of the contract, leaving the parties in the same legal situation as if the agreement had never been made: On behalf of defendants it is contended that the statute was intended to refer to such a case as this, where the injured and innocent seller desires to elect not merely not to go farther toward performance, but also to save his right to hold the breaching buyer for damages sustainable from that breach. The argument for plaintiff is, thus, that he was not required to give any notice; while the argument for defendants is that plaintiff cannot recover without proving and, therefore, pleading that such a notice was given.

In so far as concerns the need of a notice, the case is treated on both sides, and properly, I think, as if it were on the same footing with one wherein no delivery of any part of the goods had been made; and the matter of notice is discussed as if we were dealing with the simple question whether a seller, to take advantage of an anticipatory breach in order to sue the buyer for damages, must give the notice referred to in section 146.

If the situation were unaffected by section 146 of the Personal Property Law, the plaintiff, upon his receipt of defendants’ notification that they would not perform, could have done one of three things: 1st. He could have ignored the notification and proceeded to perform, in which case he would have been under the duty of being in readiness to deliver the goods at the agreed times, nothing being excused of him but the actual tender that was, in effect, waived by the defendants’ notification. 2d. He could have at' once ceased performing, in which case he could have sued at once, or at any time before the Statute of Limitations should run against him, for damages due to the anticipatory breach (the quantum of damage being affected in certain cases by the stage of performance reached at the time of the anticipatory breach). Pers. Prop. Law, § 145, subd. 4. 3d. He could have rescinded, i. e., he could have treated the contract as if it had been canceled, or as if it had never been made; in which case he would have been under no duty of giving any notice to the defendants.

What then, if anything, did section 146 of the Personal Property Law add to the plaintiff’s rights or duties? Professor Williston (Williston Sales, p. 979) says, in discussing section 65 of the Uniform Sales Act, which is identical with section 146 of the Personal Property Law, that the section was drafted for the purpose of allowing an injured seller to rescind in the strict technical sense, i. e., to declare the contract wholly at an end for all purposes, in which case, of course, the seller could not sue the buyer upon any theory upon or under the contract (although he could sue in quasi contract for the value of goods that had already been delivered). The learned author, after observing that “ Though it will generally be more favorable for a seller, if the buyer makes default, not to rescind the contract, but merely to rely on his own excuse for not performing, and sue the buyer for his default on the contract, the seller has the right- if he so desires to rescind the contract altogether,” proceeds to state his view that the section in question was designed to accomplish the object of permitting such a complete or true rescission upon the condition that the rescinding seller give the notice prescribed. It would appear, from Professor Williston’s treatise, that the apparently tautological phrase “ totally rescind ” was adopted advertently to prevent the possible construction that what was intended was the “ rescission ” sometimes loosely used to describe the attitude of a seller who desists from continued performance but who desires to hold the defaulting buyer for damages due to his breach. If any further confirmation were needed of the author’s view that the section refers only to the complete wiping out of the contract, it is furnished by the note at the foot of page 924 of his work on Sales, in which he says: “ section 65, which relates to the rescission of all obligations between buyer and seller.”

Without commenting upon the possible value of the section, under Professor Williston’s construction of it, in respect of total rescission for the reasons given in the section other than that of repudiation, I am unable clearly to see how, in respect of repudiation, the section has, under that construction, any practical meaning. The injured seller, in such a case, would be doing a seemingly idle thing in giving a notice that he intends to call the contract off. As a practical matter, he need do nothing at all, for he is amply protected by that fundamental rule of the law of contract that prevents a defaulting party from recovering against the other party. In so far, then, as concerns a seller who receives an unequivocal repudiation, the section would seem to mean something else than that the seller must give a notice that if the buyer sues him, the seller will avail of his right to defeat the buyer by relying upon the buyer’s own default. Statutes are to be construed as practical rules of conduct. What, then, does the statute mean, in so far as it relates to repudiation? It can possibly refer to the two kinds of attitudes an injured seller may take when the buyer repudiates, namely, the common-law right to ignore the repudiation, and the common-law right to accept the repudiation for the purpose of desisting from further performance while withholding a right to sue the buyer for damages. It is unnecessary to express an opinion as to whether the statute should be held to relate to the former of these two attitudes, as we are here concerned only with the latter attitude, that of stopping performance, but holding the buyer for the loss caused by his repudiation. While the doctrine of anticipatory breach does not give the offending buyer the locus penitential that he necessarily has where the seller elects to ignore the repudiation, at least it must often be helpful to such a buyer to know in advance that the seller intends to hold him for damages, instead of being content to regard the business as over and done with. I am of the opinion, therefore, that apart from adjudications binding upon us, we should construe section 146 as requiring the plaintiff seller to notify the buyer of the seller’s intention (here, concededly, by the stipulation, present) not merely not to go forward but also to hold the buyer for damages. The question is not, however, as I read the opinion in Rubber Trading Co. v. Manhattan R. Mfg. Co., 221 N. Y. 120, a new one. There, as here, the controversy was over the right of a seller to rely upon the repudiation of a buyer as excuse for not going forward; and there, as here, the seller sued for damages because of the repudiation. The buyer, in the Rubber case, insisted upon a right of inspection that was assumed, by the Court of Appeals, to be unwarranted. The buyer’s position in that regard was held to be a repudiation. The inquiry as to whether the seller, who was the plaintiff, could sue for an anticipatory breach, was not carried farther for the stated reason that in no event could the seller recover upon that theory because of its failure to give the notice prescribed in section 146. “ But even though,” says Judge Cardozo, “ the defendant was at fault, the contract, none the less, survived unless the plaintiff gave notice of an election to treat it as abandoned (Sales of Goods Act, § 146, L. 1911, ch. 571; Consol. Laws, ch. 41). * * * Still less is there any hint that because of the buyer’s wrong, the seller has chosen to treat the contract as abandoned. The statute says that the seller must give notice of his election (Sales of Goods Act, § 146).' * * * The plaintiff did not rescind for the defendant’s anticipatory breach. * * * It chose to keep the contract alive in spite of anything that had gone before.” The remainder of the opinion is devoted to a showing that the judgment in favor of the plaintiff seller was not sustainable on the other theory upon which the plaintiff in part relied, that of complete performance, for the reason that it insisted upon the right to make a tender that was not a proper tender under the agreement.

It seems to me to be very plain that the precise point we are dealing with here was necessarily disposed of in the Rubber case. It is suggested that if the point were involved at all, the treatment of it was by way of dictum. Even were that the case, I should be inclined to consider a dictum from such a source binding upon us in the absence of precise adjudication by the same court to the contrary. But I think my short summary shows that the question was squarely raised, and necessarily decided. It must be obvious that Judge Cardozo, in using the terms “ abandoned ” and “ rescinded,” did not mean to refer to the complete abandonment for all purposes which, as I have pointed out, was the intention ascribed to section 146 by Professor Williston. There was no question of complete abandonment in the case. The plaintiff was relying upon the right it would have had at common law to cease performance, and sue for damages due to an anticipatory breach." It is, therefore, quite apparent that the Court of Appeals has taken a different view of the section from that entertained by Professor Williston; and that, in this state, at least, a seller who wishes to elect to desist from performance and yet hold the buyer for damages, must, upon repudiation by the buyer, notify the buyer of the seller’s election so to hold him. As no notice of election is pleaded here, I am of the opinion that the complaint is defective.

Order denying defendants’ motion for judgment on the pleadings reversed, with ten dollars costs, and motion granted, with ten dollars costs, with leave to plaintiff to plead over within-six days on payment of costs. Order granting plaintiff’s motion to sustain demurrer reversed, without costs, and motion denied, without costs.