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Czarnikow, MacDougall & Co., Ltd. v. Baxter

Supreme Court of New York, Appellate Division

July 7, 1911

GEORGE S. BAXTER and Others, Respondents.

APPEAL by the plaintiff, Czarnikow, MacDougall & Company, Ltd., from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 24th day of January, 1910, rendered by direction of the court, after a trial at the New York Trial Term, a jury having been waived, dismissing the complaint and directing judgment in favor of the defendants upon

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their counterclaims, and also from an order entered in said clerk's office on the 7th day of February, 1910, denying the plaintiff's motion for a new trial made upon the minutes.


William P. Maloney, for the appellant.

George V. Mullan, for the respondents.


This case was tried before the court without a jury, upon a stipulation that at the close of the evidence both sides should move for the direction of a verdict and that the court should dispose of the case as though a jury were present. At the close of the case the court granted the motion of the defendants, dismissed the complaint for failure of proof and directed judgment in favor of the defendants on their counterclaim.

On the 25th of October, 1905, the plaintiff entered into a contract with the defendants for the purchase of 26,000 cypress ties, to be delivered by the defendants at the 'Regla Wharf, Havana. * * * Shipment to be made from Brunswick the first week in January, if possible, sooner.' The contract was evidenced by two letters, written by the respective parties. The lumber was purchased by the plaintiff for resale to the United Railways of Havana. The purchase price was sixty-nine cents each; the resale price was seventy-five cents each. The plaintiff agreed in the contract of resale to make deliveries at the wharf of its vendee at Regla, Havana, Cuba, in March, 1906. The contract of resale also provided for a deposit of $2,500, 'in guarantee of the satisfactory fulfillment of this contract, which sum is to be returned to him [[meaning J. M. Clark, the plaintiff's agent, in whose name the contract was made] on such satisfactory fulfillment, or if not to be forfeited to the party of the second part.' The ties were not delivered by the defendants as agreed upon and a correspondence ensued between the parties in which the defendants set up various excuses for the delay and the plaintiff insisted upon immediate delivery, at the same time informing the defendants that damage would result from delay. During March and April defendants delivered 16,000 ties in two shipments. They refused, however, to deliver the remaining

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10,000 ties until the plaintiff sent its check for the earlier shipments and a letter stating that no claim would be made for delay in shipment. The plaintiff refused to comply with that request and the defendants failed to make the delivery of the 10,000 ties undelivered. The $2,500 deposited by the plaintiff with the United Railways Company was forfeited by the latter for the non-performance of the plaintiff's contract. This action was brought for damages for the breach of the contract. The complaint specified two items of special damage; the $2,500 penalty forfeited to the United Railways Company, and $600, the difference between the contract price of sixty-nine cents and the resale price of seventy-five cents on the 10,000 ties not delivered. The complaint also contained this general averment: 'That by reason of the premises, the plaintiff has been damaged in the sum of' $8,100. The plaintiff's agent testified that he informed the defendants' agent, with whom the negotiations were conducted, that the ties were purchased for resale to the United Railways Company, who had accepted the plaintiff's bid for such ties, and that the United Railways Company required a deposit as security for the performance of the contract. I quote from his testimony: 'I told him also that it was necessary to make these deliveries in accordance with the contract that we had with them--that we were about to make with them, because we were under penalty of $2,500 with the railroad.' The said agent of the defendants denied that any such conversation occurred, or that he even had knowledge that the ties were purchased for resale to the said United Railways Company. The place of delivery specified in the contract was the wharf of the said company, and the correspondence between the parties prior to the making of the contract plainly shows that the defendants had knowledge of the plaintiff's bid, and indeed that they refused to quote prices until after it was accepted, for the reason that they had made quotations to other bidders whom they considered it their duty to protect.

The point is made that the contract with the said United Railways Company was not in fact made until November twenty-seventh, a month after the making of the contract in suit, and that it was not made in the plaintiff's name. However,

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there is no dispute but that said Clark was the plaintiff's agent, and the evidence plainly shows that its bid had been accepted when the contract in suit was made, and that the defendants had knowledge that the ties were purchased for the purpose of resale pursuant to a formal contract to be made in accordance with said bid and its acceptance.

We think the plaintiff's evidence was sufficient to justify a recovery of the item of $2,500 as special damages. According to that evidence the defendants had knowledge of the contract of resale and the deposit of $2,500, and the provision for the delivery in January was inserted for the purpose, as expressly stated by the plaintiff's agent, of guarding against the forfeiture of said sum. It was, therefore, within the contemplation of the parties that one of the consequences of a breach might be the forfeiture by the plaintiff of said sum. Not only did the defendants have notice that a forfeiture might result from a breach, but the circumstances were such as to justify the inference of knowledge on their part that the contract was accepted by the plaintiff with the special condition attached thereto, that they would indemnify it in case of a breach. The said evidence, therefore, brings the case squarely within the rule laid down by the Supreme Court of the United States in Globe Refining Co. v. Landa Cotton Oil Co. (190 U.S. 540), the case principally relied upon ...

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