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February 19, 1952

KURLAN et al.

The opinion of the court was delivered by: KAUFMAN

Having been consolidated, these two causes came on for trial without a jury. During trial, Civil 50-324 and defendant's counterclaim in Civil 50-325 were discontinued by consent. It remains for the Court to dispose of the three causes of action in Civil 50-325.

As a result of conversations and an exchange of correspondence, defendant and plaintiffs arrived at an agreement in May, 1948, That agreement is the basis for the third cause of action, which arose earlier than the first two causes in suit. Under its terms, defendant was to weave various quantities of two different types of textiles 'old 360' *fn1" and '2 x 1' for plaintiffs. Plaintiffs were to supply raw materials and specifications. The old 360 and 2 x 1 called for in the agreement were basically lastex-type fabrics which were sold by plaintiffs to manufacturers of bathing suits and ladies' undergarments. They differed in the construction of their warps and woofs. Apparently defendant and plaintiffs had independent experience in both the weaving and marketing of such fabrics and, in any event, they had dealt with each other on past occasions in arrangements such as this.

It appears that on orders such as that embraced in the May, 1948 agreement, it was the usual procedure for defendant to weave the fabric from yarns supplied it by plaintiffs, and, after they were fabricated, to send them on in the greige to plaintiffs' dyer where they would be held for varying periods of time until the dyer received instructions from plaintiffs.

 Plaintiffs claim damages on 5,491 defective yards of old 360 and 5,452 yards of defective 2 x 1 produced by defendant under the 1948 agreement. They say that the faulty goods were woven in so defective a manner that they could be sold only as seconds, the flaws having made them completely unmarketable as first quality goods. Some of the alleged flaws were such that they apparently could not be detected until the greige goods were dyed. Although it does appear that certain flaws could have been detected while the goods were still in the greige, it was not practicable, indeed it was unwise, to examine this elastic-type cloth once it was rolled and awaiting dyeing, for additional rolling and unrolling were apt to have damaged the goods further.

 Although not important to the ultimate conclusion reached, an issue exists as to whether the parties understood that weaving defects would not and could not be ascertained until the merchandise was dyed. The evidence convinces me that the parties accepted the trade practice of examining cloth of this kind after it was dyed. 'It is well settled that parties who contract on a subject-matter concerning which known usages prevail incorporate such usages by implication into their agreements, if nothing is said to the contrary.' Blatchford, J.; in Hostetter v. Park, 137 U.S. 30, 40, 11 S. Ct. 1, 4, 34 L. Ed. 568. See also Dixon, Irmaos & Cia. Ltda. v. Chase National Bank, 2 Cir., 1944, 144 F.2d 759. *fn2" 'When a usage * * * has become uniform in an actively commercial community, that should be warrant enough for supposing that it answers the needs of those who are dealing upon the faith of it. I cannot see why judges should not hold men to understandings which are the tacit presupposition on which they deal.' L. Hand, J. in Kunglig Jarnvagsstyrelsen v. Dexter & Carpenter, D.C.S.D.N.Y., 1924, 299 F. 991, 994. Apart from this, the conduct of the parties in the instant case indicates that they adopted the practice of examining after dyeing.

 Once at the dyer's, the rolls of greige goods were placed in a storeroom until dyeing orders were received from the plaintiffs. *fn3" A great number of the defects alleged here did not appear until the greige goods were dyed, and it is clear that those defects did in fact then become obvious to the naked eye.

 This cause is essentially founded on plaintiffs' contention that defendant promised to weave commercially saleable first quality goods for them and that in failing to do so, defendant breached a warranty of quality. I am persuaded that under the terms of the May, 1948 agreement, *fn4" defendant expressly warranted that from the raw materials furnished it by plaintiffs, it would weave first quality goods. For the purposes of this agreement those terms may be equated. Neither plaintiffs nor defendant expected that the goods would be categorically flawless. First quality goods and commercially perfect goods, for instant purposes, were not terms which described the ultimate in lastex perfection. Those terms did not mean 100 % perfect. That is clear from the evidence. The terms did, however, describe a high-grade material which, although not without some flaws, was so nearly impeccable that men conversant with the products of the trade would agree to its qualitative classification as firsts. The parties, I am convinced, understood that. Furthermore, it seems clear from the testimony that such imperfections as might appear in first quality goods were so much fewer in number per yard than those in seconds that the difference between the qualities was sharp and unambiguous. Defendant's position that it was to weave only 'run of the mill' cloth is not borne out by the evidence. Indeed everything from correspondence to the nature of plaintiffs' business indicates that they had no use for any but commercially perfect or first quality goods, and that defendant knew this well.

 An express warranty of quality having been given, defendant went ahead and wove the goods knowing the plaintiffs planned to dye and then sell them to the trade as first quality lastex. Defendant, I find, also knew that the disclosure of most weaving defects would have to wait upon the dyeing of the greige goods.

 In the autumn of 1948 difficulties began to arise between the parties over the quality of some of the goods being dyed, *fn5" and plaintiffs began complaining to defendant by letter, telephone and in face-to-face conversations. The complaints were based on occasional reports plaintiffs received from their dyer to the effect that the dyeing was bringing out weaving flaws not apparent to the eye while the goods were in the greige.

 Then ensued a period in which plaintiffs and defendant attempted settlement of their difficulties. In February and March, 1949 defendant credited plaintiffs' account with $ 2000 for specifically defective or second quality goods. Defendant's position is that the credit was in full and final settlement of all claims plaintiffs had against it for defective 2 x 1 up to March 5, 1949. Plaintiffs admit the credit of $ 2,000 and likewise say that it was an adjustment covering only 2 x 1 goods. However, whereas defendant urges that all defective 2 x 1 goods were covered in the credit, plaintiffs urge that 5,452 yards of some 13,000 yards of defective 2 x 1 were not so covered and it is on those 5,452 yards of defective 2 x 1 that plaintiffs base part of their third cause of action. I find that in fact there was no accord and satisfaction as to the 5,452 yards of 2 x 1 on which damages are claimed. Furthermore, plaintiffs urge that, upon defendant's admission, there was no accord and satisfaction as to 5,491 yards of allegedly defective old 360 produced under the 1948 agreement. Thus damages on this yardage are also sought in the third cause of action.

 Philip Tirrell, president and general manager of defendant company, agreed in his testimony that no settlement was ever made on 360 cloth. The defense of accord and satisfaction therefore, by defendant's own admission and in spite of its amended answer, is hollow so far as it concerns old 360 under this agreement new 360 under the February, 1949 agreement to which I shall turn in a moment.

 The facts underpinning the first and second causes of action began early in February, 1949. Plaintiffs contend that they and defendant formulated an agreement, partially oral, partially written, calling for the manufacture by defendant of 18,000 yards of first quality new 360. It is defendant's position that the agreement, as it was finally formulated, obligated defendant to produce new 360 of a 'run of the mill' quality. As I interpret defendant's contention, it is that it was not obliged to turn out commercially perfect or first quality goods. Defendant's claim in this respect rests on two letters exchanged between it and plaintiffs. On February 2, 1949 plaintiffs wrote defendant an order for weaving 18,000 yards of new 360. The third paragraph of plaintiffs' letter stated: 'You are going ahead weaving pick and pick for me assuring me that in weaving pick and pick the troubles we have had will be eliminated.'

 Defendant answered in its letter of February 5, 1949: 'However, we are not guaranteeing quality to the extent mentioned in the third paragraph of the above mentioned communication.'

 There followed a conversation in which defendant Philip Tirrell said that all that was intended was that he would not weave 100% perfect merchandise. In that conversation, plaintiff, Charles Kurlan, agreed that he did not expect absolutely flawless textiles but ...

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