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S & L PAVING CORP. v. MACMURRAY TRACTOR (06/23/69)

SUPREME COURT OF NEW YORK, ONONDAGA COUNTY 1969.NY.42136 <http://www.versuslaw.com>; 304 N.Y.S.2d 652; 61 Misc. 2d 90 June 23, 1969 S & L PAVING CORP., PLAINTIFF,v.MACMURRAY TRACTOR, INC., ET AL., DEFENDANTS Axenfeld, Webb, Marshall, Bersani & Scolaro for plaintiff. Bond, Schoeneck & King for Allis-Chalmers Manufacturing Co., defendant. John R. Tenney, J. Author: Tenney


John R. Tenney, J.

Author: Tenney

 Plaintiff S & L Paving Corporation (S & L) seeks to recover damages from the defendant Allis-Chalmers Manufacturing Company (A-C) for an alleged breach of contract. The defendant MacMurray Tractor, Inc. (MacMurray) became insolvent and did not participate in the trial of this action. However, MacMurray was a named defendant also charged with a breach of contract arising out of the same transaction.

S & L contracted with MacMurray for the purchase of a piece of equipment known as an Allis-Chalmers shovel with a specially attached Ulrich bucket. A conditional sales installment contract was entered into on April 16, 1964. It provided that the purchase price would be reduced by a $6,000 credit for a trade-in shovel. The shovel was defective upon delivery, was never repaired, and was repossessed by A-C. S & L seeks to recover the fair and reasonable value of the trade-in plus damages which resulted from the alleged breach of contract.

S & L delivered the trade-in shovel to MacMurray, the local dealer for A-C. Later, on May 21, the new shovel was delivered to S & L, apparently by MacMurray. It was defective, and S & L attempted to return it to MacMurray. At MacMurray's yard, S & L first learned of its insolvency and found the Sheriff had taken possession of all of MacMurray's property including its trade-in. S & L kept the defective shovel and called A-C to discuss its problem and a possible solution.

A-C's sales representative, John Donoghue (who prepared the conditional sales contract and participated as an adviser during the entire transaction) ordered a mechanic to make the necessary repairs. The mechanic was unsuccessful. Mr. Donoghue then referred S & L to his immediate superior, Mr. Hertel, at the A-C home office in Milwaukee, Wisconsin. Mr. Hertel sent a factory repairman who was also unsuccessful in repairing the machine. Mr. Hertel advised S & L that the dealer agreement with MacMurray had been canceled. After two unsuccessful attempts at repairing the shovel, S & L was advised to deliver it to the proposed new dealer for A-C, Atlantic Tug & Equipment Company. S & L declined because of the expense involved. There were a series of conversations by S & L with Mr. Hertel and Mr. Donoghue in an attempt to resolve the problem which continued until some time around the 10th of June. Later, a representative of A-C took the machine and delivered it to Atlantic Tug's yard where it lay for several weeks. A-C ultimately sold the machine to a third party.

There was no further contacts between the parties. S & L was advised by mail that the conditional sales contract had been assigned to A-C or its credit subsidiary, and was asked to make payments. S & L refused because A-C had possession. A-C apparently made no other attempts to contact S & L and sold the tractor.*fn1 A-C contends that it had no contractual arrangement with S & L, and even if it did, S & L repudiated the agreement by certain oral statements and conduct of its president. Mr. Donoghue said that he was told by S & L's president that he would "take it (the value of the trade-in) out of his (MacMurray's) hide". On another occasion he was told, "Get the machine off the job. I don't want it. Take it off." He also suggested that S & L had bought or intended to buy a replacement shovel from the Caterpillar Corporation.

There are four issues in this case. (1) Was there a contract between A-C & S & L? (2) If answered in the affirmative, was it rescinded by the conversations of S & L's president? (3) If it was not rescinded, did A-C breach the contract? (4) Has S & L properly pleaded its cause of action or can the pleadings be amended to conform to the proof?

In considering the issues raised by this action, the provisions of the Uniform Commercial Code do not apply since they did not become effective until September 27, 1964.

A-C contends that in attempting to make the repairs it was complying with its warranty agreement which limits its liability to the "repair or replacement of defective parts, all other damages, statutory or otherwise, being expressly waived." It further contends that no action on its part could extend this liability because of the following terms in the warranty: "No representative of the Company has authority to change this warranty or this contract in any manner whatsoever, and no attempt to repair or promise to repair or improve the machinery covered by this contract by any representative of the Company shall waive any consideration of the contract or the change or extend this warranty in any manner whatsoever."

Clearly, A-C's attempt to repair could not alter the relationship between it and S & L. If that were all A-C had done, S & L would at best have a claim for a breach of the warranty agreement, limited by its terms. However, A-C took several steps up to and including repossession of the shovel which at the time it had no right to do under any agreement. As an assignee, it could only repossess if S & L failed in its obligation under the contract. There is no evidence that there was such a failure at the time of the repossession.

At the time of the delivery of the shovel on May 24, so far as S & L knew, it was still operating under its written contract. The shovel was delivered by MacMurray, and when it proved defective, an attempt was made to seek recourse from MacMurray. Then, S & L learned what A-C already knew: (1) MacMurray's financial condition, (2) the termination of his dealer's agreement. As previously indicated, it ultimately learned that A-C had started a rescission action to recover its property and had also taken a written assignment of the contract.

Through the assignment, A-C had acquired the right to collect the balance of the payments, and there was clearly no obligation of payment to MacMurray. (Restatement, Contracts, § 423.) A-C also had the obligation to repair. Its contention that it had not sufficient time to make the repairs because of S & L's interference is rejected. It was aware of the pressing time requirements facing S & L even before delivery. It breached its warranty and was liable to S & L for that breach before it repossessed the machine.

The breach occurred when the equipment was delivered in a defective, unworkable condition and it was unrepaired after a reasonable time. S & L had the right to rescind the contract and demand its down payment (5 Williston [Rev. ed.], § 1460A), since "the buyer has not received what he bargained for." (2 Williston, Sales, § 608.)

The act of assignment did not release the assigner from his obligations under the contract. (Rochester Lantern Co. v. Stiles & Parker Press Co., 135 N. Y. 209. Cf. Liberty Wall Paper Co. v. Stoner Wall Paper Mfg. Co., 59 App. Div. 353, affd. 170 N. Y. 582; Rosenthal Paper Co. v. National Folding Box & Paper Co., 226 N. Y. 313. Restatement, Contracts, §§ 150-152.) "Frequently an assignee of contract rights undertakes to perform the assignor's duties also. This is not operative as a novation, since the assignor remains bound by those duties, so long as his creditor does not accept the assignee's ...


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