Part 2

Warranty may survive acceptance, 62–57, 102–83, 108–89

West Virginia—necessity of foreign corporations filing certificate, 106–86

CHOICE OF REMEDIES WHEN LUMBER IS REFUSED ON ARRIVAL.

Recently a member took an order from a dealer in Pennsylvania for a car of lumber, and after order had been forwarded to the mill, the buyer requested that a change be made in a certain size included in the order, which our member advised would be made if shipment had not already gone forward from the mill. It developed, however, that shipment had been made and that it was too late to alter any part of the original order. Upon arrival the buyer refused to accept the lumber on the ground that it was not as ordered.

In connection with this case we have the following opinion from an experienced attorney:

Seller has the choice of one of three things, viz.: First, he may store or retain the property for the vendee and sue him for the entire price. Second, he may sell the property, acting as the agent for this purpose of the vendee, and recover the difference between the contract price and the price of resale. Third, he may keep the property as his own and recover the difference between the market price at the time and place of delivery and the contract price. Usually, the best course to pursue would be to elect the second remedy, to wit: that of acting as agent for buyer and dispose of the carload of lumber and recover the difference between the contract price and the price of resale. By proceeding in this manner, they may have the use of the price realized from the sale, and they have done all that good faith required to the end that any loss sustained be reduced to a minimum. Of course, the seller on the resale must dispose of the goods in good faith and the best mode calculated to produce their value, whether it be public auction or by broker, or any other mode that can or could be easily adopted.

=Opinion No. 1.=

A metropolitan dealer writes:

We took an order in writing from a party for 25,000 feet of lumber, 5,000 feet to be delivered the latter part of May, June, July, August, and until all should be taken. Buyer accepted the delivery of the shipments until June, when he refused the shipment, writing us a letter, as trade was dull, to please not ship any more goods on account of order until he notified us. We immediately wrote him that we should insist on his living up to the terms of the contract. We had our truckman make note of the fact that he tendered the goods at their factory and that they refused to receive them. Now, can we sue and collect for these goods, and in the future if they refuse to receive them after tendering them can we sue? If we should instruct our truckman to leave these goods on the sidewalk in front of their place of business, could we sue, claiming this was a proper delivery and collect for same?

Reply: When goods are to be delivered in a number of instalments, as in this case, the buyer’s refusal to accept delivery of any one instalment is a breach of the whole contract; the seller may declare the contract at an end, from that moment, and may sue and recover any damage that the breach of contract may have caused him. The seller has the choice of three remedies. He may keep the goods as his own and sue for the damages; he may hold the goods as agent of the buyer, informing the buyer that they will be delivered to him upon his demand, and sue for the contract price of the goods; or he may sell the goods, for account of the buyer, giving the latter prior notice of the time and place of sale and then hold the buyer for any deficiency. A delivery of the goods upon the sidewalk in front of the buyer’s place of business would be of no advantage to the seller and it might make him liable for that part of the goods if the buyer neglected to take charge of them. The seller cannot sue for the price of each instalment, when it has been tendered and refused. This would be to put the buyer to the expense of defending a number of suits, all arising out of one contract, and this the law does not sanction. Though it calls for delivery at different times, the contract is one and not several, and it may be made the basis of only one action. Suit may be brought as soon as there is a breach of it, it is true, but that suit must be for all the loss arising by reason of the buyer’s unjustifiable act, not simply for the value of the single instalment tendered and refused. When any suit is brought the court will assume that it is for all the loss arising out of the contract and further suits upon the same cause of action will be barred.

=Opinion No. 5.=

INTERPRETATION OF “F. O. B.” SHIPPING POINT OR DESTINATION.

As there seem to be many opinions on the question of “ownership in transit,” or delivery of lumber F. O. B., and as the association has received numerous inquiries from members covering various phases of the subject, the question has been submitted by the association to Mr. Walter W. Ross, General Counsel to the Car Stake and Equipment Complaint Executive Committee, and an experienced railroad attorney, for opinion. While it must be conceded that such an opinion can cover only a specific case, it will probably be of value to many of our members when the question of ownership in transit arises, and if followed, if adopted as a practical solution, will help to bring about a better understanding between shipper and buyer, always keeping in mind however, that the laws differ in various States.

His opinion is as follows:

If A sells lumber to B and the contract of sale provides that A shall deliver the lumber free on board (F. O. B.) cars at a certain point, the title to the lumber remains vested in A, the seller, until he has delivered the lumber at the point agreed upon to the buyer or his agent the carrier.

If the lumber is damaged while in the possession of the carrier in transit to the point of agreed delivery, the question of the loss is between the seller A and the carrier. If the lumber is damaged after delivery at the point agreed upon, but while in possession of the carrier the question of loss is between the buyer and the carrier.

The question arises what constitutes delivery f. o. b. In the case of shipment of lumber by rail it is customary for the shipper to load the lumber properly on the car. It has been held by some of the courts that it is not necessary for the shipper having completed the loading to give formal notice of delivery to the carrier in order to place the consignment in the possession of the carrier—(but it is safer to notify the carrier of such fact thereby eliminating a possible controversy). If the sale is f. o. b. point of shipment the delivery by the seller to the carrier is delivery to the buyer and from that time the carrier until it has performed its contract of transportation is the agent of the buyer. This principle of law is subject to the exceptions arising under the law of stoppage in transit, as for instance if the buyer becomes insolvent after the shipment has been made—but before arrival at destination.

It has been held that the liability of the carrier begins as soon as the consignment has been placed in its possession, even though the bill of lading has not been issued.

The question also arises when does the liability of carrier as such terminate by delivery to the consignee.

The general rule is that when the carrier has placed the car of lumber on the track which is the usual and customary place for the consignee to unload and consignee has had reasonable opportunity to unload, then its liability as carrier terminates and it is liable only as a warehouseman while the consignment remains on such track, which means that the carrier is required to exercise only the degree of care which an ordinarily prudent person would exercise to protect his property from loss or destruction. In some states the statutes provide, or the courts hold, that the carrier having placed the car in such position for unloading by the consignee, it is then the duty of the carrier to send due notice of that fact to the consignee; and until such notice and reasonable opportunity has been given, the carrier’s liability as such continues. In other states the carriers are not required either by statute or rule of the courts to give such notice of arrival of consignments, it being held to be the duty of the consignee to keep himself informed as to the time of arrival of his freight. This rule is gradually being superseded in most states by the more reasonable rule that it is the duty of the carrier to send due notice to consignee of arrival of freight.

=Opinion No. 8.=

BUYING AND SELLING AGENT NEEDS NO LICENSE IN NEW YORK CITY.

Very often out of town members who contemplate opening an office in New York City, inquire as to whether it is necessary to obtain a license in order that their agent may legally represent them. The following appears to cover the ground:

Question from Baltimore, Md.—I am acting here as a buying and selling agent for a lumber company outside of the State, they supplying me with the money with which to buy the lumber to ship to them on their orders, and I crediting them with the proceeds of the sales of lumber shipped to me to sell for their account, my compensation being a commission on the sales and purchases. Under these conditions I do not pay a license here in Baltimore, but as I expect shortly to move the office to New York, I will thank you to let me know if I would require a license to conduct this business in that city, and if so, where should I apply for same?

Reply: No license is required in New York City in order to carry on such a business as our correspondent describes. One who simply buys and sells here, as agent, need not make a report or pay a fee to any public officer. But if at any time he carries on a general mercantile business, as agent, he must register and pay a fee. The statute is as follows: “Any person now carrying on or conducting a general mercantile or manufacturing business within this State, or hereafter commencing such business at or in a fixed location as agent or manager for another or others, shall—at the commencement of such business, file a sworn statement, verified by such agent and principal or principals, in the county clerk’s office of the county within which said business is carried on, stating the nature of the business and the full name and residence of such principal or principals.” The fee is $1.00, and failure to file the statement is a misdemeanor.

=Opinion No. 3.=

RETAINING LUMBER SHIPPED CONSTITUTES ACCEPTANCE.

The acceptance of lumber, where the grade is disputed, is the subject of the following correspondence:

Question.—We recently shipped a car of lumber to a dealer, who claims that same is not up to the grade bought. We have asked him to return shipment and guaranteed to replace same with material that was absolutely right. He refuses to do so, and states that he will not return it until he receives lumber to replace the lot he refused to accept. We have sold this car to another party, who asks for delivery. We believe that the original purchaser is making an unjust claim. Can we demand that the lumber be shipped back to us, as the party has refused to accept same and has not paid for it? In case he refuses to return it are we under any obligation to make a second delivery?

Reply: The purchaser in a case of this kind has no right to any material that previously belonged to the seller except under the contract which he has with the seller. When the seller sends the purchaser any lumber and the purchaser keeps it, he keeps it either wrongfully or else as being in compliance with his contract. But the courts will not allow any man to claim, for his own advantage, that he is a wrong-doer when there is a possible and reasonable explanation of his act which makes it lawful. For this reason, among others, a buyer of lumber when there has been no warranty of quality, who retains the lumber sent to him, and refuses to return it, is always held to retain it as being perfectly satisfactory and in compliance with the contract. Any complaint he may make about the delivery is of no importance; it is his act that counts. The courts will insist upon taking the most charitable view of his conduct, whatever he may say, and the most charitable view is that he is doing right, and not wrong, and is keeping the lumber because it is a good delivery under the contract. Our correspondents can demand that the lumber be returned if they choose to do so, but they cannot enforce the demand. If the buyer does return the lumber, in answer to such a demand, he will have a claim against the sellers for another delivery, and a valid one under the contract, or for a breach of the contract in failing to make a good delivery in the first place. If no such demand is made, or if it is made and not complied with, the buyer can be compelled to pay the contract price of the goods on the theory that his holding them is an acceptance under the contract. It is idle for him to say that he does not accept them; keeping them is acceptance. No second delivery need be made unless the first delivery is promptly and properly refused and returned.

=Opinion No. 6.=

OBTAINING CERTIFICATES PERMITTING FOREIGN CORPORATIONS TO DO BUSINESS AND MAINTAIN AN ACTION IN NEW YORK OR NEW JERSEY.

Almost every State in the Union, and especially the States of New York, New Jersey, Pennsylvania, Massachusetts, Connecticut, etc., require foreign corporations, that is, corporations formed under the laws of other States, to procure a license or certificate to do business within such State, and in default thereof penalties or fines are imposed.

In considering the necessity of such license the first question is to ascertain whether the corporation is transacting its business in a manner which could be interpreted as “doing business” in its legal sense, and this means generally filling all orders obtained in that State when more than two or three incidental orders have been obtained or the maintaining of a place of business in such State. The difficulties in obtaining the certificates are not great but the details are technical and the expense ranges from $10 upwards, depending upon the laws under which the company is incorporated, there being retaliatory laws in some States. The average expense is about $25, and the certificates are generally good for an indefinite period; the only annual requirements being a formal report which does not involve the giving of the details of the corporation’s business and there is no annual taxation unless the corporation has both property and is doing business within such State.

In many cases where valid claims exist in favor of a corporation of another State against a New York debtor, a serious obstacle arises where the foreign corporation has not obtained a certificate to do business in this State, and, therefore, cannot maintain the action. By the statutes as last amended this prohibition covers also any one to whom such foreign corporation has assigned the claim for collection. The provisions of the New York corporation law in this matter are easily complied with. There has to be a sworn copy of the charter of such foreign corporation and the designation of some person on whom process can be served.

The objection to complying with the statute in this respect is the possible liability to taxation after the corporation gets its name on the State Register. All that is taxable in New York State is the amount of capital used in the State, and this would be so small as to be unimportant provided, of course, that the proper returns to the tax departments at Albany and New York are made out each year. This, we understand can be done in ordinary cases, at a charge of $10, for the two reports, one to Albany and one to New York, and this sum is a very small tax to pay for what must be the advantages of selling lumber and maintaining the legal rights connected with such sales in New York State.

=Opinion No. 17.=

A CARRIER IS BOUND TO DELIVER LUMBER AS DIRECTED.

Question.—My shipper consigns me a car of lumber and marks the bill of lading “via P. R. R. delivery.” If this car arrives by the C. R. R. of N. J., can I be compelled to accept same from them, or does my original contract entitle me to insist on P. R. R. delivery?

Reply: One of the important and imperative duties of a carrier is to deliver the lumber as he is directed to deliver it. A direction to deliver it to a specified connecting carrier or delivery concern cannot be fulfilled by delivering it to another, any more than a direction to deliver it to a certain consignee can be carried out by delivery to another individual. If the carrier makes a wrong delivery, as here described, he is guilty of conversion. The consignee is not bound to accept the lumber from the connecting carrier to whom it has been wrongly delivered. He may sue the original carrier for the value of the lumber as soon as he learns that a different delivery from that directed by the bill of lading has been made.

=Opinion No. 11.=

IF A BUYER REFUSES TO TAKE LUMBER ORDERED THE SELLER HAS A CHOICE OF REMEDIES.

Question.—Some time in March last we received an order for two cars of 32–inch lath. A few days after the order came to hand we received a letter from our customer requesting us to defer shipment on account of the threatened strike in the coal regions, which request was complied with. The difficulties between the miners and operators have of course been adjusted and operations were resumed some time ago, but our customer has so far failed to furnish shipping directions for the lath, which we had cut especially for his order and piled on our docks ready for shipment at the time his request was received to hold the order. Would we not be justified in loading this stock up and putting cars in transit in accordance with the original order and insisting upon acceptance of same upon arrival?

Reply: This buyer has not, in our opinion, lost his right to select the route by which the goods shall be shipped to him. There is no question that his delay in giving such instructions has been unusually great, but the sellers on their part have given no indication of an objection to such delay. It is clearly their right now to demand that he send shipping instructions immediately and to inform him that they will send the goods by a route of their own selection if he does not name a route by return mail; then, if the buyer does not reply, or if he refuses to issue shipping instructions, or undertakes to repudiate the contract, the sellers will have a choice of three remedies: They may ship the goods to him by any suitable carrier and compel him to pay for them; they may inform him that the goods are held subject to his order, to be shipped in whatever manner and at whatever time he may select, and then compel him to pay for them, or they may name a time and place at which the goods will be sold at auction for his account, giving him sufficient opportunity to be present at the sale, and may then sell them at such time and place, holding him liable for the necessary expenses of advertisement and sale and for any amount, by which the selling price may be less than the contract price.

=Opinion No. 12.=

UNDER CERTAIN CONDITIONS THE ACCEPTANCE OF PART OF A DEBT DOES NOT RELEASE THE REMAINDER.

Question.—One of our customers recently sent us a check for less than the amount of his bill, saying in his letter that he was remitting the full amount due us. If he had taken advantage of the regular discount on his last purchase (which he did not do) the amount now due us would have been within a few dollars of the size of the check, but even then the check would not represent the exact amount due to us. He does not say in so many words that he is claiming a discount, just sends the check and writes, “enclosed please find amount of my bill to date.” Something of this kind happens rather frequently, and we would like you to advise us whether we must forego using that check until we can write and straighten out the matter with him. More is due to us than he has paid us, and it seems a hardship that we should be kept out of even this part of our claim during the week or month which it may take to have a full understanding with our customer.

Reply: The creditor, in a case of this kind, is justified in cashing the check and still demanding the amount yet due; this amount he can recover by suit if it is not paid voluntarily. The buyer, it seems, was not entitled to a discount, and he has not made a specific claim to any. Being indebted to a certain amount he simply sends a check for part of that amount. He does not say that he claims a discount. If this check for less than the full amount due had been accompanied by a demand that it be either accepted as payment in full, or else returned, a different question might have arisen; but even then the check might safely have been cashed under the facts of this case. This case is simply that of a man who owes $100 and who sends his creditor a smaller amount. The proper course for the creditor is to accept what is sent as a payment upon account and still maintain his claim for what is yet due.

=Opinion No. 18.=

BANKRUPTCY AVOIDS AN ASSIGNMENT FOR CREDITORS.

Question.—We made a sale to a firm who became embarrassed and offered a compromise to their creditors. We accepted the settlement offered, 25 per cent. cash and 25 per cent. by note at one year. The note given us was not paid and after some delay the concern now goes into bankruptcy. Please inform us whether our claim in the bankruptcy proceedings would be the note only or the full amount due under the original sale?

Reply: The compromise in this case, in so far as it has not been carried out, will probably be set aside and all the bankrupt’s estate be held liable to his creditors under the bankruptcy proceedings. It has been held that “an adjudication of bankruptcy at the instance of the bankrupt’s creditors on the ground of a general assignment, avoids such assignment and subjects the property assigned to the jurisdiction of the bankruptcy court to be administered under the Bankruptcy Act which the creditors have invoked.”

Opinion No 14.

AN INDIVIDUAL MAY TRANSACT BUSINESS UNDER A CORPORATE TITLE IN NEW JERSEY.

Frequently the question arises regarding a person’s legal right to start business under a corporate title; for instance, as “Can John Smith conduct business as the Pine Lumber Company,” etc.

Question from New Jersey.—A person wishes to start a lumber business in New Jersey. Can he adopt a style such as “The Crescent Lumber Company” without being incorporated, the manager being the sole proprietor? Is there anything necessary to be done in such a case beyond hanging out his sign at his place of business?