Opinion
February 7, 1908.
L. Laflin Kellogg, for the appellant.
Herbert Barry, for the respondents.
The defendant appeals from a judgment entered upon a verdict directed in favor of plaintiffs. The action is for the rental of certain dump cars leased to defendant and known as Goodwin cars. The defendant was the contractor for certain improvements proposed to be made by the New York Central and Hudson River Railroad Company at and about its terminal in Fourth avenue in the city of New York. The work to be done included a vast amount of excavation, it being contemplated that the excavated material should be loaded on cars and taken to various points on the line of the railroad where filling was required. As it would be necessary to run these cars over the permanent tracks in use for passengers and freight trains it was desirable that cars should be used which would carry loads of excavated material without spilling, and that would dump it on one side of, and clear of the track. After considering the comparative advantages of a number of patterns of cars the defendant finally selected the Goodwin car and leased sixty-nine of them at an agreed per diem rental. The present action is for the unpaid rental of thirty-one of these cars, and no question of amount is involved as it was stipulated at the trial how much the plaintiffs would be entitled to recover if so entitled at all. The leases to defendant were originally made by the Goodwin Car Company, the manufacturers of the cars, but subsequently in conformity with a trust agreement between the plaintiffs and the Goodwin Car Company, and at the request of the latter substituted leases were executed by plaintiffs to defendant. The cars were received by defendant in October, 1903, and in a very few months they proved to be unfitted for defendant's purposes so far as concerned the handling of rock blasted during the course of the excavation. The defendant seems to have complained, as early as February, 1904, that the cars would not do the work expected of them, and from that time on, and especially from May, 1904, correspondence was carried on between defendant and the Goodwin Company respecting the inadequacy of the cars for the work required of them, which culminated in August, 1904, in the sub-leasing agreement to be hereafter referred to. In considering whether or not a verdict against defendant was rightly directed it becomes necessary to consider the affirmative defense as outlined in the answer, for it is upon this that defendant relies. It is alleged as to each lease (for there are two involved in the action) that it was entered into "upon the false and fraudulent representation" by circulars, photographs, verbal statements and writings "that the Goodwin cars could handle all kinds of rock excavation of any size and could do the work of the defendant under its contract with the New York Central and Hudson River Railroad Company in the shortest possible time and at the least cost per cubic yard," and "that thereafter and upon a trial of the said cars * * * it was found that the representations made by the said Goodwin Car Company were false and untrue, and that the said cars were wholly unable to remove rock of all sizes or to do the work of the defendant" under its contract. Almost all of the record is taken up with evidence tending to show the statements and representations made by the officers of the Goodwin Car Company as to what their cars could do, and to establish the fact that the cars could not do the work required of them. If the defense rested upon the question whether or not the representations, or more properly warranties, were made as alleged, and that the cars failed to do what they had been represented or warranted to do, there would certainly be enough in the evidence to carry the case to the jury. This is not, however, the defense as pleaded. The defendant goes on to allege that upon the discovery of the inadequacy of the cars and in May, 1904, he refused to proceed further under the lease, or to pay further therefor, and offered and tendered back to the plaintiffs and the said Goodwin Car Company the cars so leased; that thereafter and upon the 4th day of August, 1904, an agreement was entered into with the Goodwin Car Company (with the consent and approval of the plaintiffs) that fifty-six cars then in possession of defendant and including the cars on which rental is sought to be recovered in this action should be sub-leased by the Goodwin Car Company in the name of defendant, and the rentals received under the sub-lease be paid over to the plaintiffs; that it was further covenanted in said agreement that the said Goodwin Car Company would not manufacture any new cars for the purpose of leasing the same in competition with any of the cars made under said lease, and for which they had agreed to procure sub-leases and would have the right to build only such additional cars as would not fairly be considered to be put into competition with those cars covered under the leases; that thereafter and until the 16th day of June, 1905, the plaintiffs and the Goodwin Car Company proceeded under said modified agreement and many of the cars were leased as therein provided and some of the rents received therefor applied as agreed; that the plaintiffs and the Goodwin Car Company have wholly failed to carry out and perform the agreement, and have not performed and carried out the same in good faith, and have failed to sub-lease the said cars as called for in said agreement, and in attempting to lease the same; that they have manufactured new cars and have sold the same, which have come into competition with those leased by defendant; that thereupon and upon learning the facts the defendant elected to treat the said contract as rescinded, and on or about June 16, 1905, duly notified plaintiffs to that effect and tendered back the cars. It will be observed that the defendant does not rest its defense upon a rescission of the original contract of leasing alone, but relies upon its right to have rescinded that contract and the breach of the subsequent agreement of sub-leasing. It is quite clear that it could not have successfully defended upon any attempted rescission of the original contract with plaintiff, for no such rescission was shown. If we assume that the evidence showed that the lease was induced by certain representations on the part of the Goodwin Company as to what the cars would do, and that those representations were not fulfilled, it may be that the defendant would have been justified in rescinding the contract and tendering back the cars, but it is elementary that a purchaser or lessee wishing to rescind for such a reason must act promptly upon discovery of the fraud or of the breach of the warranty. If he sleeps upon his rights or expressly affirms the contract or does acts inconsistent with disaffirmance he loses the right to rescind. The allegations in the answer that in May, 1904, the defendant notified plaintiffs of the ascertained inadequacy of the cars, and that it refused to proceed further under the lease or to pay further therefor and tendered back the cars are not borne out by the proofs. On May 17, 1904, defendant wrote to the Goodwin Car Company as follows: "We have at the present time 69 of your cars in service, but in consequence of the large proportion of rock which we are handling we cannot keep them all employed. It would oblige us very much if you would arrange to take 25 of these cars off our hands, which I presume you can readily do, as the cars are most excellent for handling any kind of material, excepting rock." To this the Goodwin Car Company replied: "While we cannot obligate ourselves in any manner to relieve you of any of the cars on hand, yet we will take the matter up promptly and any opportunity we have for leasing the cars we will present to you for consideration." The defendant replied to this letter as follows: "Your favor of May 19th, in regard to sub-leasing for us certain of your cars which we now have under lease, came duly to hand. We trust that you will give this matter your immediate attention, for as pointed out to you, you, the cars we are desirous of sub-leasing are of practically no use to us at present." In this correspondence there is certainly no attempt to rescind the lease, and no hint that any ground existed which would justify a rescission. In August, 1904, the agreement as to sub-leasing the cars was made substantially as alleged in the answer. It was embodied in certain letters between defendant and the Goodwin Car Company, dated respectively August 2, 4 and 9, 1904. The Goodwin Car Company did not undertake absolutely to obtain sub-leases, but merely undertook to attempt and endeavor to do so. It was agreed that thirteen of the cars should be retained by defendant on its work, and that as to the remaining fifty-six the leases of them to defendant and its obligations thereunder were not altered, the defendant authorizing the Goodwin Company to procure sub-lessees to whom the defendant would execute sub-leases, and the Goodwin Company on its part agreed as to the manufacture of new cars as alleged in the answer. If anything were needed to establish defendant's express waiver of any right to disaffirm or rescind the original contract it is furnished by this agreement as to sub-leasing.
As to this last agreement there is not the slightest evidence that the Goodwin Company did not attempt in good faith to perform what it had undertaken to do, or that it violated its agreement not to put cars on the market in competition with the cars leased to defendant.
The defendant failed at every vital point to establish its defense, and there was nothing to submit to the jury. The verdict was, therefore, rightly directed.
The judgment and order should be affirmed, with costs.
PATTERSON, P.J., McLAUGHLIN, LAUGHLIN and CLARKE, JJ., concurred.
Judgment and order affirmed, with costs.