Opinion
No. 32865
Decided May 21, 1952.
Sales — By sample — By distribution of packaged food product — Distributor not concerned with manufacture, package design or label — Food product not deleterious — Merchantability not impliedly warranted by distributor-seller.
Where there is a sale by sample of a packaged food product from one who is a distributor and who has assumed no duties with regard to the manufacture of the product, the design of the package or the adoption of the name thereof, where the seller and the buyer have equal knowledge of the product, of the manner of its packaging and the legality of its name, where the buyer over a period of 18 months purchased and resold many thousands of such food packages which complied with the samples thereof, and where the food contained in the packages is not deleterious or injurious to consumers thereof, there is no implied warranty of merchantability on the part of the seller upon which the buyer may rely.
APPEAL from the Court of Appeals for Franklin county.
On July 18, 1949, R.H. Ouzts, doing business as Spartan Food Company, appellant herein, hereinafter designated plaintiff, instituted an action against H.T. Maloney, doing business as World Products Company, appellee herein, hereinafter designated defendant.
In the opinion of the Court of Appeals the claims of plaintiff and defendant and the facts shown by the evidence are substantially stated as follows:
"This is a law appeal from the judgment of the Common Pleas Court rendered upon the verdict of a jury [instructed] finding for the defendant on the plaintiff's petition and also finding for the defendant on its cross-petition. The action was one for damages, breach of warranty in the sale of a product known as `So-Ezy Pudding and Pie Mix,' to which the defendant filed a cross-petition for the balance due upon the account for the purchase price of the same.
"The record reveals that prior to June, 1945, the plaintiff-appellant was engaged in jobbing and distributing various products, particularly hosiery, throughout the southern and mid-Atlantic states and doing business under the name of `Spartan Hosiery Company'; that the defendant-appellee was engaged in jobbing and distributing novelties, food products, etc., throughout the eastern part of the United States, carrying on its business under the name of `World Products Company Branch.' The first transaction between these parties took place in the early part of 1945 when defendant-appellee began purchasing hosiery from the plaintiff-appellant for resale. Apparently each party was looking for a new product to sell or for outlets of the products each had for sale and each sent price lists to the other. In June, 1945, the defendant-appellee recommended to the plaintiff-appellant `So-Ezy Pudding and Pie Mix' as an item with good sales possibilities. Pursuant to plaintiff-appellant's request a dozen packages of the product were sent to him for approval. Upon tests being made of the product the same was found to be satisfactory, and feeling that the product was a good one the plaintiff-appellant undertook to sell it to retailers and wholesalers throughout a certain territory. In the course of the next eighteen months the plaintiff-appellant purchased between $65,000 and $100,000 worth of the product. In nearly all cases shipments were made directly to customers to whom the plaintiff-appellant had made sales.
"The record reveals further that this product was manufactured by a Mr. Mark Russell of Columbus, Ohio, who was operating under several trade names and selling all this product through the defendant-appellee. Mr. Russell also manufactured the same product and sold it under the name of `Zip' to other wholesalers. Mr. Russell was the sole author of the formula used in the manufacture of `So-Ezy Pudding and Pie Mix,' the sole designer of the box in which it was packaged and sold amd the person solely responsible for selecting the name `So-Ezy.'
"In late 1945 the plaintiff-appellant suggested that the manufacturer put out a smaller package which would be a two-pie package instead of six. This was done, the package carrying the same label, although the manufacturer suggested that the name `Zip' be used, which name did not meet with the appellant's approval. On December 9, 1946, a shipment of `So-Ezy Pudding and Pie Mix' was seized by the United States Food and Drug Administration for a violation of Title 21, United States Code, regarding misbranding of foods in interstate commerce and thereafter the federal court ordered the destruction of the seized merchandise. After this seizure Mr. Russell offered to pay the freight both ways on such of the product as plaintiff-appellant might have on hand and to re-package it so as to meet the objections of the food and drug administration. This offer was refused. The same offer was refused about six months later after the claim was made that the term `So-Ezy' was a registered trade-mark owned by another firm and that its use was a violation of the owner's rights."
The last sale of the "So-Ezy" product by defendant to plaintiff was on December 2, 1946, seven days before the seizure by the United States Food and Drug Administration and more than six months before plaintiff received a letter from the general counsel for a milling company, advising plaintiff that the milling company was the owner of registered trade-mark, "So-Easy."
Such counsel said that possibly plaintiff did not know of his interference with said trade-mark but they trusted he would immediately cease using the name, "So-Ezy," and advertising any product so named; that it was not the desire of the milling company to cause any trouble; and that plaintiff could appreciate the damage from an infringement.
The record reveals further that at the time plaintiff received this letter he had in his warehouse merchandise of the value of $2,989.52, which, after the notice of the alleged trade-mark violation, was claimed to have no value at all.
After the government seizure, plaintiff limited his sales of the merchandise he had on hand to Spartanburg and adjoining places in South Carolina all in intrastate commerce.
The seizure by the United States Food and Drug Administration was for the reasons that the package containing the "So-Ezy" product appeared to contain more food than it did since it was not filled to capacity, and that the statement on the label was false and misleading in that it created the impression that the product could be used to make pies, puddings, custards, and cake fillings without the addition of other ingredients, when actually it was necessary to add the expensive ingredients, sugar and milk, and the label did not bear a conspicuous statement to that effect.
There was no claim that the product itself was deleterious or harmful or otherwise violated the Pure Food and Drug Act.
At the close of all the evidence the trial court directed the jury to return a verdict in favor of defendant, not only upon plaintiff's petition but likewise upon defendant's cross-petition for the unpaid balance due him on the sale from him to plaintiff.
Judgment was entered upon the jury's instructed verdict and plaintiff's motion for a new trial was overruled.
Upon appeal to the Court of Appeals, that court affirmed the judgment of the Common Pleas Court.
The cause is before this court upon the allowance of a motion to certify the record.
Mr. Frederick L. Orum, for appellant.
Messrs. Isaac Postlewaite, for appellee.
The trial court instructed a verdict for defendant upon the theory that one who sells food products, such as in the present case, impliedly warrants that the goods are of merchantable quality, whether the seller be the manufacturer or merely the broker; that the food product sold by defendant to plaintiff was of merchantable quality and was extensively sold until the United States Food and Drug Administration seized some of it because it did not have the right kind of package and the label did not sufficiently inform that other ingredients had to be added; that all that had to be done to make the food lawful for interstate commerce was to repackage and relabel it, which the manufacturer agreed to do at no cost to plaintiff; and that, therefore, there was no breach of implied warranty.
The Court of Appeals did not pass upon the correctness of the trial court's instruction but based its affirmance largely upon the fourth paragraph of the syllabus of the case of McMurray v. Vaughn's Seed Store, 117 Ohio St. 236, 157 N.E. 567, which paragraph reads:
"Where a dealer sells an article of merchandise in the original package as it comes from the manufacturer, and the customer buys it knowing there has been no inspection by the dealer, there is no implied warranty, and, in the absence of an express warranty or representation, such dealer is not liable to the purchaser for damages caused by any deleterious substance in such merchandise the presence of which he had no knowledge."
That paragraph of the syllabus was distinguished in Sicard v. Kremer, d.b.a. Roux Distributing Co., 133 Ohio St. 291, 13 N.E.2d 250, where the plaintiff was permitted to recover damages for personal injuries suffered as the result of using hair dye which she purchased in the original package from a retailer.
In distinguishing the McMurray case it was said in the opinion in the Sicard case, at page 300:
"The instant case is readily distinguishable from that case. There the product sold by the dealer was shipped direct to the buyer by the manufacturer, the dealer not having any opportunity for inspection. Moreover the article sold in bags was shredded cattle manure, a product not inherently dangerous as in the instant case. The defendant here was not a mere retailer who sold the hair dye to the plaintiff in package form."
The Court of Appeals in the present case said further that all the merchandise was shipped by the manufacturer and not by defendant, that the article was not inherently dangerous, and that, therefore, the present case is governed by the McMurray case and not by the Sicard case.
The Court of Appeals also cited Williston on Sales (1948 Ed.), Section 242, wherein it is stated that "where one dealer buys from another, each having supposedly equal skill and knowledge, no warranty is implied."
Defendant in the present case strenuously insists that the judgment of the Court of Appeals should be affirmed for the reason that plaintiff has failed to prove damages in that the government seizure and the later assertion of a trade-name infringement were not the proximate cause of plaintiff being left with undisposed of merchandise; and that the proximate cause was a 60-day guaranty of sale which plaintiff had given to his customers and under which they returned merchandise to him without regard to its condition or saleability.
Defendant had no knowledge of or part in plaintiff's guaranty and it was not within the contemplation of the parties that plaintiff would have merchandise in his warehouse at the end of that period.
Defendant maintains further that since the merchandise sold to plaintiff was a perishable food product and there was no proof as to the date of the acquisition of any of the merchandise eventually left in plaintiff's warehouse, there is no proof that plaintiff's assertion of a breach of warranty was made within a reasonable time.
In view of the conclusion to which we have come, it is not necessary for us to pass upon the foregoing claim of defendant.
Plaintiff contends that the question of law presented to this court is "whether or not under the Ohio law, packaged merchandise that was so packed as to violate the United States laws, and bore a trade name which the seller had no right to use, makes the merchandise unmerchantable within the purview of the Uniform Sales Act."
Plaintiff maintains that defendant, by implication, warranted the goods to be merchantable, and that the evidence disclosed that by reason of the form of the package and the unauthorized use of the name, "So-Ezy," there had been a breach of such warranty to his damage.
Plaintiff maintains further that the fourth paragraph of the syllabus in the McMurray case, supra, is mere obiter and states a rule contrary to the overwhelming weight of authority.
We are of the opinion that the decision in the present case may well rest upon grounds other than those stated by either of the lower courts.
The original package which plaintiff bought from defendant, who was not the manufacturer but simply a dealer or broker, was a container holding sufficient quantity of the "So-Ezy Pudding and Pie Mix" to make six pies or 36 puddings and retailed for 25 cents.
Before plaintiff undertook to sell this product he tested it for quality by using certain samples furnished by defendant.
Competition having arisen with other similar products which were marketed in smaller boxes, plaintiff suggested that defendant secure a similar package. A package of the same mix sold under the name, "Zip," was suggested to plaintiff but was declined by him because he had established in his territory a following for the product under the name, "So-Ezy."
On or about January 16, 1946, defendant furnished plaintiff with six sample packages of "So-Ezy" in a small size, to retail at 10 cents a package. Subsequently, all sales of "So-Ezy" made by plaintiff were chiefly in this small package from which two pies or twelve puddings could be made.
It is obvious that the purchases by plaintiff of the product from defendant were made in reliance upon the samples submitted and there is no claim by plaintiff that any of the product sold varied from the sample.
The warranty of a vendor in sales made by sample is defined as follows in Section 8396, General Code:
"In the case of a contract to sell or a sale by sample —
"(a) There is an implied warranty that the bulk shall correspond with the sample in quality.
"(b) There is an implied warranty that the buyer shall have a reasonable opportunity of comparing the bulk with the sample, except so far as otherwise provided in this chapter.
"(c) If the seller is a dealer in goods of that kind, there is an implied warranty that the goods shall be free from any defect, rendering them unmerchantable, which would not be apparent on reasonable examination of the sample."
In the present case, plaintiff bought and sold in the neighborhood of $100,000 worth of the packages containing the mix. He not only examined the package and tested the contents, but the smaller package was furnished at his suggestion. The contents of the package were not deleterious or harmful and had been highly saleable.
Since defendant did not manufacture either the package or the mix, plaintiff over a period of approximately 18 months had the same opportunity as defendant for examination and knowledge of the package, its contents, the way the contents were packed, and any infringement of the trade name.
There is no claim that defendant had any knowledge which plaintiff did not have.
The question of merchantability where sale is by sample is discussed in 1 Williston on Sales (Rev. Ed.), 678, Section 257, as follows:
"As a general rule all the buyer is entitled to, in case of a sale or contract to sell by sample, is that the goods shall be like the sample. He has no right to have the goods merchantable if the sample which he has inspected is not. The reason upon which this rule is based is identical with that which denies an implied warranty generally to a buyer who has inspected the goods which he buys."
In Waite on Sales (2 Ed.), 220, it is stated:
"* * * where the sale is of some specific chattel of which the seller is not the manufacturer or producer, and which the buyer has essentially the same opportunity to examine as does the seller, so that in effect the two are on an equal basis of knowledge, the courts as a general proposition tend toward denial of any implied warranty as to the characteristics of the chattel."
In the present case defendant was a distributor of the goods in question and had assumed no responsibility or duties with regard to the manufacture, the design of the package or the adoption of the name. Both plaintiff and defendant were on an equal basis as to knowledge of the product, and that knowledge was not acquired upon the basis of a single sale but by dealing in hundreds of thousands of packages over approximately 18 months.
Under the circumstances of the present case, we are of the opinion that there was no implied warranty in the sale of the mix by defendant to plaintiff upon which plaintiff could rely.
Plaintiff relies strongly upon the case of Myers v. Malone Hyde, 173 F.2d 291. However, in that case there were two purchases of merchandise by description, which merchandise the buyer had not inspected, and the defects for which the government seized the merchandise could not have been discovered without opening the cans of merchandise, which consisted of tomatoes, and testing the contents.
We are of the opinion that the legal rights and obligations governing the Myers case were totally different from those with which the present case is concerned.
The judgment of the Court of Appeals is affirmed.
Judgment affirmed.
WEYGANDT, C.J., ZIMMERMAN, MATTHIAS and HART, JJ., concur.
TAFT, J., concurs in the judgment.
Admittedly, defendant was "a dealer in goods of" the "kind" here sold. The "goods" here sold were not merely the contents of the packages but the packages with the contents therein. Myers v. Malone Hyde, 173 F.2d 291; Niblett, Ltd., v. Confectioners' Materials Co., Ltd. (1921), 3 KB, 387, 395, 396. Since the packaging of those goods made it unlawful to sell them, such packaging would necessarily be a "defect, rendering them unmerchantable." Myers v. Malone Hyde, supra; Manning Mfg. Co. v. Hartol Products Corp. of New England, 99 F.2d 814; Niblett v. Confectioners, supra, 395, 396, 403; 35 Harvard Law Review, 477. Such "defect * * * would not be apparent on reasonable examination of the sample" except to those familiar with the provisions of the federal food and drug laws (Section 331 et seq., and especially Section 343 (a) (d), of title 21, U.S. Code) and the construction given to those statutory provisions. Admittedly, neither the plaintiff nor the defendant was sufficiently familiar with those laws and their construction to enable them to recognize that "defect." The language of Section 8396 (c), General Code, appears to necessarily require the conclusion that the defendant impliedly warranted that the goods should "be free from" such a defect, unless it is determined as a matter of law that the plaintiff was sufficiently familiar with the federal statutes and the construction thereof to recognize that "defect" (Cf. Section 8395 (3), General Code) notwithstanding the admitted fact that he was not. Such a determination must rest upon the maxim that all are conclusively presumed to know the law. See Aetna Ins. Co. v. Reed, 33 Ohio St. 283, 293, 294; Rindskopf Bros. Co. v. Doman, 28 Ohio St. 516; 17 Ohio Jurisprudence, 96, Section 76; 30 Id., 202, Section 8; 23 American Jurisprudence, 809, Section 45; 9 A.L.R., 1051, 1054; 33 Id., 853, 880. But see Miller v. Proctor et al., Exrs., 20 Ohio St. 442.
In view of the many harsh applications of this maxim which have been consistently made in a wide variety of situations, it is difficult to find any valid reason for not applying the maxim, where only an implied warranty is involved and especially where this defendant is not shown to have had any more actual knowledge of the law involved than this plaintiff had.
The case of Niblett v. Confectioners, supra, is distinguishable because the only defect there involved was the unauthorized use of a registered trade mark on the package. That such trade mark was owned by another, and the authority of the seller to use it, were at least partly matters of fact and not merely matters of law.
It is not necessary to consider the claim of the unauthorized use of a trade name on the goods in the instant case. If, as contended by plaintiff, the goods were worthless because of their packaging, such unauthorized use of a trade name could not make them worth less than they already were worth.