author: Cardozo, Ch. J.

text:
    World Exchange Bank, Appellant, v. Commercial Casualty Insurance Company, Respondent.

      (Argued October 21, 1930;
    decided November 18, 1930.)

      Max E. Greenberg and Meyer Greenberg for appellant.
    Payment against the uncollected forged instruments was the establishment by plaintiff of credit to its customer on the faith of forged checks and plaintiff is entitled to recover for the resulting loss under the bond. (International Union Bank v. National Surety Co., 245 N. Y. 368; Silverstein v. Metropolitan Life Ins. Co., 254 N. Y. 81; Underwood v. Globe Indemnity Co., 245 N. Y. 111; Trade Bank v. U. S. F. & G. Co., 229 N. Y. Supp. 93; 249 N. Y. 546.) There was loss to plaintiff through statutory larceny and plaintiff is entitled to recover, therefore, under the bond. (Morse on Banks & Banking [6th ed.], 831; Trade Bank of New York v. U. S. F. & G. Co., 249 N. Y. 546.) Knowing and willful payment of checks against uncollected funds by plaintiff’s paying teller, made in direct violation of instructions, is a breach of trust and dishonesty within the meaning of the bond, and plaintiff is entitled to recover resulting loss. (Eland State Bank v. Massachusetts Bonding & Ins. Co., 165 Wis. 493; First Nat. Bank v. National Surety Co., 243 N. Y. 34; First Nat. Bank v. U. S. F. &

      G. Co., 137 N. W. Rep. 742; Citizens State Bank of St. Paul v. New Amsterdam Casualty Co., 224 N. W. Rep. 451; Dudley v. City of Flemingsburg, 115 Ky. 5; United States v. Breese, 131 Fed. Rep. 915.)

      Colley E. Williams and Allan C. Rowe for respondent.
    The mere payment of checks drawn against uncollected funds does not constitute dishonesty within the meaning of the bond. (First Nat. Bank v. National Surety Co., 243 N. Y. 34; Parker v. Sprague, 114 N. W. Rep. 361.) A mere violation of instructions by an employee resulting in a loss to the plaintiff bank would not constitute fraud or dishonesty and would not subject the defendant to liability upon the bond. (American Surety Co. v. Gracey, 252 S. W. Rep. 263.) The defendant herein is not liable for plaintiff’s loss resulting from statutory larcenies effected by means of forgeries committed by a depositor. (Trade Bank of New York v. U. S. F. & G. Co., 249 N. Y. 546.) The provision of the bond as to losses through payment of forged checks or the establishment of any credit to a customer on the faith of such checks does not apply to drafts or acceptances. (Harris v. Clark, 3 N. Y. 93; Neg. Inst. Law, § 210; United States Rail Co. v. Wiener, 169 App. Div. 561; Amsinck v. Rogers, 103 App. Div. 428; 189 N. Y. 252; McCluskey v. Cromwell, 11 N. Y. 593.)
   Cardozo, Ch. J.

The plaintiff, a bank in the city of New York, received from the defendant a bond or policy of insurance indemnifying it against certain described losses suffered in its business.

Martin Katz, trading as Tunney Rooters, opened a depositor’s account with the plaintiff on September 14, 1926. Between that time and September 23, he deposited a number of checks and drafts, some genuine, some forged. The checks, when forged, were drawn on banks in the far west. The drafts were drawn on the Metropolitan Mortgage and Securities Company, which was merely a trade name for Katz himself.

There was a rule of the bank that payments were not to be made to a depositor against uncollected items of deposit without the consent of the president, or, at times, another officer. During the days when the fictitious items were in course of collection, Katz drew his checks on the account, handed them to the paying teller, and received the cash over the counter. The teller, Castellano, paid them believing them to be good, but mindful of the fact that they were drawn against uncollected items of, deposit. On the presentation of the first check, one for $600, he received the approval of the president before paying out the money. When the other checks were offered, he paid them without inquiry. On September 23, 1926, about a week thereafter, the fictitious items of deposit were returned uncollected. A loss had then been suffered in the sum of $22,824.50, for which the bank has had judgment upon the contract of indemnity. The Appellate Division, reversing this judgment, has ordered a new trial. The case is now here upon an appeal by the plaintiff with a stipulation for judgment absolute. The reversal being on the facts as well as on the law, the plaintiff, to prevail, must satisfy the court that the loss as a matter of law is within the coverage of the bond (Goodman v. Marx, 234 N. Y. 172). If there is any question of fact from which opposing inferences can be drawn, the Appellate Division was free, in the exercise of its discretion, to order a new trial.

The plaintiff points to three subdivisions of the policy, designated A, B and D, as covering the loss. They will be considered in succession.

Subdivision A gives indemnity to the bank for any loss through any dishonest or criminal act of- any of the insured’s- officers, clerks or other employees * * * wherever committed and whether committed directly or by collusion with others.” The plaintiff says that Castellano was guilty, as matter of law, of a dishonest or criminal act when, mindful of the state of the account, he permitted a depositor to draw against uncollected items of deposit without the president’s approval.

We think the quality of the act is not so obvious and determinate as to exclude opposing inferences (First Nat. Bank v. National Surety Co., 243 N. Y. 34). Criminal the act was not, unless done with criminal intent (People v. Baker, 96 N. Y. 340; People v. Flack, 125 N. Y. 324; People v. Wimari, 148 N. Y. 29). The presence of that intent is not, in the setting of these circumstances, an inference of law. The question is perhaps closer whether the act within the meaning of the policy must be said to be dishonest,” for dishonesty within such a contract may be something short of criminality (City - Trust, S. D. & S. Co. v. Lee, 204 Ill. 69; Mitchell Grain & Supply Co. v. Maryland Casualty Co., 108 Kan. 379, 383; Ætna C. & S. Co. v. Commercial State Bank, 13 Fed. Rep. [2d] 474; United States F. & G. Co. v. Egg Shippers’ S. & F. Co., 148 Fed. Rep. 353; Genesee Wesleyan Seminary v. United States F. & G. Co., 247 N. Y. 52, 57). The appeal is to the mores rather than to the statutes. Dishonesty, unlike embezzlement or larceny, is not a term of art. Even so, the measure of its meaning is not a standard of perfection, but an infirmity of purpose so opprobrious or furtive as to be fairly characterized as dishonest in the common speech of men. Our guide is the reasonable expectation and purpose of the ordinary business man when making an ordinary business contract” (Bird v. St. Paul F. & M. Ins. Co., 224 N. Y. 47, 51; Silverstein v. Metropolitan Life Ins. Co., 254 N. Y. 81, 84).

If this standard is to govern, we think the quality of the teller’s act is for the triers of the facts. He was not acting lucri causa, to gain some benefit for himself. He was not acting with the thought of giving anything to any one, or so the triers of the facts might say. The money was due if the uncollected checks were good. He believed them to be good, for, with or without sufficient reason, he believed them to be certified. He ought, even then, to have consulted his superior instead of venturing to act alone. None the less, his only object was the furtherance of the business without useless fuss and pother. The act was a wrongful one, very likely a technical conversion, certainly a departure from instructions, but in the common speech of men there would be reluctance to describe it as flagitious or dishonest. A different question might be here if payments against uncollected items had been forbidden always and to every one, had been excluded altogether from the business of the bank. Here they were not excluded altogether, but were permitted if made with a superior’s approval. The situation is much the same as if the teller had been required to verify the state of the account by reference to the ledger, and had chosen to take a chance and trust to recollection. The act, even if prohibited, was not so radical a departure from the general business of the bank or the functions of the actor as to exact an imputation of dishonesty when there was innocence of motive.

Subdivision B gives indemnity for any loss “ through robbery, burglary, larceny (whether common law or statutory), theft, hold-up, misplacement or destruction * * * while the property is actually within the offices of the insured.” This clause might apply to the loss suffered by the plaintiff if it were not for a subsequent exception. By subdivision 2 (a), the bond does not cover any loss effected by means of forgery, except when covered by insuring clauses A and D.” The loss in question was one effected by means of forgery (Trade Bank of N. Y. v. United States F. & G. Co., 249 N. Y. 546), and unless covered by A or D must be held to be excluded.

Subdivision D gives indemnity for “ any loss through the payment * * * of forged checks * * * or the establishment of any credit to any customer on the faith of such checks.” Part of this loss was caused by the establishment of a credit on the faith of forged checks, but part only. Most of the loss came through a credit not for checks, but for drafts or bills of exchange. The rule at common law was inveterate and inflexible that a check must always be drawn on a bank or banker (2 Daniel Neg. Inst. §§ 1566, 1568; Bowen v. Newell, 8 N. Y. 190, 195; Merchants Bank v. State Bank, 10 Wall. [U. S.] 604, 647; Espy v. Bank of Cincinnati, 18 Wall. [U. S.] 604, 620). The statute, indeed, is even narrower for it limits a check to a bill drawn on “ a bank ” (Neg. Inst. Law; Cons. Laws, ch. 38, § 321). We assume for present purposes that in the construction of a business document such as the policy in suit, the definition may be widened, in accordance with common-law analogies, to include drafts upon a “ banker ” (cf. Banking Law; Cons. Laws, ch. 2, § 2). Indeed the very title of the policy, banker’s blanket bond,” reinforces this assumption as to the range of its protection. The Metropolitan Mortgage and Securities Company, however, was neither a bank nor a banker. It was merely a trade name for Katz or for Wise, his alias. The plaintiff was not told that it was a bank, and, for anything that we can say with certainty, did not believe it to be one.

We do not mean that the actual nature of the business is decisive if in conflict with appearances. A policy of insurance covering loss from credits on the faith of forged checks may not unreasonably include documents purporting to be checks and so dealt with by the insured, though in truth they are merely drafts on non-existent corporations or worthless men of straw. The difficulty is that there is nothing in the evidence to call for the conclusion, at least as one of law, that the plaintiff received the drafts in the belief that they were checks, or that the belief, if it existed, was reasonable in the light of facts disclosed. On the contrary, the evidence is at least consistent with the conclusion that the plaintiff in crediting its customers did not attempt to discriminate between checks and other drafts, but dealt with paper of each class on a footing of equality. True, the bills were marked accepted,” but acceptance is not confined to checks. The common formula for certification employs another word. Certification is equivalent to acceptance (Neg. Inst. Law, § 323), but it is also something more. Unlike a mere acceptance it is more than a promise by an acceptor to assume the payment of the draft; it is a warranty that funds sufficient for that purpose are presently on deposit, and have been set aside for that use (Merchants’ Bank v. State Bank, supra; Goshen Nat. Bank v. Bingham, 118 N. Y. 349).

At most the question is one of fact whether the drafts were credited with the understanding, reasonably induced, that they were drawn on a bank or banker, and hence to be credited as 'checks. This is so for many reasons. The plaintiff might reasonably be expected to know the banks and bankers doing business in its own city. On the face of the documents the drawee was described as located in New York. There was thus opportunity and invitation to investigate its origin. The name does not contain within itself a representation, express or implied, that the company assuming it is an incorporated bank, still less a private banker. The slightest inquiry would have shown that it was nothing of the kind. The trade certificate on file sets forth the purposes of the business. They are not the activities characteristic of the business of banking (Meserole Securities Co. v. Cosman, 253 N. Y. 130). Nor was inquiry omitted altogether. An officer of the plaintiff bank called upon Katz at the opening of the account to investigate his standing. He was. found occupying a desk with the grandiose title of his company inscribed upon the office door. If there were any visible tokens of a banking business, they are not mentioned • in the record. . True it is that the drafts were made out on engraved or printed blanks, similar in their make-up to the common form of checks, but this is not decisive of . their character, though it is a circumstance which with others may not be lacking in significance. To what extent it had a tendency to mislead the bookkeepers and tellers in the service of the plaintiff, the triers of the facts should say. There is at least an intimation in the record that it would not have misled them at all if they had used reasonable care. The intimation is that the Metropolitan Mortgage and Securities Company was known not to be a bank, but that a teller, glancing hastily at the paper, confused the name of the drawee with that of the Metropolitan Trust Company, and entered it accordingly.

We conclude that clause D is limited to genuine checks or to documents which in good faith and upon reasonable grounds are believed to be checks and are dealt with on that basis. Unless the documents are of that nature, the insured in crediting them takes the risk of forgery. Certainly the bond would not cover the forgery of a promissory note, or a coupon, or a bank note circulating as money, yet these too might be credited with ensuing damage. The word that is used in the policy has now, and for many years has had, a proper legal meaning. Nothing in the surrounding circumstances or elsewhere points to the conclusion that this meaning was discarded altogether in the thought of the contracting parties. On the contrary, a bank or banker, having regard to banking practice, would be unlikely to describe a bill of exchange as a check, unless drawn on a bank or banker. Certainly it would be unusual to credit such a bill as cash in anticipation of collection. The proper legal meaning is not different from the one commonly accepted in commerce and finance.

The order should be affirmed and judgment absolute ordered against the appellant on the stipulation, with costs in all courts.

Pound, Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Ordered accordingly.


source: Caselaw Access Project

license: Public Domain

text:
    Frederick O. Becker, Respondent, v. Peter A. Frasse & Co., Inc., Appellant.
    (Argued October 17, 1930;
    decided November 18, 1930.)

      John J. Hatpin and Joseph W. Kirkpatrick for appellant.
    If the agreement does not clearly show that plaintiff is not entitled to receive any part of the refund of taxes it is ambiguous and equivocal in its terms and plaintiff has failed to show that it was the intention by said agreement to cover taxes which were refunded and credited by the Federal government to defendant but had not yet been actually paid to it. (Westcott v. Higgins, 42 App. Div. 69; 169 N. Y. 582; Woolverton v. Johnson, 69 Kans. 708; Hitchings v. Van Brunt, 38 N. Y. 335; Matter of Poonarian, 234 N. Y. 329; Ireland v. Corse, 67 N. Y. 343; Adams v. Bristol, 126 App. Div. 657; 196 N. Y. 510; White v. Case, 13 Wend. 543; Elbald v. Hanson, 85 Kans. 541; Hubbell v. Board of Commrs. of Bernalillo County, 13 New Mex. 546; Iliff v. Weymouth, 40 Ohio St. 101; Ryan v. Tudor, 31 Kans. 366; State of Missouri v. Moeller, 48 Mo. 331; Yazoo & M. V. R. Co. v. Fitzgerald, 137 Miss. 905; Taylor v. Kearney County, 35 Neb. 381; Mclnerny v. Reed, 23 Iowa, 410; Pottawattamie County v. Carroll County, 67 Iowa, 456.) The evidence clearly establishes that the parties did not intend to include in the contract the refunds of overpaid taxes for the fiscal year ending November 30, 1918, for the sale of plaintiff’s stock to the defendant was predicated on the book value of the stock as shown by an audit of the defendant’s books which included therein to plaintiff’s knowledge the refund of taxes for the year 1918. (Hamburg v. Cundill, 247 N. Y. 119; Sun Oil Co. v. Heller, 248 N. Y. 28; Matter of Oakes, 248 N. Y. 280; Good v. Martin, 95 U. S. 90; Union Trust Co. of N. Y. v. Whiton, 97 N. Y. 172; Dent v. North American S. S. Co., 49 N. Y. 390; Thomas v. Scutt, 127 N. Y. 133; Middleworth v. Ordway, 191 N. Y. 404; Martin v. Mfrs. Acc. Indemnity Co., 151 N. Y. 94; Mullen v. Washburn, 224 N. Y. 413; Atterbury v. Bank of Washington Heights, 241 N. Y. 231; U. S. Printing & Lithographing Co. v. Powers, 233 N. Y. 143; Kenyon v. K. T. & M. M. A. Assn., 122 N. Y. 247; Lamb v. Norcross Bros. Co., 208 N. Y. 427; Murdock v. Gould, 193 N. Y. 369.)

      Robert H. Wilson, Jr., for respondent.
    The agreement on its face expresses an entire and complete agreement between the parties, and is not in any sense ambiguous. (Thomas v. Scutt, 127 N. Y. 133; Stowell v. Greenwich Ins. Co., 163 N. Y. 298; Brantingham v. Haff, 174 N. Y. 52; Mead v. Dunlevie, 174 N. Y. 108; Lossing v. Cushman, 195. N. Y. 386; Lese v. Lamprecht, 196 N. Y. 32; Allen v. City of Oneida, 210 N. Y. 496; Cream of Wheat Co. v. Grist Co., 222 N. Y. 487; Edison v. Thacher, 229 N. Y. 172; Matter of Loew’s Buffalo Theatres, Inc., 233 N. Y. 495; Ayers v. Palatine Insurance Co., 234 N. Y. 334; St. Regis Paper Co. v. Hubbs, 235 N. Y. 30; Brainard v. New York Central R. R. Co., 242 N. Y. 125; Newburger v. American Surety Co., 242 N. Y. 134; Ruppert v. Singhi, 243 N. Y. 156; Mitchill v. Lath, 247 N. Y. 377; Heller v. Pope, 250 N. Y. 132.)
   Cardozo, Ch. J.

Plaintiff, who was the treasurer of Peter A. Frasse & Company, Inc., sold to the defendant 1,100 shares of the defendant’s corporate stock at the price of $80 a share.

In connection with the sale he received from the defendant the following letter:

January 9, 1925
“ Mr. F. O. Becker,
“ 99 Hancock St., Brooklyn, N. Y.
“ Dear Sir: In the event that Peter A. Frasse & Co., Inc., collect after this date any further refund from the Government for excess payment of income tax paid to January 1st, 1925, it is agreed upon your sale to the company of eleven hundred (1100) shares of common stock at $80.00 per share, that the company will pay you if and when such refund is collected from the Government eleven-sixtieths ill /60) of the net amount of the refund collected, after deducting expenses for such collection.
“ Yours very truly,
' “ PETER A. FRASSE & CO., INC.,
Lester Brion,
“ President.

During the negotiations leading up to the sale, the parties had before them an audit of the books dated June 30, 1924, with which the plaintiff as treasurer of the corporation was thoroughly familiar.

This audit included as part of the surplus an item of $32,983.86, described as a United States income tax refund for the year 1918-1919.

This refund had been allowed by the United States Treasury Department by notice to the defendant in March, 1924. Of the refund thus allowed there was paid in cash to the defendant on June 16, 1924, the sum of $15,435.40. The residue though allowed had not been paid at the date of the audit. Even so, the full amount was included as part of the surplus and was classified as a refund actually made. At the time of the sale (January, 1925) the situation was unchanged. The balance with accrued interest, amounting to $18,414.49, was paid to the defendant on February 19, 1925, after the sale had been made and the certificates delivered.

The refund of taxes for 1918 was the only one that had been allowed when the bargain was in progress, but it was not the only one in view. There were other applications for refunds then pending and undetermined. Some of these were allowed afterwards, though for comparatively small amounts, and in every such instance the defendant paid to the plaintiff the part due to him under the contract out of the moneys so received.

This action is brought to recover a proportionate share of $18,414.49, the sum paid by the Government in February, 1925, on the ground that it is a further refund within the meaning of the contract.

The trial judge, construing the refund agreement in the light of the circumstances, held that the further refunds ” there referred to did not include the payment of moneys upon a refund already allowed by the Government and treated by the corporation as a cash item, but must be confined to other refunds, the subject - of claims then pending and undetermined.

The Appellate Division held that the agreement was so clear as to give no opportunity for construction, and that all refunds paid thereafter, even though previously allowed by the Government, and treated as a cash asset, were due to the plaintiff as soon as received by the defendant. The judgment for the defendant was reversed, and judgment ordered for the plaintiff.

We think a construction so literal does violence to intention.

The rule has often been declared that a contract is to be read in the light of the circumstances existing at its making, and that these may avail to stamp upon a word or phrase a loose or secondary meaning as distinguished from the strict or primary meaning to be gathered from the instrument unenlightened by extrinsic aids (Utica City Nat. Bank v. Gunn, 222 N. Y. 204, 208; Atwater & Co. v. Panama R. R. Co., 246 N. Y. 519, 524; Kenyon v. Knights Templar & M. M. A. Assn., 122 N. Y. 247; Lamb v. Norcross Bros. Co., 208 N. Y. 427).

The plaintiff himself testifies that he asked the defendant’s representative, the chairman of the board of directors, to* capitalize the amount that was to come from the Government, and to add it to the price, and that the chairman refused to do this because he did not know how much it would be.” That statement was true, of course, as to claims for refunds then pending, but plainly it was not true of claims already allowed and set up for the full amount as a cash asset of the company.

The defendant knew exactly how much this item was to be, and there is no reason to suppose that it was suspicious of the credit of the United States Government. Indeed, the contrary is distinctly proved by the fact that the item as soon as allowed was treated as a constituent of the surplus and was so recorded in the books. What was known to the defendant was as fully known to the plaintiff. The surplus, with the refund in it, entered into the estimate of value, and is reflected in the rate of $80 per share to be paid upon the sale.

In the light of the then existing circumstances the promise to pay an additional sum in the event that the defendant should collect any further refund,” may fairly be held to have referred to a refund allowed thereafter, and not to one classified as already a finality. In the thought of the parties to the contract, the claim for a refund on account of the taxes for 1918 was no longer future or contingent. Even though the money had not been paid in full, the refund was recognized as an accomplished fact. There remained only the physical act of payment as distinguished from the pressure and persuasion implicit in the process of collection. What was open was not a further refund ” as buyer and seller must have viewed it when higgling as to price. At least, the contract is ambiguous, and reasonably supports the meaning ascribed to it by the seller.

Other entries in the balance sheet give aid to this conclusion. Included in the audit is an item, accounts receivable, $155,106.79.” This item, to the extent of the unpaid balance of $18,414.49, was made up of the refund allowed for 1918. Accounts receivable in general were treated as present assets without waiting for actual payment. No reason is suggested why this should have been done in respect of accounts receivable owing from debtors generally, and refused as to an account receivable due from a debtor so solvent as the Government.

The contract has meaning and rationality if confined to claims for tax refunds then pending and undetermined. It is without sensible purpose if extended to a refund which had been dealt with as a present asset.

The judgment of the Appellate Division should be reversed and that of the Special Term affirmed with costs in the Appellate Division and in this court.

Pound, Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgment accordingly.


author: Per Curiam.

text:
    Esther H. Price, Respondent, v. Thomas D. Ryan, Appellant, and Guy B. Dickison, Respondent.
    (Argued October 15, 1930;
    decided November 18, 1930.)

      Henry R. Follett and George R. Fearon for appellant.
    The act of defendant Dickison in sending a drunken driver through the streets of Syracuse with a two and-one-half ton truck was the proximate • cause of plaintiff’s injury and absolved appellant from liability. (Saugerties Nat. Bank v. D. & H. Co., 236 N. Y. 425; Hoffman v. King, 160 N. Y. 618; Laidlaw v. Sage, 158 N. Y. 73; Ragone v. State of New York, 123 Misc. Rep. 48; 211 App. Div. 573; 243 N. Y. 607; Babcock v. Fitzpatrick, 221 App. Div. 638; 248 N. Y. 608; Seith v. Commonwealth Elec. Co., 89 N. E. Rep. 425; Psotta v. Long Island R. R.

      Co., 246 N. Y. 348; Owen v. Gruntz, 216 App. Div. 19; Fluegel v. Coudert, 244 N. Y. 393.) Irrespective of the truck driver’s intoxication and defendant Dickison’s criminal act, the driver was the servant of Dickison and not of appellant. (Finnegan v. Piercy Contract. Co., 189 App. Div. 699; DePerri v. Motor Haulage Co., Inc., 185 App. Div. 384; Carr v. Burke, 183 App. Div. 361; Hartell v. Simonson & Son Co., 218 N. Y. 345; Baum v. Link, 110 Misc. Rep. 297; McNamara v. Leipzig, 227 N. Y. 291; Braxton v. Mendelson, 233 N. Y. 122; Schmeds v. Deffaa, 153 App. Div. 819; 214 N. Y. 675; Charles v. Barrett, 233 N. Y. 127; Lipschitz v. Fitzpatrick, Inc., 234 N. Y. 592; McLaughlin v. Clarke Co., 251 N. Y. 507; Bartholomew v. Bennett Contracting Co., 245 N. Y. 66.)

      Charles E. Spencer for plaintiffs, respondents.
    The appellant is liable for damages under section 282-e of the Highway Law. (Grant v. Knepper, 245 N. Y. 158.) The right of plaintiffs to enforce their judgments against the appellant is not dependent upon the question of whether Dickison might also have been held hable. (Sweet v. Perkins, 196 N. Y. 482; Jerome v. N. Y. Rys. Co., 190 App. Div. 311; 45 C. J. 895; Dean v. Metropolitan Elevated Ry. Co., 119 N. Y. 540; People v. Alaboda, 198 App. Div. 41; Jones v. City of Albany, 151 N. Y. 223; Matter of Andersen, 91 App. Div. 563; Town of Hempstead v. City of New York, 52 App. Div. 182; Smith v. Boston & Albany R. R. Co., 99 App. Div. 94; Sutherland’s Statutes & Statutory Construction [1st ed.], 371.)

      Joseph M. Meatyard for defendant, respondent.
    Defendant Ryan has no right of appeal in this action against defendant Dickison. (Popham v. Twenty-third St. Ry. Co., 16 J. & S. 229; 89 N. Y. 633; Lane v. N. Y., N. H. & H. R. R. Co., 95 App. Div. 633; Isham v. N. Y. Assn. for Poor, 177 N. Y. 218; Matter of Fleming, 223 App. Div. 849; People ex rel. Breslin v. Lawrence, 107 N. Y. 607;
      Bryant v. Thompson, 128 N. Y. 426; Matter of Hodgman, 140 N. Y. 421; Matter of Richmond, 63 App. Div. 488; Hyatt v. Dusenbury, 106 N. Y. 663.)
   Per Curiam.

The plaintiff was injured through the negligence of a truck driver who was in the general employment of the defendant Ryan. Even though it be conceded that the defendant Dickison, with whom Ryan had contracted for the use of the truck and driver, was negligent in directing the driver, known to him to be intoxicated, to proceed along the street where the accident occurred, the defendant Ryan has no standing to complain that the jury found a verdict against himself alone. The Civil Practice Act (§ 211-a) in furnishing to one joint tort feasor a remedy for the recovery of contribution from the other, expressly confines the remedy to cases where a money judgment has proceeded against both. At common law Ryan would have had no cause of action in contribution. Under the statute he has none, since no judgment against his joint tort feasor has been had. The plaintiff, entitled to a judgment against Ryan, because of his tort, should not be denied an enforcement of the judgment because the jury, in exculpating Dickison, refused to enforce an additional liability to which the plaintiff may have been entitled.

The judgment should be affirmed, with costs.

Cardozo, Ch. J., Pound, Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgment affirmed.


author: Crane, J.

text:
    In the Matter of Frank T. Sage et al., Respondents, v. Thomas E. Broderick et al., Constituting the Town Board of the Town of Irondequoit, Appellants.
    (Argued October 21, 1930;
    decided November 18, 1930.)

      John Van Voorhis for appellants.
    The agreement violates section 9 of the General Municipal Law requiring municipal bonds to be sold at public sale after advertisement to the highest bidder. An underwriting agreement made in advance of any public offering is not authorized and is, in effect, a contract for a private sale at a discount to the underwriter contingent upon the bonds not being bid in by others. This gives to the underwriter an advantage over other competitors, frustrating the purpose of the statute. (2 Dillon on Mun. Corp. § 895; Roberts & Co. v. Taft, 109 Fed. Rep. 825; City of Cin

      cinnati v. Guckenberger, 60 Ohio St. 353; Elyria Gas Co. v. Elyria, 57 Ohio St. 374; Cardozo, Jurisdiction of Court of Appeals, § 6; Reed v. McCord, 160 N. Y. 330; Wells v. Town of Salina, 119 N. Y. 280.) The agreement, if construed merely as a brokerage or agency agreement, is in violation of section 9 of the General Municipal Law, requiring that bonds of municipal corporations or civil divisions of the State shall be sold at public sale. (Armstrong v. Village of Fort Edward, 159 N. Y. 315; Mayor, etc., v. Sands, 105 N. Y. 210; Brownell v. Town of Greenwich, 114 N. Y. 518; People ex rel. Lester v. Eno, 176 N. Y. 513; Smith v. County of Los Angeles, 99 Cal. 628; Consolidated School District v. Union Trust Co., 215 Pac. Rep. 28.) Review by certiorari does not lie except from determinations of quasi judicial bodies. There is no jurisdiction to entertain the certiorari order. (People ex rel. Desiderio v. Conolly, 238 N. Y. 326; People ex rel. Kennedy v. Brady, 166 N. Y. 44.)

      Clarence P. Moser for respondents.
    The agreement is valid. (Mayor, etc., v. Sands, 105 N. Y. 210; Brownell v. Town of Greenwich, 114 N. Y. 518; Armstrong v. Village of Fort Edward, 159 N. Y. 315; Braxton v. Mendelson, 233 N. Y. 122; People ex rel. O’Callahan v. French, 123 N. Y. 636; 2 C. J. 700; Bain v. Brown, 56 N. Y. 285; Gardner v. Ogden, 22 N. Y. 327; Moore v. Moore, 5 N. Y. 256; DeCaters v. LeRay DeChaumont, 3 Paige Ch. 178; Smith v. County of Los Angeles, 99 Cal. 628; Consolidated School Dist. v. Union Trust Co., 215 Pac. Rep. 28; Wells v. Town of Salina, 119 N. Y. 280; Ketchum v. Buffalo, 14 N. Y. 356; Peterson v. Mayor, etc., 17 N. Y. 449; Parker v. Board of Supervisors of Saratoga, 106 N. Y. 392; Village of Carthage v. Frederick, 122 N. Y. 268.) Certiorari is the proper remedy. (People ex rel. Desiderio v. Conolly, 238 N. Y. 326; Eastman Kodak Co. v. Richards, 123 Misc. Rep. 83; People ex rel. Kennedy v. Brady, 166 N. Y. 44; People ex rel. Myers v. Barnes, 114 N. Y. 317.)
   Crane, J.

Section 9 of the General Municipal Law (Cons. Laws, ch. 24), relating to the issuance of municipal bonds, provides: “All bonds hereafter issued by any municipal corporation, or by any school district or civil division of the state, shall be sold, in the case of a city of the first class as required by its charter or by any special act under which such bonds are issued, in the case of a city of the second class as required by section sixty-one of the second .class cities law, and in all other cases at public sale not less than five or more than thirty days after a notice .of such sale, stating the amount, date, maturity and rate of interest, has been published at least once in the official paper or papers, if any, of any such municipality, provided that if there is no official paper, then such notice of sale shall be published in a newspaper published in the county in which such bonds are to be issued, or a copy thereof shall be sent to and published in a financial newspaper published and circulating in New York city.”

The question arises in this case whether the town of Irondequoit had authority under the peculiar circumstances of this case to pay reasonable brokerage fees for procuring purchasers of its certificates of indebtedness and later of bonds to take them up. The situation as it existed at the time of the alleged contract with the petitioners made it very necessary for the town to have immediate financial help and assistance. Confining our statements to the certificates and bonds in question, there were outstanding, due on October 20, 1927, $600,756.47 of certificates of indebtedness held by local banking institutions. For some reason the holders were unwilling to extend further credit and the payment of these certificates on the due date had been demanded. The day of reckoning was near at hand. Under these circumstances the brokerage firm of Sage, Wolcott & Steele was consulted .and employed, pursuant to the following letter and resolution quoted only in so far as is material. On October 17, 1927, three days before the maturity of the certificates, the brokers wrote:We think we can fin,d some banks or bankers somewhere who will take care of the Orchard Park certificates that mature on Thursday of this week, October 20th, and also take care of the bonds that must be sold at an early date to finance the Orchard Park temporary borrowing. * • * * We are willing to guarantee to find a purchaser who will finance a 5% renewal certificate on the $600,756.47 Orchard Park until February 1st, and also agree to find a purchaser who will buy the bonds that must be sold to take up the short-term borrowing on behalf of Orchard Park, when the Town Board offers the bonds for sale.”

Compensation is suggested at two per cent of the face amount of the bonds if a purchaser is found who at the time of the sale will take the bonds at a rate of interest which, including premium, if any, results in the town being able to borrow its money on a four and three-quarters basis or lower.

The board thereafter, as shown by its minutes, approved the agreement of Sage, Wolcott & Steele, and agreed to pay the compensation stated.

The brokers, it will be noted, contracted to do two things: First, to procure a purchaser for the maturing certificates of indebtedness. These certificates were not within the provision of section 9 of the General Municipal Law, above quoted, and could be disposed of at private sale. They were in the nature of short-term notes to meet emergencies. They had to be paid either out of cash on hand, or from the proceeds of bonds issued and sold for the purpose of retiring them. This is why the brokers stated in their letter of the seventeenth that bonds would have to be issued and put on the market within three months, not later than February first. The second thing which the brokers agreed to do was to provide or procure a purchaser or purchasers for the bonds to be issued. This was not to be at a private sale, but in full compliance with the General Municipal Law. It might be that after the requisite advertisement and offer at public sale there would be no bid for the bonds which had to be sold at not less than par. The provisions of section 9 required a public sale after advertisement, but of course no law could provide or guarantee a market. We are well aware that prices and values are quite independent of the law. Legislation may materially aid in creating confidence and a demand for securities, but it seldom, if ever, can force or create a market. Therefore, when the town of Irondequoit purposed to put its bonds on the market February 1, 1928, after complying with the provisions of section 9, there was a chance at least that no purchasers would appear or bid at the public sale. The refusal of the banks to extend further credit or renew the certificates of indebtedness may very well have caused the town authorities to fear such a result. For their failure to procure bidders or purchasers the brokers might have been liable on their contract for such damages as could be proved, but they did not in such a case agree to purchase the bonds for themselves.

Under these circumstances and conditions we are of the opinion that the town board, acting in good faith, was permitted to procure at reasonable expense help and assistance in financing its certificates and creating a market for its bonds. The General Municipal Law was enacted for the purpose of doing away with private sales of these municipal securities, requiring open competitive bidding so that the public might receive the benefits of the highest price obtainable. The law required notice of the sale to be published in newspapers, but it did not necessarily restrict all advertising or notice to this medium. Circumstances might arise, as in this case, where additional efforts would have to be made to sell bonds at public sale at or above par. We think those circumstances existed here and that the town board was justified in making the arrangement which it did with brokers of repute to provide purchasers of its certificates and bidders for the bonds to later redeem them. All the requisites of the General Municipal Law relating to the sale of bonds were complied with. There is no question of the brokers’ fees being excessive and unreasonable or incurred in any attempt to subvert or contravene the law.

In Armstrong v. Village of Fort Edward (159 N. Y. 315); Brownell v. Town of Greenwich (114 N. Y. 518) and Mayor, etc., v. Sands (105 N. Y. 210) it was held that the power in a municipality to sell bonds carried with it the implied power to employ such reasonable or proper assistance as might be requisite to bring about an advantageous sale, including the employment of a broker. These cases were decided before the amendment to section 9 of the General Municipal Law by chapter 534 of the Laws of 1917, as above quoted, and so are not decisive on this point.

The cases of Smith v. County of Los Angeles (99 Cal. 628); Consolidated School District No. 20 v. Union Trust Co. (215 Pac. Rep. 28 [Wash.]); City of Cincinnati v. Guckenberger (60 Ohio St. 353) and Elyria Gas & Water Co. v. City of Elyria (57 Ohio St. 374), cited by the appellant, held that the municipal authorities neglected to follow statutory law — they did less than the law required.

The review of the action of the present town board by a writ of certiorari is the procedure authorized by our decision in People ex rel. Desiderio v. Conolly (238 N. Y. 326).

The order should be affirmed, with costs.

Cardozo, Ch. J., Pound, Lehman, Kellogg and O’Brien, JJ:, concur; Hubbs, J., not sitting.

Order affirmed.


text:
    In the Matter of the Application of the City of New York, Respondent, Relative to Acquiring Title to Real Property Required for the Widening of Fourth Avenue in the Borough of Manhattan. Parlex Holding Corporation, Appellant.
    (Argued October 23, 1930;
    decided November 18, 1930.)

      Martin Conboy, David Asch and Charles W. Tooke for appellant.
    An owner in condemnation proceedings is entitled to the actual value of the property actually taken by the condemnation. (Matter of City of New York, 190 N. Y. 350.) The value of the land taken may not be diminished by the benefits accruing to the land not taken. Such benefits must be assessed upon the remaining land which is the object of the benefits. The court committed error in deducting from the value of the Park avenue lots the value of the benefits accruing to the remaining property from the taking. (Matter of City of New York, 190 N. Y. 350; Genet v. City of Brooklyn, 99 N. Y. 296; Matter of Forty-eighth Street, 19 App. Div. 602.) The rule that, in estimating the value of the property actually taken, the part taken is to be considered as a portion of the whole tract, cannot be applied so as to diminish the amount which the claimant would receive were he the owner only of the portion taken. (Genet v. City of Brooklyn, 99 N. Y. 296; Matter of City of N. Y., 198 N. Y. 84; Matter of City of N. Y., 213 App. Div. 187; Matter of Bronx Parkway, 192 App. Div. 412; 230 N. Y. 607; Matter of Prospect Park & C. I. R. R., 13 Hun, 345.)

      Arthur J. W. Hilly, Corporation Counsel (Joel J. Squier of counsel), for respondent.
    The award represents the actual value of the property actually taken. (Matter of Commissioners of Central Park, 4 Lans. 467; Leeds v. New York Telephone Co., 79 App. Div. 121; Newton v. Hunt, 134 App. Div. 325.) The determination of appellant’s compensation on the basis of its actual ownership of the entire block does not involve the setting off of benefits to appellant’s remaining land against the damage caused by the taking, but is a determination that appellant does not suffer damage in excess of the amount of the award. (Matter of City of New York, 190 N. Y. 350; 2 Nichols on Eminent Domain, 723; Lehigh Valley Coal Co. v. Chicago, 26 Fed. Rep. 415; Stevens v. N. Y. E. R. R. Co., 130 N. Y. 95; Washburn v. M. L. & W. R. Co., 59 Wis. 364; People ex rel. City of New York v. Hennessy, 157 App. Div. 786; Matter of Utica R. R. Co., 56 Barb. 456; Matter of Prospect Park & C. I. R. R., 13 Hun, 345; Matter of City of New York, 174 N. Y. 26; Gillender v. City of New York, 127 App. Div. 612; Lahr v. Metropolitan Elevated Ry. Co., 104 N. Y. 268; People v. City of Brooklyn, 4 N. Y. 419.) The award is full and adequate compensation for all the damage. (Matter of City of New Work [Inwood Hill Park], 197 App. Div. 431; Matter of City of New York [East 63d Street School], 191 App. Div. 892; Matter of New York, 219 App. Div. 382; Matter of City of New York, [East 36th Street], 168 App. Div. 463 ; 217 N. Y. 621; Matter of Cassel, 178 App. Div. 687; Matter of City of New York, 198 N. Y. 84; Matter of Grade Crossing Commrs., 52 App. Div. 122; 164 N. Y. 575; Matter of City of New York [Croton Dam Reservoir], 129 App. Div. 707; Matter of City of New York, 129 App. Div. 711; Matter of Simmons, 138 App. Div. 667; Matter of Manhattan Ry. Co. v. Comstock, 74 App. Div. 341; Matter of Brook Avenue, 8 App. Div. 294; Matter of Boston Road, 27 Hun, 409; Matter of City of New York [Thayer Street], 138 App. Div. 252.)
   Crane, J.

When this case was here before (247 N. Y. 569), we affirmed the Appellate Division in holding that it was an improper method of valuation to consider the Park avenue lots as 100-foot lots shortened to 80 feet by the widening of the street. The case is here after a rehearing, the appellant again insisting that an erroneous measure of damage has been applied. The value of property taken in condemnation proceedings is a question of fact which this court cannot review unless some error of law has been committed.

To understand the contention of counsel, it is necessary to state the facts. The city of New York acquired a fee in trust for street purposes of a twenty-foot strip of land on the east side of Fourth (Park) avenue, running from East Thirty-second street to East Thirty-third street, borough of Manhattan, for the purpose of widening the street. Title vested in the city July 16, 1924. The borough of Manhattan was to pay seventy-five per cent of the cost and expense of the improvement, the other twenty-five per cent being assessed on the land benefited according to a fixed area of assessment. The strip taken measured 20 feet in width by 197.6 feet in length along the avenue. The Parlex Holding Corporation was the owner of the entire block bounded on the west by Park avenue, on the east by Lexington avenue, on the south by East Thirty-second street, and on the north by East Thirty-third street. The property was vacant, one parcel of land covering an entire block, owned by one corporation. By this proceeding, this rectangular piece of property had twenty feet taken off the Park avenue side for its full width, 197.5 feet. The remaining portion would still and does now front on Park avenue, as widened. The nature of the property adjoining Park avenue, both before and after the widening, was not changed;- the vacant lot merely had a wider street in front of it on the Park avenue side. If for sale or building purposes the owner desired to plot his front lots into parcels 25 by 100 feet, he could do so as well after as before the taking. That is, -if on paper he had plotted out the block so-as to give lots on Park avenue 25 by 100 feet in depth, he could do the same thing after the widening of the street by merely changing his rear lot lines as they appeared on the drawing. There was nothing physical upon the property itself which indicated any lot divisions. The plotting was merely artificial, or diagramatical. Should the owner consider lots on Park avenue of more value than those on Lexington avenue, he could still make the former one hundred feet in depth, although it might result in shortening by twenty feet the lots on Lexington avenue, which were of course of less value. His actual damage, therefore, if he desired so to plot his property, would be the decrease in value of the entire block. Figure it any way we will, the actual fact remains that the owner, after the taking, could have, if he desired, the same full lots 25 by 100 feet with the same advantages on Park avenue after as before' the taking.

How, then, should this strip of land taken by the city be valued? By finding the difference between the fair market value of the whole before the taking, and the fair market value of what remains. This is the general measure of damage for property situated and conditioned as the block here in question. (Matter of City of New York [Westchester Avenue], 126 App. Div. 839; Nichols on Eminent Domain, vol. 2 [2d ed.], p. 723; Washburn v. M. & L. W. R. R. Co., 59 Wis. 364, 375; Lehigh Valley Coal Co. v. City of Chicago, 26 Fed. Rep. 415; Matter of Prospect Park & Coney Island R. R. Co., 13 Hun, 345, 347.)

On the previous appeal we intimated by the affirmance of the Appellate Division that this was the rule to be applied in this case, as it had been so stated or suggested in the opinion of that court. In fact, I do not understand on this appeal the appellant to claim that this is not the proper rule. The challenge is not to the rule of law, as thus stated and applied, but to the conclusion, which counsel says must be drawn from certain evidence and findings of fact, made by the trial judge.

The error on the previous appeal had consisted in the trial court considering the front lots on Park avenue 25 by 100 feet as stationary at those measurements the same as if fenced off or built upon; viewed, in other words, as if the owner possessed no other land to the rear of it. Taking this as a premise, the conclusion was natural that by the taking of the twenty-foot strip, the lot remaining would be only eighty feet deep, a circumstance very materially affecting the damage which in condemnation proceedings should be paid the owner for the parcel taken. We held that this was an improper measure of damage, and, as above stated, the case went back for a rehearing before Nathan Bijur, a very able Supreme Court justice. The evidence introduced before him proved the value of the entire block or plot of land owned by the petitioner before and after the taking, and the difference was the damage awarded by the justice. The method of arriving at these values, together with the memorandum of the judge stating how he, following the experts, found the values of the entire block has, I fear, led to some confusion.

In determining the value of an entire piece of vacant property it may be divided up in many ways, and in different shaped lots according to the whims of the owner or the most advantageous way to produce the highest price. The experts, as well as the judge, may have many different methods in arriving at the same point or at the value of the whole. These considerations are mere matters of evidence to prove facts. As long as competent evidence is received, and none excluded, no rule of law is violated, if the main purpose is served of ascertaining the value of the whole before and after the severance of the strip taken. An examination of the evidence will illustrate what has just been stated.

Maurice S. Cass, for the claimant,- stated the value before taking to be $2,499,750; the value after taking, as $2,056,239, and the difference, $443,511, as the value of the strip taken. John W. Hotaling found the difference by the same method to be $443,511. Henry Brady, the city expert, found the value as a whole to be $1,882,000, and the remainder after the severance as $1,793,308, leaving a difference of $88,692. Edward A. Arnold, the other expert for the city, stated the difference to be $87,476.50. The trial judge made an award of $106,091.76 principal, and $30,536.74 interest, or a total award of $136,628.50. This was on February 20, IT-

On cross-examination the two city experts explained the manner in which they arrived at their total valuations. They divided the entire block into imaginary city lots, eight on Park avenue, 25 by 100 feet or thereabouts, nine on each of the streets, East Thirty-second and Thirty-third streets, and lots of about the same dimensions on Lexington avenue. ■ To these lots they gave various, values, according to situation, added a certain per cent for corner lots and key lots, and the total thus found was the value of the entire block. Dividing the value by the number of square feet in the entire lot, the unit value of a square foot was obtained. Multiplying the number of square feet in the lot that was left after the taking of the twenty feet, gave the value of this remainder. The difference between the two valuations thus obtained gave the value of the twenty-foot strip that was taken. The same result and figure would have been arrived at by multiplying the 3,950 square feet in the strip taken by the unit square foot value. There was nothing erroneous or illegal in the method adopted by these experts in arriving at their values according to theoretical lot valuations. Whatever the method, the result was the valuation of the entire block before and after the taking.

Mr. Brady, however, in his testimony, stated that his valuation would be different if he were considering a Park avenue lot 25 by 100 feet in a single ownership, that is, owned by one who had no other property in the block. The question put to him by the able counsel for the appellants was this:

“ Q. Suppose the owner owned nothing more in that block than the lots on Park Avenue, what would you have said was the value of the twenty feet taken? A. $142,200.

Q. That is, you figured that the twenty feet on the front of these lots that were taken were worth just twenty per cent of the value of the entire lots? A. Yes, sir.”

It must be noted, as stated above, that there is a difference between a lot 25 by 100 feet which is reduced to eighty feet because the owner owns no property in the rear, and a lot which is merely symbolical or figurative, and which may remain 25 by 100 feet because the owner can merely shove back the rear paper line twenty feet when the front of the lot is shortened to that extent. Counsel for the appellant claims that upon the undisputed evidence the petitioner should have this value of $142,200 instead of $106,091.76 found by the trial court. In other words, he insists upon the same measure as was erroneously adopted by the justice on the first trial, for that is what this testimony amounts to — one-fifth of the value of the lot which after the taking is left at eighty feet, because the owner has nothing in the rear. Such is not the situation here; the owner has the entire block, and after the taking still has, if he so desires, eight lots on Park avenue 25 by 100 feet with all the easements that previously existed in that street.

With this evidence before us, we gather the meaning of the trial justice when he wrote that After viewing the property I have valued all of the plot except the eight lots fronting on Park Avenue at $1,094,000. I find the basic value of an inside lot on Fourth Avenue, 25x 100 feet, to be $105,000. The value of this frontage may be calculated on that basis and added to the valuation of the remainder of the block. After determining the value per square foot of the entire block, the value of the portion taken must be figured on that basis. Submit tentative decree accordingly.” It is conceded that according to this figuring the value of the part taken was found to be and is so stated in the decree $106,091.76. The method adopted by the judge in arriving at the total valuation is that of the experts. Both found the total value before and after by the unit measure of a square foot. This unit measure, as above stated, was determined by valuing the lots into which the property might be divided. The value of these lots the judge states at a different figure from that given by the experts. This is his finding of fact which we cannot disturb. He viewed the property and may have considered the one too high and the other too low. He determined that all of the block with the exception of the Park avenue side was worth $1,094,000. To this was to be added the valuation of the Park avenue lots. The total was to be divided by the number of square feet in the entire block, which would give the unit value of the square foot, according to the judge’s findings. Thus the value of the strip taken, according to its square foot area, was determined. It is the same thing as finding the difference between the value at the square foot unit of the entire property before and after the taking.

We can find no error of law in these rulings of the Special Term, and, therefore, the order should be affirmed, with costs.

Cardozo, Ch. J., Pound, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Order affirmed.


author: Kellogg, J. Crane, J.

text:
    Czarnikow-Rionda Company, Respondent, v. Federal Sugar Refining Company, Appellant. (Actions Nos. 1 to 8.)

      (Argued October 13, 1930;
    decided November 18, 1930.

      Henry W. Taft, F. Sims McGrath, Catherine Noyes Lee and James F. Warden for appellant.
    Special damages were not contemplated under the contracts. (Chapman v. Fargo, 223 N. Y. 32; Goldston v. Wade, 123 N. Y. Supp. 114; Matter of Rosenberg, 208 App. Div. 707; Ingersoll-Rand Co. v. U. S. Shipping Board, 195 App. Div. 838; Ducas Co. v. Bayer Co., 163 N. Y. Supp. 32; Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540; British Columbia Saw-Mill Co. v. Nettleship, L. R. 3 C. P. 499; Moran v. Standard Oil Co., 211 N. Y. 187.) Notice that plaintiff intended to sell the refined sugar in the general course of business, at times and upon terms unknown, furnish no basis for special damages. (Setton v. Eberle-Albrecht Flour Co., 258 Fed. Rep. 905; Holloway & Bros. v. White-Dunham Shoe Co., 151 Fed. Rep. 216; Atlas Portland Cement Co. v. Hopper, 116 App. Div. 445; Champion Spark Plug Co. v. Automobile Sundries Co., 273 Fed. Rep. 74.) The measure of plaintiff’s damages is- the difference between the market value of the sugar in the condition in which it was delivered at defendant’s refinery and the value of fine granulated sugar at the time and place of such delivery. (Barretts Dyeing Establishment v. Wharton, 101 N. Y. 631; Chaityn v. Stock, 120 N. Y. Supp. 89; Clarke v. Schmidt, 210 N. Y. 211; Hooper v. Story, 155 N. Y. 171.) The defendant’s efforts after the delivery of the sugar to settle the buyers’ claims against plaintiff cannot be construed as an admission by defendant that at the time of contracting with the plaintiff it contemplated a liability for special damages. (Tennant v. Dudley, 144 N. Y. 504; West v. Smith, 101 U. S. 263; Goldstone v. Wade, 123 N. Y. Supp. 114; Chapman v. Fargo, 223 N. Y. 32; Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540.)

      Garrard Glenn and James F. Dealy for respondent:
    What the parties contemplated when they contracted is to be answered with reference to the particular contract in connection with all the facts and circumstances and plaintiff’s losses are properly chargeable against defendant. (Globe Refining Co. v. Landa Cotton Oil Co., 390 U. S. 540; Hammond v. Bussey, 20 Q. B. D. 79; Insurance Co. v. Dutcher, 95 U. S. 269; Woolesey v. Funke, 121 N. Y. 87.) Defendant knew of plaintiff’s contemplated resales and contracted with plaintiff on that basis. A dealer who sells to a retailer is bound to repay to the latter the damages suffered at the suits of buyers in case the merchandise turns out to be not as warranted. (Passenger v. Thorburn, 34 N. Y. 634; Buckbee v. Hohenadel, 224 Fed. Rep. 14; Delafield v. Armsby, 131 App. Div. 572; 199 N. Y. 518; Matter of Casualty Co., 222 App. Div. 304; 250 N. Y. 410; Joannes v. Lamborn, 226 App. Div. 174; Carleton v. Lombard, 19 App. Div. 297; 162 N. Y. 628; Booth v. Spuyten Duyvil Mill, 60 N. Y. 487; Trigg v. Clay, 88 Va. 330; Ober v. Katzenstein, 160 N. C. 439; Sedro Veneer Co. v. Kwapil, 62 Wash. 385; Lamborn v. Czarnikow, 221 App. Div. 458; Hammond v. Bussey, 20 Q. B. D. 79; Kasler v. Slavowsky, [1928] 1 K. B. 78; Abounader v. Strohmeyer, 243 N. Y. 458.) The burden was on defendant to show that replacement was possible, and no effort was made to sustain it. (Trigg v. Clay, 88 Va. 330; Ober v. Katzenstein, 160 N. C. 439; Sedro Veneer Co. v. Kwapil, 62 Wash. 385.) Plaintiff could not have replaced except by shipping sugar, of defendant’s manufacture, from defendant’s refinery, within the contract period. (Gumbinsky v. Smalley, 203 App. Div. 661; Clifton Shirt Co. v. Brown Co., 213 App. Div. 239; Williston Sales [2d ed.], § 459; Clark v. Fey, 121 N. Y. 470; Filley v. Pope, 115 U. S. 213; Norrington v. Wright, 115 U. S. 188; Delafield v. Armsby Co., 131 App. Div. 572; 199 N. Y. 518; Hammond v. Bussey, 20 Q. B. D. 79; Kasler v. Slavowsky, [1928] 1 K. B. 78; Carleton v. Lombard, 19 App. Div. 297; 162 N. Y. 628.) Defendant’s conduct amounted to a recognition of its responsibility, made replacement impossible, and estopped defendant from raising the point on the trial. (Railway

      Co. v. McCarthy, 96 U. S. 258; Second Bank v. Lash Corp., 299 Fed. Rep. 371; Ozmo Oil Refining Co. v. Cotton, 278 Fed. Rep. 722; Purington Paving Brick Co. v. Met. Paving Co., 4 Fed. Rep. [2d] 676.)
   Kellogg, J.

This action is brought to recover damages sustained by the plaintiff through the breach by the defendant of several contracts, entered into by the parties on the 15th day of September, 1919, the 8th of March, 1920, and the 21st of April, 1920. Under these contracts the defendant bound itself to deliver to the plaintiff, in stated installments, during the months of April to August, inclusive, in the year 1920, approximately 75,000 tons of fine granulated sugar,” or approximately 1,670,000 bags containing 100 pounds each. On March 27, 1920, and thereafter the plaintiff entered into contracts with various customers throughout the United States for the sale of fine granulated sugar, described, in all contracts but one, as “ Eastern cane fine granulated sugar, Federal Sugar Refining Co. brand,” to be delivered in installments during the months of May, 1920, to August, 1920, inclusive. The defendant made deliveries of granulated sugar, as directed by the plaintiff, consigned directly to the plaintiff’s customers. Of these deliveries, out of a total of 1,670,000 bags, 29,691 bags contained discolored sugar, not “ fine granulated.” In many instances the plaintiff’s customers elected to rescind their contracts and demanded the return of advance payments made; in others they made claim for damages. Judgments were had in many cases; in others settlements were made. As a result, the plaintiff was obliged to refund or pay its customers a sum in excess of $310,000. Its expenses in defending suits brought against it exceeded $30,000. The plaintiff has recovered a judgment against this defendant for its breach, based upon its payments so made to customers, and its expenses incurred, including interest on the sums disbursed, which awards to it the sum of $442,484.03.

The question of law surviving to be answered here is this:

Is the plaintiff, entitled to damages for the defendant’s contract breaches, in delivering a certain quantity of discolored sugar not the “ fine granulated sugar ” contracted for, measured by disbursements necessarily incurred in satisfying its own customers, for the nondelivery to them of an equal quantity of “ Eastern cane fine granulated sugar, Federal Sugar Refining Co. brand,” or merely “ fine granulated,” promised by its contracts with them; or is it entitled to no more than general damages?

The contract of September 15, 1919, is contained in two writings, Exhibits J and K. By the former, Czarnikow ” (as we shall call the plaintiff) acknowledges a sale to “ Federal ” (the defendant) of 38,500 tons of raw sugar, at seven cents per pound, deliveries to New York to-be made in specified installments during the months of April to July, 1920, inclusive. It bears the inscription: This contract applies against refined contract number 4 dated September 15, 1919 ” (Exhibit K). By the latter Federal acknowledges a sale to Czarnikow of 35,000 tons of " fine granulated ” sugar, at 9.25 cents per pound, delivered at New York in similar-installments, April to July. The reduction from 38,500 tons to 35,000 tons is accounted for by shrinkage in the refining process. The writing “ Applies against Raw Sugar Contract AB-16 dated September -15, 1919” (Exhibit J).

The contract of March 8, 1920, is expressed in six parts, Exhibits A, B, C, D, E and F. By Exhibit A Czarnikow acknowledges a- sale to Federal of 27,500 tons of raw sugar at twelve cents per pound, deliveries to be made in New York in specified monthly installments April to August, 1920, inclusive. Applies against Refined contracts 5-0-7-8-9 dated March 8th, 1920 ” (Exhibits B, C, D, E, F). The other exhibits acknowledge aggregate sales by Federal to Czarnikow of 25,000 tons of fine granulated ” sugar at 15 cents per pound, deliveries to be made in New York in like installments during the same months. Each writing Applies against Raw Contract No. AB-398, dated 3-8-1920 ” (Exhibit A).

The contract of April 21, 1920, is in three writings, Exhibits G, H and I. Czarnikow agrees to deliver to Federal, not later than June, 3,333 tons of raw sugar valued at Í9| cents per pound; not later than July, 3,333 tons; and 10,000 tons not later than August; and to pay Federal, for refining, two cents per pound for the “ fine granulated.” Federal agrees to refine the raw sugar for two cents per pound for the granulated and deliver to Czarnikow at Yonkers, deliveries to begin within ten days after receipt by Federal of the raw sugar.

It is urged by Federal that the contracts of September 15 and March 8, like the contract of April 21, 1920, are “ tolling contracts,” that is, contracts whereby Federal merely agrees to refine raw sugar for Czarnikow at two to three cents per pound for the refined, the title to the sugar remaining in Czarnikow meanwhile, and Federal becoming, during the manufacture, a mere bailee thereof. A reading of the contracts renders the argument doubtful, since it does not appear that Federal is to refine and redeliver the identical sugar delivered in the raw by Czarnikow, for the contracts are phrased to express sales of raw sugar by Cazrnikow to Federal and sales by Federal of refined sugar to Czarnikow. However, we do not decide the point, for we consider that, in this instance, the same rule of damage must apply, whether the contracts be contracts of sale, on the one hand, or contracts to bail and manufacture, on the other.

The contract writing of September 15, 1919, Exhibit K, bears the heading “ Export Contract ” and engages Czarnikow to export the goods.” It appears that Czarnikow had never before sold to the domestic trade, having been engaged exclusively in the business of importing, raw sugar and exporting the refined. However, in December, 1919, Federal writes Czarnikow, granting it permission to sell to the domestic trade, deliveries to be to the railroad at Federal’s refinery at Yonkers, rather than at steamship piers in New York city. Czarnikow is to pay an additional $1.10 per bag on domestic sales, that being the government drawback which would come to Federal if the raw imported sugars were exported as refined sugars. , In January Federal writes asking for prompt shipping directions. It asks also whether it shall use its own judgment in routing railroad shipments, to which suggestion Czarnikow expresses its assent. It is urged by Czarnikow that these letters constituted a modification of the contract of September fifteenth to permit sales to the domestic trade; by Federal that they did not, since Czarnikow made no promises thus to sell and gave no consideration. They were at the very least offers by Federal to modify the contract terms, which became effective as promises when Czarnikow accepted by giving directions for domestic shipments. The contract of March 8, 1920, likewise engages Czarnikow “ to export the goods; ” it contains, however, a clause conferring upon Czarnikow the “ privilege ” of making domestic shipments. The contract of April 21, 1920, omits to mention that the shipments shall be either export or domestic. This at least is clear: Federal, at the time of making its offer to modify the contract of September fifteenth, at the time of contracting on March 8, 1920, and again on April 1, 1920, had in mind that Czarnikow might sell to the domestic trade. On the other hand, until May eighteenth, a month after the making of the last of its three contracts, it never knew that Czarnikow had contracted to sell to domestic customers. Again, it never knew, until this action was brought, the precise terms of the contracts between Czarnikow and its customers. The extent of its knowledge, then, at the time of contracting, was this: There was a possibility that Czarnikow might resell sugars sold to it by Federal, under contracts containing undisclosed terms, to domestic purchasers.

It is the general rule that a purchaser of goods on contract, who has contracted to resell them to his own customer, for a non-delivery by the original seller, is entitled only to general damages, for the reason that, by a resort to the general market, he might have replaced the undelivered goods and thereby have satisfied his customer. (Hadley v. Baxendale, 9 Exch. 341; Grebert-Borgnis v. Nugent, 15 Q. B. D. 85; Western Union Telegraph Co. v. Hall, 124 U. S. 444; Messmore v. New York Shot & Lead Co., 40 N. Y. 422.) Where, however, there were special circumstances, made known to the seller at the making of the contract, from which it might reasonably have been foreseen that a non-delivery by the seller would in turn cause a breach of the buyer’s contract with a customer, and the two contracts are in fact breached, the damages paid and expenses incurred by the buyer in satisfying the customer may be taken as the measure of the damages which the original seller must pay to the original buyer. (Hadley v. Baxendale, supra; Grebert-Borgnis v. Nugent, supra; Hydraulic Engineering Co. v. McHaffie, Goslett & Co., 4 Q. B. D. 670; Sawdon v. Andrew, 30 L. T. [N. S. ]23; Messmore v. New York Shot & Lead Co., supra; Chapman v. Fargo, 223 N. Y. 32; Delafield v. Armsby Co., 131 App. Div. 572; affd., 199 N. Y. 518; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 487; Globe Refining Co. v. Landa Cotton Oil Co., 190 U. S. 540; 3 Williston on Contracts, §§ 1347 and 1355 to 1357, inc.; Restatement of the Law of Contracts, § 321.) It has been said that if the special circumstances, making probable a special loss to the buyer from non-performance, were known to the seller, the damages recoverable from the seller for his default would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated.” (Hadley v. Baxendale, supra.) “ The result of the rule in Hadley v. Baxendale is to increase the possibility of consequential damages since not only is the defendant liable for natural and proximate consequences of the breach, but also, if notice is given of special circumstances, for damages which those circumstances make probable, though apart from such circumstances they would be unusual.” (3 Williston on Contracts, § 1356.)

It is frequently stated that if the seller has knowledge of the circumstances entailing special damages to the buyer, he impliedly promises to pay such damages. Thus it was said in Grebert-Borgnis v. Nugent (supra, p. 89) that a seller, having knowledge of a subcontract by the buyer, and the special circumstance of difficulty involved in performance thereof, is deemed to have “ contracted on the terms of being hable if he forced the purchaser to a breach of that contract; ” in Booth v. Spuyten Duyvil Rolling Mill Co. (supra) that if both the seller and the buyer have knowledge of special circumstances affecting damages it may be fairly inferred that they contemplated a particular rule or standard for estimating them, and entered into the contract upon that basis; ” and in Globe Refining Co. v. Landa Cotton Oil Co. (supra) that liability for special damages, when the special circumstances are known to the seller, should be worked out on terms which it fairly may be presumed he would have assented to if they had been presented to his mind.” This theory, that the seller impliedly contracts to pay special damage when aware of the special circumstances which may cause it, did not meet with the approval of Bramwell, L. J., who, in Hydraulic Engineering Co. v. McHaffie, Goslett & Co. (supra, p. 674), said that it had occurred to him that the true explanation is that a person contemplates the performance and not the breach of his contract; ” that he does not enter into a kind of second contract to pay damages, but he is liable to make good those injuries which he is aware that his default may occasion to the contractee.” Neither has it met with the approval of Professor Williston, who says: “ To assert then, as is sometimes done expressly or impliedly, that the measure of damages for breach of a contract is based on the terms of the contract is to assert a fiction which obscures the truth and invites misapprehension which may lead to error.” (3 Williston on Contracts, § 1357.) However, whether the liability arises from the implication of a promise or, given certain facts, is imposed by law in invitum, the fact is that the seller’s knowledge of special circumstances making probable a special loss will, speaking generally, make him liable for that loss.

The seller’s liability, in case of a breach by him, to reimburse the buyer for losses sustained through nonperformance of a contract of resale, is not conditioned upon the existence of the resale contract at the moment of the execution of the original contract; it may arise where the seller has knowledge that such a contract is in the contemplation of the buyer. (Delafield v. Armsby Co., supra; Matter of Casualty Co. [Bliss Co. Claim], 250 N. Y. 410; Globe Refining Co. v. Landa Cotton Oil Co., supra; 3 Williston on Contracts, § 1347.) On the other hand, Mere knowledge that goods are purchased for resale in the ordinary course of business- will not take the transaction out of the general rule and place it under the exception;” if this were not so the exception would swallow up the general rule completely, for a manufacturer or jobber must always know that a wholesaler or retailer, who buys from him, purchases for the purposes of reselling the articles bought. (Setton v. Eberle-Albrecht Flour Co., 258 Fed. Rep. 905.) “ It may be said with safety that mere notice to a seller of some interest or probable action of the buyer is not enough necessarily and as matter of law to charge the seller with special damage on that account if he fails to deliver the goods.” (Per Holmes, J., in Globe Refining Co. v. Landa Cotton Oil Co., supra.) _

.Notice, of the special circumstance which may cause special damage to the buyer must be had by the seller at the very time when he contracts to sell. There must be notice “ at the time of or prior to contracting,” (Chapman v. Fargo, supra); “ No notice to the seller thereafter would increase his liability,” (Per Lehman, J., in Golston v. Wade, 123 N. Y. Supp. 114); “ The consequences must be contemplated at the time of the malting of the contract,” (Per Holmes, J., in Globe Refining Co. v. Landa Cotton Oil Co., supra); “No doubt notice subsequent to the formation of the contract though prior to the breach is insufficient,” (3 Williston on Contracts, § 1357); The seller must have “ notice when the contract was entered into that the loss in question would be a natural consequence of the breach.” (Id. § 1355.)

Even though no contract for a resale had yet been made by the buyer, damages may be recovered for loss of one, if the probability of such a resale was contemplated, and defendant knew that other goods of the kind contracted for could not be obtained by the buyer.” (3 Williston, § 1347.) “ The true distinction seems to be: — if besides notice of contemplated resale, the defendant also had notice that other goods could not be obtained to supply the place of those ■ not delivered — then the profits of a resale may be recovered; if there was no such notice it Would be held that loss of profits of a resale was not within the contemplation of the parties.” (1 Sedgwick on Damages, § 162.) The cases of Hammond & Co. v. Bussey (20 Q. B. D. 79); Delafield v. Armsby Co. (supra), and Carleton v. Lombard, Ayres & Co. (149 N. Y. 137), relied upon by Czarnikow, serve but to emphasize the very rule thus stated.

In Hammond & Co. v. Bussey (supra) the defendant contracted to sell steam coal to the plaintiffs at Dover, England, to be used for the purposes of supplying coal to steamships calling there. The defendant knew “ at the time when the contract was made that the plaintiffs were buying the coal for the purposes of reselling the same as steam coal fit for use in steamships.” The plaintiffs did resell to the owners of steamships at Dover. It turned out that the coal was not reasonably fit for use owing to a defect which could not be ascertained until the coal was undergoing the process of combustion. The sub-vendees suffered damage, because of the poor quality of the coal, for which they had judgment against the plaintiffs. It was held that the defendant must reimburse the plaintiffs for the amount they were required to pay. The defendant, knowing that the coal would be resold for steamship purposes, and that, if unfit to make steam, its unfitness would be detected only when in use upon vessels actually at sea, necessarily was aware that, if unfitness developed, replacement from the general market would be impossible, in order to prevent a breach by the plaintiffs of their sub-contracts of sale. Knowing the special circumstances, they should have foreseen the special consequences, and were properly held liable therefor.

In Delafield v. Armsby Co. (supra) the defendant sold to the plaintiff a quantity of Alaska salmon, packed by the Alaska Packers Association in special tins and with a special brand, knowing that the plaintiff had negotiated for a resale of the identical salmon, so packed in tins, at an advanced price, to purchasers in Great Britain, and that the plaintiff would presently contract so to resell the same. The defendant declined to make deliveries of the salmon contracted for and, in consequence, the plaintiff was unable to make deliveries to its English customers under contracts subsequently entered into with them. It was held that the defendant was obliged to make the plaintiff good for the profits which it would have made had the defendant performed and the plaintiff been able to fill its contracts. There was no general market for the special brand of Alaska salmon which the defendant contracted to supply, and replacement was not open to the plaintiff. Again we have, a case where the seller knew of the special circumstances whereby its own breach would occasion its purchaser a special loss.

■ In Carleton v. Lombard, Ayres & Co. (supra) the defendant, a refiner of crude petroleum for export, contracted to sell to the plaintiffs 55,000 cases of their “ Stella Brand ” petroleum, packed in their patent cans, and to deliver the same alongside a vessel bound for Calcutta, British India. The plaintiffs had already contracted to resell the petroleum, by an identical description, to purchasers in Calcutta. The defendant had knowledge of all the correspondence between the plaintiffs and the purchasers in Calcutta. During the voyage to India, owing to a foreign substance present in the oil, the cans corroded and became perforated, so that a great quantity of the oil leaked from the receptacles and the remaining oil was rendered worthless. The purchasers in Calcutta recovered a judgment against the plaintiffs on account of their non-delivery of the oil as promised. It was held that the defendant must reimburse the plaintiffs for their loss. Obviously there was no general market in Calcutta resort to which might be had by the plaintiffs for the replacement of “ Stella Brand ” oil in special cans as refined and tinned exclusively by the defendant. The defendant, knowing that the plaintiffs had contracted to resell their own petroleum in far away Calcutta, and that timely replacement by the plaintiffs would be impossible, was aware of the special circumstances that the plaintiffs must breach their contract and suffer special damage if a default was made by it in performing its own contract with the plaintiffs.

Liability for the special loss incurred by Czarnikow may be visited upon Federal only if it knew that other goods of the kind contracted for could not be obtained by the buyer.” (3 Williston on Contracts, § 1347, supra.) The proof fails to show that Federal had such knowledge, or that, in point of fact, the general sugar market, in August, 1920, was not sufficiently broad to enable Czarnikow to purchase 29,691 bags of refined sugar in order to make replacement of the sugars rejected. If circumstances disabled Czarnikow from making 'replacement, they were circumstances which Federal, when contracting, could not have foreseen.

Federal sold Czarnikow “ fine granulated sugar,” a standard article, always identical, by whomsoever manufactured. Czarnikow sold its customers, not “ fine granulated sugar,” but “ Eastern cane fine granulated sugar, Federal Sugar Refining Co. brand.” The terms of the resale contracts, therefore, necessarily narrowed the market from which Czarnikow might have made replacements. Even then, since the capacity of Federal’s refinery was 30,000 bags of sugar a day, it would seem that refined granulated sugar of the brand specified should have been readily obtainable by Czarnikow to replace the 29,691 bags found defective. However, if the circumstance that Czarnikow sold sugar specified to be Federal Sugar Refining Co. brand ” entered in to swell the damage suffered by it, that circumstance could not have been foreseen by Federal when contracting, and for the special consequence resulting therefrom it should not be liable.

If it be a fact that Czarnikow was disabled from making replacements from the general market, the circumstance chiefly responsible for the disability would seem to rest upon terms, contained in Czarnikow’s contracts with its customers, other than the terms already considered. All the contracts between Federal and Czarnikow called for deliveries not later than the month of August, 1920. All contracts between Czarnikow and its customers likewise called for deliveries not later than the month of August, 1920. Deliveries to domestic customers were to be made to a common carrier at Yonkers, N. Y. Many of Czarnikow’s customers conducted business in the far West and transportation, beginning at Yonkers, the point of delivery, and terminable at the customers’ warehouses, would require a period of more than twenty-one days. Thus if Federal, in satisfaction of any installments of sugar due Czarnikow, pursuant to Czarnikow’s orders, made shipments to the latter’s customers in the West, after the 9th day of August, 1920, the customers would not receive the sugars for inspection, and would be unable to reject defective sugars, until after September 1, 1920. In such case replacement by Czarnikow, during August, 1920, of sugars found defective on September first, would, of course, have been impossible. That it' was impossible in nearly all cases, because of the lapse of time, to make replacements, is asserted by Czarnikow itself, for 'in its brief here it states: “As to the replacement of bad sugar with good. In all cases but one impossible.”

As was said by Pollack, C. B., in Gee v. Lancashire & Yorkshire Ry. Co. (6 H. & N. 211), of a delayed shipment of cotton to a mill owner, resulting in the stoppage of the mill for want of raw material: “ But the business of life is conducted with reference to the necessity of guarding against certain accidents, and owners of cotton mills may fairly be expected to guard against the risk of being delayed, by having something in stock; ” so we may say here that Federal, in contracting with Czarnikow, might reasonably have supposed that Czarnikow would so phrase its sub-contracts, in respect to terms of delivery, that if Federal failed of performance, Czarnikow, through resort to the general market, might nevertheless perform.

Czarnikow is in this dilemma: If the circumstance referred to, or other special circumstances, debarred Czarnikow from making replacements from the general market, then Federal is not liable for Czarnikow’s special loss, since it had no knowledge, when contracting, of the special circumstances which might give rise to Czarnikow’s disability. On the other hand, if there were no such circumstances and no disability to make replacement from the general market, then, under all the authorities, Czarnikow is entitled to none other than general damages.

The point is made by Czarnikow that upon the trial of the action Federal impliedly conceded that it was liable to Czarnikow for special damages; that the position taken by Federal was merely that its liability could not be grounded upon Czarnikow’s contracts of resale involving extraordinary and unprecedented prices. Even so, the position taken by Federal was .correct, and the ruling made against Federal would require a reversal. (American Law Institute; Restatement of the Law of Contracts, § 321.) However, Czarnikow is incorrect in its assertion as to Federal’s attitude. Early in the trial of the action, in fact during the examination of the first witness who testified to the damage suffered by one of Czarnikow’s customers, counsel for Federal made objection as follows: “ I put in a general objection to testimony as to the amount paid by Czarnikow company on the ground that the measure of damages is the difference between what they should have got at Yonkers and what they did get.” The objection was overruled and an exception taken. Moreover, the whole discussion contained in the trial court’s opinion, as well as in the opinion of the Appellate Division, relates to the liability of Federal to reimburse Czarnikow for its special loss, or, upon the other hand, to pay general damages only. It cannot justly be said, therefore, that the question was not, from the very beginning, fully litigated.

The point is also made that Federal, through its general sales agent, Lowry, participated in settlements made by Czarnikow with its customers. The facts are that Federal, through Lowry or otherwise, never paid to Czarnikow’s customers the claims which Czarnikow is now seeking to enforce against Federal; otherwise this action would not. have been brought. Moreover, Czarnikow made no payments to customers of the claims now sought to be enforced against Federal until the year 1922; whereas all participation by Federal in negotiations for settlement with Czarnikow’s customers ceased in the year 1920. The fact that claims other than those now in suit may in part or in whole have been settled and extinguished by Federal can have no effect to impose liability upon Federal, as to unpaid claims now in suit, when the law itself imposes no obligation in reference thereto. It does not appear that Federal so conducted itself, or so made promises, that Czarnikow was induced thereby to postpone making replacements from the general market until, by the lapse of time, such replacements became impossible. On the contrary, it appears that all replacements by Czarnikow should have been made during the month of August, 1920; whereas the negotiations by Federal with Czarnikow, in reference to the settlement of substantially all claims against Czarnikow, took place in September or later, when already it was too late for Czarnikow to make replacements.

We conclude that a recovery by Czarnikow from Federal of damages based upon payments made by Czarnikow, in connection with the settlement of claims made by those who contracted to purchase from it, was not warranted by the proof.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

Crane, J.

(dissenting). A brief restatement of some of the facts may explain why I have taken a different view of this case. .

Federal knew that the sugar which it was refining to sell to Czarnikow was upon delivery to be immediately resold in the domestic trade to Czarnikow’s customers. The details of the transactions are stated in Judge Kellogg’s opinion. In fact, Czarnikow never had any opportunity to examine the sugar, as the agreement was to deliver it in 100-pound bags, properly marked, and shipped by the refinery according to its own routing to Czarnikow’s customers. Federal had the name of the various persons and corporations to whom the sugar was consigned. The market conditions were known as well to Federal as to Czarnikow, and perhaps better, as the refinery had been in the domestic trade and was responsible for market information circulated to the trade. The fluctuation in the price of sugar apparently followed the rise and fall in the price of other commodities. However, the price at which sugar was selling during all the time of these transactions was known to Federal. No reason can be suggested why the refinery would not or could not appreciate that the delivery of bad sugar would damage Czarnikow. To say that such a result was not within the contemplation of the parties would be contrary to the facts and their subsequent action. The rise in price does not indicate excessive profits until we know what Czarnikow had to pay for the raw material.

Federal agreed and undertook to deliver to Czarnikow’s customers fine granulated sugar.” It delivered, instead, discolored sugar of inferior quality. The evidence was overwhelming that it recognized its mistake and its obligation under its contract with Czarnikow. The authority of its agent and representative, Lowry, to meet the conditions is abundantly proved. He was authorized to deal with Czarnikow’s customers, to take back the sugar or to pay damages. Deliveries were to be made in July and August. Upon receiving the sugar the customers immediately complained to Czarnikow, whereupon Lowry undertook to meet and settle with them. The customers came on from the West and saw Lowry, who settled with some of them, and promised to make arrangements with the others, either to replace the sugar or to sell it at the best price possible. Some of his settlements were carried out by the refinery, and not until the return to New York of Claus Spreckels were Lowry’s acts repudiated. Even then, Spreckels, according to the plaintiff’s witnesses, admitted Lowry’s authority to make substitution or give back money paid for sugar not up to standard. In fact, on August 27, 1920, Czarnikow-Rionda Company wrote the Federal Sugar Refining Company at its office, 91 Wall street:

Dear Sirs: We are in receipt of your favor of August 27 and, in accordance with same, we are enclosing herewith a list of the different buyers and the number of bags of poor quality sugar which each buyer is complaining about, so that you will be able to replace said sugars before September 1st.”

Twenty-five items of shipment are then specified.

Under such circumstances, when the plaintiff, acting upon the suggestion of Federal, sent a list of the defective shipments to be replaced with good sugar, how can it be claimed that the plaintiff should immediately have gone into the market and bought fine granulated sugar ” for its customers, and thus reduced or lessened the damage?

The action of the defendant, through Lowry and its other officers, amounted to two things: First, it was a recognition of the nature of its contract with Czarnikow, and an interpretation of its meaning as Federal understood it. It recognized that it was under obligation to deliver good sugar to these customers of Czarnikow, and that these sales were within the contemplation of the parties at the time Federal contracted to make deliveries. It further recognized that according to the contract it was obliged to meet the damages. At least these actions constituted evidence by which the trial justice was justified in finding the fact of contract as alleged by the plaintiff. The action of the parties and the interpretation which they put upon their own contract was for the trial judge a very safe guide. (Brooklyn Insurance Co. v. Dutcher, 95 U. S. 269; Woolsey v. Funke, 121 N. Y. 87, 92.) Second, the action of Federal through Lowry and its officers in dealing with the plaintiff’s customers and in requesting a list of defective shipments for replacement estops it from claiming that the plaintiff should have bought “ fine granulated sugar ” in the open market to fill its contracts. The plaintiff passed the matter over to the defendant, not only as requested, but in accordance with the very nature of the situation. The defendant had bagged the sugar at the refinery and shipped it directly to Czarnikow’s customers. Who knew whether or not it was defective and below standard? The complaints were coming in to Czarnikow, which was not justified in dealing with the defendant’s product without notification to it. Claus Spreckels subsequently claimed that the sugar did not come from his refinery; that his product was never defective. Subsequent litigation showed him to be wrong. The plaintiff’s story and the actions of Lowry are consistent with the things we would expect to happen under such conditions — Lowry has authority from the refinery to clean up the mess; he undertakes to do so and partially succeeds until stopped by Claus Spreckels.

I do not see how we can say as matter of law under these circumstances that there is no evidence to sustain the finding that the plaintiff’s dealings with its customers were in the contemplation and expectancy of the defendant. Neither do I see how we can further hold, as matter of law, that it was the duty of the plaintiff to purchase other sugar in the general market to meet its subcontracts.

I do agree that the questions raised by the appellant are here for our decision. The attitude of trial counsel may have stressed other points in the case, but it is equally open to counsel on appeal to press any objection which has been fairly raised during the course of the trial. All these questions which we are here discussing were embodied in the objections raised by Mr. Bigelow, representing the defendant.

I do not understand the law to be that before a seller is liable for loss of profits, he must have known the terms and conditions of the subcontracts made on resale by his purchaser. That Federal did not know the price or the. terms of the contracts which Czarnikow had made with its consignees of the sugar was for the purpose of this action immaterial. What was within the contemplation of the parties when Federal agreed with Czarnikow to deliver fine granulated sugar ” to Czarnikow’s customers is of course a question of fact to be proved like any other fact, by the circumstances of the case. Federal knew, as I have already stated, that Czarnikow was a dealer in sugar and was not to store or keep it for any future market; that it had no warehouses or storage facilities; that all deliveries were to be made from the refinery to Czarnikow’s customers. It was a case of immediate resale, where delivery was to be made by the first seller to the second purchaser. If all of this was within the contemplation of the parties at the time Federal agreed with Czarnikow to deliver sugar to its customers in the domestic trade, Federal is liable for the losses sustained by Czarnikow because of the former’s breach of contract. (Delafield v. Armsby Co., 131 App. Div. 572, 585; affd., 199 N. Y. 518; Booth v. Spuyten Duyvil Rolling Mill Co., 60 N. Y. 487, 494; Carleton v. Lombard, Ayres & Co., 19 App. Div. 297; affd., 162 N. Y. 628; Burdick Sales [2d ed.], ch. V, § 10, p. 210; Trigg v. Clay, 88 Va. 330, 334; Hammond & Co. v. Bussey, 20 Q. B. D. 79.) (See, also, section 321 of the Restatement of the Law of Contracts, Tentative Draft No. 8 [The American Law Institute], which says: “ In awarding damages, compensation is given for only those injuries that the defendant had reason to foresee as a probable result of his breach when the contract was made.”) In the comment to this section the reporter states: If the contract for the resale of the goods is at a price that will net an extraordinary profit, or if the terms of that contract are such that there will be extraordinary losses in case of nonperformance, the seller or carrier of the goods does not have reason to foresee that these extraordinary injuries will be caused by his breach, unless he knows or has reason to know the terms of the contract of resale.” This case comes both within the rule and this exception stated in the comment. The defendant had reason to foresee the result of shipping inferior sugar to the plaintiff’s customers. There could only be one result — loss to the plaintiff. As to the extraordinary profits, we do not know what the plaintiff paid for the sugar, the cost of refining being only the price of manufacture. The raw materials were purchased by it, but the price is not given. Even if we assume that the rise of the market to twenty-seven cents a pound was an extraordinary and exceptional price, the defendant had reason to know the prices at which the plaintiff would or could resell its sugar. It was the source of information for the sugar market as to the conditions in trade and the prices demanded and to be procured. When it agreed to deliver the sugar to the plaintiff’s customers, it knew the price sugar was bringing, and that the market was and had been a fluctuating one. The price of sugar goes up and down like everything else which has a speculative value. Even this becomes a question of fact which has been dealt with by the trial court.

Exact rulings and a perfect fit of the law to the facts, and vice versa, are almost impossible in every breach of contract case involving large transactions; an approximation is as near as we can get to the right thing to be done. Under all the circumstances of this case, I feel that the trial court was justified in its conclusions, and that the judgment below should be affirmed.

Cardozo, Ch. J., Pound, Lehman and O’Brien, JJ., concur with Kellogg, J.; Crane, J., in opinion, and Hubbs, J., dissent.

Judgments reversed, etc.