Devoine Co. v. International Co.

Bond, C. J., delivered the opinion of the Court. In this case a buyer of goods appeals from a judgment against it in favor of the seller, for damages from an alleged breach of the contract by the buyer’s refusal to receive further deliveries after delivery of part. On February 8th, 1924, the appellee sold to the appellant, a manufacturer of candies, under a written contract for the sale, 400 barrels, of 50 gallons each, of cherries in syrup, “quality satisfactory,” at specified prices, and, on November 26th, 1924, after 97 of the 400 barrels had been delivered, the appellant refused to receive any more and declared that the quality of goods delivered was not satisfactory. The appellee, the seller, in the regular course of its business, purchased green cherries in Italy, where they were grown, in amounts calculated to meet the demands for its product, and imported the cherries preserved in brine or sulphur.

At its factory or place of business in Baltimore City, the cherries were put through a process which removed the brine or sulphur, and after that through further processes of boiling, coloring and flavoring; and were then sorted and put up in syrup. Thereafter they were shipped out to- the customers as the customers called for them. .Tbe Devoine Company, one of the customers, put such cherries up in candies, in its factory in Baltimore. At the trial of the suit below, the seller produced evidence to prove that the buyer’s repudiation of the contract for further deliveries was not due to a conclusion on the buyer’s part that the cherries were unsatisfactory-in quality or condition, but to its preference of a plan ⁶⁹³ by which it would get its supply at a lower cost. Declarations to that effect by the president of the Devoine Company were testified to, and evidence of high quality was offered by the seller and received in evidence.

The buyer, on the other hand, produced evidence to substantiate its declaration that the quality of the cherries was unsatisfactory. The exceptions bring up three principal questions for review. The first is that of the construction of the contract clause, “quality satisfactory.” The buyer contends that this referred all question of continued acceptance of the cherries to its unrestrained choice, and that there could not properly be any inquiry into the reasons or motives for its decision, such as the trial court permitted. The seller, on the other hand, contends that the decision of the buyer had no effect on the contract if it was not rendered as a bona fide decision as to its satisfaction with the goods delivered.

And the trial court adopted the latter view, and admitted evidence and instructed the jury accordingly. A second principal question is one of the legal sufficiency of the evidence to prove any such lack of good faith in the refusal of the goods. And the third principal question is as to the correctness of the meas-use of damages adopted. Taking up the first question, that of the construction and effect of the provision, “quality satisfactory,” we assume there can be no doubt that this means of a quality satisfactory to the buyer.

The arguments proceeded upon that assumption. Contracts referring questions of quality or measure to the decision of a party or his agent have been construed by this court in several cases in the past, and it seems to us that as a result of the discussions and decisions in those cases we have a definite, clear principle of construction, and one that is in harmony with the best of later authorities elsewhere. Lynn v. Balto. & O. R. Co., 60 Md. 404 ; Balto. & O. R. Co. v. Brydon, 65 Md. 198; Latrobe v. Winans, 89 Md. 636 ; Goldberg v. Feldman, 108 Md. 330 . When parties to a valid contract refer any question of performance to the decision of one of them, or of a third person, the decision ⁶⁹⁴ contracted for is final. “To substitute for it the opinions and judgments of other persons, whether judge, jury or witnesses,” said Judge Miller, in Lynn v. Balto. & O. R. Co., supra, “would be to annul the contract, and make another in its place.” And Williston (1 Williston, Sales, sec. 191) says it would be “an arbitrary refusal by the court to enforce the contract that the parties have made, and seems unwarranted.” But it is only the decision contracted for that is final.

If the question referred does not arise, as if a title to be accepted as satisfactory should turn out to be clearly free from question, then a decision which pretends to be upon that question might have no effect. Goldberg v. Feldman, supra. And in those cases in which there may be a question open to decision, if the person to whom it is referred decides, not on the question submitted, but on some question of interest or advantage not made the basis of rights or obligations by the contract, the decision is outside of the contract and is given no effect by it. Apart from any possible difficulty in proof, and assuming it to be made clear in any case, as, for instance, by a clear admission to that effect, that the tendered performance did meet the test stipulated for, that it was satisfactory or sufficient, as the case might be, a rejection on the ground of dissatisfaction or insufficiency would be beyond the right of the party who is to approve, in bad faith, and ineffectual.

The appellant urges suggestions made in the separate concurring opinion filed in Balto. & O. R. Co. v. Brydon, supra, page 226, at the time of the overruling of the motion for reargument, that when a party to the contract is himself to be satisfied, there can be no inqniry into the reasons or motives for his rejection, but that when a third person, even the party’s agent, is to be satisfied, his rejection is valid only if made in good faith. That view of the law was not adopted by the Court in the Brydon case, and although urged in later cases has not been adopted in any one of them. And it is not accepted generally in other courts. 1 Williston, Sales, sec. 191. It may be added that if the suggested distinction had been adopted, it is not clear that it would ever have given any ⁶⁹⁵ greater freedom to a corporation buyer, which must always act by agents.

It is, furthermore, settled by our decisions that on the issue of good faith in rejection of performance the evidence may take a wide range, and facts such as the appellant sought to elicit in this case against objections of the appellee should be admitted. In Balto. & O. R. Co. v. Brydon, supra, coal bought by the company was required to be of a quality satisfactory to its master of transportation and master of machinery, and after part had been delivered, acceptance of any further deliveries was refused because these agents had condemned the coal delivered as unsatisfactory, and in that case the seller, suing for a breach of the contract, offered evidence to prove expressions of satisfaction by the agents, and deliveries of coal of the proper grade, and that the rejection was due to some objection made to the coal by steamers, and to a reversal of the company’s choice between this grade of coal and another. The Court, page 220, said: “Certainly they were not obliged to accept coal if they thought it was not fit for the uses contemplated by the contract; neither on the other hand would they be justified in rejecting it for the reason that it did not possess qualities, which at the time of the contract it was known by the parties that it did not possess. By the terms of the contract the whole decision was committed to them; if they made their decision .against the coal in good faith, the defendant would not be obliged to accept it, but if they fraudulently rejected it, their judgment would be without effect in law, and the defendant would not be excused by it.

We on this point refer to Lynn’s Case, 60 Md. 404 , and approve and adopt it. On the question of fraud, it was proper that the evidence should take a wide range. * * * It was proper to show whether the coal fulfilled these expectations, and whether the officers who were to decide on its rejection knew, or had the means of knowing, its quality, and whether there were any circumstances which might induce them to make an unjust decision in the interest of the defendant. It was proper also to prove acts, declarations or ⁶⁹⁶ statements of these officers which would show what opinion they really had of the merits of this coal.” In the case at bar, the question referred to the buyer by the clause “quality satisfactory” concerned a supply of foodstuff, to be put up for an exacting trade, and seems clearly enough one on which there would be room for judgment and choice. And an honest decision by the buyer of that question of satisfactory quality must, according to the principles stated, bq accepted, however mistaken or unreasonable a judge or jury might consider it.

On the other hand, as only the decision of that question must be accepted as final, the seller was at liberty to prove, if he could, that his goods were rejected not because the quality was unsatisfactory, but because the buyer had found a cheaper source of supply, and having proved rejection for that reason, the seller was