Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.
Before SPARKS, KERNER, and MINTON, Circuit Judges.
The plaintiffs are a partnership engaged in business as factors, and their residence and place of business is in New York. The defendant is a corporation organized under the laws of Illinois, and is engaged in the wholesale shoe business in Chicago, and has been so engaged since 1911.
The following facts appear from the court's findings and are supported by substantial evidence in the record.
Since 1931 the defendant had been selling a brand of shoes known to the trade as Truman shoes, and its business in this line of shoes had grown from a little over $10,000 in 1931 to $93,000 in 1939. In 1937 the defendant employed Arthur Fisher Shoe Company (hereinafter referred to as Fisher) to manufacture for it the Truman shoes, which were warranted by Fisher to have a steel shank, and in the case of the half double sole shoes, a leather middle sole. Each pair of said Truman shoes had the following legend embossed on the outer sole visible to the purchaser: "Truman Arch Shoe," "Steel Arch," "Oak Bend Sole." The latter words were known to the trade to indicate a leather middle sole.
In 1937, 1938 and 1939, the defendant bought many thousands of dollars worth of Truman shoes from Fisher. On November 7, 1939 the defendant discovered for the first time that Fisher was putting into the Truman shoes wooden shanks instead of steel as agreed, and on November 11, 1939, that Fisher was also putting in a paper or composition middle sole instead of leather. On each of these dates, the defendant wrote to Fisher, protesting and demanding an explanation. More customers of the defendant came in complaining about the substitution in Truman shoes of the wooden shank for the steel and the paper or composition sole for the leather. The defendant wrote several more letters to Fisher, advising of these complaints and its discovery and protesting the substitutions. It was not possible to discover the substitutions, and the consequent breach of warranty, without tearing the shoes apart or examining them under an X-ray.
During the winter of 1939-1940 the defendant was unable to find a manufacturer to supply all the Truman shoes it needed.
Fisher had assigned the defendant's accounts to the plaintiffs. Each invoice sent the defendant contained the following statement placed thereon by the plaintiffs:
"This account is payable only to H. M. Hubshman & Bro., Factors, Two Park Ave., New York, to whom the same has been assigned and to whom prompt notice must be given of any objections to payment of this invoice as rendered. Goods returnable for any reason shall be returned only on the Factors' written shipping instructions."
When the defendant received no response from Fisher on its reports and complaints, it sent to the plaintiffs on January 3, 1940, copies of the letters it had written to Fisher, and made complaint to the plaintiffs about the breach of warranty.
In the three years defendant had been doing business with Fisher, the accounts had been assigned to the plaintiffs and each invoice to the defendant contained the notice set out above and placed thereon by the plaintiffs. During this time some ninety-one complaints were made by the defendant about defective merchandise and all were made to Fisher, who made the adjustments, and plaintiffs in every instance approved and issued credit memos to the defendant.
Immediately after the defendant's complaint and notice to the plaintiffs of January 3, 1940 the plaintiffs filed suit on the account. The defendant, in order to maintain its credit standing, had been paying on the account, until the balance due was $10,996. The defendant filed its counterclaim, setting up the breach of warranty and damages therefrom. On the trial the court found for the defendant on its counterclaim in the sum of $6,013.45, and gave judgment for the plaintiffs on their complaint for the difference between the judgment on the counterclaim and the amount of the past-due account, which judgment was in the total sum of $4,982.55. The plaintiffs appealed.
The questions presented by this appeal are whether the plaintiffs were entitled to receive notice of the breach of warranty, whether reasonable notice was given, or whether the notice was waived, ...