On appeal from the Superior Court, Law Division, Essex County.
Michels, Pressler and Trautwein. The opinion of the court was delivered by Pressler, J.A.D.
Defendants Africa-Middle East Marketing, Inc., and A.M.E. International, Inc. (A.M.E.) appeal from a judgment requiring them to pay plaintiff Columbia Can Co. of New Jersey, Inc. the purchase price of goods sold and delivered. We reverse.
The facts are not in essential dispute. A.M.E. is in the business of selling to customers in the near East an acrylic lacquer thinner for thinning automobile paint. Its principal place of business is in Somerset, New Jersey. Its method of doing business is to purchase steel containers, apparently known in the trade as pails, and usually in single, five or fifty-gallon sizes. The containers are then shipped directly to an independent contractor who fills the containers with the solvent supplied by A.M.E. Immediately upon being filled and sealed, the containers are transported by A.M.E.'s shipper to a dock for overseas transportation to A.M.E.'s customers. For several years prior to the transaction in question A.M.E. had been purchasing at least a portion of its container requirements from a company owned by Russell C. Mentone. The pails supplied by Mentone had always been of what is referred to as "fresh" manufacture and had always been satisfactory.
In October 1979 Mentone apparently gave up his own business and accepted employment by plaintiff as a salesman. In December of that year he telephoned A.M.E. to offer to sell it approximately 1800 five-gallon pails. These pails had been manufactured
by plaintiff's supplier for another customer who had not accepted them, and in accordance with industry usage, they had been "resprayed" for sale on the general market. Because the pails had been resprayed, they were offered at an 8% discount. At the time Mentone telephoned the A.M.E. offices, defendant's president, Dr. Raja Soudah, was abroad on a business trip. The call was then taken by Soudah's secretary, to whom the foregoing information was communicated and who advised Mentone that she would attempt to communicate the offer and would let him know. She in fact returned Mentone's telephone call the following day, accepting the offer. It appears, however, that in her communication with Soudah she did not tell him the pails were resprayed.
On January 14, 1980 the pails were shipped directly from the premises of plaintiff's supplier to the premises in Princeton of Spirit Fluid, which was one of defendant's fillers. The pails, as is customary, had been prepared for shipping by being packed with their covers in place, on pallets. The pallets were then "shrouded" top and bottom with cardboard, and wire strapping was then placed around them. Several days after the delivery, on either January 19 or January 20, Soudah telephoned Mentone and asked him to redeliver the shipment from Princeton to the premises of another filler in Farmingdale, Long Island. Mentone did not have any of his own company's trucks available but undertook to arrange for that redelivery to be made by an independent trucker, one Gillespie, who had done shipping for him previously. Gillespie picked up the packaged pallets in Princeton on January 26 and took them to Farmingdale, where they were apparently rejected for lack of space. Gillespie then returned them to Princeton but, it appears, not until two days later.
Upon the rearrival of the pails in Princeton, now two weeks following the date of the original shipment, Soudah sent an A.M.E. employee to inspect the pails. It was then that Soudah first learned that there was rust on the inside of the pails, rendering them entirely useless for A.M.E.'s purposes. He then
immediately notified Mentone, who forthwith inspected the pails himself. It was Mentone's testimony that the pails indeed were rusty; that they had not been examined by him prior to being shipped out by his company's supplier; that he was aware of the use to which A.M.E. intended to put them, and that he was aware that their rusty condition made them wholly unfit for their intended use. It was also Mentone's testimony that the pails seemed to have sustained damage as a result of the transhipments and their intervening outdoor storage at Spirit Fluid. Although Mentone did not directly admit that the pails were rusty when shipped, he did testify that after exposure to water or interior condensation caused by exposure to extremes of weather, rust would take between 30 days and 6 months to become visible. The trial judge found as a fact at the close of the evidence, and based largely on Mentone's testimony, that the pails were defective when shipped by reason of interior rusting, and that finding is supported by the record.
Within a day or two after his discovery of the rust condition, Soudah wrote to plaintiff's president rejecting the goods. He wrote again on the following day, February 1, 1980, confirming his first letter as well as a telephone conversation in which he rejected the goods. Demanding that plaintiff remove the pails from Spirit Fluid's premises, the letter went on to state, in part, as follows:
By this letter I am confirming my discussion with you of this morning, refusing to accept the pails as these are rusty, as verified by our ...