Central Trust Co. v. Arctic Ice Machine Manufacturing Co.

77 Md. 202 | Md. | 1893

McSiieury, J.,

delivered the opinion of the Court.

On the third day of April, 1890, the Maryland Ice Company, a body corporate, executed and acknowledged, and on the fifth of the same month placed upon record in Baltimore City, a mortgage to the Central Trust Company of New York, bearing date March the first, 1890, and conveying certain property, fully described, and also all property thereafter acquired, for the purpose of securing the payment of two hundred and fifty bonds, each for the sum of one thousand dollars, together with the coupons attached for the amount of the semi-annual interest; and at the same time it executed and acknowledged a second mortgage to the same trustee upon the same property, with a like provision as to after-acquired property, to secure the payment of one hundred and ten other bonds, each for the sum of one thousand dollars, with similar interest coupons attached. On September the first, 1891, the mortgagor made default in the payment of the coupons due on that day, and payable in New York, and on the next day the Central Trust Company filed a bill in the Circuit Court of Baltimore City, for a foreclosure of the mortgage, a sale of the mortgaged property and the appointment of a receiver to take possession of the property of the Maryland Ice Company.

Simultaneously with the filing of the bill of complaint the Maryland Ice Company put in an answer, but, by the consent of the Central Trust Company, not under oath, admitting all the allegations of the hill to he true, and consenting to the appointment of a receiver, and the Court at-'once passed an order appointing Ormond Hammond, Jr., such receiver. On the fourth day of the same month, the Arctic Ice Machine Manufacturing Company filed a petition in the case claiming to own certain machinery which had been affixed to the mortgaged premises after the mortgages had been recorded, but which had not been fully paid for by the Maryland Ice Company. The Central Trust Company and the Maryland Ice Company both answered this petition, and the last named company insisted that the damages which it had sustained by the failure of the Arctic Ice Machine Manufacturing Company to construct the machinery erected by it within the time and according to the specifications of its contract, were far in excess of the balance due under the contract. On March the fifteenth, 1890, Thomas Sturgis, of New York, and Ormond Hammond, Jr., of Baltimore, entered into a written contract with the Arctic Ice Machine Manufacturing Company of Cleveland, Ohio, by which the Arctic Company agreed to construct and then to erect in Baltimore three ice manufacturing machines of a designated capacity, and Sturgis and Hammond agreed to pay therefor the sum of one hundred and seven thousand dollars in several instalments; the first, a cash payment of thirty-five thousand dollars on April the seventh, 1890, and the residue at later periods. The contract contained the following provision: “And it is further expressly agreed, that the title and ownership of said apparatus and appurtenances shall remain in said Arctic Ice Machine Manufacturing Company, until each of the aforesaid payments shall have been fully made; and in case of default in any of said payments when due, said Arctic Ice Machine Manufacturing Company shall have thereupon the right to take possassion of and remove said apparatus and appurtenances.” On March twenty-first, 1890, the Maryland Ice Company was incorporated under the laws of New Jersey, and on the third of April following it executed the mortgages to which allusion has already been made. Those mortgages, as heretofore stated, bear date March the first, or twenty days before the mortgagor company was - actually incorporated, and among other things provide that the lien created thereby should extend to the land and premises described, “and the buildings now erected or hereafter to be erected thereon, and the plant and machinerty affixed or to be affixed thereto,” and that “the fixed plant and machinery hereby mortgaged, or intended so to be, shall be real estate for all the purposes of this indenture, and shall be held and taken to be fixtures and appurtenances of the said real property hereby mortgaged and a part thereof, and shall be used and sold in connection therewith, and not separate therefrom. ” On May the seventh, 1890, ¡Sturgis and Hammond assigned to the Maryland Ice Company the contract between themselves and the Arctic Company, the latter company having the preceding day consented that the transfer might be made. After the mortgages had been recorded the Arctic Company began the erection of the three ice manufacturing machines on the mortgaged premises in Baltimore, but owing to some delay in their construction, they were not finally accepted by the Maryland Company until November the eighth, 1890. The only payment made for them was the first instalment of thirty-five thousand dollars — the residue of seventy-two thousand dollars remains unpaid.

The Arctic Company claims a return of the machines under the provision heretofore quoted from the contract between it and Sturgis and Hammond; the Central Trust Company claims title to and property in these same machines under the mortgages from the Maryland Ice Company, for the benefit of the holders of the mort- ' gage bonds; and the Maryland Ice Company claims the right to recoup out of the unpaid purchase money due by it on these machines, the amount of damages it has sustained by the failure of the Arctic Company to construct the machines in accordance with the contract. These conflicting claims give rise to the several questions which were ably and elaborately argued at the Bar.

Whatever may be the law elsewhere, it is settled beyond dispute in Maryland, that a conditional sale of personal property, whereby the vendor retains the title until the purchase price has been fulty paid, is perfectly valid between the vendor and the vendee, and all persons claiming, under or through the latter with notice of the outstanding lien. Hall vs. Hinks, 21 Md., 418; Lincoln vs. Quynn, et al., 68 Md., 299. As between the Arctic Company on the one hand and Sturgis and Hammond on the other, there can, therefore, be no doubt that the machines contracted for by them on March the fifteenth, 1890, remained the property of the vendor until paid for. And it is equally clear that no assignee of Sturgis and Hammond having notice of the Arctic Company’s title, could acquire or assert any better claim than Sturgis and Hammond had. Walker vs. Schindel, 58 Md., 360. Nor is it necessary, in order to affect the person claiming under the vendee, with notice of the vendor’s lien, to show actual knowledge of the existence of that lien; for if “there he circumstances which, in the exercise of common reason and prudence, ought to put a man upon particular inquiry, he will be presumed to have made that inquiry, and will be charged with notice of every fact which that inquiry would give him. ’ ’ Baynard vs. Norris, 5 Gill, 483; Green vs. Early and Townshend, 39 Md., 229; Higgins vs. Lodge, et al., 68 Md., 229.

The Maryland Ice Company gave to the Central Trust Company an order dated April the first, 1890, for the delivery of the whole issue of the first mortgage bonds to the London and New York Investment Corporation; and on March the thirty-first, or one day before the date of the order, and three days before the mortgage was actually executed, the Central Trust Company agreed to deliver these bonds upon receiving notice that the mortgage had been recorded. The two hundred and fifty first mortgage bonds were delivered to the London and New York Investment Corporation not earlier than April the fifth, and that corporation still holds two hundred of them. Fifty of the two hundred and fifty bonds were purchased by Poor and Greenough, and they still hold forty-five of them. The remaining five the record does not disclose the ownership of, but if they are in the possession of bona fide holders for value without notice, the decree in this case will not affect their title. Had the bondholders, in whose behalf the Central Trust Company now claims the three ice manufacturing machines erected by the Arctic Company, knowledge or information, before they acquired the bonds, of the lien of the Arctic Company, or of circumstances which ought to have put them upon inquiry with respect thereto ? To answer intelligently this inquiry, it will be necessary to examine some of the numerous facts contained in the voluminous record, and to contrast with them portions of the testimony delivered by several of the witnesses who have given evidence in support of their own interests.

On the twenty-eighth of February, 1890, Ormond Hammond, Jr., who has already been alluded to, entered into a written contract with the executors of William E. Hooper, deceased, for the purchase from them of certain property in the City of Baltimore. In this contract it is recited that Hammond, “and certain associates,” are about to form a corporation for the purchase of this property, and for making such additions thereto and improvements thereon as may be desirable, and for the conduct of the business of manufacturing and selling ice, &c. Who these associates were the contract does not say, but further references to the record will reveal that the London and New York Investment Corporation and Poor and Grreenough were among them. The price agreed to be paid was one hundred and fifty thousand dollars in cash, and one hundred and ten thousand dollars “in second mortgage bonds of the company which is to be organized to operate said property as above set forth.” It was further stipulated that Hammond “will erect or have erected by the company which it is thus proposed to organize, additional machinery for the manufacture of ice,” which additions, it was agreed, should cost from one hundred and thirty to one hundred and fifty thousand dollars. The contract also provided that Hammond would furnish the executors of Mr. Hooper “with a letter from Poor and Grreenough of New York, giving their guaran tee that said improvements shall be erected upon the said property within the time limited.” Upon the execution of this contract with the executors Hammond paid, as part of the one hundred and fifty thousand dollar cash payment, the sum of five thousand dollars, which money had been furnished him by the London and New York Investment Corporation to be thus applied. Prom this contract alone it is apparent that the London and New York Investment Corporation and Poor and Grreenough were not only in consultation with Hammond, but were through him actively interested in projecting and promoting this ice manufacturing'enterprise in Baltimore. In four days after the execution of this contract with Hooper’s executors, that is to say, on March the fourth, 1890, Hammond entered into a written agreement with the London and New York Investment Corporation in which the details for the organization of the Maryland Ice Company are fully set forth, and the contract between Hammond and Hooper’s executors is specially referred to. The whole scheme for the formation of the ice company, all contracts, bonds, mortgages and other instruments necessary or, in the judgment of the London and New York Corporation, expedient for the purpose of carrying into effect the agreement of March the fourth were to bo prepared under the direction of the Investment corporation’s own solicitors, by whom also all legal questions of whatever nature relating thereto were to be settled. By this agreement Hammond stipulated that he would convey to the Maryland Ice Company when formed the property purchased from Hooper’s executors, and partially paid for by the London corporation’s money. Hammond further agreed that the price he was to receive for the property, and which the Maryland Company was to pay, would be eight hundred and sixty thousand dollars, “to be paid as to five hundred thousand dollars in the full paid capital stock of the company;” as to two huudred and fifty thousand dollars in first mortgage bonds, and as to one hundred and ten thousand dollars in second mortgage bonds of the Maryland Ice Company: That these mortgages were to be liens on all the property owned by the Maryland Ice Company when the mortgages should be executed, and on all property thereafter to be acquired by it, and that the London corporation would purchase two hundred thousand dollars of the first mortgage bonds, and one hundred thousand dollars of the stock for the sum of one hundred and eighty thousand dollars. It was further stipulated that two of the directors of the Maryland Ice Company should be designated for the first year by the London corporation, and that the latter corporation, so long as it held any stock or bonds of the Maryland Company, should be entitled to keep at the expense of the Maryland Company in the office of the last named company’s treasurer, a representative who should have access to its hooks of account. The London corporation agreed that it would first deduct from the price of the bonds and stock which it contracted to purchase, the sum of one hundred and fifty thousand dollars, and that it would apply the balance to the payment of the expenses of organizing the Maryland, and the fees of its own solicitors, and the residue it would expend for new plant and machinery. The one hundred and fifty thousand dollars so deducted, less the five thousand dollars previously advanced, were paid to Hooper’s executors in full of the cash payment provided for in Hammond’s contract of February the twenty-eighth with the executors. All these stipulations were entered into by the London corporation seventeen days before the Maryland Ice Company was incorporated. Thus the London corporation provided for the creation of the Maryland Ice Company, prescribed the terms of the purchase to he made from Hammond by the yet unincorporated ice company, the mode of payment, the disposition of the mortgage bonds which had not been issued, and which were then legally incapable of being issued, and bound the Maryland Company in advance of its formation as to what covenants its mortgages should contain. Whilst doing all this the London corporation knew that Hammond had contracted to erect at a very large cost new and additional machinery for the use of the company to he formed, though it also knew that he was without the means to pay therefor, because the London corporation had itself advanced for him the comparatively small sum of five thousand dollars to make a partial payment of the purchase money to the Hoopers. Indeed the whole subject had been rally discussed by Hammond, Sturgis and Greenough, the latter of whom was chairman of the American committee of the board of directors of the London and New York Investment Corporation; and it had been so discussed long before Hammond entered into any negotiations at all. As the London corporation knew as early as February twenty-eighth. 1890, that Hammond was not able to pay for the three additional ice manufacturing machines and other appliances which he in behalf of himself and his associates had contracted with Hooper’s executors should be erected, and interested as it then was in the venture under the contract of March the fourth, and bound by the last clause of that contract to apply certain sums of money to the payment of the cost of such additional plant, the most ordinary prudence would have dictated some inquiry on its part as to the terms and conditions upon which the machines were shortly thereafter purchased, had Hammond and Sturgis not been in fact its mere agents in making that purchase. The London corporation must be charged with knowledge of every thing which its agents in carrying out its instructions knew, and which its contract with Hammond and Hammond’s contract with Hooper’s executors disclosed. The London corporation carefully provided that every step taken towards the organization of the Maryland Ice Company should be taken under the supervision of its solicitors, and that the operations of the company when created should be conducted under the eye of two directors to be chosen by the London corporation, and that the books of account should be subject to the scrutiny and inspection of the latter’s representative. It is difficult to conjecture how the London corporation could haye been placed in a position of more absolute control over the whole project, or how Hammond could have been more completely clothed with the powers of an agent of the London and New York Investment Corporation from the very inception of the undertaking. The success of the enterprise depended in a large measure upon the addition of new plant having a greatly increased capacity, and the London corporation knew if in no other way at least from the very terms of the contract of February the twenty-eighth that it, the London corporation, either through Hammond or through the Maryland Ice Company, when organized and incorporated, would have to provide that .machinery or the means with which to purchase it. Whilst the London corporation was thus in possession of the information and the facts we have indicated, and the project was being developed under its direction, Sturgis (who shortly afterwards became president of the Maryland Ice Company) and Hammond went to Cleveland, Ohio, and there entered into a contract dated March fifteenth, 1890, with the Arctic Ice Machine Manufacturing Company for the construction of the three machines provided for in the agreement of February the twenty-eighth, and these are the machines now in controversy. In the contract of March the fifteenth, it was distinctly provided as has been heretofore stated, that the title to and property in the machines should remain in the vendor until the whole purchase money was paid. Sturgis, whose connection with the •enterprise began prior to the purchase from Hooper, returned from Cleveland to New York and carried with him a copy of the written contract with the Arctic Company, but certainly not for the purpose of concealing its contents from the persons with whom he was co-operating. The Maryland Ice Company bad not yet been incorporated. Sturgis communicated to Greenough the fact that a contract had been entered into for the construction of these machines, named the price they were to cost, and the company which was to build them. Greenough acted throughout this whole transaction in behalf of the London corporation. The New York office of the London corporation was No. 2 Nassau Street, in a room adjoining and communicating with, the office of Poor and Greenough — the same bankers whom Hammond agreed with Hooper’s executors would guarantee the erection of the new machines and additional plant. Greenough, the chairman of the American committee of the board of directors of the London corporation, who had been cognizant in behalf of his corporation and of his firm of the negotiations with Hooper, the project of forming a company to manufacture ice, the purchase of machinery for that purpose, and the contract on the part of his corporation to acquire stock and bonds in the ice company, and who knew that the London corporation was to have a voice in and a supervision over the ice company’s management, in fulfilment of Hammond’s agreement of February the twenty-eighth, wrote a letter to Hooper’s executors under date of March the thirty-first, 1890, before any of the mortgage bonds had been delivered, and before the mortgages had been executed, in the following words: •'•'Gentlemen: Referring to a contract between yourselves and Ormond Hammond, Jr., dated February 28, 1890, wherein it is stipulated that wo shall arrange a guarantee that the proposed Maryland Ice Company shall erect additional machinery for manufacturing ice to the extent of one hundred and fifty tons per day, to be placed at once upon the property therein described, we now beg to state that tho Arctic Ice Machine Manufacturing Company has entered into a contract for the furnishing of ice machines in accordance with the stipulation, and E. J. Codd & Co. have entered into a contract to supply boilers, &o., completing the manufacturing outfit, which contracts, together with the improvements now being made, will aggregate a cost in excess of §130,000. These contracts, we are assured, are from thoroughly responsible people, and supply the guarantee which you desire. We remain, gentlemen,

very truly yours, Poor & Greenough. New York, April 5th, 1890. P. S. The.Maryland Ice Company has deposited with us the funds called for hy the within described contracts, a,nd we hereby agree that they shall he applied in accordance therewith. Poor & Greenough.” Two days after the date of this letter — that is, on April the second — the Maryland Ice Company was substituted as purchaser of the property bought hy Hammond from Hooper’s executors, and on April the fifth — the date of the postscript' — the sale of this property was ratified hy the Orphans’ Court of Baltimore City. Here, then, is unequivocal evidence that Greenough who signed this letter and with his own hand wrote the postscript thereto, knew at least when the letter was written, if not long before, of the existence of the Arctic Company’s contract with Sturgis and Hammond; and when Greenough’s connection with the project from the beginning is borne in mind, it is impossible to escape the conclusion that he also knew the provisions and terms of that contract.

When the stock and bonds were issued Hammond did not receive any of the second mortgage bonds; they were all delivered to Hooper’s executors under the contract of February the twenty-eighth; he did not receive any of the first mortgage bonds or a dollar of the proceeds of their sale, and, according to his own testimony, he never received a single share of the capital stock. Though the contract of March the fourth between him and the London corporation treated him as a vendor entitled to be paid hy the company to be formed, he received nothing whatever from that company after its organization, and the whole stock went into the hands of the other projectors of the concern including the London corporation. When it is remembered that, before any step was taken by Hammond towards the organization of this project, he was in consultation with the London corporation, was actually furnished by it at the outset with five thousand dollars to make part of the cash payment to the executors, that he subsequently submitted his contract with Hooper to the London corporation, that that corporation accepted and acted upon it and previously authorized it; that Hammond was required to he governed by the London corporation’s solicitors and that he had no interest whatever in the Maryland Ice Company when created, other than as manager, it is impossible to escape the conclusion that throughout the whole scheme from first to last he and Sturgis were acting, not for themselves, hut for the London corporation. The London corporation and Poor and Greenough and Sturgis were undoubtedly the “associates” referred to in the contract with Hooper— for they were the parties who controlled the Maryland Company upon its coming into existence, and since the appointment of Hammond as receiver he has been furnished by the London corporation through Poor and Greenough, upon receiver’s certificates, considerably over thirty thousand dollars. It was for the London corporation and at its instance that Hammond negotiated the purchase with Hooper, and it was for it and for its benefit that he incurred the obligation to erect the three additional machines thereon; and it was to advance its interests that he and Sturgis entered into the contract with the Arctic Company. He and Sturgis were, therefore, in fact the agents of that corporation employed to develop the project for it, and the attempts to disguise their real connection with the London corporation are, whilst numerous and adroit, none the less transparent and obvious. The knowledge which Hammond and Sturgis and Greenough all had of the Arctic Company’s lion was the knowledge of the London corporation, for the information which its own agents, whether called agents or not, acquired in carrying out the purposes of the corporation in this enterprise, is binding upon that corporation.

But apart from all this, it is simply incredible with the minute provisions made in the contract of March the fourth, relative to the supervision of the London corporation’s solicitors over the whole subject, that the corporation should have been apprised of every thing in relation to the scheme except only the terms of the Arctic Company’s contract. Chargeable as it is with all the information which the chairman of the American committee of its directors in prosecuting this business for it possessed, and with all the information which Sturgis and Hammond, who were acting for it rather than for a company yet unincorporated, acquired in executing its project, the London and New York Investment Corporation is in no position to assert that it is a bona fide holder of the Maryland Ice Company’s bonds, without notice of the lien of the Arctic Company. To subordinate the Arctic Company’s lien to that claimed by the London corporation through the Central Trust Company would permit the London corporation to repudiate the contract made by Sturgis and Hammond for that corporation. The priority asserted by the Central Trust Company for the holders of the Maryland Ice Company’s first mortgage bonds is a priority claimed in behalf of the very persons whose agents and “associates” purchased the machines and contracted for the preservation of the vendor’s lien thereon. The London corporation and Poor and Greenougb, who are stockholders of the Maryland Company, claim, as creditors of the very company which they organized and control, and whose obligations they were aware of, apriority over the vendor of the machines, notwithstanding the knowledge and information which they had and were chargeable with when they took the bonds, and notwithstanding the fact that the very priority which they are now seeking to defeat was one created by their own agents even before the bonds were issued. No Court has ever 3et held that parties thus situated could successfully maintain such a position. It is the worst of bad faith.

The stringent provisions of the mortgage, prepared by the London corporation’s own solicitors, cannot alter the question. Whatever may he the effect of the covenant subjecting after-acquired property to the lien of a mortgage, when the owner of the bonds secured by the mortgage is an innocent holder, it is too clear for discussion, that such a covenant can never be availed of, or resorted to, to further a claim which is tainted with fraud.

The London corporation having taken two hundred of these bonds, with notice and knowledge acquired through their own agents, and Poor and Greenough having taken the remainder with like notice and knowledge of the Arctic Company’s lien, that lien is superior to theirs, and cannot be defeated by them.

It is true that Gans, the secretary of the London corporation, and Greenough, the chairman of the American committee, deny that they had knowledge of this lien. But if there were nothing else in the record, the letter of March the thirty-first already quoted refutes most conclusively the denial of Greenough, and whether Gans knew of the Arctic’s lieu or not is immaterial, inasmuch as Hammond and Sturgis, who were actual agents of the London corporation, were fully apprised of it and Gans had the opportunity to be. His failure to know was gross negligence and was tantamount to notice.

This case does not fall within that group where, as in Winchester & Lemmon vs. Balto. & Susq. R. R. Co., 4 Md., 231, it has been held that notice to a president or director who is avowedly acting for himself and not in the capacity of agent, but adversely to the interests of the principal, does not, unless communicated to the board, bind the corporation. Here, as we have stated, the whole project was conducted from its inception by Hammond, Sturgis and G-reenough for and in behalf of the London corporation, and Poor and Greenough, and not adversely to their interests.

Nor can the covenant made by the Maryland Ice Company in the mortgages to the effect that all machinery affixed should be treated as real estate, and be sold as part of the realty affect the lien of the Arctic Company under the circumstances we have set forth. The result might possibly be otherwise under different conditions. But it would be a singular doctrine for a Court of equity to announce that creditors of an incorporated company could in their relation of creditors of the artificial entity take advantage of a covenant which they as projectors and organizers of the same company had procured to be made by the company they had formed, and by that covenant defeat a lien of which they were not only aware, but which had been created by their own agents. As bondholders they have no standing to destroy or to impair the, lien which as projectors of the company they through their own agents established in favor of some one else. Though the Arctic Company may, by' the recordation of the mortgages, have had or be chargeable with constructive notice that the Maryland Ice Company had covenanted with the bondholders that all new machinery should be considered real estate and be subject to the lien of the mortgage, still the plainest principles of natural justice would preclude any bondholder who, before he purchased a bond, participated in creating a lien in another’s favor, from afterwards repudiating and destroying that lien for his own benefit and gain. Such a proceeding has never received judicial sanction and never can. This circumstance broadly distinguishes the case at bar from Toledo, Delphos and Burlington R. R. Co. vs. Hamilton, 134 U. S., 296; Thompson vs. White Water Valley R. R. Co., 132 U. S., 68; Galveston H. & H. R. Co. vs. Cowdrey, 78 U. S., 459, and many others of the same class.

We pass now to the remaining question in the case — - that is the Maryland Ice Company's claim to recoup out of the balance due to the Arctic Company the amount of damages sustained by the Maryland Company by reason of the failure of the Arctic Company to erect the machines according to the provisions of the contract of March the fifteenth, 1890. There are two distinct claims involved — the first, for the failure to erect the machines within the time specified in the contract, and the second, for defects in construction, workmanship and material. The measure of damages for such a breach of contract as is first above mentioned has been so repeatedly laid down by this Court that nothing more is needed than a brief statement of the rule without comment or discussion. That which the vendee is entitled to recover for such a breach of the vendor’s undertaking, is the fair rental value of machines of the like capacity and character for the period during which the vendor has been in default. Abbott vs. Gatch, 13 Md., 314; Clagett vs. Easterday, 42 Md., 617; Wood vs. State, &c., 66 Md., 61. Estimated profits, which it is conjectured might have been made out of the business, constitute no part of such rental value, and are too speculative and contingent to form a basis for calculating damages. There have been cases where a recovery, measured by the amount of lost profits, has been allowed; as in actions for a trespass resulting in the destruction of an established business, Brown & Otto vs. Urner, 40 Md., 15; Lawson vs. Price, 45 Md., 123; or, where upon a breach of a contract to receive a certain number of tons of coal per day at an agreed price per ton, the vendor has been permitted to recover the difference between the contract price and the cost of mining and delivering the coal, Balto. & Ohio R. R. Co. vs. Brydon, 65 Md., 198, because in all these instances the damages resulted directly and necessarily from the wrongful act of the defendant and the profits of which the plaintiffs were deprived were susceptible of exact ascertainment and were proved with reasonable certainty. Crabbs vs. Koontz, 69 Md., 59. In the case at bar there was no destruction of an established business, and the testimony adduced as to the extent of the loss is, at best, nothing more than a conjectural estimate of what might have been the profits realized had the machines been in a condition to ojoerate. On November the eighth, 1890, the machines were finally accepted by the Maryland Ice Company, and the ten days test provided for in the contract was waived and dispensed with. Beyond that date, then, damages for a failure to deliver the machines cannot be computed, and from that date interest on the July payment must be allowed, and interest on the remaining payments must be calculated from the dates they w.ere due under the contract. By the contract two of the machines ought to have been erected and in operation on June the first, 1890, and the third on the first of August following. But this was not .done. The machines were, however, in partial operation considerably prior to the eighth of November, and whilst the damages which the Maryland Ice Company is entitled to recover for the failure of the Arctic Company to comply with this provision of the contract, are the rental values of like machines of equal capacity from the dates they ought to have been in operation to the time of acceptance, there must be deducted from that total rental value the fair rental value, of the machines for the portion of that period that they were actually in use by or for the Maryland Ice Company — otherwise the Ice Company would recover damages for the time the machines were yielding it some benefit. There is no sufficient evidence in the record of a rental value and we are, consequently, wholly unable to reach any conclusion on this branch of the question of damages. In the computation of these damages the Arctic Company will not be entitled to claim exemption from liability during the “reasonable time” allowed by the contract for the correction of oversights or defects “in construction,” or for the sixty days within which to make the machinery accomplish the results it was warranted to produce. Those provisions obviously relate to a state of facts which did not exist, and they were intended to afford the Arctic Company an opportunity to rectify any inadequacy in the structure and in the manufacturing capacity of the machines had they been erected upon the dates specified. The damages claimed in this branch of the case are not for the failure of the machines to produce the quantity of ice per day which they were warranted to produce, but for the neglect of the Arctic Company to deliver and erect them.

With regard to the other item of damages, to wit, the alleged defective workmanship, material and construction, it is insisted by the Arctic Company that the final acceptance of the machines on November the eighth forecloses all claim. But to this we cannot accede. The contract provides that the machinery “shall be constructed of first class material, in a thorough and workmanlike manner, and of sufficient capacity to accomplish the results as set forth” in the specifications. This was a warranty that the materials and workmanship would be good, and that the machines would be fit for the purpose to which they wore to be applied. Jones vs. Just, 3 Q. B., 197; Rice vs. Forsyth, 41 Md., 403. The acceptance of the machines was no waiver of this warranty, and does not deprive the purchaser of the right, to sue on the warranty or to rely by way of defence upon a counter claim or recoupment in the vendor’s action for the price, if the machines were defective in material and workmanship. Benj. on Sales, sec. 1356; Day, et al. vs. Pool, et al., 52 N. Y., 416; Gurney, et al. vs. Atlantic, &c., R. R. Co., 58 N. Y., 358; Presbyterian Church, &c. vs. Hoopes Artificial Stone Co., 66 Md., 598. And it has been held that this is so whether the defect be latent, patent or discoverable. Randall vs. Newson, L. R., 2 Q. B. D., 102. An acceptance does no more than preclude the purchaser from rescinding the contract and returning the property. The superadded promise that the vendor would remove the machines if, after a ten days’ test, they did not fulfil the specifications, did not vacate the warranty contained in the same contract. It gave the purchaser, if not a double remedy, at least a choice of remedies. The purchaser might have returned the property if it proved not to be what was contracted for, or accepting it, maintained an action for the breach of warranty, or recouped the amount of damages sustained in the vendor’s suit for the price. Warren Glass Works Co. vs. Keystone Coal Co., 65 Md., 547; Douglass Axe Manufacturing Co. vs. Gardner, 10 Cush., 88; Seigworth vs. Leffel, 76 Pa. St., 476. The measure of damages for the breach of a warranty as to workmanship and materials in cases where the article has not been returned is the difference between its value with the defect warranted against and the value which it would have borne without that defect. Lane, Adm’x vs. Lantz, 27 Md., 211. Or, differently stated, it is the difference between the value of the article as it is and what it would have been if the warranty had been true. Tuttle vs. Brown, 4 Gray, 457. And as applicable to machinery it is the cost of repairing or replacing the machinery so as to make it what it should have been under the contract. Brown vs. Foster, 51 Pa. St., 165. If any such damages have been sustained, the Maryland Ice Company is entitled to recoup them. As the case must be remanded that testimony may be taken on the question of the rental value, these damages for the other alleged breach of warranty against defective materials and unskilful workmanship may also be gone into beyond what is now to be found in the record on the same subject, if the parties desire to do so.

(Decided 15th March, 1893.)

The decree appealed from determined no more than that the three ice manufacturing machines belonged to the Arctic Ice Machine Manufacturing Company, as against the Central Trust Company of New York, and directed that they should not be delivered to the claimants until the Maryland Ice Company had been paid by the Arctic the damages ascertained to be due by the latter to the former. But it did not, however, determine as the Court was fully empowered to do, Chase, et al. vs. Winans, el al., 59 Md., 475, the amount of those damages. The decree, as far as it goes, is correct, and for the reasons we have given, it will be affirmed; but the question of damages, though alluded to in the opinion of the learned Judge of the Circuit Court, having been left open and undisposed of by the decree, is not before us for final decision, and the' cause will, therefore, be remanded that this question may be tried and determined upon the principles announced in this opinion.

Decree affirmed, with costs to be paid by the Central Trust Company, and, cause remanded for further proceedings on the question of damages.