Case Name: MOLINE MALLEABLE IRON CO. v. YORK IRON CO.
Court: United States Court of Appeals for the Seventh Circuit
Jurisdiction: United States
Decision Date: 1897-11-08
Citations: 83 F. 66
Docket Number: No. 416
Parties: MOLINE MALLEABLE IRON CO. v. YORK IRON CO.
Judges: Before WOODS, JENKINS, and SHOW ALTER, Circuit Judges.
Reporter: Federal Reporter
Volume: 83
Pages: 66–79

Head Matter:
MOLINE MALLEABLE IRON CO. v. YORK IRON CO.
(Circuit Court of Appeals, Seventh Circuit.
November 8, 1897.)
No. 416.
1. Principal and Agent — Sales by Agent — Purchaser’s Liability to Principal.
Where a purchaser of goods from agents knows whom they are agents for, and that the goods in question are of the principal’s manufacture, and where the invoice calls attention to the agency and to the principal’s ownership, the purchaser is liable to the principal for the agreed price.
2. Same — Election to Hold Agent.
Even if it were true that the reception by one party, of a contract executed on the other part in the name of an agent, with knowledge that the agent acted for a principal, constitutes a' conclusive election to look alone to the agent, yet quaere whether such election involves a reciprocal abandonment by the principal of his rights against the other party to the contract.
3. Same — Presumptions.
Even if that proposition were established, yet there would, at least, be a presumption that the principal was the contracting party, unless it clearly appeared that the agent contracted on his own account, and that, with a knowledge of the facts, the opposite party elected to look to the agent.
4 Contracts — Performance—Actions.
When a party has fully performed his part of a written contract, and nothing remains to he done hut for the other party tó pay the money due under the contract, a recovery may be had under the common counts.
5. Review on Error — Harmless Error.
Though improper evidence be admitted, under an erroneous theory of the measure of damages, the error is not ground for reversal if the actual recovery is in accordance with the correct rule.
6. Sale by Agent — Suit by Principal — Agent’s Lien.
The fact that an agent who sells goods had a qualified title in the goods and their proceeds as pledgee, as against his principal, does not impair the principal’s right of action against the purchaser to recover the agreed price, particularly where the purpose of the pledge is accomplished’ before the action is brought.
7. Same — Set-Off.
A purchaser of goods from the agent of a known principal cannot set off against his debt for the purchase a sum owing to him from the agent.
Showalter, Circuit Judge, dissents.
In Error to the Circuit Court of the United States for the Northern District of Illinois.
This is an action in assumpsit upon the common counts, brought by tiie York Iron Ooinpany to recover Cor 300 tons No. 2 soft Minneapolis pig iron, alleged to have been sold to the plaintiff in error through the agency of Forsyth, Hyde & Co., at the price of $15 per ton. For nearly seven years prior to the Kith ot May, 1893, Forsyth, Hyde & Go. had been the agents at Chicago of the defendant in error, under a written agreement hy which that firm undertook to act as the agents of the York Iron Company in the sale of the product of its furnace at Black River Falls, Wis. They were to have the exclusive salo of all the pig iron produced at the furnace during the period of the agreement. All sales of such iron should he made by them as agents for and in the name of llie York Iron Company, and subject to its approval, and for a stated commission; and they were to collect for sales made by them, and to remit to the company, but they did not guaranty the collections. On May 1(5, 1893. Forsyth, Hyde & Go. sold to the plaintiff in error 300 tons No. 2 soft Minneapolis pig iron, manufactured by the defendant in error. Tiffs iron was at the time at the furnace at Black River Falls, Wis., not segregated from a larger amount of similar iron stored at that place. The iron was shipped to the Moline Malleable Iron Company between June (5 and June S, 1893, and was received by them on the Kith, 17th, and 18th days of June, 1893. Forsyth, Hyde & Co. rendered to the plaintiff in error a sale memorandum, describing the character and price of the commodity sold, and stating the terms to be “spot cash,” with privilege of four months’ time, at 6 per cent, interest, upon a blank headed, “Forsyth, Hyde & Company, Pig Iron Commission,” and, prior to the receipt of the iron hy the Moline Malleable Iron Company, rendered to it invoices of the iron shipped upon billheads headed, “Commission Pig Iron. Moline Malleable Iron Company, St. Charles, 111., bought of Forsyth, Hyde & Company, Agents for York Iron Company. Terms, Cash.” The plaintiff in error had for several years dealt with Forsyth, Hyde & Co., and knew that they were agents for the York Iron Company, and knew that the staled brand of iron was the product of the furnace of the York Iron Company, which was a well-known brand of Iron of that company’s manufacture, and the iron delivered was so marked. A few days before the sale, Hyde, of Forsyth, Hyde & Co., went to Minneapolis, and arranged with the York Iron Company that he should endeavor to make immediate sales of iron, and, if necessary, to lower the price one or two dollars a ton. He returned to Chicago, and sold 200 tons to the Rockford Malleable Iron Works, 300 tons to the Moline Malleable Iron Company, and 1,500 tons to the Pullman Company, and at once, by wire and by letter, notified the York Iron Qompany of the sales. He then returned to Minneapolis to further consult with the York Iron Company. Before this time, Forsyth, Hyde & Co. had accepted drafts for the accommodation of the York Iron Company to the amount of $30,000, and it was desired that they should accept further drafts to the amount of $6,000 to enable the York Iron Company to meet pressing liabilities. It was arranged that such acceptances should be made, and that 3,000 tons of iron should be placed by the York Iron Company in possession of a storage company, and that such company should issue certificates for the iron. This was done, the storage company issuing certificates for 2,000 tons to B orsyth, Hyde & Co., and for 1,000 tons to the York Iron Company. It was arranged that Forsyth, Hyde & Co. should use the certificates issued to them to complete the sales made to the three companies named, and that the proceeds could be used to take up the obligations of the York Iron Company upon which Forsyth, Hyde & Co. were liable. The iron was estimated to be worth $13.50 per ton at the furnace where it was stored. At this time one piece of accommodation paper to the amount of $2,500 had matured, and had been taken up by Forsyth, Hyde & Co.; and they subsequently, in May and June of that year, took up three other pieces of paper of $2,500 each, making a total of $10',000, which they paid. They received the avails of the sale to the Pullman Company, amounting to over $20,000, and a portion of the Rockford claim. Forsyth, Hyde &'Co. failed and assigned on the 5th day of July, 1893, at that time owing to the York Iron Company $20,000 over and above the $10,000 of accommodation notes which they had paid. All the other accommodation paper upon which Forsyth, Hyde & Co. were liable was taken up and paid by the York Iron Company. It was understood between the parties at the time of the making of the arrangement that if the Moline Company should fail, and the account should not be collected, the loss would fall upon the York Iron Company.
Some time in the year 1892 the Moline Malleable Iron Company had executed its notes to the amount of $5,000, for the accommodation of Forsyth, Hyde & Co. For these notes, renewal notes had been given, maturing in July, 1893, at which time they were paid by the plaintiff in error. With respect to that transaction, Mr. Ullman,' the president of that company, states that Forsyth asked him for some notes which he could discount. “I told him that we owed him nothing, and he said that he wanted the money, and it would be a great accommodation if I could give him that amount in notes. I finally'told him that I would do so, but I would charge it on account to Forsyth, Hyde & Co.” The plaintiff in error pleaded the general issue with a statement of special matter intended to be relied upon under that plea, which was to the effect that, for many years prior to the purchase of the iron sued for in this suit, tne defendant had purchased iron of the firm of Forsyth, Hyde & Co. on many occasions and in large amounts; that it purchased such iron of that firm as the owners thereof, and made payments therefor with the notes of the defendant to the order of Forsyth, Hyde & Co., without any knowledge that the plaintiff (defendant in error here) was the owner of any of the iron so procured; that it purchased the iron in controversy of Forsyth, Hyde & Co., and at that time the Moline Malleable Iron Company had a credit with F'orsyth, Hyde & Co. for the proceeds of the accommodation notes given to that firm; that it purchased the iron in question without knowledge that the plaintiff had any interest therein, and, if it had, the iron had been paid for to them by drafts accepted by Forsyth, Hyde & Co., and was at the time of the purchase the property of Forsyth, Hyde &’ Co.; and that in accordance with its custom in purchasing iron of Forsyth, Hyde & Co., and paying for the same with notes, the Moline Malleable Iron Company had the right to purchase the iron from Forsyth, Hyde & Co., and pay for the same with its said notes then held by Forsyth, Hyde & Co. The only witness testifying verbally to the contract of sale was Mr. Ullman, the president of the plaintiff in error. He states that he purchased the iron in question of Mr. 1-Iyde; that he did not remember the particular conversation had with him further than the purchase of the iron, and, after stating that at the time of the purchase a reference was made to the accommodation notes given to Forsyth, Hyde & Co., he first stated that all that was said with respect to the notes was that Hyde had those notes, “and he wanted me to take this iron in satisfaction of the notes.” Being asked whether he was certain ahont that, he responded; “I testified that there was nothing' said in the talk ahont the notes. We having the notes then, he said: ‘X want to sell you that iron. I want to sell you three hundred tons of iron;’ and we took the iron, and 1 understood— Q. Never mind what you understood; just, what yon said. A. No; nothing further was said about it. Q. So, there was no reference made to these notes at the time you purchased this iron? A. Títere was the talk that he owed us for those notes earlier in the conversation, but there was no conversation further than that in the purchase of the iron. We talked about his owing us for these notes. Then he went on, and talked about buying so much iron from him. I said there was no connection made with (lie purchase of the iron at that time. There was the talk that he owed us for those notes earlier in the conversation, hut there was no conversation further than that in the purchase of the iron. We talked about his owing us for those notes, and afterwards about buying so much iron from him.” At the trial, counsel for defendant below requested the court to instruct the jury that if they believed from the evidence that exclusive credit was given by defendant to Forsyth, Hyde & Go., and it contracted with them exclusively in respect of the iron to recover the price for which suit was brought, then plaintiff could neither sue nor ho sued upon such a contract. This request was refused, and a. proper exception reserved. The court was further requested to charge the jury that, from the facts given in evidence, plain tiff was not entitled to recover. This request was overruled, and proper exception reserved. The court charged the jury that the only quesiion was whether it had been proven that the plaintiff, through its agent, had sold and delivered to the defendant the pig iron sued for, and, if so, they should return a verdict for the plaintiff for the valué at the time and place delivered. There was a verdict for the plaintiff below.
S. S. Gregory, for plaintiff in error.
Charles M. Gherman, for defendant in error.
Before WOODS, JENKINS, and SHOW ALTER, Circuit Judges.

Opinion:
JENKINS, Circuit Judge.
The right of a principal to sue and his liability to be sued upon a contract made by an agent in the name of and for the benefit and advantage of the principal are unquestioned; nor Is it doubted that an undisclosed principal may sue or be sued upon a contract made by his agent in the name of the latter (Story, Ag. § 160a; Mechein, Ag. § 769), except possibly (1) when the agent has contracted personally by deed; (2) when, in a contract of sale, the agent has a lien upon the subject-matter of the contract, or its proceeds, exceeding or equal to the value, in which case the right of the agent is paramount to that of the principal; (3) when an exclusive credit is given to and by the agent. Ewell's Evans, Ag. 525 (401). There has been some contention Whether, with resiieet to a written contract executed in the name of an agent, the party who received the contract knowing that the agent acted for a principal could hold the principal; the supreme court of New Hampshire holding, contrary to Story, that in such case the reception of such a contract constituted a conclusive election to look alone to the agent. Chandler v. Coe, 54 N. H. 561-573. It may be doubtful whether the doctrine of this case can be upheld. Calder v. Dobell, L. R. 6 C. P. 486-498; Insurance Co. v. Allen, 116 Mass. 398; Byington v. Simpson, 134 Mass. 169; Nicoll v. Burke, 78 N. Y. 580. But quaire whether such election by a third party involves an abandonment by the principal of Ms rights against the third party under a contract made by his authority. Whart. Ag. § 403. We need not concern ourselves, however, at this time, with that controversy; for as well the court of New Hampshire as the other courts recognizes the doctrine as to express verbal contracts that, "if the principal was known, it is to be presumed that he was the contracting party, unless it clearly appears that the agent contracted on his own account, and that, with a knowledge of the facts, the opposite party elected to look to the agent." Chandler v. Coe, 54 N. H. 561, 575.
The difficulty with the instruction the refusal to give which is first assigned for error is that there is no evidence to support it. The plaintiff in error knew that Forsyth, Hyde & Co. were dealing in iron upon commission; that they were the agents of the York Iron Company; and that the iron purchased was of its mánufacture. Presumably, therefore, the iron was the property of that company. For several years prior to the transaction in question the plaintiff in error purchased that description of iron of these agents with such knowledge of their agency and of the ownership of the iron. Every invoice delivered spoke to those facts and to that ownership. Ullman, the president of the plaintiff in error, who alone testifies to the question, does not pretend to deny his knowledge of the facts. He frankly states that he "had never bought any except through agency of Forsyth, Hyde & Co." It is true, he states he never 'had any dealings with the York Iron Company. That is true in the sense that he did not deal directly with that company, and that is the sense in which the statement is intended to be understood; for it is no less true that the plaintiff in error had for years dealt with the York Iron Company through its agents with knowledge of the agency and of the ownership of the iron. It is therefore the case of a dealing with an agent of a disclosed principal touching the property of the principal. In such case the presumption is indulged that the principal is the contracting party; and the contention of the plaintiff' in error, if it can in any case be upheld, can only be applied when it clearly appears that the agent contracted on his own account, and that the plaintiff in error elected to look to the agent alone. There is not in this record a scintilla of evidence to sanction such conclusion. Nothing transpired at the time of the contract to justify such inference. It is not sustained by the fact that in previous dealings the purchase price of iron had been paid to the agents. It was'their duty, within the terms of their agency, to make such collections, and the fact of such payment does not warrant an inference that it was contemplated either by the plaintiff in error or by the agent that the principal should be ignored in the transaction. The instruction requested was therefore properly refused.
It is said, however, that, if the principal sue upon the contract made by the agent, he must adopt the precise contract made, and cannot repudiate that contract and sue in assumpsit upon an implied contract for the value; or that, if the contract be unauthorized, the principal must repudiate the contract, and sue in trover for the value of the goods. We are not called upon to pass upon the technical question of pleading which was strongly urged to our attention, for the reason that, upon the assumption of the correctness of the propo sition, in our judgment the evidence wholly fails to disclose any contract with Forsyth, Hyde & Co. by which as a term of the contract the iron was to be paid for by offsetting the indebtedness of Forsyth, Hyde & Co. to the ' plaintiff in error for the accommodation notes stated. The memorandum of sale and the invoices, so far as they speak to the contract, show that it was'a sale for cash. The evidence of Mr. Ullman, the president of the plaintiff in error, shows no other or different contract. He distinctly states that the question of the payment of Forsyth, Hyde & Co.'s indebtedness to his corporation was not a term of the contract for the purchase of the iron. The fact that the bookkeeper of Forsyth, Hyde & Co., in their account with the plaintiff in error, credited the latter with the amount of the notes executed for their accommodation, and subsequently, at the time of the sale nearly a year thereafter, charged the amount of the sale to the company, does not in any degree tend to prove that it was agreed at the time of the sale that the price of the iron should be paid for by their indebtedness to the plaintiff in error. It is urged that the question should have been submitted to the jury, and that they would have a right to infer such a contract; but we think no such inference is warranted in the light of Mr. Ullman's positive statement that the two subjects were not connected. It would have been the duty of the court, if the verdict had been rendered upon the testimony adduced in favor of the plaintiff in error, to have set aside the verdict for want of evidence to support it. It may further be observed that no such contract is set up in the notice or statement of facts which the plaintiff in error gave as his defense under the general issue. The correspondence of the parties discloses no claim to any such contract, but merely the right to set off. We therefore need not inquire what would have been the rights of the principal if the contract of sale had been as is now claimed by the plaintiff in error. The contract being then as appears in the memorandum of sale and in the invoice, and having been executed, the defendant in error had a right to sue upon it, and could, under the common counts, recover the contract price. Crane Elevator Co. v. Clark, — U. S. App. -, 26 C. C. A. 100, 80 Fed. 705-710.
If the court below erred in admitting evidence of the value of the iron at the time and place of delivery, the error was harmless, and the judgment is not reversible for that reason, the amount of the recovery being for the contract price of the iron, and not for its value, which was proven to be greater than the contract price.
We do not' think the situation is at all disturbed, or that the right of the principal to sue is impaired, by the transaction by which the iron was turned over nominally to the agents, and they were authorized to apply the proceeds in payment of obligations assumed for the accommodation of their principal. The agents did not thereby acquire the absolute title to the iron. It was pledged to them for a specific purpose. This pledge enabled them to hold the goods against third parties, and against the York Iron Company, but only so far as was necessary for their protection and security; and the title thereby acquired was a qualified one. The title to the iron or its proceeds was not exclusive in the agents. The right of the principal to col lect the proceeds of sale was not thereby impaired. Hill v. Railroad Co., 43 S. C. 461, 21 S. E. 337; Merrill v. Thomas, 7 Daly, 393; Francklyn v. Sprague, 10 Hun, 589; Balderston v. Rubber Co., 18 R. I. 338, 27 Atl. 507. If, by such an arrangement, the subject-matter became (the property of the factors, and was of a perishable nature, and had been destroyed, the loss would fall upon the factors, and they would have no recourse upon their principal for payment of the obligations upon which they were bound. So, likewise, if it had been lost in transit, or had met destruction in any way. It is, we think, manifest, that they took the property under no such assumption of responsibility. Indeed, it seems to have been understood at the time of the arrangement referred to that it was a mere transfer of the possession of the property to be disposed of under the terms of the agency and the proceeds applied to the discharge of the obligations. They did not even assume the risk of the collection of sales. If there should be loss in that regard, it was to fall upon the York Iron Company, and not upon them. The relation created was that of an agency, coupled with an interest. We cannot regard the arrangement as in any degree impairing the right of the principal to collect of the purchaser the proceeds. Possibly, equity would intervene at the in.stance of the factors to prevent collection when the purpose for which the iron was pledged would be defeated by such collection. The agents had a special property in the iron, which was paramount to the right of the York Iron Company; but the latter company had a right of property in the'iron, and could demand the application of its proceeds to the payment of its obligations upon which the agents were bound. Any appropriation of the iron or its proceeds by the agents to the payment of their debt to the plaintiff in error (with which the York Iron Company was not concerned) would have been in violation of the terms of the contract of pledge, and could not be sustained; and equally would it be wrong to permit a purchaser of the property of the principal to set off against Ms debt for the purchase a sum owing to Mm from the agent. It appears that before this suit the specific purpose for which the iron was pledged had been accomplished. The agents had paid $10,090 of the obligations. The balance of them was paid by the York Iron Company. Forsyth, Hyde & Co. had received from the sales of the iron over $20,000, and at the time of their failure were largely indebted to their principal. The purpose of the pledge being consummate, the right to the proceeds revested in the principal. The judgment will be affirmed.