Case Name: KELLY HANDLE COMPANY v. CRAWFORD PLUMBING AND MILL SUPPLY COMPANY et als.
Court: Supreme Court of North Carolina
Jurisdiction: North Carolina
Decision Date: 1916-04-19
Citations: 171 N.C. 495
Docket Number: 
Parties: KELLY HANDLE COMPANY v. CRAWFORD PLUMBING AND MILL SUPPLY COMPANY et als.
Judges: 
Reporter: North Carolina Reports
Volume: 171
Pages: 495–504

Head Matter:
KELLY HANDLE COMPANY v. CRAWFORD PLUMBING AND MILL SUPPLY COMPANY et als.
(Filed 19 April, 1916.)
1. Statute of Frauds — Principal and Agent.
The principle that a general agent may not hind his principal by his promise to answer for the debt of another does not obtain when made concerning matters within the apparent scope of the agent’s authority and induces an agreement to extend credit to another wherein the principal has a direct and beneficial interest.
2. Same — Consideration.
An original promise to pay an obligation founded upon a distinct consideration moving to the promisor at the time, and not simply collateral or superadded to that of the principal obligor, does not fall within the meaning of the statute of .frauds, requiring that it must be in writing, etc.
3. Same.
The plaintiff, a manufacturer of handles, contracted with B. to manufacture and furnish it with certain slabs suitable for its business, which necessitated the purchase by B. of an engine to’ drive the machinery used in making the output. In order to enable B. to get the-engine, the general agent of the plaintiff, acting within the ostensible scope of his employment, promised the defendant seller of the engine that the plaintiff would see that the engine should be paid for within a reasonably short time if sold on a credit, and the defendant, acting on this promise, was induced to make the sale accordingly. Held, the promise of the agent was binding upon the plaintiff, his principal, and being founded upon a consideration, did not fall within the meaning of the statute of frauds.
4. Claim and Delivery — Mortgage—Mortgagee’s Possession — Mortgage Jiotes»
Claim and delivery cannot be maintained against a mortgagee in possession of personal property, the subject of the proceedings, when the mortgage was given to secure two or several notes, one of which the mortgagee still owns; and upon conflicting evidence of such ownership, the question is for the determination of the jury. 4-S to whether the proceedings would lie where the' mortgage secured but one note, the title to which had been transferred by indorsement to the plaintiff, qucere.
Civil actioN tried before Cline, J., and a jury, at September Term, 1915, of FORSYTE.
Plaintiff brought the action to recover certain personal property, with damages for its detention, and the amount of certain notes alleged to be due by defendants to it. The defendants "Wooten & Benigar were engaged in manufacturing handle slabs, which were used by the plaintiff in its business. Plaintiff contracted with Wooten & Renigar to purchase from them all the handle slabs they could manufacture which were suitable for use in its mill, and in order to assist Wooten & Renigar in making .the slabs, plaintiff agreed to supply them with a certain amount of money to buy timber and to pay their employees, title to the slabs, bolts, and stumpage to be retained by plaintiff as security for the advances made by it. Slabs were manufactured and delivered to plaintiff under this contract, for which plaintiff paid $3,838.01, leaving a balance due by defendants Wooten & Renigar of $589.72, as alleged, which was secured by a bill of sale for all handle timber then on the yards of the debtors. In order to make the handle slabs called for in the contract with the plaintiff, it was necessary for the firm of Wooten & Ren-igar to have certain machinery and other supplies which they proposed to buy from their eodefendants, Crawford Plumbing and Mill Supply Company, called hereafter the Crawford Company, which contended that the superintendent of plaintiff’s mill at Winston-Salem, N. C., had agreed for and in behalf of plaintiff to assume responsibility for the payment of the price of the machinery and supplies purchased by Wooten & Renigar from the Crawford Company, and that this was done before the contract of purchase was made or any of the goods were delivered. This transaction is explained in the testimony of R. R. Crawford, as follows:
“Mr. Tatem, I think, was the first one mentioned it to me. He said they had a man that they were going to start in business, to saw handles for them, and he wanted to know if I had a 20 or 25 h. p. engine and boiler that would suit them, and I told him I did; told him I had one in Statesville, 25 h. p., and in a few days Mr. Wooten and Mr. Renigar came to see me, and I asked them what terms they wanted to buy the rig on, and they said they might be able to pay $100 cash and the balance they would want some time on. So, then, a little later — I think probably the same day — I think they brought Mr. Tatem with them. I don’t know whether it was the same day or the next day — along about that time. It was the Mr. Tatem of the Handle Company. He was superintendent at that time, and we talked the matter over and finally agreed that this outfit would suit them, and Mr. Tatem said: ‘These men haven’t anything, but we are going to start them in business; they are going to saw timber for us, and I will see that you get your money,’ and he would see that we got pay for the outfit.
“He said a good deal. I couldn’t say exactly as to anything else at that time. I don’t remember of anything else he said right at that time. Then Wooten & Renigar said they would be back to get the boiler and engine in the course of a week or something like that, and at the end of the week they were to come and pay $100 cash and the balance was to be notes, three, six, and' nine months. At the end of the time they came back and didn’t have the money. They had not been able to raise the $100, and Mr. Tatem told me: ‘You go phead and let them have it, and I will see that you get your $100 inside of a short while, next week or two.’ So we let them have the boiler and engine; told him he could go and get the boiler and engine at Statesville. That was about 25 miles from their point of business.
“We sold them the boiler and engine and what is included in the chattel mortgage. I can’t give the exact language Mr. Tatem used when he spoke about letting them have the boiler and engine, but the substance of it was, ‘We will see that ypu get your money.’ That’s as near as I can state it. I can’t say that he used the name of the Handle Company, except that he said he was acting as the agent for the Kelly Handle Company. Tatem was working for the Kelly Handle Company. I had had a conversation with him before that about it. He is the first man that came to see me about the outfit. He said Wooten & Renigar wanted to buy a boiler and engine. He said they had no money. I did not know them. I don’t think I had ever seen them before. I possibly might have seen Mr. Wooten before that time. He worked at the Handle Company before that. I let them have it because the Kelly Handle Company said they would be responsible for it. The amount of the bill for the boiler and engine was $450, and of that amount they were to pay $100 cash and give two $125 notes and another note for $100.”
The judge excluded, by his ruling, from the consideration of the jury the question as to plaintiff’s indebtedness to the Crawford Company based upon the evidence relating thereto, upon the ground, as stated in the argument, that the alleged contract of plaintiff with the Crawford Company was within the statute of frauds and should have been in writing. Issues covering this feature of the case were tendered by the Crawford Company, but rejected by the court, and the company excepted.
Plaintiff caused to be issued claim and delivery process under which the property mortgaged to the Crawford Company to secure the debt due by Wooten & Renigar to it was seized, the Crawford Company contending that, as the mortgage was made to it, the possession was rightfully in it at the time of the seizure under the writ, which was, therefore, illegal, and especially so as it owned one or more of the notes secured by the mortgage, one of the notes for $128.75 secured by the mortgage having been transferred by the Crawford Company in writing on the hack thereof, to the plaintiff, together with another note for $101, which, as plaintiff alleges, was represented by the Crawford Company as also secured by the. mortgage, though in fact it was'not. The Crawford Company contended that the note for $128.75 was transferred by it merely to pass the title thereto, as against Wooten & Renigar, to the plaintiff, without any understanding or intention by the parties that it should make the company liable as indorser.
This statement, we think, will be sufficient to explain the issues and ■the nature of the matters in controversy between the parties.
The jury, upon the issues submitted by the court, returned the following verdict:
1. Are the defendants Wooten & Renigar indebted to the plaintiff? If so, in what sum? Answer: “Yes; $819.47.”
2. Is the plaintiff the owner of the handle timber, saw-rig, belting, and other property used in connection with the milling business of Wooten & Renigar, as alleged in the complaint? If so, what was its value at the time of the bringing of this suit? Answer: “Yes; $192.”
3. Did the defendants, or either of them, destroy or appropriate to their own use the handle timber, saw-rig, belting, and other property used by them in their milling business ? If so, what is the value of the same? Answer: “ ‘Yes’ as to the handle timber; ‘No’ as to the saw-rig, belting, etc.; value unknown.”
4. Is the defendant Crawford Plumbing and Mill Supply Company liable to the plaintiff by reason of its indorsement of the notes, as alleged in the complaint? If so, in what sum ? Answer: “No.”
5. Are the notes or either of them which are described in the complaint secured by the chattel mortgage to the Crawford Plumbing and Mill Supply Company, as alleged in the complaint? Answer: “Yes: one note, $128.15.”
6. Did the defendant the Crawford Plumbing and Mill Supply Company represent to the plaintiff that the $100 note sued on, originally executed by Wooten & Renigar to Crawford Plumbing and Mill Supply Company, was secured by chattel mortgage upon the sawmill and boiler in the same manner as the $128 note, and did Kelly Handle Company take over and pay the Crawford Plumbing and Mill Supply Company $101 of said note upon the understanding and in the belief that it was secured by the chattel mortgage, as alleged in the complaint? Answer : “Yes.”
Y. In what amount, if anything, is the defendant indebted to the plaintiff on said note ? Answer: “$101.”
8. "What was the value of the property conveyed in the chattel mortgage to the Crawford Plumbing and Mill Supply Company, at the time it was levied on in the claim and delivery proceedings? Answer: “$300.”
9. What is the value of the property conveyed in the chattel mortgage to the Crawford Plumbing and Mill Supply Company at this time? Answer: “$150.”
After ascertaining the amount of plaintiff’s claim against Wooten & Renigar, the court entered judgment therefor, and then decreed that the chattel mortgage be foreclosed to pay the debts secured thereby, and a commissioner was appointed to sell the same, if the $128.Y5 was not paid by the defendants on or before a date fixed in the judgment. The court further adjudged that plaintiff recover of defendants Wooten & Renigar the handle timber, saw-rig, beltings, and other property mentioned, and unless the same was delivered to plaintiff it should recover on the redelivery bond such damages as it had sustained by the detention, deterioration, or destruction of the same. There were directions for the recovery of damages upon the other issues, depending upon whether or not the property described in the mortgage to the Crawford Company was delivered up for the purpose of sale under the judgment. There was also a recovery by plaintiff against the Crawford Company for the amount of the $101 note. Defendants were adjudged to pay the costs. ' The Crawford Company excepted to certain rulings of the court and to its judgment, and appealed.
Louis M. Swink and Gilmer Korner, Jr., for plaintiff.
J ones & Patterson and Philip Williams for defendant.

Opinion:
WalKee, J.,
after stating the case: There was no appeal in this case by Wooten & Renigar, and we are confined, therefore, to the questions arising on tbe appeal of tbe Crawford Company, wbieb may be reduced conveniently to three beads:
First. Is tbe plaintiff bound by tbe contract of its general superintendent, viz., that if tbe Crawford Company would let Wooten & Reni-gar bave tbe engine, boiler, and fittings they needed to carry on their business and manufacture tbe handle slabs or handle blanks for tbe plaintiff, tbe latter would see tbat tbe company was paid for tbe same? It is true tbat a general agent has no power, merely as such, to agree tbat bis principal will stand for tbe performance of another's contract, as by guaranteeing tbe payment of a note given by a third party; but tbe rule of liability is different where tbe promise is an original one made for tbe purpose of advancing tbe interest of tbe real promisor, or where, as in this case, tbe corporation in whose behalf tbe promise is made has a direct and beneficial interest to be subserved by tbe performance of tbe .principal contract, and especially where tbe guaranty is necessary, or requisite, to tbe performance of tbat contract, and there is evidence tbat tbe agent has ostensibly been clothed with tbe power thus to contract, and tbe promisee is induced to enter into tbe contract and, in this ease, furnish tbe materials by reason of tbe promise tbat payment will be made by tbe corporation for which tbe promise was made, by its agent, and which will be specially benefited if tbe goods are sold by tbe promisee.
1 Corpus Juris, pp. 641 to 644, says, at sections 285 and 287: "In the absence of anything to show a different intention, tbe power to make or indorse commercial paper will be construed as extending only to bills, notes, or drafts executed or indorsed in tbe business of tbe principal and for bis benefit. Tbe broadest possible authority to make and indorse paper presumptively is to be exercised in tbe principal's interest only, and does not impliedly extend to making or indorsing paper for tbe accommodation of third persons, and still less for tbe agent himself. . . . It will be sufficient to bind tbe principal for acts or contracts by tbe agent, tbat they were reasonably necessary to keep tbe property in good repair, or tbe business a going concern, or to protect tbe interests confided to tbe management of tbe agent; and when tbe principal leaves tbe agent as bis sole representative in doing tbe business, third persons are justified in relying on bis acts as to matters tbat would naturally devolve on tbe principal in such a business. One who is put in .the place of a general manager is thereby clothed with bis powers."
Substantially the same view is thus expressed in 31 Cyc., pp. 1386, 1387: "Agency to manage implies authority to do with tbe property what has been previously done with it by tbe owners, or others with their express or implied consent; or, further, to do with it what is usual and customary to do with property of tbe same kind in tbe same locality. Rut in tbe absence of a grant of such power in specific terms, no power to do acts beyond tbe ordinary needs of tbe principal's business is to be inferred from tbe use in bis authorization of general terms of tbe broadest import. Tbus an agent is not authorized to make permanent additions or improvements to tbe property under bis control, or to grant any easements or licenses, or impose other burdens upon bis principal's property. Rut it will be sufficient to bind tbe principal for contracts by tbe agent that they were reasonably necessary to keep tbe property in good repair, or tbe business a going concern, or to protect tbe interests confided to tbe management of tbe agent. And when tbe principal leaves tbe agent as bis sole representative in doing tbe business, third persons are justified in relying on bis acts as to matters that would naturally devolve on tbe principal in such a business. One who is put in tbe place of a general manager is thereby clothed with bis powers. Since it is tbe agent's business to keep the business a going concern, be has no implied authority to take steps for its winding up or to sell it out."
Speaking of tbe implied power of a general agent to make or indorse a bill so as to bind bis principal, it was said in Bank v. Johnson, 33 S. C. (3 Rich.), at p. 46 : "Tbe use of negotiable securities so universally prevails in trade as tbe means of credit that, from Wray's general agency, bis power may be inferred to make bills and notes in tbe defendant's name in payment of bis liabilities in tbe course of business, and in like manner to take such securities in settlement of debts due, and to negotiate and discount them. But this authority of tbe agent to bind bis principal as a party to bills and notes must be restricted to such as derive a consideration from liabilities contracted by tbe agent in tbe course of trade, or from tbe direct use and application of them for tbe convenience or necessities of tbe business."
Tbe same was held in regard to tbe authority of a superintendent of a mining corporation, in Stuart v. Adams, 89 Cal., 367.
There is evidence here that some of tbe handle blanks made with tbe machines sold by defendant, tbe Crawford Company, have been seized by tbe plaintiff, and it claims tbe right to have received more of them, and this claim is still insisted upon, even after notice of the alleged agreement between its superintendent and tbe Crawford Company.
We are of tbe opinion that there was evidence sufficient to take tbe case to tbe jury upon tbe authority of Tatem, tbe superintendent, to make tbe promise of payment.
Second. This being so, tbe promise, if made as alleged, was not within the statute of frauds, but it was an original promise founded upon a distinct consideration moving to tbe plaintiff at tbe time, and was not simply collateral and superadded to that of Wooten & Renigar to pay tbe debt.
Our case falls within tbe principle stated in Dale v. Lumber Co., 152 N. C., 651, where tbe matter is clearly stated By Justice Ilolce, who, quoting from the well considered case of Emerson v. Slater, 63 U. S., 28, at p. 43, said: "Whenever the main purpose and object of the promisor is not to answer for another, but to subserve some pecuniary or business purpose of his own, involving either a benefit to himself or damage to the other contracting party, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing that liability. This position has been sustained and applied in other cases of the same Court, notably in Davis v. Patrick, 141 U. S., 479, in which it was held: 'In determining whether an alleged promise is or is not a promise to answer for the debt of another, the following rules may be applied: (1) If the promisor is a stranger to the transaction, without interest in it, the obligations of the statute are to be strictly upheld; (2) but if he has a personal, immediate, and pecuniary interest in a transaction in which a third party is the original obligor, the courts will give effect to the promise. The real character of a promise does not depend altogether upon form of expression, but largely upon the situation of the parties, and upon whether they understood it to be a collateral or direct promise.' " The position is also sustained by decisions in other jurisdictions, which are cited in the Dale case, and the general doctrine has been frequently recognized and approved by this Court. Deaver v. Deaver, 137 N. C., 241; Threadgill v. McLendon, 76 N. C., 24; Voorhees v. Porter, 134 N. C., 591-605; Mason v. Wilson, 84 N. C., 51; Whitehurst v. Hyman, 90 N. C., 487.
In Voorhees v. Porter, supra, the Court, in referring to Mason v. Wilson, supra, closely follows the case of Emerson v. Slater, supra, in its language, for it is said: "The doctrine there stated is that if a third person promise the debtor to pay his antecedent debts in consideration of property placed in the hands of the promisor by the debtor for the purpose, which is afterwards converted into money, the creditors may recover on the promise as for money had and received, for, although, says the Court, the promise is in words to pay the debt of another, and the performance of it discharges that debt, still the consideration was not for the benefit or ease of the original debtor, but for a purpose entirely collateral, so as to create an original and distinct cause of action; and it is immaterial, as is further said by the Court, whether the liability of the original debtor is continued or not, the promise being an independent and original one founded upon a new consideration and binding upon the promisor. . . . When the promise to pay the debt of another arises out of some new and original consideration of benefit' or harm moving between the original contracting parties, the creditor may sue the promisor, whether his debtor remains liable to him or not."
Tbe principle is repeated in Peele v. Powell, 156 N. C., 553, where Justice Allen bas stated tbe law upon tbis subject fully and witb apt and clear discrimination between those cases which are and those which are not affected by the statute of frauds. It is there said that if the promise is based on a consideration, and is an original obligation, it is valid, although not in writing. The obligation is original if made at the time or before the debt is created, and the credit is given solely to the prom-isor; or if credit is given on the promises of both, as principals and as jointly liable, and not on the promise of one as the surety for the other; or if a promise is based on a new consideration of benefit or harm passing between the promisor and the creditor. We here reproduce the language of that case which bears more directly upon the evidence in this record: "Where the promise is for the benefit of the promisor, and he has a personal, immediate, and pecuniary benefit in the transaction, as in Neal v. Bellamy, 73 N. C., 384, and in Dale v. Lumber Co., 152 N. C., 653; or where the promise to pay the debt of- another is all or part of the consideration for property conveyed to the promisor, as in Hockaday v. Parker, 53 N. C., 17; Little v. McCarter, 89 N. C., 233; Deaver v. Deaver, 137 N. C., 242; Satterfield v. Kindley, 144 N. C., 455; or is a promise to make good notes transferred in payment of property, as in Adcock v. Fleming, 19 N. C., 225; Ashford v. Robinson, 30 N. C., 114, and in Rowland v. Rorke, 49 N. C., 337, the promise is valid, although in parol. If, however, the'promise does not create an original obligation, and it is collateral, and is merely superadded to the promise of another to pay the debt, he remaining liable, the promisor is not liable unless there is a writing; and this is true, whether made at the time the debt is created or not." Citing numerous cases.
We have evidence here which tends to show (and we must view all of it most favorably for the Crawford Company) that the promise, if made by the plaintiff, was for its benefit and advantage. The engine, boiler, and fittings were needed by Wooten & Renigar to manufacture the handle blanks or slabs, which in their turn were needed by the plaintiff to carry on its business; and moved by this consideration of benefit or profit to itself, it induced the Crawford Company to part with its property to Wooten & Renigar by the promise on plaintiff's part to see that they were paid for. If this be the case, the statute does not apply. Kanter v. Hofheimer, 88 S. E., 60.
It follows from this view of the matter that the court erred in not submitting the question as to the promise, and plaintiff's liability thereon, to the jury.
Third. The question as to the right of the plaintiff to seize the property under claim and delivery proceedings depends upon whether the original mortgage of Wooten & Renigar to the Crawford Company secured, at tbe time of tbe seizure, more tbau one note. Tbe defendant contends tbat wben tbe new notes and mortgage were taken from Reni-gar, after tbe dissolution of tbe firm of Wooten & Renigar, tbe Crawford Company did not surrender tbe first mortgage given by Wooten & Renigar, while tbe plaintiff contends, as we understand tbeir position, tbat it was given up by tbe Crawford Company and tbe new notes and mortgage of Renigar taken in tbe place thereof, and, this being so, tbat only tbe note for $128.75 was then secured by tbat mortgage, and tbat tbe Crawford Company bad agreed with plaintiff to transfer both tbe note for $128.75 and tbe mortgage securing it to the plaintiff. If tbe first mortgage still subsisted in favor of tbe Crawford Company and secured two notes, one of which belonged to it and tbe other to tbe plaintiff, we do not see bow plaintiff can claim the possession of tbe property covered by tbe mortgage to tbe exclusion of the Crawford Company, both being equally interested in it and tbe mortgage having been made to tbe 'latter company.
Where there is only one note secured by a chattel mortgage tbe authorities conflict upon tbe question as to whether a transfer of tbe note will carry tbe mortgage with it to tbe extent of conferring on tbe transferee tbe right to sue in replevin for tbe property. Cobby on Replevin, sec. 186, refers to tbe conflict as follows: "Tbe assignment of tbe note carries tbe mortgage with it, notwithstanding tbat it may not be a legal transfer of tbe mortgage. Tbe debt and tbe security are inseparable, and cannot reside at the same time in different parties; and be who controls tbe debt also controls tbe mortgage. I am aware tbat this is a disputed question, and that 'Jones says, 'The mortgagee's legal interest does not pass by bis assignment of the debt. Such as-signee cannot maintain replevin in bis own name for tbe mortgaged property, though be may, in tbe absence of any express or implied stipulation to tbe contrary, bring such action in tbe name of tbe mortgagee, who bolds, in such case, tbe legal title in trust for such as-signee's benefit.' But this evidently puts tbe case of a single note secured by a chattel mortgage."
We are not required in this case to select between these conflicting views, as tbe court decided peremptorily as to tbe right of plaintiff to recover tbe property and instructed only upon tbe rule of damages as it is in an action of replevin. As tbe case goes back for a new trial, tbe facts may be ascertained more clearly in this respect, and a proper issue submitted for tbe finding of tbe jury in regard to them. There was error, as above indicated, in tbe rulings of tbe court, on account of which a new trial becomes necessary, and it will extend to all tbe issues.
New trial.