Court Opinion

ID: 8860045
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:45:13.361639+00
Date Added: 2024-06-11T17:05:47.293153
License: Public Domain

SHOWALTER, Circuit Judge
(dissenting). Mr. Edward C. Gale, secretary of the York Iron Company, defendant in error, and the only witness who testified on behalf of the defendant in error at the trial other than Mr. Ullman, the president of the Moline Company, the plaintiff in error, said in Ms testimony:
“About the middle of May, Mr. Hyde came to Minneapolis, and we authorized him to come hack to Chicago, and sell as much iron as he could. The arrangement was not in writing. We told him to drop the price, if necessary, one or two dollars a ton, in order to make immediate sales. He-went to ■Chicago same day, and in a day or two we-Teceived from him the letter in evidence, showing the sale to the Moline Company for 300 tons.”
*73The relations between the defendant in error and Forsyth, Hyde & Co., up to the time of the conversation referred to by the witness, are shown by the following contract put in evidence by defendant in error:
“This agreement, made tins 7tli da.y of July, 188G, by and between the York iron Company, of Minneapolis, Minnesota, party of (he first part, and J. I:'. Forsyth and E. H. Hyde, of Chicago, Illinois, co-partners, as Forsyth, Hyde & Co., parties of the second part, witnesseth: That said parties of the second part undertake to act as the agents of said party of the first part in the sale of the product of the furnace of said party of the first part, situated near Black River Falls, Wisconsin, upon the terms and conditions following, viz.-. (1) Said parties of the second part are to have the exclusive sale of all pig iron produced by said furnace so long as this agreement shall remain in force. (2) All sales of such iron shall be made by them as agents for and in. the name of said York Iron Company, and. subject to its approval, and all collections made by them on account thereof shall be at once remitted to said company at Minneapolis. (3) Said parties of the second part agree to exercise tlue caution in respect to the financial responsibility of all parties to whom sales are made, and shall collect all sums due from purchasers of the company's iron, whenever possible, but said second parties do not guaranty collection of accounts or paper taken in settlement thereof. In case suit is necessary or other unusual expenses are incurred in making such collections, the same shall be borne by the company. (4) In case of sales known to the iron trade as ’cash sales,’ said second parties agree to honor drafts of the company at thirty days’ sight, for the net proceeds of such sales. (£5) Said second parties agree to exert their best endeavors to sell the products of said furnace for the best interests of said first party, and to collect and remit the proceeds thereof, and for such services they are to receive a commission of two and one-lialf per cent, of the net price of the iron at the furnace. Any commissions due on sales made and settled for by note or cash may be deducted by said second parties out of any collections in their hands, but, in case any sums due for iron sold shall not be collected, said parties of the second part are to return the commission charges thereon, and all commissions on sales made to stockholders of the company shall be remitted to the party of the first part. (G) £aid parties, in consideration of the behefiis accruing to them from this contract, agree to advance money to said first party, when desired, upon any merchantable iron made by it of the quality known as ‘Lake Superior Charcoal Iron,’ in sums equal to any part of Its market value above three dollars per ton at per rate of interest, not exceeding seven per cent, per annum, and at a less rate when practicable. All iron upon which said advances are made shall be pledges to said second parties In the customary manner. (7) This agreement shall continue in force so long as the same may prove satisfactory to the party of the first part, and on its termination said second parties agree to promptly turn over all accounts and other property of the company to which it may then be entitled.”
The letter referred to in Mr. Gale’s testimony above quoted was as follows:
"Forsyth, Hyde & Company, Dealers in Big Iron, Chicago, G8 and 70 Dear-born Street.
“Chicago, May 16, 1803.
“Messrs. York Iron Company, Minneapolis, Minn. — Gentlemen: We wired you to-day to ship to the Rockford Malleable Iron Works two hundred ton No. 2, and send to you S. M. No. 1,780 herewith for sale. We also send you S. M. 1,700 for 300 tons of soft 2 for the Moline Malleable Iron Company, at St. Charles, Illinois. You will see that the Moline concern has moved, and they are not (paite ready yet to take any iron. We therefore request that you ship to Rockford first, and the. Moline Company second. We send the S. M. to you, and a copy to Black River Falls. The sales are fifty per cent, better than the memorandum shipment of yesterday. Both Mr. Gaylor and Mr. Pullman were out of town yesterday, and Mr. -, of the Malleable *74Iron Company, could not be found. We hope to see .both of them to-morrow, and will close up sale for 2,000 tons possibly.
“Very truly, yours, Forsyth, Hyde & Oo.”
The S. M. (sales memorandum) No. 1,790 inclosed in the foregoing letter was in words following:
“Forsyth, Hyde & Company, Pig Iron Commission, 68 and 70 Dearborn
S.treet, Chicago.
' “Sale Memorandum 1,790. Chicago, May 16, 1893.
“Messrs. York Iron Company, Minneapolis, Minn.: We have sold for your account'to the Moline Malleable Iron Company, of St. Charles, Illinois,cars, 300 tons soft, No. 2 Minneapolis pig iron, at $15.00 per gross ton, spot cash, f. o. b. St. Charles, Illinois, six per cent, for four months’ time, deliverable at once. Notify them two days before you ship. Firm sale memorandum sent to buyer, Rhodes. Subject to possible delay from accident or other cause unavoidably delaying manufacturers. Shipment via E. J. & E., care of Chicago & Great Western Railway; rate of freight-per gross ton from-to-. . Forsyth, Hyde & Company.
“H. Nott.”
The sale in controversy was made in a conversation between Mr. Ullman, acting for plaintiff in error, and Mr. Hyde, acting for Forsyth, Hyde & Co. Afterwards Forsyth, Hyde & Co. sent to plaintiff in error the following sales memorandum:
“Forsyth, Hyde & Co., Pig Iron Commission, 68 and 70 Dearborn Street, Chicago.
“Sale Memorandum, Including all Shipping Directions Received with Your Order, No. 1,790.
“Chicago, May 16, 1893.
“Sold to Moline Malleable Iron Co., St. Charles, 111., - cars, 300 tons No. 2 soft Minneapolis pig iron. Price (freight cash) $15.00 per gross ton, spot cash, f. o. b. St. Charles, Ills., privilege of 4 mos. time @ 6% int. If this lot is divided in delivery, settlement to be made for each lot promptly when delivered. If sold on time, settlement is to be by note or acceptance. Delivery to be made at once, * * * subject to possible delay from accident or other cause, unavoidably delaying manufacture or shipment. Order shipped via E. J. & E., e/o C. & G. W. N. Ry.
“[Signed] Forsyth, Hyde & Co.
“J. H. Mott.
“Please advise us if this is not in accordance with your understanding.”
Plaintiff in error, at the time of the purchase, knew or had reason to suppose that Forsyth, Hyde & Oo. would procure the iron from the defendant in error, and it is probable that they knew at that time that there was some sort of arrangement between defendant in error and Forsyth, Hyde & Co. whereby the firm handled the product of the corporation; but what the terms of that arrangement were they did not know, or seek to know, so far as appears. The testimony, touching the sale was entirely by Mr. Ullman. That testimony is certainly not inconsistent with the theory of counsel for plaintiff in error that the plaintiff in error was, in fact, contracting with Forsyth, Hyde & Oo. themselves, and not with them in any representative capacity. At the time of the sale, Forsyth, Hyde & Oo. were indebted some $5,000 to plaintiff in error, that being the proceeds of two accommodation notes then outstanding, but afterwards paid by plaintiff in error. Mr. Ullman testified:
“The notes shown me, dated March 2, 1893, and April 15, 1893, are the notes which I gave. They were paid through the First National Bank of Moline, lili*75nois, at maturity. I had dealt with Forsyth, Hyde & Company, I think, ever since they were in business; that is, for a number of years. Q. What were the circumstances under which these notes were given? A. Mr. Forsyth asked me at one time to give him some notes which he could discount. I told him that we owed him no tiling; and he said that he needed the money, and it would be a great accommodation if 1 could give him that amount in notes. 1 Jina-lly told him that I would do so, but I would charge it on account to Forsyth, Hyde & Company. I purchased the iron of Mr. Hyde. I do not remember the particular conversation we had with him further than the purchase of 1'lie iron. I had made no payments for iron bought of Forsyth, Hyde & Company prior to this time, except to them by note or otherwise. Had never bought any except through agency of Forsyth, Hyde & Company. I never had any dealings ■with the York Iron Company. * * * Q. At the time that this iron was purchased, in May of 1893, was any reference made to these notes? A. Yes, sir. Q. What was it? With whom was the conversation had? A. With Mr. Hyde. Q. Well, what was said? A. Nothing was said except that he had those notes, and that ho wanted me to take this iron in satisfaction of the notes. Q. Are you certain about that? A. I testified that there was nothing said about the talk about the note. ‘We having tlie notes then,’ he said, T want lo sell you that iron. 1 want to sell you 300 tons of iron;’ and we took the iron and I understood— Q. Never mind what you understood; just what you said. A. Nothing further was said about; it. Q. So there was no reference made 1o these notes at the time you purchased the iron? A. There 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 ;ron. We talked about bis owing us for these notes, and then afterwards we went on, and talked about buying so much iron from him. Q. But that was not my question. A. 1 said Hiere was no connection made with the purchase of the iron at that time. There was the talk that he owed us for those notes earlier in Hie conversation, but 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. The York Iron Company was never represented when the accounts of Forsyth, Hyde & Company were paid. .So far as I know, they liad no knowledge of ¡lie manner in which they were paid.”
That Hie terms of the sale to plaintiff in error were correctly stated in Hie sales memorandum last above quoted was not disputed. Plainiiif in error, not electing', when it received the iron, to give notes at four months’ time, was then charged with the price in the books of Forsyth, Hyde & Co.; and, so far as concerned that firm and plaintiff in error, 1he iron (which was delivered in June, 1893) was paid for in full by the credit in favor of the latter. Forsyth, Hyde & Go. faded iu July, 1893. I think the jury might have inferred from the testimony of Tillman and the bookkeeper that the price of the iron was to be offset against the credit. I do not understand Ullman’s testimony to be “positive” “that the two subj'ects wore not connected.” The insisience by defendant in error is that the sale contract of May 16th was with defendant in error, it being principal, and Forsyth, Hyde & Co. merely agents; that defendant in error, as vendor, has not been paid; and that plaintiff in error must, now again pay the price of the iron. The testimony tends to show additional matters about as follows: On May 19th defendant in error, being advised that Forsyth, Hyde & Co. had made the sale of the 300 tons to plaintiff in error, also that they ‘had made two other sales which would bring up the aggregate to 2,000 tons, delivered to Forsyth, Hyde & Co. that quantity of iron. In consideration of this, Forsyth, Hyde & Co. bound themselves to pay at maturity a certain indebtedness of *76$6,000 then owing by defendant in error to a third party. They also engaged to pay four promissory notes made by defendant in error, for $2,500 each, and on which they had become sureties, of which notes one had fallen due May 12, 1893, another would fall due May 20th, another May 28th, and still another on June 10, 1893. They also engaged to pay, as they matured, other obligations of the defendant in error on which they had become security, in sums of $5,000 and $2,500, aggregating altogether $20,000, and maturing at different dates in the future. The witness Mr. Gale, who alone testified on the subject, added: “If the Moline Company had failed, and the account had been lost, it was talked and understood between Mr. Forsyth and ourselves that it would be our loss. Mr. Hyde never told us about any account against the Moline Company.” This means that Forsyth, Hyde & Co. took the chances of collection from Pullman and the Rockford Company. It is to be noticed, further, that defendant in error then knew that plaintiff in error had the privilege of four months’ time on the purchase- of May 16th. The last of the obligations which Forsyt'h, Hyde & Co. were to pay matured August 15, 1893. The contract of May 19th could not mean, therefore, that Forsyth, Hyde & Co. were to pay with the proceeds of the iron.
Out of the 2,000 tons so obtained by them, Forsyth, Hyde & Co. shipped the 300 tons here in question to plaintiff in error about the 7th of June, and the same was received by the plaintiff in error about 10 days later. They also delivered the remainder of the 2,000 tons, except about 105, in carrying out other sales made by them. Forsyth, Hyde & Co.'paid the four notes first above mentioned, aggregating $10,000. Presumptively these notes were paid before there had been any delivery of iron to plaintiff in error. When the deliveries of other portions of the 2,000 tons were made does not appear, nor was it shown when the price of said other portions would be payable. The presumption is that Forsyth, Hyde <& Co. paid the first $2,500 note as soon as the contract of May 19th was made, and •each of the other three at maturity. They had paid as much as $5,000, then, by May 20th, or, at latest, by May 23d. Up to this time there could hardly have been any delivery of iron to either of the other vendees. At all events, there is no showing that the $5,000, or even the entire $10,000, or any part of it, was the price or proceeds of the 200 tons sold to the Rockford. Malleable Iron Company, or of the 1,500 tons sold to Mr. Pullman. Apart from the four notes mentioned above, no other obligation included within the arrangement of May 19th matured till about the time of the failure of Forsyth, Hyde & Co. They made no further payment under the agreement of May 19th, but they did collect from Pullman and the Rockford Company, though when is not shown.
It is said, in effect, as I understand, that the 2,000 tons of iron were actually sold to the three vendees by this defendant in error; that Forsyth, Hyde & Co. were mere bailees of this iron; that, as agents of defendant in error, they had negotiated the three sales; that, as such agents, they were to collect from each vendee the price of the iron sold to him; and that the payment of outstanding obligations under the arrangement of May 19th was, in effect, but an account*77ing to their principal for proceeds which, as soon as received, belonged to such principal. Suppose A.., an agent, has negotiated sales of certain goods for and on behalf of 3>., Ms principal. The latter puts the goods into A.'s possession, authorizing him to deliver to each purchaser the portion bought by such purchaser, and to collect the price from each. A. makes delivery first to C., a purchaser; but, instead of receiving from C. the price in cash, it is then agreed between the two that a debt which A. owes C. shall be canceled, and A., out of his own pocket, is to pay B. a sum equal to that for which the goods were sold. A. at once makes this payment on the agency account. Then A. makes delivery to and collects from each of the other purchasers. These latter purchasers have uow paid B., since payment to B.’s agent is payment to him; but A. becomes insolvent, and fails to account to B. for any further proceeds, is it law that B. may now turn on 0., and force him to pay B. the price of the goods sold to him? I think not. From the standpoint of all the vendees including (I, B. ‘has been paid in full. He received in cash from (Vs debtor the price of the goods sold to (1, and Ms agent received the price on each sale, respectively, from each of the other vendees. Or, again, suppose that A., before he has made any delivery, advances to B. on his agency account, and meaning to reimburse himself out of the proceeds of the goods, a sum of money as large as or greater than the price O. is to pay. ne then makes delivery to 0., and, instead of receiving the price in cash, he agrees with O. that an old debt from himself to C. be canceled, or that C. will do something for him at a future time, and the price of the goods is to be deemed paid. A. thereafter makes delivery to and collects from the other vendees, and, becoming insolvent, fails to make any further payment to B. May B. now recover from (I? I think not. He has received the price of the goods sold to C. His loss results from the default of his agent on the other sales.
In brief, on the theory of: agency, the $5,000 paid by Forsyth, Hyde & Co. on or about the 20 th of May was more than an equivalent for the price of the 300 tons of iron bought by ¡.his plaintiff in error. This defendant in error has already received — -this, at least, would be the presumption — the price of the iron sold to plaintiff in error. It ought not therefore to recover the same. Defendant in error suffered no loss by reason of any failure to get value for the iron sold to plaintiff in error. Its losses resulted from the failure of the agents, Forsyth, Hyde & Co., to account for proceeds actually received by them in their character as agents. The case would not be different if plaintiff in error had advanced the full price in cash to Forsyth, Hyde & Go. on May 16, 1893, and the latter had thereupon, and before delivering or collecting for any portion of the iron sold to the. other parties, paid and advanced on their agency account a sum equal to or greater than the price of 300 tons of the iron, and then delivered the 300 tons to plaintiff in error. Assuming that defendant in error was vendor in the contract of May 16th, then the understanding between plaintiff in error and Forsyth, Hyde & Co. that the firm should pay defendant in error for the iron, so that plaintiff in error might settle with the firm, seems clearly inferable from the evidence. This side arrangement would probably signify nothing as against *78defendant in error but for the fact that Forsyth, Hyde & Co. did at once pay on their agency account, with respect to the 2,000 tons of iron, $10,000. On the agency theory, in the absence of proof that they paid this $10,000 with proceeds received from Pullman or the Bockford Company, why shall it be said that this payment was not in response to the obligation due by the firm to this plaintiff in error? Suppose there had been but the one sale, namely, the 300 tons to plaintiff in error, and Forsyth, Hyde & Co., having agreed with plaintiff in error that they would pay the price to defendant in error, (fid so pay; could defendant in error afterwards recover the price again from plaintiff in error?
But I do not think this defendant in error was or ever became the vendor in the sale contract of May 16, 1893. It was a term in that contract that the vendee (plaintiff in error), when it received the iron, might, instead of paying cash, give notes at 6 per cent, payable in four months. This defendant in error never authorized Forsyth, Hyde & Co. to make on its behalf any such contract. By the writing of July 7, 1886, Forsyth, Hyde & Co. had no authority to make any contract of sale at all. The scheme by that writing was that Forsyth, Hyde & Co. would report orders, and, when approved and accepted by defendant in error, the sale was made. Defendant in error then delivered the iron, and Forsyth, Hyde & Co. collected the price, and accounted for the same, less their commission. I do not see that the conversation testified to by Gale was meant to change the contract in any way. Certainly, that talk'was no authority to Forsyth, Hyde & Co. to conclude a sale on four months’ time. When, therefore, Forsyth, Hyde & Co., on the 16th of May, made the sale to plaintiff in error, they alone were bound. They were bound to obtain iron and deliver it. There was no agency in the case; nor did defendant in error ever assume by ratification or in any other way to become the principal or vendor in that contract. The arrangement of May 19th, as testified to by Gale, does not by any kind of necessity have any such.meaning. By that arrangement, Forsyth, Hyde & Go. themselves, for valuable consideration, then took the title to the 2,000 tons of iron. Plaintiff in error had no notice of that arrangement. It is conceivable that, as against a third person dealing with the 2,000 tons or some part thereof as a mere volunteer or with notice, a constructive trust in favor of defendant in error might have been declared in a court of equity. But here the rights of defendant in error are determined by the contract. The proceeds of the iron when and as received did not necessarily become, in the hands of Forsyth, Hyde & Co., the money of defendant in error. It was their own money. They were to take up certain outstanding commercial paper when and as the same fell due. For this engagement by them, defendant in error parted with the iron. There was no relation of principal and agent between defendant in error and Forsyth, Hyde & Co. so far as concerned the sale of the 300 tons of iron to this plaintiff in error, prior to the treaty of May 19,1893; and it was not necessary, in order that the terms of that treaty be carried out, that defendant in error become or be treated as vendor in the contract whereby plaintiff in error bought the 300 tons of iron. All this on the assumption that, *79as against plaintiff in error, it was possible, by some ex post facto agreement between Forsytli, Hyde & (Jo. and defendant in error, of which plaintiff in error had no notice, for this defendant in error to become principal and vendor in the contract last named. The theory of ratification presupposes, as beyond question, that, within the intent of plaintiff in error, defendant in error was vendor in the contract of May 16th. But I do not so understand the record. If Forsyth, Hyde & Co. had been in fact authorized to make that contract, then the evidence, it may be contended, would not affirmatively and distinctly exclude a possible understanding by plaintiff in error that defendant in error was really vendor. But Forsyth, Hyde & Co. were not so authorized. There is no basis for the theory of ratification. I am not able to see that defendant in error sold to plaintiff in error the 300 tons. It ought not therefore to recover the price.
The court instructed the jury: “The only question before you is the question as to whether or not the plaintiff has proved that, through these agents, they did sell and deliver to the defendant the pig iron that is sued for. If so, you may find a verdict for the plaintiff for the value o£ the iron at the time and place of delivery,” etc. The record shows that the counsel for defendant “excepted to so much of said charge as directed the jury that the only question was as to whether plaintiff shipped to defendant certain pig iron in suit, and its value.” The counsel for defendant also requested the court to charge the jury that “if they believe from the evidence that exclusive credit was given by defendant to Forsyth, Hyde & Company, and it contracted with them exclusively in respect to the iron to recover the price for which suit was brought, then plaintiff could neither sue nor be sued upon such contract.” This request the court refused, and exception was duly taken and allowed. In other words, upon the theory which prevailed in the circuit court, the relation of principal and agent, as between the defendant in error and Forsyth, Hyde & Go., was assumed as beyond question. I think this judgment is error, and that the same ought to he reversed.