Court Opinion

ID: 3602410
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:48:31.699805+00
Date Added: 2024-06-11T13:57:31.935647
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 393 
The material facts in this case are substantially undisputed. For some years previous to 1875 the defendants had been in the habit of purchasing lumber in Canada of Hall  Company, dealing with that firm as owners and in their own name. In the process a large indebtedness had accrued in favor of the defendants, which the parties expected would be reduced by the sale of a quantity of shooks consigned by Hall  Company to the defendants, to be sold by them on commission. While the shooks remained unsold, and the indebtedness referred to stood unbalanced or unaffected by their proceeds, and on or about September 23, 1875, the defendants made a contract with Hall  Company for the sale and delivery to them of 600,000 feet of specified lumber upon a credit of three months. The order was very soon increased to 900,000 feet, which at the agreed price would have amounted to more than the outstanding debt, irrespective of the proceeds of the unsold shooks. This contract of purchase and sale was made binding by telegrams and letters which sufficiently manifested the terms of the agreement. That agreement was, of course, executory, and remained to be performed, the respective parties having only the right to compel performance, or recover damages for a breach. Before any of the lumber arrived at New York, and before title to any of it had vested in the defendants, the *Page 395 
latter were, in substance, informed that the lumber shipped and on the way was not the property of Hall  Company, but was owned by other parties for whom Hall  Company were acting as agents. While some criticism is expended upon the manner and tenor of this notification, we deem it quite sufficient to charge defendants with a knowledge that Hall  Company were not the owners of the lumber with which they were proposing to fulfill their contract. The defendants accepted the lumber with this knowledge. It turns out that the insolvency of Hall  Company and a seriously diminished return from the sale of the shooks has left a portion of the debt due from Hall  Company unpaid, which balance the defendants claim to off-set in this action brought by the real owners of the lumber, and whether that off-set should be allowed, or rejected as the courts below have determined, is the principal question presented by this appeal.
The reasoning of the learned counsel for the appellants is founded substantially upon the validity and binding force of the executory contract of purchase and sale at its date. He answers the authorities which deny the right of set-off when notice of an agency and different ownership is given "before the contract is completed" (Moore v. Clementson, 2 Camp. N.P. Rep. 22); "before they are delivered or paid for" (Barb. on Set-off, p. 135, 136); "before the factor delivers goods in his own name" (Rabone v. Williams, 7 Term Rep. 360); "by something which transpired before the contract was completed" (Hogan v.Shorb, 24 Wend. 457, 463); by insisting that they relate to cases in which the sale and delivery are concurrent acts and there is no contract without the delivery; and he claims that in the present case the rights of the parties were fixed when the contract itself was made; that the right of set-off at once accrued, and when the principal sued and took the benefit of his agent's contract he was liable also for its burdens.
We think the error of this reasoning lies in the assumption that the defendants obtained a right of set-off at the moment the contract was made. We are unable to admit that proposition. *Page 396 
The contract was executory. While it remained such, it created no debt due to Hall  Company against which there could be a set-off. Out of that contract a debt due from the defendants might or might not arise, and until it did there was nothing upon which a counter-demand could be applied. The defendants were not at once liable for the purchase-price of the lumber. Until its delivery or tender in accordance with the contract terms the vendee was not bound to pay or give his note, and until those conditions performed created a debt there was none so existing as even to raise the question of off-set. If the vendors did not perform, the vendees would owe them nothing for the lumber, but, on the contrary, would merely have a further claim for breach of the contract. At the date of the contract, the added fact must be noted that the real claim of the defendants was unknown and unliquidated and could not be finally ascertained until the proceeds of the shooks were determined by a sale. The debt was only liquidated in part. It was subject to reduction by the property already received from Hall  Company, but the proceeds of which were unknown. The right of off-set, therefore, did not and could not arise at the date of the contract, and sprang up, if at all, at the date of delivery But, before that, notice of another ownership intervened. When the lumber came, and the vendee saw that the vendor, on a contract made with him as owner, was seeking to perform as agent, and instead of fulfilling his own obligation was substituting performance by another, such vendee could refuse the substituted performance in any case where his rights or interests would be injuriously affected by the change. Brett  Company had been long dealing with Hall  Company as owner, and in the process mutual accounts had been steadily debited and credited, and applied one upon the other. When the purchase was made the balance, so far as ascertained, was largely against the vendors, and may have been made either as to quantity or price for that very reason. In such a case the vendees undoubtedly had a right to refuse to come under obligations to the new creditor, and did not break their contract with Hall 
Company *Page 397 
if they stood upon such refusal. But, being at liberty to refuse, and to demand performance by Hall  Company, under the existing circumstances and relations, in strict accord with their contract, they were also at liberty to accept the lumber with the necessary consequence that the whole purchase-price should become due to the real and disclosed owner, and none of it to Hall 
Company, except as agents for that owner. And so it follows that the authorities stand upon just principles when they assert that the set-off is lost if the principal is disclosed before the goods are delivered or the payment made. The vendee is not then acting in the dark, and has his liberty of action remaining, at least where his interests may be affected by the change of creditors, and so can have no equity to use the goods of one man to pay the debt of another. If he refuses, as he may, his contract relation with his vendor remains, and all his rights and remedies under it. But if he accepts he cannot complain that his rights are changed and harmed, since the acceptance is his free and voluntary act, made with full knowledge and without being misled.
Certain questions of evidence remain to be briefly considered. One of the defendants was asked whether he ever knew, or supposed, or suspected that Hall  Company were not the principals in the transaction. The question was certainly too broad. It could not have been truthfully answered in the negative for the witness admits that he heard of plaintiff's claim directly from them in April, 1876. Indeed, he was permitted to answer that he knew of no such agency before February of that year which covered the material portion of the time. He was also asked who he understood to be the owner of the lumber at the time of the sale and delivery. The facts as to the notice given were proved. His understanding or misunderstanding of them could not alter what they disclosed. The letter of February 10, 1876, was not objected to because written by Cooper. When offered it was shown to the witness and he was asked: "Is that the signature of Brett, Son  Company by Cooper," and answered, "It is." The objection was "immaterial and incompetent and *Page 398 
as being subsequent to this lumber transaction." There was no suggestion that the letter was not that of the firm, or was written without their knowledge or authority, which appears to be the present ground of complaint. Other questions we have examined but need not discuss.
The judgment should be affirmed, with costs.
All concur.
Judgment affirmed.