Court Opinion

ID: 5355660
Source: CourtListenerOpinion
Date Created: 2022-01-08 07:00:26.6537+00
Date Added: 2024-06-11T08:29:47.607090
License: Public Domain

Dore, J.
(dissenting). As to the transactions in the first and second causes of action, I agree that the appellant Merchants was protected in its dealings with Eldredge, the vice-president and general manager of Grossmann in New York, by reason of his apparent authority, and as to these two causes of action, judgment should have been directed in favor of Merchants.
The third and fourth causes of action relate to pledging with Merchants 2,375 cases of eggs purchased on a joint venture and borrowing thereon $14,250 upon collateral notes of Grossmann issued solely by Eldredge. In my opinion, judgment should have been in Merchants’ favor on these causes of action also, as well as on the fifth cause of action.
Eldredge conducted Grossmann’s affairs from its place of business in New York. Harding, the president of Grossmann, testified that Eldredge “ ran this business in New York, yes,” that he was in charge of the plant and did all the buying and all the selling. He was in sole and direct charge from the time of his election in April, 1932, to the time of his withdrawal or discharge in the latter part of January, 1933.
It is disputed whether Eldredge resigned as vice-president on January 6, 1933, or after January 23, 1933, but that is immaterial, as Harding testified that between January sixth and January twenty-third the business of Grossmann was conducted exactly the same as it had been prior to January sixth and that there was no change at all. Concededly, no notice was sent to Merchants that Eldredge had resigned. Notice was not sent either to the Irving Trust Company with which Grossmann banked, or to any one that did business with the corporation. Harding testified, “ we didn’t want to disturb things. I wanted to have Mr. Eldredge’s business — that is, his connection with our company, a continuous thing, and there didn’t seem to be any reason for it whatsoever.” Two hundred checks of Alex Grossmann & Co., Inc., signed by Eldredge and Henry Reich, as treasurer, were in fact issued between January 6 and January 23,' 1933, and were honored by Grossmann. These checks totaled $79,950.49. In fact, from the news item in The American Creamery and Poultry Produce Review of January eleventh, on which Grossmann relies, it is a fair inference that the change was to be effective from February 1, 1933. Eldredge testified that he received a telegram that his discharge took effect February first, and he received his check up to February first. In that state of facts, third persons, outsiders, dealing in good faith with Grossmann should not be charged with notice of an internal change in Grossmann’s affairs, of which they had no notice, actual or otherwise, so long as Grossmann continued to hold Eldredge out *152to the commercial community as acting in the same capacity as he acted prior to the change.
There were prior transactions that Merchants had with Eldredge acting on behalf of Grossmann in 1932 not involved in this litigation, except as indicating a course of dealing. In one previous transaction there was a prior collateral note similarly signed by Eldredge alone which had been honored by Grossmann. In July, 1932, Eldredge, acting for Grossmann, bought 4,238 cases of eggs then on storage in Merchants’ warehouse, and Eldredge borrowed from Merchants $12,633.75 on a promissory note dated July 25, 1932, pledging the warehouse receipt for the 4,238 cases of eggs as security, and signed the note: “ Alex Grossmann & Co., Inc., D. C. Eldredge, Jr., V. Pres.” Grossmann paid that loan by twelve of forty-four checks constituting one of plaintiff’s exhibits. These checks were signed by Eldredge and Grossmann’s treasurer and paid to Merchants in recognition of Grossmann’s obligation created by Eldredge’s sole signature on the promissory note.
On December 5, 1932, there was another transaction involving a consignment of 1,318 tubs of butter sent to Merchants from one Faulkner for the account of Droste-Snyder subject to the payment of drafts for $19,968.98, concerning which Eldredge notified Merchants that Grossmann would pay the difference between what was loaned by Merchants and the amount of the drafts and confirmed the notice by letter dated December 5, 1932, sending to Merchants Grossmann’s check for $6,788.98 signed by two officers of Grossmann, which, with the $13,180 advanced by Merchants, made up the amount of the Faulkner drafts which Merchants paid under the arrangement. That butter was stored for Droste-Snyder in accordance with Eldredge’s written request acting on Grossmann’s behalf in the letter of December fifth.
In November, 1932, Eldredge acting for Grossmann and Droste acting for Droste-Snyder had bought on account twenty-five cars of storage eggs on the Chicago Mercantile Exchange for November delivery, of which transaction Grossmann received and concededly retained a profit of $977.47. This transaction also was in DrosteSnyder’s name but under an arrangement that Grossmann and Droste-Snyder would contribute equally and split the profit or loss equally. This was done and the profit of $977.47 remitted to Grossmann.
It is, therefore, not accurate to say that there were no former transactions similar in nature to those involved in this litigation and that Merchants was especially put on inquiry in the transactions here in question, as to Eldredge’s authority to act as he did. The transaction involving the prior promissory note indicated a course *153of dealing which informed Merchants that two-signature checks of Grossmann’s were issued by Grossmann, with Grossmann’s authority, to pay its one-signature note signed by Eldredge. As indicated, there were twelve such checks issued on twelve separate dates for varying amounts between July 26, 1932, and August 11, 1932. This might well excuse inquiry by Merchants on the subsequent transactions involving the promissory notes in causes of ' action three and four, especially since all of Merchants’ dealing with Eldredge necessarily confirmed its faith in his authority to bind his principal in butter and egg transactions. Grossmann’s office was in New* York, and Eldredge was in complete charge of it. The president was in Omaha, Neb., and came to New York only five or six times a year for a few days, and Eldredge transacted, as the general administrative officer, the large Grossmann business in butter and eggs. Grossmann’s annual volume of business was six or seven million pounds of butter and one and a half million dozens of eggs, which in 1932 would be upwards of two million dollars in gross business.
In addition to this, it seems to me that Grossmann ratified the transactions after full knowledge thereof. The eggs involved in the third, fourth and fifth causes of action are all part of twenty-eight cars of eggs which came into possession of Grossmann by delivery of the ninety-three cars that were bought on the joint venture by Droste through James E. Bennett & Co.
Grossmann’s action against Merchants is in conversion and is predicated, therefore, on the theory that Merchants converted property belonging to Grossmann. The only way that Grossmann could possibly get the ownership of this property was through the purchase of the ninety-three cars in December as part of the joint venture, twenty-eight cars of which were delivered to Grossmann in January. The advances made by Grossmann prior to December 31, 1932, were made upon the entire purchase of ninety-three cars, and no part of these payments can now be segregated or allocated to any particular carloads of eggs. Grossmann’s drafts, totaling $106,834.15, are much more than the purchase price of the twenty-eight carloads shipped to Grossmann, and, accordingly, it could never have been the intention of the parties at the time that Grossmann was buying and paying only for twenty-eight segregated carloads. Neither Eldredge nor any one else in the Grossmann company had any direct dealings with Bennett. All of the purchases were made by Droste, acting for the joint venture.
Grossmann concedes that it ratified the purchase of the twenty-eight carloads of eggs. But the twenty-eight carloads were part *154of the ninety-three purchased by the joint venture. The law is clear that a ratification of one portion of a joint venture is a ratification of the whole. The law is also clear that the respondent may not claim title to the twenty-eight carloads of eggs without ratifying the means by which that title was acquired. Hence, a ratification of the purchase of the twenty-eight carloads is a ratification of the operation of the joint venture through which the purchase was made.
Up to now, in two causes of action tried together in a single trial, Grossmann has won in its cause of action against Merchants on the theory of conversion, that is, that there was ownership in Grossmann of the property converted; and Grossmann has simultaneously defeated the cause of action by Industrial Cold Storage against Grossmann on the theory of a complete repudiation of the joint venture. This result cannot be sound.
Of course, if the defendant as a warehouseman had a lien, it was not bound to deliver the eggs without an offer to satisfy the warehouseman’s lien. (General Business Law, §§ 95, 112.) It seems to me that Merchants in the regular course of its business had acquired warehouseman’s liens on the property in its possession and it was not obliged to surrender in the absence of a tender to satisfy the lien. Incidentally, the court refused to find that demands had been made by the plaintiff without tender of liens but these refusals seem contrary to documentary evidence of multiple demands made by Merchants from January 25 to February 1, 1933. Under sections 95 and 116 of the General Business Law these demands were ineffectual to make Merchants a converter of the butter and eggs demanded because of the conceded failure of respondent to tender the amount of the liens.
It is significant that the Grossmann telegram repudiating the joint venture was not sent until January 25, 1933, the day after there were no quotations whatever on storage eggs. Is it not conceivable and most probable that if the market had taken an opposite turn and there had been a profit on the transaction, Grossmann would have received and retained the profit as it concededly did on the prior Board of Trade transaction? Mr. Mclnnerney, president of National Dairy Products Corporation, in answer to a question whether they would have taken the profits if the transaction went “ right,” replied, “ A. I hope not. I don’t know.” It is also significant that on Grossmann’s books subsequent to December, 1932, there were five different changes with regard to the item of $977.44, the profit Grossmann received and retained on the former joint venture, the last entry being made in September, 1933, in accordance with instructions from the auditing department *155of National Dairy Products “ so that it may properly reflect the legal interpretation of our relation with Droste.”
Whatever may be the truth of the claim that Eldredge did not reveal to his superiors the exact nature and extent of his transactions with Droste-Snyder, that should not be the responsibility of third parties warehousemen honestly dealing in good faith with Grossmann’s fully accredited agent. When apparent authority is conferred the principal and not third parties should suffer from an actual exercise of authority not exceeding the appearance of that which is granted. (Armour v. Michigan Central R. R. Co., 65 N. Y. 111, 121.)
A principal may be bound by the act of his agent even in excess of actual authority where a third person believing and having a right to believe that the act was within the authority has acted in reliance thereon and would sustain damage if the act of the agent was not considered that of the principal. (Walsh v. Hartford Fire Ins. Co., 73 N. Y. 5.) Grossmann should not be permitted to place its business in the hands of a general manager with the broadest powers and then escape the result of his exercise of discretion and judgment. Similarly Grossmann should not be permitted to proceed to judgment against Merchants on the theory that it has ratified the joint venture and resist judgment against it in the Industrial action on the theory that it has completely repudiated the joint venture.
In the case of Grossmann v. Merchants the judgment appealed from should be reversed, with costs, the complaint dismissed, and judgment directed for Merchants against plaintiff Grossmann on the defendant’s counterclaim, with interest and costs representing the amount of the balance unpaid after crediting the sums realized from the sale of the collateral security. Merchants’ counterclaims to the first and second causes of action were withdrawn. Its counterclaims to the other causes of action are as follows: In the third cause of action, for $2,807.66; in the fourth cause of action, $2,772.41, the balance unpaid on the notes after the collateral was liquidated; in the fifth cause of action, for $933.45, principal and accrued interest remaining unpaid for the loan to Droste-Snyder in connection with the joint venture.
The trial court refused to find the terms on which the loans were made on the eggs involved in the thud and fourth causes of action but it did find demand for payment and refusal, and sale for a price that was reasonable. Similarly the court refused to find the facts on the Droste-Snyder loans up to January 14, 1933, and refused to find the disposition made of the proceeds of the loan on the 1,461 cases of eggs in the fifth cause of action and also refused to find *156demand and notice of sale, default, sale, the result of the sale, or the balance due after crediting the proceeds. Accordingly I consider that instead of directing judgment for a definite amount on the counterclaims the matter should be remitted to the trial court to determine the amount unless the attorneys can agree upon the figures.
The Industrial Cold Storage and Warehouse Company is the plaintiff in the second suit for the sum of $11,495.08, on the theory that Eldredge was authorized by virtue of his implied authority to enter into the joint venture and, therefore, that Grossmann is liable on the loans concededly made by Industrial to Droste-Snyder in connection therewith and also on the theory that Grossmann ratified the joint venture. For the reasons indicated above the judgment in favor of Grossmann in this case should be reversed, with costs, and judgment entered in favor of Industrial Cold Storage and Warehouse Company for the amount advanced on behalf of the joint venture less the amount realized through the sales, with costs. In this case, similarly, if the attorneys cannot agree upon the figures, the matter should be remitted to the trial court to determine the exact balance due.
TJntermyer, J., concurs.
Judgment modified by eliminating therefrom the sum of $9,207, with interest from December 30, 1932 (first cause of action), and the sum of $5,733, with interest from December 31,1932 (second cause of action), and as so modified affirmed, with costs to the appellant. Settle order on notice, reversing findings inconsistent with this determination, and containing such new findings of fact proved upon the trial as are necessary to sustain the judgment hereby awarded.