Thomas Gordon Malting Co. v. Bartels Brewing Co.

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] We have reached the conclusion that the judgment, which dismissed the complaint as to both causes of action, must be affirmed as to the first and reversed as to the second. In order to understand the facts which differentiate the two transactions upon which these two causes of action are founded, we must know something of the facts which are common to both.

The plaintiff was a corporation engaged in the business of manufacturing malt at Oswego, N.Y., and the defendant was a corporation which owned and operated a brewery at Syracuse. When these contracts were entered into Herman Bartels was the president of the defendant, and had his office at its brewery. At the same time he was also the president of the Lake Shore Malting Company, which had its office in the same rooms. Bartels was also interested in other breweries, among which were the Monroe Brewing Company of Rochester and the Chemung Consumers' Brewing Company of Elmira. He was evidently the controlling spirit, if not the largest stockholder, in the Bartels Brewing Company and the Lake Shore Malting Company, and he seems to have been the practical manager of both. The business of the brewing company was, as its name indicates, the manufacture and sale of beer, in the conduct of which it bought and used large quantities of malt, and the business of the Lake Shore Malting Company was the manufacture and sale of malt. Both contracts were negotiated between a Mr. Eddy, acting for the plaintiff, and Herman Bartels, acting either for the Lake Shore Malting Company or the defendant, and both were executed at the office of the defendant. With this statement of the features which are common to both contracts, we now pass to the consideration of those which characterize them separately.

1. It is to be observed that the order, which is the basis for the first contract, is written upon the printed letter paper of the Lake Shore Malting Company and is signed by Herman Bartels as an individual. This order, immediately after it was received by the plaintiff, was entered upon its books under the heading "sold to H. Bartels," and the plaintiff's treasurer wrote to Bartels an acknowledgment. On May 23rd, 1904, or about six months after the acceptance of this order, the plaintiff received some shipping directions purporting to have been signed on behalf of the defendant, and the receipt thereof was acknowledged by the plaintiff. On the very next day after the receipt of this acknowledgment Herman Bartels sent to the plaintiff a letter written upon the letter paper of the Lake Shore Malting Company stating: "The malt ordered is to be billed to the Lake Shore Malting Company. All malt to be ordered shipped is to be billed in that way." Following this, the Lake Shore Malting Company directed the New York Central freight agent at Syracuse to deliver all malt consigned to it to the Bartels Brewing Company at its brewery. There were various consignments of malt under contract one. Some of the bills of lading were directed to the Lake Shore Malting Company and others were directed to concerns which, the defendant now claims, were customers of the Lake Shore Malting Company. The invoices, however, seem to have been all made out to the Lake Shore Malting Company, and this discrepancy the plaintiff's cashier explains by saying that he acted upon directions received from Bartels. Whatever the facts may be with reference to this method of shipping and billing, it is apparent that a considerable quantity of the malt came into the possession of the defendant. As bearing upon the issue whether the plaintiff was dealing with the defendant or the Lake Shore Malting Company, the plaintiff was permitted to prove entries in its books showing that the malt had been charged to the defendant. The door to such self-serving declarations having thus been opened, the defendant was permitted to introduce extracts from its own books and papers and from the books and papers of the Lake Shore Malting Company to establish that the malt which the defendant received had been purchased by it from the Lake Shore Malting Company. Much evidence of this character, and much more that was competent upon the issue, is to be found in the record, but we cannot refer to it in detail without extending the discussion beyond reasonable limits. As we have concluded to affirm the judgment in so far as it relates to the first cause of action, it may be sufficient to say that upon all the evidence relating to contract one, we think the referee was justified in finding "That the said order was intended by Herman Bartels to be made for and on behalf of the Lake Shore Malting Company, * * * and the fact of such intent was communicated to plaintiff shortly after the giving of the above order, and the plaintiff acquiesced in the assignment or transfer of said contract, * * * and treated and dealt with the Lake Shore Company as the owner of and a party to said contract."

Parol evidence was competent to show who were the parties to the transaction, for the plaintiff invoked the rule that the contract, although apparently made between the plaintiff and Herman Bartels, was in fact made between the plaintiff and the defendant. Such evidence is always admissible in an action brought to charge the real principal, and it goes without saying that it is equally open to the defendant, not named in the contract, to show that he was not the real principal. (Higgins v. Senior, 8 Mees. W. 834, 844; Mills v. Hunt, 20 Wend. 431, 434; Story on Agency, sec. 269, and cases cited in notes.)

We, therefore, conclude that in the first cause of action the judgment must be affirmed.

2. The situation with regard to the second contract is entirely different. Here the plaintiff is seeking to charge the other party, to the contract as made, and is not attempting to hold a third person not named therein. This contract was entered into in September, 1905, nearly a year after the first one, and is signed by the defendant through its president, Herman Bartels. The rules of evidence relating to it are directly antithetical to those which apply to the first contract, under which the plaintiff has sought to charge a person not named in it, for here the suit is against the party who signed the instrument. The rules of law pertinent to this question are very simple in theory, but often difficult of application. Where a party signs a contract in his own name, even though he is acting for another, he is personally bound thereby. (Magee v. Atkinson, 2 Mees. W. 440; Meyer v. Redmond, 205 N.Y. 478, and cases cited.) If the other party to the contract elects to hold the signer thereof, parol evidence is not admissible to release him from the obligation which he has voluntarily assumed, although it would be competent, as we have seen, to bring in a third party not named. (Higgins v. Senior,supra; Mills v. Hunt, supra; Story on Agency, supra.) With respect to this second contract, the referee found "That the plaintiff knew and understood at the time the said last above order was received that it was intended by the said Bartels as a continuance of the business relations which had existed between the plaintiff and the Lake Shore Malting Company during the year 1904, for the season of 1905, and that the goods to be shipped thereunder were to be shipped to the Lake Shore Malting Company and its customers." It is evident that this finding is based upon the same evidence which was relied upon by the defendant to show that it was not a party to contract one. This evidence, although competent as to contract one, was not admissible as to contract two, for the reasons which we have suggested; and, if we disregard it, there is nothing to sustain this finding either as one of fact or law.

At this point the defendant calls to its aid the defense ofultra vires, and its contention is that the evidence not only fails to show that Bartels, its president, was authorized to enter into contract two, but affirmatively establishes that he was not empowered to execute it. It is a sufficient answer to this position that the defense of ultra vires was not pleaded by the defendant, for it is always an affirmative defense. (Hess v. Sloane, 66 App. Div. 522; affd. on opin. below,173 N.Y. 616; Richmond Co. Socy. P.C.C. v. City of New York,73 App. Div. 607, 610.) But beyond this, the findings of the referee indicate that he gave undue weight to the by-laws of the defendant in upholding this defense, and did not attach sufficient importance to the course of dealing under contract two. This is probably explained to some extent by the fact that both contracts were regarded as being controlled by the same rules of evidence, and that, as we have seen, was a mistake. The defendant used large quantities of malt, and Bartels was its president, assuming to make a contract which was apparently within the range of its business and the scope of his authority. The greater portion of the malt, delivered under contract two, was used by the defendant, and the rest was sent to its nominees under circumstances which are not inconsistent with the conclusion that the defendant was the purchaser of all the malt. The plea of ultra vires here does not arise out of a lack of power in the defendant corporation to make the contract with which it is sought to be charged, but out of the asserted lack of authority in its president. This is a vital distinction which was very clearly stated by Judge GRAY in Leslie v. Lorillard (110 N.Y. 519, 532) where he wrote: "In suits between the corporation and strangers dealing with it, the question is whether the act is one the corporation is not authorized to perform under any circumstances; or one that it may perform for some purposes or under certain conditions. In the first case it is ultra vires and there can be no recovery; because the party dealing with the corporation is bound to know, from the law of its existence, that it has no power to perform it. In the second case, the issue will turn upon whether the party dealing with it is aware of the intention to perform the act for some unauthorized purpose, or whether the attendant circumstances justify its performance." As contract two was one which the defendant had power to enter into in the ordinary course of its business, the question is whether the plaintiff had any reason to suspect that the defendant, acting through its president, intended to purchase malt for an unauthorized purpose. The referee's findings do not cover this phase of the case, and the finding which he made relates solely to plaintiff's knowledge or understanding of Bartels' imputed intention to continue his course of dealing through the Lake Shore Malting Company. We cannot further pursue the discussion upon this point without anticipating or suggesting the course of another trial, and we, therefore, leave it with the observation that this defense is not available to the defendant in any event until it is properly pleaded.

Another difficulty in the case arises out of the referee's findings sustaining the defense of payment. The referee's conclusions upon this issue are evidently founded upon the plaintiff's acceptance of the notes of the Lake Shore Malting Company in payment of the malt delivered under contract two. It appears to be the fact that the plaintiff had these notes discounted at a bank, and when they were not paid at maturity brought suit upon some of them against the Lake Shore Malting Company which was prosecuted to judgment. Action was also commenced against Bartels as indorser upon some of the notes. All this might be cogent evidence in support of the defense of payment, if it tended in any degree to connect the defendant, the party to the contract, with the transactions upon which this defense is based. But there is no such evidence in this record. The notes were those of a stranger to the contract. There was no privity between the Lake Shore Company and the defendant. So far as appears, neither acted as agent for the other. The Lake Shore Company was appearently a mere volunteer in the giving of its notes, and in these circumstances no attempted payment or satisfaction by it could inure to the benefit of the defendant. (Atlantic Dock Co. v. Mayor, etc., of N.Y., 53 N.Y. 64;King v. Barnes, 109 id. 267, 289; Muller v. Eno, 14 id. 597.)

The appellant's brief presents many exceptions to findings and rulings which we deem it unnecessary to discuss, in view of the fact that on the second trial, under contract two, the evidence must be materially different.

The judgment of the courts below, in favor of the defendant on the first contract set forth in the first cause of action, should be affirmed; and the judgment, so far as based upon the second contract set forth in the second cause of action, should be reversed and a new trial granted, without costs in this court to either party.

CULLEN, Ch. J., GRAY, HAIGHT, VANN, CHASE and COLLIN, JJ., concur.

Judgment accordingly.