Imágenes de páginas
PDF
EPUB

property, and was connected with the subject of the plaintiffs' action, and damages for the breach of the contract on which the present action is founded. This counterclaim was demurred to by the present defendants, and, the demurrer being overruled, a reply was filed denying that the property had ever been delivered to Baer, or that the counterclaim arose out of the transaction of the delivery of the property. That thereafter the cause came on for trial, was submitted to the jury, and the jury found in favor of the plaintiffs therein, and judgment was rendered against the defendant Baer. During the trial testimony offered by Baer in support of his said counterclaim was excluded on the ground that his cause of action did not amount to a counterclaim, and before the final sub-mission of the cause Baer was permitted to withdraw said counterclaim, and it was ordered by the court that the same be docketed and proceeded with without further process under section 5089 of the Revised Statutes of Ohio for 1906. After stating these facts, the answer submitted that, there being no counterclaim under section 5069 of the Revised Statutes of Ohio for 1906, there was no authority under section 5089 to docket the same as a separate action, and the court was without jurisdiction over the persons of the defendants.

A demurrer to this answer, or plea in bar, was sustained and leave given to answer. The answer, after a preliminary protest against the jurisdiction of the court over the persons of the defendants, goes on to present in detail their defense to the action upon its merits, and along with the same incorporates a cross-petition in which they seek to recover a large amount of money for extra work and material furnished under the contract. A reply was filed to this answer and cross-petition, and the case went to trial before a jury, which returned a verdict in favor of the plaintiff and for $1,000 and costs. Both the defendants below and the plaintiff seek to set aside this judgment, the defendants on the ground that the court below was without jurisdiction over the persons of the defendants, and the plaintiff on the ground that the court erred in its rulings upon the trial.

1. The defendants make the point that after the court held there was no counterclaim under section 5069 of the Revised Statutes of Ohio for 1906, in favor of Baer, it was without authority, under section 5089 of the Revised Statutes of Ohio for 1906, to order this alleged counterclaim to be docketed as a separate action, and therefore was without jurisdiction over the persons of the defendants in the action thus wrongfully docketed. But we are satisfied the court below was wrong in holding that there was no counterclaim under section 5069 in favor of Baer. This section of the Ohio Code provides that "a counterclaim is a cause of action existing in favor of a defendant, and against a plaintiff or another defendant, or both, between whom a several judgment might be had in the action, and arising out of the contract or transaction set forth in the petition as the foundation of the plaintiff's claim, or connected with the subject of the action." The right claimed by Baer to recover damages for the breach of the contract with the West Side Foundry Company was so connected with the material and. tools replevined by the latter that it came within the definition of a counterclaim under the section mentioned. It arose out of the contract or transaction relied upon by the West Side Foundry Company, and

was so connected with the subject of their action as to make it properly a counterclaim. For this reason the court below had authority, under section 5089 of the Revised Statutes of Ohio for 1906, to order it to be docketed as a separate action, and therefore had jurisdiction over the persons of the defendants and the subject-matter of the action now before us on error. Clement v. Field, 147 U. S. 467, 13 Sup. Ct. 358, 37 L. Ed. 244; Morgan v. Spangler, 20 Ohio St. 38.

2. Having thus disposed of the question of jurisdiction, the case, so far as it is necessary for us to consider it, turns upon the proper construction of that portion of the contract which defines the limits of recovery to one who rightfully cancels the contract, and under its terms completes the job. Under the present contract, he was clearly entitled, in addition to certain damages, to the cost of completing the work. This did not mean the reasonable, but actual, cost. If it appeared from the testimony that he paid in good faith certain sums of money for material and labor to complete the job, he was entitled to recover such sums, whether the jury thought they were reasonable or not. The contract provided:

"It is further understood and agreed that in case of failure of the party of the first part, the West Side Foundry Company, to complete this contract as specified and agreed upon, that the said party of the second part, Randolph & Baer, shall have the right to recover any and all damages incurred by reason of said failure by the party of the first part, and shall also have the right to recover whatever sums may be expended by the party of the second part in completing the said contract in excess of the price stipulated, to be paid by the party of the first part for completing the same."

Referring to this portion of the contract, the court charged the jury as follows:

"Now, gentlemen, if, under these instructions, you find that the plaintiff was entitled to cancel this contract on the 12th day of December, you will proceed to inquire what, under the proof, he is entitled to recover from the defendants. I cannot be of much service to you in that respect. If he is entitled to recover, he is entitled to recover the reasonable cost of completing the contract, not the unreasonable or extravagant cost, but only the reasonable cost of it."

This portion of the charge was specially excepted to. Under it, as appears from the record, testimony was relied upon tending to lead the jury to believe that certain items charged against the defendants for the cost of completing the work were unreasonable and extravagant, and should be rejected or reduced, although paid by the plaintiff in good faith. Thus it was left to the jury to determine, as to each particular item, whether the cost should be recovered or not; in other words, no matter if the item cost what Baer charged for it, and no matter if he had paid the price thus demanded, and no matter if he could not have obtained the material or labor for less money, nevertheless, if the jury, in its discretion, should determine that the cost of the material or labor was extravagant, it might reject or reduce the item.

We do not understand that the contract vests any such power in the jury, or leaves the contracting party to such a doubtful and uncertain remedy under the contract. A man who contracts to do certain work must perform his contract, and, if he fails to do so and leaves the contract uncompleted, the other party is given the right to cancel the contract and complete the work. In case the contract is thus annulled,

"the party of the second part [meaning in this instance Baer], shall be thereupon authorized, if an immediate performance of the work or delivery of the materials in their opinion is required by the public exigency, to proceed to provide for the same by open purchase or contract, and the party of the first part shall remain liable to the party of the second part for the damages occasioned to them by the said noncompliance, delay, or negligence."

We have already referred to that part of the contract which provides:

[ocr errors]
[ocr errors]

"That in case of failure of the party of the first part to complete this contract that the party of the second part shall have the right to recover any and all damages incurred by reason of said failure, * and shall also have the right to recover whatever sums may be expended by the party of the second part in completing said contract in excess of the price stipulated to be paid to the party of the first part for completing the same.”

The view we take is that the purchase of the material and labor is left to the party of the first part. It may be made either "by open purchase or contract." If it is made in good faith, the sums thus expended to complete the work become a proper charge against the party of the second part. The sole question is whether such sums have been expended in good faith by the party of the second part in completing the work. If they have been, it is not for the jury to say that they are unreasonable or extravagant. The party of the first part in completing the work, occupied substantially the position of an agent for the party of the second part, and did not guaranty the wisdom of the purchase of labor or material.

The judgment is reversed, and the case remanded for a new trial.

BEEBE et al. v. WELLS.

In re FEDERATION SHOE CO.

(Circuit Court of Appeals, First Circuit.

No. 666.

February 13, 1907.)

BILLS AND NOTES-CONSIDERATION-FORBEARANCE TO SUE.

The P. S. Company, being insolvent, instead of liquidating, formed a new corporation, which subsequently became bankrupt, conveying a substantial portion of the assets of the P. S. Company to the new corporation, in payment of capital stock. Claimant, a creditor of the P. S. Company, had been demanding payment, and, after the reorganization, proposed that the balance of the P. S. Company's assets be transferred to the new corporation, in consideration of certain notes of the latter which should be transferred by the new corporation to claimant as security for its debt, threatening otherwise to sue to wind up both corporations. The notes were executed as agreed, but no additional property was transferred from the P. S. Company to the bankrupt. Held, that claimant's promise to forbear suit against both corporations constituted a sufficient consideration for the bankrupt's notes.

Appeal from the District Court of the United States for the District of Massachusetts.

On appeal from an order affirming an order of a referee disallowing the claim of Lucius Beebe & Sons against the estate of the Federation Shoe Company, a bankrupt.

The following is the opinion of Dodge, District Judge, in the District Court:

The notes upon which the claim of the petitioners for review is based are dated March 20, 1902. They are payable to the petitioners' order, and signed: "The Federation Shoe Company, by H. M. Cushman, Treas." The bankrupt was a corporation under the laws of Massachusetts. Cushman was its treas

urer, and signed the notes, which were then delivered to the petitioners. The Federation Shoe Company was adjudged a bankrupt October 17, 1902, upon an involuntary petition filed against it on September 26, 1902. The petitioners' claim against it upon these notes was rejected by the referee, and upon their petition for review a certificate was filed June 15, 1903, which was recommitted to the referee April 17, 1905, to hear further evidence. The referee's decision after the hearing on recommittal was the same as at first, and the petitioners now seek to review that decision. The question certified by the referee (March 24, 1906) is: "Are the notes offered in proof good and valid notes and entitled to be proved against the estate of the bankrupt?" By the findings of fact and opinion which accompany the referee's certificate it appears that he answered this question in the negative, because on the facts found he ruled that the notes were without consideration, and that the petitioners are not bona fide purchasers of the notes for value without knowledge of the want of consideration.

No reason appears for questioning any of the findings of fact which the referee has made, and they are therefore approved and adopted.

He has declined to make certain further findings of fact requested by the petitioners. These requests, and the referee's decision upon each, appear in his report of findings, being numbered 4, 5, 6, 7, and 8. As to requests 4 and 5, it was for the referee to determine how far Small's statements could be relied upon. His refusal to rely upon them is supported by the undisputed facts appearing regarding Small, and nothing has been shown which warrants the court in holding that the refusal was wrong. As to the request numbered 6, also, it cannot be said that the referee was required by the evidence before him to make the finding requested. I am unable, upon the evidence before the referee, to see any reason for doubting the correctness of his qualified finding made upon the request numbered 7.

In refusing the request numbered 8, the referee decides against the petitioners' contention that a good consideration for the notes is found in their forbearance to bring a suit in equity for the purpose of following those assets of the Pray-Small Company which that company had conveyed to the bankrupt in exchange for $30,000 in its stock. Such a suit would, it is claimed, have resulted in avoiding the conveyance referred to as fraudulent, and in a marshaling of the bankrupt's assets for the purpose of paying therefrom the indebtedness due the petitioners from the Pray-Small Company; and that such would have been the result of the suit, had it been brought. must be granted, in view of the findings that the conveyance was in fraud of the petitioners' rights as creditors of the grantor and gave them the right to avoid it. The petitioners, however, fail to show, in my opinion, that the notes were given in consideration of their forbearance to bring such a suit.

No such suit was brought, it is true, but it does not follow, from the mere fact that the petitioners did not bring it, that the notes were upon consideration of their forbearance. There must have been an express or implied agreement to forbear between them and the bankrupt. Boyd v. Freize, 5 Gray (Mass.) 553. No express agreement is claimed, and the evidence does not show an implied agreement.

The actual consideration for which the notes were, in fact, given must be ascertained from the petitioners' letter to Small dated March 20, 1902. The notes bear the same date, and, as the referee has found, were made by the treasurer of the bankrupt corporation, at Small's request, upon receipt of the letter referred to. Not only does that letter specify, as the consideration contemplated for the proposed notes, the purchase which it suggests by the bankrupt of more of the Pray-Small Company's assets, and not only does it omit any statement or intimation that the petitioners will attack the former conveyance by that company as fraudulent unless the proposed notes

are given, but it states that the assets of that company were undoubtedly sufficient. when that conveyance was made, to pay all its debts. This statement is inconsistent with the findings now made by the referee, it is true; but it is nevertheless inconsistent also with the contention that the petitioners were, when the notes were given, threatening the bankrupt with a suit to avoid the former conveyance, as is also the further statement in the letter that there seems to be no good reason why the Pray-Small Company should not make a further conveyance of its assets to the bankrupt.

Nothing which may have been said or written before March 20, 1902, to Small or to the bankrupt by the petitioners or their counsel, seems to me sufficient to affect the above conclusion, because the letter of that date, which as the referee has found was drafted by the petitioners' counsel, and must be considered as written in view of everything which had been previously discussed, expressly states that the previous request for payment is "somewhat modified," and thereupon proceeds as above stated. The position stated in the letter must be considered as the attitude of the petitioners upon which the parties acted in giving and receiving the notes, to the exclusion of anything inconsistent therewith involved in what may have passed between them before the writing of the letter. It is indeed said in the letter that the petitioners "do not care to unnecessarily cripple your new company by requiring a liquidation of the affairs of both companies," etc. But since the other statements made in the letter are, as has been indicated, wholly inconsistent with the theory that it was in the petitioners' power to accomplish anything of the kind, I am unable to consider this language as manifesting any intent on their part to make the attempt.

The proposed notes were, according to the letter, to be given by the bankrupt to the Pray-Small Company, which company was then to deliver them to the petitioners as collateral security for their claim against it. This course was not, in fact, followed. The notes were, instead, made payable to the petitioners direct, indorsed by the Pray-Small Company, and thus indorsed delivered to the petitioners.

The petitioners, however, accepted this arrangement as the equivalent of that proposed in the letter, and I see nothing, therefore, in the fact that it was a departure to the above extent from the arrangement proposed which requires any modification of the conclusions herein reached.

The separate written inquiries addressed by the petitioners' counsel on April 23, 1902, after the petitioners had received the notes, to the Pray-Small Company and the bankrupt, and the replies thereto received from each, afford further confirmation of the strongest character to the view that the only consideration for the notes was understood by the petitioners and the bankrupt to be property sold by the Pray-Small Company to the bankrupt. The substance of these inquiries and replies is set forth in the referee's report. The petitioners' understanding is thus definitely set forth in the inquiry addressed to the bankrupt: "I am advised that in payment of these notes (the Pray-Small Company notes then held by the petitioners) the PraySmall Company has given to L. Beebe & Sons certain notes made by you and indorsed by the Pray-Small Company, which were given by you to Pray-Smali Company in payment of property which you purchased of PraySmall Company." If any other consideration, or if a different consideration, was then in the petitioners' minds, it is difficult to believe that all reference to it would have been here omitted, considering the circumstances under which this inquiry was written and the purpose for which it was written. Lastly, the proof of claim in these proceedings, sworn to December 5, 1902, by one of the petitioners, contains the explicit statement, "These notes were given by the bankrupt for merchandise and assets sold to them by the Pray-Small Company, and Pray-Small Company transferred them to creditors in payment of indebtedness to the deponents," and no reference whatever is made in it to any other or any different consideration for the notes. There never was, in fact, any such purchase by the bankrupt from the Pray-Small Company, as suggested in the letter of March 20, 1902, or as referred to in the letters of inquiry of April 23, 1902. Small's answers to those inquiries were untrue. Unless, therefore, the petitioners were misled by the bankrupt into the belief that it had, in fact, bought merchandise of

« AnteriorContinuar »