Columbus Construction Co. v. Crane Co.

Columbus Construction Co. v. Crane Co. (Circuit Court of Appeals, Seventh, Circuit. October 1, 1892.) No. 23. 1. Contracts—Sale —Agency. Plaintiff and defendant entered into a written agreement, in which the defendant agreed to purchase in its own name and upon its own credit, as the agent irrevocable of the plaintiff, certain goods, and to deliver the same at a specified time. Meld, that defendant was liable to plaintiff, as a vendor, for failure to deliver the goods according to the agreement. 2. Same—Construction. The fact that there was attached to such agreement an exhibit showing a form of contract with a manufacturer for the manufacture and sale of such goods does not bind the defendant to procure the goods under such contract. In Error to the Circuit Court of the United States for the Northern District of Illinois. Action by the Columbus Construction Company against the Crane Company. A demurrer was sustained to the third and fourth counts of the declaration. Plaintiff brings error. Reversed. Statement by Woods, Circuit Judge: The nature and ground of the ruling upon which error is assigned are well stated in the following brief opinion of the judge who presided in the circuit court: “Blodgett, District Judge. This is a demurrer to the third and fourth counts of plaintiff’s declaration, which charge.the defendant with a breach of the contract, attached to the declaration, and made a part of these counts, while acting as agent of the plaintiff. I have no doubt that this contract is a contract for the employment of the defendant by the plaintiff as a broker or agent of the plaintiff for the purchase of the wrought-iron pipe mentioned in the contract. It is not a contract for the sale of the pipe by the defendant to the plaintiff, nor does it contain any guaranty, expressed or implied, of the quality of the pipe on the part of the defendant, if defendant was only acting as agent or broker for the plaintiff. The contract makes the defendant merely the broker or agent of the plaintiff to purchase this pipe for the plaintiff. Both the letters attached to the contract, and made a part thereof, and the terms of the contract itself, exclude any other construction than that this is a contract for brokerage. And, as there is no allegation in either of these counts charging the defendant with any breach of duty as a broker or agent of the plaintiff in the purchase of this pipe, such as that the defendant failed to purchase pipe of the required quality for delivery to the plaintiff, I do not see that there is any cause of action made by these two counts. The demurrer is therefore sustained to the third and fourth counts.” The following is the agreement in question, with the exhibits attached, excepting parts omitted, which are not relevant to any question discussed by counsel: “This agreement, made this twenty-eighth day of June, A. D. 1890, between the Columbus Construction Company, a corporation existing under and by virtue of the laws of the state of New Jersey, party of the first part, and the Crane Company, a corporation existing under and by virtue of the laws of the state of Illinois, party of the second part, witnesseth, that for and in consideration of the facilities and representations of the party of the second part, more fully shown by ‘Exhibit A,’ hereto attached, and made a part hereof, to effect for the party of the first part, upon desirable terms, the purchase of the standard wrought-iron line pipe hereinafter specified, and the sum of one dollar in hand paid by each of the parties hereto, the one to the other, the receipt whereof is hereby mutually acknowledged, it is agreed between the parties hereto as follows, to wit: The party of tiie second part will purchase in its own name and upon its own credit, as the agent irrevocable of the party of the first part, and secure the delivery to the party of the first part during the months of July, August, and September, as hereinafter specified, at such places as may be designated hereafter by the party of the first part, at the earliest practicable dates, but not later than October 1, 1890, barring strikes and causes beyond control, for the lowest obtainable price, (which price shall include freights to the points of delivery, same not to exceed the current rate of freight from point of shipment to Chicago,) and the party of the first part will take all wrought-iron standard line pipe hereinafter specified in conformity with the specifications, and subject to the conditions and tests, more fully set forth and specified in the contract and specifications for standard eight-inch line pipe, hereunto attached, (subject, however, to change as to size and weight as hereinafter stated,) marked ‘Exhibit B,’ hereunto attached, and made a part hereof, at a price, including commissions to be paid party of the second part of two and. one-half (2J) per cent., not exceeding ninety-one cents (91) per lineal foot for eight (8) inch standard line pipe, and price on the following sizes to be in proportion to price given on eight-inch as above and as hereinafter specified: * * * The party of the second part will, barring strikes and causes beyond their control, deliver all the eight-inch pipe before mentioned in amount not less than thirty-seven miles in July, not less than 123 miles in August, and all remaining undelivered in September, 1890, prior to the 15th of September, if possible. The party of the first part agrees to pay the party of the second part, upon delivery of each and every invoice of pipe at such delivery points as the party of the first part shall designate, spot cash therefor, including commission of two and one-half (2§) per cent, over and above the amount of each original invoice rendered party of the second part by the manufacturer, but in no case agreeing to pay any sum or sums in excess of (including pipe, freight, and commission or other charge) the prices hereinbefore fixed for each size of pipe. In witness whereof, the parties hereto have caused this instrument to be executed in duplicate by their respective presidents and attested by their respective secretaries, under their respecti ve corporate seals, this 30th day of June, 1890. Columbus Construction Company. “By C. E. Hequembourg, President. “Attest: C. K. Wooster, Secretary Crane Company. “B. T. Crane, President. “Exhibit A. “Chicago, June 20,1890. “ C. B. Hequembourg, Bsq.—Dear Sib: As members of the Pipe Association, with a representative on the board of managers, we feel confident of our ability, in fact know that we can purchase the pipe in question at least 5 per cent, less than any outsider. Especially is this true in the face of the legislation enacted by the board of managers at a meeting held in Pittsburg on Wednesday, the 18th inst., at which meeting it was agreed that cash forfeits of large amounts be put up, the same to be forfeited in the event of the agreed price being cut. It will be necessary for the board of managers to take special legislation, in effect, to throw the market open in the interest of our company, to enable us to secure the material wanted at a price satisfactory to you, and, acting merely as your agent, the price made us would naturally be yours. Our position in the association is'such that we feel confident of bringing this about. Should you have sufficient confidence in our company to appoint us your agents in this matter, the actual placing of the order—in itself quite a task, to our minds—would only be the beginning of a large line of work that we would be necessarily called upon to do for you in the handling of a dozen milis, more or less, that would have to participate in the completion of such an order. In consequence of which, we think, in tendering our services to you, as we do, that 2J per cent, brokerage would only be a reasonable charge. Should you decide to accept our offer, your wishes will be our instructions. Very respectfully, yours, ' [Signed] ' “Crane Company. “George L. Forman, Secretary. “Exhibit B. “This agreement, made and entered into the-of-by and between -, part— of the first part, and the-part— of the second part, witnesseth, that the said party of the first part, for and in consideration of one dollar to it in hand well and truly paid by the party of the second part, at and before the sealing and delivery hereof, the receipt of which is hereby acknowledged, and of the payments hereinafter mentioned to be made by the said party of the second part, has covenanted and agreed, and by these presents does covenant and agree: First, to furnish and deliver to the said party of the second part-miles of eight-inch standard nominal weight line pipe, made from soft iron, free from blisters and other imperfections, and guarantied to stand a working line pressure of one thousand pounds to the square inch when proved and tested in lines as hereinafter provided; * * * seventh, that it will pay to the party of the second part all damages and expenses of every kind which second party shall sustain by reason of any defect or defects in the pipe delivered, up to and including the time when said pipe is tested by the second party under working pressure not in excess of one thousand (1,000) pounds to the square inch, and proved tight in the line, and which working test shall be made with reasonable promptness; and, eighth, that it will pay to the party of the second part, as liquidation damage's, the sum of fifty ($50) dollars per day, for each and every day after said * * * and until the amount of pipe agreed to be furnished, as above provided, has been furnished; and second party may deduct the amount of such damages from any money in its hands due first party for pipe furnished under this contract. In consideration of the premises the said party of the second part covenants and agrees to pay to the party of the first part the sum of * * * per "foot for each and every foot of pipe received by it under this contract, said payments to be made on'each car load of pipe within fifteen days after the receipt of the same, unless counterbalanced by damages due to second party. It is expressly understood and agreed by and between the parties hereto that the representative of the second party at first party’s mill is there only for the purpose of seeing that the said pipe comes up to the guarantied, weight, and that the threads and sockets are not manifestly defective, and said pipe shall not be construed to be accepted by second party by reason of any payments made therefor, so as to relieve first party from liability on account of its defective character until the same has been laid and tested in the line and proved. In witness whereof, the parties to this agreement have hereunto set their hands and seals, the day and year first above written.” In each paragraph of the declaration it is alleged that under this contract the defendant company furnished to the plaintiff a statement showing the prices at which it would deliver to the plaintiff the pipe so agreed to be bought and delivered, and naming the companies by which specified quantities thereof, of sizes and at prices stated, would be manufactured; and that thereafter, at times and places stated, the defendant did deliver and cause pipe to be delivered, “as "in compliance with the contract,” but that the defendant had failed of full performance of the contract, in this: “that all of said pipe was not delivered within the times limited by the contract for the delivery thereof,” of which failure a specific statement is made, “and that said pipe was not made from soft iron, free from blisters and other imperfections, and sufficiently strong and of a quality such as to stand a working line pressure of one thousand pounds to the square inch when proved and tested in lines, but on the contrary, was of a weak, imperfect, poor, and defective quality, and wholly unable to stand a pressure not in excess of one thousand pounds to the square inch, and was not such pipe, nor was any of it, as when subjected to such pressure would prove tight,” The difference between the two counts is that one is drawn upon the theory of a rescission of the contract, and seeks a recovery of the moneys paid thereon, while the other is for damages on account of the breaches alleged. The additional averments of each are framed according to the theory on which it proceeds. The other counts were withdrawn, and judgment rendered against the plaintiff. S. S. Gregory, for plaintiff in error. Williams, Holt & Wheeler, for defendant in error. Before Harlan, Circuit Justice, and Gresham and Woods, Circuit Judges. [MAJORITY — Woods, Circuit Judge,] Woods, Circuit Judge, (after stating the facts.) The decision of the circuit court rests upon the proposition that the defendant was merely the agent of the plaintiff; and, if that be conceded, the ruling is, of course, right. It seems to us, however, that, while the contract created an agency, it did more. It constituted the defendant an agent with special obligations beyond the duties which, in the absence of express stipulation, are attributed by law to that relation. It was, of course, competent for the parties to so frame their contract, and, in our opinion, they so framed this one, by whatever name it should be called, that the defendant became an agent in respect to the proposed purchases; but in respect to the subsequent transfer and delivery of the goods to the plaintiff it became obligated substantially as a vendor. An apt illustration is found in the ease of Ireland v. Livingston, L. R. 5 H. L. 395, 406, wherein, in respect to an action by a commission merchant against his principal to recover on a contract for the purchase of sugar, which the defendant had refused to accept because the quantity was less than the amount ordered, Lord Blackburn said: “My opinion is, for the reasons I have indicated, that when the order was accepted by the plaintiffs there was a contract of agency by which the plaintiffs undertook to use reasonable skill and diligence to procure the goods ordered at or below the limit given, to be followed up by a transfer of the property at the actual cost, with the addition of the commission; but that this superadded sale is not in any way inconsistent with the contract of agency existing between the parties, by virtue of which the plaintiffs were under the obligation to make reasonable exertions to procure the goods ordered as much below the limit as they could.” And so, under the contract before us, the defendant, though required to purchase in its own name and upon its own credit, became bound to use reasonable diligence to procure the pipe to be purchased at the lowest obtainable price not in excess of the maximum limit; this to be followed by a transfer of the property to the plaintiff at actual cost and commission, which the plaintiff was to pay in “spot cash” to the defendant. And the fact that the agency is declared irrevocable involves no inconsistency. On the contrary, the two phases of the contract are in distinct harmony, and by reason of their connection were doubtless, for all the purposes of the agreement, incapable of revocation or termination by one party without the consent of the other, even though nothing had been expressed to that effect. The stipulation, which in effect binds the defendant as a vendor, is unequivocal and occurs twice in the contract: first, that “it will secure the delivery;” and, second, that “it will deliver” the pipe “specified in conformity with the specifications, and subject to the conditions and tests more fully set forth” in the exhibit attached to the agreement. This does not mean, and cannot reasonably be construed to mean, that, in respect to the transfer and delivery of the-pipe to the plaintiff, the defendant was an agent merely, and bound to do no more than exercise reasonable diligence to procure of manufacturers comprising the pipe association (of which defendant was itself a member) contracts for the delivery of such pipe as was required. That the parties understood this when settling the terms of their agreement is indicated by the saving clause, twice used, against “strikes and causes beyond control,”—a clause which, when employed in respect to an agency, is superfluous and meaningless, because in no event could a mere agent be responsible for the consequences of a strike, or other cause beyond control. It is an unwarranted assumption, often repeated or implied in the argument made in support of the ruling below, that by force of the contract the defendant was required to obtain of the manufacturers contracts in the form of the exhibit, and that for the matters complained of the plaintiff’s remedy should, and, as nothing to the contrary is averred, presumably could he sought of the manufacturers upon those contracts, and not of the defendant upon the contract in suit. There is no support for this proposition, except in the fact that an exhibit showing a form of contract with a manufacturer is attached to and made a part of the contract between these parties. But manifestly that was done only for the purpose of defining the specifications, conditions, and tests under which the defendant undertook to make delivery of pipe to the plaintiff. That is the purpose stated, and no other is fairly inferable. In respect to its own purchases, therefore, the defendant was at liberty to buy on credit or for cash, and with or without warranty, express or implied, as it chose. It could buy or bargain for the quantities of pipe necessary to supply the plaintiff, or it could purchase in larger quantities, and for the supply of other customers, being bound to the plaintiff, whatever the contract made with the manufacturer, to produce no evidence of the transaction except the manufacturer’s original invoice, showing the purchase price. And of such contracts it is difficult to see how the plaintiff could take advantage, even if they happened to contain provisions which, if available, would afford relief. Counsel have discussed with exhaustive research and learning the question whether or not, in the contracts of purchase made by the defendant for the purpose of complying with this-contract, there was privity of contract between an original vendor and the-plaintiff, by reason of which either of them might have an action against, the other for any breach to its injury. We do not deem it necessary to-consider that question. If the affirmative of the proposition were conceded, there could be no right of action except for an infraction of the-contract actually made by the agent; and that, as we have seen, might- or might not extend to the subject of complaint. The contract of these-parties, as we view it, instead of leaving the plaintiff to a circuitous and. uncertain quest for relief, affords for the breaches alleged, and upon the theory of either paragraph, a right of action directly against the defendant. The judgment of the circuit court is therefore reversed, and the cause remanded, with instructions to overrule the demurrer to the third and fourth paragraphs of the declaration respectively, and tor further proceedings.