author: Freedman, J. Jones, J.

text:
    GEORGE W. HART, Plaintiff and Respondent, v. DENNIS M. FITCH, as Surviving Executor of the last Will and Testament of Stephen A. Dennis, deceased, Defendant and Appellant.
    Under a contract whereby D., as the owner of one half of a patent, in consideration of the assignment to him of another quarter by the inventor, agreed with said inventor that he would proceed, with funds to be furnished by him, with the construction and completion of a machine according to the plan of said patent, and put the same into operation; and that after such machine had been made and completed, the same should be used and applied to the promotion of the formation of a stock company, the capital of which was not specified, in which D.’s interest in the patent should be incorporated as a part of the capital stock, and that whatever stock in said company, when formed, should he represented by the quarter of the patent still remaining the property of the inventor, should he transferred to said inventor free of all assessment, charge, or expense, etc.;
    Held that D. was hound to pnt his interest in the patent into the company under all circumstances, but the inventor might elect whether he would do so or not; that the construction and completion of the machine was a condition precedent to the formation of the company; that the inventor had a right to refuse his assent to the formation of a company, as long as this condition remained unperformed; that after the organization of a company without such previous performance and the refusal of the inventor to join, which refusal resulted in the formation of the company upon D.’s three-quarters interest in the patent, the inventor could not, after all the stock had been issued and disposed of, change his mind and insist to come in, but that he might maintain an action for the recovery of the damages sustained by him generally in consequence of D.’s breach of the contract.

      [Decided December 4, 1869.]
    Before Monell, Jones, and Feeedman, JJ.
    Appeal from a judgment entered upon the report of a referee.
    The action was to recover damages for a breach of two written contracts.
    The referee found the following facts:
    That the defendant’s testator made the following agreement:

      “ Whereas, Oarmi Hart has, this day, by instrument in writing bearing even date herewith, transferred and assigned to me, Stephen A. Dennis, the one undivided equal fourth part of certain letters patent of the United States, issued to said Hart for a machine for cutting veneers: How, in consideration thereof, and other considerations received, to my full satisfaction, I, the said Stephen A. Dennis, do hereby covenant and agree with said Hart, that in ease certain contemplated arrangements agreed upon by and between me, the said Dennis, and Edward White, for forming and organizing a stock company, under the laws, of the State of Hew York, shall not be completed and successfully carried out, which said company is to have the said letters patent and certain other property for its capital, that in such ease the said Dennis will proceed with the construction and completion of a large machine for cutting veneers, according to the plan described in the said letters patent, and will put the same into operation, and that he will appropriate and expend ten thousand dollars ($10,000), if necessary, for such object; and that, after such machine is made and completed, the same shall be used and applied to the promotion of the formation of a stock company, in which the interest of the said Dennis in said letters patent shall be incorporated as a part of the capital stock; and it is understood and agreed, on the part of said Dennis, that whatever stock in the said company, now or hereafter to be formed, shall be represented by the quarter of the letters patent aforesaid, now remaining the property of said Hart, shall be given and transferred to said Hart or his assigns, free of all - assessment, charge or expense, either to said Hart or to the stock so represented; it being the intention of the said Dennis that the interest of the said Hart which shall go into the said company, when formed, shall be held and owned by him, said Hart, and his assigns, free, clear, andunassessable for any charge or expense whatsoever arising out of the formation and organizing of the said company, or the incorporation thereof; and

      “ Whereas, A certain agreement in writing has lately been made and entered into by and between me, the said Dennis, and Edward White, bearing date the 27th October, 1856, in reference to the same object and intention of forming a company and building a machine, as is heretofore provided: How it is understood that this agreement is made in connection with that agreement, and in part furtherance thereof, and that said Hart has an interest in enforcing and carrying out the said agreement.

      “ And I, the said Dennis, do hereby agree to and with the said Hart, that so far as the interest and influence of the said Dennis are concerned, the same shall be used for the joint benefit of all concerned, and that he, the said Dennis, will, when such company is formed, use his influence and exertions to the best of his power toward having a new and complete machine built and put in operation, sufficiently large and powerful to cut veneers such as may be required to suit the market; as witness my hand and seal this 25th Hovember, 1856.”
    Simultaneously with which, Staples, the subscribing witness, made the following memorandum at the request of Dennis, explanatory of the agreement:
    “ It is understood by me, and so stated and agreed to on the part of Messrs. White and Dennis as a part of the arrangements toward organizing a company, that Mr. Gar mi Hart’s interest in the letters patent, being one fourth of said patent, is to represent and receime one quarter of the capital of such company, and that said stock will when issued represent not only one quarter of said letters patent, but will represent and own one quarter o'f all the property, machinery, and sums that may be put into said company by White and Rogers^ and one quarter of all the property late of the Bridgeport Company, and of any machine or property that may be erected or built by the said company, without charge to said Hart.”
    The agreement of the 27th of October, 1856, referred to in the foregoing contract, is sufficiently stated in the opinion of the court.
    Dennis died in December, 1856, leaving a will, in which he appointed the defendant one of his executors, and which contained the following provision:
    “ Being the owner of three eighth parts of a certain patent called Carmi Hart’s Patent Cutting Veneer Machine, invented in 1854, for cutting rosewood, mahogany, etc., it is my wish and desire, if no stock company therefor shall be organized previous to my decease, that then my said executors and the survivors of them shall pay, from time to time, any income arising from my estate not otherwise appropriated, such sum "and sums of money, not exceeding ten thousand dollars, as may be necessary for the purposes of carrying out my written agreement with Edward White, relative to the said patent; and after having expended the sum above named, then to aid in relation to the said patent, as they in their judgment may deem most fit and proper and advisable.
    “Also, that they pay out of such income such proportioned sum and sums of money as may be necessary for the purpose of securing the patent right of the above-named inventor in any foreign country or countries.”
    White and the executors of Dennis endeavored to form a company on a capital of $200,000, in pursuance of the agreement of October, 1856, and requested Hart to put in his remaining one fourth of the patent, which he declined. Failing to form such company, they made efforts to form one on a capital of $100,000. During these times Hart was engaged in making plans for a large machine, but was discharged by White.
    In April or May Fitch, the executor of Dennis, told Hart that they were about forming a company on the basis of one hundred thousand dollars as a capital, and requested him to put his one fourth of the patent into the company. This Hart declined to do, giving as a reason that, according with his understanding with Mr. Dennis, the capital was to be two hundred thousand dollars, and that he was to have one fourth, which would include the mill property of White and Rogers.
    Fitch explained to him that he would receive just as much whether the capital was two hundred thousand dollars or one hundred thousand dollars, so long as it included the same property ; but he still declined to put his one fourth of the patent into the company.
    In May, just before or about the time the company was formed, Fitch again saw Carmi Hart, and told him that if he did not put his one fourth of the patent into the company, they would be obliged to form a company on the basis of three fourths of the patent, but if he would put in his one fourth, or consent to do so, he should receive one fourth of the stock; but Hart again declined to do this.
    On the 15th of May, 1857,’ a company was formed under the general manufacturing law of this State, by Edward White, Joseph Rogers, and B. M. Wilson (the latter one of the executors of Dennis), on a capital of one hundred thousand dollars divided into four thousand shares of twenty-five dollars each, for thirty years, by the corporate name of “ White & Rogers’ Hew York Sawing, Planing, and Patent Veneer Cutting Company.”
    Ho tender of any stock in this company was. ever made by the executors of Dennis to George W. Hart, or to his attorney, Columbus Hart, or to Carmi Hart, after the formation of the company, nor any demand made by them, or either of them, for a transfer to the company of the remaining one fourth of the patent.
    A month or two after the formation of the company, viz., in June or July, 1857, Carmi Hart, professing to act in behalf of his son (the plaintiff), offered to Edward White, the president of the company, to transfer the remaining one fourth of the patent to the company, or to whoever they might desire, and to receive the stock; which offer was declined by White, on the ground that the one fourth had not been put into the company, but that the company had been formed on the three fourths of the patent only.
    Upon these facts, the referee decided that the plaintiff was entitled to recover, as damages, for not transferring to him the stock of the company formed, the par or nominal value of such stock, there being no proof of any market value, with interest upon such value.
    The defendant excepted to the findings, and appealed from the judgment.

      Mr. D. B. Eaton, for appellant.
    Hart had no option to put his one fourth into the corporation, and there was no obligation on the part of the defendant to do more in relation thereto than to allow the one fourth to come in if duly tendered by Hart for that purpose. He not only omitted to tender the one fourth, but in the exercise of his right refused to allow it to go in when solicited to furnish it for such purpose. The estate then was clearly guilty of no breach of duty.
    The claim that Hart’s option might be exercised after the company should be formed, is clearly unreasonable and untenable.
    The contract, neither directly nor by any implication, allows or contemplates such an extended right of election. ..
    All the provisions and purposes of the contract is answered, and full justice would be done to the Harts by limiting the right of election to the period anterior to the formation of the contract.
    Hart was only to have stock that should be “ represented by his one fourth of the patent; ” and no stock could be represented by his part of the patent unless he allowed it to go into the corporation, and that he refused. He thereby placed himself outside of the contract, and deprived himself of all just pretence to claim stock under the contract.
    The corporation was obliged by la/w to declare on what property and with what amount of stock it was formed, and there was no authority to increase the stock; and to give the contract the construction claimed by the Harts would render compliance therewith legally impossible.
    It would be practically impossible to form a corporation and dispose qí its stock, if it was uncertain how much stock there was to be, and a right was reserved for its increase. It is not to be presumed, nor held but upon the most conclusive testimony, that any contracting parties in the situation of this estate and the Harts, made a contract that would lead to. such destructive, anomalous, and illegal results.

      Mr. Abram Wakeman, for respondent.
    Insisted that it could not be claimed that before a large machine had been built—and before it could have been used in promoting the formation of any company, or any company had ever been incorporated, and without knowing of what its capital would consist, or whether White & Kogers would transfer their property to such a company, or whether the property of the Bridgeport company would be included, or whether the stock would be assessable or full stock—Mr. Hart could be called upon to make an election which would bar his rights, or relieve Dennis from his obligations arising under his contract.
    The tender was within a reasonable time. The reasonableness of the time, being a mixed question of law and fact, will not be disturbed by an appeal unless palpably erroneous.
    But aside from the question of the reasonableness of this tender, it is insisted that the obligation to make a tender rested with the defendant, and not with the plaintiff.
    Hart sold and delivered to Dennis one quarter of the whole patent, in payment for which Dennis agreed to give him one quarter of the paid-up stock of a company established as provided for in the contract.
    The plaintiff is entitled to damages. The one fourth of the stock of the company, as such, when formed, constituted no measure of the actual damages sustained by the plaintiff, for the reason that the company was incorporated anterior to the construction and operation of a larger machine, which was to be used in aid of its formation.
    Taking the value of the patent to be that fixed by the parties themselves is most equitable, and violates no principle of law. Certainly fixing the whole value of the patent at $55,000, when Dennis paid $20,000 for one fourth of it, was most favorable to the defendants. Why should he not have been obliged to pay at the same rate for the one fourth obtained from the inventor on the 25th November?
    By the express terms of the agreement last referred to he was to be entitled to one fourth of the White & Rogers’ mill property, valued by all the parties, and actually sold to the company for $45,000.
   By the Court:

Freedman, J.

The contract of October 27, 1856, made between Dennis and White, did not bind Carmi Hart to put his one-quarter interest into the company proposed to be organized under said contract with a capital of two hundred thousand dollars ($200,000), nor did it of itself confer any rights upon Carmi Hart. The clause at the end of said contract to the effect that such undivided interest in Hart’s patent as is not owned by the contracting parties shall be brought into the capital stock of said company, and shall be paid for in stock in such proportions as shall be just and equitable, laid White, however, as well as Dennis, under the obligation, in case of the formation of the company referred to, to procure that interest, and to incur the expenses (in stock) necessary to secure it. But, as all efforts to organize a company under this contract failed, and were abandoned as impracticable, the rights of the plaintiff in this action mainly depend upon the true construction of the agreement of November twenty-fifth, 1856. This agreement is executed by Dennis only, and contains promises and covenants on the part of Dennis only, but does not state any on the part of Carmi Hart. Dennis thereby covenanted that in case the arrangement between himself and "White for forming a stock company, with a capital of two hundred thousand dollars ($200,000), should not be completed and successfully earned out, he would proceed with the construction and completion of a large machine for cutting veneers, according to the plan described in Carmi Hart’s letters patent, and would put the same into operation; that he would appropriate and expend ten thousand dollars ($10,000) if necessary for such object; and that after such machine had been made and completed, the same should be used and applied to the promotion of the formation of another stock company, the capital of which is not specified, in which his (Dennis) interest in the letters patent should be incorporated as a part of the capital stock; and he therein further agreed, among other things, that whatever stock in the said company, now or hereafter to be formed, shall be represented by the quarter of the letters patent still remaining the property of said Hart, shall be given and transferred to said Hart, or his assigns, free of all assessment, charge, or expense, either to said Hart or to the stock so represented; it being the intention of the said Dennis that the interest of the said Hart, which shall go mto the said company, when formed, shall be held and owned by him, said Hart, and his assigns, free, clear, and unassessable for any charge or expense whatsoever, arising out of the formation and organization of the said company,, or the incorporation thereof, etc.”

It will be seen that Dennis thus bound himself to put his interest in the patent into the company, to be organized, under all circumstances, but that Hart was under no obligation to put in his one-quarter interest unless he so elected. It will also be observed that the agreement did not in terms obligate, or purport to obligate, Dennis to secure the organization of a company with a stipulation, or to contract with the company to the effect that Carmi Hart should have the privilege at all times, and under all circumstances, of transferring his interest to the company after it had been formed. In these respects the last-named agreement materially differs from the contract between Dennis and White. The memorandum at the foot of the agreement of November twenty-fifth, 1856, signed by Staples (but not signed by Dennis or White), if binding upon Dennis at all, affects no other question but the question of the quantity of the stock to which Hart might become entitled. It can exercise no influence upon the determination of the question in what contingency or upon what condition Dennis did covenant that the stock should be issued to Hart, and it seems as if this memorandum, at the time it was made, had, in the minds of the parties which could be affected by it, special reference to the agreement of October twenty-seventh, 1856. But although this may have been otherwise, it cannot be doubted that Dennis, in the agreement of November 25, 1856, undertook to construct and build a large machine according to the plan described in said letters patent, and to put the same into operation, and to appropriate and expend, if necessary, ten thousand dollars ($10,000) for that object before the attempt was to be made to form the stock company. A fulfilment of these stipulations before the actual formation of the company was necessary, therefore, to the due performance of the contract on the part of Dennis. Upon this point the language of the agreement is too clear to admit of dispute.

When, therefore, all efforts to organize a company with a capital of two hundred thousand dollars ($200,000), under the agreement of October 27, 1856, had been abandoned; when Carmi Hart was informed of the steps which had been taken to form a company with a capital of one hundred thousand dollars ($100,000), which was to have as capital, exclusive of money ■capital, precisely the same property as contemplated by the •agreement between Dennis and White; when he was told that If he did not put his one fourth of the patent into the company, the other parties would be obliged to form a company on the 'basis of three fourths of the patent, but if he would put in his -one fourth or consent to do so, he should receive one fourth of the stock, he was not bound to assent to the formation of that company, but on the contrary had a clear right to refuse' to come in, for the reason ■ that Dennis and his executors had wholly failed to perform those conditions of the agreement, which were to precede the formation of the company, and upon the performance of which the success of any company, which might or could be formed, depended to a great extent.

On the other hand the agreement of November 25, 1856, as’ before said, did not, in express terms, impose an obligation upon Dennis to secure the organization of a company in such a manner and with such stipulations as to reserve to Oarmi Hart the unlimited privilege of coming in with his one-quarter interest at any time he might thereafter elect; and I am of the opinion that, after full performance on the part of Dennis of all the aforesaid conditions precedent, and an express refusal on the part of Oarmi Hart to transfer his one-quarter interest in the letters patent to a stock company subsequently organized in strict conformity with the provisions of the agreement of November 25, 1856, a company could have been formed on the basis of the ownership of an undivided three-quarters interest in the patent. In such case Oarmi Hart might well be held estopped upon general principles from subsequently insisting upon the delivery of any portion of the stock and from otherwise asserting the rights, which, but for his approval, he would have had.

But inasmuch as the undisputed facts of the case under consideration show that the company formed upon the one hundred thousand dollar ($100,000) plan was organized without the previous construction by the estate of Dennis of a large machine, according to the plan described in Hart’s patent; that no machine was ever constructed by the estate of Dennis at the expense of the estate; that a large machine which has been constructed was not constructed strictly on Oarmi Hart’s plan or invention, but was built by the company, under the superintendence of a person incompetent for that purpose; that a machine properly constructed on Hart’s plan would have done good work, and that the failure of the company was attributable in a great degree to the insufficiency of that machine; Oarmi Hart cannot be deemed to have forfeited his rights against the estate of Dennis by a refusal to join a stock company which was not organized in such a manner, and with such a guarantee of success as he had stipulated for.

It is true, the company was, in point of fact, organized on the basis of the ownership of an undivided three-quarters interest in the patent only; all of its stock was issued for property to be used in its business. It was, therefore, a physical impossibility, after the company had once been thus organized and had thus parted with its stock, to give to the one-quarter interest of Hart a subsequent representation by stock in such company; no stock remained for any such purpose, and Carmi Hart, in consequence of his persistent refusals to join, may be fairly held estopped from subsequently claiming part of such stock. But this estoppel does not extend any further, and does not prevent the plaintiff, as the representative of the interest of Carmi Hart, from asserting his rights against the estate of Dennis. As the offer of Carmi Hart to waive all damages for the breach of the conditions precedent to the formation of the company, contained in the agreement of November twenty-fifth, 1856, and to accept stock of a company not organized as it should have been, was not accepted—and the fact that it was impossible to accept it does not change the matter—the plaintiff is at liberty to insist upon full payment of all damages sustained in consequence of the breaches on the part of Dennis, and his executors, of the covenants contained in said agreement. It seems perfectly clear to me that the plaintiff has an undisputable right to the recovery of these damages; but they can in no event exceed, as the evidence stands, the market value of the stock at the time of the demand. The referee, therefore, erred in computing the damages sustained by the plaintiff by taking the value of said stock and of the patent at the time of the organization of the company.

The judgment should be reversed.

Monell, J., concurred.

Jones, J.

I concur in reversing the judgment in this case, but on different grounds from those taken by my associates.

The provisions contained in the document signed by Dennis, dated November 25, 1856, formed the consideration for the transfer of the one quarter of the patent on that date assigned by Carmi Hart to Dennis. In other words, those provisions were the mode in which Hart was to receive payment, or an equivalent, for the one quarter interest which he on November 25, 1856, transferred to Dennis.

This equivalent, as I read the document of November 25, was that Hart should have the right to put his remaining quarter (he having disposed of the other three quarters) into a stock company which Dennis and White were endeavoring to organize on the basis of a capital of $200,000, and to receive therefor one quarter of so much of the stock of said company as was contemplated to be appropriated for the purchase of the patent; or if it should be found impossible to organize that contemplated stock company, then that Dennis should use his influence and exertions for the formation of a stock company in which his interest hi the patent should be incorporated as part of the capital stock, and that Hart should have the right to put in said company his remaining quarter and receive therefor so much of the stock as should be represented thereby, free from all assessment, charge, or expenses arising out of the formation and organizing such company, or the incorporation thereof; and that after the formation of either of such companies, Dennis should use his influence and exertions to the best of his power towards having a new and complete machine built and put in .operation sufficiently large and powerful to cut veneers, such as might be required to suit the market.

In short, Hart was to receive for this one quarter a right to bring his remaining quarter into a contemplated company; or if that should fall through, a right to the services of Dennis in forming another company, and a right to bring his remaining one quarter into that company, together with a right, after the formation of either of such companies, to the influence and exertions of Dennis towards the building of a machine for the purpose of the business.

On the other hand, Dennis, for giving to Hart the said rights and services, received the one quarter interest assigned to him on November 25.

It may have been foolish and improvident in Hart to part with the one quarter interest on such terms. With that, however, we now have no concern.

This action is based on that agreement, and seeks to enforce a liability claimed to have arisen thereunder.

The questions, therefore, are whether Dennis has performed what he undertook to perform, as a consideration for the assignment, or, if' not, was his performance before breach by him rendered impossible by the act of Haft or those claiming under him?

If he has performed, or if his performance has been so rendered impossible by the plaintiff, then there is no liability resting on him under the contract.

The proof shows that it was found impossible to form a company with a capital of §200,000, as contemplated by the agreement between Dennis and White—that project was therefore abandoned; that Dennis subsequently succeeded in perfecting arrangements for the formation of a company on the basis of §100,000 capital; that thereupon application was made to Hart to put in his remaining one quarter; this he refused to do, and thereupon the 'company was organized on a basis of a capital of §100,000, to be paid in as -follows: §55,000 by three quarters of the patent held by parties other than the plaintiff, and §45,000 by other property. The whole of the stock was accordingly issued in payment of such three quarters and of such other property.

Thus, then, Dennis has performed all that he was bound to as the consideration for the one quarter assigned to him, except so far as performance has been rendered impossible by Hart’s own act.

Hpon the falling throug-h of the project for a company with a capital of $200,000, he rendered his services and used his best endeavors towards the formation of another company, and was successful. This was all he was bound to do, unless Hart saw fit to put in his remaining quarter. If Hart saw fit so to do, then he was to receive as much stock as was represented by that quarter, and also the exertions and influence of Dennis in the procuring the building of a large machine for working purposes.

If, however, Hart did not see fit to put in his remaining quarter, he in that event was not entitled to receive any stock or the benefit of any exertion of Dennis towards building the large machine for working purposes.

How, Hart refused to put his remaining one quarter in the $100,000 company, and this, although he was told that if he did, it would be necessary to form-a company, leaving out his one quarter. Conceding that Hart had a locus penitentim, still it could only extend up to the time of the organization of a company without his one quarter, for after the organization of such a company it would be impossible to bring in his one quarter and issue stock therefor.

Hart then exercised his option not to come into the company, and did not repent of such exercise until after it had become impossible to take him in and issue stock to him for his one quarter. That being the case, he cannot now recall his refusal, on the faith of which the parties have acted, and consequently defendant is under no liability to him by reason of that portion of the agreement of Hovember 25,1856, which provides for the issuing of stock to Hart and for the exertions of Dennis in building a large machine for working purposes.

It is stated above that Dennis has performed that part of the agreement whereby he was to form a company in which his interest in the letters patent should be incorporated as part of the capital stock.

It is, however, claimed by the plaintiff that that part of the contract has not been performed; that Dennis, by the organization of the company of $100,000, has put it out of his power to perform that part, and therefore a liability has arisen against him on the contract. If these two propositions are correct, then I think there would be a liability for the value of the one quarter assigned to Dennis by assignment of Hovember 25,1856.

Plaintiff claims that Dennis has not performed the contract to organize a company, because,

First—He was to build a large machine to be used in the promotion of the formation of such company, which he did not do.

Second—Because the company contemplated was to have a capital of $200,000.

Third—Because it was to have the same property as the company contemplated by the agreement between Dennis and White, and the company formed did not have the same property.

1. This machine was not intended for working purposes; a subsequent provision is made for a machine for that purpose. There is no provision that this machine was to be brought into the company after it was formed as part of the property thereof. It was simply intended as a machine for exhibition, in order to induce persons to enter into the formation of a company.

Such was its sole design. If that design could be accomplished without the aid of such a machine, the construction of it might well be dispensed with. It was only an incident leading to the accomplishment of a principal object. The principal object having been accomplished without the aid of the incident, no liability arises for the non-performance of the incident.

2. The agreement makes no provision as to the amount of capital on which the company should be formed. Mor do I perceive any thing which indicates it to have been the intention that it should be formed on a capital of not less than $200,000. Indeed, the impossibility of forming one on a $200,000 basis seems to have been in view of the parties, and provision was therefore made for such a contingency.

3. This objection is based on the ground that there was not transferred to the $100,000 company certain property formerly of the Bridgeport Veneer Company, which it is alleged was to form a part of the $200,000 company referred to in the agreement between Dennis and White.

It is not found as a fact that this property did not go into the company of $100,000; and there is evidence to the effect that it did.

It is unnecessary, therefore, to consider what effect the non putting in of this property would have. Whatever effect it has must depend on the construction of the unsigned paper supplementary to the agreement of Movember 25, 1856.

Judgment reversed, and order of reference vacated; new trial ordered, with costs to appellant to abide the event.


source: Caselaw Access Project

author: Freedman, J.

license: Public Domain

text:
    THE BOARD OF WATER COMMISSIONERS FOR THE CITY OF DETROIT, Plaintiffs, v. HENRY A. BURR and CHARLES ST. JOHN, Defendants.
    Where a contract for certain engines, pumps, and boilers provided that plaintiffs’ engineer should be at liberty at all times to require the rejection of any work which he should deem inferior, and of any material which he might deem of improper or inferior quality or strength, and to require the substitution of other work and materials, and the contract further provided for the payment of advances, as the work progressed, based upon the relative amount of the work furnished to the whole sum, and the principal contractors thereupon made a sub-contract through plaintiffs’ engineer with other parties, as to part of the work, according to drawings approved by plaintiffs’ engineer, and such work was subsequently accepted by said engineer as satisfactory; but where the contract also provided that, when completed, the said engines, pumps, and boilers should perform a stipulated duty; and where upon the trial of an action brought against the sureties of the principal contractors for the general non-performance of the contract, a conflict of evidence arose upon the following points:
    1. Whether or not the principal contractors were improperly influenced by plaintiffs’ engineer in the award of the sub-contract to the sub-contractors;

      2. Whether or not plaintiffs’ engineer, in order to bring about this award, agreed to be responsible that the sub-contractors would perform their work perfectly, and in full compliance with and satisfaction of the original contract;
    3. Whether or not plaintiffs’ engineer in all which he did in regard to the sub-contract, acted as the agent of the principal contractors;

      'á. Whether or not an interference took place by plaintiffs’ engineer with the subcontractors without the acquiescence of the principal contractors; and
    5. Whether the acceptance of the work done under the sub-contract by plaintiffs’ engineer, was an acceptance on behalf of the principal contractors, or on behalf of the plaintiffs, and if on behalf of the latter, whether it was an absolute one or made for the sole purpose of making it the basis for an estimate for advances to be made under the original contract:

      Meldy That by such conflict of evidence, clear issues of fact were raised for the determination of the jury under proper instructions from the court.
    That it was error for the court below to determine as matter of law upon this evidence and to charge the jury in effect, that Any acceptance or approval of the work done under the sub-contract by plaintiffs’ engineer, no matter in what capacity or in what manner or for what purpose, relieved the sureties, although it did not relieve the principal contractors from their obligation that, when completed, the entire machinery should successfully perform the stipulated service, and that this was so, if the acceptance took place for the principal contractors only, under authority derived solely from them, and not for the plaintiffs.
    That a contractor cannot appoint an agent and by that agent do an act which, would release his own sureties and destroy plaintiff’s right of action.
    Where sureties have bound themselves by the provisions of their bond, that the contractors will perform and abide by any alterations which the parties to the contract may make therein, a direction to the jury contained in the general charge of the court, that if they come to the conclusion that material alterations have been made in the contract by the parties thereto, without the knowledge and consent of the sureties, or that there was any interference on the part of the plaintiffs without the consent of the sureties, to stop^there and find a verdict for the defendants, without any qualification of the language at the time, although the court, prior to the general charge, had, on plaintiffs’ motion, laid down a proposition containing the true rule of law—

      [Decided December 4, 1869.]

      Seld, That the general charge, if not erroneous, was at least calculated to mislead the jury, and that a new trial should he granted upon that ground.
    Before Barbour, C.J., Monell and Freedman, JJ.
    This case was tried before Mr. Justice MoCmsnsr and a jury.
    The action was against sureties on a bond as follows:
    “ Know all men by these presents, that we,, Henry A. Burr and Charles St. John, of the City of Hew York, are held and firmly bound unto the Board of Water Commissioners of the City of Detroit, incorporated by the Legislature of the State of Michigan, February 14, 1853, in the sum of fifty thousand dollars, to -be paid to the said commissioners, for which payment, well and truly to be made, we bind ourselves, our heirs, executors, and administrators, firmly by these presents. Sealed with our seals, and dated this nineteenth day of July, in the year eighteen hundred and fifty-six.
    “ The condition of the above obligation is such, that if Edward H. Dickerson and Frederick E. Sickels, who have executed the annexed contract for engines and machinery, shall in all respects well and faithfully execute and perform, live up to and abide by the same, according to the terms thereof, and shall perform and abide by any alterations which the parties may make therein, then the above obligation shall cease and become null and void, otherwise the same shall be and remain in full force and virtue.
    [l, s.] “ H. A. Bttbb.
    [l. s.] “ Charles St. Johtt.
    “Sealed and delivered in 1 presence of j
    “ (Signed) ■ Geo. D. Sebgeabt.”

      The complaint alleged that a contract was made between the plaintiffs and Edward H. Dickerson and Frederick E. Sickels, by which Dickerson & Sickels agreed to build, furnish, and erect for the plaintiffs two engines, known as square engines, together with all and singular the pumps, boilers, and all other fixtures and apparatus necessary to put the engines and machinery in full and complete order for the purposes, and to perform the service mentioned in the proposals and specifications thereinafter referred to.
    That by the contract it was provided that the engines/so to be constructed, should in all respects conform to the proposals and specifications appended to the contract, and that the engines should also, in all respects, conform to plans of the work, which had been certified by Dickerson & Sickels, and by the engineer of the plaintiffs, and that every thing in said proposals, plans, and specifications required to be done and furnished by Dickerson & Sickels should be done or furnished as therein set forth, except where the same were modified or changed by the contract, and that in all such cases the express provisions of the contract should prevail.
    That by said contract it was further provided, that the engines should be capable of bearing a cold-water pressure of two hundred pounds to the square inch; that by the contract, it was provided, in case every thing contemplated or required by the contract should be built, and completed, and should successfully perform all that it was agreed to perform, that then the plfl.int.iffs should pay therefor, to the said Dickerson & Sickels, the sum of fifty thousand dollars as the contract price thereof.
    That with the making of the contract, the defendants made and delivered to the plaintiffs the bond hereinbefore set forth.
    It was further alleged, that the time for the completion of the work was from time to time extended; that the plaintiffs had fully performed the contract on their part and had made the payments therein specified. Then followed allegations of non-performance of the contract by Dickerson & Sickels; the expenditure by the plaintiffs of large sums of money in consequence of such non-performance, and a claim to recover therefor against the defendants.

      The defendants, in their answer, after denying performance by the plaintiffs and averring performance by Dickerson & Sickels, further alleged that the plaintiffs, by their engineer, assumed and undertook to make a building for said engines upon a plan which Dickerson & Sickels disapproved, but which the said plaintiffs insisted upon and guaranteed to be sufficient, and that when the engines were started it was found to be insufficient, and the plaintiffs refused to have it made safe by proper bracing necessary to enable the engines and pumps, to be built by Dickerson & Sickels, to perform the work provided to be done in their agreement.
    Then follow allegations of acts of the plaintiffs, and of insufficient work procured by them under the contract, which hindered and delayed the contractors in completing the work.
    On the trial, it was proved that one Houghton was the plaintiffs’ engineer, and had charge of the work to be done under the contract; and there was evidence tending to show his approval and acceptance of the work, but not that he had any special authority to do so. There was also evidence of alterations required by the plaintiffs to be made in the work from time to time.
    The court charged the jury, among other things, that although Houghton had no special authority to approve of or accept the work, and snch approval or acceptance did not release Dickerson & Sickels, yet it did release the defendants as their sureties. The court further charged that if material alterations were made in the work by direction of the plaintiffs without the knowledge and consent of the sureties, the defendants were released.
    The plaintiffs excepted to the charge.
    The jury gave the defendants a verdict. ■
    The exceptions were ordered to be heard at the General Term.

      Mr. J. E. Burrill for plaintiffs.
    The alleged approval or acceptance by the plaintiffs’ engineer during the progress of the undertaking of any part of the machinery prior to the completion of the whole, did not relieve Dickerson & Sickels, or the defendants, from their obligation, that when completed, the engines, pumps, etc., should perform the stipulated service.
    Such right of approval did not authorize Houghton to reject any portion of the machinery in which the workmanship and. materials were good, and which was of the description called for by the contract, but he was bound to receive all such.
    It was, therefore, error to charge that although Dickerson and Sickels were not relieved from their obligations in regard to the sufficiency or capacity of the work by any alleged approval or acceptance by Houghton, that such • acceptance did exonerate and discharge the sureties.
    It is difficult to see how the defendants could be discharged from them obligation that the contractors shonld perform and fulfil their contract, by an act which did not afford to the contractors any excuse or justification for such non-performance and non-fulfilment. H the contractors could not set up such an act in defense of themselves, upon what principle can the defendants claim to be thereby relieved and discharged from their obligation that the contractors shall perform the contract ?
    The court also erred in the charge that if alterations had been made by the original contractors without the knowledge or consent of the defendants, they should find a verdict for the defendants.
    If such alterations were so made without defendants’ consent, the latter were (according to the charge) entitled to a verdict.
    How can this charge be reconciled with the clause in the bond by which the sureties (defendants) became responsible for the due performance by Dickerson & Sickels of the contract, and any alterations which may be made therein.

      Mr. John K. Porter, for defendants.
    Houghton was the general agent of the plaintiffs in all that related to the contract and to work done under it, and all that he did and said in connection therewith, has the same precise legal effect as if it had been said and done by the^ plaintiffs when convened in full board.
    “ Municipal corporations, acting within the limits of the powers conferred upon them by the legislature, in the exercise of a special franchise granted to them, and the performance of a special duty imposed upon them, are responsible for the acts and contracts of their agents, duly appointed and authorized, within the scope of the authority of such agents, in the same manner as other corporations and private individuals are responsible on their promises, express and implied ” (Clark v. Mayor of Washington, 12 Wheaton, 40; Devereux, Court of Claims R., 55; Sharp v. The Mayor, etc., of N. Y., 40 Barb., 274; Olcott v. Tioga R.R. Co., 27 N. Y. R., 558).
    The plaintiffs, who were unable to fulfil their contract, and obtained an extension from the sureties by the representations of their engineer that he was their authorized agent, and that they guaranteed the boiler, the sufficiency of which was then in question, precludes them from taking the benefit of the extension, and repudiating the representations upon which they procured it.
    It is also to be borne in mind, that the defendants neither became, nor assumed to become sureties, either for the performance by the plaintiffs of their portion of the undertaking, or for the competency, fidelity, or skill of Houghton, their engineer, or for the substitution of other parties to do the work undertaken by Dickerson & Sickels.
    Again: The changes made by the plaintiffs in the plan of the foundation for the machinery in the building, their refusal to adopt the necessary expedients of internal walls, or external buttresses or braces, and their interference in regard to the construction of the boilers, constituted essential changes in the contract, going to its very root, and absolving the sureties, who never gave their assent, from all further liability.
    The ' contract provided for model alterations in the work contracted for, such as the substitution of better work and materials for any the engineer might disapprove ; and this is the class of alterations to which the clause in the undertaking of the sureties appties; but no right was reserved to the plaintiffs and the contractors, to uproot the foundations of the written contract, and substitute other and more onerous burdens on the sureties, without their assent.
    The sureties, by their undertaking, made themselves parties, as such, to the contract, and they were in no sense bound by fundamental alterations therein, made without their concurrence or approval.
    The defendants not only did not consent, but they did not authorize Dickerson & Sickels to consent, that the plaintiffs be relieved from thevr obligation to furnish adequate foundations for the machinery, thus leaving the sureties at their mercy and converting the written agreement into a mere unilateral contract.
    “Any agreement with the creditor, which varies essentially the terms of the contract,' without the assent of' the sureties, will discharge him from his responsibility ” (Sprigg v. Bank of Mt. Pleasant, 14 Peters, 208).
    “If a surety be held upon" his contract, that contract must remain unchanged, unless by his consent, and he must be held according to the tenor of his contract, or not at all ” (Henderson v. Marvin, 31 Barbour, 297; McWilliams v. Mason, 6 Duer, 276; Smith v. United States, 2 Wallace, 219).
    Again: The acts of the plaintiffs in respect to the foundations and the boilers, amounted not merely to a radical and vital change in the contract, without the assent of the sureties, but to a waiver and prevention of complete performance, which absolved the sureties from liability.
    “ There can be no question but that hindrances by the defendant, rendering it impossible for the plaintiffs to fulfill their contract, would afford a legal excuse for their non-performance ” Stewart v. Keteltas, 36 N. Y. R, 390; Young v. Hunter, 6 N. Y. R., 206).
    There was, therefore, no error in the charge of the court.
   By the Court:

Freedman, J.

The contract provides that the contractors, Dickerson & Sickels, should build, furnish, and erect, in full and complete order, and according to certain proposals and specifications therein referred to, two square engines, with pumps, boilers, and all other fixtures and apparatus necessary to put the said engines and machinery in full and complete order for certain services to be performed by them, and that they should assume every risk and accident as their own responsibility.” The contractors bound themselves absolutely to furnish a completed contract in all particulars, and that the entire machinery should, upon actual test, successfully perform the stipulated services. By the express terms of the contract, the engineer of the plaintiffs was at liberty at all times to require the rejection of any work which he should deem inferior, and of any material which he might deem of improper or inferior quality or strength for the completion of the contract in the best manner, and to require the substitution of work and material which in his judgment would be proper and adequate. Provision was also made in the contract for the payment of advances, as the work progressed, based upon the relative value of the work furnished to the whole sum. The contracting parties evidently intended to leave a great many things open for subsequent arrangement between the contractors on one side and the engineer of the plaintiffs on the other side; they evidently foresaw that alterations in the contract even, might become necessary during the progress of the work. At any rate, the bond executed by the sureties, upon which this action is brought, expressly authorizes alterations to be made in the contract by the parties thereto without any qualification or reserve.

As a part of the entire machinery to be built and furnished, the contractors were bound to build and furnish certain boilers, which should bfe capable of bearing a cold-water pressure of two hundred pounds to the square inch. At the time the contract was signed, there was, as the learned justice presiding at the trial charged, and to which proposition no exception was taken by either side, no stipulation or condition in force by which Dickerson & Sickels were obliged to have the boilers built in any particular place, or by any particular person. They were entirely free to have them built by whomsoever they pleased, and were bound to have them well and properly built. They subsequently subcontracted with the firm of Johnson & Dunham, of the city of Detroit, for the building of the boilers, by written contract, bearing date January 27,1857, duly signed and executed by Dickerson & Sickels, as well as Johnson & Dunham. By that contract, the latter agreed, among other things, to make the said boilers according to certain drawings, which the evidence shows were agreed upon between Dickerson & Sickels and Mr. Houghton, plaintiffs’ engineer, and to warrant them to be tight under a cold-water pressure of two hundred pounds to the square inch, and to have them ready by a certain time, subject to the approval of plaintiffs’ engineer. Dickerson & Sickels, on their part, agreed to pay to the said Johnson & Dunham for the said boilers, when delivered and set up and proved to be tight, to the satisfaction of the engineer of the Waterworks of the City of Detroit, the sum of eleven and one half cents per pound for every pound weight of said boilers, in the following manner, to wit:

Fifty per centum of the whole sum during the construction of said boilers, whenever the engineer of the said Waterworks shall approve the work as far as it has gone, and the balance, fifty per centum, when the boilers are delivered according to contract and satisfactory to the engineer of the Waterworks aforesaid.

When the boilers were said to be completed by the boilermakers, they were subjected to the test pressure; they leaked and were rejected by plaintiffs’ engineer as insufficient. After that they were made sufficiently tight by men employed by the principal contractors, Dickerson & Sickels, for that purpose to stand, and they did successfully stand, a second test, and Mr. Houghton thereupon accepted them as satisfactory. It subsequently turned out, however, that although they had thus stood the test prescribed by the original contract, namely, the cold-water test, they could not during actual work stand the fire test, and' their insufficiency in this respect was one of the principal reasons assigned by the sureties for the general non-performance of the contract on the part of the principal contractors. Now the court below charged that so far as Dickerson & Sickels were concerned, the alleged approval or acceptance by the plaintiffs’ engineer during the progress of the undertaking, "of any portion of the engines, boilers, machinery, or apparatus, prior to the completion of the whole, did not relieve Dickerson & Sickels from their obligations, that when completed, the engines, pumps, boilers, and other fixtures and apparatus, should perform the stipulated duty; but at the same time also charged, that so far as the sureties were concerned, it was otherwise; that the alleged approval by Houghton of the boilers, or of any of the work or material of them, relieved the sureties, and that this was so, if the acceptance took place for Dickerson & Sickels only, under an authority derived from them, and not for the plaintiffs. This part of the charge was in effect a direction for the jury to bring in a verdict for the defendants, and a compliance with this direction rendered it unnecessary, as the evidence stood, that the jury should consider, any other question submitted as a question of fact. According to this ruling, the contractors could appoint an agent, and by that agent do an act which would release their own sureties, and destroy the plaintiffs’ right of action, a result which they could not .accomplish by any act of their own. This is clearly error. There was a great conflict of evidence upon the following points among other questions:

1. Whether or not Dickerson & Sickels were improperly influenced by Houghton, plaintiffs’ engineer, to award the contract for building the boilers to the firm of Johnson & Dunham, at Detroit.

2. Whether or not Houghton, in order to effect this award, agreed to be responsible that the boiler-makers would make the boilers required in all respects perfect and in full compliance with and satisfaction of the original contract.

3. Whether or not Houghton, in all which he did in regard to the contract with Johnson & Dunham, acted at the request and for -the accommodation of Dickerson & Sickels.

4. Whether or not material alterations were made by Houghton in the plans for the boilers without the full and hearty acquiescence of Dickerson and Sickels.

5. Whether the acceptance of the boilers by Houghton was an acceptance on behalf of Dickerson & Sickels, or on behalf of the plaintiffs, and, if on behalf of the latter, whether it was an absolute one, or made, as he testified, as all other acceptances of parts of the work during its progress were made by him, namely, for the sole purpose of making it the basis for an estimate for advances to be made under the original contract.

Upon all these questions evidence was permitted to be given both ways. A great portion of that evidence was received against the objections of the plaintiffs, and grave doubts may be well entertained as to the admissibility of most of such evidence, especially as it is very questionable whether Houghton could, under any circumstances, bind the plaintiffs by mere declarations, admissions, engagements, or acts on his part made and done outside of the line of the particular business, for which he was employed by the plaintiffs. There is no evidence that the plaintiffs ever had any thing to do with the giving of the sub-contract to Johnson & Dunham, or that they had ever heard of any arrangement between Houghton and Dickerson & Sickels in relation to it, or had in any way authorized it, and I do not find that the defendants make any such claim. But assuming that the whole of the evidence thus received under plaintiffs’ objection was properly admitted and was competent and material to the issues involved in the case, it follows as a necessary consequence that clear issues of fact were raised thereby for the determination of the jury under proper instructions from the court, and that it was error for the court, after the evidence had been thus received, to determine as matter of law upon the same, that ant acceptance or approval of the boilers by Houghton, no matter in what capacity or in what manner or for what purpose, or of any of the work or material of them, relieved the defendants as sureties from all liability whatever, although it did not relieve the principal contractors from their obligation, that, when completed, the entire machinery should successfully perform the stipulated service. Indeed I cannot perceive how the defendants as sureties could be thus held relieved even irrespective of the question of alterations in the contract, while the contractors remained bound.

Again the learned justice presiding at the trial appears to have tried the case throughout upon the theory that any subsequent alteration in the contract, even if made in perfect good faith and for the benefit of the contractors, if in point of fact made without the knowledge and consent of the sureties, had the effect to discharge the latter in the same manner as they would have been discharged, in case their bond did not provide for such alterations. It is true that in deference to a request made by plaintiffs’ counsel, the judge charged the following propositions :

1. By the condition of the bond, the defendants were required to perform and abide by any alterations in the contract with the plaintiffs, and the defendants were not discharged by such alterations, but were expressly bound by them; and

2. In determining the question whether Dickerson & Sickels, in fact, performed their contract with the plaintiffs, and whether the plaintiffs did any thing which excused Dickerson & Sickels from such performance, the jury should exclude any consideration of the defendants’ position as sureties, and determine sueh questions upon the evidence alone, precisely as they would upon the same evidence if Dickerson & Sickels were defendants.

But in his subsequent general charge to the jury, the judge used the following language :

The first question in order of consideration for you to determine is, whether material alterations have been made by the principal contractors (the Commissioners of the Detroit Waterworks and Dickerson & Sickels) without the knowledge or consent of these sureties. If you come to the conclusion that such alterations have been made, then your work is done, and you will find a verdict for the defendants.”

And in his closing remarks the judge again directed the jury, if they should find that material alterations took place in the boilers, or cmy portion of the work, between the contracting parties, Dickerson & Sickels, and the Commissioners of the Detroit Waterworks, without the knowledge and consent of the sureties, or that there was any interference on the part of the plaintiffs without the consent of the sureties, to stop there and find a verdict for the defendants.

These remarks were not confined to such alterations and such interference as prevented or .were calculated to prevent a proper performance of the contract; but according to them the jury was left free to render a verdict for the defendants for any alteration or cmy interference, without regard to its effect or consequence upon the work, or the performance of it by the contractors. This broad statement of a rule generally applicable to undertakings by sureties, cannot be reconciled with the special clause contained in the bond in this action, by which the defendants became responsible for the due performance by Dickerson & Sickels of .the contract, and cmy alterations which may be made therein. Therefore, if it was not error so to charge without any qualification of the language at the time, the charge was at least calculated to mislead the jury.

The views so far expressed render it unnecessary to pass upon the other exceptions taken by the plaintiffs.

The verdict should be set aside, and a new trial granted, with costs to abide the event.


text:
    WILLIAM H. TALMAGE and TUNIS P. TALMAGE, Plaintiffs and Appellants, v. GEORGE L. NEVIUS and PETER I. NEVIUS, Jr., Defendants and Respondents.

      [Decided December 4, 1869.]
    A principal will be held liable for acts of his agent done in excess of the actual authority conferred upon the agent, provided such acts be within the scope of the apparent authority, and be such as an innocent third party, from the recognized acts of such agent, had a right to infer such agent was authorized to do.
    Where a broker had the apparent general charge of plaintiffs’ office, and effected a sale therein in the usual course of the business in the plaintiffs’ name, without disclosing that he acted as a broker, and subsequently delivered to the purchaser, who was a stranger to plaintiffs, the evidences of the title to the property sold, upon which a delivery took place, and he thereupon presented to the purchaser the bill for the price made out on a printed form generally used by plaintiffs for such purpose, and received from the purchaser, upon a demand made, a check for the amount, drawn to plaintiffs’ order, the money for which he obtained from the bank by means of an indorsement purporting to have been made by plaintiffs, but in fact made by himself—Held, that the purchaser was justified in considering the broker as plaintiffs’ general agent, having authority to collect as well as to sell, and that the plaintiffs having, by their own acts and conduct, misled the purchaser into making payment to such agent, could not compel him to make a second payment.
    Before Chief-Justice Barbour and Justice Freedman.
    This case was tried before Mr. Justice Monell without a jury.
    It is an appeal from a judgment entered in favor of defendants. The court found the following facts:
    That on or about the 19th day of September, 1868, the plaintiffs sold to defendants ninety-oue tons and fourteen hundred weight of coal.
    That the contract of sale was made through one Charles L. Foxwell, acting for and on behalf of plaintiffs.
    That the coal was delivered to defendants a day'or two before the 26th day of September, 1868, and was delivered by Foxwell, who held the shipper’s receipt for the coal, and which receipt he delivered to the defendants.
    That on the delivery of the coal and the shipper’s receipt therefor, Foxwell presented to defendants a bill for the coal, made out in the name of the plaintiffs’ firm and upon the usual billheads of the firm, and thereupon defendants made and delivered to Foxwell, in payment therefor, their check on the Merchants Bank of the City of Mew York, for the sum of five hundred and seventy-three dollars and thirteen cents, and Foxwell receipted and accepted the same in payment of the bill, and gave a receipt therefor in the name of plaintiffs.
    That the check was duly paid by the Merchants Bank, and the amount thereof charged to the account of defendants, and the check returned to them by the bank.
    That defendants had no acquaintance with plaintiffs, or either of them, and no notice or knowledge that Foxwell was not in fact a member of their firm, and that the acts and doings of plaintiffs in the premises were such as to induce the belief on the part of the defendants that Foxwell was a member of their fiim, or duly authorized to act for them in the collection and receipt of bills.
    That Foxwell was authorized and empowered by plaintiffs to collect and receipt bills in the name of their firm, and to receive payment of bills in checks drawn to the order of plaintiffs.
    The conclusions of law were:
    That the coal sold and delivered to defendants, and to recover which this action was brought, was paid for by defendants prior to the commencement of said action, and that the defendants were entitled to judgment and for the costs of the action to be adjusted.
    The plaintiffs requested the court to find the following facts:
    To amend the fourth proposed finding by adding thereto the word as “ broker.”
    That Foxwell was a coal-broker selling coal for the plaintiffs, or any other person, on commission.
    That the defendants had no previous transactions with the plaintiffs, and no knowledge of any transactions between them and F. E. Smith & Go., or any other persons.
    That the check was not delivered to Foxwell by the defendants until a day after he gave them the shipping receipt for the coal or the bill.
    That Foxwell made out and delivered the-bill to defendants without the authority or knowledge of the plaintiffs.
    That the plaintiffs never accepted the check of the defendants as payment.
    That it is not proven the papers delivered by Foxwell to the defendants were muniments of title to the coal.
    That the indorsement “ Wm. H. Talmage & Co.” of the check by Foxwell was a forgery.
    That Charles L. Foxwell acted as broker in the sale of the coal named in the complaint.
    That Charles L. Foxwell had no authority to collect of the defendants the amount due the plaintiffs upon said sale.
    "That said Foxwell had no other connection than as broker with the plaintiffs.
    That he had no authority from the plaintiffs to sign their firm name, or to collect money, or to make out or receipt bills.
    That the defendants’ check was not duly paid by the bank.
    That the indorsement of plaintiffs’ firm name was not made by authority, or with the knowledge or assent of the plaintiffs.
    That the delivery of the check to Foxwell was not a delivery to the plaintiffs, so as to entitle them to recover the amount thereof from the bank.
    That the check never came to the hands of .the plaintiffs.
    That it does not appear that the check was paid by the bank to any person.
    That the coal was not paid for by defendants prior to the commencement of this action.
    The plaintiffs requested the court to find as matter of law:
    1st. That the defendants are in possession of the check, and to defeat a recovery they must surrender the check to the plaintiffs.
    2d. That the plaintiffs are entitled to judgment against the defendants for the amount of the bill and interest.
    The court refused to find as requested, and the plaintiffs duly excepted to each refusal separately.

      The plaintiffs also excepted to the following findings of fact and law:
    That said contract of sale was made by one Charles L. Fox-well, acting for and on behalf of the plaintiffs.
    That said coal was delivered to defendants’ firm a day or two before the 26th of September, 1868, and the same was delivered by Foxwell, who held the shipper’s receipts for said coal, and which receipts he delivered to the defendants.
    That said Foxwell received and accepted the check of the defendants in payment of the bill of said coal.
    That said check was duly paid by the-Merchants Bank, and the amount thereof charged to the account of defendants, and said check returned to them by said bank.
    That the acts and doings of the plaintiffs in the premises were such as to induce the belief on the part of the defendants that said Foxwell was a member of said firm, or duly authorized to act for them in the collection and receipt of bills.
    That said Foxwell was authorized and empowered by plaintiffs’ firm to collect and receipt bills in the name of their said firm and to receive payment of bills in checks drawn to the order of plaintiffs’ firm.
    That the coal sold and delivered to defendants’ firm, and to recover which this action is brought, was paid for by the defendants prior to the commencement of this action.
    That the defendants are entitled to judgment and for costs of this action.

      Mr. W. W. Goodrich for appellants.
    The court admitted evidence of a transaction between Smith and the plaintiffs, of which the defendants had no knowledge at the time of defendants giving Foxwell the check, and which could not have influenced the defendants’ action. Such admission was erroneous, as was also the refusal of the court to find that defendants had no knowledge of this transaction.
    The request to find that Foxwell acted as a broker was clearly proven. Foxwell was a broker, and as such sold the coal.

      The refusal to find that the cheek was not delivered by defendants to Foxwell till a day after he gave them the shipping receipt was error. It was material to the plaintiffs’ case that the fact should be found whether Foxwell made and delivered the bill to defendants without the knowledge or authority of plaintiffs.
    Also the refusal to find that the plaintiffs never accepted defendants’ checks. This was material to show that no payment was actually made to the plaintiffs.
    So the refusal of the court to find that the indorsement of the check was a forgery, and that the indorsement was made without their knowledge, and that Foxwell had no authority to collect bills for the plaintiffs, or to make out or receipt their bills.
    The court refused to find that Foxwell had no connection with the plaintiffs except as broker; the fact was clearly proven, and the only question was whether the court should have found that fact.
    The court was requested to find that the delivery of the check to Foxwell was not a delivery to the plaintiffs so as to entitle them to recover of the bank. The court was bound to find that fact affirmatively in order to sustain its finding of law that the defendants had paid the plaintiffs’ claim. There is no proof that the check was ever paid by the bank, even to Foxwell, and the court refused to find that there was no such evidence.
    The defendants proved that the purchase was made of the plaintiffs. The receipt produced by them shows the same fact. It can make no difference that the defendants gave a check to the order of plaintiffs. B"o authority is shown in Foxwell to receive it. On the contrary, it is distinctly disproved by plaintiffs’ evidence. The money was due from the defendants to the plaintiffs. The only question, therefore, is, has the debt been paid? The only claim of payment is, that the payment was in the check given to Fox-well. A broker has no authority to receive payment for property so sold; his duty ends when he has made the bargain (Story on Agency, § 109; Higgins v. Moore, 34 N. Y., 417, 424; Easton v. Clark, 35 N. Y., 225).
    The principal was known to the defendants, who received a bill in the plaintiffs’ name and gave a check to plaintiffs’ order. They dealt with an unauthorized person at their own peril.
    It is claimed that Foxwell had authority to collect the bill on the ground that he had the muniments of title. The delivery of the check to Foxwell was not a delivery to the plaintiffs. He was not their agent for that purpose. They have not ratified or adopted his action, and it never came to their possession, or to the possession of any agent of theirs. A principal is bound by the acts of his agent only so far as the agent is acting in the course of his employment (Weisser v. Denison, 10 N. Y., 6 Seld., 68).
    The taking of the note or promise of the defendants to pay is not a discharge of the debt, unless the plaintiffs agreed to take it as such (Fobey v. Barker, 5 Johns., 68; Murray v. Gouverneur, 1 Johns. Cases, 440).
    The giving of a check, even to the plaintiffs themselves (much less to an unauthorized person), is no payment of a debt, unless the check be paid (People v. Howell, 4 Johns., 296, 304).
    The defendants have their right of action against the bank, and it is undoubted. They directed the bank to pay Wm. H. Talmage & Co., or order; the bank paid on a forged indorsement; and that this is no defense to an action by the defendants (Weisser v. Denison, 10 N. Y., 68).

      Mr. John E. Burrill for respondents.
    The findings of the court on the questions of fact involved are not only warranted by the evidence, but, like the verdict of a jury, are conclusive upon this appeal. Should the court on this appeal examine the evidence, it will see that the findings of the court are fully warranted by the evidence.
    The contract for the sale of the coal was made at the office of the plaintiffs by Foxwell, who was there present and in charge, and acting as one of the firm. Foxwell held the shipping receipt of the coal, which was delivered on board the Florence, and a bill and receipt. Foxwell was in fact acting in behalf of the plaintiffs, and kept their books at the time of the transaction. He occupied a desk behind the railing the same as a partner; made sale of coal and collected the bills therefor, used the billheads of the plaintiffs, and received checks payable to the order of the plaintiffs, which were indorsed by Foxwell in the name of the plaintiffs and deposited to their account. When the check in question was given to Foxwell, he delivered the bill, shipping bill, and receipt.
    The principal is liable for the acts of the agent even in excess of the actual authority conferred upon the agent, provided such acts be within the scope of the apparent authority, and be such as an innocent third party, from the recognized acts of such agent, had a right to infer such agent was authorized to do (Dunny v. Roberts, 35 Barb., 463; Brindenbecker v. Lowell, 32 Barb., 9).
    The principle contended for by plaintiffs, that a mere broker has no implied authority to collect, has no application to this case, because here Foxwell was not a mere broker, but was intrusted with the possession of the evidences of title to the property and to the money to be paid, and also because it is shown that the acts of Foxwell in collecting and receiving payment of bills were known to be recognized by the plaintiffs.
    The cases referred to, that a check does not operate as payment unless expressly agreed to be received as payment, have no bearing, because in this instance the check, was paid at bank by defendants, and they have parted with their money. And again, the check is not in the possession of the plaintiffs, but has been by their agent disposed of.
   By the Court:

Freedman, J.

The general doctrine undoubtedly is, that a broker employed to sell has no authority as such to receive payment, for the reason that he has no authority to sell in his own name. The duty of a broker, in general, is ended when he has found a purchaser and has brought the parties together, and evidence of a local usage, allowing mere brokers to receive payment in certain cases, is not admissible for the purpose of. establishing authority in such brokers to receive such payment. But the plaintiff's in this case cannot, in my judgment, invoke the application of these general rules for their benefit. The evidence shows that Foxwell was more than a mere broker. He seems to have had general charge of the office of the plaintiffs at the time the clerk of the defendants purchased the coal there; he was behind the railing in plaintiff's’ office in the same manner, as a member or clerk of plaintiffs’ firm, and one of the plaintiffs testified that he had that privilege; he effected the sale in plaintiffs’ name without disclosing that he acted as a broker merely, and the sale was made openly in a business manner and in the presence of other persons; the next day Foxwell called at the office of the defendants and procured the name of the vessel, on board of which the coal was to be delivered; the coal was delivered accordingly ; after that he brought the company’s receipt for it, the bill of lading, and the bill for the price made out on one of the blanks with a printed billhead usually used by plaintiffs’ firm for that purpose, to the office of the defendants and finally demanded and received the money. Up to this moment the defendants neither knew nor suspected that they were dealing with a broker; they had had no previous acquaintance or previous dealings either with the plaintiffs or with Foxwell; they, therefore, had every reason to believe, and I cannot doubt that they did believe, that Foxwell was either a member of plaintiffs’ firm, or at any rate an agent clothed with general authority, and consequently did not hesitate to give him their check payable to the order of the plaintiffs, for which he signed a receipt in plaintiffs’ name. Thus it will be perceived that Foxwell not only negotiated the sale behind the railing in plaintiffs’ office, but that subsequently he had the possession of the evidences of the title to the property as well as to the money to be paid, and as his acts up to the time of payment including the presentation of the bill for the price had apparently been ratified by the plaintiffs in every particular, the defendants were justified in dealing with him as if he was authorized to collect bills and receive payment, and after having done so as innocent parties, they have a right to invoke the protection of the rule, which holds the principal liable for acts of the agent done even in excess of the actual authority conferred upon the agent, provided such acts be within the scope of the apparent authority, and be such as an innocent third party, from the recognized acts of such agent, had a right to infer such agent was authorized to do. In cases of this description, the real question ip not what power was intended to be given to the agent, but what power a third person, who dealt with him, had a right to infer he possessed, from his own acts and those of Ms principal (Dunning v. Roberts, 35 Barb., 463; Bridenbecker v. Lowell, 32 Barb., 9).

In the cases relied upon by the plaintiffs in this action a different state of facts existed. In Higgins v. Moore (34 N. Y., 417), the referee found as matter of fact, that the sole authority of the agent was to sell, and that simply as broker, and he rested his judgment upon a custom or usage which he found to exist in the City of Hew York, that when grain is sold by a broker for the broker to have the bill for grain sold by him made out in Ms own name, and for Mm to collect the money from the purchaser, where the seller resides out of the city of Hew York; and on further examination, it will be found that at the time of making the sale, the defendant in that case did not know who was the owner of the rye, but before any part of the same was delivered, he knew that the plaintiffs were the owners thereof; and, in fact, the rye was delivered directly to the defendant by the plaintiff’s bargemen from the barge in which it was brought to the city. In Easton v. Clark (35 N. Y., 225) there was an unauthorized sale of the property, by wMch, if the plaintiff had so elected, no title passed. In the case of the New York Life Insurance and Trust Company v. Beebe (7 N. Y., 364) the agent was employed to obtain a loan for the respondent from the appellants, but Ms alleged declarations, wMch were relied upon, were entirely without the scope of such or any other agency. Instead of acting as the respondent’s agent he represented himself as acting in Ms own name and right, and on his own account, in effect denying any agency whatever, and the respondent did nothing to mislead the appellants. These cases, therefore, do not help the plaintiffs. On the other hand it seems to be well settled, as a rule, based on principles of policy, propriety, and justice, that if a principal puts his agent in á position to impose on innocent third persons by apparently pursuing his authority, he shall be bound by the agent’s acts, for the reason that he, by his own acts and conduct furnishes the opportunity to the agent to deceive, and because such innocent third persons should not be made to suffer for the positive carelessness of the principal. The evidence in this case shows that the arrangements between Foxwell and the plaintiffs were generally very loose, indeed. Shortly before the sale to the defendants, Foxwell made some sales to other parties; he used plaintiffs’ billheads, presented the bills, received the checks to plaintiffs’ order, indorsed the latter in plaintiffs’ name, deposited them, thus indorsed, to plaintiffs’ credit, and plaintiffs ratified his acts. This evidence was not received for the purpose of showing that the defendants were in any wise influenced thereby, for they had no knowledge thereof, and had already rested their defence upon other testimony, but in rebuttal of statements made by plaintiffs upon the stand, to the effect that Foxwell never acted otherwise than as a broker for them, and in part refutation of the claim set up by plaintiffs generally, that because Foxwell was in point of fact a broker, and as such also sold for other houses, he must have acted as such in the particular transaction which plaintiffs had with the defendants. Ho error was committed by the admission of this evidence. It also appears that shortly after the sale to the defendants, Foxwell, at plaintiffs’ request, kept plaintiffs’ books for a short time, and collected bills for them. There is some evidence tending to show that during that time the bill of defendants was marked or crossed off plaintiffs’ books, and the fact that plaintiffs, although the sale was for cash, made no demand for the money upon the defendants until after the expiration of about two months from the time of the delivery by the defendants of their check to Foxwell, is not disputed at all. Upon the whole evidence there can be no doubt that the plaintiffs are alone to blame, and that it would be highly inequitable to compel the defendants to pay a second time, upon the sole ground that plaintiffs’ agent, who to all appearances had full authority to receive payment, had none in point of fact. The defendants having thus been induced to part with their check, and the bank having paid the same, and charged the defendants therewith, it becomes immaterial to inquire by what means Foxwell got hold of the proceeds of the same, and for the same reason an examination of the cases cited by plaintiffs’ counsel, for the purpose of demonstrating that a check does not operate as a payment, unless expressly agreed to be received as payment, is unnecessary.

I am of opinion that the findings of "the court below are fully warranted by the evidence ; that no error was committed by the refusal of the court to find as requested by the counsel for the plaintiffs, and that, therefore, the judgment appealed from should be affirmed, with costs.


text:
    ALLAN HAY, Plaintiff and Respondent, v. COLUMBUS C. DOUGLAS, Defendant and Appellant.

      [Decided December 4, 1869.]
    Where a party, on Ms direct examination as a witness on Ms own behalf, with a view to strengthen Ms testimony on the main issue, testifies to another transaction had with the other party, which is not strictly within the issues to be tried, but calculated to throw light upon them, the extent of his cross-examination as to such other transaction rests in the sound discretion of the justice presiding at the trial.
    Where a deed containing an interlineation in the description of the premises conveyed thereby is offered merely as a piece of corroborative evidence to sustain plaintiff’s testimony as to the actual occurrence of a transaction forming the principal issue, the deed is admissible without previous explanatory testimony in relation to the interlineation.
    And where such deed is not set forth in the printed ease, and on appeal no other evidence is presented from which it can be seen that the interlineation actually exists, the General Term will not assume its existence simply because the case shows that a motion for its exclusion on that ground was made on the trial.
    Before Chief-Justice Barbour and Justice Freedman.
    This case was tried before Mr. Justice Monell and a jury.
    The facts sufficiently appear in the opinion of the court.

      Mr. J. F. Harrison for appellant.
    The justice erred in allowing evidence, in the cross-examination of the defendant, as to the purchase of the West Virginia lands.
    The allusion to the West Virginia land in his direct examination was but incidental and no part of the case; and it was error to suffer the plaintiff’s counsel to pursue that subject in the cross-examination.
    It was error to allow the deed with interlineations in that clause which expressed the interest purporting to be conveyed by it, to be introduced in evidence without proof of its delivery to Douglas, and that it was so interlined at the time of its delivery.
    There was no evidence in the case that the deed which furnished the sole consideration, if any, to support the promise contained in the note, was ever delivered to Douglas, or that he ever saw it, or knew its contents. Delivery of a deed is essential to its validity (Church v. Gilman, 15 Wend., 656).
    Despite the promise on the part of Hay to pay the money to Berry, the transaction would be incomplete, as furnishing the consideration for the note, without showing the delivery of the deed. Douglas was in the same position as if the note had been given directly to Berry for the consideration money (Clark v. Gifford, 10 Wend., 310).
    The deed bearing upon its face an interlineation in so material a portion as the amount of interest conveyed, it was improperly received in evidence without explanation on the part of the party producing it, that such interlineation was made before its execution and delivery (Jackson v. Osborn, 2 Wend., 555; Herrick v. Malin, 22 Wend., 388).
    It was error to exclude testimony offered on the part of the defendant, in answer to the question in relation to the purchase of these lands.
    As had been stated, the allusion made to the West Virginia lands on the first examination of the defendant was but incidental, and not continued. When, then, the plaintiff had been suffered to go over the whole transaction, and his version to be fully placed before the jury, it was error that the defendant .■should be shut out, and not permitted to testify in that behalf.

      Mr. John E. Burrill for respondent.
    The question by the plaintiff’s counsel as to the purchase of the lands in West Virginia was proper.
    It was on the cross-examination of the defendant, who had testified in regard to the purchase, but had omitted to give the name of the seller, and it was necessary to identify the transaction.
    Again, the question and answer, even if improperly admitted, •could not by any possibility have affected the result; and even had they been improperly admitted, the court will not interfere.
    The deed was properly admitted.
    Even if it had appeared from the deed that the part which expressed the.intended property to be conveyed by it was interlined, that did not invalidate the deed, nor render it necessary for the plaintiff to offer explanatory testimony in regard thereto before offering it in evidence.
    The testimony offered by the defendant in relation to the purchase of these lands was properly excluded.
    By the question the defendant sought to re-examine the plaintiff generally as to the “ transaction in regard to the purchase of the land.”
    The court did not rule that the defendant could not offer testimony on that subject, but merely confined the re-examination to the. points developed in the plaintiff’s evidence.
    The witness here sought to be re-examined was the defendant himself, who had already been examined on his own behalf, and cross-examined, and his testimony closed.
   By the Court:

Freedman, J.

This is an appeal from a judgment upon exceptions taken at the trial of the action at the Trial Term of this Court. The action was upon a promissory note made by the defendant to his own order for five thousand dollars, dated January 23, 1868, and by him indorsed and delivered to the plaintiff. The defendant by his answer admitted the making, indorsement, and delivery of the note, that the same is held and owned by the plaintiff and the non-payment thereof, but claimed that the said note was a renewal of another note made by the defendant, dated April 27,1865, that the original note was loaned to the plaintiff, and was without consideration, and that the note in suit was given in renewal thereof for the accommodation of the plaintiff.

The defendant, having the affirmative of the issue, was examined at the trial as a witness on his own behalf and substantially proved, the allegations contained in his answer, and among other things testified that the plaintiff, having organized a scheme for the purchase of a large tract of land in West Virginia, applied to the defendant for a loan of his note, so that he, the plaintiff, could get it discounted and thus be enabled to raise money to pay on account of this property. On his cross-examination, the defendant was required to state from whom the lands in West Virginia were to be purchased. This question was objected to, but allowed, and defendant now insists, that it was error to suffer the counsel of the plaintiff to pursue that subject. I think the question was entirely proper to identify a transaction testified to by the defendant upon his direct examination, and its admissibility was, to say the least, a question resting in the sound discretion of the justice presiding at the trial, with which the court at General Term will not interfere.

The next exception relates to the admission in evidence of a certain deed relating to this West Virginia land. The defendant had rested; the plaintiff had gone upon the stand and shown that the original note was not loaned, but delivered in payment for an interest in this land given by plaintiff to defendant. To corroborate his statement, the plaintiff offered in evidence a certain deed bearing date seven days prior to that of the original note. The counsel for the defendant objected on the ground that it appeared by the deed then produced and exhibited, that the part which expressed the interest purporting to be conveyed by it to the parties was interlined, and that there was no proof that it was in that state at the time of its pretended delivery.” The form of this objection does not entitle the appellant to argue the question of the sufficiency of the evidence of a delivery of the deed upon appeal for the first time. The deed itself has not been printed in the papers upon which the appeal is brought on, and there is no other evidence from which I could judge whether the ground upon which the objection was actually put, namely, the existence of a material interlineation, existed in point of fact. I certainly cannot, on appeal, assume that the fact alleged in regard thereto was true. But even if such interlineation did appear from the deed, I am inclined to think that the deed was admissible without previous explanatory testimony in relation to such interlineation. The question to be tried was whether there was a loan of the note, or whether a consideration was given for it. Under the pleadings, the defendant, if liable at all, was liable for the full amount of the note; nor did he at the trial propose to litigate the question of a partial failure of consideration. The deed referred to- was offered simply as a piece of corroborative evidence to sustain plaintiff’s version in regard to the main issue. ETo error, therefore, was committed by its reception.

The only remaining exception was taken to the refusal of the court to permit the defendant, when recalled for the purpose of rebutting plaintiff’s testimony, to be re-examined generally as to the transaction in regard to the purchase of the land. But, inasmuch as it appears that the defendant was subsequently allowed, in answer to specific questions, to give such further evidence as to the details of the transaction as he desired, this exception is clearly untenable.

. The judgment should be affirmed, with costs.