Noel Co. v. Atlas Cement Co. , 103 Md. 209 ( 1906 )

This action was brought by the Noel Construction Company, a corporation, to recover from the Atlas Portland Cement Company, a corporation, damages for the breach of an alleged contract to deliver to the plaintiff twenty-five thousand barrels of cement purchased for use in the erection of Midshipmen's Quarters at the Naval Academy in Annapolis, Maryland.

The declaration contains the common money counts, and the following special count: "And for that the plaintiff in the early part of the year 1902, acting by its agents, Edgar M. Noel and David W. Thomas, agreed to buy of the defendant, and the defendant, acting by its duly authorized agent, agreed to sell to the plaintiff, twenty-five thousand barrels of Atlas Portland Cement, to be delivered as ordered by the plaintiff on the dock at the Naval Academy grounds at the city of Annapolis, in the State of Maryland, at and for the price of one dollar and twenty cents per barrel, delivered; and the plaintiff in fact says that it was at all times ready and willing to accept and pay for said cement; and that it made frequent demands upon the defendant for the delivery of the same; but that the defendant wholly failed and refused to make said deliveries or to perform any part of its said contract. And the plaintiff further says that because of the said failure and refusal on the part of the said defendant, it was compelled to go into the open market, and purchase, at a price largely in excess of the agreed price aforesaid, to-wit, at the rate of $1.468 per barrel, 25,000 barrels of cement similar to that which the said defendant so as aforesaid sold, but failed and refused to deliver.

"And the plaintiff claims ten thousand dollars ($10,000.)

The defendant filed the general issue pleas, and at the close of the plaintiff's testimony the Court granted a prayer offered by the defendant instructing the jury that there "was no evidence legally sufficient to entitle the plaintiff to recover under the pleadings in the case," and from this ruling the single exception in the record is taken.

It will be necessary to state the facts somewhat at length in order to a proper understanding of the case, but the questions of law arising thereon are but two in number, and these depend for their solution upon well established principles.

Sometime in December, 1901, the United States Government had awarded to Edgar M. Noel and David W. Thomas, as associate contractors, a contract for the erection of Midshipmen's Quarters at Annapolis, Maryland, for the sum of $2,448,000, and on January 14th, 1902, the contract was formally executed in writing, the bond required of said contractors by the United States Government, in the sum of $270,000, for payment of the contractors' debts, being then given, and all other requirements of the Government being then complied with. On January 9th, 1902, Noel and Thomas in order the better to enable them to carry out said contract, together with Jacob D. Kline, Moses Pels and J. Kemp Bartlett, formed a corporation under the name of The Noel Construction Company, with a capital stock of $250,000, of which one-half was at once paid up in cash. The certificate of incorporation was duly recorded January 14th, 1902, and on the same day the required bonus tax was duly paid to the State of Maryland by the said corporation.

The certificate stated that the corporation was formed for the purpose "of carrying on the business of general contractors; * * * to make, enter into, and perform any and all contracts and agreements with the Government of the United States, State, County and Municipal Governments, and with corporations, firms and individuals; * * * also for the purpose of indemnifying sureties, individual or corporate, upon any bond or bonds required by any of said Governments, guaranteeing the performance of any contract or contracts in which the corporation hereby formed, is or may be interested."

On January 15th, 1902, at the first meeting of the stockholders of the Noel Construction Company, its officers duly elected were authorized to execute in its behalf an agreement of indemnity to the United States Fidelity and Guaranty Company against all loss it might sustain as surety for Noel and Thomas upon the bond of $270,000 guaranteeing the performance of their contract for the erection of said quarters, and to deposit $50,000 of the funds of the Noel Construction Company with the United States Fidelity and Guaranty Company as collateral security for the performance of said contract of indemnity; also to enter into agreements with sub-contractors of Noel and Thomas guaranteeing the payment of their claims for labor and materials in the prosecution of the work of erecting said quarters; also to enter into such subcontracts for labor and materials in the erection of said quarters as they might deem for the best interests of the company, and in case any sub-contractors should prefer that their contracts be with Noel and Thomas, as associate contractors, to execute in behalf of the company agreements guaranteeing the payment of the just claims of said sub-contrators under said contracts. These last-mentioned provisions were made because the formal contract with the Government was required to be made with the bidders to whom it was awarded, and could not be made in the name of the Noel Construction Company, and under the provisions of the Federal statutes the bonds given by contractors for government work can be sued on for work and material furnished, it being regarded as doubtful whether those who might contract with the Noel Construction Company could resort to such bonds; thus those who elected to contract with Noel and Thomas as associate contractors could depend upon the bond of the United States Fidelity and Guaranty Company, and those who might contract directly with the company could rely upon the guaranty of the company itself. On the same date, January 15th, 1902, Noel and Thomas entered into an agreement under seal with the Noel Construction Company, reciting the contract of Noel and Thomas with the United States Government, together with the resolution of the Noel Construction Company to execute said contract in behalf of said Noel and Thomas, and proceeded, in consideration of the premises and other good considerations, to assign to the said Noel Construction Company all the right, title and interest of Noel and Thomas in said contract, and in all sums to become due thereunder. Under the Federal statutes, any assignment of a Government contract is voidable at the option of the Government, but the formation of the Noel Construction Company for the purposes stated and the contemplated assignment to it of the contract with Noel and Thomas was communicated to and considered by the United States Government authorities in charge of this work, and Judge Advocate General Lemley informed Noel and Thomas that the Department had no objection to recognizing such assignment upon condition that Noel and Thomas remain liable to the Government upon their contract, notwithstanding such assignment; that the Noel Construction Company also be deemed liable for the fulfillment of the original contract with Noel and Thomas, and that the United States Fidelity and Guaranty Company be liable for any default, whether said contract be carried on by Noel and Thomas, or by said Noel Construction Company.

Subsequently however, Judge Advocate General Hanna, acting for Judge Advocate General Lemley, thought that there might be some embarrassment to the Government by a formal recognition of the assignment and that it would be best to let it remain a merely tacit recognition. Consequently no formal recognition of the assignment was made. This recital of facts will serve to show clearly how complete and thorough was designed to be the substitution of the Noel Construction Company for Noel and Thomas in the execution of this contract, and it will hereafter be shown that knowledge of all these facts was brought home to the Atlas Portland Cement Company when they contracted to deliver the cement in question.

Prior to January 14th, 1902, The Atlas Portland Cement Company had been endeavoring to secure this contract, as appears from a letter or telegram of that date from McClaren, their sales agent, to Noel and Thomas in which he says: "We understand you are now ready to talk cement for your Annapolis contract and will be obliged if you will advise us when it will be convenient to see the writer in reference to this matter." This brought an interview with McClaren in Baltimore on January 31st, 1902, when he submitted the following proposition:

January 31st, 1902.

"Messrs. Noel and Thomas, Baltimore, Md.

We hereby offer to supply you with 25,000 bbls Atlas Portland Cement or what you may require for your contract on dock at Naval Academy, Annapolis, at one dollar and twenty ($1.20) 4 bags to the bbl. subject to the engineer's approval on test, usual rule for bags to be exacted.

Signed. The Atlas Portland Cement Company per P.M. McClaren."

To which proposal the following reply was then made,

Baltimore, January 31, 1902.

"The Atlas Portland Cement Company

30 Broad St., N Y Gentlemen

We hereby accept your Mr. McClaren's proposal to deliver us on dock at Annapolis Naval Academy, approximately 25,000 barrels Atlas Portland Cement, or all that we may require on our contract at said Annapolis Academy, in duck bags, 4 bags to the barrel, at $1.20 per barrel. The usual charge of 10 cts per bag will be exacted. The acceptance of this cement of course, is subject to the engineer's test and approval. Terms 90 per cent in 30 days, or 1 per cent cash in ten days. The cement to be delivered as we may require it on order. This acceptance is subject to a contract which may be mutually agreed upon later.

Signed E.M. Noel and D.W. Thomas"

According to this undisputed evidence, McClaren, who is since dead, dictated this acceptance.

Mr. Noel testified that McClaren came to see him relative to this order several weeks before it was placed, and he then told him before it could be placed it was necessary for them to make some financial arrangements, and that they might form a Construction Company; that at the interview of January 31st he told him the Construction Company was formed, and the contract of Noel and Thomas had been assigned to this company; that they were now ready to give orders, and that McClaren's order was the first one placed and signed. Mr. Thomas was present at that interview, but he too has since died. Testifying in detail Mr. Noel said, "McClaren asked me who the Noel Construction Company was, and what it was for. I told him it was formed for the purpose of financing this contract for us, and that the contract had been assigned to the company. I told him we had authority to make contracts in the name of Noel and Thomas, for the benefit of the Noel Construction Company, and I had such authority."

On February 6th, 1902, The Atlas Portland Cement Company wrote Noel and Thomas, saying, "Referring to your acceptance of our Mr. McClaren's proposal to furnish you with 25,000 bbls Atlas Portland Cement for use on your Annapolis contract would say we have been informed that the Noel Construction Company has been formed and has some connection with your contract. We would request that you advise us at your earliest convenience if this information is correct; and if so, what the relationship is between yourselves and the above-mentioned company. Meanwhile we will prepare the contract spoken of in the last paragraph of your letter above referred to."

On February 11th Noel and Thomas replied, saying: "The Noel Construction Company has underwritten the contract and will pay all bills for this work. Your contract will have to be written with Noel and Thomas, as the Government will not recognize any assignment of contracts. The company has a capital of $250,000, fifty per cent of which is paid in cash. I will forward you contracts duly executed by us within a few days. You may ship us a cargo of cement whenever you see fit. We will be able to take care of it in about two weeks."

This was acknowledged February 13th saying, "We presume you will make the company a party to the contract with us, and awaiting same, we remain, c."

On February 18th Noel and Thomas wrote: "Our sheds are built and we are awaiting the cement, and have to request you will have the same reach here at the earliest possible moment as this cement has to stand a 28 day test before it can be used."

On February 19th the Atlas Portland Cement Company replied: "The contract referred to in yours of 11th and our reply of 13th has not yet come to hand, and we request that you forward same at your earliest convenience. Immediately we execute a contract with you we will forward cargo as soon as possible."

On February 20th Noel and Thomas wrote saying: "Our counsel has been out of town until recently, therefore the contract has not been prepared, but will forward same today or tomorrow. Would say a resolution has been passed by the Noel Construction Company at the stockholders' meeting to become liable for all bills contracted by Noel and Thomas, but this cannot be made a part of your contract, owing to the fact that it might be misconstrued to mean an assignment of the contract, which would violate our contract with the Government. The Noel Construction Company has underwritten this contract to the Surety Company, which no doubt you know are responsible for all debts contracted by Noel and Thomas. Please ship us cargo of cement at the earliest possible time."

February 21st the Cement Company wrote saying: "In view of the amount of the contract we feel justified in requesting that you forward us for our records a copy of the resolution of the stockholders of the Noel Construction Company. We will at once proceed to engage a vessel for shipment requested."

February 26th Noel and Thomas forwarded contracts in duplicate for delivery of cement, and promised copy of resolution after next meeting of board of directors of Noel Construction Company, to be held about March 1st.

March 5th the Cement Company wrote: "The form of contract you sent us is not at all satisfactory to us, and it is our intention to submit one drawn by ourselves;" and on March 7th wrote, "As we advised you on the 5th, the form of contract you submitted was not at all satisfactory to us, and we therefore return the two copies to you, and send you a form of agreement we have drawn up. If same is satisfactory to you please execute and return, andupon receipt we will forward you our copy properly executed."

On March 26th Noel and Thomas replied, saying: "Referring to yours of March 7th, we return herewith the contract prepared by you and duly signed by us. Please send us a copy of your contract executed by you, as per your letter."

On March 27th the Cement Company wrote: "We have no record of having received the copy of the resolution mentioned in ours of February 21st and yours of the 26th. We request that you forward it at your earliest convenience, as we expected to have this paper before we executed a contract with you. Your favor of 26th enclosing your signed copy of contract received, and we will await your reply to this letter before forwarding our signed copy."

On April 1st the Cement Company wrote again, saying: "We have not heard from you in reply to ours of March 27th requesting copies of certain resolutions of the Noel Construction Company. In looking over the signed copy of contract you forwarded us March 27th, we note same is signed Edgar M. Noel, David W. Thomas by Edgar M. Noel. We feel same should have signature of Mr. Thomas, or we should have a paper from Mr. Thomas authorizing the signature as stated. We therefore request that you send us copies of resolutions desired, together with such a paper from Mr. Thomas as we have outlined."

On April 2nd Noel and Thomas replied, saying: "A copy of the resolution was forwarded to you yesterday, March 31st, by Mr. Bartlett, of the Noel Construction Company. In regard to the contract being signed Noel and Thomas by Edgar M. Noel, I, of course, have power of attorney from Mr. Thomas to sign his name, otherwise I should not have done so; however, if you desire the contract signed by him, if you will return same I will have it done.

"It appears to me that you are unusually exacting about this contract, and it would seem that you do not want to carry out your proposition as accepted by us through your Mr. McClaren. If such is the case, if you will be frank and tell me so, I will try to purchase the cement elsewhere. I do not care to have further correspondence about the contract."

On April 2nd, after copy of resolutions sent March 31st should in due course of mail have been received, the Cement Company wrote, saying, "We beg to acknowledge receipt of your order, No. ____ of 31st, which will receive our prompt attention."

Here it should be stated that the market price of cement began to rise in February, 1902, and continued to rise until October, 1902, when cement of the quality in question reached $1.99 delivered at Annapolis, and that in April, 1902, the market price at the mills was 95c. per barrel, and if the cost of transportation to Annapolis 52c. be added, the price at Annapolis would be $1.47; that the Noel Construction Company, having other contracts with Government at Annapolis, purchased from the Government for these other contracts, the same sort of cement which the defendant had contracted to furnish the plaintiff, and which same cement the defendant had sold to the Government in October, 1902, at $1.99 per barrel.

In this state of facts, on April 2d 1902, and presumably at a later hour in the day than that at which the acknowledgment of the plaintiff's order of March 31st was written, the Cement Company wrote again, saying, "Referring to our correspondence relative to our executing contract with you for the Portland Cement you will require at Annapolis, we have to advise you that we have decided that we will be unable to execute this agreement. Our present position is such, owing to our inability to obtain the necessary cars, that all orders we receive are subject to a delay of about three weeks in shipment from date of receipt, and we therefore do not feel justified in entering into any more new contracts until our shipments have decidedly improved. Regretting that we feel forced to write to you in this manner, we are, respectfully yours."

On April 12th Noel and Thomas wrote, saying, "We are in receipt of yours of April 2nd by which we understand that you do not propose to carry out your bid and our acceptance of same for cement for Cadets' Quarters at Annapolis. We will try and place this order elsewhere, but we wish it distinctly understood that we propose to hold you responsible for any additional cost by so doing."

To this, on April 25th, the Cement Company replied, saying, "We are advised and believe that we have made no contract with you to supply the Portland Cement required for your contract for the Cadets' Quarters at Annapolis, and if we have made such a contract with you, we feel justified in refusing to perform it, and therefore will not fulfill the contract, nor accept any liability for any alleged breach thereof."

It is contended by the plaintiff that the contract was formed on January 31st, 1902, by the offer and acceptance of that date, and that the apparent qualification contained in the acceptance contemplated nothing more than a subsequent formal embodiment of an agreement already reached, while the defendant maintains that this clause in the acceptance conclusively shows that an agreement between the parties was never intended to be consummated by the letters referred to of January 31st, 1902, and that it was the clear intention of the parties that the agreement should be in writing and signed by the parties before any contractual obligation should exist.

In Bonnewell v. Jenkins, L.R. 8 Chan. Div. 70, it is said that a long series of cases has established that mere reference to a future contract is not enough to negative a present one; and in a note to Sanders v. Pottlitzer Bros. Fruit Co., 29 L.R.A. 431, it is said the decisions upon this subject, while apparently conflicting, are divisible into classes which are quite harmonious and which leave very little actual conflict.

We think however it would serve no useful purpose to determine to which of these classes the case under consideration belongs, because we think there is ample evidence to show that subsequent to January 31st, 1902, a binding contract was formed between the parties, conceding for the purposes of the case that none was formed on that date. In the letter of the Cement Company dated March 7th, 1902, there was tendered to the plaintiff a form of agreement drawn up by the Cement Company in pursuance of the clause providing therefor in the acceptance of January 31st, 1902, and the plaintiff was told if same was executed by it and returned to defendant, it would forward its copy properly executed. This agreement was duly executed by the plaintiff and returned to the defendant, who retained it but never did forward according to promise its own copy signed by it. We think that the letter of March 7th enclosing and referring to the form of agreement, was as valid an execution of the contract by the defendant, as if duplicates had been enclosed, both duly signed by it, as soon as the plaintiff had signed and delivered one of these duplicates. There is no magic as to the place of signing, and we think the defendant was as effectually bound by the letter forwarding the form for plaintiff's signature, as it would have been by an actual signing of the duplicate form. The defendant could not free itself from the obligation thus imposed, by its own failure to sign and forward its own copy of its own agreement, based upon the flimsy pretexts contained in its letters of March 27th and April 1st.

Nor can we entertain any doubt that the plaintiff is entitled to sue upon the contract. The defendants were apprised at the time of the offer and acceptance of January 31st, 1902; that Noel and Thomas in purchasing the cement were acting as the agents of the Noel Construction Company. Their first letter of February 6th shows that their agent, Mr. McClaren, communicated to them the information upon that point given him by Noel, and all the subsequent correspondence between the parties shows that the defendant understood that Noel and Thomas were acting throughout as agents for the Noel Construction Company. This, however, bears only upon what may be termed the moral aspect of the case, since in law it was not necessary that the defendant should know that Noel and Thomas were acting as the plaintiff's agent. In 2 Pageon Contracts, sec. 960, it is said "If the facts exist which in law create the relation of principal and agent, such relationship exists, though the parties may not have intended such facts to have such legal effect." The right of a principal to sue on an agent's contract does not depend upon the defendant's knowledge or ignorance of the agency. The Maryland cases are clear to this effect, and such is the general doctrine. In Oelrichs Lurman v. Ford, 21 Md. 501, this Court said: "The right of a principal to maintain an action on a written contract made by an agent in his own name, without disclosing the name of the principal, although formerly sometimes questioned, is now well settled." And in Balt. Coal Tar Manufacturing Co. v.Fletcher Murdock, 61 Md. 295, it is said: "Though the contract may have been in the name of the agents, if it was made for and on behalf of, and for the benefit of the plaintiffs, it may be sued on and enforced by the plaintiffs, notwithstanding the agents or one of them may have furnished the money for the purposes of the contract."

There is no difficulty arising from the fact that the draft of the agreement sent by the defendant and signed by Noel and Thomas concludes "witness our hands and seals," and is only signed and not sealed by them. The acceptance of January 31st did not stipulate for an agreement under seal, and the defendant had no right to add, another term to that stipulation without the consent of Noel and Thomas. Moreover, the defendant accepted without objection the draft signed by Noel and Thomas, without being sealed, and while of course it was not effective as a deed, without seals, it was effective as a simple agreement or contract conforming precisely to the stipulation of the acceptance for a"contract." The undisputed testimony shows that after every reasonable effort to purchase elsewhere the cement which defendant refused to deliver, the plaintiff was forced to pay $1.97 per barrel for cement of like quality, making a loss to it of $6,750, to which extent the plaintiff was injured by the ruling of the Court upon the prayer granted.

It follows from what we have said that the judgment must be reversed.

Judgment reversed and new trial awarded with costs to theappellant above and below.

(Decided March 27th, 1906.)