Hubbard v. New York New England Western Investment Company/Opinion of the Court

This is an action at law brought by the plaintiff in error, a citizen of Massachusetts, against the defendant in error, in the supreme judicial court of that state for the county of Suffolk, and removed by the defendant, a corporation and citizen of the state of Illinois, into the circuit court of the United States for that district. The New York, New England & Western Investment Company is a corporation chartered by the state of Illinois under the name of the Edgar County Land & Loan Company, its name having been subsequently changed. It has an authorized capital stock of $100,000, subject to be increased to $200,000. Its powers were conferred by the third section of an act approved March 8, 1867, which reads as follows:

'Sec. 3. The said corporation shall have power to borrow money, and to receive money in deposit, and pay interest thereon, and to loan money within or without this state, at any rate of interest not exceeding that now or hereafter allowed by law, to private individuals, and to discount loans, and in computation of time thirty days shall be a month, and twelve months a year, and to make such loan payable either within or without this state, and to take such securities therefor, real and personal, or both, as the directors and managers of said corporation shall deem sufficient, and may secure the payment of such loans by deeds of trust, mortgages, or other securities, either within or without this state; may but and sell negotiable paper or other securities; may open and establish a real-estate agency; may purchase and sell real estate, and shall have power to convey the same in any mode prescribed by the by-laws of such corporation; may accept and execute all such trusts, whether fiduciary or otherwise, as shall or may be committed to it by any person or persons, or by order of any court or tribunal or legally constituted authority of the state of Illinois, or of the United States, or elsewhere; may make such special regulations in reference to trust funds, or deposits left for accumulation or safe-keeping, as shall be agreed upon with the depositors or parties interested, for the purpose of accumulating or increasing the same; may issue letters of credit and other commercial obligations, not, however, to circulate as money; and may secure the payment of any loan made to said company in any way the directors may prescribe.'

The home office of the company was at Chicago but a branch was established in New York city, which became, and was at the time of the transactions in question in this suit, the main office, at which its business was chiefly transacted. The company also directed the establishment of branch offices at Philadelphia and Boston. The relation between the defendant and the plaintiff grew out of a contract entered into between them, having in view the establishment of the office in Boston. A contract in writing was entered into between them on the seventeenth day of December, 1879, the substantial parts of which are as follows:

The plaintiff Hubbard agreed 'to open and take charge of a branch office of said corporation at Boston, Massachusetts; to devote his best energies and time to the interests of said corporation, as far as may not be inconsistent with a due regard for the interests of such legal clients as he may have from time to time, always considering his duties towards said corporation as of the utmost importance; to use his best endeavors to place in New England, where it may be of greatest advantage to said corporation, twenty-five thousand dollars ($25,000) of the capital stock of said party of the first part, and generally to do and perform (within his 'division,' so called) all acts for the furtherance of the interests of said party of the first part as shall be consistent with honor, honesty, equity, and fair dealing.'

On its part the defendant agreed 'forthwith to elect said party of the second part one of its directors, with the title of assistant vice-president; to give said party of the second part the direction of said office designated as the 'Eastern Division,' subject, of course, to the by-laws of said corporation now in force or hereafter to be enacted; to furnish said office and its furniture, all the books, signs, circulars, and advertising which said corporation may require; to pay the salary of its book-keeper, and of such other employes as may be deemed necessary and proper, and, generally, to pay the running expenses of said office; to pay to said party of the second part the sum of eighteen hundred dollars ($1,800) per year as 'salary,' together with all expenses of travel incurred by him on its behalf, and a further amount as 'commissions,' to be determined as follows, to-wit: All business originating in said 'Eastern Division,' which shall include the whole of Maine, New Hampshire, Vermont, and Massachusetts, or transacted at said Boston office, shall be 'valued' according to the amount of gross profit coming therefrom to said corporation, or which can be rightfully claimed by it. After deducting from the aggregate of such profts for each year the sum of fifty-four hundred dollars, ($5,400,) plus the amount of book-keeper's salary, said party of the second part shall be entitled to one-third of the balance as commissions, as above. Settlement shall be made between said parties as often as once a month, said party of the second part becoming entitled to said 'commissions' pro rata as soon as the same shall have been earned and received, and shall exceed in the aggregate the amount of $5,400, plus salary of book-keeper, as above set forth, and shall be paid 'in kind.' Said party of the first part shall favor, as much as practicable, said Boston office, to the end that parties within its precincts may deal directly with it. All legal services required by said party of the first part, for itself or others, in suits or proceedings in court, or in the drawing of railroad deeds and mortgages, shall be entitled to extra compensation from said party of the first part.' It was also provided that 'this agreement shall go into effect from the after the sale or purchase by said party of the second part at par of ten thousand dollars ($10,000) of the capital stock of said party of the first part, and payment therefor, and shall be in force for one year, at the end of which time there shall be a general accounting together of said parties, and a new agreement may be made and ntered into, if the mutual interests of said parties may so require.'

This agreement went into effect, according to its terms, by the plaintiff taking and paying for $10,000 of its capital stock, at par, on the twenty-fourth of December, 1879. On the fifth of June, 1880, he was elected a director by the stockholders at their annual meeting in Chicago. The plaintiff opened in Boston the branch office contemplated, and performed all the services required of him during the year fixed by his contract; was paid his salary of $1,800, and reimbursed for all outlays, as provided in the contract of December 17, 1879, rendering monthly accounts to the New York office, as required, to which no objection was ever made; and, apart from the transaction here in question, there was no controversy as to his interest in any part of the gross profits arising under the contract.

It also appeared from the evidence-the whole of which is set out in the bill of exceptions-that, through a contract with the Kansas City, Burlington & Santa Fe Railway Company, of which W. H. Schofield was then president, the defendant had for sale certain bonds of that company, and, in order to place them before other railroads and investors, it had issued a circular, dated May 15, 1880, offering for sale these bonds, which were to cover not only the extension of that road to Burlington, Kansas, but also that portion of the road already built from Ottawa to Burlington, and on this completed portion of the road of 45 miles there was already outstanding $600,000 of first mortgage bonds, which were to be taken up and canceled from the proceeds of the new bonds offered in this circular. One of these circulars was sent from the New York office to the plaintiff at the Boston office. A negotiation was commenced and carried on personally by J. C. Short, president of the defendant company, with the Atchison, Topeka & Santa Fe Railroad Company, in interviews, some of which occurred at the office of the latter company in Boston. At some of these the plaintiff was present; at others, not. At one of these interviews, on June 10, 1880, at which the plaintiff was not present, a preliminary agreement or memorandum between the parties was entered into, signed by the president of the Atchison, Topeka & Santa Fe Railroad Company, the president of the Kansas City, Burlington & Santa Fe Railway Company, and Short, as president of the defendant company. This memorandum contemplated the purchase by the Atchison, Topeka & Santa Fe Railroad Company of the railroad of the Kansas City, Burlington & Santa Fe Railway Company, and, as a means of accomplishing that, the purchase of the mortgage bonds of the latter company, with a view to a foreclosure of the mortgage and the reorganization of the company. This memorandum was supplemented by a subsequent agreement entered into on the thirteenth of June, 1880, to which the parties were the Atchison, Topeka & Santa Fe Railroad Company, the New York New England & Western Investment Company, Alden Speare, Charles S. Tuckerman, and Lucien M. Sargent, the three last named to act as trustees to hold the bonds to be used in consummating the purchase. The object of this contract was to provide and declare the modes by which the property of the Kansas City, Burlington & Santa Fe Railway Company should be sold and delivered to the Atchison, Topeka & Santa Fe Railroad Company free from incumbrance, and contemplated the foreclosure and sale of the road for that purpose. The transaction was completed in accordance with the terms of the contract. It resulted in a gross profit to the New York, New England & Western Investment Company, as is alleged by the plaintiff in his declaration, of $117,833.33, of which the plaintiff claims to be entitled to recover one-third, on the ground that the business originated and was transacted and said contract was made in said Eastern division or Boston office, and that the plaintiff himself procured, or was instrumental in procuring and carrying out, t e same.

The cause was tried by a jury, when, at the close of the plaintiff's evidence, the defendant asked the court to instruct the jury to render a verdict for the defendant, which was done, and a verdict rendered accordingly, and judgment thereon, to reverse which this writ of error is prosecuted.

The error assigned is in the ruling of the court in this instruction to the jury. The principal question, in our view of the case, is one of fact. It is whether, within the meaning of the contract between the parties, December 17, 1879, the business in question, out of which these profits arose, originated in the Eastern division, as therein described, or was transacted at the Boston office. Upon a careful review of the entire evidence, giving to the plaintiff the benefit of all inferences which might reasonably have been drawn by the jury, we are of the opinion that the court below did not err in instructing the jury to find a verdict for the defendant. In our opinion, it clearly appears from the evidence, in which there was no conflict, that the business did not originate in the Eastern division, and was not transacted at the Boston office. It would serve no useful purpose to go into any detail of the testimony, which, we think, admits of no different conclusion.

The plaintiff's declaration, in addition to counting on the special contract in writing, contained also common counts for work and labor done and services performed in and about the negotiation of the contract for the sale of the Kansas City, Burlington & Santa Fe Railway, under which a recovery might have been had, in the absence of a special contract, for the reasonable value of services as a broker, if any such had been performed; but in the present case no such recovery could be had, because it clearly appeared that whatever was done by the plaintiff in that behalf was done under the special written contract, and not upon any implied contract for compensation.

The judgment is accordingly affirmed.

The following is the opinion of the court of claims filed April 2, 1883, referred to in U.S. 119 on page 148:

[Syllabus from Pages 703-794 intentionally omitted]

DAVIS, J.

It is but simple justice to the counsel on both sides to say, at the outset, that the court has derived the greatest assistance from their able and full discussion of the complicated issues involved in this case, both in their briefs and in their oral arguments.

The items in the claimant's bill of particulars depend, in some measure, upon the force to be given to a contract known as contract No. 561. In the autumn of 1871, the claimant offered to put the Canal road between Aqueduct and Chain bridge in order. Apparently his terms were not acceptable, for no notice was taken of them. A year later the board ordered that a contract should be awarded him for this work, and directed that he be notified of its action. An attempt was made to connect this act with the claimant's acts of the previous year; but the findings show no such connection, and, in our opinion, there was none. The secretary of the board at once wrote to the claimant, but, instead of notifying him of the real doings of the board, he notified him that a contract had been awarded him 'at board rates,' which had not been alluded to by the board in their action. The claimant, before commencing work, saw the defendant's officers in relation to the work and the contract, but what took place can only be inferred from subsequent acts of both parties. The claimant did work to the amount of a few thousand dollars in the autumn of 1872, for which he was paid in part. In the spring of 1873 he resumed work, and continued at it until the autumn, when a final measurement was had of the work done to that time. For all this work he was paid at board rates, with two exceptions-First, he was paid for stone masonry at five dollars per cubic yard, while the board rate was $6.50 per perch; second, he was paid nothing for haul. So far as we can gather from the findings, his bills were rendered at the rates at which they were paid, and the payments were received without any intimation that the amounts allowed were too small.

During the progress of the work the claimant had put macadam on the road by direction of one of the board of public works. This was formally recognized as a part of his contract. In November, 1873, and in December, 1873, the contract, (No. 561,) under which all the work was supposed to have been done, was formally executed. The findings show that both parties intended to embody in this formal instrument, and supposed they had embodied in it, all the agreements under which the one had been doing work, and the other had been paying money. The instrument was antedated for the purpose, as the findings further show, of making it operative during the whole period of the work.

The claimant, now, however, makes two objections to this instrument.

In the first place, it was signed, on behalf of the board of public works, by Henry D. Cooke, Alexander R. Shepherd, and James A. Magruder. Cooke was a member of the board in October, 1872, when the contract with the claimant was actually made, but he had ceased to be a member in December, 1873, when the formal evidence of it was actually signed. Shepherd and Magruder were members throughout. The total number of the board was five. The claimant maintains that the instrument, not having been signed by a majority of the board, is invalid. It is unnecessary for us to decide whether he is correct in this contention, for the findings show that the claimant signed that paper for the purpose of showing what his own understanding of the contract was. If, notwithstanding the written instrument, the contract still rested in parol, the court could have no stronger evidence to show what the claimant intended it to be. If, on the other hand, the written contract is valid, the practical result in the issues in this suit is the same.

In the second place the claimant maintains that he engaged to do work at board rates; that when the written contract varied from board rates, by excluding haul, and paying masonry at only five dollars a cubic yard, it was a variation made without his knowledge, and against the intent of both parties; and that, these provisions of the contract having been inserted by mistake, the court should reform the contract by restoring board rates as the measure of compensation. This theory rests for its support upon (1) the letter of the secretary informing the claimant that a contract had been awarded him at board rates; (2) the testimony of the claimant that he supposed the rates stated in the written instrument were board rates.

We have already seen that the letter of the secretary was not justified or authorized by the action of the board. The claimant's contention, therefore, rests mainly upon his own unsupported testimony. On the other hand, it is contradicted by his own consistent conduct from October, 1872, when he began work under the original contract, to January, 1876, when he finished under the last extension of the contract. During all this time he rendered accounts and received pay for masonry at fiv dollars, and for grading without claiming haul. We cannot shut our eyes to these practical acts of construction. We think that before he began work he must have known that the secretary had made a mistake. We are also of opinion that when he signed the contract, in December, 1873, he knew what its purport was, and that it expressed the agreement as he understood it

Having disposed of this general question, we will take up the items of the claim and counter-claim in detail.

The claimant's bill of particulars consists of 14 items, 13 of which are in the original petition, and one in the amended petition. Four of these were abandoned at the trial, namely: Stone excavation, 1,661.53 cubic yards of haul,

as above, at 20.62 1/2 cents per cubic yard,. $ 342

per cubic yard, (see Exhibits Nos. 7, 8, and 9,). 570

overseer of repairs, at 75 cents per cubic yard,. 90

The item, 'Balance due on Conduit road, $325.67,' was amended at the trial so as to make it a claim for a receiving basin, $71.25. We do not find this claim to be sustained. Finding 30.

There was also a claim made in the original petition for $33,679.54, for difference between the face value of certificates and the cash price for the work. In view of previous decisions, this claim was not pressed, and it is unsupported by proof. Finding 37.

There was also a claim set up in the original petition for $1,328.47, for difference between the amount audited to the claimant and the amount paid to him. We have disposed of this by finding 18, which states, in substance, that it is not sustained by proof.

We will take up the remaining items in classified chronological order, and consider them, when pertinent to do so, in connection with the counter-claims.

The following items stand by themselves, and have no relation to the counter-claims:

33,232 cubic yards of haul, 1,650 feet over 200 feet,

at 1 1/4 cents per hundred feet, 20.62 1/2 cents

per cubic yard, ................$ 6,854

913.39 cubic yards of stone masonry, audited at $

per cubic yard, which should have been at $6.50, the board rates,

making a difference of (see certificate of B. D. Carpenter,

engineer in charge, of date February 4, 1876, marked

"Exhibit No. 4,")................ 1,370

These claims are for work done before December, 1873, and are founded upon the alleged mistake as to rates. For the reasons already given, they cannot be allowed. The claimant received his contract price both for haul and masonry, and has no just claim to any further compensation for either.

The next of the series of claims grows out of an extension of contract No. 561 so as to cover the construction of an expensive wall on the south side of the Canal road, and the completion of that road as a first-class road. It was made by the commissioners after the abolition of the board of public works, and was a much more extensive contract than the original. Under this extension the claimant now makes the following claims, which are set forth in his original petition:

492 cubic yards coping, which should have been measured as stone masonry,

at $5 per cubic yard, (see letter of petitioner of June 4,

1875, and answer of engineer thereto of June 9, 1875, marked, respectively, Exhibits Nos.

5 and 6, and extension of contract before described,)  $ 2,460

4,624 cubic yards of earth excavation, necessary

for foundation of retaining wall on Canal

road, at 40 cents per cubic yard, see engineer's measurement, Exh     ibit No. 10,)..  1,849

4,528 cubic yards of broken stone, necessary

for drainage back of retaining walls, at $4.50 per cubic yard, (see

voucher of engineer's estimate dated January 26, 1876,-

voucher No. 1134, Exhibit No. 11,)....... 20,376

-And the following in his amended petition: 5,000 yards excavation for

the purpose of constructing the lining in the rear of the

retaining walls, 40 cents per cubic yard.. $2,000

In this connection the defendant sets up the following items of counter-claim:

account of stone masonry in canal

wall in excess of amount required

by contract 4,091.83 cubic yards,

at $5,................................... $20,459

$8,276

The next items in consecutive order relate to what is known as the 'New Cut Road,' a road near to, and connected with, the Canal (or Little Falls) road, on which the claimant was at work in August, 1875. It appears that this new cut road was badly damaged by storms in that month. The three years' experience which the District authorities had had at that time with the claimant as a contractor appears to have inspired confidence, and in the emergency Mr. Hoxie addressed the following letter, on the thirty-first August, to the claimant: 'You are authorized to repair the roads and culverts in the vicinity of the work now being performed by you along the Little Falls road, which have been damaged by the late storms, as extra work under your contract, No. 561, with the late board of public works. You will present this order with your bill for the work, which will be done under the direction of Mr. Cunningham and Mr. Carroll, overseers.' No answer was made to this communication, but, as the claimant at once went on with the work, he must be presumed have accepted the proposal. In December he rendered an itemized bill, amounting, in the aggregate, to over $15,000, and asking for measurement and payment under his contract. This contract called for payment in cash. The defendant had no cash. Under direction of the commissioners, a bill was made out and certified to at rates which produced an aggregate that would make a payment in certificates equivalent to a payment of the bill rendered in cash, and the claimant was so paid in certificates.

We do not apprehend that there was anything immoral or intrinsically dishonest in this transaction. The parties assumed, what was a manifest fact, that work to be paid for in depreciated securities was nominally worth higher rates than work to be paid for in cash. But the act was clearly illegal. The defendant, having agreed to pay cash, was legally bound to pay cash; but, when it found itself unable to do so, the law forbade it from parting with its securities to a creditor at less than par. It is too clear for argument that what it did was an attempt to do indirectly what the law forbade it to do directly, which a familiar rule of law makes an impossibility. This payment in certificates, to the amount of $22,182.92, must therefore be taken to be a cash payment to that amount on account of the work done on the New cut road. It is the only payment that has been made on that account. Our labors in this respect are therefore now reduced to ascertaining the amount of the work done by the claimant on that road.

On the fourteenth December, 1876, Lieut. Hoxie's addressed to the commissioners a letter, in which he said: 'I transmit herewith final measurement of work done on New cut road, by J. J. Shipman, under contract No. 561 of the late board of public works, amounting to $24,352.29.' The measurements inclosed in this letter show the following apparent variations from contract rates: An allowance of $650 for masonry, and an allowance for haul. The counsel for defendant asks us to trike these items from the measurement. These measurements were made after the present controversy arose, and undoubtedly express Lieut. Hoxie's well-considered judgment as to the claimant's rights. Their may have been good reason for allowing the haul, and the masonry may have been of a different quality from the rubble cement, for which the contract fixes the price at five dollars. We are not disposed to assume the responsibility of changing these items. Among the items included in this measurement were 1,090.8 perches of dry wall. The contract fixes no price for such labor and material. Lieut. Hoxie estimates it to be worth $2.50 per perch, and allows that rate. The claimant contends that it is worth more than that, and introduced considerable proof to sustain his contention. We have reached the conclusion that the rate allowed by Lieut. Hoxie is below the prices paid for such wall at the time of the construction, and have found that it was worth $3.50 per perch, instead of $2.50, as allowed.

As the result of this, we disallow the counter-claim on account of the work on the New cut road, and allow the claimant as follows:

Work done as by Hoxie's estimate,. $24,352

1,068.8 perches dry wall, $1 per perch additional,. 1,098

$ 3,268

The court orders, andjudges, and decrees that the contract between the claimant and the defendants, referred to in claimant's petition as contract No. 561, correctly and truly sets forth the understanding and intention of the parties, and has not by accident, inadvertence, mistake, or clerical error failed to set forth the same, and ought not to be reformed. And the court further orders, adjudges, and decrees that the claimant has extablished the following items of claim against the defendant, set forth in his petition, or the several amendments thereto, to-wit:

A claim on account of 4,528 cubic yards of broken

stone, for drainage back of retaining-walls, at

$1.25 per cubic yard,............. $ 5,660

A claim on account of balance due for work on the

New cut road,....................... 3,268

-And has failed to establish the residue of the counter-claims set forth in its bill of particulars.

And the court further orders, adjudges, and decrees that the claimant shall have and recover of the defendant the sum of $652.11, as due and payable on the first of January, 1876, being the difference between the said amount of claim allowed to the claimant and the said amount of counter-claim allowed to the defendant. And the court further orders, adjudges, and decrees that, except as to the said amount of claims so allowed to the claimant, all the claims demanded in the claimant's petition, and the amendments thereto, be disallowed, and the petition, with reference to all the disallowed claims, be dismissed; and, further, that, except as to the said amount of counter-claims so allwoed to the defendant, the defendant's counter-claims be dismissed.