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does not charge the latter with knowledge, though the director was present at the meeting when the loan was voted.--Innerarity v. Merchants' Nat. Bank. 139 Mass. 332, 1 N. E. 282, 52 Am. Rep. 710.
[c] (N. Y. 1901) The knowledge of the president of a bank as to his own insolvency, or that of a firm with which he was connected, could not be imputed to the bank receiving securities in connection with certain overdrafts and loans of the president, where such president dealt with the bank in regard to his own affairs as with a third party.—Crooks v. People's Nat. Bank, 34 Misc. Rep. 450, 70 N. Y. Supp. 271.
[d] (Tenn. 1895) Where an agent of an undisclosed principal, holding bonds as collateral, with notice that, subject to such pledge, they have been transferred as collateral to another, surrenders them to the pledgor, who, from proceeds obtained from a sale thereof, pays a debt to a bank of which such agent is president, having been urged by such president to make a payment, the bank will be liable, for the money so received, to the one having the secondary rights in the bonds as security; the president, and through him the bank, being charged with notice how the money was obtained.-Hughes v. Settle (Ch. App.) 36 S. W. 577.
V. CONVEYANCES, MORTGAGES, OR LIENS. [a] (U. S. 1882) An insolvent firm, two members of which were president and cashier of a bank, on the eve of bankruptcy conveyed their bank stock to the bank, in pursuance of a prior verbal hypothecation. An action was brought by the receiver of the firm to set aside the transfer. Held, that the knowledge of the officers of the insolvency of their firm was the knowledge of the bank.-Nisbit v. Macon Bank & Trust Co. (C. C.) 12 Fed. 686.
[b] (Colo. 1896) Whether one who, at different times during a period extending from 3 years down to 10 or 11 months prior to a levy of a writ of attachment in a suit by the bank of which he was and had been the president. had been frequently told in the course of his private business of a third ownership of the property levied on, still retained that knowledge at the time the attachment suit was begun, is a question for the jury.—Campbell v. First Nat. Bank, 22 Colo. 177, 43 Pac. 1007.
[c] (Ky. 1831) Where a director of a bank was one of the grantees in an unrecorded deed of property, which the grantor subsequently conveyed to the bank, the director's knowledge of the prior deed is not notice to the bank of its existence, if such director be interested in protecting his own title by not communicating his knowledge to the board of directors.-Lyne v. Bank of Kentucky, 5 J. J. Marsh. 560.
[d] (La. 1853) When a bank deals with a mortgagor on the faith of his apparent title, a private knowledge of its simulation in two of the directors, who are not clothed with any special authority in the premises, and who con. stitute a small minority of the whole number, which knowledge was undis. closed to the board, cannot destroy the rights of the corporation as a bona fide mortgagee.- Mercier v. Canonge, 8 La. Ann. 37.
[e] (Me. 1881) A trustee of a bank, who was also an attorney, had actual knowledge of an existing unrecorded deed of lands. With that knowledge, he, as such attorney, afterwards wrote and took an acknowledgment of a mortgage on the same lands from the same grantor to the bank, and the deed was recorded. Held, that the bank was not chargeable with his knowledge, unless the fact was in his mind at the time, nor unless he was acting for the bank in the making of the mortgage.-Fairfield Sav. Bank v. Chase, 72 Me. 226, 39 Am. Rep. 319.
[f] (S. C. 1906) That an attorney of a corporation knew of a lien on property purchased by the corporation does not show notice to a bank which made a Joan to the corporation, though the attorney was president of the bank ; nor does the fact that the president of the corporation knew of the lien constitute notice to the bank, though he is a director of the bank and a member of its loan committee.- Wardlaw v. Troy Oil Mill, 74 S. C. 368, 54 S. E. 658. (155 Fed. 719.)
A. SANTAELLA & CO. v. OTTO F. LANGE CO. et al.
(Circuit Court of Appeals, Eighth Circuit. June 17, 1907. On Rehearing,
September 3, 1907.)
No. 2,364 1. CONTRACTS-CONSIDERATION-MUTUALITY.
There is want of mutuality, necessary for a valid contract, where plaintiff, the manufacturer of a certain cigar, offered to sell in the future to defendant, a cigar dealer, as many of such brand as he might desire for his wants, and to continue to do so during the life of the brand, as long as defendant cared to sell them.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 11, Contracts, & 344.
Mutuality in, see note to American Cotton Oil Co. v. Kirk, 15 C. C. A.
543.] 2. APPEAL-RECORD-QUESTIONS RAISED.
The question of want of mutuality in the contract on which a counterclaim is predicated is properly raised by the record; plaintiff having at the close of the evidence moved for an instructed verdict on the ground that defendant showed a failure of consideration on the part of plaintiff for the contract, and the overruling of the motion having been assigned
as error, and such assignment insisted on in the brief. 3. SAME-REVIEW_RULES OF COURT.
The provision of Circuit Court of Appeals rule No. 11, that the court, at its option, may notice plain errors not assigned, reserves to the court, in the interest of justice, the right, resting in public duty, to take cogni. zance of palpable errors on the face of the record and proceedings, especially such as clearly demonstrate that the suitor has no cause of action.
[Ed. Note.—For cases in point, see Cent. Dig. vol. 3, Appeal and Error, 88 2968-2982.]
In Error to the Circuit Court of the United States for the Northern District of Iowa.
George W. Kiesel and D. J. Lenehan (L. G. Hurd, on the brief), for plaintiff in error.
Nathan E. Utt (Alphons Matthews and John P. Frantzen, on the brief), for defendants in error.
Before SANBORN and HOOK, Circuit Judges, and PHILIPS, District Judge.
PHILIPS, District Judge. The plaintiff in error (hereinafter designated the plaintiff), an Illinois corporation, with its principal place of business in Chicago, sued the defendants in error (hereinafter designated the defendants), a copartnership, doing business at Dubuque, in two counts. The first count is predicated of a promissory note, executed by the defendants to the plaintiff February 23, 1903, for $1,200, due in three months thereafter. The second count is based upon open account for cigars sold by plaintiff to the defendants between the 6th day of March and the 5th day of May, 1903, amounting to $4,415. The answer, in effect, admitted the debts as alleged, and then set up a counterclaim for damages in the sum of $30,000, resulting from an alleged breach of contract in the failure and refusal of the plaintiff to ship to the defendants cigars as required. On trial to a jury, at the close of the evidence, the plaintiff moved for a directed verdict, which was refused. The jury returned a verdict for the defendants in the sum of $3,262.25, which, including the admitted sums owing to the plaintiff, amounted to $9,087.75.
As counsel for the plaintiff insisted in argument here only upon the error assigned in the refusal of the court to direct a verdict, it is made necessary to disclose the case made on behalf of the defendants. The alleged contract was not in writing, and its character is to be found in the allegations of the counterclaim and the testimony of Otto F. Lange, representing the defendants in making the alleged contract. The answer, after some preliminary statements by way of inducement leading up to the contract, disclosed that the plaintiff was engaged in the manufacture and sale of a cigar known as the "Optimo" brand, which it was anxious to exploit in certain territory in Iowa and vicinity, and wished the defendants, as experienced dealers in cigars, to undertake this exploitation in the interest of both concerns. The answer states that the same was "to be furnished at the times and in the quantities, sizes, shapes, and qualities as might be thereafter ordered by the defendants, all of the said cigars to be sold and furnished subject to a discount of two per cent. if settled for thirty days from the date of shipment or invoice, such settlement to be made by cash or notes of the said defendants, bearing five per cent. interest and running thirty, sixty or ninety days at the option of the said defendants, and would continue to manufacture, and supply exclusively such ‘Optimo' cigars to said defendants, at such prices, on such terms, and in such sizes, shapes, and quantities as ordered by the defendants, in the territory named, and such other territory as might thereafter be given to them, so long as the trade therein would continue.' It is further averred that the plaintiff failed and neglected to furnish, as ordered, said Optimo cigars in the sizes, qualities, shapes, and quantities as demanded and as was necessary for the trade in said territory.
The testimony of said Otto F. Lange was to the effect that by request of one Glaspell, traveling salesman representing the plaintiff, they met in Dubuque, Iowa, about the 13th of August, 1900; that Glaspell wanted the defendants to buy from the plaintiff said brand of cigars known as the "Optimo," which he thought the defendants could build up a trade and create a large market therefor. His version of the agreement was as follows:
"The terms were 60 days net, without discount, or 2 per cent. discount if paid in 10 days, but that he would give me 30 days from date of bill in which to take the 2 per cent. discount if I wanted to take it. He said that the goods were made in Tampa, Fla., but that they were shipped from Chicago. If our business grew so that they shipped in case lots from Tampa, that the date of the bill should be the date of the arrival of the goods."
This was followed by some other details as to the mode of settlement. Further on he testified: "I said to Glaspell I would accept the contract.
Glaspell said they would stop others from selling the cigars in the territory given me. He would sell me as many as I desired for my wants, and continue during the life of the brand, as long as I cared to sell them.
My orders were to be filled the same day they were received, if they had the goods."
While there are some variances between the versions of the contract in the testimony between said Lange and Glaspell, for the purposes of this case, it is not necessary to rest it upon other testimony than that of Lange.
Orders thereafter were sent in by defendants for cigars as needed in their business, and were generally satisfactorily complied with by the plaintiff. Some complaint in January, 1902, and perhaps later, on the part of the defendants was made that some orders had not been promptly filled; but after explanation by plaintiff the business relations were continued. Shipments of cigars were only made as and when ordered by the defendants. In December, 1902, and the forepart of 1903 the orders were sent in most frequently. On the 7th day of May, 1903, the defendants telegraphed to the plaintiff to “Cancel all our orders.” The plaintiff immediately answered by letter as follows:
"Your telegram of to-day is at hand, and in compliance with same we have wired our factory to cancel all of your orders.”
And in a postscript said that it (the plaintiff) had received check for $1,000, which was placed as a credit on the note of $2,000, due May 2, 1903, and requested the defendants to send check for the balance not later than Monday. The defendants followed up said telegram of May 7th with a letter giving in explanation of the direction to cancel all orders that “we have lost track of what we have ordered." In the letter they requested shipment of certain specific cigars. This letter evidently having been received on the 9th of May, 1903, the plaintiff wrote the defendants that it was very much surprised at the telegram of the 7th of May, "as you canceled all your orders and we wired our factory to that effect." In this letter the plaintiff inclosed the defendants a statement of account, stating that they owed the plaintiff bills amounting to about $3,500, reminding the defendants of the necessity in its business of having prompt payments made, alleging that in the past they had been quite lenient, that "we find that you seem to take your own time and do your business with us all your own way, leaving us nothing but to ship you goods as fast as you want them, and you pay for them when you get good and ready, and make deductions when you feel like it.” Thereafter considerable correspondence took place between the parties respecting the payment of past accounts and notes, resulting in the refusal of the plaintiff to fill any more orders from the defendants until the past arrears were paid, and under a new arrangement. As much of this correspondence ensued after the controversy arose, it contains much of self-serving statements, which are not important to a proper decision of the case.
The controlling question for determination is: Did the defendants have an enforceable contract with the plaintiff? It must be conceded that, if the defendants had such a contract, it was essential to its validity that it should have been mutually obligatory upon both parties. If the defendants could compel the plaintiff to ship cigars, the plaintiff ought to be in a position to compel the defendants to take. Were the defendants under any obligation to send in orders within any particular time, or for any specified quantity or quality of cigars? The allegations of the counterclaim and the version given of the agreement in the testimony of Otto F. Lange answer these questions. It was entirely at the option of the defendants, dependent upon the conditions of their business and trade, as to whether they would send in any orders at all. From any cause, such as depression in business, or other more desirable arrangements, or a desire to get out of that line of trade, the defendants were at liberty to cease at any time to send orders to the plaintiff, without liability for breach of contract. As shown by the entire dealing between the parties, both unquestionably understood that the plaintiff could only ship cigars as and when ordered by the defendants. So, notwithstanding that prior to the 7th day of May, 1903, the defendants had sent in a large number of orders, which had not then been met by shipments, and although the plaintiff had placed them with the factory at Tampa, both parties acted upon the understanding of the contract, that the plaintiff could not ship save as and when the defendants might direct. It would be a work of supererogation to review the authorities touching the law applicable to such situation, as Judge Sanborn, speaking for this court, in Cold Blast Transp. Co. v. Kansas City Bolt & Nut Company, 114 Fed. 77, 52 C. C. A. 25, 29, 57 L. R. A. 696, laid down the following postulates as expressing the correct rule of law :
“The rules applicable to contracts of this class may be thus briefly stated : A contract for the future delivery of personal property is void, for want of consideration and mutuality, if the quantity to be delivered is conditioned by the will, wish, or want of one of the parties; but it may be sustained if the quantity is ascertainable otherwise with reasonable certainty. An accepted offer to furnish or deliver such articles of personal property as shall be needed, required, or consumed by the established business of the acceptor during a limited time is binding, and may be enforced, because it contains the implied agreement of the acceptor to purchase all the articles that shall be required in conducting his business during this time from the party who makes the offer. Wells v. Alexandre, 130 N. Y. 642, 29 N. E. 142, 15 L. R. A. 218; Minnesota Lumber Co. v. Whitebreast Coal Co., 43 N. E. 774, 160 Ill. 85, 31 L. R. A. 529; Parker v. Pettit, 43 N. J. Law, 512. But an accepted offer to sell or deliver articles at specified prices during a limited time in such amounts or quantities as the acceptor may want or desire in his business, or without any statement of the amount or quantity, is without consideration and void, be. cause the acceptor is not bound to want, desire, or take any of the articles mentioned. Bailey v. Austrian, 19 Minn, 535 (Gil. 465); Tarbox v. Gotzian, 20 Minn. 139 (Gil. 122); Railway Co. v. Bagley, 60 Kan. 424, 433, 56 Pac. 759; Oil Co. v. Kirk, 15 C. C. A. 540, 68 Fed. 791; Crane v. C. Crane & Co., 45 C. C. A, 96, 105 Fed. 869. Accepted orders for goods under such void contracts constitute sales of the goods thus ordered at the prices named in the contracts, but they do not validate the agreements as to articles which the one refuses to purchase, or the other refuses to sell or deliver, under the void contracts. because neither party is bound to take or deliver any amount or quantity of these articles thereunder. Crane v. C. Crane & Co., 45 C. C. A. 96, 105 Fed. 869; Oil Co. v. Kirk, 15 C. C. A. 540, 68 Fed. 791 ; Campbell v. Lambert, 36 La. Ann. 35, 51 Am. Rep. 1; Railway Co. v. Mitchell, 38 Tex. 85, 95; Ashcroft V. Butterworth, 136 Mass. 511, 514; Drake v. Vorse, 52 Iowa, 417, 3 N. W. 465; Thayer v. Burchard, 99 Mass. 508. 520: Hoffman v. Maffioli, 80 N. W. 1032, 1035, 104 Wis. 630, 47 L. R. A. 427; Railroad Co. v. Jones, 53 Ill. App. 431, 437; Rafolovitz v. Tobacco Co. (Sup.) 25 N. Y. Supp. 1036, 73 Hun, 87."
The case at bar does not come within the rule in respect of a contract obligating the vendor to furnish all the goods required by