275 Pa. 191 | Pa. | 1922
Opinion by
Both plaintiff and defendant are Pennsylvania corporations, the former chartered in 1915, having for its purpose the manufacture and sale of coke and its byproducts, and the latter authorized to buy, sell and deal in coal, coke, pig-iron and other materials, and act as brokers in the purchase and sale of these commodities.
The By-Products Company secured a plant in operation at Glassport, and began its relations with Hillman & Sons Company by entering into two contracts, one of which made provision for the supplying of such coal as might be necessary in it's business, and the other appointed the defendant its exclusive sales agent, “to use its best efforts to sell the entire output of coke produced at the plant, at the best possible prices obtainable, and to exercise its best judgment as to when and for what length of time contracts should be made.” This arrangement was to continue until March 31, 1918, and later,
The product of the plaintiff company consisted largely of what was known as “furnace” coke, but a higher grade known as “foundry” was also prepared and sold. For a proper understanding of the many transactions which must be here considered, it is also to be noticed that an additional output in excess of that required to meet the terms of contracts for the furnace grade, was known as “excess or spot cash” coke. This was also sold by the defendant as agent.
When the first of plaintiff’s supply was ready for shipment in 1915, the defendant assigned to it a portion of a contract to purchase at a fixed price which it had with the Buffalo Union Furnace Company, subject to a commission of 5%. This arrangement continued until June 30,1916, though deliveries on like terms were made until August 24th following, and is evidenced by a paper referred to as “C” throughout these proceedings. The conduct of the agent under this agreement was not impeached, and the learned court below, as well as the master, found the plaintiff was not entitled to any account from the defendant by reason thereof. On October 6, 1916, contract “D” was executed, having for its purpose the disposition of the furnace output for the first six months of 1917. A third agreement, “E,” made provision for the output for the balance of that year, and a fourth covered the first six months of 1918. Thereafter the sales were made through the agency of the defendant, but by contract “G,” executed directly by seller and purchaser. After deliveries had ceased on the first contract, “0,” and
In the case of all the contracts mentioned, with the exception of the first, defendant, in addition to its commission, took advantage of the freight differential of fifteen or more cents per ton, and in certain cases, which will be particularly noticed hereafter, received not only the fixed price, but, under the terms of its contract, obtained allowances for wage advances, none of which were accounted for.
In 1919, the plaintiff discovered that its product had been sold for larger sums than had been paid to it by the agent, and thereupon it filed a bill, subsequently amended, praying for an accounting of all amounts improperly withheld from it. Answers were filed, and the position was assumed therein that, in the various trans-. actions, the coke had been purchased by the defendant, and it was therefore at liberty to make resale at whatever prices it might see fit, accounting only for the sums named in the contracts with the plaintiff. The court below has found the relation was that of principal and agent, and the agreements executed, though calling the transactions sales, were merely put in this form to aid in the carrying out of the agency contract between the parties.
At the hearing, a necessity to account for some items was acknowledged, and, as a result, a decree was entered directing the master appointed to examine specially as to certain matters, leaving to him the measure of liability. The defendant submitted a statement show
Objection is first made to the inclusion in the final accounting of items which are not specifically referred to in the bill and the amendments thereto, or in the decree appointing the master. The operations of the defendant became apparent only when the testimony was taken. The court had directed an accounting for the sums received for the domestic and foundry coke, for that sold for cash, not included in the first four agreements, and for all disposed of under contract “G,” as well as for sums received by reason'of wage advances. It had likewise in its 11th conclusion left open, for subsequent determination, the measure of defendant’s liability. Complaint is now made that under the circumstances there was no power to include a charge for cars of coke alleged to have been converted, nor sums received for freight differentials or commissions. It has been frequently held by this court that the accounting must be limited to the matters set forth in the pleadings (Luther v. Luther, 216 Pa. 1; Robinson v. Fulton, 262 Pa. 265; Seifert v. Rusch, 269 Pa. 53; Rolshouse v. Wally, 272
The conclusion finally reached by the master, and approved by the court in banc, directs an accounting in many transactions, which necessarily must be considered separately. It was found that various devices were used by the defendant company to secure for itself larger earnings than the 5% commission provided for in its contracts and orders for shipments, and in some instances it has been held that the coke received was diverted from the ordinary course of trade, and used by the defendant to carry out its agreements to sell at a low price. In such cases, it has been charged with the-highest market value of the output at the time of its delivery. As a result1 of this, and other misconduct pointed out, commissions on all contracts were disallowed.
The first class of charges are those based upon the “freight differential” collected by the agent and not
The defendant has likewise, been directed to repay the wage advances received by it from the purchaser of coke under contracts D, E and F. In these cases not only did the agent obtain more than it paid to the principal, —this difference being retained on the theory that it had made a purchase, — but by undisclosed arrangements with the buyers it secured from time to time larger prices, based on the increased cost of production. These sums properly belonged to the plaintiff, and the direction to account for the amount thereof was proper. In addition to the collections made on the three contracts referred to, it made use of the principal’s coke to carry out what was known as the Rainey contract, under which the defendant was required to deliver in 1917 at a fixed, price. Instead of so doing, it applied the plaintiff’s product to its own purposes, and satisfied its obligation. Here again it received the benefit of wage advances properly payable to the plaintiff, and for these
Another class of sales are those known as the LaBelle. After the expiration of the first arrangement with the Buffalo Furnace Company there was an interval of time when the shipments of plaintiff are not evidenced by written contract. During this period the defendant had an agreement with the LaBelle Furnace Company to furnish coke at $3 per ton. This fact it did not disclose to the principal, but directed it to make shipments to the buyer at the rate of $2.50, thus being relieved of responsibility. Here, the master properly held there was a conversion, and directed an accounting at the market price at the time, of delivery, irrespective of the sum named in defendant’s contract.
The same can be said of the disposal of the “spot or excess,” being the product of plaintiff in addition to that required to fulfill contracts C, D, E and F, and which was sold by the defendant on written orders for shipment at arbitrary prices. Such coke was used by the defendant to carry out certain of its own low-price contracts, and it should be held to have converted this, and pay the market' price at the time of delivery.
The only other sales subject to attack are those in which the foundry and domestic coke, — a higher grade of plaintiff’s output, — was disposed of. In. all, orders were given from 1915 to 1919 for 3,804 cars, representing 929 purchases. As far as the testimony discloses, 3,521 of these cars were properly accounted for. Appellant admits that 234 cars, including 49 bought by it, were not.. The appellee claims this number should be at least 293. No evidence was produced to show any wrongful conduct in the great majority of the shipments, unless it is to be inferred from the general course of business. That the purpose of the defendant in all cases was fraudulent" was deduced by the” master from the transactions concerning which investigation was made. This was limited
The agent stands in the capacity of a fiduciary to his principal, and, in all of the dealings he must serve his employer with the utmost good faith and loyalty. It is his duty to make known all matters affecting transactions which may be of importance to the one for whom he acts: 2 C. J. 708; Persch v. Quiggle, 57 Pa. 247; Pratt v. Patterson, 112 Pa. 475. He must not speculate in the subject-matter of the agency (2 C. J. 695), conduct a rival business (Ewing’s App., 4 Atl. 832), sell to himself (2 C. J. 700), make any secret profits (Graham v. Cummings, 208 Pa. 516; Kreise v. Cartledge, 262 Pa. 55; Yeaney v. Keck, 183 Pa. 532), or, without disclosing the fact, ask for compensation from both buyer and seller: Everhart v. Searle, 71 Pa. 256; Wilkinson v. McCullough, 196 Pa. 205. Particularly should his conduct be investigated where the agent stands in the peculiar relationship such as here appears. Hillman, the president of the defendant corporation, purchased an interest in the plaintiff company in the fall of 1916, and within a few months became a director. In making the subsequent contracts he was an active negotiator, and the actions of the agent were likewise controlled by him. There is no reason why an official of the corporation cannot be legally employed by it and receive compensation for his services, but his actions are subject to close scrutiny, and may be avoided if overreaching appears: Sotter v. Coatesville Boiler Works, 257 Pa. 411; Michigan Crown Fender Co. v. Welch (Mich.), 13 A. L. R. 896, 178 N. W. 684.
In charging the defendant with the market price of the product sold at the time of delivery, the master proceeds upon the theory that there was a conversion by the appropriation of the property to the use of the agent, and we agree that where this was done, or where the coke was in effect taken to carry out its low-price contracts,
Where the agent has appropriated property to his own use, he is liable for the market value of the article at the time of its delivery to him (Pierce v. Beers, 190 Mass. 199, 76 N. E. 608), with interest: Jacoby v. Laussatt, 6 S. & R. 300. The ordinary measure, however, is the sum which has been unlawfully obtained by the unfaithful agent: Michigan Crown Fender Co. v. Welch (Mich.), supra; Kramer v. Winslow, 130 Pa. 484; Graham v. Cummings, 208 Pa. 516. A distinction must therefore be drawn in the present case between the various transactions, as above indicated.
One other complaint must be considered. The master, finding the conduct of the agent was dishonest in certain cases, concluded that it should be allowed no commissions on such sales, nor compensation in any of the other transactions, though actual wrongdoing was not affirmatively shown; and further directed that' all sums which had been paid for services rendered should be returned. This conclusion rests on the theory that all of the transfers of coke are made as a result of the agency
It follows from what has been said that the decree entered must be modified as to the charges for foundry and domestic coke, — item one of the account stated, — and as to commissions, — item fifteen, — and the record is remitted to the court below to make the necessary modifications as indicated in this opinion. The assignments of error raising other questions are overruled; the costs of this appeal to be paid by appellant.
Motion for reargument.
October 20, 1922:
The appellant has asked for a reargument in this case. Upon due consideration, we are of opinion that the application should be refused.
The order already filed sufficiently indicates the liability to be imposed upon the defendant in the case of sales referred to in finding 25, and the amplification thereof. Where it appears there was a direct conversion to the use of defendant, or the coke of plaintiff was diverted to the carrying out of the lower-priced contracts of the agent, the latter is properly chargeable with the market value at the time of delivery, without allowance of any commissions for its services. In the other cases, the sums actually received, and not accounted for, including freight differentials and wage advances, if any, are to be paid, with the loss of commissions in all cases where any misconduct was shown.
One matter has been called to our attention, which can be corrected by a modification of the order heretofore filed. In item nine of the account, approved by the court below, defendant1 was charged with wage advances received under contract F, entered into after the governmental order, fixing the price of coke at $6 per ton. We have found in the appeal between the same parties, to
The petition for reargument is dismissed* and the decree heretofore entered is modified so as to exclude therefrom such sums as have been charged for wage advances received under contract F, or on tonnage applied to the Eainey contract where delivered under the same agreement.