Canton Cotton Mills v. Bowman Overall Co.

• Decision Date: 15 January 1924
• Citation: 257 S.W. 398,149 Tenn. 18
• Parties: CANTON COTTON MILLS v. BOWMAN OVERALL CO. CANTON COTTON MILLS v. LITTLE BROS. CO.
• Court: Tennessee Supreme Court

257 S.W. 398

149 Tenn. 18

CANTON COTTON MILLS v. BOWMAN OVERALL CO.

CANTON COTTON MILLS v. LITTLE BROS. CO.

Supreme Court of Tennessee.

January 15, 1924

Appeal from Chancery Court, Knox County; Hal H. Haynes, Sitting by Interchange with Chas. Hays Brown, Chancellor.

Two suits by the Canton Cotton Mills, the first against the Bowman Overall Company and the second against the Little Bros. Company. Decree in each case for defendants, and plaintiff appeals. Affirmed.

CHAMBLISS J.

These suits were brought to recover damages for breach of alleged contracts for the sale of cloth goods for future delivery the defendants having refused to receive the goods, their defenses being, in substance: (1) That the alleged contracts were never bindingly completed; (2) that they were not with complainant Canton Cotton Mills, the manufacturer, but with the Farish Company, not as agents of the complainant, but as principal; and (3) that they were breached by the complainant in that it failed to ship and tender to defendants the quantity or quality of goods called for.

The chancellor decreed in favor of the defendants, holding that no contract had been consummated between the parties. This defense will be first considered, since, if sound, it is determinative.

The cloth article known as denim is manufactured by complainant Canton Cotton Mills, located in Canton, Ga., and is used by defendants, located in Knoxville, Tenn., in the manufacture of overalls. The product of the Canton Mills is handled by the Farish Company, commission merchants, located in New York City, and having in Knoxville a traveling agent, R. E Gettys. This was the situation of the parties in December 1918, and the early months of 1919, when the transactions which are the subject of this litigation took place. In previous years defendants had purchased and used in their business of making overalls the product of the Canton Mills, dealing with the same agencies, it being the custom of the defendants to contract in the winter months for their spring supply, these future delivery contracts, at prices fixed in advance, being essential to the prudent conduct of the business of all parties, affording a firm basis for their purchases of raw product and sales of finished goods.

It seems to be conceded that the facts developed by the proof are to such an extent identical in their application to both the defendants as that the result in either case would control the other, and we shall therefore, for convenience in statement, use mainly the dealings with Little Bros. Company.

On December 19th, pursuant to authority from Canton Mills, the Farish Company wired Gettys at Knoxville to offer Canton 2.20 denims at 35 cents and 2.40 denims at 32 1/2 cents, for weekly deliveries, beginning the first week in March and running through June. On the morning of the 20th Mr. Gettys showed this telegram, which covered certain other details not now necessary to mention, to Mr. Little, representing the defendant, who indicated a desire to contract for as much as 200 bales of each of the numbers, and thereupon Gettys wired Farish to this effect. On the following morning, December 21st, Farish wired Gettys instructing him to confirm the sale to Little of 200 bales of each of the numbers. On the same morning, before the receipt of the telegram of confirmation from Farish, Gettys had written and mailed to Little a letter reading as follows:

"Enclosed please find memo, of the nice order you gave me for Canton denims. This was wired to the Farish Company and just as soon as they advise me disposition of it I shall be glad to send you final confirmation."

It appears that upon receipt of the telegram from the Farish Company Gettys telephoned notice of this acceptance to defendant Little Bros. Company, and notation thereof was duly made. It is insisted for the complainant that this interchange of communications definitely closed the contract and bound complainant to sell and defendant to buy the denims in the amounts and at the prices and for delivery at the times specified, all essential elements of a binding contract being thus sufficiently embraced. Some proof and argument is directed to the insistence that defendants were to more or less extent misled, or overinduced, but this insistence is neither sustained by the proof, nor is it a material issue under the pleadings. It is quite evident that the defendants purposed to procure definite assurances that they would secure at the times specified the supply of denim stipulated for and at prices at least no greater than those named. As before indicated, in accordance with the custom and reasonable requirements of the trade, it was essential that the manufacturer of overalls should know in advance of the making of its sales of the finished product just what could be relied upon as to quantities, deliveries, and prices.

Now, nothing more appearing, it would seem that the wire of confirmation of December 21st from the Farish Company, and its communication through Gettys to the defendant, would have closed a contract. However, it is insisted on behalf of the defendants that this was not the construction at the time placed upon these communications by the Farish Company, agents of complainant, but that the further dealings on the part of the Farish Company clearly indicate a purpose to treat these communications as in effect negotiations only, and that complainant is now bound by this construction given by its agents at the time. This insistence is based upon the following additional facts: On the 2d day of January the Farish Company mailed to the defendants a formal memorandum of acceptance, reading as follows:

"We are pleased to inform you of the acceptance by Canton Cotton Mills of your valued order of the 20th ulto., for the following:

200 bales Canton 2.20 denims at 35¢; 200 bales of Canton 2.40 at 32 1/2¢.

Shipment equal weekly shipments March 1st to July 1st, 1919. Buyer agrees to accept up to 25% seconds of 2.20's and 15% of 2.40's if mill can't supply first at 1 1/4¢ less.

We thank you for the business and solicit a continuance of your favors."

There follows a provision covering strikes and other contingencies and the signature of Farish Company. By the same mail, and according to the weight of the evidence, in the same envelope, the Farish Company sent the defendants the following letter:

"Your order of the 20th ult. for 200 bales Canton denims, approximate value $151,750, has come to the writer for his attention.

"We are accepting this order with the understanding that it will be subject to a line of credit which will be hereafter assigned to your firm. This line of credit, of course, will be determined largely by the showing made in your latest financial statement, which we presume will be as of the 1st inst., and this being the case, are writing to request that you favor us with a copy of this financial statement as soon as it is ready.

Thanking you in anticipation of an early reply, we are."

It will be observed that, while the sums involved were large, the terms of payment, whether for cash or on credit, and if on credit for what length of time, are in no way mentioned in the memorandum letter of formal acceptance, quoted above, nor in the letter referring to a line of credit, also quoted. Nor does it appear that this important feature of the contract was referred to in the wire communications between the Farish Company and Gettys of December 19, 20, and 21. However, an examination of the memorandum order dated December 20th and delivered by Gettys to Little, covers this detail, and sets out the terms as "2/10/60," which means a credit of as much as 70 days with 2 per cent. off, at the option of the buyer. In this connection it appears from the testimony of Mr. Little that, if deliveries had been made pursuant to the order given and upon the terms stated, approximately $80,000 of indebtedness would have accrued from Little Bros. Company before default, and that prior to this transaction the extent of indebtedness so accruing had never exceeded $35,000. It thus becomes apparent that the element of credit was of serious importance, warranting the consideration which was evidently being given this matter by the Farish Company.

Following receipt of these communications of January 2d Little Bros. Company, on January 9th, transmitted to the Farish Company a copy of its financial statement of September 30, 1918, stating that this represented conditions existing at the close of its fiscal year, "which we trust you will find satisfactory." On January 18th receipt of this statement was acknowledged by the Farish Company, saying that--

"The writer has not as yet had an opportunity to give your statement an analysis, but wishes to assure you that he will do so within the next few days and advise you regarding same."

Meanwhile defendants, beginning with January 7th, entered into correspondence with Farish Company regarding prices requesting reductions in line with figures elsewhere obtained. This correspondence touching prices, which it is unnecessary to detail, continued until, in response to a letter declining to make any further concessions in the matter of prices, Little Bros. Company telegraphed the Farish Company on February 20th, "Cancel all orders booked for us. Letter follows." Much discussion is had in argument, pro and con, as to the phraseology of various portions of this correspondence, but the material substance is as stated. When the telegram of cancellation...