Day v. Spiral Spring Buggy Co.

• Decision Date: 03 June 1885
• Citation: 23 N.W. 628,57 Mich. 146
• Court: Michigan Supreme Court
• Parties: DAY v. SPIRAL-SPRING BUGGY CO.

23 N.W. 628

57 Mich. 146

DAY v. SPIRAL-SPRING BUGGY CO.

Supreme Court of Michigan

June 3, 1885

Case made from Kent.

Edward Taggart, for plaintiff.

Maher & Falker, for defendant and appellant.

COOLEY, C.J.

This action is brought to recover the value of 32 tons of the article called "Excelsior," which had been received by the defendant of the plaintiff. The defendant is a corporation, organized, as its articles of association state, "to purchase material for, and manufacture and sell, carriages, and carriage and harness hardware; also for the disposing of the right to manufacture on royalty the spiral buggy-spring, Smith's patent." In the manufacture of carriages excelsior is used for upholstering seats and backs, but for no other purpose. The place of business of defendant is Grand Rapids Michigan.

It was shown on the trial that in April, 1883, defendant contracted with one Hulz, of Chicago, to sell and deliver to him in Chicago 174 tons of excelsior, the delivery to be made at the rate of two car-loads a month, and the price to be $14 a ton. For the purpose of this contract defendant then bargained with the plaintiff that she should manufacture the requisite quantity of excelsior and deliver it on board cars or boat at Grand Rapids, billed to Hulz at Chicago. The price to be paid by defendant was $11.50 a ton, which, after paying cost of transportation, would leave to the defendant a profit on the sale to Hulz. It was known to plaintiff, when she contracted for the manufacture, that the defendant was not procuring the article for use in its business, but for the purposes of a sale at a profit in Chicago, where the defendant had no place of business, and the delivery to be made by her was to be made from time to time as required by the Hulz contract. The plaintiff was therefore fully aware that the contract of the defendant with her was purely one of speculation, and had no connection with its legitimate corporate business.

The excelsior was delivered by the plaintiff under the contract from time to time until about June 15, 1883, and was shipped to Chicago under defendant's contract with Hulz. At the time last mentioned the market value of the article had considerably advanced, and plaintiff declined to deliver any more at the price agreed upon. Part payment had been made for the quantity received, and defendant refused to pay further unless plaintiff should go on in completion of her contract. This suit was accordingly instituted.

The claim of the plaintiff is that the contract she entered into with the defendant was void in law; that therefore she was at no time under obligation to perform it; that, in so far as the defendant has received excelsior from her, she is entitled to recover the value, not exceeding the price agreed upon; and having shown that the value was equal to that price, she now claims to recover it in this suit. The defendant, on the other hand, insists that the plaintiff is estopped by the contract from disputing the capacity of the defendant to enter into it; and that when she refuses to perform, she becomes liable in damages. These damages the defendant seeks to recover from the claim of the plaintiff. The circuit judge was of opinion that the contract made by the defendant with Hulz, not being for a corporate purpose was ultra vires and void, and the contract made with the plaintiff for the purpose of meeting its requirements was void also. For the excelsior actually received by the defendant the plaintiff was held entitled to recover, as if the void contract had not been entered into; but a claim to recoupment must necessarily assume the validity of the contract, and was therefore inadmissible. The judge therefore, gave judgment for the plaintiff for the value of what had been received, deducting such payments as had been made. The defendant brings error.

It is scarcely denied in this court that the contract of the defendant on which it now relies was ultra vires. Its corporate purposes were specified in its articles, and it was without legal power to go beyond them. The contract was one of speculative dealing, and was as much foreign to the purposes of corporate organization as would have been a contract for dealing in grain on the produce exchange, or in shares in the stock market. The state had not by law consented that its manufacturing corporations should be at liberty to make such contracts, but for reasons of sound public policy had withheld from them the power to do so. Neither had the corporators of the defendant consented that their interests might be put in jeopardy by such dealings. But defendant relies here, as it did in the court below, upon the plaintiff's being estopped by her contract from raising the question of ultra vires. She has certainly admitted the power of the defendant to make the contract, and if the elements of an estoppel are to be found in this mere admission, or in this admission coupled with such action as has taken place under it, then the defendant should be entitled to recoupment.

There are some decisions which give plausibility to the position of the defendant, but we know of none that is adequate to the exigencies of this case. Parties entering into contracts with an association of persons, who are de facto exercising corporate powers, are not suffered to dispute the corporate authority which their contracts admit,...