Dayton Bread Co. v. Montana Flour Mills Co., 8927

• Decision Date: 12 March 1942
• Docket Number: 8928.,No. 8927,8927
• Citation: 126 F.2d 257
• Parties: DAYTON BREAD CO. v. MONTANA FLOUR MILLS CO. MONTANA FLOUR MILLS CO. v. DAYTON BREAD CO.
• Court: U.S. Court of Appeals — Sixth Circuit

126 F.2d 257 (1942)

DAYTON BREAD CO. v. MONTANA FLOUR MILLS CO.

MONTANA FLOUR MILLS CO. v. DAYTON BREAD CO.

Nos. 8927, 8928.

Circuit Court of Appeals, Sixth Circuit.

March 12, 1942.

COPYRIGHT MATERIAL OMITTED

Virgil Schaeffer, of Dayton, Ohio (Pickrel, Schaeffer & Ebeling, of Dayton, Ohio, on the brief), for Dayton Bread Co.

Clinton S. Courson and Guy H. Wells, both of Dayton, Ohio (Clinton S. Courson, Guy H. Wells, W. B. Turner, and E. H. & W. B. Turner, all of Dayton, Ohio, on the brief), for Montana Flour Mills Co.

Before ALLEN, HAMILTON, and McALLISTER, Circuit Judges.

HAMILTON, Circuit Judge.

Appellee in No. 8927 and appellant in No. 8928, Montana Flour Mills Company, instituted this action against appellant in No. 8927, and appellee in No. 8928, the Dayton Bread Company, to recover liquidated damages for the breach of a contract of sale of 5,000 barrels of flour. The Dayton Bread Company admits the execution of the contract, but insists that it is void under Sections 13069 and 13070, inclusive, of the Ohio Statutes (Gen.Code).

At the conclusion of the evidence, the court peremptorily instructed the jury to find for the Montana Flour Mills Company in the sum of $7,276.67 and disallowed $1,000 of its claim.

Appellant in No. 8927, the Dayton Bread Company, appeals from the judgment entered against it on the verdict and the appellant in No. 8928, Montana Flour Mills Company, appeals from the ruling of the court in disallowing $1,000 of its claim. The parties agreed to remit $680 of the judgment against the Dayton Bread Company so that the net judgment from which it appeals is $6,596.67.

The Dayton Bread Company is an Ohio corporation engaged in the business of manufacturing, buying, selling and dealing in bakery goods and similar merchandise of all kinds and also in the business of selling flour to other bakers. The Montana Flour Mills Company is a Montana corporation and is engaged in the business of manufacturing, buying, selling and generally dealing in flour and other articles manufactured from grain or cereal and also operates mills, elevators and warehouses, and carries on a general milling and manufacturing business. At the time the contract in controversy was entered into, it operated several mills in the State of Montana and one in the State of Ohio and employed salesmen to call on the trade and sell its products. One of its trade brands was known as "Sapphire Flour."

Before the present contract was entered into, one of its salesmen solicited and received from the Dayton Bread Company an order for 250 barrels of "Sapphire Flour," the sales contract of which was on a standard form used by millers generally and this contract was fully consummated.

On October 6, 1932, the same agent of the Montana Company solicited the President and General Manager of the Dayton Bread Company to purchase more flour from the Montana Company, but was advised that at that time the Dayton Company had on storage approximately 3,000 barrels of flour and had contracted for the purchase of approximately 15,900 barrels which would probably meet all of its requirements for about ten months. The discussion about the order was lengthy, the substance of which was that the agent of the Montana Company was urging the President and General Manager of the Dayton Company to give him an order as he was anxious to get one and his Company was expecting it, the President of the Dayton Company advising him that his company was not at that time in the market for any more flour. Finally the agent of the Montana Company insisted on writing up a contract on his Company's standard form for 5,000 barrels of flour with a thirty days' trade acceptance, assuring the President and General Manager of the Dayton Company he would not have to worry about taking any of the flour, but that the agent of the Montana Company would resell it probably to some small bakers to whom his Company extended credit. After expressing dissatisfaction with the idea and being reassured by the Montana Company's agent of his expert knowledge of the flour market and that the price of wheat was going up and that they would split whatever profit was made on the transaction, the contract was signed by the Dayton Company's President and General Manager. It was dated October 6, 1937, executed and delivered to the Montana Company's agent. Under its terms the seller agreed to sell to the purchaser 5,000 barrels bulk of "Sapphire Wheat Flour" at $6 per barrel, subject to the terms and conditions of said contract, f. o. b. carrier at shipping point, freight charges to be allowed or paid by the seller. The flour was to be manufactured and shipped by the seller to the purchaser on or before June 30, 1938, the end of the crop year, and shipments were to be made upon directions furnished by the purchaser within that period. The contract was subject to confirmation by the seller's sales manager and on October 11, 1937, he confirmed it and the purchaser was so advised. On receipt of the Dayton Company's order, the Montana Company acquired, in the open market and stored in its elevators, an amount of wheat equivalent to the number of barrels of flour purchased.

On April 25, 1938, the Montana Company inquired of the Dayton Company when it proposed to order out the flour purchased under the contract and on receipt of the letter, the Dayton Company requested the Montana Company to have its agent call on the Dayton Company's President so he could advise him about the true facts of the alleged purchase. On May 6, 1938, the Montana Company's sales manager called on the President of the Dayton Company, who at that time told him of the oral contract he had made with the Montana Company's sales agent simultaneously with the execution of the written contract for the purchase of the flour. This was the first notice the Montana Company's officers or agents had, other than its salesman who solicited and obtained the order, that the flour in question was not purchased in good faith and was not to be delivered in any event.

Although the Montana Company requested the Dayton Company to give instructions for its shipment, none of the flour mentioned in the contract was ordered shipped but on June 30, 1938, the Montana Company advised the Dayton Company that the purchase contract would be terminated according to its terms. On July 5, 1938, the Montana Company demanded of the Dayton Company $8,276.67, which it claimed was the liquidated damages provided in the contract in case of its cancellation or failure of the Dayton Company to demand delivery of the flour within the period of the contract.

The Dayton Company insisted that the contract was void and refused to pay any part of the demand. Thereupon this action was instituted.

It is well settled under the laws of Ohio that purchase or sales of commodities of any kind for future delivery are valid, although the seller may not own the commodity at the time the contract is made and will have no other means of performance than by going into the market and making the requisite purchases when the time for delivery arrives. But such a contract, even though valid on its face and without any patent infirmities in it, becomes void if the real intent of the parties thereto be merely to speculate on the rise or fall of prices and the goods are not in fact to be delivered. The rule of the common law of the State has been incorporated into its statutory law and Sections 13069 and 13070 respectively provide:

"§ 13069. * * * Whoever contracts to have or give to himself or another the option to sell or buy at a future time grain or another commodity, or stock of a railroad or other company, or forestalls the market by spreading false rumors to influence the price of commodities therein, or `corners' the market for any of such commodities or attempts to do so, shall be fined not less than twenty dollars nor more that five hundred dollars or imprisoned in jail not more than six months, or both."

"§ 13070. * * * All contracts made in violation of the next preceding section shall be void, but the provisions of such section shall only apply to contracts where the intent of the parties thereto is that there shall not be a delivery of the commodity sold, but only a payment of differences by the parties losing upon the rise or fall of the market."

The Dayton Bread Company urges on us that the undisputed facts show that the Montana Flour Mills Company's salesman in negotiating the sale of the flour in question was acting within the scope of his employment and in the ordinary course of his employer's business, and that his acts were the acts of his principal and that the pretended purchase of the flour by the Dayton Company's President was a clear violation of the foregoing Statutes. It further urges that even if the Montana Company's agent was acting beyond the scope of his real or apparent authority, that the Montana Company accepted the contract of purchase with all of its infirmities, under the doctrine of ratification.

The Montana Flour Mills Company urges on us that its salesman had no authority, express or implied, to enter into a contract in violation of the Ohio Statutes, and that the intention of its agent to gamble, uncommunicated to it and unexpressed in the sales contract which it accepted in good faith, does not affect the validity of the...