Fortune Furniture Mfg. Co., Inc. v. Mid-South Plastic Fabric Co., Inc.

• Citation: 310 So.2d 725
• Decision Date: 07 April 1975
• Docket Number: No. 47975,MID-SOUTH,47975
• Parties: 16 UCC Rep.Serv. 935 FORTUNE FURNITURE MANUFACTURING COMPANY, INC. v.PLASTIC FABRIC COMPANY, INC.
• Court: United States State Supreme Court of Mississippi

Page 725

310 So.2d 725

16 UCC Rep.Serv. 935

FORTUNE FURNITURE MANUFACTURING COMPANY, INC. v. MID-SOUTH PLASTIC FABRIC COMPANY, INC.

No. 47975.

Supreme Court of Mississippi.

April 7, 1975.

O'Barr, Coleman & Burns, Okolona, for appellant.

John D. Sibley, Okolona, for appellee.

Before GILLESPIE, ROBERTSON and SUGG, JJ.

GILLESPIE, Chief Justice.

Mid-South Plastic Fabric Company, Inc., (Mid-South) sued Fortune Furniture Manufacturing Company, Inc., (Fortune) in the Circuit Court of Chickasaw County for plastic goods sold to Fortune by Mid-South. Fortune admitted owing Mid-South the amount sued for, $32,962.63, but filed a set-off or counterclaim for $39,028.79, and demanded judgment against Mid-South for the $6,066.16 difference. Mid-South denied owing Fortune any part of the counterclaim and pleaded several affirmative defenses later to be mentioned. The jury found for Fortune in the amount demanded in the counterclaim. The court sustained a motion of Mid-South for judgment notwithstanding the verdict. Judgment was entered for Mid-South in the amount demanded in its declaration. Fortune appealed.

Fortune was engaged in manufacturing furniture in Okolona, Mississippi. On or before July 8, 1968, Phil Stillpass, who lived in New York, and W. E. Walker, who lived in Okolona, called at the office of Fortune and talked to Sidney Whitlock, President of Fortune, about plastics. Stillpass was in the business of selling plastics and Fortune needed plastics in the manufacture of furniture. A tenative oral agreement was reached whereby a company by the name of Mid-South would sell plastics to Fortune. Whitlock told Walker and Stillpass to send him a letter containing the terms of the contract. On July 8, 1968, the following letter was mailed to Whitlock and received in due course:

Mr. Sidney Whitlock, President

Fortune Furniture Manufacturers, Inc.

Okolona, Mississippi 38860

Dear Sid:

This is to confirm the agreement entered into this date between myself and Phil Stillpass on behalf of Mid-South Plastic Co. Inc. and you on behalf of Fortune Furniture Manufacturing Co. Inc.

We agree to maintain expanded and 21 oz. Plastic in the warehouse of Mid South Furniture Suppliers, Inc. in sufficient amounts to supply all of the plastic for your plant's use, and if for any reason we do not have the necessary plastic you will be at liberty to purchase the plastic from any other source and we will pay the difference in price paid the other source and our current price.

We also agree to pay Fortune a 2% rabate on the gross sale price of our plastic as an advertisement aid to your Company which rebate to be paid at your request.

We assure you that all fabrics you need will be in our warehouse at all times and we appreciate your agreeing to buy all of your plastics from us.

Very truly yours,

W. E. Walker, President

Mid-South was organized with a corporate charter dated July 22, 1968. Stillpass was elected chairman and secretary-treasurer and W. E. Walker was elected president. No one on behalf of Mid-South, other than Walker and Stillpass, contacted Fortune concerning the sale of plastics. Fortune began buying all its plastics from Mid-South. It was only when Mid-South was unable to supply all of Fortune's needs that Fortune bought from other suppliers. The difference between the amount paid to other suppliers for plastic when Mid-South was unable to meet Fortune's requirements and Mid-South's price, plus the two percent rebate provided in the latter, totaled $39,028.79, the amount of Fortune's counterclaim. Other facts are stated in discussing the specific issues. The foregoing facts are stated in the light most favorable to Fortune for whom the jury found.

If the testimony on behalf of Fortune made a jury issue, the motion for judgment notwithstanding the verdict should have been overruled. Carlize v. Richards, 216 So.2d 422 (Miss.1968).

There are two questions presented on this appeal.

1. Is Mid-South bound by the letter?

The principal argument of Mid-South is that the letter dated July 8, 1968, written by Walker, purportedly on behalf of Mid-South and as president thereof, is not binding because Mid-South did not come into existence until July 22, 1968, the date of the charter. It is contended by Mid-South that the letter could not have been the act or the creation of Mid-South which was not then a corporate entity and that there was no ratification or adoption of the contract by affirmative action of the company after its incorporation.

The general rule is that a contract made by promoters with a view towards incorporation will be binding upon the corporation if it accepts benefits of the contract with the full knowledge of the terms of the contract. Morgan v. Bon Bon Co., Inc., 222 N.Y. 22, 118 N.E. 205 (1917); Annot., 17 A.L.R. 452 (1922); 18 Am.Jur.2d, Corporations § 119 (1965).

There are several theories upon which corporations have been held liable, including the theory of adoption and the theory of ratification. In Pearl Realty Co. v. Wells, 164 Miss. 300, 145 So. 102 (1933), the Court spoke in terms of 'ratification' and upheld a contract for services rendered in obtaining a cancellation of a lease to a lot upon which Pearl Realty Company subsequently erected a building. Pearl Realty Company was incorporated after the negotiations between the promoter of the...