Hanna v. Florence Iron Co. of Wisconsin

• Decision Date: 08 January 1918
• Citation: 222 N.Y. 290,118 N.E. 629
• Parties: HANNA et al. v. FLORENCE IRON CO. OF WISCONSIN.
• Court: New York Court of Appeals Court of Appeals

222 N.Y. 290

118 N.E. 629

HANNA et al.

v.FLORENCE IRON CO. OF WISCONSIN.

Court of Appeals of New York.

Jan. 8, 1918.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Dan R. Hanna, Robert L. Ireland, Matthew Andrews, and Howard M. Hanna, Jr., composing the partnership of M. A. Hanna & Co., as trustees of an express trust for the benefit of certain creditors of the New York State Steel Company, a New York corporation, against the Florence Iron Company of Wisconsin. From a judgment (170 App. Div. 933,154 N. Y. Supp. 1125), affirming a judgment at trial term for plaintiffs, defendant appeals. Reversed.

Pound and Crane, JJ., dissenting.

Alexander B. Siegel, of New York City, for appellant.

F. C. Slee, of Buffalo, for respondents.

HISCOCK, C. J.

This action was brought to recover damages for an alleged breach of a contract to deliver iron ore, and we think that the judgment recovered therein must be reversed. In 1907 the New York State Steel Company made contracts with the defendant and two other companies each of which provided for the sale to and acceptance by said steel company of at least 50,000 tons of iron ore during each of five consecutive years commencing with the opening of navigation in the year 1908. Performance of the contract and payment for ore by said steel company were guaranteed by one Spencer Kellogg. Intermediate the execution of the contracts and the time for delivery of ore the steel company became involved in financial difficulties, and in an action in the United States District Court receivers were appointed who forthwith entered upon the discharge of their duties.

Plaintiffs were the agents of defendant in the execution of its contract with the steel company, and much correspondence took place between them and the defendant after the appointment of receivers concerning performance of the contract. At first the defendant placed its unwillingness to deliver ore upon the alleged insolvency of the steel company. This position, however, was assumed in correspondence between the defendant and its own agents acting somewhat in an advisory capacity, and later the defendant placed its refusal to deliver ore upon reasons which were broad enough to lay the basis for its present defense, if that question is at all material, and we shall not regard it necessary to discuss that feature of the controversy any further.

It apparently was clear to the receivers that they would not be able through the direct operation of the steel company to use all of the ore which it had contracted to take from the various companies including defendant, and at the same time, as there was then a profit in the prices at which the ore had been contracted for, the receivers naturally and properly were anxious to preserve for the creditors and stockholders of the steel company the benefits of the contracts. Under these circumstances on application to the United States District Court an order was made allowing the receivers to make contracts with other people to take over and market ore contracted to be delivered under the contract with defendant. It is claimed and denied that this order was broad enough to authorize the receivers to assume and adopt the entire contract between the steel company and the defendant, and that dispute presents the fundamental question in the case.

[1] It is undoubtedly the law as claimed by plaintiffs that mere insolvency of one of the parties to a contract does not relieve the other party from performance thereof, and would not excuse the refusal of defendant to carry out its contract. It is equally true, however, in this case that the steel company had become disabled from carrying on its contract, and that the same with all obligations of performance on the part of the defendant fell, unless the receivers were authorized by the court to approve and adopt the contract with defendant and insist upon its performance. It would not have been enough that after their appointments they did not repudiate and refuse to carry out said contract. It was necessary for them to do more than this and under authority of the court affirmatively indicate their election to proceed with the same and hold the other party to the obligations thereof. Stokes v. Hoffman House of N. Y., 46 App. Div. 120,61 N. Y. Supp. 821, affirmed 167 N. Y. 554, 60 N. E. 667,53 L. R. A. 870;Breed v. Glascow Co. (C. C.) 92 Fed. 760;Kansas City South. Ry. Co. v. Lusk, 224 Fed. 704, 140 C. C. A. 244;Chicago Dep. Vault Co. v. McNulta, 153 U. S. 554, 14 Sup. Ct. 915, 38 L. Ed. 819;Peabody Coal Co. v. Nixon, 226 Fed. 20, 140 C. C. A. 446;U. S. Trust Co. v. Wabash Western Ry. Co., 150 U. S. 287, 299, 14 Sup. Ct. 86, 37 L. Ed. 1085.

[2] In determining whether the order obtained by the receivers did authorize the receivers to take over the entire contract with the defendant it is perfectly proper that we should refer for light to some of the circumstances and considerations which surrounded the application of the receivers and the action of the court. If this order authorized the receivers to adopt the contract with the defendant, it also authorized them to adopt and demand fulfillment of the contracts made with the other ore-producing corporations. These contracts in the aggregate involved the delivery of 750,000 tons of ore at a total price of nearly $2,000,000, and extended over a period of five years, during which the price of ore, then favorable to the receivers, might materially change and turn what was a benefit into a heavy and disastrous burden. Under such circumstances the interests and rights of everybody required that if it was intended by the order then aobut to be made to permit the receivers to assume the execution of these contracts and charge the estate which they represented with the possible losses thereof, it should be done in language which fairly indicated that intent and which clothed the receivers with an authority so plain that it could not be successfully questioned if misfortune rather than profit resulted from the transaction.

[3] We do not think that the order does thus permit the receivers to assume these contracts in their entirety, but that on the other hand the permission thereby conferred was limited to the year 1908, and although this was a very wise course for the court to pursue in some respects, it was not sufficient for the purposes of this action.

After many other recitals in the order which need not be repeated we have the one in reference to the contracts with defendant and other corporations that it might be impossible for the receivers to use in the plant of the steel company the ore which had been contracted for, and that unless said ore could be disposed of said steel company might suffer great loss and consequent breach of said contracts. It is then ordered that the receivers be--

‘authorized, empowered and directed, in their discretion, to enter into a contract or contracts with responsible parties, * * * to sell and dispose of the product agreed to be taken by the New York State Steel Company under the contracts heretofore entered into * * * on the best possible terms, not to exceed, however, a commission of seven cents per ton on the sale of said contract, during the season or year of 1908; and they are further authorized, empowered and directed to enter into a contract or contracts with responsible agents or brokers, in their discretion, to obtain advances of moneys necessary for the transportation charges and other expenses of handling, shipping and marketing the said ore, by pledging the said ore to the said party or parties with whom the said receivers may make a contract or contracts, at a charge or cost of not to exceed three cents per ton, or that the said receivers may, in their discretion, enter into a contract or contracts with responsible parties to sell, dispose of, transport and finance operations necessary for the sale and disposal of the said ore to be taken by the New York State Steel Company under said contracts, in and for the season or years of 1908, at a cost of not to exceed ten cents per ton.’

[4] When we analyze these provisions of the order we see at once that there is not any general authority to the receivers to assume the contracts, followed by subsidiary clauses permitting them to dispose of the ore to be received under the contracts through the agency of brokers. The only authority to assume the contracts is found in what naturally would have been such subsidiary provisions, namely, an authority to make contracts with brokers to dispose of ore, and therefore the assumption of the contract is governed and limited by the extent of this authorization to deal with brokers. It seems to us that the provision giving power to the receivers to make a contract with brokers to dispose of ore ‘on the best possible terms, not to exceed, however,a commission of seven cents per ton on the sale of said contract, during the season or year of 1908,’ was one which simply authorized them to adopt so much of the contract with defendant as related to delivery of ore during the year 1908, and that it did not touch or permit any assumption of the contract beyond that year. It is argued that the limitation to the year of 1908 related only to the commissions which the receivers were authorized to pay and did not in any manner limit or affect the assumption of the contract by the receivers for the other years. We do not think that this is a fair or reasonable construction of the order, even if based on the particular clause to which we have referred. But if this clause by itself is ambiguous, we think such ambiguity is eliminated by a subsequent provision. In addition to authorizing the payment of the commission for the sale of ore the receivers were, as stated, also authorized to pay a commission, for financing the expense of handling, shipping, and marketing ore, of three cents per ton. These two commissions amounted in the aggregate to ten cents...