John F. Clark & Co. v. Nelson

• Citation: 216 Ala. 199,112 So. 819
• Decision Date: 31 March 1927
• Docket Number: 6 Div. 703
• Court: Supreme Court of Alabama
• Parties: JOHN F. CLARK & CO. et al. v. NELSON.

112 So. 819

216 Ala. 199

JOHN F. CLARK & CO. et al. v. NELSON.

6 Div. 703

Supreme Court of Alabama

March 31, 1927

Rehearing Denied May 19, 1927

Appeal from Circuit Court, Jefferson County; John Denson, Judge.

Action on common counts by C.B. Nelson against John F. Clark & Co. and others. From a judgment for plaintiff, defendants appeal. Reversed and remanded.

Percy Benners & Burr, of Birmingham, for appellants.

Walter S. Smith, Black & Harris, and W.E. Fort, all of Birmingham for appellee.

GARDNER J.

One S.R. Stewart was engaged in the cotton brokerage business in Birmingham, and defendants in this action, John F. Clark &amp Co., were engaged in like business in New Orleans. Stewart placed orders on his own account for cotton with Clark & Co. Nelson (plaintiff in this suit) was a customer of Stewart and, as a result of their cotton transactions, Stewart became indebted to Nelson in a sum in excess of $2,000. These transactions were had by Nelson with Stewart. This original indebtedness was from Stewart to Nelson, and there was no contractual relation between Nelson and Clark & Co. When the orders were placed with Stewart, he then placed his own order with Clark & Co., and out of the consummation of the contract each received a commission.

Stewart became financially involved, and called upon Clark & Co. for aid, and some loans were made. As a final result, Marks, a member of the firm of Clark & Co., went to Birmingham to investigate Stewart's business, and ascertain if further financial assistance was feasible or desirable from a business standpoint. He remained there several days. Stewart remained open for business, but it was agreed, on account of Stewart's involved condition, that his customers, as they would come in to place their orders, should place the same direct with Clark & Co. in their own names. During this period, Nelson did so place a few orders resulting in a profit, which was paid him direct by Clark & Co., and constitutes no part of this litigation.

Nelson brings this action against Clark & Co. to recover the balance due him by Stewart, upon evidence offered tending to show that Marks, acting for Clark & Co., while in Birmingham, agreed with Stewart, for a valuable consideration, to pay his indebtedness to his customers, including the debt to Nelson. Plaintiff's right to maintain such action under these circumstances is well settled in this jurisdiction ( Liles v. Cox [Ala.Sup.] 110 So. 716; Farrell v. Anderson Co., 211 Ala. 238, 100 So. 205; Huckabee v. May, 14 Ala. 263; Carver v. Eads,

65 Ala. 190), and is not here questioned.

Defendants deny that such agreement was made, and this constitutes a controverted issue of fact in the case. But, conceding such agreement, defendants insist they were entitled to the affirmative charge as duly requested, upon the theory that, upon the undisputed proof, there had been a rescission by mutual agreement between Stewart and Clark & Co. before plaintiff took any action thereon.

We are of the opinion such mutual rescission was established by the uncontroverted proof. Stewart's testimony is to the effect the agreement was made by Marks on Tuesday (Marks leaving for New Orleans that night), and that he (Stewart) forwarded the money consideration and the mortgage on his home the following day to Clark & Co. None of the accounts being paid, he testified he learned, on Friday following, Clark & Co. would not carry out the agreement, and went to New Orleans to talk matters over. Defendants' testimony tends to show the accounts were much larger than they had been led to believe, and good cause of rescission; but that is a matter not here of material consequence. Stewart's testimony clearly discloses that Clark & Co. declined to further consummate any such agreement, and surrendered to him all consideration which had been paid, which he accepted, and afterwards conveyed some of the property in a general assignment for his creditors. Quoting from Stewart's testimony:

"Clark & Co. gave back to me everything I had given them in pursuance of this agreement, and I do not contend they kept the mortgages or money or anything I gave them in pursuance of the agreement. *** I accepted the mortgages back from them, and, after accepting the mortgages. I deeded the property over to other people without reference to those mortgages. *** I did make another proposition to Clark & Co. after I realized this first proposition about Clark & Co. taking the mortgages, and so forth, and paying my debts, was off."

"The agreement to rescind need not be expressed. Mutual assent to abandon a contract, like mutual assent to form one, may be inferred from circumstances. Therefore, if either party without right claims to rescind the contract, the other party need not object, and, if he permits it to be rescinded, it will be done by mutual consent." 3 Williston on Contracts, § 1826.

"So a contract will be treated as abandoned when the acts of one party inconsistent with its existence are acquiesced in by the other." 13 C.J. 601.

This rule of law was recognized and given effect by this court in Moline Jewelry Co. v. Crew, 171 Ala. 415, 55 So. 144. See, also, Hayden v. Boyd, 8 Ala. 323.

Indeed, that there was a mutual rescission of such agreement, if made, is not controverted by counsel for appellee in brief; but it is insisted that such rescission could not become effective as against this plaintiff, who assented to and acted upon the contract. Appellee relies upon that line of authorities, holding in effect that, upon the contract being made by one person for a consideration moving to him from another, promising to pay a third person a sum of money, the law immediately operates upon the acts of the parties and fastens a liability at once upon the promisors to this third person, which cannot be affected by any subsequent conduct of the promisor, and the original debtor. These authorities hold that in such a case the third person's right at once accrues and becomes absolute. The leading case sustaining this view is that of the Wisconsin court in Tweeddale v. Tweeddale, 116 Wis. 517, 93 N.W. 440, 61 L.R.A. 509, 96 Am.St.Rep. 1003, where many of the cases are discussed.

The question here involved has given rise to much discussion in the litigated cases, resulting in a great diversity of opinion. It forms the subject of an extensive note to Baxter v. Camp, 71 Conn. 245, 41 A. 803, 42 L.R.A. 514, 71 Am.St.Rep. 169. Five different grounds have been mentioned by the courts as foundation for the rule of liability, as trust relationship, the equitable right of subrogation, agency, priority of contract by substitution, and the broad equity of the transaction. Note Baxter v. Camp, 71 Am.St.Rep. 187.

Mr. Williston (1 Williston on Contracts, p. 742) makes a distinction between those cases of sole beneficiary and cases of debtor and creditor, saying:

"In most jurisdictions the distinction has not been clearly stated in the decisions between cases of sole beneficiary and cases of debtor and creditor. Most of the cases have been of the latter sort, and it has generally been laid down broadly as true of all cases that, prior to the assent or acting upon the promise by the third party, but not afterwards, a rescission or release is operative. *** In theory,

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