Louisville Point Lumber Co. v. Thompson

• Decision Date: 26 February 1924
• Citation: 259 S.W. 345,202 Ky. 263
• Parties: LOUISVILLE POINT LUMBER CO. v. THOMPSON ET AL.
• Court: Kentucky Court of Appeals

259 S.W. 345

202 Ky. 263

LOUISVILLE POINT LUMBER CO. v. THOMPSON ET AL.

Court of Appeals of Kentucky.

February 26, 1924

Rehearing Denied, with Modifications, March 28, 1924.

Appeal from Circuit Court, Jefferson County; Chancery Branch, First Division.

Action by the Louisville Point Lumber Company against J. F. Thompson and others. Judgment for defendants, and plaintiff appeals and cross-appeals are filed by the other parties. Affirmed in part, and reversed and remanded in part.

Humphrey Crawford & Middlton, and George D. Caldwell, all of Louisville, for appellant.

Thomas C. Mapother, of Louisville, for appellees.

McCANDLESS J.

The Louisville Point Lumber Company, referred to herein as the "company," or the plaintiff, is a corporation engaged in the manufacture of lumber in the city of Louisville. One Headden was for several years its agent at Obion, Tenn., being paid the sum of $1.50 per M. feet for such logs as he purchased, scaled, and accepted for it at railway stations in that section, though he devoted only a part of his time to its service. In January, 1920, the company contracted with him for his entire time, and raised his commission to $2.50 per M. feet. He claims that it also agreed to furnish him an automobile for his use in its service, while it contends that at his request it agreed to purchase one for him and advance the payment thereon, for which he is indebted to it.

In February Headden entered into negotiations for the purchase of a large number of ash logs, notifying it of the price character, and terms; and that other parties were wanting to buy them, and wiring to know if it would take them; the company answering in the affirmative. He thereupon prepared written contract in accordance therewith; this was executed by the sellers, Thompson and Parks, and he forwarded it to Louisville, where it was executed by plaintiff. This contract was dated March 1, 1920, and was a purchase of not less than 200,000 nor more than 400,000 feet of ash logs, commercial grade, sound timber, 10"' in diameter at top and larger, at price of $100 per M. feet, f. o. b. on cars at Miston, Tenn., freight rate to be measured, branded, and received by it through its agent, Henry M. Headden, each week as delivered at points on railroad; 75 per cent. cash to be paid on inspection, and balance when logs were delivered on cars; the delivery to begin immediately and to continue to September 1, 1920.

There was a delay in beginning the work, and the first delivery was not made until July; the bulk of it being delivered the latter part of August. The logs were received measured, and branded by Headden, who forwarded tally sheets therefor to plaintiff; 285,000 feet being thus received.

Ash timber advanced in value for several weeks, but began to decline in July, and continued to decline during the latter part of the summer and fall, until there was practically no demand for it. However, the company received the logs as delivered without complaint of any kind, and sawed them into lumber. The condition of the market affected the financial situation of the company, which, though amply solvent, was unable to meet all the cash payments, and in lieu thereof gave trade acceptances, some of which were renewed by notes.

In the month of February, 1921, it was owing $3,000 in renewal notes which had been negotiated to a local bank, and there was over $4,000 balance on the contract due Thompson & Parks, who were insisting on payment.

About that time it was informed that Headden was a partner in the firm of Thompson & Parks, and after investigation and some discussions, which proved fruitless, it filed this suit against them and Headden; service being had on Thompson in the city of Louisville, and the other defendants entering their appearance thereto.

It in substance alleged in the petition that Thompson, Parks, and Headden were partners, doing business under the firm name of Thompson & Parks, and as such partners made the sale in question; that Headden fraudulently concealed this fact from plaintiff, and thereby induced it to enter into the contract; that he continued to fraudulently conceal that fact during the entire time of the transaction, and thereby not only sold his own timber to plaintiff, but also inspected, measured, and received same; that he was the only agent it had in Tennessee; and that it relied implicitly on him both to advise it of the values of timber in that section and to guard its interests in the matters mentioned; that by reason of such actings and doings it had been grievously wronged and defrauded. It admitted that it had accepted and retained all the timber and manufactured the same into lumber, but alleged that all of this occurred before it discovered the fraud perpetrated upon it, and that, while it could not tender a return of the logs in specie, a fair equivalent of this could be had by crediting defendant with the value of the logs at the time of the discovery of the fraud, or at the time of their delivery to it, which it alleged to be less than $50 per M. It prayed for a rescission and for a recovery of the consideration paid by it, $23,832.63, to be credited by the timber it received at $50 per M., $13,724.47; the net balance sought being $10,108.16.

Thompson & Parks controverted the allegations of the petition, and made their answer a counterclaim, and sought a recovery against it for the unpaid balance due them on the contract, $4,912.34.

Headden filed a separate answer, in which he traversed the allegations of the petition, and pleaded affirmatively that plaintiff owed him a balance of $2,845 for commissions on this and other purchases for which he asked judgment. By reply plaintiff traversed the counterclaim of Thompson & Parks, and in a separate pleading practically admitted the correctness of the items in Headden's account, but denied liability for commission on the 285,000 feet of timber in question, to wit, $723.91, and charged him with the price of the automobile and accessories amounting to $874.95, leaving a balance of $1,193.85, which it admitted owing him, this being controverted by a rejoinder.

It appears in evidence that J. F. Thompson and E. W. Parks for a number of years had been engaged as partners in the business of logging, milling, and trading in live stock under the firm name of Thompson & Parks, and that Headden had no connection with that firm except in this instance, but that in February, 1920, he and Thompson & Parks purchased a tract of timber land containing 800 acres for the sum of $50,000. Headden had no money, and the others had to advance the cash payment, and later, on the 25th day of June, 1920, Headden executed to them a deed of trust for his interest to secure them in the advancements made by them, and both of these deeds were recorded on the 25th day of June, 1920, but the purchase was consummated while the negotiations for the sale of the timber were in progress. From the above and other evidence there seems to be no doubt of the ownership of the land, and that as to it as well as to the timber taken therefrom the parties were jointly interested either as partners or cotenants. Of the 285,000 feet of timber furnished under the contract, 190,000 feet came from this land, 60,000 feet from the land of E. W. Parks, and the remainder was purchased by Thompson & Parks.

While there is some conflict as to the value of the timber at the place of delivery and time of purchase, the overwhelming weight of the evidence is to the effect that the reasonable market value thereof at that time and place equaled the purchase price, and numerous instances are cited by the various witnesses of as high or higher prices being realized for like material under similar circumstances, both at and after that date; it being further shown that plaintiff had three buyers operating in different states seeking hardwood, that ash lumber was extremely high, No. 1 grade selling as high as $350 per M. in the winter and spring of 1920, and that plaintiff at that time was anxious to purchase such logs, though all parties agree that the price of ash logs dropped below $50 per M. in the next fall and winter.

Also there was some evidence that there were 2,300 feet of logs under 10"' in diameter and about 1,500 feet of culls, but as stated above all were received in Louisville and accepted, retained, and used without objection or criticism either as to quality or grading. It further appears that as late as November 23, 1920, the plaintiff's president wrote Headden, complaining about the material purchased from a Mr. Clerc, in which he said, "All of the stock which you bought in that territory averaged out all right, but Clerc's logs have always been short;" hence there is no well-grounded complaint as to the inspection or grading of these logs. In this respect it might also be said that neither of these items was pleaded.

The chancellor was of the opinion that Headden was a partner in the timber transaction, and rescinded the contract, giving plaintiff a judgment for the consideration paid, this however to be credited by the value of the timber at the time of the purchase, which he fixed at $85 per M. He also deducted from Headden's counterclaim the amount of his commission on this deal, and charged him with the automobile, giving him judgment for the balance, $1,193.85. Plaintiff appealed, and the other parties filed cross-appeals.

Summarizing the questions of fact and referring to the legal principles involved, it appears:

Headden was a joint owner of the lands in controversy. In purchasing timber taken therefrom as agent of plaintiff he purchased his own property, and upon discovering that fact his principal could repudiate the contract and sue at law for deceit, or in equity for...