Means v. Southeastern Gas Co.

• Decision Date: 21 March 1933
• Docket Number: 7298.
• Citation: 169 S.E. 390,113 W.Va. 864
• Parties: MEANS v. SOUTHEASTERN GAS CO.
• Court: West Virginia Supreme Court

169 S.E. 390

113 W.Va. 864

MEANS v. SOUTHEASTERN GAS CO.

No. 7298.

Supreme Court of Appeals of West Virginia.

March 21, 1933

Submitted February 15, 1933.

Rehearing Denied June 5, 1933.

Syllabus by the Court.

To render principal liable for agent's act, agent's authority must be established, unless act was incidental to ordinary business intrusted to agent.

Admissions and declarations of alleged agent are inadmissible as evidence to prove agency.

Agent's authority to obligate principal to pay another's debt cannot be inferred except from circumstances which are clear and convincing.

Evidence held insufficient to support verdict finding that field superintendent of gas company had authority to guarantee payment for drilling operations of another company.

Statute providing that, when pleading alleges making of writing proof is not necessary unless denial be under oath held applicable only to pleading of facts, and not of law (Code 1931, 56-4-46).

1. To hold the principal for an unratified act of his agent, it must be proved that the agent was authorized to do the act unless it was incidental to "the ordinary business entrusted to his management."

2. "Admissions and declarations of a person claiming to be an agent of another are not admissible as evidence to prove such agency." State v. Brewing Co., 74 W.Va 232, point 2 of the syllabus, 81 S.E. 974.

3. Authority of an agent to obligate his principal to pay the debt of another is not to be inferred except from circumstances which are clear and convincing.

Error to Circuit Court, Kanawha County.

Action by C. M. Means against the Southeastern Gas Company. To review a judgment in favor of the plaintiff, the defendant brings error.

Judgment reversed, verdict set aside, and new trial awarded.

WOODS, J., dissenting.

Koontz, Hurlbutt & Revercomb and Brown, Jackson & Knight, all of Charleston, White & Case, of New York City, Glover C. Johnson, of Fort Worth, Tex., and Lon H. Kelly, of Charleston, for plaintiff in error.

Lively & Stambaugh and Maurice J. Crocker, all of Charleston, for defendant in error.

HATCHER Judge.

The plaintiff, C. M. Means, recovered a judgment in the circuit court against the defendant, Southeastern Gas Company, (a West Virginia corporation), for the debt of another corporation, and a writ of error followed.

The Jervian Corporation (a New York corporation) acquired an option to purchase "the equity of the stock" of Tennessee Oil & Gas Company, and agreed in the option to advance the Tennessee Company sufficient money for it to drill three gas wells. The Jervian Corporation was owned exclusively by E. R. Diggs & Co., of New York City. The Southeastern was not controlled by the Diggs Company, but the entire stock of Southeastern was held by Inland Utilities Company (a Delaware corporation) which was owned by the Diggs Company and sixteen other banking houses. J. E. Kelly, acting for the Jervian Corporation, requested John Young, field superintendent for the defendant, who was then serving Jervian temporarily in the same capacity, to recommend a driller for the Tennessee work. Young had known the plaintiff for some time, and recommended him. After some negotiations, he entered into a written contract on Janury 24, 1930, directly with the Tennessee Company to drill the wells. Plaintiff testified that, when the contract was presented to him, he told Young that he knew nothing about the Tennessee Company, and would have to be guaranteed his money for the drilling, to which Young replied: "We have an option on this property and we will guarantee your money." (Means says he had known Young as the superintendent of Southeastern, and inferred that by "we" he meant Southeastern. Young says the "we" meant "the E. R. Diggs banking house," for whom he was working at that time.) Young referred plaintiff to Kelly, who gave the following guaranty on June 4, 1930:

"Mr. C. M. Means, Charleston, W. Va.

"Dear Sir: With reference to the contract entered into on January 24th, between C. M. Means and the Tennessee Oil and Gas Company, providing for the drilling of certain wells in Tennessee and the payment therefor, the Jervian Corporation will pay or cause to be paid at the time and in the manner set forth in the said contract, sums due to you by the said Tennessee Oil and Gas Company.

"Yours very truly,

"[Signed] John Eoghan Kelly" Means testified that, when the above guaranty was tendered him, he had the following conversation with Kelly (denied by Kelly): "I told him I knew nothing of the Jervian corporation and he told me I was working with the Southeastern Gas Company. He said 'They are just acting as agent or go-between between the Southeastern Gas Company and Diggs and the Southeastern Gas Company is responsible to you for your money."' Means then proceeded with the drilling. Not being paid therefor, and the Jervian becoming bankrupt, Means conferred with Kelly about the middle of February, 1931, and he testified as follows concerning that conference: "We was talking about the Southeastern Gas Company and I asked him why I could not collect off the Southeastern; and also of course the Jervian proposition came up. He said 'The Jervian corporation never was intended to own anything or owe anything. If you are able to fight it I don't see any reason why they could beat you."' (Kelly also denied this conversation.)

The Southeastern owned a number of properties, all of which (with possibly one exception) were obtained through Jervian. Kelly was vice president of Southeastern while he was representing the Diggs Company and Jervian. Southeastern lent its field superintendent Young to Jervian while the Tennessee property was being prospected. Those circumstances demonstrate that a very close relationship existed between the Jervian (entirely Diggs) and the Southeastern (sixteen others and Diggs through Inland). Plaintiff is entitled to the benefit of this background of intercorporate relations in having his case determined, despite denials by both Young and Kelly that Southeastern had any interest in the drilling of the Tennessee property.

The brief for Means takes the following positions: "(1) That Kelly as vice-president and in active charge of field operations of the Southeastern executed the guaranty as the agent of the Southeastern, or (2) that the Jervian acting through its sole agent, Kelly, executed the guaranty as agent of the Southeastern."

1. There is no evidence whatsoever supporting the first position. Kelly was not in active charge of field operations for Southeastern on June 4, 1930, when the guaranty was executed, though he was then its vice president. He had been in active charge of Southeastern prior to 1930, but on January 1, 1930, he was superseded in that capacity by a Dr. Bray, and Kelly then became the representative of the Diggs Company and Jervian. "John Eoghan Kelly--Jervian Corporation" was lettered on the door of Kelly's office. Means had never met Kelly prior to the final verbal agreement relative to the Tennessee drilling, which was after he ceased to be in charge of Southeastern. Means says that Young had told him "before" that Kelly was superintendent of the Southeastern, but Means admits that Kelly was introduced to him by Young merely as vice president of Southeastern. Therefore Means was not misinformed as to Kelly's official connection with Southeastern during negotiations with him. Kelly testified (a) that he had no authority from Southeastern to execute the guaranty for it and (b) that he executed the guaranty for Jervian on the express instruction of his "client," Mr. Diggs. The foregoing is not controverted, and is not inconsistent with the written guaranty, which is specifically the guaranty of Jervian. The office of vice president gave Kelly no inherent power to contract at all for Southeastern, much less to bind it for...