Paine v. Loeb

• Decision Date: 18 July 1899
• Docket Number: 79.
• Citation: 96 F. 164
• Parties: PAINE et al. v. LOEB.
• Court: U.S. Court of Appeals — Second Circuit

96 F. 164

PAINE et al. v. LOEB.

No. 79.

United States Court of Appeals, Second Circuit.

July 18, 1899

Theron G. Strong, for plaintiffs in error.

Franklin Bien, for defendant in error.

Before WALLACE and SHIPMAN, Circuit Judges, and THOMAS, District judge.

THOMAS District Judge.

The plaintiffs are bankers and brokers doing business under the firm name of Franklin Paine & Co., at Duluth Minn., and the defendant is a broker at the city of New York. The city of Duluth, in 1896, had a population of about 55,000, and was supplied with water and gas by the Duluth Gas & Water Company, whose works were capable of meeting the necessities of the city, were of the value of upwards of $1,500,000, and produced an annual net income of $115,000. In the year 1896 the company had outstanding two classes of bonds. The first class consisted of $295,000 first mortgage bonds, bearing 6 per cent. interest, and payable in 1908, while the second class comprised $1,513,000 5 per cent. interest-bearing bonds, secured by a second mortgage. It was the intention to retire the bonds of the first class with those of the second class, and the later bonds, by words indorsed upon them tended to show that they were first mortgage consolidated bonds. The value of the first bonds was somewhat above par and the interest had been paid duly on all bonds, except that in 1896 the interest upon the 5 per cent. bonds had been delayed from April 1st to May 15th. Franklin Paine, one of the plaintiffs, and the active party in the negotiations about to be stated, had been a broker in the city of Duluth for 10 years prior to the event herein involved. At some time in the forepart of September, 1896, the defendant, by letter asked the plaintiffs to procure for him a bid on certain of the 6 per cent. bonds, which the plaintiffs were unable apparently, to do. On September 17th the plaintiffs wrote the defendant as follows:

'A short time ago you asked us for a bid on $10,000 Duluth Gas and Water 6 per cent. bonds, which we could not make. If you can arrange to do so please offer them to us at a fixed price, open for, say, three days. We have had some conversation regarding them with a party who says he might consider the purchase if the price suited him, though he does not wish to make a bid.'

To this letter the defendant replied by telegraph on September 21st, as follows, 'Will sell ten Duluth Gas sixes 85,' and a letter of the same date contained a similar statement. To this offer the plaintiffs answered on September 21st that the person to whom they wished to offer them was absent, and that they would wire the defendant should such person, on his return, accept the bonds, or make an offer. On September 24th the plaintiffs wrote the defendant as follows:

'We wired you this a.m. as follows: 'Keep touch of bonds few days, if possible, Negotiations progressing.' We have offered them to two men, each of whom seems to think that he can at least get a bid for the lot in a short time, even if they cannot be sold at your price. Both of them expect to know this week what they can do. As, in the event of a sale to them, we do not wish to become responsible for the payment, we may ask you to place the bonds in some New York bank, say for one business day, to be delivered to order of American Exchange Bank, Duluth, upon payment of price agreed upon. In that case, if the buyers fail to close the deal, we would incur no loss.'

The defendant answered this letter on September 28th as follows:

'Yours of the 24th came duly to hand. In reply beg to say that the simplest manner to handle the sale of the Duluth G. & W. bonds, in case you prefer it, is to let your bank authorize the payment for the same through their New York correspondent, and your purchaser can deposit the money with your bank in Duluth. This excludes all risk on your part.'

On September 30th the plaintiffs telegraphed the defendant:

'Can yet eighty-five for the bonds for November delivery. Answer.' The defendant expressed qualified consent to this on October 1st, and on the same date received from the plaintiffs the following:

'Only difference seems to be the question of accrued interest. If you prefer cash lump sum eighty-two hundred and fifty covering everything, think could make that deal. If you reply satisfactorily on either proposition; can close quickly.'

To this the defendant telegraphed on October 2d:

'I sell you ten Duluth Gas & Water sixes for eighty-two hundred and fifty dollars, payable and deliverable prompt New York.'

The bonds were delivered, and payment made, as suggested in the plaintiffs' letter of September 24th and the defendant's letter of September 28th. In fact, the defendant delivered 5 per cent. bonds under the misapprehension that they were 6 per cent. bonds, and on October 6th the plaintiffs advised the defendant of the mistake, and in their letter of that date the plaintiffs maintain the pretense that they had sold the bonds to third parties, and to this end the following language is used:

'In reply to your message this a.m., asking terms of settlement, we replied as follows: 'Five per cent. bonds unsalable. We sold sixes as offered. You receive back bonds, reimburse bank, and pay us difference to fill our sale.' This was before we had seen the buyers. Have seen them since, and they are disposed to insist upon delivery, though, of course, if you cannot deliver, we shall have to make some settlement with them. We depend upon your taking care of us to the extent necessary for settlement.'

Again, on October 7th, the plaintiffs wrote the defendant:

'We sold them (referring to alleged purchasers) the bonds at 96, for which we will, if it will be of service to you, furnish certified statement from American Exchange Bank. * * * If we are forced to settle with the purchaser, we shall have to pay to market; while, if we were able to offer them a voluntary settlement, we think they would make us some concessions '

This claim of undiscovered principals was preserved in subsequent letters. In the end the bonds were received back by the defendant, the bank was reimbursed, and in the present action the plaintiffs sue to recover damages for the breach of the defendant's contract to deliver 6 per cent. bonds. To this point it is evident that the plaintiffs, skilled brokers long resident of Duluth, knew that the defendant was seeking a bid for bonds of the water and gas company of that city and that he contracted to sell the same at some 25 per cent. below their value, and that the plaintiffs represented that they were acting for third persons, and carefully stipulated...