Sheatz v. Markley

• Decision Date: 30 January 1918
• Docket Number: 2304.
• Citation: 249 F. 315
• Parties: SHEATZ v. MARKLEY et al.
• Court: U.S. Court of Appeals — Third Circuit

249 F. 315

SHEATZ v. MARKLEY et al.

No. 2304.

United States Court of Appeals, Third Circuit.

January 30, 1918

Rehearing Denied March 12, 1918.

Owen J Roberts, Olin Bryan, and Harry Reiss Axelroth, all of Philadelphia, Pa., for plaintiff in error.

Henry J. Scott, of Philadelphia, Pa., and Fred H. Atwood, of Chicago, Ill., for defendants in error.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

McPHERSON Circuit Judge.

In this action the use plaintiff, E. Kirby-Smith, sued the International Lumber & Development Company (whose receiver John O. Sheatz, was afterward substituted as defendant) claiming to recover money due or to become due by the company to the legal plaintiffs, Markley & Miller.

He based his claim on Markley & Miller's assignment to him on August 28, 1911. Several years before that date they had contracted with the company to cultivate and develop a ranch in Mexico, and had employed Kirby-Smith as manager; his duties requiring him to live on the ranch and to look after the work on the ground. In 1911 he gave up his employment, and on August 28 he met Markley & Miller in Chicago, where his claim against them was compromised, and the sum of $105,000 was agreed upon as due. Thereupon they executed an assignment of that amount out of such money as might then be due or might become due thereafter upon their contract with the company. They also signed notes aggregating $105,000, and drew drafts upon the company in the same amounts as the notes and falling due on the same dates. The plaintiff offered evidence to the effect that C. M. McMahon, the company's secretary and treasurer, was present at the settlement and agreed to the assignment on behalf of the company, and also offered evidence tending to show that Markley & Miller had performed the original contract. He asserted that during the year 1912 the company agreed with Markley & Miller that about $364,000 was due to them under the contract, and proved the payment of the first draft, for $4,000, and the refusal of the others.

The assignment was only partial, and the use plaintiff undertook the burden of showing the company's acceptance, as well as the fact that it owed to Markley & Miller, either on August 28 or thereafter, enough money to pay the amount assigned. In the effort to establish these facts, he offered evidence of McMahon's presence in Chicago, and his declaration at the conference there that the company owed or would owe Markley & Miller $400,000 under the contract, and would pay the drafts covering their assignment. This raised the question of McMahon's authority to bind the company, and to support his authority the plaintiff called the chief bookkeeper, who testified that McMahon conducted the company's correspondence, had full direction of its funds, and was in general charge of the office. The by-laws were not offered, nor was any resolution of the board of directors referring to McMahon's authority. It appeared that when he returned from Chicago he gave the bookkeeper a list of the drafts, so that a memorandum of their amounts and due dates might be made, and that he directed the payment of the first draft, and the dishonor of the others. The plaintiff also offered evidence that Markley & Miller had agreed to pledge certain collateral security with their notes, and he attempted to show that the company had taken part in carrying out this agreement. On this point the facts were these: The company's stock was to be paid for in installments; until all the installments were paid, the subscribers received, not the stock itself but a form of contract, and it was a definite amount of these stock contracts that Markley & Miller agreed in August to pledge as collateral.

In September, under some arrangement that was not fully explained, the company issued stock contracts in the name of Markley & Miller, who assigned them in blank and pledged them as security for the notes. On some of these contracts the stock was afterwards issued, apparently in the name of a dummy. It was not proved that the company issued the stock contracts for the purpose of carrying out Markley & Miller's assignment, or with knowledge thereof. This is an outline of the plaintiff's case on the subject of the company's acceptance of the assignment.

On the other question-- whether Markley & Miller had performed their contract with the company, and, if so, how much was due thereon-- the plaintiff offered the following evidence: He attempted to prove the company's declaration against interest, contained in an account with Markley & Miller, kept in a book that was produced at the trial and called an 'auxiliary ledger.' He called the bookkeeper to identify the volume as an official record of the company, but the witness testified that, although the book had been kept in the principal office, it was not one of the company's...