March 14, 1919.
E. Crosby Kindleberger [ Hamilton Rogers with him on the brief], for the appellant.
E.W. Hofstatter, for the respondent.
We are all agreed that the learned trial justice was right in his ruling that the contract was a chose in action, and that Ryan could not transfer a greater interest in it than he himself possessed, unless as between plaintiff and himself he had authority to dispose of it. And if he had no such authority, the question would still remain whether the plaintiff by his conduct or laches is estopped from questioning the sale to the Canadians. We are also agreed that if the plaintiff is entitled to recover, his interest would be in the net profits, if any, of the contract for the ten submarine chasers after proper allowances have been made for expenses for the use of the plant, interest on working capital, premium on bond and all other necessary and proper expenses in the construction of the vessels. The judgment appealed from establishes plaintiff's ownership of one-half interest in the contract and his right to one-half of such net profits.
My brethren who dissent from the affirmance of the judgment are of opinion that upon the evidence the plaintiff cannot, as against the Canadians represented by the defendant corporation appellant, question Ryan's right to sell the contract, and that plaintiff omitted to promptly disavow Ryan's acts on learning of his assignment or sale of the award and contract. This is the point of difference between us.
The learned trial justice has found as matter of fact that the Canadian investors in dealing with Ryan acted in good faith and without knowledge of plaintiff's interest in the transaction. The respondent urges that the evidence shows the contrary, or at least lack of the ordinary precautions to be taken where one is purchasing property title to which upon the face of things is not in the vendor, and he asks this court to make new findings holding the defendant corporation chargeable with knowledge of plaintiff's rights and equities. If this were an original question with us, we might have some difficulty in approving of the business methods of the purchasers of the contract. The remarkable haste with which the purchase was consummated, the fact that on its face the award had been made to the company of which Ryan was simply general manager, the use of the name of the company by the purchasers in making the contract, these and other matters in evidence would seem to call for investigation and inquiry from some one other than the man who was selling what apparently did not belong to him. The general manager of a corporation has no such plenary power to sell out its entire property and assets as would avoid the necessity of the purchasers inquiring as to who was really interested in the company, and such inquiries should not have been made solely of the general manager and his colleague Pope. Slight inquiry, whether at the office of the so-called company in New York city; or even at the Navy Department where the plaintiff personally had actually submitted the bid on introductions from high governmental officials, would have at once disclosed his interest. It is not enough to say that they "did not know," if they should have known, nor should they justify their lack of knowledge by omitting to make inquiries any reasonable man would have made or by relying upon statements made by the very people who were selling them property marked plainly as belonging to someone else. But the respondent did not except to the findings of the learned trial justice in these particulars, nor has he appealed therefrom, and he cannot question them here. ( Cox v. Stokes, 156 N.Y. 491, 504; Brown v. Robinson, 173 App. Div. 583. )
I cannot find any evidence that the plaintiff ever authorized Ryan to sell or assign the award and contract. The trial judge has found that Ryan acted without the knowledge and consent of the plaintiff and with intent to defraud him. Ryan appears to have been a man of varied experiences, but the evidence shows that he was a boatbuilder, had constructed boats which may not have been as large as those desired by the government, but were of the same general character as fast motor boats. He was interested in a boatbuilding plant near Detroit, and there is no doubt on the evidence that the plaintiff relied upon his ability as a boatbuilder. He had undertaken to build boats for the Canadian government and plaintiff had accompanied him to England. They had dealt with naval authorities and shipbuilders and had exhibited their plans and blueprints and there is no suggestion in the record that his competency was questioned. Even the defendant corporation agreed to pay him a salary of $7,500 a year for his services in securing business and aiding and assisting them in designing and building boats. Nor was the bid made and the award of the contract obtained with the purpose of selling it. Immediately upon receiving notice of the award the plaintiff and Ryan set about procuring a plant. The approval of the naval authorities was obtained first for a plant at Detroit and later at Nyack. Before Ryan's first lapse from fair dealing with plaintiff they were discussing the advance in price of material and Ryan testified that he had actually ordered material which was being loaded at Hillside, Miss., billed to Marine City, Mich. He testified that he had actually commenced work at the latter place for which governmental approval had been obtained, and was disturbed at the difficulty in bringing the completed boats to tidewater at New York, afterwards obviated by the selection of the yard at Nyack, N.Y. The plaintiff appears to have been in earnest on his part. He had visited the surety company to arrange for the necessary bond upon the contract, and it was the plaintiff who visited and examined the Nyack shipyard, reporting his approval to Ryan. There appears to be ample evidence to sustain the finding of the trial justice that the plaintiff was at all times ready and willing to finance and carry out the contract with the government, to perform all the conditions of his contract with Ryan and that he at no time abandoned the enterprise. It will not do to call him an adventurer, in the offensive sense. I think the evidence shows that at the outset Ryan intended to carry out his agreement with plaintiff, and it was not until after his personal necessities brought him into contact with the financial gentlemen, Messrs. Isman and Pope, and the Canadian investors, that he suffered himself to be led astray. So far as his twenty-five per cent stock interest in the defendant corporation was concerned, half of it immediately went to Isman and Pope, the remaining twelve and one-half per cent being put in pawn or as collateral for a loan of $5,000 obtained from a New York gentleman named Considine, from whom the Canadians subsequently purchased it. It would appear that the plaintiff cannot be charged with any lack of good faith. Indeed, it is evident that while he may not have had experience in shipbuilding, his individual introduction to the naval authorities in Washington, and his individual correction and deposit of the bid were important factors in the acceptance of the bid and the award of the contract. There is no evidence in the record that he had any idea or intimation of any sort that Ryan was attempting to sell him out.
It is suggested that he is in some way estopped from questioning the sale to the Canadians because when he first learned of Ryan's duplicity about May 12, 1917, he did not at once notify the Canadians of his claim. But the sale was then an accomplished thing. He had in no way induced the Canadians to deal with Ryan. They say they never knew him or heard of him. He at once demanded from Ryan the money which he had advanced and to which he was entitled under his agreement irrespective of his interest in the profits arising from the profits of the enterprise. He refused Ryan's offer of $30,000 in stock of the defendant company as a gift for "past favors." He rendered statements of his advances and afterwards itemized them, but he could not collect anything and finally consulted counsel and this action was commenced late in July. I cannot see how anything he did or omitted to do prejudiced the defendant corporation or its managers. They had purchased the award and contract, signed the papers, incorporated the company, expended $50,000 in cash for the Nyack shipyard and deposited $100,000 for working capital, all on May second or third. They had at once commenced work on the boats. It is hard to see how any announcement by the plaintiff of his rights and claims after May twelfth would have affected them. They had taken an assignment of an award made to "International Shipbuilding and Marine Engineering Co., World's Tower," without any mention of Ryan's name, and had executed a contract with the government in the name of that company described as of "World's Tower Bldg., West 40th St., of New York," Mr. Tanguay signing as president and Mr. Forward as secretary, although neither of them was an officer of the company which in fact had no legal existence. They had procured the Globe Indemnity Company to act as surety for them on that contract. If there was necessity for signature of a president and secretary to the contract, it would seem as though some proper inquiry should have been made as to the authority of Mr. Ryan as "general manager" to turn over the contract to them. But the point of all this is that it is evident that the plaintiff's failure to protest or object between May twelfth and the date of the commencement of his lawsuit, cannot have injured them or influenced them in their dealings in any way. They did nothing and omitted nothing because of plaintiff's silence, and we know that after suit was commenced they acquired Mr. Ryan's stock from his friend Mr. Considine. So that, conceding the proposition that in the absence of estoppel the assignor of a chose in action cannot transfer to the assignee, even though a purchaser for value without notice, any greater title than the assignor possesses, I cannot find any estoppel as against the plaintiff here.
It is impossible to tell upon the record before us what profit may have resulted from this contract, or whether there was any profit, but upon the evidence the judgment rendered at the Special Term appears to be right and should be affirmed.
RICH and PUTNAM, JJ., concurred; MILLS, J., read for reversal, with whom JENKS, P.J., concurred.
The crucial question here is whether or not Ryan as against Curnen had authority to sell the award to the Canadian capitalists — either directly or impliedly through some form of estoppel. If he had no such authority, then I think, barring any question of laches, plaintiff Curnen could in equity seek and gain the relief which by the judgment has been awarded to him. I think that the undisputed facts and the inferences fairly to be drawn from them answer the above inquiry in the affirmative. This I conclude for the following reasons, viz.:
(a) The award, according to the finding, was really in the name of Ryan, viz.: "International Shipbuilding and Marine Engineering Company, John J. Ryan, by John J. Ryan, Manager." There was no such corporation. The bid, therefore, was really in form by Ryan, and the award was really to him. If Curnen was, as found, a half owner of it with Ryan, he, Curnen, suffered the Canadians to deal with Ryan as sole owner and, therefore, should be held estopped from disputing as to them Ryan's authority to deal with them as such, inasmuch as they did so deal with him in entire good faith.
(b) It is evident that the two, Curnen and Ryan, in the matter of the bid and award were co-adventurers; that neither had the capital to carry out the proposed work, and that their real purpose was to dispose of the award. It was, therefore, within the obvious scheme of their copartnership to dispose of the award outright, or at least for a part of the stock of the corporation which capitalists might form to do the work under the award. Hence Ryan had real authority from Curnen to dispose of the award as he did for an interest in the working corporation formed by the Canadian capitalists. The telegram by plaintiff to Ryan of April 9, 1917, fairly implies that Curnen realized that Ryan could then in Detroit make valid such deal and, therefore, deemed it necessary to specially stop him from so doing until he, Curnen, had a chance to submit a proposition which he was attempting to negotiate. Moreover, it is evident that when Curnen first learned of the deal actually made by Ryan with the Canadians, he did not repudiate Ryan's authority to make it, but merely complained, in effect, that Ryan was not giving him his share, viz., that "he [Curnen] had been given a rotten dirty deal;" and the break between them evidently came from Ryan's disputing the amount due from him to Curnen for moneys advanced or loaned. From the facts in reference to this phase of the matter as found, it is evident that from May 5, 1917, when Curnen became fully advised of the deal made by Ryan, to July 27, 1917, when this action was commenced, Curnen made no claim against the Canadians or their corporation, but made his claim merely against Ryan personally. Meanwhile, evidently the corporation was proceeding with the execution of the contract and completed some of the submarine chasers.
My conclusion, therefore, is that Curnen is bound by the contract made by Ryan with the Canadians and their corporation: (a) Because such a deal was within the real authority of Ryan as co-adventurer with Curnen; (b) because it was certainly within the apparent such authority of Ryan, i.e., within the appearances with which Curnen had clothed him and upon which the Canadians in good faith acted; and (c) because Curnen did not at once, upon being informed of the deal, repudiate to the Canadians and their corporation Ryan's such authority, but suffered them to go on with their expenditures and work upon the faith of such authority. In short, the situation appears to be this, that the two adventurers (here using the term in the other and dubious sense), having entered into a scheme to exploit the government, and to that end taken an award which they were utterly incapable of carrying out, did by one of them sell it for a substantial price to the Canadian capitalists and then quarreled among themselves as to the division of that price, and after, through such quarrel, Ryan, who had received the whole price, had made away with it, then the other one, Curnen, made claim upon the Canadians. To my mind there is no merit, legal or equitable, in such claim.
Therefore, while I appreciate the great care which Mr. Justice KELLY has exercised in considering the appeal and preparing his opinion, I feel constrained to dissent therefrom.
JENKS, P.J., concurred.
Judgment affirmed, with costs.