Commercial Credit Co. v. L. A. Benson Co.

Johnson, J., delivered the opinion of the Court. The Commercial Credit Company, appellant herein, is a corporation engaged in commercial banking, and in connection with this business extends financial aid to various business concerns unable to finance their own engagements and undertakings. The appellee, L. A. Benson Company, has for some time been engaged in furnishing certain materials and supplies to its customers, including the Poole Engineering & Machine Company, of Balti ²⁷² more, Maryland, to which between July 22nd, 1931, and January 7th, 1932, it made deliveries on orders amounting in value to approximately $4,300. This customer was adjudicated a bankrupt in January, 1932, its charter was forfeited for nonpayment of taxes, and appellee failed to receive settlement for the merchandise thus sold and delivered.

Accordingly, on November 22nd, 1934, it brought suit in the Superior Court of Baltimore City against appellant to recover from the latter the purchase price of the materials thus ordered by the Poole Company. At the conclusion of the appellee’s testimony, by reason of its concession of certain prayers offered by defendant below, the sole issue remaining for the consideration of the jury was whether, in ordering the supplies, the purchase price of which was the subject of the suit, the Poole Engineering & Machine Company was acting as agent for the Commercial Credit Company, and the verdict of the jury having been favorable to appellee, an appeal is taken by the defendant below from the judgment entered thereon. The lower court rejected appellant’s A and B prayers, which were demurrers to the evidence. It therefore becomes necessary at the outset to determine whether there exists in the case evidence of sufficient probative force to enable an ordinarily intelligent mind to draw a rational conclusion in support of appellee’s theory that the relation of principal and agent existed between appellant and the Poole Engineering & Machine Company at the time the latter ordered the supplies in question, for if there is present in the case evidence tending to establish such relation, this, together with all legal presumptions fairly deducible therefrom, must be taken as true.

Clough & Molloy v. Shilling, 149 Md. 189 , 131 A. 343 ; Abuc Trading etc. Corp. v. Jennings, 151 Md. 392 , 135 A. 166 ; Atlas Realty Co. v. Galt, 153 Md. 586 , 139 A. 285 ; Purdum v. Edwards, 155 Md. 178 , 141 A. 550 . The evidence relied upon by appellee as being sufficient to require the court to submit for the jury’s determination the existence of such relation admits of no dispute, and consists entirely ²⁷³ of certain transactions which took place between appellant and the Poole Engineering & Machine Company in 1981, and the circumstances surrounding the same, which, for the purpose of this opinion, may be summarized as follows: In March, 1981, the Poole Engineering & Machine Company, a Maryland corporation, for convenience hereinafter referred to as “Poole,” maintained a plant at Woodberry, Baltimore, Maryland,'where for many years it had conducted ¡upon an extensive scale the business of manufacturing machinery, castings, and products of a similar nature. In June, 19,30, it had entered into an agreement with the Electromatic Voting Machine Corporation for redesigning and manufacturing voting machines, as to the manufacture of which the latter held patent rights. Shortly thereafter Poole obtained a contract with Allegheny County, Pennsylvania, to manufacture for it one thousand of these machines, but this contract was held invalid by the courts of that state upon technical grounds, whereupon Poole and Allegheny County, in March of that year, entered into a second contract upon substantially the same terms and conditions.

At that time, because of having been held up through litigation, Poole’s liquid assets had become materially depleted, and it made application to the Commercial Credit Company, hereinafter referred to as “Commercial,” for a loan of $150,000 to enable it to manufacture for Allegheny County the machines in question. Poole and Commercial then entered into an agreement whereby the latter would advance the former $150,-000 in installments of $50,000 each, the first of which was payable on March 28th, 1981, and the other two at intervals of thirty and sixty days apart; Poole agreeing to execute promissory notes to Commercial for such advances as and when the same were made, the notes to bear interest at six per cent., Poole also to assign to Commercial as security for the repayment of such obligations its contract with Allegheny County for the manufacture of such voting machines. Commercial, in ²⁷⁴ addition to receiving repayment of the sums so advanced, with six per cent, interest thereon, was also to be paid $50 per machine for the first one thousand machines and $10 for each additional machine up to three thousand; the expressed consideration for the charges last mentioned having been the advance of the money to Poole. The process of manufacturing the machines having begun, it was soon realized that deliveries were going to be slower than anticipated; that lack of funds, because of inability to make deliveries, made it necessary to obtain additional money for Poole’s pay roll.

This led to another application to Commercial for $50,000 additional, and Poole and Commercial, on June 29th, 1931, entered into a second agreement, which in many respects was similar to their former agreement, in that as such advances were made for the $50,000, Commercial was. to receive Poole’s interest-bearing obligations, indorsed by its president, Poole also assigning its interest in contracts which it held with Schuylkill and Northumberland counties, Pennsylvania, for the manufacture of certain additional voting machines, which contracts had been obtained by Poole since the execution of the first agreement. Commercial was also to receive, as a bonus for the amounts advanced thereunder over that provided for in the first contract, an amount proportionate to the increase of Poole’s indebtedness to Commercial above , the $150,000, Poole agreeing to deliver to Commercial the original remittances; under the contracts thereby assigned, Commercial to deposit these and turn the total thereof over to Poole, less an amount equal to $250 per machine, instead of $200 as in the first contract. When this agreement was executed on June 29th, 1931, at Commercial’s request, a Mr. Ningard, one of Commercial’s, engineers, • became associated with Poole’s plant and acquainted himself with the construction of the machines, and- Poole’s agent, Sho'emlaker, was to extend Ningard' all information possible concerning their manufacture. On July 1st Commercial advanced Poole.$12,500 under the seeond agreement and a similar sum one week later:. ²⁷⁵ By July 15th, a mechanical defect had developed in the machines, and on July 21st a conference was held between the Maryland Casualty Company, Poole’s surety under the Pennsylvania contracts, the representatives of Commercial, and Poole’s representatives, at which this difficulty was discussed.

The president of Poole explained the situation to all present and stated his unwillingness to permit his creditors to continue manufacturing and shipping parts to his plant, unless- the machines then being made would function properly. Apparently at that time Poole’s president viewed the situation as hopeless and one which it was useless to expend further effort upon. However, on the following day, officials of Commercial and the representative of Electromatic visited the office of Poole and there met representatives of the latter. As a result of a frank discussion of the situation which then took place, the consensus of opinion was that the mechanical defect in the machines could be overcome, and, if production were speeded up, Allegheny County would accept and pay for the machines it had contracted to purchase, while Commercial would continue to advance the necessary money to complete existing contracts and carry out the work, upon condition that it have a representative in the Poole plant to oversee expenditures and purchases in connection with voting machine production.

This suggestion was accepted by Poole’s president, it being understood that a Mr. Hopkins was to be placed in the plant for the purpose above stated, Poole’s president signing a letter requesting such supervision. From that time on Ningard, the engineer, and Hopkins, both representatives of Commercial, remained at Poole’s until near the time it was adjudicated a bankrupt. While there Ningard’s duties were that of assisting Shoemaker, Poole’s vice president and general manager, in making estimates of requirements for materials, which, when made, were turned over to Poole’s purchasing agent, who gave orders for the same. Hopkins, in connection with Poole’s president, passed upon the matter of purchases as well as cash expenditures. ²⁷⁶ Shortly after arrival of these representatives at the Poole factory, the $25,000 advanced by Commercial under the second agreement had been spent, but no deliveries of voting machines had been made by Poole, and, in view of the mechanical difficulty it had so recently encountered, there was no immediate prospect of being able to make deliveries and collections.