Keystone Surgical Supply Manufacturing Co. ex rel. Rennyson v. Bate

Opinion by Mr. Justice Dean, Perhaps the plaintiff had no case, but we are of opinion that neither the court below nor we, on at least one aspect of it, can determine that fact without the verdict of the jury. The plaintiffs assignor is a manufacturing corporation, of which the defendant, Richard H. Bate, was a stockholder and director. On March 16, 1894, the corporation entered into an agreement in writing with William T. Bate and Richard H. Bate, doing business as William T. Bate & Son, whereby Bate & Son agreed to construct for the company, on a tract of land in the borough of Bridgeport, Montgomery county, for the price of $5,500, a large building, according to plans and specifications already accepted. The company agreed to pay the consideration money upon completion of the building and on receiving title to the land, by delivering to Bate & Son a first mortgage upon the property in the sum of $5,500, payable in five years, interest at six per cent to be paid semi-annually, with the option to the mortgagor to pay it off at any time within the five years. William T. Bate, of Bate & Son, owned individually the land on which it was pro-X^osed to erect the buildings, so on the same day, by another agreement in writing, he contracted to sell to the company, for the consideration of $1,000, the land; the deed to be made as soon as the building was completed, at which time the consideration was to be paid in cash. The consideration was actually paid before the building was completed, about which time the company took possession of the building and placed in it valuable machinery. There was evidence tending to show, that the directors of the company had adopted the site and invited proposals for the erection of the building, and that at a meeting held on February 23,1894, Richard H. Bate submitted propositions to construct the buildings, at three different prices, differing according to different details in the plans and quality [468] of material, one was for $5,800, one for $5,500 and the other. for?$6,500; 'further, that Bate represented to the directors that each of these prices would be the actual cost to him of the work; the contract was awarded to him as before noted at the price of $5,500. Bate was one of the building committee, and to him a contractor named Shoffner had offered to do the work for $3,874; Bate did not make this fact known to the building committee or to the board of directors, but immediately after his contract for $5,500, he subcontracted the same work to Shoffner for $4,040. On learning this fact, five or six months afterwards, the company refused to pay the consideration of $5,500, by the execution of the mortgage to Bate & Son in that amount, as it had contracted to do; thereupon, Bate & Son, without legal proceedings, ejected the company from the premises, and took possession, not only of the building, but of the machinery and other property. The company soon after became insolvent and made an assignment for benefit of creditors to this assignee, who brings this suit for damages, averring a readiness and willingness on part of company to perform its contract, and refusal of Bate & Son to perform theirs; and further, that while the company was in the lawful and peaceable possession of the premises, Bate & Son had unlawfully ejected it and wrongfully continued in possession, not only of the land, but of the company’s machinery and fixtures. We do not say the facts alleged by appellant were clearly proved, but that evidence was given tending to prove them cannot be questioned; if it had been submitted to the jury and had been believed by them the plaintiff would have been entitled to a verdict. If the company paid to Bate the $1,000 as alleged, it was the owner of the land, and had a right to demand the legal title from William T. Bate; a court of equity would have so decreed, and what ought to have been done, equity will consider as done. Then, we have the case of the owner of land on which a building has been erected, in the rightful possession of the premises, for there is no pretense that the possession taken by the company was not peaceable and with consent of the builders, wrongfully dispossessed. But, it is argued, the company did not, from the evidence, perform its contract with Bate & Son by a delivery or tender of the mortgage; admit it; but what right did that give building contractors to eject the owner [469] from the peaceable possession of his own premises ? A mere breach of covenant confers no such remedy on the wronged party, and if the latter adopts it, he is liable to an action in damages. But appellant offered evidence tending to show the building contract had been procured by falsehood and fraud on the part of the active member of the partnership, and therefore it was not bound to tender performance. Richard H. Bate was a director and stockholder and also one of the building committee, and acted in each capacity; then, as one of the firm of contractors, he dealt with the company. Appellant cites the act of March 31, 1860, to show that in no case can an officer of a corporation contract for himself with the corporation to furnish supplies or materials, etc. This act, obviously, lias no application to contracts like unto this one with a private corporation, and it has been frequently so held. This transaction comes under the common-law rule, that all such transactions should be closely scrutinized, and it must be shown that the contract is in all respects fair and reasonable; for the parties do not deal at arms’ length; a certain degree of confidence and trust is necessarily reposed in the officer by his corporation; his opinion, often, has great weight with his associates, and this gives him an advantage which he may use for his own interests, in disregard of his duty to the corporation. If it be true, as alleged, that Bate, being a director and member of the building committee, was entrusted along with his associates with the duty of procuring the erection of the buildings at the lowest price, then, after ascertaining from Shoffner that it could be erected for less than $4,000 represented to the directors that it could not be built at actual cost for less then $5,500, and thus secured the contract for his firm at a profit of nearly $1,500, that was a fraud upon the corporation which warranted the rescission of the contract, or it could waive the right to rescind and tender a mortgage for or pay the actual cost of the work performed by the unfaithful director. It was not in default when it refused to accede to the demand for a mortgage of $5,500; if it had complied, that, after knowledge, would have been a ratification of the fraudulent contract. Clearly, on appellant’s evidence, if believed, the company could have defended in an action by Bate & Son on the contract to the amount it was damaged by [470] tbe fraud; but, in tbis action by the company, the statement is so meager and defective, even under the recent legislation, that •we are not surprised that the learned judge of the court below was in doubt as to whether he could sustain a verdict on this branch of the case. But, as this may be cured by future amendment, we do not decide the point. As to the first, we think the plaintiff, on the pleadings as they stood, had a right to go to the jury on the question of damages for a wrongful dispossession. The decree is reversed, and a procedendo awarded.