Part 9

Under the amendment to the National Bankruptcy Law as amended in February, 1903, the rules relating to discharge of bankrupts, are somewhat changed. Many parties are interested ofttimes in preventing the discharge of a bankrupt for no other reason than that they are creditors who believe that the bankrupt has not been honest in his dealings and irrespective of motives of personal enmity feel that the welfare of the business community is served by preventing the bankrupt from being discharged and re-entering into business. Probably the act that will prevent a discharge that most often appeals to the creditor is that the bankrupt obtained goods on a false statement in writing. This, if shown, will prevent the discharge, the law reading in this respect, as follows: “Obtained property on credit from any person upon materially false statement in writing made to such person for the purpose of obtaining such property on credit.” It is obvious that the party who urges this objection must be the one who has been injured thereby.

Other debts not dischargeable in bankruptcy are taxes levied by the United States, the State, county, district or municipality in which bankrupt resides, and others of no practical interest to merchants. In addition to the above are those debts which have not been duly scheduled by the bankrupt in the proceeding in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; or were created by his fraud, embezzlement, misappropriation, or defalcation, while acting as an officer or in any fiduciary capacity.

=Opinion No. 97.=

SALES—OF AN INDEFINITE QUANTITY.

A purchaser of a quantity of merchandise ordered by letter two hundred to three hundred tons of a certain article to be delivered within the following six months as wanted. The vendor duly acknowledged receipt of the order and accepted same, stating that they would deliver a certain quantity in the immediate future and balance as ordered within the following six months. Thereafter, the vendor delivered a certain portion of the merchandise for which it was paid with the exception of one installment, which the vendee refused to pay for alleging that the vendor had refused to deliver further installments. The purchaser sued the vendor for damages for breach of contract in failing to deliver the balance of the contract. The Court held that by the terms of the order the vendor could not insist on the purchaser taking more than the two hundred tons but the purchaser on his part could insist within the six months period upon the vendor delivering the remaining hundred tons, it appearing that two hundred tons had been already delivered. In fact, it was an option which the vendee could enforce but not the vendor.

The above is a brief outline of an action decided in the Appellate Court in New York and applies as well to an executory sale of lumber, many similar orders being placed among lumbermen.

=Opinion No. 98.=

LIABILITY OF BANK FOR FAILURE TO GIVE NOTICE OF PROTEST TO ENDORSER UPON NOTE RECEIVED FOR COLLECTION.

That it is the legal obligation of a bank, which receives a note for collection to use all diligence to give notice of its dishonor to all endorsers is set forth in a decision of the Appellate Division of the New York Supreme Court (Howard vs. Bank of Metropolis, 95 App. Div. 342).

One H., who was the owner of a promissory note made by one S., and indorsed by G., delivered the note to a bank for collection and left with it a card giving G.’s full name and address, stating that he wished the note carefully protested as he expected to hold the endorser, the maker not being responsible, and that he would not be in the city when the note fell due. The maker of the note having failed to pay it when due, the bank sent it to its Notary for protest, but failed to deliver to the Notary the card bearing the name and address of the endorser, and informed the Notary that the endorser’s address was unknown. The Notary made out two notices of protest, one directed to H. and the other to G. Both notices were placed in an envelope and sent to H., who did not receive them, being out of town.

The Court held the bank responsible and in rendering its opinion referred to a prior New York case entitled First National Bank vs. Fourth National Bank (77 N. Y. 320) and quoted “it is the duty of an agent who receives negotiable paper for collection, in case such paper is not paid, so to act as to secure and preserve the liability thereon of all the parties prior to his principal, and if he fails in this duty and thereby causes loss to his principal, he becomes liable for such loss.”

=Opinion No. 99.=

ACCOUNTS STATED.

The Settlement of Accounts and Striking of a Balance Between Parties—What It Consists Of.

Upon merchandise accounts which embrace many items or cover transactions running through a long period it is often wise to strike a balance or to bring about an agreement between the creditor and debtor as to the exact amount owing thereon. The value of such arrangement becomes of great moment when at a later date attempt is made to enforce collection of the account. It obviates the necessity proving various material matters such as the delivery of the various items charged to the debtor; that they were accepted by the debtor; that they were of the kind called for by the contract of sale; that there was a full number or count; that the agreed prices were as charged. The fixing of a balance upon a running account is legally known as the _stating of an account_ and an account so fixed is an “account stated.”

A running account becomes an “account stated” by agreement either express, or implied by acquiesence, between the parties, that a definite amount or sum is owing from one to the other. No particular form of words is essential and neither must it be in writing, although a written expression is of more ready proof and, therefore, preferable. An express admission, either verbally or by letter, of the correctness of an account constitutes an account stated.—(Vernon v. Simmons, 7 N. Y. Supp. 649.)

In the above case the debtor retained accounts received from his creditor without objection or replying and subsequently acknowledged orally the receipt of the letter containing them and promising to pay later on, and it was held that the creditor could sue upon an account stated. It is not necessary that the account should be signed by the parties to make it an account stated. It is enough that it has been examined and accepted by the party and this acceptance need not be expressed; it may be implied from circumstances such as keeping it without objection beyond a reasonable time. As to what is an unreasonable time depends on circumstances largely and it has been held that two months was sufficient, although generally a longer time would be more conclusive. This acquiesence, however, may be explained by the debtor, which would nullify the apparent acceptance, but without such satisfactory explanation the situation is prima facie against him. Where the indebtedness has been expressly denied, the retention of the account does not bind the debtor.—(Austin v. Wilson, 11 N. Y. Supp. 565.)

In bringing an action on an account stated if the plaintiff is defeated through failure to prove the agreement as to the amount or the fact that an “account was stated;” he would not be debarred from bringing another action to recover for the various items comprising the account.

=Opinion No. 101.=

ACCEPTANCE OF GOODS—WHEN SUFFICIENT TO BIND PURCHASER.

It is a daily occurrence in the lumber trade that a purchaser finds some objection to the quality or quantity of lumber shipped to him on order. Frequently in such case, without any communication with the shipper a purchaser feels warranted in using such portion of the lumber as suits him, relying on an assumed right to lay aside the balance for the account of the shipper, with the idea that he may reject it entirely or obtain some reduction in the price. The general rule laid down by the courts in cases of this sort is as follows: Where the vendee of goods, purchased without warranty, after full opportunity for an inspection, accepts them without objection when delivered, he cannot, in an action against him to recover the price defend upon the ground that they did not conform to the contract of sale.—(Smith vs. Coe, 170 N. Y. 162.)

If the purchaser, upon the receipt of the goods, makes objection to the quality, but, without the express permission of the seller, uses a portion, it is held that by so doing he tacitly waives his objection and his acts amount to an acceptance of the entire lot.—(Coplay Iron Co. vs. Pope, 108 N. Y. Appeals, 232.)

In the above case, which involved a transaction in pig iron, the purchaser complained of the shipment and upon being sued for the purchase price set up a claim for damages by reason of the alleged defective quality and it was held “where after discovery or opportunity to discover any defect in goods delivered under an executory contract of sale, the vendee neither returns or offers to return the property nor gives the vendor notice or opportunity to take it back, in the absence of a collateral warranty or agreement as to quality, he is conclusively presumed to have acquiesced and may not thereafter complain of the inferior quality.”

When a car constitutes but a portion of the order, which was in the nature of one contract for a number of cars, the purchaser cannot object to the quality and retain the initial car and decline to receive the balance of the shipment. The contract of sale being an indivisible one in law, the purchaser by his acceptance of the initial shipment and failure to return it, is conclusively presumed to have acquiesced in the quality of the lumber offered him and waived any objection to the remainder of the shipment order provided it is the same as the first car.

In the case of Weil vs. The Unique Electric Device Co., Reported in 39 Misc. (New York 1902), page 527, a vendor sought to recover the stipulated purchase price of certain merchandise sold to the defendant, consisting of some 3,000 electric batteries, of which 1,000 were delivered and paid for, but the purchaser refused to accept the balance on the ground that the quality was not according to the agreement. The court held that the contract of sale was an entire one and it was the duty of the purchaser to receive balance of the order, provided they were of similar quality to the lot already delivered. That when the purchaser received the first lot and found them unsatisfactory, it was its duty to rescind the sale and return, or offer to return the goods; and its failure so to do was an acquiesence on its part of the quality of the goods in question.

The above discussion leaves for further consideration the question when a purchaser though bound to take goods and chargeable with their full price, may hold the seller liable for damages for breach of express or implicit warranty.

=Opinion No. 102.=

CONTRACT OF SALE—STATING ESTIMATES OF MAXIMUM AND MINIMUM AMOUNT.

It is the custom of many merchants, with a view doubtless of securing the best possible terms and yet to leave a loophole, whereby they can take only such an amount as they desire, to give the vendor a general idea of their requirements.

In Heisel vs. Volkman, reported in Volume 55, New York Appellate Division, page 607, a dealer wrote to a manufacturer of certain kinds of merchandise asking for “prices for supplying our requirements,” stating “we estimate our yearly requirements at from five to ten million pieces. Are confident that they will not be less than the smaller amount and reasonably certain that they will come up to or exceed the larger one,” to which the manufacturer replied, “I would be willing to make a yearly contract with you from five to ten million pieces, etc.” The purchaser did not take the minimum amount of five million pieces during the period in question and the manufacturer sued to recover the purchase price of the difference, having, of course, done what was necessary in respect to making a tender of delivery. The court held that the purchaser was obligated to take and pay for at least five million pieces, even if his requirements for the year fell substantially short of that amount and that the seller in making his price had a right to rely upon the minimum amount stated by the buyer.

Attention is called to this for the reason that the same rule would apply to a transaction in lumber and because many of the trade are in the habit of making contracts upon similar conditions and referring in elastic terms to their probable requirements.

=Opinion No. 103.=

CERTIFICATION OF CHECK—RELEASES THE MAKER.

Attention is called to the fact that under the law of New York State the procuring of the certification of a check by the holder from the bank or banker upon which it is drawn is equivalent to the acceptance of a bill of exchange and releases the drawer.—(Meurer vs. Phœnix National Bank, 94 App. Div. (N. Y.) 331.)

=Opinion No. 104.=

SALES—STOPPAGE IN TRANSIT.

The right to stop a shipment in transit is based on the existence of a lien in favor of the seller, which continues until the goods have reached the actual physical possession of the buyer. So long as the goods are in the hands of a carrier the seller may, given the proper conditions, reclaim the goods. This is so even if the carrier is one designated or selected by the purchaser. A fraudulent sale of the goods by the purchaser to third parties will not defeat the right of stoppage, nor will seizure under attachment or execution issued against the purchaser provided the right is exercised before the transit is at an end.

=Opinion No. 105.=

FOREIGN CORPORATION LAWS.

Necessity of Filing Certificates, Etc., in West Virginia, Indiana, Tennessee, Mississippi, Kentucky, Ohio, Michigan, New York.

One of our members recently had an attorney examine the corporation laws of several States and give an opinion concerning the advisability of filing corporate certificates, securing so-called licenses, etc., in the various States wherever the member was making sales. The States referred to are West Virginia, Indiana, Tennessee, Mississippi, Kentucky, Ohio, Michigan and New York. This information may be helpful to other members, and a copy of the opinion follows:

WEST VIRGINIA.—Every corporation whose principal place of business is located out of the State must pay an annual license tax as follows: If the authorized capital is not more than $25,000, $20; not more than $100,000, $50; not more than $1,000,000, $50; an additional forty cents on each $1,000 in excess of $100,000. No other taxes are assessed unless it has personal or real estate in West Virginia. Such foreign corporations may be authorized to hold property and do business in the State by certificate of the Secretary of the State that they have filed with him a copy of their articles of association, which certificate with a copy of the charter must be filed with and the certificate recorded by, the Clerk of the County Court of such county in which their business is conducted. A foreign corporation obtaining the above mentioned certificate authorizing to hold property and do business in West Virginia has the powers, rights and privileges and is subject to the same regulations, restrictions and liabilities that are conferred by statutes of West Virginia on domestic corporations.

Every foreign corporation which shall do business in the State without having obtained such certificate and having it filed and recorded according to law shall be guilty of misdemeanor, and upon conviction shall be fined not less than $50, nor more than $1,000 for each month its failure so to comply shall continue.

INDIANA.—Every foreign corporation, except railroad and telegraph companies, built before March 15, 1901, and insurance companies must maintain a public business office in Indiana and must designate a representative in Indiana on whom service of process may be had. Such foreign corporations are subject to the liabilities, restrictions and duties imposed upon domestic corporations. They must before being permitted to do business in Indiana file in the office of the Secretary of State certified copy of its articles of incorporation, and a statement sworn to by the principal or agent in Indiana of the proportion of the capital stock of such corporation represented by its property located and business transacted in Indiana, and must pay in the office of the Secretary of State upon such proportion incorporation fees equal to those required of domestic corporations. The Secretary of State shall then issue a certificate authorizing such corporation to do business. Until this law is complied with, demands of a foreign corporation, whether arising out of contract or tort, cannot be enforced in the courts of Indiana, and such corporation is subject to a fine of not less than $1,000. Fee for filing articles of incorporation of a corporation with capital stock of $10,000 or under is $10, over $10,000, one-tenth of one per cent. upon authorized capital. No annual State tax on corporation as such.

TENNESSEE.—Foreign corporations must file in the office of the Secretary of State a copy of its charter and cause an abstract of same to be recorded in the office of the Register of each county in which such corporation purposes to carry on its business or to acquire and own property. Penalty for failure to do so shall subject the offender to a fine of not less than $100 nor more than $500. They must pay in the office of the Secretary of State a tax or license of $100 to exercise such privilege.

MISSISSIPPI.—Foreign corporations may sue and be sued and are liable to be proceeded against by attachment or otherwise, as individual non-residents are liable. The acts of their agents shall have the same force as the acts of agents of private persons within the scope of their power. They cannot recover on any contract made in the State or cause action originating therein which is in violation of laws or policies of States. No general statutes about taxation of foreign corporations. Subject governed in main by common rule as to taxes, but they are required to file with the Secretary of State certified copy of their charter for record, for which a graduated fee is fixed.

KENTUCKY.—If the corporation be organized under the laws of another State a board shall fix the value of the capital stock determined from the amount of the gross receipts of the corporation in Kentucky and elsewhere the proportion which the gross receipts in Kentucky bear to the entire gross receipts. The same proportion of the value of the entire capital stock, less the assessed value of tangible property in the State, shall be the correct value of the corporation franchise for taxation. Reports must be made and failure is a misdemeanor punishable by a fine of $1,000 and $50 for each day.

OHIO.—Foreign corporations are forbidden to do business until they have procured from the Secretary of State certificate that they have complied with the requirements of law which authorize them to do business in the State, and until said companies shall have caused the proportion of their capital stock employed within the State to be determined by the Secretary of the State, and shall have paid to him a fee of one-tenth of one per cent. upon such amount and obtained his certificate of such payment. No foreign corporation doing business in the State can maintain any action upon any contract made by it in the State until it has procured such certificate. The corporation must file with the Secretary of State due copy of its charter and statement under seal of the amount of its stock, the nature of its business and state which is to be its principal place of business, designating a person upon whom process against such corporation may be served. The person so designated must have an office where the corporation is to have its principal place of business within the State. Corporations complying with these requirements are exempt from attachment on the ground that they are foreign corporations.

MICHIGAN.—Foreign corporations filing in the office of the Secretary of State certified copy of articles of incorporation and an appointment of an agent in this State for service of processes may carry on their business in Michigan. Foreign corporations may bring suits on furnishing security for costs.

NEW YORK.—No foreign corporation shall do business without first procuring from the Secretary of State certificate that it has complied with requirements of law. License fee shall be paid. No foreign corporation can do business in New York or sue on contract made there unless it has procured such certificate prior to the making of the contract. Selling goods through a factor within the State is not covered by this prohibitive clause. Before granting such certificate foreign corporation must file with Secretary of State copy of its charter and a statement setting forth its business, its principal place of business within the State and designating the person upon whom processes may be served. Such person must have an office within the State, where the principal place of business of such corporation is located. Foreign corporations must pay to State Treasurer a license fee of one-eighth of one per cent. for privilege of exercising its corporate franchise in New York, to be computed upon the amount of capital stock employed within the State during its first year of business.

=Opinion No. 106.=

CONTRACTS FOR CARLOADS SEPARABLE.

Where a contract was made for three carloads of a company’s No. 1 white cedar shingles and the purchaser accepted and paid for two carloads, but refused to accept the third because of alleged inferior grade and quality, and because the shingles were not made by said company, the Supreme Court of Minnesota holds that the contract as to the three carloads was separable, so that the purchaser’s payment and the seller’s acceptance of payment for two carloads did not prevent the seller from beginning an action to recover the purchase price of the third carload nor the purchaser from defending therein. The court also holds that a buyer, seeking to reject an article as not in accordance with the contract of sale, must do nothing after he discovers the true condition inconsistent with the seller’s ownership of the property.—Duluth Log. Co. vs. John C. Hill Co., 124 N. W., 967.

=Opinion No. 107.=

WARRANTY SURVIVES ACCEPTANCE.

Where one attempting to sell shingles stated in a letter that “They are mighty good shingles, they are as good as you could get anywhere,” it was a warranty of their quality. Where a buyer of shingles accepts shingles which he knows are of a grade inferior to what the seller warranted, the buyer does not waive the warranty, and he can defend against an action for the price on that ground. (Texas Court of Civil Appeals.) Harroll vs. McDuffie, 128 S. W. Rep., 1149.

=Opinion No. 108.=

ACCEPTANCE OF LESS THAN INVOICE PRICE.

On arrival of a carload of shingles, the buyer complained of their quality, and for the purpose of securing an immediate settlement and avoiding further negotiations the seller agreed to accept a less amount for them than the full price if payment was made before a specified time. The buyer failed to make payment within such specified time and in a suit to recover for the full amount of the invoice it was held by the court that the seller could require payment under the circumstances of the full price. (Texas Court of Civil Appeals.) Harroll vs. McDuffie, 128 S. W. Rep., 1149.

=Opinion No. 109.=