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ARMOUR & CO. v. CELIC

November 2, 1960

ARMOUR AND COMPANY, Plaintiff,
v.
Joseph P. CELIC, J. Dwright Reeve, Thomas White, Alfred W. Topping, William A. Zeh, Robert W. Gillispie, Harold E. Goodale and Isidore P. Krupski, Defendants



The opinion of the court was delivered by: ABRUZZO

The plaintiff, Armour and Company, instituted this action against eight individuals who were officers and directors of the Suffolk Farmers Cooperative Association, Inc., hereinafter referred to as the Co-op, to recover the sum of $ 59,264.81. The Co-op is not a defendant.

The plaintiff's cause of action against these eight individuals is laid on the basis of trover or conversion. The complaint alleges that on or about February 1, 1956, the plaintiff entered into an agreement, Exhibit 1, with the Co-op under the terms of which plaintiff agreed to deliver and the Co-op agreed to accept fertilizer on consignment and for plaintiff's account, and all sums resulting from the sale to become and remain the property of the plaintiff' that the sums realized of the plaintiff; that the sums realized remitted to plaintiff but were converted by the Co-op and the defendants.

 The plaintiff in its brief contends that only three issues have to be determined, (1) to whom did not fertilizer belong, (2) was it converted, and (3) if it was converted, who was responsible.

 The answer admits that all of the defendants except White and Topping were directors at all of the times mentioned in the complaint, and that White and Topping became directors in May, 1956, and November, 1956, respectively. It is not denied by the defendants that on or about February 1, 1956, the Co-op signed a paper writing for the sale of fertilizer and that thereafter Armour did deliver fertilizer which fertilizer was sold by the Co-op to others. The defendants admit that at the time of the commencement of this suit the Co-op owed Armour a substantial amount.

 The separate defenses set forth by the defendants may be summarized as follows:

 1. At the time of the signing of the paper writing, and at all times during the existence of the Co-op, there existed, to the knowledge of Armour, in Suffolk County, a method of doing business, a general custom and practice, whereby wholesalers sold farm supplies to the growers in exchange for produce delivered to those wholesalers, and that pursuant to that custom, Armour fertilizer was delivered to the growers with the full knowledge, approval and consent of the plaintiff.

 2. That at no time were the defendants advised of the true nature of the contract, and that by reason thereof, plaintiff is estopped in an action in trover against the defendants.

 3. That all the actions of the plaintiff were inconsistent with a consignment contract, were consistent with the relationship of debtor and creditor, and that the plaintiff waived the observance of the written terms of the agreement, Exhibit 1, as against the Co-op, and that it is estopped from claiming tort.

 4. That by reason of the acts (set forth in paragraphs 7 to 37 of the answer), plaintiff has agreed to treat the transaction as an ordinary sale to the Co-op, and has waived its right to assert trover against these defendants. (Deft. Br. 3.)

 5. That the plaintiff has failed and refused to pursue its remedy against the Co-op and others.

 6. That in fact the agreement alleged in the complaint was not in effect because it did not conform with the provisions of paragraph 14 of the agreement which provides as follows:

 '14. This contract shall not be binding upon us until confirmed in writing by one of our duly authorized division managers.'

 The facts can be stated briefly as follows:

 At a meeting of the Co-op on January 21, 1956, the following directors (defendants) were present: Zeh, Krupski, Gillispie, Goodale and Reeve; the attorney for the Co-op, one Hubbard; five representatives of the plaintiff including its district manager, Post, and its regional sales manager for Eastern Long Island, Walter. At this meeting the contract and the benefits to be derived from the contract were discussed. A form copy of a contract was passed among the directors present and Hubbard. It provided, 'We hereby agree to consign to you for sale, on commission and for our account * * *' quantities and brands of plaintiff's fertilizer products as agreed upon from time to time between the plaintiff and the Co-op. It also provided that all products delivered to the Co-op until sold and all cash, notes and accounts resulting from sales shall remain plaintiff's property. It provided further that the contract was not to be binding on plaintiff until confirmed by one of plaintiff's authorized division managers (Par. 14, Ex. 1).

 A contract (Ex. 1) was not signed at this meeting but on January 27, 1956, defendant Zeh, president, signed it on behalf half of the Co-op. Post signed it (Ex. 1) on February 1, 1956, but no proof has been offered by plaintiff that it was actually mailed or delivered to the Co-op although Post testified that he gave instructions to his secretary to mail it. The defendants claim that the agreement was not received by the Co-op signed by any division manager of plaintiff and until such time as it was delivered by hand or mail the agreement was not in effect. (The record will indicate that the Court had its own misgivings on this point and pressed counsel for the plaintiff for proof of mailing or delivery of the agreement to the Co-op.) Testimony of defendant Goodale, secretary of the Co-op, reveals that at a meeting of the Co-op held on February 1, 1956, he noted in the minutes of the meeting that Zeh stated that he received a letter from Armour and Company welcoming them into the family. Armour raises the contention that this in effect is proof that the Co-op did receive notification that the agreement had been accepted by plaintiff. This letter from Armour was not offered in evidence by the defendants, nor was a copy offered by the plaintiff, so that this Court must believe that there was nothing in that letter which referred to confirmation of the agreement, Exhibit 1.

 The defendants who were present at the meeting of January 21, 1956, testified that the word 'consignment' was never mentioned at the meeting although Post and Walter testified to the contrary. They also testified that they were not informed that they had to keep a trust or special agency account, never were advised about 'consignment' until June 12, 1957, and that they never saw a copy of the confirmed contract until after the commencement of this action.

 A fertilizer account was opened in March, 1957, and money received for fertilizer was deposited in this account, however, two other companies furnished fertilizer to the Co-op and the funds received from the sale of all three accounts were commingled in this fertilizer account. Money for the Co-op's payroll was drawn from this account.

 Hubbard testified that he was present at the meeting of January 21, 1956, as counsel for the Co-op, but at the trial he could not recall whether the word 'consignment' was used by anyone. Although he recognized that Exhibit 1 was a consignment contract he had no recollection of telling the directors so but told them that it was a contract designed for the benefit and protection of Armour and Company.

 Armour commenced delivering large quantities of fertilizer to the Co-op on April 10, 1956. All charges for fertilizer shipped up to March 27, 1957, had been paid but charges for a large quantity of fertilizer shipped subsequent thereto remained unpaid, and on July 3, 1957, the Co-op made an assignment for the benefit of its creditors to Hubbard, its counsel. The plaintiff filed a proof of claim as a preferred creditor (Ex. R) but has not commenced any legal action to establish its preference. In an interim report dated May 29, 1958, filed with the Supreme Court of the State of New York, ...


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