Erie Malleable Co. v. Standard Parts Co. ( 1924 )

DONAHUE, Circuit Judge

(after stating the facts as above).

The only conflict in the evidence is in reference to the knowledge of Scott, receiver, as to the existence of this contract. While the master’s ■finding that Scott did not have knowledge of Younger’s contract with the corporation is fully sustained by' the evidence, that fact is not of controlling importance. Younger was paid for all the services performed by him during the term of that contract. His present cause of action is based upon a breach of an alleged new contract or a renewal of the original contract by implication of law, not for a like term, but for an additional year only.

In support of the proposition that, where an exployé continues in the same service of an employer after the expiration of his contract of employment, without any new or different arrangement, a contract for another year upon the same terms arises by implication of law, counsel for intervener rely particularly upon Associated Newspaper v. Phillips (C. C. A.) 294 Fed. 845; Kelly v. Carthage Wheel Company, 62 Ohio St. 598, 57 N. E. 984; 26 Cyc. 976. The contract involved in one of these cases fixed the term of employment at one year. In the other case there was no definite term named in the contract but the salary was fixed at $3,000 a year and the court held that this was a contract for one year, so that the renewal of these contracts by implication, renewed all the terms of the contract as originally made at the same salary and for the same term'of service.

The contract of this intervener with the Standard Parts Company was not for one year, but, on the contrary, the term was definitely fixed from February, 1920, until December 31, 1922. That the salary to be paid in money during this time was $20,000 per year did not make it a contract for one year, as was held upon a different state of facts, in the Carthage Wheel Company Case, supra. If the rule announced in the cases first above cited has any application to the facts of this case, which question need not now be decided, then a renewal of this contract by implication would renew it for the same term and upon the same conditions named in the original contract. 26 Cyc. 976. In this respect there seems to be a substantial difference between the law applicable to renewal by implication of this class of contracts and the rule established as to the effect of a holding over by a tenant of lands after the expiration of a lease for years; yet, even in case of a receiver holding over after the termination of a lease for years, no new tenancy from year to year is implied, but, on the contrary, only a tenancy at will. Clark on Receivers, § 522; Dietrich et al. v. O’Brien, 122 Md. 482, 89 Atl. 717.

It is unnecessary however, to discuss the distinction between this contract and the contracts involved in the cases cited. Whatever may be the law in reference to the éffect of an employé continuing at the same salary, in the same service of an employer acting in a personal and individual capacity, after the expiration of the original contract of employment, it can have no application whatever to a contract with a receiver. One who deals with a receiver is conclusively presumed to have knowledge of the extent of his authority. In Chicago Deposit Vault Co. v. McNulta, 153 U. S. 554, 562, 563, 14 Sup. Ct. 915, 918 (38 L. Ed. 819), the Supreme Court quoted with approval from Beach on Receivers, § 257, the following:

“ * * * This rule is so well established that it has been decided that all persons contracting with a receiver are chargeable with knowledge of his inability to contract, and enter into contracts with him at their own peril, and that the court has unquestioned power to modify or even vacate his agreements.”

See Cowdrey v. Railway Co., 93 U. S. 352, 23 L. Ed. 950; Union Trust Co. v. Illinois Midland Co., 117 U. S. 434, 479, 6 Sup. Ct. 809, 29 L. Ed. 963; Gulf Compress Co. et al. v. Merchants’ Cotton Press & Storage Co. (C. C. A.) 265 Fed. 199; Robertson et al. v. Blower (C. C. A.) 263 Fed. 695; Lehigh Coal Co. v. Railway Co., 35 N. J. Eq. 426; High on Receivers, § 186.

The Supreme Court in Chicago Deposit Vault Co. v. McNulta, supra, further quoted with approval from Beach on Receivers the following:

“Although, as receiver, he may enter into negotiations and make such agreements as would be binding upon him as an individual, yet, in order to affect the fund in his hands, his acts must be ratified by the court.”

See Clark on Receivers, § 522; Dietrich v. O’Brien, 122 Md. 482, 89 Atl. 717.

In this case the decree appointing these receivers granted to them no absolute right to enter into a long term contract, but, on the contrary, specifically reserved to the court authority to regulate and control the conduct of these receivers in all respects. If the receiver had actually entered into an express contract with Younger, it would not have been binding upon the trust estate represented by him until approved by the court.

Even where the employer is acting in his individual capacity, with full power to contract for and on his own behalf, the legal presumption that arises by the continuation of the employe in the service after the expiration of the period, fixed in the contract and without any new arrangement may be rebutted by proof of facts showing a different intention. 26 Cyc. 976, 977, and cases there cited. In this case the master found that Scott had no knowledge whatever of the terms and conditions of this contract, and that Younger, although specifically required to present all contracts to the receiver, wholly failed to bring this contract to Scott’s attention. For this reason the receiver cannot be held impliedly to have agreed to a renewal for a year of a three-year contract, of which he had no knowledge. Nor could Younger, in good faith, rely upon a contract by implication for the original term or for an additional year only. He knew that Scott was the receiver, and that his authority as such receiver might be terminated at any time at the pleasure of the court. He knew in December, 1922, shortly prior to the expiration of his contract with the corporation, that Scott, receiver, was contemplating an early sale of all of the property of .the Standard Parts Company, and to that end counsel for the receiver, with the assistance of this intervener, was then preparing an application for a decree ordering such sale, which decree, directing the receiver to sell all of the property in his possession on March 29, 1923, was shortly thereafter entered. He also knew in December, 1922, that the receiver would have no further need of his services after this property was sold, and that any contract made by the receiver, renewing the original contract for his services for the term named therein, or even for an additional year after December 31, 1922, would be wholly inequitable, improvident, and detrimental to the trust. Vanderbilt v. Central Ry. Co., 43 N. J. Eq. 669, 12 Atl. 188. These admitted facts would be sufficient to rebut any legal presumption that would arise by intervening petitioner continuing in the service after the expiration of this original contract, even if such presumption would obtain as against a receiver.

The fact that the receiver, with the approval of the court, compromised claims of Eaton and Torbenson, based upon unexpired contracts of employment with the Standard Parts Company, cannot affect the decision in this case, even if their respective claims involved the same state of fact. But it appears from this record that their claims were based solely upon the original contract of employment. If the receiver did not ratify and adopt these contracts, then the respective parties could recover damages for breach of contract. Baird Rubber & Trading Co., Inc. v. George D. Bates, Trustee, 296 Fed. 289, decided by this court March 14, 1924; Samuels v. Drew & Co. (C. C. A.) 292 Fed. 734, 739.

For this reason, the advisability of the adoption of a long term contract by a receiver depends on wholly different considerations than the making of a new contract for a period that may largely exceed the term of the receivership. If, on the other hand,, there was a valid adoption by the receiver of an existing contract, he would be equally liable for its breach. In either event the compromise with Eaton and Torbenson may have been largely to the advantage of the estate.

For the reasons stated, the judgment of the District Court is affirmed.