American Steel Foundries v. Railroad Supply Co. (235 Ill. App. 228, 1924)

Mr. Justice Taylor

delivered the opinion of the court.

On August 21, 1914, the plaintiff, American Steel Foundries, brought suit in assumpsit in the superior court against the defendant, The Railroad Supply Company. The affidavit of claim recited the amount due to be $20,184.65. The defendant filed a plea of the general issue, and of the five-year-statute of limitations, and also a plea of set-off. A demurrer was filed to the plea of set-off, and was sustained. The defendant filed an affidavit of merits to the whole of the plaintiff’s demand. The plaintiff filed a similiter to the defendant’s plea of the general issue, and a replication to the plea of the statute of limitations. That replication recited that from September 5, 1901 to October 20, 1909, the defendant paid on the several causes of action the sum of $16,522.61, the last payment being on October 20, 1909, and, on the various dates of payments made, acknowledged the causes of action set up; that the date of the last acknowledgment was October 20, 1909; and that the plaintiff commenced its action within five years next after the defendant’s acknowledgment of said several causes of action. The cause was tried without a jury, and a judgment entered in favor of the defendant. From that judgment this appeal was taken.

The chief question involved is whether a certain debt of $20,184.65 from the defendant to the plaintiff, which admittedly has not been paid, was outlawed at the time this suit was begun. This suit having been begun on August 21, 1914, it became necessary, in view of the plea of the defendant of the statute of limitations, for the plaintiff to prove that sometime within the preceding five years, that is, since August 21, 1909, the defendant had done such things that, legally considered, the running of the five-year-statute of limitations had been tolled.

The last transaction which occurred between the parties, and which constitutes the chief matter of fact to be considered, stated generally is as follows:

On June 4, 1909, the defendant entered into a contract with the Seattle Railway Company, whereby the defendant was to sell and deliver to the Seattle Railway Company 24 knuckles, weighing 1,228 pounds, and for which the Seattle Railway Company was to pay the defendant four cents a pound. Subsequently, on July 3, 1909, the defendant requested the plaintiff to manufacture and ship the 24 knuckles to the Seattle Railway Company. In making that request it was understood both by the plaintiff and the defendant — • that understanding being implied from their former practice and from letters that passed between them— that the plaintiff should invoice the merchandise when manufactured and sent, so that the price fixed in the contract between the defendant and the Seattle Railway Company of four cents a pound would be paid by the Seattle Railway Company directly to the plaintiff, and that when (according to the claim of the plaintiff) the plaintiff was paid it would take for itself three cents a pound, or $36.84, being its total charge for manufacturing the merchandise, and then credit the defendant’s account with one cent a pound, or $12.28, thereby reducing the defendant’s debt to the plaintiff to that extent.

The theory of the plaintiff is: (1) that it was the agent of the defendant for certain purposes, including the collection and application of certain moneys on the indebtedness owed by the defendant to the plaintiff; that a collection was made and the proceeds applied strictly in conformity with the authority thus conferred; and that that payment had the same legal effect with respect to the statute of limitations as if made by any other agent of the defendant duly authorized to make such a payment; (2) that a payment was actually made upon the account within the statutory period; that the defendant was advised of the payment and adopted it as a credit received during the statutory period to which the defendant was entitled; and that whether there had been any pre-existing agency or not, the adoption and acceptance of the credit by the defendant had the same legal effect as if the payment had been made directly by the defendant.

The theory of the defendant is, that the last act of the defendant, which may be relied upon by the plaintiff as a partial payment, “was the turning over by the defendant to the plaintiff the order for 24 Hein Knuckles, which occurred on or about July 3, 1909.”

In view of the contentions made, and in order to understand fully what was done by each of the parties to the transaction in question, it becomes necessary to recite somewhat in detail the history of the relations of the plaintiff — and its predecessor, the American Steel Castings Company — with the defendant; and that involves a series of letters that passed between them; entries in the books of the plaintiff and of those of the defendant; their methods of bookkeeping; the issuance of credit memoranda by the plaintiff to the defendant and the action of the defendant concerning them, and the testimony of certain witnesses.

The plaintiff, American Steel Foundries (and its predecessor, American Steel Castings Company), manufactured and dealt in steel castings. The defendant dealt in couplers and railway supplies prior to 1902, and had become greatly indebted to the American Steel Castings Company. Subsequently, some time prior to February, 1903, the plaintiff took the place of and became the assignee of the indebtedness due to the American Steel Castings Company, so that the suit here is in the name of the American Steel Foundries Company. After the assignment, the defendant dealt with the plaintiff and from time to time acknowledged the latter as its creditor.

The evidence shows that as early as June, 1902, the American Steel Castings Company, as a manufacturer, filled orders or contracts that were obtained by the defendant, and collected the proceeds of those orders, or contracts, from the purchasers, who were the defendant’s customers, and with the sanction and authority of the defendant applied parts of the amounts collected in reduction of the general indebtedness of the defendant to the plaintiff.

The following extracts from eighteen letters that were put in evidence show the way in which they dealt with each other, and, inferentially, their understanding as to their mutual conduct.

On June 3, 1902, the defendant wrote to the American Steel Castings Company as follows:

“We wired you today to ‘Invoice couplers direct to St. Paul Road. Full instructions by mail tonight, ’ and now beg to confirm same. We also enclose you authority from the railroad company to bill direct to them.

“Our contract with the Chicago, Milwaukee & St. Paul on these couplers is $18 per pair, f. o. b. Milwaukee. All other conditions regarding couplers are stated on the orders, except that the St. Paul Road has always discounted their bills at the rate of 2% for cash in 10 days, and on all existing orders will undoubtedly insist upon this condition.

“Will you please keep us thoroughly posted regarding the shipments so that we can be in touch with the St. Paul Road and keep them advised as to dates of inspection? Of course, in carrying out this arrangement it will not be necessary for us to keep an Inspector at your plant, but we take it for granted that you will keep us posted as to the tests which the couplers show and that the matter of testing will go on in the future as it has in the past.”

On June 3, 1902, the defendant wrote to the St. Paul road that, in order to save double accounting which had theretofore taken place between the manufacturers in the steel casting business and it, the defendant, it had “closed an arrangement with the American Steel Castings Company under which that company will hereafter invoice direct for all couplers manufactured by them for our account”; and that all bills relating thereto should thereafter be paid to the American Steel Castings Company.

On the same date, the St. Paul road wrote to the defendant announcing that the method of invoicing couplers as outlined would be satisfactory.

On June 9, 1902, the defendant wrote to the American Steel Castings Company,

“You are hereby authorized to bill against the Anglo-American Refrigerator Car Co. for 100 couplers on our order #17047 at $18.80, accounting to us for the difference between this and $13.75.”

On June 17,1902, the American Steel Castings Company wrote to the defendant that it was in receipt of certain orders which were addressed to the defendant, but that it would be necessary for it, the American Steel Castings Company, “before shipping these couplers to have authority from the Penn. Railroad Co. to invoice them direct, which you will note you have failed to furnish us. This authority is necessary in every instance when you send us orders of this kind and should be furnished in addition to your authority for so billing them.”

On the same date, the American Steel Castings Company wrote another letter to the defendant concerning another order, as follows:

“You understand that it will be necessary for us to have authority from Lexington & Eastern Co. to invoice the castings directed to them, and on any orders that you send us, you will kindly arrange that this authority is furnished.

“While you send us the Lexington & Eastern order, you will note that it is addressed to you, and really does not affect our position in any degree. We will, therefore, hold the matter in abeyance until we receive further advices, instructing us to invoice the castings direct to your customer.

“We will, of course, use your price in issuing these invoices.”

On January 15, 1903, the defendant wrote the plaintiff, suggesting that some plan might be devised whereby orders for parts of couplers “could be put up to your company direct, you billing and collecting for same as you do the couplers, crediting the account with the difference between the cost and selling price. * * * The only way we can fill the orders, as we have been doing is to have the knuckles from you shipped to Chicago and re-shipped from here.”

That letter contains the following:

“Under the contract Hein has with the Railroad Supply Co., regarding his patent, I presume if we should discontinue the selling of the malleable coupler he could insist upon the surrender of his patent, and cancel his contract with the company. I do not understand you have a malleable plant in your association to whom this business could be transferred. If you had, I should certainly recommend and advise you to arrange to make the malleable coupler at this plant letting us put the orders to you, and crediting us with the difference between the cost and selling price.”

On February 10, 1903, the defendant wrote the American Steel Foundries as follows:

“I find on my return to the city your letter of the 28th ult. enclosing a voucher covering unpaid bills due us from the Sargent Co. amounting to $262.03, with request that we receipt this voucher, return same to you, and you would place same to our credit on the books of the American Steel Castings Co.

“Under an agreement made by the American Steel Castings Co., the Illinois Steel Co. and the Pennsylvania Steel Co. these companies were to retain certain profits on goods manufactured by them which were to be billed and collected by these companies for our account, crediting to our account the difference between the purchase price and the amount for which the goods were sold. In other words, you were to retain the gross profits, applying same to liquidation of the account.' Under the arrangements under which the Illinois Steel, Pennsylvania Steel and your company are working, this bill should be paid by your company to us in cash. Mr. Daniel Eagan is thoroughly familiar with the arrangement under which we are working, and I think by referring the matter to him he will inform you that the account rendered against the Sargent Co. should be paid in cash to this company.

“I return herewith voucher with request that you send us remittance to cover same.”

On August 4, 1903, the defendant wrote the plaintiff that a certain statement of account which the plaintiff had sent to the defendant was correct, save that a certain credit for shipments made in April, May and June had not been given the defendant. That letter contains the following:

“As you sent us a credit memorandum dated July 10th, for $283.01, this difference was undoubtedly taken into your July account. Balance shown on our books due you on June 30th is $31,723.40. The credit memorandum referred to shows the difference between the two statements.”

On February 29, 1904, the defendant wrote the plaintiff that it expected materially to reduce its indebtedness to the plaintiff out of the profits made that year.

On May 10, 1906, the defendant wrote the plaintiff as follows:

“Replying to your letter of the 3d inst. and referring to your statement dated February 28, 1906, which you claim shows a balance of $20,843.87, beg to state our records show we have received invoices and statements from your company practically for the same amount.”

The next letter from the defendant to the American Steel Foundries Company is dated June 12, 1906, and is as follows:

“Below please find list of orders on which we have not received notice of shipment. The orders have, however, undoubtedly been filled, and in order to enable us to close our records would ask that you furnish copy of invoice covering each order, together with credit memorandum for our proportion.”

On December 31, 1907, the defendant wrote to the plaintiff, calling its attention to three different orders on which it stated it had not received credit memoranda covering its proportion, and requesting plaintiff to send credit memoranda at an early date to enable the defendant to close its records. Concerning the same matters, the defendant wrote again, January 16, 1908, stating that it had “not yet received credit memorandum” on account of those orders, and closed with the words, “Please favor us with credits covering these orders.”

On May 1,1908, the plaintiff wrote to the defendant, acknowledging the receipt of an order for 40 Hein Knuckles to be shipped to the Beid Newfoundland Company. That letter recites: “We will charge the Beid Newfoundland Co. 4^S per lb. F. O. B. our works, for this material and will credit your company with difference between this price and our price to you, viz: 3.30^ per lb. F. O. B. our works.”

On September 16, 1908, the plaintiff wrote to the defendant concerning another order, stating therein that it would invoice that particular merchandise at four cents per pound, “crediting you with the difference between this price and our price to you at 3^ per lb. F. O. B. our works, Indiana Harbor, Ind.”

On December 29, 1908, the plaintiff wrote the defendant, acknowledging receipt of another order, and stating the terms on which it would invoice the material to the purchaser, and that it would credit the account of the defendant with the difference in price.

On May 12, 1909, the plaintiff wrote the defendant, acknowledging the receipt of another order and stating that it was entering for prompt shipment, and “will hill material direct to yonr customer at a price of 4^ per lb. f. o. b. our works, Indiana Harbor, Ind., crediting your account with the difference between this price and our price to you at 3^ per pound, f. o. b. Indiana Harbor, Ind.”

On July 6, 1909, the plaintiff wrote to the defendant as follows:

“We beg to acknowledge receipt of your valued order of July 3, No. 22599, calling for 24 Hein Knuckles to be shipped to the Spokane, Portland & Seattle Ry. Co., their Order No. P — 3180.

“We will invoice this material direct to your customer at a price of 4-