Commonwealth v. Seagram Dis. Corp.

Full title: Commonwealth v. Seagram Distillers Corporation, Appellant

Court: Supreme Court of Pennsylvania

Date published: Nov 8, 1954

109 A.2d 184 (Pa. 1954)

109 A.2d 184

Opinion

October 6, 1954.

November 8, 1954.

Contracts — Oral contracts — Validity — Contract with State administrative agency — Pennsylvania Liquor Control Board — Statutory requirements — Contract for transportation and delivery of liquor — Restitution and unjust enrichment — Act of November 29, 1933, P. L. 13.

1. In matters of importance to the Pennsylvania Liquor Control Board it is necessary to comply with the requirements of § 3 of the Act of November 29, 1933, P. L. 13 (which provides that "two members of the Board shall constitute a quorum, and any action or order of the Board shall require the approval of at least two members") by having formal action taken at a duly constituted Board meeting. [415-17]

2. Where it appeared that representatives of the Liquor Control Board entered into an oral agreement pertaining to the transportation and delivery of liquor in the Pittsburgh district at a time when the Board was under a contract with another company for the storage, handling and delivery of the Board's various brands of liquor in the Pittsburgh district, it was Held that the oral agreement involved a matter of such importance that it required the attention and action of the Board, in accordance with the requirements of § 3 of the Act of 1933 and that the oral agreement was in contravention of the provisions of that section and invalid. [412-21]

3. Where a statute provides that a contract by a governmental agency shall be executed in a particular manner, the method prescribed by the statute must be pursued in order to have a binding contract. [416-17]

4. Persons contracting with a governmental agency must, at their peril, know the extent of the power of its officers making the contract. [417]

5. Where official action of an administrative board is required by statute, there can be no quasi contract recovery if the requisite statutory provisions have not been complied with. [419]

6. In a suit brought against an administrative agency of the Commonwealth, the doctrine of unjust enrichment does not extend to benefits which by their very nature cannot be surrendered and the retention of which is involuntary. [419-20]

Argued October 6, 1954. Before STERN, C. J., STEARNE, JONES, CHIDSEY, MUSMANNO and ARNOLD, JJ.

Appeal, No. 11, May T., 1953, from judgment of Court of Common Pleas of Dauphin County, Commonwealth Docket, 1951, No. 169, in case of Commonwealth of Pennsylvania v. Seagram Distillers Corporation. Judgment affirmed.

Appeal by claimant from decision of Board of Finance and Revenue refusing petition for review of claim for expenses in distribution of whiskey. Before SMITH, NEELY, SOHN, KREIDER and RICHARDS, JJ., opinion by NEELY, J.

Appeal dismissed and judgment entered for Commonwealth. Defendant appealed.

The facts are stated in the opinion, by NEELY, J., of the court below, as follows:

This matter comes before the Court upon appeal by Seagram Distillers Corporation, a Delaware corporation, hereinafter referred to as claimant, from the decision of the Board of Finance and Revenue of the Commonwealth of Pennsylvania, refusing to review the order of the Auditor General and State Treasurer, constituting the Board of General Claims. The procedure in this case is under and pursuant to the provisions of the Act of March 30, 1811, P. L. 145 (5 Sm. L. 228) and The Fiscal Code of April 9, 1929, P. L. 343, as amended, 72 PS 1, et seq.¹

1 The procedure is set forth in §§ 405, 1003, 1004, 1102, 1103 and 1104 of The Fiscal Code. For a discussion and review of these applicable provisions of The Fiscal Code and of the Act of 1811 as well, see Merchants' Warehouse Company v. Gelder et al., 349 Pa. 1, 4 (1944), and Lowry v. Commonwealth, 365 Pa. 474, 478 (1950).

On May 26, 1948 Seagram filed with the said Board of General Claims its claim against the Commonwealth of Pennsylvania for reimbursement of transportation costs which it paid to the Tobin Transfer Company, a common carrier by motor vehicles in Pittsburgh, hereinafter referred to as Tobin, for making direct store deliveries of claimant's Kessler brand of whiskey in the Pittsburgh district from November, 1938 to October 10, 1942. The claimant maintains that the deliveries were made pursuant to a parol agreement between its representatives and the Director of Operations of the Pennsylvania Liquor Control Board and his assistant, whereby it was agreed that the Board should pay for those deliveries. To this claim the Board filed an answer denying that the Board entered into such agreement, and further denying the authority of its Director of Operations and his assistant to enter into any agreement for the local transportation of liquor.

Upon the issue so framed, the Board of General Claims, on January 26, 1951 filed an opinion dismissing the claim. Claimant's petition for resettlement was refused by these same officials on March 15, 1951, and on May 17 the Board of Finance and Revenue refused claimant's petition for a review of the decision of the Board of General Claims and dismissed the claim for transportation charges. Whereupon, the claimant prosecuted its appeal to this Court.

The case was tried by the Court without a jury under the Act of April 22, 1874, P. L. 109, 12 PS 688, pursuant to a stipulation filed. Testimony was taken at the trial. We have answered claimant's (appellant's) requests for findings of fact and conclusions of law, and our answers are filed separately herewith. Those facts essential to a consideration of the issues involved are fully set forth in our discussion.

Discussion

In the year 1938 Arthur G. Stevens and Frank C. Rutter were the Director of Operations and Assistant Director of Operations respectively for the Pennsylvania Liquor Control Board. In the fall of 1938 Stevens entered into an oral agreement with certain representatives of the claimant, whereby claimant's Kessler brand of whiskey purchased by the Board was to be shipped by claimant to Tobin and delivered by Tobin to the Pennsylvania Liquor Stores in the Pittsburgh district.

Under the oral agreement claimant was to pay Tobin for all transportation and delivery charges and submit invoices covering these charges to the Board for reimbursement. There was a written contract in force at the time between the Board and Try Street Terminal of Pittsburgh for the storage, handling and delivery of the Board's liquors in the Pittsburgh district. And under the oral agreement involved in this case, it was provided that Tobin's charges were to be at the same rate that was effective under that written contract.

Pursuant to the oral agreement, claimant during the period November, 1938 to October 10, 1942 shipped its Kessler brand of whiskey to Tobin in Pittsburgh who delivered the same to the Board's stores in the Pittsburgh district. Tobin was paid for such deliveries by the claimant at the rate set forth in the written agreement at that time in effect between the Board and the Try Street Terminal.

No invoices covering the payments to Tobin were transmitted or furnished by the claimant to the Board at any time during the years, 1938 to 1942 when the whiskey was delivered. Neither the Board nor its Comptroller, who always as a matter of practice received copies of any agreements by the Board involving the payment of money, had any knowledge of the oral agreement here in question, or of any claim against the Board by reason thereof until December 13, 1946 when invoices totaling over $96,000.00 were received by the Board from the claimant. The claimant explained the delay in submitting these invoices by stating that the methods employed in keeping claimant's accounts resulted in the delayed discovery that the Board had not been billed for these transportation costs. * * *

The Pennsylvania Liquor Control Board is an independent Administrative Board of the Commonwealth consisting of three members created and now constituted by the Act of November 29, 1933, P. L. 13, 47 PS 744-901, et seq., as amended. Under § 3 of the Act, 47 PS 744-903, it is provided, inter alia: "Two members of the board shall constitute a quorum, and any action or order of the board shall require the approval of at least two members."

In Merchants' Warehouse Company v. Hitchler et al., 335 Pa. 465 (1939), it was recognized by the Supreme Court that in matters of importance to the Board it is necessary to comply with the requirements of § 3 by having formal action taken at a duly constituted Board meeting. It is also recognized in the Merchants' case that it is customary for the Board in certain areas to take formal action in the execution of contracts for the storage and transportation of liquors. In view of the fact that the Board was under a contract with Try Street Terminal of Pittsburgh for the storage, handling and delivery of the Board's various brands of liquor in the Pittsburgh district, any agreement involving the same area that might affect in any way the Board's liabilities or responsibilities under this existing contract must be considered as a matter of importance.

In urban areas, such as Pittsburgh and Philadelphia, these contracts involve large sums of money. It is manifestly important in the interest of certainty that such contracts should be entered into the records of the Board and approved by formal action taken with respect thereto. We think that in a matter such as this, involving an agreement affecting an area already covered by a written storage and transportation agreement, Board action at a duly constituted meeting would be required.

The certainty that results from such Board action operates as a protection not only to the Board but to the other contracting party as well. Had this arrangement involving Tobin and the claimant been formalized by written contract, duly approved by the Board as required by statute, and brought to the attention of the Comptroller in accordance with the practice of the Board, it is inconceivable that this matter would have languished for approximately eight years without having been brought to the attention of any of the responsible parties.

In our opinion, this oral agreement pertaining to the transportation and delivery of liquor in the Pittsburgh district at this particular time involved a matter of such importance that it required the attention and action of the Board, in accordance with the requirements of § 3 of the Act of 1933. And in our view, the oral agreement made by the Board's Director of Operations and his assistant was in contravention of the provisions of that Section.

It has been held that where a statute provides that a contract by a governmental agency shall be executed in a particular manner, then in order to constitute a binding contract upon that agency, the method prescribed by the statute must be pursued: Luzerne Township v. Fayette County, 330 Pa. 247, 251, 252 (1938); also see Kuhn v. Commonwealth, 291 Pa. 497 (1928); Coyle v. Pittsburgh, 344 Pa. 426, 428 (1942); Willis Bancroft, Inc. v. Millcreek Township, 335 Pa. 529, 536 (1939); Commonwealth ex rel. v. Jones, 283 Pa. 582, 586, 587 (1925). In the foregoing cases, the Supreme Court held contracts to be invalid where the statutory requirements were not complied with in the matter of their execution. We feel that the same principles are involved in the instant case with respect to an oral agreement executed with the Board's subordinates, contrary to the requirements of the applicable statute. And it is therefore our conclusion that the oral agreement must be considered invalid.

It was incumbent upon the representatives of Seagram to ascertain the extent of the authority of the Director of Operations to bind the Board by any oral agreement. That oral agreement, in our judgment, must be considered as having been made without statutory authority and is therefore of no effect. In Charleroi Lumber Company v. Bentleyville Borough School District, 334 Pa. 424, 433 (1939), the Supreme Court said: ". . . Persons contracting with a governmental agency must, at their peril, know the extent of the power of its officers making the contract." See also Commonwealth v. Sanderson, 40 Pa. Super. 416, 451 (1909).

In its specifications of objections in support of its appeal in this Court, claimant sets forth that the Board has accepted all the benefits of the oral contract, has been unjustly enriched in the amount of $91,332.86, and that therefore the Board is liable to the claimant in that amount on "the theory of quantum meruit or quasi contract." The specifications also claim that the Board had sufficient knowledge and took sufficient action concerning this transaction to make a valid claim against the Commonwealth.

We cannot accept this contention of the claimant under all of the evidence in this case. Two members of the Board, Messrs. Gelder and Hitchler, denied any knowledge of the arrangement whatsoever. The only other living member of the Board, Mr. Brooks, testified that he did not have any recollection concerning the matter. In our judgment, the evidence is insufficient to establish knowledge on the part of Brooks of this transaction. And we think the evidence is clearly insufficient to show that the Board had any such knowledge.²

2 In addition to the members above named, Messrs. Rial and Wagner, now deceased, also served on the Board during the period of time when these transactions took place.

It is shown that when the various members of the Board placed orders for liquor, the purchase orders contained the notation "Pittsburgh District Stores per Distribution Sheet". The preparation of the distribution sheets under the testimony was a matter for the attention of the Director of Operations. The testimony of both Messrs. Gelder and Hitchler was to the effect that they had no knowledge concerning the distribution after the orders were placed. It is indicated that a copy of the distribution sheet was sent to Tobin. It clearly appears from the evidence that no knowledge was had by the Board of these transactions involving Tobin until the first invoice was presented to the Board nearly eight years after the first consignment of liquor moved. In these circumstances, we do not believe that it can be said that the Board had knowledge or took action concerning the transactions in question.

There are serious legal objections to claimant's recovery in this case on the theory of quantum meruit or quasi contract as set forth in its specifications of objections. It has been held that if official action of an administrative board is required by statute, there can be no quasi contract recovery if the requisite statutory provisions have not been complied with: Price et al. v. Taylor Borough School District et al., 157 Pa. Super. 188, 194 (1945). The reason for this rule is well stated In re Appeal of Sykesville Borough, 91 Pa. Super. 335, 341 (1927), as follows: ". . . 'Regular official action, evidenced by official minutes, is what the statute requires to ground such an action as the present, and because it is a statutory requisition, all equities and implied liabilities are excluded: . . . .' " Willis v. York County Directors of the Poor, 284 Pa. 138, 142 (1925).

We have reached the conclusion here that in order to effect a binding contract for the storage, handling and transportation of liquor in the Pittsburgh district during the time involved herein, official action by the Pennsylvania Liquor Control Board was required under the statute. And under the authority of the above cases, there can be no quasi contract recovery if the requirements of the statutory provisions have not been met.

There is another principle which excludes the claimant's claim in this case in quasi contract. It has been held by the Supreme Court that in an action brought against a political subdivision, the doctrine of quasi contract does not extend to benefits which by their very nature cannot be surrendered, and the retention of which is therefore involuntary: Luzerne Township v. Fayette County, supra; Coyle v. Pittsburgh, supra; Charleroi Lumber Company v. Bentleyville Borough School District, supra. We think this same rule has application to a claim being presented against the Commonwealth on account of a contract affecting one of its administrative agencies.

The Supreme Court's language in the Coyle case is particularly apposite in the matter now before us. We quote from the Court's per curiam opinion at page 428: "As to the contention that, even though the oral contract of employment be invalid for failure to meet the requirements of the Act of 1901, 'justice and fairness still compel a determination that the city is indebted to appellant for his services on the theory of quasi-contract,' it is sufficient to point out that where, as here, the benefits conferred upon the municipality pursuant to an invalid contract are such that by their very nature they cannot be surrendered, at its option, no implied obligation on the part of the municipality to make compensatory payment can possibly arise."

Any benefits that were conferred upon the Board in this case were such that by their very nature could not have been surrendered. They were benefits therefore which the Board involuntarily received. Arguendo, it may be doubtful whether the Board could have accepted any benefits knowingly under this oral agreement without rendering itself liable for breach of contract on account of its outstanding written agreement with Try Street Terminal.

In balancing the existing equities which the claimant maintains are in its favor, we must bear in mind the fact that Seagram did not press its claim during the entire period of time when these transportation services were being rendered, and did not therefore give the Board any opportunity to accept or refuse such services. And we must consider also the fact that under the oral agreement, any benefits conferred must have been received by the Board involuntarily. The indefinite duration of the contract and the ignorance of its existence for many years is an element for our consideration on the question of the equities in this case. And the responsibility of the Board under its outstanding existing contract with Try Street Terminal also goes to the inherent equities in this situation. In any event, the existing equities in our opinion are not sufficient to recover on quasi contract against the Commonwealth: In re Appeal of Sykesville Borough, supra; Charleroi Lumber Company, supra; Willis v. York County Directors of the Poor, supra. * * *

W. S. Storey, with him Storey, Bailey Rupp, and J. Paul Rupp and John B. Pearson, for appellant.

Horace A. Segelbaum, Deputy Attorney General, with him Frank F. Truscott, Attorney General, for appellee.

OPINION PER CURIAM, November 8, 1954:

The judgment of the court below is affirmed on the opinion of Judge NEELY.