Case Name: KANSAS CITY SOAP CO. v. ILLINOIS CUDAHY PACKING CO.
Court: United States Court of Appeals for the Eighth Circuit
Jurisdiction: United States
Decision Date: 1920-03-27
Citations: 265 F. 108
Docket Number: No. 5173
Parties: KANSAS CITY SOAP CO. v. ILLINOIS CUDAHY PACKING CO.*
Judges: 
Reporter: Federal Reporter
Volume: 265
Pages: 108–116

Head Matter:
KANSAS CITY SOAP CO. v. ILLINOIS CUDAHY PACKING CO.*
(Circuit Court of Appeals, Eighth Circuit.
March 27, 1920.)
No. 5173.
1. Corporations <£=^577 — May enforce contract after transfer of property to reorganized company.
A corporation which, after, making a contract for the purchase of merchandise on a term of credit, pursuant to a plan of reorganization, conveyed all of its property to the new corporation, subject to all its debts, undertakings, liabilities, and obligations, which were assumed by the new company, did not thereby, without the consent of the other party, become released from the obligation of its contract, nor divest itself of the right to enforce the same, and may maintain an action for its breach. (Elliott, District Judge, dissenting.)
2. Corporations <^>577 — Transfer of all property by corporation not breach of executory contract.
That plaintiff corporation, after making a contract with defendant for the purchase of merchandise on credit, pursuant to a plan of reorganization, conveyed all of its property to a new corporation, subject to all its debts, undertakings, liabilities, and obligations, which were assumed by the new company, hold not to have deprived it of the right to enforce performance of the contract or to recover damages for its breach, especially where it 'tendered to defendant the contract price. (Stone, Circuit Judge, dissenting.)
3. Appeal and error <S^997 (3) —Directed verdict, when asked by both parties, reviewable only for want of any evidence.
Where both parties move for directed verdict, neither can assail the finding made on any other ground than that there was no substantial evidence to sustain it.
<§rs>For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes
In Error to the District Court of the United States for the District of Kansas; John C. Pollock, Judge.
Action by the Illinois Cudahy Packing Company against the Kansas City Soap Company. Judgment for plaintiff (247 Fed. 556), and defendant brings error.
Affirmed.
Eldridge H. Henning, of Kansas City, Mo. (J. PI. Brady, of Kansas City, Kan., on the brief), for plaintiff in error.
Don Kenneth Jones, of Chicago, 111. (George T. Buckingham, of Chicago, 111., and O. Q. Claflin, of Kansas City, Kan., on the brief), for defendant in error.
Before SANBORN and STONE, Circuit Judges, and ELEIOTT, District' Judge.

Opinion:
SANBORN, Circuit Judge.
On September 30, 1915, the Kansas City Soap Company, a corporation of the state of Kansas and the defendant below, made a contract with the Illinois Cudahy Packing Company, the plaintiff, to sell and deliver to the latter for prices specified therein, on a credit of 30 days from the respective dates of the invoices, 90 drums of glycerine. The defendant delivered, and the plaintiff paid for, 54 drums. Then the defendant refused to deliver the remaining 36 drums because, pursuant to a scheme of rer organization of the plaintiff, whereby those entitled to stock in that corporation took, for their stock, stock in the Cudahy Packing Company of the State of Maine, a new corporation, and the plaintiff made a written assignment of all its personal property and-a conveyance of all its real estate, which together were worth about $38,000,-000, to the Maine corporation—
"subject to all the debts, undertakings, liabilities, and obligations whatsoever oí grantor, heretofore existing and to exist on October 31, A. £>. 1915, which said debts undertakings, liabilities, and obligations of grantor grantee hereby assumes and agrees to discharge, pay, carry out, and in all things perform."
The plaintiff never notified the defendant of this assignment or conveyance, never ordered or requested it to deliver the 36 drums to the Maine corporation, never refused to perform its part of its contract with the defendant, and after October, 1915, it continued to do business about the liquidation of its obligations and the performance of its contracts entered into prior to that date personal to it, so far as this was necessary for the discharge of its duties and obligations. On March 8, 1917, it made a legal tender to the defendant of the contract price of the 36 drums of glycerine and demanded their delivery. The defendant refused to deliver any of them. The plaintiff thereupon brought this action for the damages which it sustained by the defendant's breach of contract. At the trial the parties stipulated the amount of the damages, if any, and each party moved the court for a directed verdict in its favor, and the court thereupon directed a verdict and rendered a judgment for the plaintiff for $7..172.94 and interest from March 16, 1917.
Two questions, and two only, are presented to this court for decision. They are: Did the general assignment of its property to the Maine corporation by the plaintiff divest the latter of its interest in its contract with the soap company, so that it is not the real party in interest in this action against the defendant for its refusal to perform its contract? And, if the plaintiff is the real party in interest in this action to recover the damages caused by the defendant's failure to perform its contract, did the plaintiff lose its right to recover these damages because it made an assignment of all its property to the Maine corporation subject to all its debts, liabilities, and obligations, which the Maine company assumed, in view of the facts that the plaintiff did not notify the defendant of its assignment or order or request it to deliver any of the glycerine to the Maine company, that it never refused to perform its part of the contract, that after October, 1915, it continued to do business relative to the performance of its contracts and the liquidation of its obligations and that it tendered full pay ment of the purchase price of the 36 drums of glycerine to the defendant and demanded their delivery to it pursuant to the contract of sale? The court below answered the first question in the affirmative, and the second in the negative, and rendered a judgment for the plaintiff.
This is an action at law, and the judgment below) may not be lawfully reversed, unless the court below was in error in its answer to at least one of these questions. The majority of the court have reached the conclusion, from which Judge ELLIOTT dissents, that the answer of the court below to the first question was correct, and that the plaintiff is the real party in interest in this action. These are some of the considerations 'which have led the majority of the court to this result: This was an executory contract for the sale of personal property on credit, which was partially performed when the plaintiff made its assignment and conveyance to the Maine company. Without the consent of the defendant, and it never consented, it was beyond the power of the plaintiff, and beyond the power of the plaintiff and the Maine company together, under the law, to substitute the Maine company for the plaintiff in the contract with the defendant as the purchaser and delivered of the- glycerine, or to vest in that company any right 6r interest in the contract or in its performance. National Bank v. Hall, 101 U. S. 43, 50, 25 L. Ed. 822; Equitable Life Assurance Society v. McElroy et al., 83 Fed. 631, 641, 28 C. C. A. 365, 375.
While the consent of the defendant would have effected an assignment of the interest of the plaintiff, and vested the right to the performance of the contract in the Maine company, the written assignment of it was void, and the contract was unassignable under the law without it. Without such an assent of the other contracting party, the paper assignor of such a contract remains liable to the former for the performance of his covenants therein. Illinois Car & Equipment Co. v. Linstroth Wagon Co., 112 Fed. 737, 741, 50 C. C. A. 504, 508; Lovell v. St. Louis Mutual Life Ins. Co., 111 U. S. 264, 274, 275, 4 Sup. Ct. 390, 28 L. Ed. 423. Without such assent of' the other contracting party, the paper assignee of such a contract has no interest in it, and cannot maintain an action for a breach of it. Arkansas Valley Smelting Co. v. Belden Mining Co., 127 U. S. 379, 380, 381, 387, 388, 8 Sup. Ct. 1308, 32 L. Ed. 246; Boston Ice Co. v. Potter, 123 Mass. 28, 30, 31, 25 Am. Rep. 9, where the defendant contracted with the Citizens' Ice Company to furnish him with ice. During the delivery of the ice under the contract the Citizens' Company sold out to the Boston Ice Company, which continued the delivery until the defendant discovered that the Boston Ice Company was delivering the ice to him, when he refused to pay for that which had been delivered by it. The Boston Company sued him for the price of the ice it had delivered pursuant to the contract. The court held that he was not liable to the Boston Ice Company, because it had never become a party to the contract' with him. Lansden et al. v. McCarthy, 45 Mo. 106, 107; Joseph Dixon Crucible Co. v. Paul, 167 Fed. 784, 787, 788, 93 C. C. A. 204, 205, 208; Nation al Bank v. Hall, 101 U. S. 43, 50, 25 L. Ed. 822; Hardy Implement Co. v. South Bend Iron Works, 129 Mo. 222, 228, 229, 31 S. W. 599; Watterson v. Webb, 4 La. Ann. 174.
And without such an assent of the other contracting party an assignor, in such a paper assignment of an unassignable contract, claim or title, does not lose his right in or title to the contract by his futile attempt to assign it, but retains his right and title to it, and is the real party in interest in án action to enforce it or to recover damages for a breach of it. Galbraith v. Payne, 12 N. D. 164, 172, 96 N. W. 258, and cases there cited; McLeland v. St. Louis Transit Co., 105 Mo. App. 473, 80 S. W. 30, 31; New Orleans Gaslight Co. v. Webb, 7 La. Ann. 164. As the majority of this court are of the opinion that the trial court committed no error in its answer to the first question, the judgment below may not be reversed on account of that ruling.
Did the real party in interest in this action, and in the contract on which it is based, the plaintiff, lose its right to recover the actual damages which it sustained by the defendant's breach of the agreement, because it made the assignment and conveyance of its property, subject to its debts and liabilities, to the Maine company, which assumed and agreed to pay them, in view of the facts that it tendered full payment of the contract price for the glycerine, never failed or refused to perform its part of that contract, never notified the defendant of the assignment or conveyance, and never requested it to deliver the glycerine to the Maine company, or to accept that company in its place as the purchaser in the contract? The court below answered this question in the negative,- and the majority of this court are of the opinion that its answer was right, a conclusion from which Judge STONE dissents.
The ground on which counsel for the defendant base their conclusion that this question should have been answered in the affirmative is, as stated in their answer, that by the assignment and conveyance of its assets in October, 1915, the plaintiff stripped itself of all property whatsoever, so that the—
"plaintiff from and since the said 14th day of October, 1915, has not boon solvent or a going concern, and at no time since the said 14th day oC October, 1915, has plaintiff been able to accept deliveries under the said contract or to pay for the same."
Conceding that if, after the assignment of October, 1915, the plaintiff had been without means and ability to pay for the 36 drums of glycerine still due from the defendant according to the terms of the contract, the latter might have been released from its liability to deliver them, the majority of the court are of the opinion that the defendant was not released for these reasons:
Whether or not the plaintiff was so stripped of its property by the assignment and conveyance that it was insolvent, and could not accept and pay for the 36 drums of glycerine, after October, 1915, was a question of fact, determinable by the stipulations, and admissions of the defendant and the evidence in the record. That evidence is, as has already been shown, that without the consent of the defendant, which never was given, the right to the receipt and delivery of these 36 drums of glycerine at the contract price was not and could not be assigned or transferred to the Maine company, and that this right remained in the plaintiff notwithstanding the assignment and conveyance. The evidence and the admission of the defendant establish the fact that, owing' .to the advance in the market value of glycerine, this right, to these 36 drums of glycerine was worth $7,172.94 more than their contract price. The contract required the- defendant to deliver them to the plaintiff on a credit of 30 days. If it had so delivered them at any time after October, 1915, the plaintiff could have sold them within the 30 days for a much larger sum than the contract price, and with the proceeds could have paid, and the legal presumption is that it would have paid, to the defendant the contract price for them. Again, the evidence and the admissions of the defendant established the fact that, even without the delivery of this glycerjne to the plaintiff 30 days before payment for it, to which it was entitled, the plaintiff not only had the ability to pay for it, but.it actually had in legal tender and offered to pay to the defendant the full purchase price of these 36 drums, and the defendant refused to accept it. The legal presumption is' that this money was the plaintiff's, and there is no evidence to the contrary.
Moreover, under tire express terms of the assignment to the Maine company, that company took, accepted,, and held in trust the $38,-' 000,000 of property, subject to all the liabilities and obligations of the plaintiff, and-hence subject, among other liabilities, to the plaintiff's liability under the contract with the defendant, so thát under the assignment, and under familiar rules -and principles of law, that $38,000,000 of property at the instance of the plaintiff, or, at the instance of the defendant upon delivery of the glycerine, was applicable to- the payment of the purchase price therefor. In view of the evidence and the admissions of the defendant, to which reference has now been made, it is believed, not only that the defendant failed to establish its claim that the plaintiff was insolvent and that it was without ability to pay for these 36 drums of glycerine after October, 1915, but also that the contrary was clearly proved at the trial of this case.
Not only this, but at the close of the trial each party requested the trial court to instruct the jury to return a verdict in its favor, and the court directed a verdict in favor of the plaintiff. That verdict could not have been directed by the court without its having first considered and found that the plaintiff had not so stripped itself of its property-that it was insolvent and unable to pay for the 36 drums of glycerine subsequent to October, 1915, and the memorandum of the trial court in "the'transcript in the case shows that this was its conclusion. The defendant, by its request.for an instructed verdict in its favor, was estopped-from assailing that finding upon any other ground than that there was- no substantial evidence to sustain it (United States v. Bishop, 125 Fed. 181, 183, 60 C. C. A. 123, 125; Phenix Ins. Co. v. Kerr, 129 Fed. 723, 724, 64 C. C. A. 251, 252), and the evidence and admissions recited above have convinced that there was such evidence in support of that finding.
As the majority of this court are of the opinion that there was no error in the answer of the court below to the second question, there may not lawfully be a reversal of the judgment on account of that ruling, and the judgment below must be affirmed. It is so ordered.
Rehearing denied August 7, 1920.