Court Opinion

ID: 8816039
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:19:07.313359+00
Date Added: 2024-06-11T17:04:28.468947
License: Public Domain

STONE, Circuit Judge
(dissenting). As stated by Judge SAN-BORN, I cannot agree with the majority upon the second question discussed. This question belongs in the law o f contracts, and is whether the Cudahy Company has given sufficient legal grounds to discharge the Soap Company from further performance o‘f the contract. If the Cudahy Company has committed such a breach of the contract as will materially affect its further performance of its obligations under the contract, the Soap Company may terminate its own future obligations thereunder. Concerning breaches of contract, Elliott, in his recent work on Contracts (section 2025) says:
*“Tlie broach may occur in any one of three ways: Tlie party may renounce his liability under the contract, or he may by his own act make it impossible for him to fulfill his liabilities under the contract, or he may totally or par-tally fail to perform his promise.”
We are here concerned with the two first of these methods. Concerning these he says, in the same section:
“The first two forms of breach may take place while the contract is still executory and before performance can legally be demanded. * * * The effect oi: a breach of a contract by one party is to excuse performance by the other, and generally, but not always, to discharge the contract.”
It is here claimed that the Cudahy Company both renounced the contract and also voluntarily rendered itself incapable of further performance.- Since both parties waived jury and requested peremptory findings, the court can examine only such facts as are undisputed, or proven beyond controversy, and draw therefrom only such inferences favorable to the Soap Company as necessarily follow. However, we are not bound by any results or findings not supported by the evidence. Fortunately the essential facts are undisputed. They are: That during course of performance of a contract for sale to the Cudahy Company upon credit it deeded, assigned, and transferred all of its assets, real, personal, and mixed, including all “rights,” its “good will, and -going business,” to another company; that such assets, etc., went, subject to all of the debts “undertakings, liabilities and obligations, whatsoever, of grantor, * * * which said debts, undertakings, liabilities, and 'obligations of grantor, grantee hereby assumes and agrees to discharge, pay, carry out, and in all things perform, and to save grantor forever harmless therefrom.” All of the capital stock of the Cudahy Company was also transferred to the other company. The entire consideration for all of the above was shares of stock in the other company. No part of this stock was paid into the treasury of the Cudahy Company, but was issued and de*114livered to the former stockholders thereof, as their own property. I find no evidence of action by plaintiff since his transfer, except this one transaction here involved. When the transaction was completed the situation was that the Cudahy Company, which had been a large and prosperous going .concern with something like $38,000,-000 of varied assets, had absolutely nothing, had ceased active business, with its complete control, represented by all of its capital stbck, in the hands of the purchasing company. All of this was the necessary result of its own voluntary acts.
Do such acts amount to a renunciation or disabling for further performance under the contract? That the Cudahy Company intended to transfer the benefit of this contract seems certain to me. That it also-expected its grantee to assume performance of all its obligations thereunder, and to hold it harmless for any injury through failure to do so, seems plain. Whether it intended that a total assignment of the contract, rights, and obligations should be taken as an expression of its intention absolutely to cease further performance on its part does not necessarily follow from the sole circumstance of the assignment of the entire contract. A party to a contract might assign it with the hope that the other contracting party would accept the assignee in his place, and yet' have no intention of renouncing or escaping his obligations under, the contract, if the other party refused to accept the assignee. At the same time, an assignment might be under such circumstances as to clearly evidence renunciation of the contract, or it might be one of a set of facts which as a whole show such renunciation. The circumstances under which this contract was assigned, or the set of facts of which this assignment was one, are that this contract was part of a large transaction which was intended to, and did, have the effect of transferring the entire business 'and assets of the Cudahy Company leaving it penniless and in complete control of the transferee. It was left an empty corporate shell, incapable of action of any sort, except as its assignee willed, with no power to, or property from which, to meet its obligations, including those under this contract, except as the assignee, or some volunteer, with the assignee’s consent might come to its aid. Such a puny, helpless creature bears no resemblance to the powerful, rich company with which, and upon the credit of which, the Soap Company contracted and assumed obligations. This change had been voluntarily wrought by the Cudahy Company. In my judgment, an assignment of a contract, under circumstances totally impairing the assignee’s ability to further perform,' is conclusive proof that it had no intention of further performing.
But, aside from a theory of renunciation, there clearly is revealed a voluntary deprivation of all power to perform or pay. To my mind it is no answer to say that this was a question of fact on opposing evidence; there was no opposing evidence. It is said that the evidence establishes that the glycerine was worth much more, than the contract price, and therefore the purchaser could resell it within the 30 days of credit, and out of the proceeds pay the seller. This was a credit transaction, and the credit upon which the sale was made, and *115upon which the rule of law is founded, has no reference to the value of the goods delivered by the seller under such credit sale. No man relies for payment upon the value of the goods he is delivering in a sale. Such is no part of the basis of credit for the sale. What guaranty in law fact has the seller that the buyer will respond for any portion of the higher price for which he (the buyer) may resell the glycerine, or even that he will resell it, or resell within the 30 days of credit? Or what assurance that the glycerine, or its proceeds, if resold, would not be seized upon by, some creditor of the buyer, or consumed by the buyer itself? Commercial -credits rest in no case upon such shadowy and shifting foundations.
Another position is that actual legal tender was made of the amount due, and that the legal presumption is that the money tendered belonged to plaintiff. I know of no such legal presumption; but, if there is such, the testimony, undisputed, shows beyond peradventure of doubt that such was not the fact here. This company had parted with every penny of its property, and it could not have had any money of its own to offer. It is crystal clear that the money offered was that of the assignee, who desired to take advantage of the contract, and in no sense that of the plaintiff. This bogus solvency, useful in taking hold of advantageous contracts, and nonexistent where the contract is otherwise, was condemned by Judge Thayer, formerly of this court, when he was on the Missouri state circuit, and that attitude affirmed on appeal. Boykin v. Campbell, 9 Mo. App. 495. It seems to me that, if this position and the preceding one are well taken, then a hopelessly insolvent buyer can always demand performance where it is advantageous to him to have performance, because he can always say to the seller, “The value of the goods you deliver is more than the contract price,” or he can say, “I have, or I will have, by pay day, the amount due therefor.” In my judgment this emasculates, if it does not effectively eliminate, the rule of law that voluntary inability to pay after execution of sales contract excuses delivery, following such inability. Another position is that the large assets of the plaintiff went to the assignee, under a contract expressly making such assets subject to the liabilities and obligations of the plaintiff. Without this provision, the law would have presumed and executed such a trust. But such a conveyance of total assets is a renunciation of the contract, and entitles the seller to treat it as such. In Lovell v. Insurance Co., 111 U. S. 264, 273, 274, 4 Sup. Ct. 390, 395 (28 L. Ed. 423), the court said:
“The assignment of all of its assets by tbo old company to the new one, upon the consideration of its obligations being assumed by the new company, is somewhat analogous to an assignment of property by a debtor for the benefit of his creditor's, in which only those creditors who are preferred, or those who choose to come in and participate in the fund assigned, receive any benefit, whilst those who refuse to come in take no benefit, preferring to retain their claim against the debtor. * * * Our third conclusion is that, as the old company totally abandoned the performance of its contract with the complainant, by transferring all its assets and obligations to the new company, and as the contract is executory in its nature, the complainant had a right to consider it as determined by the act of the company, and to demand what was justly due to him in that exigency. Of this we think there can be no doubt. *116Where one party to an executory contract prevents the performance of it, or puts it out of his own power to perform it, the other party may regard it as ■terminated and demand whatever damage he has sustained thereby.”
Expressions on page 272 of this same case are closely applicable to the instant case. Central Trust Co. v. Chicago Auditorium, 240 U. S. 581, 36 Sup. Ct. 412, 60 L. Ed. 811, L. R. A. 1917B, 580, is also in point in its reasoning. On page 591 of 240 U. S., on page 415 of 36 Sup. Ct. (60 L. Ed. 811, L. R. A. 1917B, 580) the court •says:
“Commercial credits are, to a large extent, based upon the reasonable expectation that pending contracts of acknowledged validity will be performed in due course ,* and the same principle that entitles the promisee to continued willingness entitles him to continued ability on, the part of the promisor. In -■short, it must be deemed an implied term of every contract that the promisor will not permit himself, through insolvency or acts of bankruptcy, to be ■dis'abled from making performance; and, in this view, bankruptcy proceedings .are but the natural and legal consequence of something done or omitted to be ■done by the bankrupt, in violation of his engagement.”
Neither insolvency nor bankruptcy could more effectually disable to perform than to strip a company of-its business and all of its assets, and place its complete control in the hands of its assignee, as was here done. The above decisions are controlling, and seem to me applicable-to the situation here presented. Cases dealing with assignments of property, or rights therein, are not helpful here, because this is a pure question of what constitutes a -renunciation or breach of a contract. The basis of those decisions is different,-as set out in Galbraith v. Payne, 12 N. D. 164, at 171, 96 N. W. 258. I think this total assignment, which not only stripped this plaintiff of all of its assets, but distributed the proceeds therefrom among the stockholders, leaving this plaintiff a mere shell, with’even its capital stock in control of its assignee, was, within the above United States Supreme Court ■decisions, a renunciation of the contract of purchase, and such a breach .as entitled the seller to refuse further performance.
Therefore I conclude that the judgment should be reversed.