Continental Collieries v. Shober

Decision Date14 September 1942
Docket NumberNo. 7925.,7925.
Citation130 F.2d 631
PartiesCONTINENTAL COLLIERIES, Inc., v. SHOBER, Jr.
CourtU.S. Court of Appeals — Third Circuit

James F. McMullan, of Philadelphia, Pa., for appellant.

Herman H. Krekstein, of Philadelphia, Pa., for appellee.

Before BIGGS, JONES, and GOODRICH, Circuit Judges.

JONES, Circuit Judge.

The question presented by this appeal is whether the plaintiff's complaint pleads an enforceable cause of action. The defendant moved to dismiss on the ground that the contract which furnishes the basis of the claim, as averred in the complaint, is unenforceable by reason of § 4 of the Pennsylvania Sales Act,1 commonly known as the Statute of Frauds relating to personalty. The learned judge of the court below sustained the motion and dismissed the complaint.

Jurisdiction of the action is based upon diversity of citizenship. The complaint (as amended) alleges that Continental Collieries, Inc., one of the plaintiffs, in 1938 entered into five written agreements with five owners or lessees of coal mines for Continental's exclusive sales agency of the coal produced by the mines. Each agreement provided that the agency thereby created was to endure for five years or until the exhaustion of the coal in the mines, respectively. Continental assigned to another of the plaintiffs, one Wattles, a one-half interest in each of the agency contracts in consideration of his services in negotiating them. The plaintiff Tate is the president of Continental.

On or about January 4, 1939, in Cincinnati, Ohio, Shober, the defendant, orally agreed to pay Continental $5,000 for an assignment of all of Continental's right, title and interest in and to the agency contracts. On January 13, 1939, Wattles, purporting to act as the agent of Shober sent a letter to Tate in the latter's capacity as president of Continental, enclosing a draft of such an assignment and requesting that it be executed by Continental and Tate. Wattles' letter stated that upon the return of the executed assignment Shober would "issue his check in your Continental's favor for $5,000.00" and that "upon receipt * * * thereof I Wattles will turn over to * * * Shober the executed papers and contracts and simultaneously mail * * * Continental Mr. Shober's check." By the assignment as drafted Tate, Wattles and Continental, in consideration of the sum of $5,000, were to assign to Shober all their right, title and interest in the five exclusive sales agency contracts. The assignment was executed by Continental and Tate and returned to Wattles with a letter from Continental on January 16, 1939, wherein Wattles was requested to "act as trustee in handling the closing of" the contract of assignment as contemplated by the last paragraph of Wattles' letter of January 13, hereinabove quoted in material part.

The complaint then avers that Shober neglected and refused to pay the consideration for the assignment or any part thereof; that at or about the time of the transactions looking to the assignment Shober was engaged in organizing a coal producing business in association with Wattles under the name of Antrim Coal Company; that through this company Shober had sold and at the time of the suit was selling the product of one or more of the mines covered by the exclusive sales agency contracts; and that thereby Shober accepted and retained the benefits of the assignment. The complaint further avers that Tate and Wattles have no interest in the $5,000 consideration for which the suit was instituted; that they were joined in the action only because their signatures were appended to the assignment at the request of Shober; and that they are not real parties in interest.

The learned judge of the court below held that under the averments of the complaint Wattles was one of the assignors and as such could not act as the agent of Shober for the purpose of signing a memorandum contemplated by the Statute of Frauds. The court was of the further opinion that the averment that Wattles was not a real party in interest did not overcome the earlier averment that he had an interest in the contracts assigned and that the allegation of Wattles' lack of any interest in the assignment could not be accepted in view of the provisions of the assignment attached to the complaint as an exhibit. The District Court also held that, as there was no averment of delivery of the assignment or that Shober acted under the assignment as sales agent for any of the coal companies, there was nothing by way of Shober's actual receipt and acceptance of the benefits of the assignment to remove the case from the operation of the statute. Accordingly, the court below held that the amended complaint failed to disclose a legally enforceable cause of action.

As federal jurisdiction of this case rests upon diversity of citizenship and the requisite amount in controversy, the substantive rights of the parties are to be determined according to local law. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. Included within such applicable law is the local rule of conflicts. Klaxon Company v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477. In Pennsylvania, the situs of the federal jurisdiction in the instant case, the validity of a contract so far as it may be affected by the Statute of Frauds is generally determined by the law of the place of contracting. Bernstein v. Lipper Manufacturing Co., 307 Pa. 36, 43, 160 A. 770. Consequently we look to the law of Ohio in the first instance. The courts of that state have ruled that the Ohio Statute of Frauds is remedial and attaches to all contracts wherever made when suit thereon is brought in Ohio. Heaton v. Eldridge, 56 Ohio St. 87, 46 N.E. 638, 639, 36 L.R.A. 817, 60 Am.St.Rep. 737. Under the Ohio law, as thus interpreted, a contract is not invalid simply because it lies in parol but, when oral, a remedy for its breach is denied unless one of the exceptions relieving of the bar of the statute is made affirmatively to appear. This being so, the Ohio law does not affect the validity of the contract here sued upon. Hence, the federal court sitting in Pennsylvania need concern itself only with the applicable local law. Is there anything therein which bars suit on the agreement here in question, which is a valid contract by the law of the place of execution?

It has been expressly stated in decisions of Pennsylvania courts that § 4 of the Sales Act of that state affects only the remedy and not the validity of the contract. Producers' Coke Co. v. Hoover, 268 Pa. 104, 109, 110 A. 733; Clegg & Clegg v. Lees & Lees, 82 Pa.Super. 584, 587. In some of the Pennsylvania decisions, an oral contract within the Statute of Frauds has been spoken of as "unenforceable" and the provision in the statute as "a limitation upon the judicial authority to afford a remedy". See Brown v. Sheaffer, 93 Pa.Super. 246, 247. But § 4 of the Pennsylvania Sales Act is to be distinguished from the fourth section of the Act of April 22, 1856, P.L. 532, 33 P.S. § 2, which declares that "all grants and assignments" of land shall be evidenced by a writing signed by the holder of the title "or else to be void". Thus, under the Act of 1856, it was held in Safe Deposit & Trust Co. v. Diamond Coal & Coke Co., 234 Pa. 100, 112, 83 A. 54, 58, L.R.A.1917A, 596, that a parol contract for the sale of land is a "nullity". The court there also spoke of the fourth section of the Act of 1856 as being "a limitation of judicial authority to afford a remedy" and this language has been quoted in later decisions coustruing § 4 of the Sales Act. See Manufacturers' Light & Heat Co. v. Lamp, 269 Pa. 517, 520, 112 A. 679. However, this should not be taken to imply that the court's construction of the fourth section of the Act of 1856 is likewise to be the construction of § 4 of the Sales Act, for, whether a statute be substantive or procedural, its restrictions upon the enforcement of a right alike amount to a "limitation of judicial authority to afford a remedy". On the basis of the clear expressions by Pennsylvania's appellate courts in Producers Coke Co. v. Hoover, loc. cit. supra, and in Clegg & Clegg v. Lees & Lees, loc. cit. supra, it is our opinion that § 4 of the Pennsylvania Sales Act is procedural.

An aspect which serves to inject confusion in any consideration of the exact character of § 4 of the...

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