North Chicagoco v. St Louis Ore Steel Co

• Decision Date: 09 April 1894
• Docket Number: No. 197,ROLLING-MILL,197
• Citation: 38 L.Ed. 565,152 U.S. 596,14 S.Ct. 710
• Parties: NORTH CHICAGOCO. v. ST. LOUIS ORE & STEEL CO. et al
• Court: U.S. Supreme Court

152 U.S. 596

14 S.Ct. 710

38 L.Ed. 565

NORTH CHICAGO ROLLING-MILL CO.

v ST. LOUIS ORE & STEEL CO. et al.

No. 197.

April 9, 1894.

The principal question presented by the record in this case is whether a garnishee, who occupies the double position of debtor to the principal defendant, in a definite or ascertained amount, and also that of a creditor of such principal debtor by way of unliquidated damages arising out of the breach of contract in existence when the garnishment proceedings were instituted, can, after an order at law subjecting the defined indebtedness to the payment of the garnisher, invoke the aid of a court of equity to restrain the garnishing creditor from enforcing the payment of the amount due until the unliquidated damages can be ascertained, and set off against such indebtedness, on the ground that the principal debtor is insolvent, and a nonresident of the state in which the garnishee resides, and in which the garnishment proceedings are had. In other words, is the insolvency and nonresidence of the principal debtor, to whom the garnishee is indebted in a certain, difinite amount, and against whom he has a valid claim for unliquidated damages growing out of a breach of contract between them,—in existence at the commencement of the garnishment proceedings,—a good ground for the exercise of equitable jurisdiction, after an order or judgment at law declaring the sum due the principal debtor applicable to the payment of the garnisher, to stay the enforcement of such order or judgment until the unliquidated damages due the garnishee can be ascertained, and set off against the amount certain owing by him to the principal debtor?

The material facts and proceedings out of which this question arises are as follows:

In November, 1883, the St. Louis Ore & Steel Company, of St. Louis, Mo. (hereafter styled the 'St. Louis Company'), and the North Chicago Rolling-Mill Company, of Chicago, Ill. (hereafter called the 'Chicago Company'), were each engaged in the manufacture of steel rails for railroads. The St. Louis Company was also a miner of iron ore, and the maker of pig metal. On November 6, 1883, the St. Louis Company entered into a contract with the Missouri Pacific Railroad Company for the sale and delivery to the railroad company of 24,000 tons of steel rails, in quantities of 2,000 tons per month from January to December, 1884, inclusive, for which the railroad company agreed to pay for each monthly delivery of rails, on receipt of bills of landing and invoice, at the rate of $18 a ton, cash, and one ton of old rails for each ton delivered.

On November 19, 1883, the St. Louis Company entered into another contract with the Missouri Pacific Railroad Company, by which it agreed to sell to the railroad company the further quantity of 18,000 tons of steel rails, to be delivered at the rate of about 1,500 tons per month, commencing January 1, and ending in December, 1884, for which the purchaser was to pay, for each delivery of 1,500 tons, at the rate of $37.50 a ton, in cash, on the 20th day of the month succeeding the delivery.

Having these engagements on its hands, the St. Louis Company, on December 1, 1883, entered into a written contract with the Chicago Company, by which the latter agreed to furnish the former company 18,000 tons of No. 1 Bessemer steel rails, to be delivered free on board the cars at Chicago, in about equal amounts (1,500 tons), during each month of the year 1884, at the rate of $35 per gross ton (2,240 pounds), to be paid by the St. Louis Company on the 10th day of each month for all rails delivered during the previous month. The contract specified that the rails to be furnished by the Chicago Company should weigh 52, 56, 59, or 63 pounds per lineal yard, as per templet to be furnished by the St. Louis Company, and were to be drilled for bolts at certain distances from the ends of the rails, according to their weight.

The rails were to be consigned as directed by the St. Louis Company, which was to furnish the cars for the prompt shipment thereof from Chicago, 'and in the absence of the furnishing of cars upon which to load said rails, enabling the said first party [the Chicago Company] to make their deliveries as herein specified, then the said second party [the St. Louis Company] shall make their settlements and pay for said rails on the tenth day of the month, the same as though said rails had been delivered, and the nondelivery of cars shall in no way relieve the said second party from the prompt payment for the rails on the tenth day of the month, as specified herein.' The rails, so far as delivered, were manufactured in varying weights, upon orders given by the St. Louis Company.

On December 22, 1883, the Chicago Company entered into a contract with R. M. Cherrie & Co., of Chicago, for the purchase of 50,000 tons of iron ore, to be mined and shipped during the year 1884 from the Pilot Knobmine, in the state of Missouri, owned and operated by the St. Louis Company, This ore was to be delivered at the Chicago Company's works in quantities of from one to seven thousand tons per month, as required by the Chicago Company, and payment therefor was to be made on the 15th day of each month for ore delivered during the previous month. This contract, if not made by Cherrie & Co. as agents of the St. Louis Company, was guarantied by the latter, so far as the quality of the ore, and its delivery, were concerned.

Cherrie & Co. became financially involved, and on July 3, 1884, made an assignment to one Jenkins for the ben- efit of their creditors, of whom the St. Louis Company was a large one. Upon the failure of Cherrie & Co. the St. Louis Company assumed the former's ore contract with the Chicago Company, and thereafter, between the 4th and 21st days of July, 1884, delivered to the Chicago Company iron ore and pig metal to the amount or value of $44,916.82, for which payment was to be made by the Chicago Company on August 15, 1884.

On July 10, 1884, the St. Louis Company, being indebted to the Chicago Company in the sum of $21,536.56 for steel rails delivered during the previous month (June), made default in paying the same, and the next day (July 11, 1884) informed the Chicago Company, by letter, of its inability to pay for the June delivery of rails, and asked, as a special favor, to let the matter rest for a little while, as the Chicago Company had in its possession funds arising from the sale of ore and pig metal which were being delivered during the month of July. To this request no reply appears to have been made.

On July 12, 1884, the St. Louis Company again wrote the Chicago Company, expressing a doubt as to its ability to pay its debts promptly, and suggesting an arrangement by which the receivers of the Wabash Railroad Company should take certain rails, and settle directly with the Chicago Company. This arrangement was not, however, consummated.

The St. Louis Company, being embarrassed, and having made default in paying the interest on its several issues of bonds, secured by mortgages, was on July 21, 1884, placed in the hands of a receiver, upon a bill filed against it in the United States circuit court for the eastern district of Missouri by Robert M. Olyphant, as trustee, a citizen of New York, for the foreclosure of a second mortgage upon its property. The bill alledged the insolvency of the St. Louis Company; and, upon the day of its filing, E. A. Hitchock, the president of the company, was appointed provisional receiver of its property and assets, with instructions 'to carry out and perform the contracts of the company for the purchase and sale of steel rails, and to preserve and protect all its property.' This receivership was made permanent on August 7, 1884 and the provisional instructions were renewed. Hitchcock promptly qualified both as provisional and permanent receiver.

The receiver subsequently, on August 25, 1884, made a report to the court, in which after referring to the several contracts of the St. Louis Company with the Missouri Pacific Railroad Company for the sale of steel rails, and with the Chicago Company and others for the purchase of such rails, together with what had been done thereunder, he stated that on July 30, 1884, he had received from the railroad company an order for 2,045 tons of rails, to be delivered in August; that he thereupon had placed with the Chicago Company an order for 1,500 tons of the rails required, the price of which, under the contract between the St. Louis Company and the Chicago Company, would amount to about the sum of $52,000, and if the rails were delivered in August that sum would have to be paid on September 10, 1884; that he had not in hand, and was not likely to have, any funds with which to meet such payment; that he had, after negotiations, failed to induce the railroad company to agree to make payment for the rails on September 10, 1884; that the railroad company had, furthermore, notified him that it was ready to carry out its contract with the St. Louis Company according to the terms there-of, but would no longer accept steel rails from other makers in the performance of that contract; that he had, without success, made overtures to be released from the contract of the St. Louis Company for the sale and purchase of steel rails on the basis of the difference between the then market price of such rails, estimated at $31 per ton, and the contract prices, which terms he regarded as just to all parties, but that these overtures were not accepted. The receiver further reported that the Chicago Company had notified him, by letter under date of August 6, 1884, that it was ready and willing to carry out its contract of December 1, 1883, for the manufacture and delivery of steel rails upon the terms of payment therein mentioned, and that for the failure of the St. Louis Company to carry out the said contract it would claim damages; that the Chicago Company requested an explicit statement from him as...