De La Vergne Refrigerating Machine Company v. German Savings Institution 11, 1899

• Decision Date: 30 October 1899
• Docket Number: No. 45,45
• Citation: 44 L.Ed. 65,175 U.S. 40,20 S.Ct. 20
• Parties: DE LA VERGNE REFRIGERATING MACHINE COMPANY, Petitioner , v. GERMAN SAVINGS INSTITUTION et al. Argued April 7, 11, 1899. Decied
• Court: U.S. Supreme Court

175 U.S. 40

20 S.Ct. 20

44 L.Ed. 65

DE LA VERGNE REFRIGERATING MACHINE COMPANY, Petitioner,

v GERMAN SAVINGS INSTITUTION et al.

No. 45.

Argued April 7, 11, 1899.

Decied October 30, 1899.

This is a consolidation of eight actions brought by the German Savings Institution and seven other plaintiffs, in the circuit court of the city of St. Louis, against the De la Vergne Refrigerating Company and John C. De la Vergne, its president and principal stockholder, personally, for a failure to deliver to plaintiffs certain stock in the Refrigerating Company.

Certain personal property was seized upon on attachment issued, a forthcoming bond given therefor, and the several actions were afterwards removed to the circuit court for the eastern district of Missouri upon the joint petition of the defendants. In that court the several actions were consolidated and sub- mitted upon an agreed statement of facts upon which judgment was entered for the defendants.

Pending the proceedings in the state court, and on May 12, 1896, John C. De la Vergne died, and on November 5, 1896, his death was suggested to the court, when William C. Richardson, public administrator of the city of St. Louis, entered his appearance, and with his consent an order was entered reviving each of such actions against him.

From the judgment so entered in the circuit court, a writ of error was taken from the circuit court of appeals, the judgment of the court below reversed, and the cause remanded with directions to grant a new trial. 36 U. S. App. 184, 70 Fed. Rep. 146, 17 C. C. A. 34.

Amended answers were filed in the lower court, much testimony taken, the cause submitted to the court without a jury, and a judgment entered in favor of the plaintiffs for $126,849.96.

From this judgment a writ of error was prosecuted by the Refrigerating Company, one of the defendants. The judgment was affirmed by the court of appeals by an equal division. 49 U. S. App. 777, 84 Fed. Rep. 1016, 28 C. C. A. 681. Whereupon the Refrigerating Company applied for and was allowed a writ of certiorari from this court.

Messrs. Frederick W. Lehmann, Charles H. Aldrich, and Charles Nagel for petitioner.

Messrs. Leo Rassieur, J. M. Wilson, and Eleneious Smith for respondent.

[Argument of Counsel from pages 41-48 intentionally omitted] Mr. Justice Brown delivered the opinion of the court:

The principal question in this case is whether, under the laws of New York providing for the organization of manufacturing corporations, such corporations are authorized to purchase the stock of a rival corporation for the purpose of suppressing competition and obtaining the management of such corporation.

The facts of the case are substantially as follows: The Consolidated Ice Machine Company (hereinafter referred to as the Consolidated Company) was a corporation organized under the laws of Illinois, and was engaged in the business of manufacturing and selling refrigerating and ice-making machines. The entire amount of issued stock of such corporation was $100,000, held in various proportions by the plaintiffs in this consolidated cause. Having become insolvent, the company, on October 14, 1890, made an assignment under the general laws of Illinois, for the benefit of creditors, to one Jenkins, who, at the date of the contract sued upon, was engaged in winding up its business. The assignment on its face purported to convey to Jenkins and his successors in trust the entire real and personal 'property and effects of every kind and description' belonging to the corporation, 'or in which it has any right or interest,' the same being fully and particularly enumerated and described in an inventory, which, however, does not appear in the record. Its assets consisted mainly of a plant for the manufacture of refrigerating and ice-making machines in Chicago; of patent rights, outstanding accounts, and the goodwill of its business, which appears to have been an extensive one.

It is asserted by the plaintiffs, who are stockholders in this company, that the assets exceeded in value the liabilities of the company, and that the company was not in reality insolvent, but had assumed contracts to such an extent that, with its limited capital, it was unable to carry them out.

However this may be, subsequently to the assignment, and on April 16, 1891, the company itself, by its president as party of the first part, and its stockholders as parties of the second part, entered into an agreement with the De la Vergne Refrigerating Machine Company, a corporation organized under the laws of New York (hereinafter called the Refrigerating Company), as party of the third part, and John C. De la Vergne, of the state of New York, president of that company, party of the fourth part. This agreement is the basis of the action. After reciting that the Refrigerating Company was willing to acquire such right as the Consolidated Company and its stockholders could assign in and to the assets of such company; that under the laws of Illinois the Consolidated Company was not entitled to the post session of its assets in the hands of the assignee until its obligations had been discharged; that the Refrigerating Company was incorporated with a stock of $350,000 when its assets were worth $1,400,000; and that its stockholders were considering a plan of increasing the stock to $2,000,000, of which $1,000,000 was to be turned over to the Consolidated Company under the terms of the agreement.

Therefore, in view of these facts, the Consolidated Company and its stockholders covenanted with the Refrigerating Company and its president, De la Vergne, to sell and convey unto the Refrigerating Company all their right, title, and interest in and to the assets of the party of the first part, subject to the payment of its obligations, and subject to the custody thereof in the legal custodian, R. E. Jenkins, assignee as aforesaid.

The second clause contained a covenant to issue to the stockholders of the Consolidated Company fully paid-up stock in the Refrigerating Company to the amount of $100,000 in certain specified proportions to each stockholder.

By the fourth clause, the stockholders agreed within ten days from the date of the agreement to assign to De la Vergne, for the benefit of the Refrigerating Company, all stock of the insolvent company which had been issued, and which they guaranteed had been paid in full; and within sixty days thereafter the Refrigerating Company and its president agreed to issue and deliver to the stockholders of the Consolidated Company stock in the Refrigerating Company to the amount of $100,000.

By the fifth clause, the stockholders in the Consolidated Company covenanted to accept, in lieu of the stock of the Refrigerating Company, $100,000 in cash, at the option of De la Vergne, the president of the company.

By the seventh clause, the stockholders of the Consolidated Company agreed that for a period of ten years they would not enter into or become engaged in the selling or making of refrigerators or ice machines, directly or indirectly, within the United States, excepting the state of Montana.

Within the ten days provided by the agreement, certificates representing one thousand shares of the stock of the Consolidated Company, with written assignments executed by the parties who held the certificates, were delivered to De la Vergne, although ninety-five of these shares were held by P. J. Lingenfelder and Leo Rassieur as executors, and ninety were held by them as trustees under the will of one Jungenfeld, deceased. These shares were assigned by the parties without an order authorizing them to do so from the probate court of St. Louis, in the state of Missouri, in which the estate of Jungenfeld was in the process of administration. Two days after the receipt of these certificates De la Vergne's attorney wrote to Mr. Rassieur, calling his attention to certain technical defects, which were immediately remedied by suitable instruments of further assurance. No objection was then made that the assignments of the executors and trustees were insufficient for want of an order of the probate court authorizing the same.

In the following July demands were several times made by Mr. Rassieur for himself and his associates for the $100,000 in stock or money stipulated by the contract, but no response was received until September, when Mr. Fitch, acting for the Refrigerating Company, announced for the first time that the defendants declined to carry out their part of the contract. The reasons for the refusal do not seem to have been substantial ones. The letter contained an announcement that Mr De la Vergne's counsel was ready to return the papers sent to him to whomsoever was legally entitled to their custody. There was no reconveyance to the Consolidated Company of whatever was covered by the contract, the covenant of its stockholders to refrain from transacting business for ten years was never released, and none of the certificates and assignments of stock were ever delivered back. It appeared, however, that in the meantime the Refrigerating Company had secured the former New York office of the Consolidated Company; had employed its agent in making contracts with former customers of that company, which contracts were taken in the name of such agent. He was, however, furnished with the means by which they were carried out, and assignments were taken from him, which practically secured the goodwill of the company, although the Chicago assets were allowed to go to sale by the assignee. At this sale Mr. De la Vergne was present and offered for the tangible assets the sum of $25,000.

In their answer as amended, defendant set up as justification for a refusal to perform the contract that no assets of the Consolidated Company ever came into the possession of the defendants, since all, including the goodwill, had been transferred to Jenkins, the assignee, for the benefit of its creditors, and remained in his possession...