Henderson Tire & Rubber Co. v. Gregory

• Citation: 16 F.2d 589,49 ALR 1503
• Decision Date: 22 November 1926
• Docket Number: No. 7342,7349.,7342
• Parties: HENDERSON TIRE & RUBBER CO. v. GREGORY et al. WELHENER v. HENDERSON TIRE & RUBBER CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

49 ALR 1503, 16 F.2d 589 (1926)

HENDERSON TIRE & RUBBER CO. v. GREGORY et al.

WELHENER v. HENDERSON TIRE & RUBBER CO. et al.

Nos. 7342, 7349.

Circuit Court of Appeals, Eighth Circuit.

November 22, 1926.

Thomas Hackney, of Kansas City, Mo. (George C. Riley, of Buffalo, N. Y., and Thomas H. Edwards, John Kramer, and C. C. Weatherby, all of Kansas City, Mo., on the brief), for Henderson Tire & Rubber Co.

Leland Hazard, of Kansas City, Mo. (Maurice H. Winger and Miller, Winger & Reeder, all of Kansas City, Mo., on the brief), for Gregory, Welhener and others.

Before BOOTH, Circuit Judge, and PHILLIPS, District Judge.

BOOTH, Circuit Judge.

The appeal by the Henderson Tire & Rubber Company, hereafter called Henderson Company, is from so much of the decree of May 11, 1925, made by the court below on the intervening petition of said company in a creditor's bill (No. 321), as disallowed in part its claim. The appeal by the receiver appointed in said creditor's bill is from so much of the same decree as allowed in part the claim of the Henderson Company. The salient facts are as follows:

On January 13, 1922, appellee Charles E. Gregory filed in the court below two bills in equity in the nature of creditor's bills — one, No. 321, against the A. J. Stephens Rubber Company, hereafter called the Rubber Company; the other, No. 322, against Stephens Tire Stores Company, hereafter called the Stores Company. Jurisdiction was based on diversity of citizenship and the requisite amount involved. Receivers were appointed in both suits, who took charge of the assets of both companies. Massey Holmes was appointed special master in each of said suits.

On the 28th of February, 1922, the Henderson Company filed in suit No. 321 its intervening petition, setting up its claim. The petition alleged that on the 23d of April, 1921, the Henderson Tire & Rubber Corporation entered into a written contract with the Rubber Company, by the terms of which the Henderson Corporation agreed to manufacture for and sell to the Rubber Company certain automobile casings; that payments were to be made therefor by sight drafts drawn against bills of lading; that the intervener Henderson Company had acquired from the Henderson Corporation all of its rights in said contract. It alleged, further, that on the 2d of September, 1921, a subsidiary and ancillary contract for the manufacture and sale of automobile casings was entered into between the intervener, the Henderson Company, and the Rubber Company, and that this latter contract had appended to it an agreement made by the Stores Company. Payment under this new contract was to be made in accordance with the following provisions:

"(8) All shipments made hereunder shall be invoices to the buyer and, except the order of August 6, 1921, above provided for shall be paid for by the buyer as follows: The manufacturer shall attach to the bill of lading of shipment a 30-day trade acceptance drawn on the Stephens Tire Stores Company, a corporation of the state of Missouri, for one-half thereof, and a 60-day trade acceptance drawn on said Stephens Tire Stores Company for the remainder thereof, each bearing interest at the rate of 8 per cent. per annum, and forward said acceptance and said bill of lading through any Kansas City bank designated by the buyer, with instructions for the delivery of said bill of lading to the buyer upon the proper acceptance of said acceptances by the said Stephens Tire Stores Company and the indorsement thereof by the buyer."

The appended agreement signed by the Stores Company was as follows:

"In consideration of the sum of one dollar ($1.00) to the undersigned in hand paid, and for other good and valuable considerations, the undersigned hereby agrees to accept, as in the foregoing contract provided, the trade acceptances referred to in the seventh paragraph of said contract, and pay the same in accordance with the respective terms thereof, hereby waiving demand and notice of protest on each thereof, and notice of acceptance, by the manufacturer, of this agreement, and all other notices to which the undersigned might otherwise be entitled.

"In witness whereof, the undersigned has caused these presents to be executed and its corporate seal to be hereto affixed this _____ day of August, 1921, by its officers thereunto duly authorized.

"Stephens Tire Stores Company "By A. J. Stephens, President."

The petition further alleged that certain trade acceptances had been drawn, presented, accepted, and indorsed for goods manufactured and delivered under the contract in accordance with the provisions thereof, but had not been paid, amounting to $56,374.83.

The petition for a further cause of action alleged that the Rubber Company and the Stores Company and the receivers of the respective companies had refused to accept further deliveries under said contract, and had refused to give shipping orders as provided in said contract, although tender had been made by the Henderson Company. The petition further alleged:

"Therefore both the A. J. Stephens Rubber Company and the Stephens Tire Stores Company are under the law held for an accounting to this intervener for such damages as shall have been or will be suffered by this intervener, Henderson Tire & Rubber Company, Inc., by reason of the breach of contract aforesaid on the part of the parties defendants as aforesaid, in the respective causes aforesaid."

Damages were averred for the alleged breach of contract in the sum of about $120,000. The prayer of the petition was that the amount due and owing the intervener, the Henderson Company, be ascertained; that the claim, as established and allowed, be paid out of the assets along with the claims of other creditors. The petition was verified by attorney.

On the same day that the foregoing petition was filed by the Henderson Company as intervener in the creditor's bill No. 321 against the Rubber Company, a similar petition in intervention was filed by it in the creditor's bill No. 322 against the Stores Company.

On the 12th of January, 1923, the Henderson Company filed a second or amended petition in intervention in the creditor's bill No. 322. This amended petition alleged the making of the contract of the 23d of April, 1921. It further alleged the making of an oral contract under date of September 2, 1921, which, as set out, was substantially the same in terms as the written contract of the same date set up in the first petition in intervention, except that both the Rubber Company and the Stores Company were the purchasers. The amended petition further alleged that by mutual mistake, when this contract of September 2d was reduced to writing, it provided that the Rubber Company alone was the purchaser, instead of providing that the Rubber Company and the Stores Company were copurchasers. An additional prayer asked that the contract be reformed as regards the mutual mistake. In other respects the amended petition was substantially the same as the original petition filed in creditor's bill No. 322.

The receiver in No. 322 answered this amended petition, admitting the trade acceptances which had been drawn, presented, and accepted, but not paid, under the contract; admitted that the Henderson Company demanded, both of the Rubber Company and of the Stores Company, shipping orders for further shipments under said contract, and that tender was made to the receiver, and performance of the contract demanded of him. The receiver denied that there was any mistake in entering into the written contract of September 2, 1921; denied that the Stores Company was indebted to the Henderson Company in any sum whatever, except $56,719.83 on the trade acceptances.

The issues being thus joined, a stipulation was entered into as follows:

"Stipulation. — It is agreed that the evidence offered at this hearing and all subsequent hearings shall be considered as introduced in both cases; that is, in the case of Gregory against A. J. Stephens Rubber Company, No. 321, and Gregory against Stephens Tire Stores Company, No. 322."

It was admitted that the amount of the claim of the Henderson Company for damages set up in its petition in intervention was reduced to the sum of $112,140.48, by reason of the filling of two orders which were pending at the time of the appointment of the receiver. Testimony was taken by the master.

Further proceedings in suit No. 322 resulted in a holding by the master that the Henderson Company was not entitled to a reformation of the contract of September 2, 1921. The trial court approved this holding of the master. Judgment was entered. No appeal was taken.

Further proceedings in suit No. 321 resulted in a finding by the master that the could be no recovery by the Henderson Company against the Rubber Company on the claim for damages for breach of the contract of September 2, 1921. The basis for this finding was that the Henderson Company, on the trial of its amended petition in intervention in suit No. 322, had taken the position that the contract of September 2, 1921, was made not with the Rubber Company but with the Stores Company as purchaser, and that the Henderson Company could not now in suit No. 321 take the inconsistent position that the contract was with the Rubber Company. In other words, that the Henderson Company had made an election of remedies. But the master further found that, if he was wrong in his conclusion, and the Henderson Company was entitled to recover on its claim for damages, then the amount of the recovery under the evidence should be $112,140.48.

The master further held that there could be no recovery on the claim of the Henderson Company against the Rubber Company, based on the trade acceptances indorsed by the latter company. The grounds for this holding were that, inasmuch as the Henderson Company had repudiated the contract of September 2, 1921, that contract could not be considered as evidence in connection with the claim on the trade acceptances,...