Arnold v. Streck

• Decision Date: 19 December 1939
• Docket Number: No. 7002.,7002.
• Citation: 108 F.2d 387
• Parties: ARNOLD et al. v. STRECK et al.
• Court: U.S. Court of Appeals — Seventh Circuit

108 F.2d 387 (1939)

ARNOLD et al. v.STRECK et al.

No. 7002.

Circuit Court of Appeals, Seventh Circuit.

December 19, 1939.

Charles S. Sigoloff, of St. Louis, Mo., Frank T. Plattner, of East St. Louis, Ill., and Sigoloff & Sigoloff, of St. Louis, Mo. for plaintiffs-appellants.

Walter E. Ackermann, of Belleville, Ill., and Turner, Holder & Ackermann, of Belleville, Ill., for defendants-appellees.

Before EVANS, TREANOR, and KERNER, Circuit Judges.

TREANOR, Circuit Judge.

Plaintiffs filed suit against the defendants in the United States District Court for the Eastern District of Illinois to recover for an alleged breach of contract.Defendants filed a motion to dismiss for the reason that the complaint did not state a cause of action, and the motion was sustained.Plaintiffs refused to plead further and the court entered final judgment dismissing the complaint.From this judgment plaintiffs prosecute this appeal.

The contract involved in this litigation was executed on the third day of February, 1937, between Packers' Brands Incorporated, a Missouri Corporation, styled "licensor," and the defendants, doing business under the title of Streck Bros. Packing Co., styled "licensee."By the terms of the contract the licensor granted the licensee for a period of ten years the exclusive right to manufacture and sell within a limited territory a dog food made with "`Arnold's Vita-Mix,' a scientifically compounded dog food mixture owned by licensor."The licensee agreed to purchase and use in the manufacture of the dog food, and the licensor agreed to sell to the licensee, all the necessary ingredients.Licensee agreed to purchase not less than 1500 pounds of Arnold's Vita-Mix during the first year of the life of the contract and thereafter "at least ten (10) tons during any twelve (12) month period."Among the specific obligations which the licensor, Packers' Brands Inc., assumed are the following: (1) To pay for the cost of all plates, mechanical preparations and art work required in connection with all advertising which the licensee should "deem necessary for the sale, market and merchandizing of said dog food * * *."(2) To spend 10% of all sums received by it under the contract as purchase price of "Arnold's Vita-Mix" for advertising.(3) To furnish and pay for all laboratory work which may be necessary to enable the dog food to pass the city, state and federal requirements; and to furnish and pay for all legal services required for such purposes.(4) To make all tags, labels, etc. manufactured by it available to licensee at the cost thereof, plus 10%.

In addition to the foregoing specific obligations the contract must be construed to impose upon the licensor an obligation to continue able and ready to furnish "Arnold's Vita-Mix" to the licensee for a period of ten years.

On January 1, 1938, Packers' Brands Inc. was suspended by action of the Secretary of State of Missouri, and on January 1, 1939, it was disfranchised.The action of the Secretary of State was taken under the statutes of Missouri and the correctness of the ruling of the District Court depends upon the legal consequences to be attached to the official action of the Secretary of State.

It is the contention of the plaintiffs that under the Missouri law¹ the disfranchised corporation continued to have a de facto existence and the statutory trustees in charge of its affairs had the power to maintain this suit.The allegations of the complaint disclosed that the corporation was disfranchised as of January 1, 1939, and that the defendants were not required to complete their annual purchase of ten tons for the current year until February 3, 1939.Consequently, defendants urge that there had been no breach of the contract by them during the life of the corporation.Defendants further urge that the corporation's disfranchisement necessarily put an end to its corporate existence and to any exercise of its corporate powers; and that under the law of Missouri the statutory trustees had no power to continue the corporate business and, therefore, could not perform the contract obligation which had been assumed by Packers' Brands Inc.It follows, so defendants argue, that since the corporate obligation of Packers' Brands Inc. could not be performed after January 1, 1939, the necessary legal consequence is that the defendants were released from their obligation to perform as of that date, and were not obligated to purchase any more of the product of Packers' Brands Inc.

The St. Louis Court of Appeals of Missouri has had occasion to construe and apply the sections of the Missouri Statutes which are relied upon by plaintiffs and defendants.That Court of Appeals in Estel v. Midgard Inv. Co.² states its construction of two of the pertinent sections as follows:

"It is difficult to read the provisions of the statute without arriving at the conclusion that it was the intention of the Legislature that the act of the secretary of state should operate as a dissolution of the corporation, leaving it without corporate existence or corporate rights, privileges, franchises, or powers, subject only to the right of rescission and reinstatement, upon the application and showing required by section 4621, R.S.1929 Mo.St.Ann. § 4621, p. 2050.Section 4619 provides that upon failure to comply with the provisions of the statute, the corporate rights and privileges of the corporation shall be forfeited, and the secretary of state shall thereupon cancel the certificate, or license, of the corporation, by appropriate entry, whereupon all the powers, privileges, and franchises of the corporation shall, subject to rescission as in the statute provided, cease and determine, and the secretary of state shall notify the corporation that its corporate...