Butler Bros. Shoe Co. v. United States Rubber Co.

Decision Date25 October 1907
Docket Number2,496.
Citation156 F. 1
PartiesBUTLER BROS. SHOE CO. v. UNITED STATES RUBBER CO.
CourtU.S. Court of Appeals — Eighth Circuit

a Colorado corporation engaged in the wholesale business in that state whereby it agreed to send to the corporation in Colorado rubber goods for sale, which the latter agreed to store and to sell in its name as consignee, and to pay for the goods when sold certain prices which were so much less than its selling prices that it secured thereby the expenses of the business and a liberal commission. The contracts provided that the latter was the agent of the former to sell the goods; that the latter should make advances when requested, and that to the amount of its profits it guaranteed the sales; that the goods and their proceeds until the latter paid the agreed prices, should be the property of the former, and that the latter assumed the risk of the receiving, handling and selling. The manufacturing corporation shipped its goods. It had no office or place of business in Colorado, and neither incurred nor paid any of the expenses. The Colorado corporation sold the merchandise at its own expense, in consideration of the factorage. Held that the agreements were factorage contracts and not conditional sales.

The United States Rubber Company, a corporation of New Jersey, was a large manufacturer of rubber goods, and its principal office was in New York. It had a factory in one of the Eastern states and a warehouse in Chicago, from which it shipped its merchandise to consignees and purchasers. The Butler Bros. Shoe Company, a corporation of Colorado, was a wholesale merchant engaged in the purchase and sale of rubber goods and other merchandise at Denver, in that state. In January, 1901, in January, 1902, and in January, 1903, it made similar factorage contracts with the rubber company for the shipment of the goods of the latter from its mill and warehouse to the shoe company at Denver upon its orders. By the contract of January, 1903, the rubber company appointed the shoe company its agent to sell, and agreed to consign to it at Denver, certain of its goods at agreed prices, and the shoe company agreed to receive the goods and assume the risk thereof; to pay freight and expenses of handling, carting, storing, selling, and delivering to its customers; to make advances to the rubber company in cash, or in notes, if requested; to guarantee the rubber company against all losses from sales to the extent of the shoe company's profits; to pay the rubber company at agreed prices, which were so much below the prices at which the shoe company sold to its customers that it thereby secured a liberal factorage or commission, and at specified times, for all consigned goods it sold to its customers; to purchase, at the option of the rubber company, at the termination of the contract, all of the consigned goods then in its possession, except original and unbroken packages, at the prices that should then be ruling; to keep separate account books of the goods, of their receipt and sales; to keep a separate bank account under the name of the 'Butler Bros. Shoe Company Consignee Account,' in which the proceeds of the sales, including the consignee's profits or factorage should be deposited, and from which the consignee should check out the amounts due the consignor, the freight charges, and the consignee's profits or factorage; to bill the goods to the purchasers as consignee, and that all goods then on hand and those subsequently consigned should be the property of the consignor until they were sold to the consignee's purchasers; and that the books, accounts, bills receivable, and cash derived from the sales of the consigned property should be the property of the consignor. Pursuant to this contract the consignee ordered for sale to its customers, and the consignor shipped from its warehouse in Chicago, and from its mill, to Denver, Colo., goods of the value of many tens of thousands of dollars. After a few months the rubber company demanded an advance in cash from the factor. The latter failed to make this advance, but at the same time ordered the rubber company to send to it from $15,000 to $20,000 worth of rubber goods to fill orders it had previously taken from its customers therefor. In this state of the case, on October 22, 1903, the parties made a supplemental agreement to the effect that the consignor would waive its demand for the advance and would fill the factor's orders, and that the factor would pay the consignor for all the goods which it sold to its customers 60 days after the accounts for them fell due. The contracts provided that they should terminate at the end of one year from January, 1903. At the end of the year the factor made default in its payments, and in March, 1904, the rubber company exhibited its bill against the shoe company in the court below for an accounting, for a receiver of the property in the hands of the factor under the contract, for an injunction, for a recovery of its property remaining in the possession of the shoe company, and for a recovery of the moneys which the shoe company owed to it. The defendant answered, among other things, that the complainant had not qualified itself to do business in Colorado and had not paid the annual license tax prescribed by the statutes of Colorado for the doing of business in that state by a foreign corporation. To this portion of the answer the complainant excepted, its exception was overruled, and it then filed a general replication. Evidence was taken, there was a final hearing on the merits, and the court below rendered a decree that the complainant should receive $8,276.47 which remained in the bank in the 'Butler Bros. Shoe Company Consignee Account,' $29,647.09 which the receiver had realized from the goods, bills receivable, and accounts that accrued under the consignment and were taken from the shoe company by the receiver, and that the rubber company should recover of the shoe company $14,856.27 which the latter owed it, and the costs of the suit. From this decree the shoe company appealed.

Syllabus by the Court

Filing a replication and taking the proofs waives no substantial insufficiency of the facts set forth in a plea or answer to constitute a defense.

The broad statement in Paul v. Virginia, 8 Wall. 168, 181, 19 L.Ed. 357, that a state may exclude a foreign corporation from business, or may condition its admission to do business within its borders by such terms as it may deem proper, has been qualified by the decisions of the Supreme Court, and the following exceptions to it are established:

(a) Every corporation empowered by the state of its creation to engage in interstate commerce may carry on that commerce in sound and recognized articles of commerce in every other state in the Union. Every prohibition, obstruction, or burden which the other states attempt to impose upon such business is unconstitutional and void.
(b) Every corporation of every state which is in the employ of the United States, has the right to exercise the necessary corporate powers and to transact the requisite business to discharge the duties of that employment in every other state in the Union, without let or hindrance from the latter.
(c) Every corporation of every state has the absolute right to institute, maintain, and defend in the federal courts, and to remove to those courts its suits in any other states in the cases and on the terms prescribed by the acts of Congress.

Where a corporation of one state is engaged in both interstate and intrastate commerce in any other state, the prohibition or the conditioning by the latter state of its exercise of its right to do business within its borders, without discriminating between that which constitutes interstate commerce and that which constitutes intrastate commerce, is unconstitutional and void, so far as it relates to the former.

Interstate commerce in sound and well-recognized articles of commerce must be free, and any prohibition, obstruction, or burden of it by a state by any method is unconstitutional. Such commerce may not be regulated by a state at all. The exclusive power to regulate commerce among the states is vested in the Congress.

A manufacturing corporation of New Jersey made annual contracts with a corporation of Colorado engaged in the wholesale business in that state, whereby the former agreed to send from its mill and warehouse in Eastern states to the latter in Colorado, upon its orders, rubber boots, shoes, and other rubber goods during the year for sale, and the latter agreed to receive, to store, and to sell them in its name as consignee, and to pay to the former for the goods which the latter sold certain agreed prices, which were so much less than its selling prices to its customers that it secured thereby the expenses of carrying on the business and a liberal commission. The contracts provided that the latter was appointed the agent of the former to sell the goods, that the latter should make advances when requested, that to the amount of its profits it guaranteed the sales, that the goods and their proceeds, until the latter paid the agreed prices, should be the property of the former, and that the latter assumed the risk of the receiving, storing, handling, and selling. The manufacturing corporation shipped the goods as agreed. It had no office, warehouse, or place of business in Colorado, and it neither incurred nor paid any of the expenses of receiving, storing, and selling the goods. The Colorado corporation ordered, received, stored, and sold the merchandise at its own expense, in consideration of the factorage secured to it by the contracts. Held:

(a) The agreements were factorage contracts, and they were not contracts for conditional sales.
(b
...

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