Central Electric Co. v. Sprague Electric Co.

• Decision Date: 07 October 1902
• Docket Number: 835.
• Parties: CENTRAL ELECTRIC CO. v. SPRAGUE ELECTRIC CO.
• Court: U.S. Court of Appeals — Seventh Circuit

120 F. 925

CENTRAL ELECTRIC CO. v. SPRAGUE ELECTRIC CO.

No. 835.

United States Court of Appeals, Seventh Circuit.

October 7, 1902

John M Hamline, for plaintiff in error.

Wm Brace, for defendant in error.

The defendant in error (plaintiff below) brought its action at law in assumpsit to recover of the plaintiff in error (defendant below) for certain goods sold and delivered. To this there was a plea of the general issue, with notice of set-off to the effect that, prior to the organization of the defendant in error, the plaintiff in error was accustomed to purchase goods from the Interior Conduit & Insulation Company, which company had agreed to take back and credit upon its account, at the cost price, all goods which the plaintiff in error might purchase, and which it was unable to sell or which should become unsalable, and that from the years 1894 to 1898 it so purchased of the conduit company goods which had proved unsalable, and by reason thereof it had a claim against the conduit company which it sought to set off against the claim of the defendant in error; that in February, 1898, the defendant in error was organized as a corporation, and took over all the property of the conduit company acquired in its business, and its good will, and assumed all its contracts and liabilities. At the trial evidence was introduced by the plaintiff in error to sustain its claim with respect to the set-off against the conduit company, and it undertook, by consent, under an insufficient notice to produce, to show the contents of a resolution of the defendant in error with respect to an alleged assumption by it of the liabilities of the conduit company. A former secretary and treasurer testified that the defendant in error acquired and continued the business of the conduit company, and that a certain resolution was adopted with respect to the assumption of certain liabilities of the conduit company; that it provided for the assumption of the executory contracts of the conduit company, and the payment of such debts of that company as were exhibited upon its books, and not otherwise; but he did not remember, and could not state, whether that resolution provided for the assumption of all of the indebtedness of the conduit company. It was also shown by the evidence of McKinlock, the president of the plaintiff in error, that in February, 1898, after the organization of the defendant in error, Mr. Johnson, the former president of the conduit company, and then the vice president of the defendant in error, stated that the property and assets of the conduit company had been taken over by the Sprague Electric Company, and that the latter company was to pay the obligations of the conduit company. There was evidence tending to establish the claim of set-off of the plaintiff in error against the conduit company.

At the conclusion of the testimony the court excluded all the evidence offered on the defendant's claim to a set-off, and submitted the case to the jury upon the claim of the defendant in error, who returned a verdict in its favor.

Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.

JENKINS Circuit Judge, after stating the facts as above, .

It is an undoubted general principle that, to sustain an action at law upon a contract, privity of contract is necessary (National Bank v. Grand Lodge, 98 U.S. 123, 25 L.Ed. 75), and an indirect interest in the performance of an undertaking does not constitute such privity (Keller v. Ashford, 133 U.S. 610, 10 Sup.Ct. 494, 33 L.Ed. 667). There are, however, exceptions to the rule-- as where the plaintiff is the sole beneficiary of the promise, or where assets have been acquired by the promisor which in equity belong to another, or where the promise is to pay the plaintiff. There are other exceptions noted in the books.

It is settled in the federal courts that whether the remedy in such cases is in equity or at law is dependent upon the law of the forum. Willard v. Wood, 135 U.S. 309, 10 Sup.Ct. 831, 34 L.Ed. 210; Union Mutual Life Insurance Company v. Hanford, 143 U.S. 187, 12 Sup.Ct. 437, 36 L.Ed. 118; Willard v. Wood, 164 U.S. 502, 17 Sup.Ct. 176, 41 L.Ed. 531. It is needful, therefore, to inquire whether by the law of the state of Illinois a remedy at law is afforded.

The nature of the claim here presented should be precisely apprehended. The plaintiff in error asserts itself to be a creditor of a corporation which transferred all its assets to the defendant in error; the latter, as is claimed, assuming all its contracts and obligations.

It has been ruled by the Supreme Court of Illinois that if one, upon consideration, promises another to pay that other's debt to a third person, an action at law may be maintained by the third person upon the promise (Brown v. Strait, 19 Ill. 88; Beasley v. Webster, 64 Ill. 465; Steele, Administrator, v. Clark, Administrator, 77 Ill. 474; Chicago & A.R.R. Co. v. Coal Co., 79 Ill 126), and that a mortgagee may sue at...