Continental Collieries v. Shober, No. 7925.

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: BIGGS, JONES, and GOODRICH, Circuit
• Citation: 130 F.2d 631
• Parties: CONTINENTAL COLLIERIES, Inc., v. SHOBER, Jr.
• Docket Number: No. 7925.
• Decision Date: 14 September 1942

130 F.2d 631 (1942)

CONTINENTAL COLLIERIES, Inc.,
v.
SHOBER, Jr.

No. 7925.

Circuit Court of Appeals, Third Circuit.

Argued May 20, 1942.

Decided September 14, 1942.

130 F.2d 632

James F. McMullan, of Philadelphia, Pa., for appellant.

Herman H. Krekstein, of Philadelphia, Pa., for appellee.

Before BIGGS, JONES, and GOODRICH, Circuit Judges.

JONES, Circuit Judge.

The question presented by this appeal is whether the plaintiff's complaint pleads an enforceable cause of action. The defendant moved to dismiss on the ground that the contract which furnishes the basis of the claim, as averred in the complaint, is unenforceable by reason of § 4 of the Pennsylvania Sales Act,¹ commonly known as the Statute of Frauds relating to personalty. The learned judge of the court below sustained the motion and dismissed the complaint.

Jurisdiction of the action is based upon diversity of citizenship. The complaint (as amended) alleges that Continental Collieries,

130 F.2d 633

Inc., one of the plaintiffs, in 1938 entered into five written agreements with five owners or lessees of coal mines for Continental's exclusive sales agency of the coal produced by the mines. Each agreement provided that the agency thereby created was to endure for five years or until the exhaustion of the coal in the mines, respectively. Continental assigned to another of the plaintiffs, one Wattles, a one-half interest in each of the agency contracts in consideration of his services in negotiating them. The plaintiff Tate is the president of Continental

On or about January 4, 1939, in Cincinnati, Ohio, Shober, the defendant, orally agreed to pay Continental $5,000 for an assignment of all of Continental's right, title and interest in and to the agency contracts. On January 13, 1939, Wattles, purporting to act as the agent of Shober sent a letter to Tate in the latter's capacity as president of Continental, enclosing a draft of such an assignment and requesting that it be executed by Continental and Tate. Wattles' letter stated that upon the return of the executed assignment Shober would "issue his check in your Continental's favor for $5,000.00" and that "upon receipt * * * thereof I Wattles will turn over to * * * Shober the executed papers and contracts and simultaneously mail * * * Continental Mr. Shober's check." By the assignment as drafted Tate, Wattles and Continental, in consideration of the sum of $5,000, were to assign to Shober all their right, title and interest in the five exclusive sales agency contracts. The assignment was executed by Continental and Tate and returned to Wattles with a letter from Continental on January 16, 1939, wherein Wattles was requested to "act as trustee in handling the closing of" the contract of assignment as contemplated by the last paragraph of Wattles' letter of January 13, hereinabove quoted in material part.

The complaint then avers that Shober neglected and refused to pay the consideration for the assignment or any part thereof; that at or about the time of the transactions looking to the assignment Shober was engaged in organizing a coal producing business in association with Wattles under the name of Antrim Coal Company; that through this company Shober had sold and at the time of the suit was selling the product of one or more of the mines covered by the exclusive sales agency contracts; and that thereby Shober accepted and retained the benefits of the assignment. The complaint further avers that Tate and Wattles have no interest in the $5,000 consideration for which the suit was instituted; that they were joined in the action only because their signatures were appended to the assignment at the request of Shober; and that they are not real parties in interest.

The learned judge of the court below held that under the averments of the complaint Wattles was one of the assignors and as such could not act as the agent of Shober for the purpose of signing a memorandum contemplated by the Statute of Frauds. The court was of the further opinion that the averment that Wattles was not a real party in interest did not overcome the earlier averment that he had an interest in the contracts assigned and that the allegation of Wattles' lack of any interest in the assignment could not be accepted in view of the provisions of the assignment attached to the complaint as an exhibit. The District Court also held that, as there was no averment of delivery of the assignment or that Shober acted under the assignment as sales agent for any of the coal companies, there was nothing by way of Shober's actual receipt and acceptance of the benefits of the assignment to remove the case from the operation of the statute. Accordingly, the court below held that the amended complaint failed to disclose a legally enforceable cause of action.

As federal jurisdiction of this case rests upon diversity of citizenship and the requisite amount in controversy, the substantive rights of the parties are to be determined according to local law. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. Included within such applicable law is the local rule of conflicts. Klaxon Company v. Stentor Electric Manufacturing Co., Inc., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477. In Pennsylvania, the situs of the federal jurisdiction in the instant case, the validity of a contract so far as it may be affected by the Statute of Frauds is generally determined by the law of the place of contracting. Bernstein v. Lipper Manufacturing Co., 307 Pa. 36, 43, 160 A. 770. Consequently

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we look to the law of Ohio in the first instance. The courts of that state have ruled that the Ohio Statute of Frauds is remedial and attaches to all contracts wherever made when suit thereon is brought in Ohio. Heaton v. Eldridge, 56 Ohio St. 87, 46 N.E. 638, 639, 36 L.R.A. 817,...