Coweta Fertilizer Co. v. Brown

• Decision Date: 16 June 1908
• Docket Number: 1,784.
• Citation: 163 F. 162
• Parties: COWETA FERTILIZER CO. v. BROWN.
• Court: U.S. Court of Appeals — Sixth Circuit

163 F. 162

COWETA FERTILIZER CO. v. BROWN.

No. 1,784.

United States Court of Appeals, Sixth Circuit.

June 16, 1908

This is a bill to have an accounting and to enforce a lien upon or trust in the proceeds of the sale of some hundreds of sacks of fertilizer. The bill shows that on June 27, 1901, the Coweta Fertilizer Company, a corporation of the state of Georgia, and having its factory and office within that state entered into a written contract with the defendant, a citizen of the state of Tennessee, whereby it agreed 'to furnish' to Brown, 'for sale' by him, certain amounts and kinds of fertilizers specifically described and having the analysis set out, delivery to be made in car load lots at three points named, all within the state of Tennessee. The paragraphs of this contract more directly bearing on the question at issue read as follows:

'(c) That the customer may sell all fertilizers at such advance over the prices hereinbefore stipulated as he shall see fit and the same shall constitute his entire compensation and commission hereunder. The customer agrees:

'(1) To receive during the continuance of this contract all said fertilizers for sale, and to take the same and pay therefor the said prices hereinbefore mentioned, and that any advance, over and above such price at which he may sell the same, shall constitute his entire compensation so far as the company is concerned. * * *

'(3) That, until sold or settled for by the customer, the fertilizers contracted for under this agreement shall remain the property of the company and when sold, all the proceeds of the sales of such fertilizers including cash, notes, open accounts and collections therefrom, whenever in possession of the customer, shall be kept separate and be held by the customer for the use and benefit of the company and subject to its order, and the same, together with any unsold fertilizers taken under this agreement, shall be the property of the company until the entire indebtedness of the customer arising under this agreement has been paid. * * *

'(6) That any failure on the part of the customer to fulfill his obligation arising under this agreement, shall cause the debt hereunder to become immediately due and payable to the company, and any report or occurrence unfavorable to his credit shall terminate this agreement at the option of the company. * * *

'(9) That all shipments shall be made under this agreement by or before December 1, 1901, and that the payment of all taken is guaranteed in full to the company at the prices stated, and settlements are to be made on or before December 1, 1901, by cash or negotiable notes (on the company's regular form without erasure) of the customer, maturing 1-3 Ea.Nov. 15, Dec. 1, 15, 1902, and payable at Greenville, Tenn., Bank of . . . . If the customer pays before December 1, 1901, a discount will be allowed at the rate of 7 per cent. per annum, from date of payment to December 1, 1901.

'(10) That this agreement shall be signed in quadruplicate and be operative only after being approved in writing by the company's home office. It is further agreed by and between the parties hereto:

'(x) That the company shall have the right to enforce the collection of the notes of the customer, given it in settlement for said fertilizers, upon the maturity of same, notwithstanding there may be any outstanding and unpaid accounts or notes held by him for the sales of the said fertilizers made by him, or on hand unsold any of said fertilizers, and any renewals given of notes under this agreement, or other forbearance or indulgence of any kind extended to the customer, or to the maker or endorser of any notes given by the party purchasing from him the fertilizers agreed to be furnished herein, shall not affect its terms and stipulations.

'(y) That the company shall be at no costs, expenses, or charges whatever in the collection of notes and obligations of purchaser of said fertilizers delivered to or held for the company by the customer, but all the same shall be borne by the customer.

'(z) That the customer will pay over to the company all the cash proceeds of sales made for cash, when sold, and on or before the first day of December, 1901, will send to the company a complete list of his time sales, and endorse, if necessary, and surrender to the company all notes received by him from the purchaser of said fertilizers, which notes are to be returned by the company to him, if no contrary reason arises, for the purpose only of collection and remittance to the company, and when so returned are to be receipted for, in trust, to the company.'

The bill charges that the quantity and quality of fertilizers shown by an exhibit were received by the defendant, that all or nearly all were sold by him to his customers, and that proceeds aggregating $3,500, either in money or customer's notes, have been received by him, and are withheld by him, he having paid over or accounted for only $105, and that he is accountable for the remainder. It then shows that the defendant refuses to account for the said proceeds as provided by said contract made an exhibit to the bill, 'but, under some pretended claim that the goods did not contain the ingredients called for by the statutes of Tennessee, refuses to recognize your orator's rights in the premises or to account to it. * * * ' It then avers that this conduct amounts to a breach of trust, as he holds said proceeds, as well as any goods unsold, in a fiduciary capacity and as the trustee of complainant, that it is remediless in a court of law or otherwise than in a court of equity. The prayer is for an accounting for the goods sold and unsold and of the proceeds 'whether in notes or cash'; that the complainant 'be decreed to be entitled to, and to recover such of said goods on hand as may not have been sold and be decreed to be entitled to, and recover from said defendant all moneys collected by him, the proceeds of said goods, and all notes or choses in action received as the proceeds of such goods, where the same have not been paid for in money; and that by a proper decree of this court the title and possession of such notes and choses in action be vested in your orator, and the same be required to be delivered to it; that where the same cannot be so turned over and delivered, or if the court shall not decree that the same be so delivered, that orator have a decree against said defendant for the face value of the said choses in action.'

In this view of the jurisdiction of a court of equity, we cannot deny relief, unless the contract to which the complainant appeals is illegal and unenforceable for some one or more of the grounds urged against it. We cannot, therefore, escape a decision touching the merits of the case, for it is well established that, when one cannot make out a case for relief without relying upon an illegal contract, he cannot recover.

The defendant demurred, first, because complainant's remedy, if any he had, was complete and adequate at law; second, because neither the description and analysis of the fertilizers sold nor the averments of the bill show that said fertilizer conformed in quality to the requirements of the law of Tennessee, but that the same constituted goods which could not be legally sold under the statutes in force within the state. The demurrer was overruled. The answer denies that the complainant has ever complied with the Tennessee statute prescribing terms upon which corporations of other states may do business within that state; denies that the fertilizer which he had received conformed to the Tennessee statute regulating the sale of fertilizers within the state; denies that he is indebted to the complainant in any sum, and says that he did business with complainant the previous year and had bought and sold a large quantity of fertilizers, mainly upon a credit; that before making collections he paid to complainant his full account; that subsequently the Supreme Court of Tennessee had decided that fertilizers which did not conform to the law regulating their sale were illegally sold and that no suit would lie to recover the sale price; that in consequence of this ruling he had not been able to collect much of the amount due him for sales so made in 1900, as well as for very little of that sold in 1901. The sums thus lost to him by the defective character of complaint's fertilizers he pleads as an offset to anything which the court might find was due from him.

Upon the final hearing the court below dismissed the bill without prejudice to a suit at law.

Alex. King, for appellant.

Dana Harmon, for appellee.

Before LURTON and RICHARDS, Circuit Judges, and KNAPPEN, District judge.

LURTON Circuit Judge (after stating the facts as above).

1. The concession of learned counsel for both parties is that the contract under which Brown received the goods of the Coweta Company was one of sale, and not one of bailment. All of the rights and risks of ownership pertained to the buyer. There was an attempt to retain the title until the goods were paid for, but this, if valid under the public policy of Tennessee (see Star Manufacturing Co. v. Nordeman et al., 118 Tenn. 384, 100 S.W. 93), was only for the purpose of security. The goods were bought to be resold. When a sale occurred, assuming the title effectually reserved, the title passed...