German Sav. Inst. v. De La Vergne Refrigerating Mach. Co.

• Decision Date: 07 October 1895
• Docket Number: 511.
• Citation: 70 F. 146
• Parties: GERMAN SAVINGS INST. v. DE LA VERGNE REFRIGERATING MACH. CO. et al. [1]
• Court: U.S. Court of Appeals — Eighth Circuit

70 F. 146

GERMAN SAVINGS INST. v. DE LA VERGNE REFRIGERATING MACH. CO. et al. ^[1]

No. 511.

United States Court of Appeals, Eighth Circuit.

October 7, 1895

Leo Rassieur and B. Schnurmacher, for plaintiff in error.

George A. Madill and Charles Nagel, for defendants in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

The German Savings Institution, a corporation, the plaintiff in error, brought an action against the De La Vergne Refrigerating Machine Company, a corporation, and John C. De La Vergne, the principal stockholder of that corporation, the defendants in error, for that portion of the purchase price of the assets, good will, and capital stock of the Consolidated Ice Machine Company, a corporation, which the defendants in error promised to pay to it by a written agreement made on April 16, 1891. The plaintiff was a stockholder of the Consolidated Ice Machine Company, and the defendants answered that the plaintiff and his costockholders had failed to assign the stock of that company as they had promised to do in this agreement. The case was tried by the court upon an agreed statement of facts, and a judgment was rendered for the defendants. These were the material facts:

The De La Vergne Refrigerating Machine Company, hereafter called the De La Vergne Company, was a corporation of the state of New York, and the Consolidated Ice Machine Company, hereafter called the Consolidated Company, was a corporation of the state of Illinois. These corporations were engaged in manufacturing and selling ice-making machines, and were rivals in that business. On October 14, 1890, the Consolidated Company made a general assignment for the benefit of its creditors. On April 16, 1891, that company and its stockholders, one of whom was the plaintiff, made a bill of sale and an agreement with the De La Vergne Company and De La Vergne which recites that, 'whereas, * * * the assets of the said party of the first part (the Consolidated Company), in the opinion of the said party of the second part (its stockholders), exceed in value the liabilities thereof and consist in part of the good will of said party of the first part (which good will has been established by six years of successful manufacture of refrigerating and ice-making machines, together with an expenditure of the earnings from such manufacture); and whereas the said party of the third part (the De La Vergne Company) is willing to acquire such rights as the said parties of the first and second parts can assign in and to the said assets, subject to the obligations of said party of the first part: * * * Now, therefore, in view of the premises, and for and in consideration of the mutual advantages to be gained by the execution of this contract,' the Consolidated Company and its stockholders 'agree and covenant to and with the parties of the third and fourth parts (the De La Vergne Company and De La Vergne) to bargain, sell, and convey, and by these presents do bargain, sell, and convey, unto the said party of the third part, all their right, title, and interest in and to the assets of the said party of the first part, subject to the payment of its obligations'; the De La Vergne Company and De La Vergne covenanted and agreed to issue to the plaintiff in error the full-paid capital stock of the De La Vergne Company to the amount of $2,500 par value, to issue to its costockholders a proportionate amount of such stock so that all the stockholders would receive in the aggregate $100,000 in such stock; the stockholders of the Consolidated Company agreed to assign to De La Vergne; within 10 days from the date of the agreement, all the full-paid stock of the Consolidated Company, which was 1,000 shares, to take $100,000 in cash in lieu of the $100,000 in stock of the De La Vergne Company, and promised and agreed not to enter into the business of selling ice-making machines in the United States, except in the state of Montana, for 10 years; and the De La Vergne Company and De La Vergne agreed to issue the $100,000 of capital stock in the De La Vergne Company to the stockholders of the Consolidated Company within 60 days after the stock of the latter company was assigned to De La Vergne. Within 10 days after the date of this agreement, the certificates which represented the 1,000 shares of the stock of the Consolidated Company, and written assignments of that stock executed by the parties who held the certificates, were delivered to De La Vergne, but 125 of these shares were held by P. J. Lingenfelder and Leo Rassieur as executors, and 90 shares were held by them as trustees, under the will of E Jungenfeld, deceased, and they assigned these shares, without an order authorizing them so to do from the probate court in the state of Missouri in which the estate of Jungenfeld was in the process of administration. On April 27, 1891, four specific defects in the assignments of the 1,000 shares of stock were pointed out by counsel for De La Vergne, and the means of curing them were suggested. On April 29, 1891, these defects were cured by the delivery to the counsel of De La Vergne of suitable instruments of further assurance of title. No objection was made in this letter, or at any time prior to April 10, 1893, that the assignments of the executors and trustees were insufficient because no order of the probate court had been obtained authorizing the assignment. On the other hand, the counsel for De La Vergne wrote on April 27, 1891, respecting 25 of these shares: 'These shares are transferred by the signature of P. J. Lingenfelder and Leo Rassieur, executors of Ed Jungenfeld, deceased, which, of course, would be regular.' In July, 1891, the former stockholders of the Consolidated Company demanded the $100,000 of capital stock in the De La Vergne Company, but they received no response to their demand until September 12, 1891, when the counsel for De La Vergne objected to issuing and delivering this stock on several frivolous grounds, one of which was that the stock of the Consolidated Company had not been assigned in time, and wrote: 'Pending further information on these points, I have still in my possession the papers which you have sent me, and sent to Mr. De La Vergne, which, of course, if my views as above expressed are correct, I am ready to pass over to whoever is legally entitled to the custody of the same, which is a question which I am not willing personally to decide.' The right to the assets of the Consolidated Company, subject to its liabilities, and the good will of its business, which were conveyed to the De La Vergne Company by the bill of sale and agreement of April 16, 1891, were never reconveyed; the covenant of the stockholders to refrain from transacting the ice-making business for 10 years was never released; and none of the certificates and assignments of the stock of that company were ever delivered back to its former stockholders. It is assigned as error that upon this state of facts the judgment should have been for the plaintiff.

One who receives the benefits of the substantial performance of a contract, and retains them, after a technical default in the performance by his adversary, until it is impossible to put the latter in the situation in which he was when the contract was made, and when the default occurred, cannot entirely defeat an action for the specific performance of the contract, or an action for the price named in the agreement on the ground that the plaintiff has failed to completely perform the contract on his part. When a contract has been partially performed, and one of the parties to it makes default, the other has a choice of remedies. He may and he must rescind or affirm the contract, but he cannot do both. If he would rescind it, he must immediately return whatever of value he has received under it, and then he may defend against an action for specific performance, or for the price of the property (if the agreement was a contract of sale), and he may recover back whatever he has paid or delivered under it. On the other hand, he may, and if he retains its benefits he does, affirm the contract, and in that case he can maintain a suit for specific performance against his adversary, or an action for damages for failure to perform, or he may, if opportunity offers, offset those damages against the amount he has agreed to pay under the contract. He cannot, however, while he retains the benefits of a substantial performance, totally defeat an action for the price which he has agreed to pay, or for the specific performance of the contract on his part, on the ground that the plaintiff has not completed the performance required of him by the contract. He cannot at the same time affirm the contract by retaining its benefits and rescind it by repudiating its burdens. Hunt v. Silk, 5 East, 449; Hammond v. Buckmaster, 22 Vt. 375; Brown v. Witter, 10 Ohio, 143; Dodsworth v. Iron Works, 13 C.C.A. 552, 557, 66 F. 483; Swain v. Seamens, 9 Wall. 254, 272; Beck v. Bridgman, 40 Ark. 382, 390; Andrews v. Hensler, 6 Wall. 254, 258; Conner v. Henderson, 15 Mass. 319, 321; Teter v. Hinders, 19 Ind. 93; Howard v. Hayes, 47 N.Y.Super.Ct. 89, 103; Welsh v. Gossler, Id. 112; Underwood v. Wolf, 131 Ill. 425, 23 N.E. 598; Brown v. Foster, 108 N.Y. 387, 15 N.E. 608; Vanderbilt v. Iron Works, 25 Wend. 665; Lyon v. Bertram, 20 How. 149, 153-155; Clark v. Steel Works, 3 C.C.A. 600, 53 F. 494, 499; Voorhees v. Earl, 2 Hill, 288, 294; Barnett v. Stanton, 2 Ala. 181, Churchill v. Holton, 38 Minn. 519, 38 N.W. 611; Treadwell v. Reynolds, 39 Conn. 31; 21 Am. & Eng.Enc.Law, 557, note 2. The reason of this principle is that the retention of the benefits of substantial performance after default is utterly inconsistent with the position that the default has...