Groton Bridge & Mfg. Co. v. American Bridge Co.

• Decision Date: 21 March 1907
• Citation: 151 F. 871
• Parties: GROTON BRIDGE & MFG. CO. v. AMERICAN BRIDGE CO.
• Court: U.S. District Court — Northern District of New York

151 F. 871

GROTON BRIDGE & MFG. CO. v. AMERICAN BRIDGE CO.

United States Circuit Court, N.D. New York.

March 21, 1907

Jones McKinney & Steinbrink (Henry R. Follett, of counsel), for plaintiff.

Stetson Jennings & Russell, for defendant.

RAY District Judge.

The plaintiff, a business corporation of the state of New York sets out a cause of action against the defendant, a corporation of the state of New Jersey, alleging the sale and delivery to defendant and the acceptance by it of certain contracts at and for the agreed price of $165,631, which sum it agreed to pay the plaintiff therefor; that such sum has been duly demanded, but that no part of same has been paid except the sum of $130,590.97, leaving a balance due of $35,040.12, with interest from May 12, 1900, for which sum the plaintiff demands judgment. The defendant answers, in its first defense, in substance, admitting the incorporation of the parties as alleged, but alleging that prior to the commencement of the action the plaintiff corporation was voluntarily dissolved, and since then has and now continues in existence for the purpose of winding up its business in the mode and manner provided by the laws of the state of New York; also denying the other allegations of the complaint, except it admits that 'about May 12, 1900, by an agreement in writing, copy of which is hereto annexed and made a part hereof marked 'No. 1,' the Groton Bridge & Manufacturing Company sold, assigned, transferred, and set over unto this defendant certain contracts enumerated in said agreement for which the defendant agreed to pay a certain price as provided in said agreement and upon the terms and conditions therein stated,' and that thereafter said bill of sale or assignment 'No. 1' was modified by a certain supplemental agreement, 'copy of which is hereto attached and made a part hereof marked 'No. 2." Therefore, without any statement of default or nonperformance by the plaintiff, it alleges the purchase by defendant from plaintiff of certain contracts, and an agreement to pay therefor as stated in the agreements annexed to the answer.

The answer then sets up five defenses and counterclaims denominated as follows:

'For a further and separate defense and a counterclaim to the cause of action set forth in the complaint,' or in substance that.

This contract referred to as 'No. 1' and 'No. 2,' as a whole, contains certain guaranties, and in the first counterclaim, also stated as a defense, these writings are referred to as hereto annexed, and a breach thereof is alleged, and that by reason thereof $84,963.74 became and remains due to the defendant from plaintiff. This second defense and first counterclaim also alleges that the sale and transfer of contracts mentioned in the complaint is the same sale and transfer of contracts mentioned in these agreements and this second defense and first counterclaim. This is a good and sufficient allegation of a counterclaim. This is demurred to. The next or second counterclaim for $58,790.59 is demurred to specifically; so of the third counterclaim for $60,702.77. The same is true of the fourth counterclaim for $18,295.78, and of the fifth for $5,645. The total of the counterclaims is $228,398.08, and defendant demands judgment for the balance due it after deducting complainant's claim which balance is alleged to be $88,501.29. This is the balance for which the defendant demands judgment, not the amount of any one counterclaim, or of all the counterclaims. Hence the demurrer to the counterclaim and separate counterclaims, 'that the defendant has not legal capacity to recover upon the counterclaim for $88,501.29 with interest thereon from July 22, 1902, in its answer set forth, in that,' etc., does not in terms, or by intelligible reference, refer to anything set forth in the answer. Evidently the pleader intended to refer to all the five counterclaims and raise his objections to all of them, and he takes the balance alleged to be due the defendant after deducting from the total of the counterclaims the sum that would have been due the plaintiff, but for such counterclaims, as the amount of the counterclaim. So treating this part of the demurrer, it must be overruled, as the first counterclaim sets out, as a part thereof, the said agreements 'No. 1' and 'No. 2,' and a breach thereof, etc. It does not appear upon the face of the answer and the counterclaim, or either, that at all times in reference to the work in question defendant was doing business in New York, and that the contracts under and upon which the work was to be done were to be performed and were performed within the state of New York, or that the work referred to was done in the state of New York. A list of the contracts, but not the contracts, is set forth in Schedule A of the agreement, and the answer refers to them as 'enumerated' in the agreement. But, even were these statements correct, and even if these facts did appear, there is nothing in the statutes referred to that prohibits or prevents the defendant from recovering on the agreements.

If a foreign corporation does business in the state of New York and earns money, or sells property in the state of New York on credit, or makes, or assumes, a contract entered into by others, to do work in the state of New York, and does the work and earns the money or performs the contracts assumed, it may sue for and recover the money due in the courts of the United States, even though it has failed to comply with the provisions of section 15 of chapter 687, p. 1805, of the Laws of the state of New York 1892, and the acts amendatory thereof, or with the provisions of section 181, c. 908, p. 856, of the Laws of said state 1896. Nor is it necessary in a suit in the courts of the United States to allege compliance with such sections of such laws, or either of them, in order to state a good cause of action on such claims as are above mentioned, or either of them. The contract was not void or illegal, and the defendant to make its cause of action set out in the counterclaims, if any are set out, is not compelled to rely on an illegal contract. If such were the facts, then defendant could not recover on its counter-claims. It is undoubtedly true that the Legislature of the state of New York may by express provision, in certain cases, deny to a foreign corporation the right or privilege of resort to her courts for the enforcement of such contract rights (Welsbach Co. v. N.G. & E. Co., 96 A.D. 52, 89 N.Y.Supp. 284, affirmed 180 N.Y. 533, 72 N.E. 1152; but see Fuller & Co. v. Schrenk, 58 A.D. 222, 224, 68 N.Y.Supp. 781, affirmed 171 N.Y. 671, 64 N.E. 1126, and Parmele Co. v. Hass, 171 N.Y. 579, 581, 64 N.E. 440), but it has no control over the courts of the United States, and, if such a corporation has such a cause of action arising on contract, it may recover in any United States court having jurisdiction in the very teeth of an express statute of the state saying it shall not. The jurisdiction and power of the courts of the United States are determined by the Constitution of the United States and the acts of Congress not in conflict therewith. This, however, is quite a different proposition from that involved when the contract sued upon is illegal and void. Miller v. Ammon, 145 U.S. 421, 12 Sup.Ct. 884, 3l L.Ed. 759, where it is held:

'The general rule of law is that a contract made in violation of a statute is void; and that, when a plaintiff cannot establish his cause of action without relying upon an illegal contract, he cannot recover.'

Nor is it a case where the one party, a foreign corporation, is suing another, a domestic corporation, to recover damages for the nonperformance of an agreement made by it in refusing to go on under it and execute its provisions, where the laws of the state where it was made and to be performed forbade the plaintiff corporation to do business in such state until it had complied with certain conditions precedent, and also made the contract to do such business in such state void as to it, and the plaintiff corporation has not complied with the provisions of such state laws. Diamond Glue Company v. United States Glue Company, 187 U.S. 611, 612, 613, 23 Sup.Ct. 206, 47 L.Ed. 328. I do not question the power of a state to provide that all contracts, not affecting interstate commerce, made within and to be performed within its borders by the parties, between one of its citizens, corporation, or individual, and a foreign corporation, shall be void in case such foreign corporation fails to comply with lawful conditions imposed as a prerequisite to its doing business within such state. The question here for decision is: Has the state of New York in or by the statutes referred to made the contract in question illegal or void? If so, and the contract relied upon by the defendant is the same one under which the accounts were transferred and upon which the plaintiff must rely for recovery, it cannot maintain the action. Diamond Glue Co. v. United States Glue Co., 187 U.S. 614, 23 Sup.Ct. 206, 47 L.Ed. 328; McMullen v. Hoffman, 174 U.S. 639, 19 Sup.Ct. 839, 43 L.Ed. 1117. The plaintiff corporation, by those written agreements 'No. 1' and 'No. 2,' sold to defendant corporation certain contracts made by plaintiff corporation with certain parties, and which the defendant corporation assumed and agreed to perform, and as to and in respect to which plaintiff corporation made certain guaranties.

The plaintiff corporation now sues to recover the price agreed to be paid for such contracts by the terms of the agreement; in other words, seeks to enforce its provisions. The defendant corporation says to plaintiff: 'You have not performed on your part, but, to our damage, have violated same, and we counterclaim our damage. ' There...