In re Monongahela Distillery Co.

• Citation: 186 F. 220
• Decision Date: 18 April 1910
• Docket Number: 1,724.
• Parties: In re MONONGAHELA DISTILLERY CO.
• Court: U.S. District Court — Eastern District of Michigan

186 F. 220

In re MONONGAHELA DISTILLERY CO.

No. 1,724.

United States District Court, E.D. Michigan, Southern Division.

April 18, 1910

[Copyrighted Material Omitted]

Sloman & Sloman, for trustee in bankruptcy.

Bernard B. Selling and Arthur E. Fixel, for Monongahela Distillery Co.

Miller Smith, Paddock & Perry, for Henry H. Schufeldt Co.

DENISON District Judge.

Upon the petition of the Schufeldt Company for reclamation of goods, and the supplemental petition of the same company claiming the book accounts which accrued from the sale of goods disposed of before the adjudication, the referee found in favor of the petitioner and ordered the return to the Schufeldt Company of about 200 gallons of liquors which had been shipped by it to the bankrupt, awarded to the Schufeldt Company $114.13 in the hands of the trustee as the proceeds of other similar goods, and further awarded to the Schufeldt Company book accounts which had accrued to the bankrupt by the sale of other similar goods and which were uncollected at the date of the adjudication, and which had a face value of about $3,600. This finding was upon the theory that in the transactions in question the bankrupt had been factor and the Schufeldt Company had been consignor, and that the goods until sold, and then the substituted accounts, belonged to the consignor.

The trustee brings this petition for review and assigns several errors, which can be grouped as follows:

(1) The dealings between the Schufeldt Company and the Monongahela Company contemplated the sale by the latter in Michigan, and as a wholesale liquor dealer, of the liquors furnished for that purpose by the former, and that, because the bankrupt at the date of the arrangement had no license under Michigan laws, to do this business, the contract was invalid, and neither party is entitled to any legal remedy.

(2) The transactions amounted to a doing of business within the state of Michigan by the Schufeldt Company, and it cannot ask any aid from the courts, because it had not qualified itself, under Michigan laws, to do business, as a foreign corporation, within that state.

1. The Liquor License.

The annual license of the Monongahela Company as a wholesale liquor dealer expired May 1, 1909. A contract between the parties, looking to the shipment and sale of liquors to and by the Monongahela Company, as the factor for the Schufeldt Company, was made April 24th, and under that contract goods were shipped, before May 1st, amounting to about $1,500. Payments on account were made in July and August amounting to about $1,200, and a large amount of goods was returned. It does not appear whether any of the goods shipped or received before May 1st entered in their original form or in the form of substituted accounts into the award made by the referee; and the proofs furnish no means of determining this question.

The original arrangement of April 24th did not extend to any particular amount, and the Schufeldt Company was under no obligation on May 1st to ship any more than it had already shipped.

More goods being asked for, the Schufeldt Company's representatives came to Detroit, were unwilling to ship without more definite and exact arrangements, and entered into a further contract of the same nature, but giving it additional safeguards, and the shipments thereafter were made under and pursuant to the contract of May 10th. From May 15th to May 21st, shipments were made amounting to about $8,000. On May 28th the Monongahela Company took out its regular license, and no question exists of its authority to do business after that date. In August a large amount of the goods was returned to the Schufeldt Company. There is no proof from which it is possible to determine whether any of the goods shipped from May 1st to May 21st were received and sold before May 28th, or whether any such goods remained on hand in their original form when this petition was filed, or whether the book accounts on hand represented any such goods. If either this question or the one just above stated becomes material, it must be decided upon some theory of presumption.

I think the lack of license by the Monongahela Company until May 28th is immaterial for these reasons:

First. It does not appear that any of the subject-matter now in controversy arose out of shipments before May 28th, and I find no presumption to that effect; on the contrary, the ordinary presumption is that the remaining portion of an account is the product of the transactions of latest date, and goods consigned at over $3,200 were shipped after May 28th.

Second. Even if some shipments are involved, which were made before May 28th, it is even less probable that those sales by the consignee to its customers which remain unpaid for were made before that date; and I do not see how the absence of a license when the goods were shipped and received, although it might involve the immediate relations of the parties, would prevent the contemplated relations from coming into force as soon as the consignee was legally qualified to do the expected business. In the case of Niagara Falls Co. v. Wall, 98 Mich. 158, 57 N.W. 99, relied upon by counsel for the trustee, it appeared that the impediment preventing the consignee from lawfully doing the expected business continued until the contract had been rescinded by one party for a breach by the other; manifestly, a different situation from one where both parties continue after the temporary impediment is removed.

Third. Even if the contract of May 10th was wholly void, the trustee would not be helped in his present position, the title to the liquors would not have passed, and both the liquors and their proceeds would belong to petitioner, nor would petitioner, in that event, be barred from relief on the ground that both parties were in equal wrong, since there is nothing tending to show that petitioner doubted or had any reason to doubt the consignee's full, legal capacity to continue to carry on the business in which it had been for several years engaged.

2. The Foreign Corporation.

The question whether the carrying out of the arrangement of May 10th amounted to a doing of business by the Shufeldt Company within the state of Michigan is perhaps not free from doubt.

If this was doing business within the state, it was prohibited by that statute, any suit based upon such contract is likewise prohibited, and such prohibition will be observed by the federal courts as well as by the state courts. See Judge Lurton's opinion in Oakland Co. v. Wolf Co., 118 F. 239, 55 C.C.A. 93.

It is argued that this arrangement was a mere subterfuge for a warehouse and distributing sales agency, and should be treated accordingly. Whatever the rule as to an ordinary...