Kansas City Wholesale Grocery Co. v. Weber Packing Corporation

Decision Date17 November 1937
Docket Number5745
Citation93 Utah 414,73 P.2d 1272
CourtUtah Supreme Court

Rehearing Denied December 31, 1937.

Appeal from District Court, Second District, Weber County; E. E Pratt, Judge.

Action by the Kansas City Wholesale Grocery Company against the Weber Packing Corporation. From a judgment on a directed verdict for defendant, plaintiff appeals.


Joseph E. Evans, of Ogden, for appellant.

DeVine Howell & Stine and A. W. Agee, all of Ogden, for respondent.

FOLLAND, Chief Justice. HANSON, WOLFE and LARSON, JJ., concur. MOFFAT, J., dissent.


FOLLAND, Chief Justice.

This is an action to recover money paid for certain catsup on grounds of breach of implied warranty. The defendant, Weber Packing Corporation, sold by contract of August 4, 1930, and in March, 1931, shipped, 303 cases of tomato catsup to plaintiff, Kansas City Wholesale Grocery Company. In September of 1931 the 271 cases of catsup remaining unsold in plaintiff's warehouse were examined by an inspector of the Federal Food & Drug Administration and after a microscopic examination of samples from 18 cans by competent chemists the catsup was found to contain a mold filament in 67 per cent of the microscopic fields examined. It is alleged that the federal regulations condemn, as unfit for food, catsup containing such mold in excess of 66 per cent of the microscopic fields examined.

A libel against the catsup was prosecuted by the government in the United States District Court at Kansas City and the entire 271 cases of catsup condemned and by the United States marshal destroyed. The present action was brought by the grocery company to recover from the packing corporation the amount paid by it for the destroyed catsup, together with interest. From a judgment on a directed verdict for defendant, plaintiff appeals.

A number of interesting questions are raised. Defendant urges five obstacles in the way of recovery by plaintiff: (1) That plaintiff is not entitled to maintain the action in the state court because it is a Missouri corporation which has never qualified by compliance with the laws of Utah to do business within this state. (2) The contract upon which the action is founded is void as to plaintiff because its making constituted doing business within the state by a nonconforming foreign corporation. (3) That the transaction between the packing corporation and the grocery company did not constitute a shipment in interstate commerce and therefore did not fall within the operation of the Federal Food and Drug Act (as amended, 21 U.S.C. A. § 1 et seq.). (4) The contract expressly provides that all claims except for "swells" must be presented within ten days from the receipt of the goods; that the goods were delivered by the packing corporation to the grocery company at North Ogden, Utah, March 1, 1931, and that no claim was presented for the alleged loss until September 30, 1931, or more than ten days after the receipt of the goods. (5) The condemnation of the catsup by the government is not binding on defendant because it received no notice of the libel, and, further, that there is no proof of any standard of purity of tomato catsup established by the regulations of the Department of Agriculture and therefore no proof of any violation of any such regulation.

It would seem the contract of purchase was made and performed in Utah. The order for the goods was solicited from the grocery company on behalf of the packing corporation by a broker in Kansas City, Mo. The written contract of sale was signed by the grocery company at Kansas City and sent to Ogden, where it became a binding obligation on the part of both parties upon acceptance and execution by the packing corporation. A contract between parties in different states is made at the place where the last act necessary to give it validity is performed. Lawson v. Tripp, 34 Utah 28, 95 P. 520. The written contract provided: "Terms: F. O. B. sellers factory, sight draft with bill of lading." The buyer was to carry its own insurance and "Notwithstanding shipped to seller's order, goods are at risk of buyer from and after delivery to carrier." The contract was dated August 4, 1930. The goods were delivered by the packing corporation to the railroad carrier for shipment March 24, 1931, and went forward in a pool car shipped by and in the name of North Ogden Canning Company. The catsup was not a sufficiently large consignment to fill a car so arrangements were made by the shipper, the packing corporation, for the goods to go forward in a car containing other goods shipped by the North Ogden Canning Company and consigned by it to a consignee in Kansas City. The catsup was received, paid for, and lodged in plaintiff's warehouse at Kansas City.

We have, therefore, a Utah contract, fulfilled by the packing corporation by delivery of the goods to a carrier for transportation to Kansas City in interstate commerce.

The grocery company is a Missouri corporation and has never complied with the provisions of section 18-8-1, R. S. Utah 1933, so as to entitle it to do business in the state of Utah and enjoy the benefit of the laws of this state relating to corporations pursuant to section 18-8-5, R. S. 1933, as amended by chapter 12, Laws of Utah 1933, which provides that a noncomplying corporation doing business in Utah shall not have the right to sue, prosecute, or maintain any action in the courts of this state, and that any contract made in pursuance of such business by such corporation shall be void. It is undisputed that the grocery company never at any time had any office, warehouse, or place of business in Utah, nor did it own or manage any property or business in the state. It had neither salesmen nor buyers nor representatives of any kind in the state nor had it sold any of its merchandise here or bought any goods or merchandise within the state except only the transaction in question in this case and possibly one other purchase of catsup from the same packing corporation.

Under these facts it is clear plaintiff was not doing business in Utah within contemplation of the cited statute. Certainly the cases of First National Bank of Price v. Parker, 57 Utah 290, 194 P. 661, 12 A. L. R. 1373; and Dunn v. Utah Serum Co., 65 Utah 527, 238 P. 245, cited and relied on by defendant, do not sustain its position. In the Parker Case it was conceded the corporation had been and was doing business within the state. That question was not in issue. In the Dunn Case, the corporation had at the time of suit complied with the law, but the contracts in suit were entered into by it prior to the time of its qualification. The court held they were made at a time when the company was doing business in the state without having complied with the enabling statute. The evidence showed the corporation had been doing business other than merely the making of the note and mortgage in question. No case has been cited, and we have found none, holding that the purchase of goods by a foreign corporation under facts similar to those here is such "doing business" as will bring the corporation within the terms of the statute. The mere purchase, even under a Utah contract, of goods in Utah to be shipped to Missouri, is a transaction in interstate commerce which the Utah law regulating foreign corporations does not touch. McNaughton Co. v. McGirl, 20 Mont. 124, 49 P. 651, 38 L. R. A. 367, 63 Am. St. Rep. 610; Lemke v. Farmers Grain Co., 258 U.S. 50, 42 S.Ct. 244, 66 L.Ed. 458; Dahnke-Walker Milling Co. v. Bondurant, 257 U.S. 282, 42 S.Ct. 106, 66 L.Ed. 239. Miller Brewing Co. v. Capitol Distributing Co. (Utah) 72 P.2d 1056.

We need not decide, and therefore do not, whether the catsup was the property of the buyer or the seller at the beginning of or during the transportation. Irrespective of ownership at that time, the packing corporation knew the catsup was intended for shipment in interstate commerce and it actually placed the goods in the channels of such commerce. The transaction was therefore within the operation of the Federal Food and Drug Act. Glaser, Kohn & Co. v. United States (C. C. A.) 224 F. 84, 85.

Defendant next objects that plaintiff is prohibited from recovering because the contract provides, "All claims other than swells must be made within ten days from receipt of goods," and no claim for the presence of mold was made within ten days from the date of receipt of the goods. Plaintiff, however, contends that there is an implied warranty on the part of the seller that the food product would be fit for the purpose for which it was sold and that the express provision of the contract does not apply to latent defects, such as the presence of mold, which could not be discovered by ordinary inspection, such as taste, smell, and sight. There is no dispute but that the presence of mold could only be discovered by a careful microscopic examination.

Where the seller is also the manufacturer there is an implied warranty that the goods sold as well as the sample, are free from latent defects not discoverable on ordinary examination. Nixa Canning Co. v. Lehmann-Higginson Grocer Co., 70 Kan. 664, 79 P. 141, 70 L. R. A. 653. When the goods are sold for shipment in interstate commerce, the implied warranty that the goods are fit for the purpose for which they were manufactured and sold should meet the test of the federal pure food act.

With respect to the timeliness of the claim, it is true, clauses in contracts limiting the time for inspection and making claim for defects are valid and binding where the defects are patent, but not where they are latent. National Grocery Co. v. Pratt-Low Preserving Co., 170 Wash. 575 17 P.2d 51, 54, In this...

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