Krueger Corp. v. Detroit Trust Co., 11836.

• Decision Date: 10 February 1954
• Docket Number: No. 11836.,11836.
• Citation: 210 F.2d 152
• Parties: KRUEGER CORP. v. DETROIT TRUST CO.
• Court: U.S. Court of Appeals — Sixth Circuit

210 F.2d 152 (1954)

KRUEGER CORP. v. DETROIT TRUST CO.

No. 11836.

United States Court of Appeals, Sixth Circuit.

February 10, 1954.

Arthur E. Fixel, Detroit, Mich., Fixel & Fixel, Detroit, Mich., on the brief, for appellant.

Joseph S. Radom, Detroit, Mich., Kenney, Radom & Rockwell, Detroit, Mich., on the brief, for appellee.

Before SIMONS, Chief Judge, and McALLISTER and MILLER, Circuit Judges.

McALLISTER, Circuit Judge.

Appellant, a Wisconsin corporation, brought suit in the District Court for the Eastern District of Michigan, asking that the Addison Manufacturing Company render an accounting and be required to pay damages arising out of a breach of contract whereby the Addison Company agreed to process, or manufacture, certain wheel trim discs out of aluminum furnished by appellant. Further, appellant asked that the Addison Company be required not only to pay damages resulting from breach of contract, but also to pay damages for conversion of appellant's property consisting of the aluminum in question. The Addison Company denied that it was guilty of any breach of contract or conversion, and further defended on the ground that appellant was a foreign corporation which had not been authorized to carry on business in the State of Michigan, and could not, according to Michigan law, prosecute such a suit in the courts of that state; and that it was likewise barred from enforcing such contractual rights in the federal court. Subsequent to the commencement of suit, the Addison Company was adjudicated bankrupt, and the trustee in bankruptcy was substituted as the party defendant. Both the Addison Company and the trustee will hereafter be referred to as the appellee.

The district court held that, through the agreement of the parties, title to the aluminum in question had passed from appellant to appellee; that there was no trust relationship between the parties; that title to the property having passed to appellee, appellant had no grounds upon which to base a claim of conversion; and that, because appellant had not been authorized to do business in the State of Michigan, it could not maintain an action based on a contract which was unlawful under state law.

In our determination, we have been obliged to resort to the transcript of testimony and the original papers on file because of the inadequacy of the portions of record contained in the appendices to the briefs, but overlook this failure to comply with the appendix rule, inasmuch as the briefs and appendices were filed shortly after the adoption of such rule.

As disclosed by the findings of fact which are amply sustained by the evidence, it is clear that appellant had not complied with the Michigan statute which requires that a foreign corporation procure a certificate of authority before it can lawfully carry on business in Michigan; and that its contracts with appellee were intrastate transactions, unenforceable in the state courts, or in a federal court in Michigan.

We come, then, to the question of the claimed conversion by the Addison Company of the aluminum which appellant furnished to the manufacturer of the discs. Appellant contends that even though it did not comply with the Michigan statute requiring it to procure a certificate of authority before it could lawfully carry on business in the state, nevertheless, it had the right to maintain a suit for wrongful conversion of the aluminum to which it had title and which it confided to the possession of the Addison Company for the manufacture of the discs in question; and that the proofs entitle it to a judgment against appellee for wrongful conversion. There could, of course, be no basis for a claim of conversion if title to the aluminum had passed to the Addison Company; or if such aluminum had been wholly used up in manufacturing the discs which had thereafter been furnished to appellant or its customers.

The determination of this case rests entirely on the facts. It appears that on June 18, 1946, appellant purchased approximately 41,000 pounds of aluminum from the Milwaukee Stamping Company. The president of appellant company, who was its chief witness in the case, could not, or would not, tell how much appellant had paid for the aluminum, but other evidence indicated that the sum was $12,982.00. This included scrap aluminum, partially completed discs, and sheet aluminum. Three days after this purchase, on a Sunday, June 21, 1946, appellant company, without any prior consultation or business or contractual relationship with the Addison Company, brought by truck, from Wisconsin, to the latter's plant, in Michigan, a quantity of dies and a large amount of the aluminum, merely on the strength of a conversation with some promoter who, apparently, advised appellant's president that the Addison Company could do the manufacturing work contemplated by him. However, it was not until more than two weeks later, on July 8, that a contract was entered into between the two companies in the form of a written "purchase order." Appellant's president had arrived at the Addison Company's plant on the same day as the truckload of aluminum and immediately learned that the Addison Company did not have the proper equipment to do the processing work of stamping out the wheel discs. It was then agreed by appellant that the Addison Company would farm out the work to the Glenfield Machine & Tool Company in East Detroit, Michigan. The purchase order contract provided that Addison would arrange for the manufacture of 1850 partially processed wheel discs and recited that the aluminum had been received from appellant. It appears also to have been agreed that the Addison Company would arrange for the shipment of the completed discs to appellant's customers, and would bill them directly for a price specified by appellant. Out of the proceeds of the payments from such purchasers which were to be received by Addison, it was agreed that it would pay appellant 60 cents per disc.

When the work of manufacturing the discs was farmed out to the Glenfield Company, that company found that the dies were in bad condition and not suitable for the stamping work; they did not run true, and it was necessary to recondition them. This was done by the Glenfield Company, with the approval of appellant. The aluminum which had been removed from Addison's premises to the plant of the Glenfield Company for processing into wheel discs was thereafter used for this purpose; and several thousand discs were manufactured by the Glenfield Company and accepted by appellant. However, the aluminum furnished by appellant turned out to be old, hard aluminum, not of the right drawn quality, and unsuitable for stamping. As a result of the quality of the aluminum, breakages occurred in 25 per cent of the stampings. When the Glenfield Company called the attention of appellant's president to the fact that the aluminum was old, hard, and unsatisfactory for stamping, he replied that he knew it was old aluminum but that he had to buy what he could get and that if he had been able to secure the right kind of material, he would not have experienced the trouble he had. In spite of the fact that the president of the Glenfield Company told appellant's president of the shortcomings of the aluminum and that, in his opinion, the discs which appellant actually accepted were really unsatisfactory and defective, nevertheless, appellant, who was unable to secure any other aluminum — because it was not then available — told the Glenfield Company to go ahead and use up the material on hand for the making of the discs.

For reasons as obscure as are many of the other happenings in the case, it was thereafter decided, either by the Addison Company, or appellant, or both, to remove all of the dies and the remaining stock of aluminum from the Glenfield Company and take it to the plant of the O. K. Stamping Company at Fort Wayne, Indiana, and have the latter company do the stamping work. However, the Glenfield Company had charges in the amount of $2,238.61 against appellant for reconditioning its dies, and a further charge for stamping operations in the amount of $2,000.00. To secure the dies, Addison advanced the sum of $2,238.61 on appellant's behalf by giving it a check for that amount, which appellant endorsed over for payment to the Glenfield Company; and the dies were, accordingly, surrendered to appellant company.

Appellant then entered into a new contract with Addison which provided that in consideration of Addison's advancing the money, appellant "assigns to (Addison) sufficient aluminum to cover this advance." The agreement also set forth: "It is further understood that $.60 received for each wheel sold shall be returned to (appellant) until such time as their present stock of aluminum is exhausted with the exception that the $2238.61 advanced shall be retired by our retaining the said $.60 until such time as we have received $2238.61." At the same time, appellant gave Addison a bill of sale to "approximately" 20,000 pounds of aluminum then located at the plant of the Glenfield Company; and the aluminum was thereafter secured and removed...