Mobile Shipbuilding Co. v. Federal Bridge & Structural Co.
| Decision Date | 25 February 1922 |
| Docket Number | 3001. |
| Citation | 280 F. 292 |
| Parties | MOBILE SHIPBUILDING CO. v. FEDERAL BRIDGE & STRUCTURAL CO. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Rehearing Denied April 5, 1922.
E. E Jacobson, for plaintiff in error.
Amos C Miller, of Chicago, Ill., for defendant in error.
Before BAKER, ALSCHULER, and EVANS, Circuit Judges.
Describing the parties as they appeared in the District Court, it appears that plaintiff brought this action to recover damages for defendant's failure to carry out a contract which had been negotiated with the Kelly-Atkinson Construction Company and which had been assigned to defendant. This contract provided for the fabrication by the plaintiff of all the structural material necessary for the completion of 18 composite cargo-carrying steamers for the United States Shipping Board Emergency Fleet Corporation. It was charged that defendant agreed to 'assume, keep, and perform all the terms of said contract on the part of said Kelly-Atkinson Construction Company to be kept and performed.'
Plaintiff fabricated the material for 6 of such steamers, for which it was paid. Defendant then canceled its contract, and plaintiff sought by this action to determine and recover its damages. Defendant defaulted, but subsequently moved to set aside the default, and to file its pleas and affidavit of merits. The motion was denied, on the ground that the supporting affidavit was insufficient; but leave was granted to renew the motion, if satisfactory supporting affidavits were presented. Availing itself of the opportunity thus presented, defendant renewed its motion and sustained its application by affidavits of an officer and an engineer of the Kelly-Atkinson Construction Company. These affidavits, instead of supporting the defendant's contention, tended strongly to establish the plaintiff's allegations. The motion to open the default was therefore denied, and counsel thereafter stipulated 'that a jury shall be waived in said cause, and the cause submitted to the court for the assessment of damages. ' Upon the issue of damages much evidence was received, supplemented by numerous exhibits, which contained a mass of figures on costs, maintenance charges, equipment expenses, etc. Defendant attacked plaintiff's figures on the ground that much of the loss indicated might have been avoided, had the plaintiff devoted its plant to other construction work, etc.
The court, while making no special finding, found 'the issues for the plaintiff and assessed the plaintiff's damages at the sum of $149,301.70. ' Our examination of the testimony convinces us that there was ample evidence to support the amount of damages fixed by the court. It would serve no useful purpose to go into the mass of figures to sustain this conclusion. There was evidence tending to show that plaintiff's damages exceeded the amount of recovery, and we conclude the trial judge did not err in making its determination.
We have likewise examined the record to determine whether defendant was erroneously denied its motion to open the default. It appears that defendant was granted repeated opportunities to present affidavits of merits in support of its plea; that several such affidavits were on information and belief, and disclosed no personal knowledge on the part of the affiant. Finally, however, defendant presented the affidavits of certain officers of the Kelly-Atkinson Construction Company, and these affidavits showed that defendant assumed the obligations due plaintiff under the contract. There was, therefore, clearly no error or abuse of discretion on the part of the court in adjudging defendant in default.
Defendant's liability turned upon its assumption of the obligations of the Kelly-Atkinson Construction Company under its written contract with plaintiff. While the court was justified in recognizing the action as a default, we do not agree with plaintiff's counsel that a cause of action sufficient to support an action at law was disclosed. Plaintiff's position, to quote its own language is:
'The declaration was based, not upon a novation, but upon the assumption by defendant of the liability of the Kelly-Atkinson Construction Company under the contract of August 11, 1917, upon which contract of assumption the plaintiff, though it was not a party thereto, is permitted to sue.'
Respecting its legal position counsel further says:
'The law is well settled, it is true, that in England and in certain jurisdictions in this country the assumption by C. of the obligations in a contract between A. and B. does not create a liability from C. to A.; but the law in Illinois is just the contrary, and the federal courts will follow the decisions of Illinois in this respect.'
If this position be sustained, then an affirmance of the judgment necessarily follows. It must be admitted that in most jurisdictions, upon facts similar to those disclosed in this case, A. may sue C. in an action at law and recover. For collection of cases, see Williston on Contracts, vol. 1, Sec. 381; 9 Cyc. 378. That he cannot do so in all of the states must also be recognized. See Williston on Contracts, supra, and 9 Cyc. 375.
The federal courts have taken the position that such a liability cannot be enforced in an action at law. National Bank v. Grand Lodge, 98 U.S. 123, 25 L.Ed. 75; Cragin v. Lovell, 109 U.S. 194, 3 Sup.Ct. 132, 27 L.Ed. 903; Willard v. Wood, 135 U.S. 309, 10 Sup.Ct. 831, 34 L.Ed. 210; Constable v. National Steamship Co., 154 U.S. 51, 14 Sup.Ct. 1062, 38 L.Ed. 903; German Alliance Ins. Co. v. Home Water Supply Co., 226 U.S. 220, 33 Sup.Ct. 32, 57 L.Ed. 195, 42 L.R.A. (N.S.) 1000; Goodyear Shoe Machinery Co. v. Dancel, 119 F. 692, 56 C.C.A. 300. Liability may be enforced, however, in a suit in equity. Keller v. Ashford, 133 U.S. 610, 10 Sup.Ct. 494, 33 L.Ed. 667; Union Life Ins. Co. v. Hanford, 143 U.S. 187, 12 Sup.Ct. 437, 36 L.Ed. 118; Johns v. Wilson, 180 U.S. 440, 21 Sup.Ct. 445, 45 L.Ed. 613; Dancel v. Goodyear Shoe Machinery Co., 144 F. 679, 75 C.C.A. 481.
We have searched the record in vain for any evidence disclosing the situs of the execution of the contract between defendant and the Kelly-Atkinson Construction Company. In the absence of any showing to the contrary, the court will presume that the contract was made in a common-law jurisdiction.
However, even if it were shown that the contract was made in Illinois, the federal court in an action brought therein, in determining the rights of the parties, will not be bound by the interpretation placed upon the common law by the courts of Illinois, but will determine the common law independently of the holdings of such state courts. Swift v. Tyson, 16 Pet. 1, 10 L.Ed. 865; Liverpool Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 9 Sup.Ct. 469, 32 L.Ed. 788.
But does it necessarily follow that, because a demurrer to the declaration might have been sustained, we must reverse the judgment here rendered? The case was fully tried by the court without a jury. The facts respecting liability are not in serious dispute. The parties have fully and fairly litigated the question of damages. If we were to reverse the judgment, it would not be with directions to dismiss, but to transfer the cause from the law to the equity side of the calendar. The district judge who presided over the law action would sit as chancellor in the equity suit, and upon the same evidence no doubt make the same findings. Unless required by the rules and the established precedents, we are unwilling thus to pay tribute to form. Many of the federal cases referred to were decided prior to the announcement and general application of the equity rules.
Rule 22 (198 F. xxiv, 115 C.C.A. xxiv) reads:
'If at any time it appear that a suit commenced in equity should have been brought as an action on the law side of the court, it shall be forthwith transferred to the law side and be there proceeded with, with only such alteration in the pleadings as shall be essential.'
Under this rule it has frequently been held that the court does not lose jurisdiction of the...
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