Simon v. Goodyear Metallic Rubber Shoe Co.

• Decision Date: 04 December 1900
• Docket Number: 842.
• Citation: 105 F. 573
• Parties: SIMON v. GOODYEAR METALLIC RUBBER SHOE CO.
• Court: U.S. Court of Appeals — Sixth Circuit

105 F. 573

SIMON v. GOODYEAR METALLIC RUBBER SHOE CO.

No. 842.

United States Court of Appeals, Sixth Circuit.

December 4, 1900

This was an action for fraud and deceit in the procurement of a contract for the sale of 250 tons of rubber waste, and for the recovery of the damages sustained by the plaintiff, Aaron Simon, in the execution of the contract. Upon the conclusion of the plaintiff's evidence, the court directed a verdict for the defendant. This instruction, as we learn from the charge itself, was based upon two grounds: First, that the representations which induced the contract were either promissory in character or true in fact; second, that the contract was still largely executory when the plaintiff acquired full knowledge of the alleged false and deceitful representations made to induce the sale, and with such knowledge proceeded to execute it according to its terms, and thereby waived the fraud and deceit for which he now sues.

The evidence shows that the plaintiff had for many years been engaged in the business of buying old rubber boots and shoes and selling same to manufacturers engaged in the business of reclaiming the rubber. For several years prior to 1895 the principal consumer of such rubber waste had been a company known as the Rubber Reclaiming Company of New York. This company had a New Jersey charter, under which five subordinate corporations were sheltered, the factories of each being leased to and operated by the dominating corporation. In 1894 the United States Rubber Company another combination of rubber manufacturing corporations engaged also in the business of reclaiming rubber waste, and became a large competitor for such waste in the market. Beside these two great customers, there were several small factories engaged in buying and reclaiming, but their competition was of little or no importance, as their capacity was small. In this condition of things, one William J Rodenbach, the buyer for all of the factories controlled by the United States to sell for the use of the Goodyear Metallic Rubber Company, one of the allied corporations operating under the United States Rubber Company, several hundred tons of old rubber shoes and boots, deliverable in monthly installments. The plaintiff's evidence tended to show that Simon was reluctant to make so large a contract, inasmuch as he carried no stock, and would be obliged to send out agents and buy from collectors in order to comply with its terms. This reluctance was made known to Rodenbach. To overcome this and induce plaintiff to contract as desired, the plaintiff testified as follows: 'He told me he wants to give us a chance to make a few dollars this time, and there would be a good chance to make a dollar this time, because rubbers are going to be cheaper. He says, 'The spring is coming pretty near, and the Rubber Reclaiming Company is entirely out of business.' It means our best customer is gone. And he wants me to enter into a large contract for four or five hundred tons for future delivery at a fixed price. He told me that the Rubber Reclaiming Company was entirely out of business, and that the Goodyear Metallic Rubber Shoe Company, or the company Mr. Rodenbach represented at the time, would be the only consumers of rubber. He told me at the office that, if we would buy any more lots of rubbers, he has got to buy them at a less price than he paid us, and then, if he bought in the city, he would not pay as much as he paid us. I asked him about the competition in Cleveland and Buffalo. He said, 'I did not come to rob you of your money.' He said the market would be a good deal lower, because nobody would be in the market for rubbers; there would not be any competition at all any more; they would be the only consumers. Q. How many times, in the course of the hour or hour and a half he was there in your office, did he tell you that the Rubber Reclaiming Company was entirely out of business? A. He told me that three times, anyway, in different ways. He wanted to make a contract for either four or five hundred tons. Q. Did he say the Rubber Reclaiming Company was then out of the business? A. He said they were entirely out of the business. Those were the words he used. And we would be the only consumers of the article, he said, except there might be a few small orders, but we would be the main consumers. Q. What others did he say? A. He didn't mention anything. I asked him how many more there would be left after the Rubber Reclaiming Company had gone out of business, and he said they would practically be the only consumers of the article. ' Plaintiff also testified that he relied upon the truth of the statement made by Rodenbach, and contracted to sell and deliver 250 tons of rubber waste at 4 3/8 cents per pound, deliverable 'in about equal monthly installments' by September 1, 1895. This contract is dated April 18, 1895. There was no direct evidence as to what Rodenbach actually knew of the plans and purposes of the Rubber Reclaiming Company in respect of a continuance in business. But there was evidence tending to show that the Goodyear Metallic Rubber Company, the defendant in error, was one of the constituent companies comprising the dominating corporation called the United States Rubber Company, and that its affairs were entirely controlled and dictated by it through the ownership of its capital stock. There was also evidence tending to show that while an actual dissolution of the bonds uniting the corporate members of the Rubber Reclaiming Company that such dissolution would occur, and that several of its constituent corporations would thereafter continue in business each for itself. There was also evidence tending to show that within a few days after the contract with Simon the market for rubber waste became active and the price higher, and that the agents for the separate companies of the Rubber Reclaiming Company appeared in the market as competitive buyers in May following. The plaintiff conceded that he learned of this activity in the market before he made his first delivery, May 2, 1895, and that before he made any other delivery he knew that some of the corporate members of the Rubber Reclaiming Company were separately engaged in buying and reclaiming old rubber. Finding that this unexpected competition had advanced the price of such waste, and that as a consequence he could not buy to fill his contract except at a loss, he made vain efforts, by correspondence and personal intercession, to obtain some concession in quantity or some advance in price. Failing in this, he notified defendant that he would carry out his contract, and hold it responsible, in an action for fraud and deceit, for the loss he might sustain. He accordingly continued to buy and make deliveries, obtaining a concession in respect to deliveries until December 1, 1895, and received for each such monthly delivery payment at the contract price. The evidence tended to show that in buying to fill his contract he paid an average 4 3/4 cents per pound, and received 4 3/8 cents per pound, thereby sustaining a loss of the difference, aggregating about $4,000.

Alfred Lucking, for plaintiff in error.

F. W. Whiting, for defendant in error.

Before LURTON and SEVERENS, Circuit Judges, and EVANS, District Judge.

LURTON Circuit Judge, after making the foregoing statement of the case, .

The question as to what Rodenbach meant Simon to understand when he said 'the Rubber Reclaiming Company is entirely out of business' was not so clear as to justify the court in taking it from the jury. That statement was not promissory in character. It was a definite statement of an existing fact. It was a true statement, substantially, for that particular corporation had resolved to surrender its charter and cancel its leases upon the factories of the five subordinate corporations. The dissolution of the Rubber Reclaiming Company meant the sundering of the bonds which prevented the independent conduct of the same business by the five corporations whose factories had theretofore been operated by it. Now, did Rodenbach mean that Simon should understand that these five factories theretofore operated by it would cease to be operated, and would be out of the market as customers for rubber waste? If he did, it was an untrue and deceptive representation. Those factories continued in the business of reclaiming old rubber, and, at the time Rodenbach made his representation, it was intended and expected that they should so continue in business, each for itself. When the officials of the Rubber Reclaiming Company advised the officials of the United States Rubber Company of the purpose of the Rubber Reclaiming Company to dissolve, they also informed them of the purpose of at least some of the corporations whose factories they had theretofore operated to continue in business each for itself, and the United States Rubber Company was sounded with a view to a new combination which should include these factories. The Goodyear Robber Company was but one of the controlled instrumentalities through which the United States Rubber Company was engaged in the business of reclaiming old rubber waste, and Rodenbach was the purchasing agent of such material for the Goodyear Rubber Company. Within a very few days after knowledge of the purposes of the Rubber Reclaiming Company reached the United States Rubber Company, Rodenbach is found in Detroit endeavoring to obtain a large contract for old rubber. Simon was reluctant to engage himself so deeply. The amount he could collect and the price he would have to pay would be affected by the competition for such material. Nathaniel C. Mitchell, the president of the Rubber Reclaiming Company, and of one of the corporations whose factory was operated by the Rubber Reclaiming Company,...