Swift & Co. v. Detroit Rock Salt Co.

• Decision Date: 16 June 1916
• Docket Number: 2792.
• Citation: 233 F. 231
• Parties: SWIFT & CO. v. DETROIT ROCK SALT CO.
• Court: U.S. Court of Appeals — Sixth Circuit

233 F. 231

SWIFT & CO. v. DETROIT ROCK SALT CO.

No. 2792.

United States Court of Appeals, Sixth Circuit.

June 16, 1916

T. G Long, of Detroit, Mich., for plaintiff in error.

P. B Moody, of Detroit, Mich., for defendant in error.

Before KNAPPEN and DENISON, Circuit Judges, and SESSIONS, District judge.

SESSIONS District Judge.

In March, 1911, the Detroit Salt Company, a Michigan corporation, was engaged in mining, manufacturing and selling salt. Its plant was located near Detroit. On March 24, 1911 the Detroit Salt Company and the plaintiff, Swift & Co. entered into a written agreement whereby the former agreed to sell to the latter all of the rock salt used by it in a specified territory for a term of five years from January 1, 1912, at the price of $2.25 per ton in bulk f.o.b. the Salt Company's mine. The contract also gave to plaintiff an option to purchase at the same price the salt used in its plants at East St. Louis and South St. Paul after the termination of an existing contract which expired October 31, 1912. Four days later, March 28, 1911, in a foreclosure suit in the circuit court for the county of Wayne, the Security Trust Company of Detroit was appointed receiver for the Salt Company. The order appointing the receiver authorized and directed it 'to continue the business of said defendant company without interruption and to fulfill its contracts (other than the payment of indebtedness of said company). ' Immediately after its appointment the receiver notified plaintiff 'that all existing contracts for the delivery of salt will be carried out by the receiver, who has been authorized so to do by the court. ' August 1, 1912, Warren W. Clute succeeded the Security Trust Company as receiver. The receivership was terminated September 30, 1912, when the defendant, Detroit Rock Salt Company, was organized by the stockholders, bondholders and other creditors of the old company and took over the latter's property and business. Mr. Clute, the receiver, became president of the new corporation. During the receivership all orders for salt were given by the plaintiff and filled by the receiver in accordance with the terms of the contract. After the receiver was discharged and until the end of the year 1912 salt was furnished to the plaintiff by the defendant upon orders (75 in number), referring directly to the contract and at the price and upon the terms therein named. Defendant's letter heads, invoices and other stationery were all stamped or printed: 'Detroit Rock Salt Co., Successors to Detroit Salt Co.'

One Edward E. Rude had charge of the salt sales under the receiver and after the organization of the defendant corporation continued in sole charge of its Detroit office for about nine weeks. During that time no officer of the company was in the office and no instructions were given to him. He attended to all correspondence and made or supervised all sales of salt. On October 8, 1912, while Rude was in charge of the office, plaintiff sent a letter of inquiry, addressed to the Detroit Salt Company, asking for prices for salt delivered at South St. Paul for a period of one year after November 1, 1912, when its former contract expired, and in reply received a letter dated October 9, 1912, signed 'Detroit Rock Salt Company, per Rude,' and containing the statement:

'Your kind favor of the 8th inst. to hand * * * inquiring for price on your rock salt requirements for South St. Paul, Minn., commencing November 1st. In reply, you will find the above proposition covered in contract, entered into March 24, 1911. Reference to this document will undoubtedly give you the information required.'

On October 12, 1912, plaintiff again wrote to defendant:

'Referring to your letter regarding rock salt requirements for South St. Paul, you understand that our five-year contract with you gives us the option of including our St. Paul and East St. Louis requirements. The chances are good we will be able to buy rock salt delivered at South St. Paul and East St. Louis at figures less than those in the contract in question. Therefore we thought you would prefer to make a special price at South St. Paul now and another for East St. Louis a little later.'

In reply plaintiff received the following letter, dated October 19, 1912:

'Replying to your kind favor of the 12th inst. we hardly think it would be just the thing for you to do, to place your South St. Paul and St. Louis business elsewhere. We naturally prefer that our mine be your full source of supply. We also take advantage of this opportunity to suggest that in our opinion you will certainly experience some difficulty in securing any better price than represented in our contract, which will mean, $4.05 St. Louis or $4.55 St. Paul, based on present freight rates.'

From November 1 to December 31, 1912, plaintiff's orders for salt for South St. Paul delivery were filled at the contract price which was a reduction of 25 cents per ton from the price named in and paid under the former contract. On December 5, 1912, there was a change of management of the defendant company and after December 31, 1912, defendant refused to fill plaintiff's orders except at an increased price of 50 cents per ton, which plaintiff has been compelled to pay. This suit is brought to recover damages for the alleged breach of the contract of March 24, 1911. At the close of the...