E. E. Taenzer & Co. v. Chicago, R. I. & P. R. Co.

• Decision Date: 19 April 1909
• Docket Number: 1,866.
• Citation: 170 F. 240
• Parties: E. E. TAENZER & CO. v. CHICAGO, R.I. & P.R. CO.
• Court: U.S. Court of Appeals — Sixth Circuit

170 F. 240

E. E. TAENZER & CO. v. CHICAGO, R.I. & P.R. CO.

No. 1,866.

United States Court of Appeals, Sixth Circuit.

April 19, 1909

[Copyrighted Material Omitted] [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Caruthers Ewing, for plaintiff in error.

E. E. Wright, for defendant in error.

Before LURTON and SEVERENS, Circuit Judges, and KNAPPEN, District judge.

KNAPPEN District Judge, after stating the facts as above, .

1. The trial court rightly held that there was no testimony tending to show the defendant liable for breaches of the contract on the part of the Choctaw Company. As appears by the statement of facts above, no testimony whatever was introduced tending to show by what means (whether consolidation, lease, or otherwise) the defendant acquired its interest in the contract or in the property generally of the Choctaw Company; much less was there any evidence that the defendant, by virtue of either statutory obligation or express agreement, undertook to become liable for the prior defaults of the Choctaw Company. Plaintiff's counsel frankly says in his brief that:

'On this record it is impossible to tell whether the defendant represents the result of a consolidation of the Choctaw and some other road; it is impossible to tell whether the defendant is a purchaser of the Choctaw Road or a lessee thereof.'

Plaintiff's right to recovery is rested upon the proposition that 'the fact of assumption of the liabilities of the contract is conclusively presumed from the defendant's admission that it received the benefit of the contract. ' No cases are cited, and we know of none, which support the proposition that a suit is maintainable at law against a successor corporation, through lease or purchase, for recovery of damages on account of a prior default of the original contracting corporation, without proof either of an express assumption of liability by the successor corporation, or that the possession of the assets of such corporation was obtained by virtue of some relation by which liability for the prior obligations of such corporation is imposed by statute. On the contrary, the authorities are express that neither a lessee nor a purchaser becomes liable for the prior debts or obligations of the lessor or vendor, in the absence of either express contract or statutory provision therefor.

1 Elliott on Railroads, Secs. 459, 462; Hoard v. Chesapeake & Ohio R.R. Co., 123 U.S. 222, 226, 8 Sup.Ct. 74, 31 L.Ed. 130; Wiggins Ferry Co. v. O. & M. ry. Co., 142 U.S. 396, 407, 408, 12 Sup.Ct. 188, 35 L.Ed. 1055; 4 Cook on Corporations, Sec. 895; Rice v. Norfolk & Western Ry. Co., 153 F. 497, 82 C.C.A. 447.

2. The question next arises whether the testimony presented tended to show the defendant liable for breaches of the contract by it after its succession to the rights of the Choctaw Company. The testimony tended to show an actual acquirement by the defendant of the rights of the Choctaw Company under the contract of November 22, 1900, an express assertion of its rights under the contract as against plaintiff, the proceeding to carry out the contract under such claim of right so to do, demands upon the plaintiff that it perform its reciprocal obligations, and the receipt from the plaintiff of the benefits of the contract by virtue of such claim of right thereto.

In Wiggins Ferry Company v. Ohio & Miss. Ry. Co., 142 U.S., at page 408, 12 Sup.Ct., at page 192 (35 L.Ed. 1055), it is said:

'It is not necessary that a party should deliberately agree to be bound by the terms of a contract to which he is a stranger, if having knowledge of such contract he deliberately enters into relations with one of the parties which are only consistent with the adoption of such contract. If a person conduct himself in such manner as to lead the other party to believe that he has made the contract his own, and his acts are only explicable upon that theory, he will not be permitted afterwards to repudiate any of its obligations.'

In the case cited, the ferry company, which operated a ferry across a navigable river and owned the land at the landing and about the approaches, contracted with a railroad company for the use of the land for the purposes of its business so long as they should be used and employed for such uses and purposes. In consideration thereof the railroad company agreed, among other things, always to employ the ferry company in its transportation across the river. After the railroad company had for several years performed its contract, its property was purchased by the defendant company, no formal assignment of the interest of the railroad company in the contract mentioned having been made. The defendant entered into possession of the land leased to the railroad company, and for several years continued to carry on the business as it had been carried on before, but without making any new contract or any agreement for rent. The defendant later diverted a portion of its transportation across the river to other carriers. The proceeding was brought to recover damages for such diversion. It was held that by reason of this course of dealing the defendant 'and the ferry company sustained the same relation as had previously existed under the deed between the railroad company and the ferry company, or at least that both parties are equitably estopped from denying that such was the case. ' This conclusion was rested upon the ground that the defendant had by its conduct adopted the contract between its predecessor and the ferry company and made that contract its own.

In Chicago & Alton R.R. Co. v. Chicago, Vermillion & Wilmington Coal Co., 79 Ill. 121, which is cited with approval in the Wiggins Ferry Case, 142 U.S. 409, 12 Sup.Ct. 188, 35 L.Ed. 1055, certain individuals interested in the coal company constructed a coal railroad from Streator to Winona, on the Illinois Central Railroad, and later sold this coal road to the Jacksonville Railroad Company, by the terms of which sale it was agreed that all coal carried from the coal company's mines at Streator to Winona, for the use of that town and its vicinity, or for delivery to the Illinois Central Railroad Company for the use of that company, or for further transportation on its line of railroad, should be carried over the coal road in question at a certain price per car. The Jacksonville Company at once turned over the coal road to the appellant company.

There was no covenant in the deed of transfer that appellant should perform the obligations assumed by the Jacksonville Company to the coal company, but for more than three years appellant did carry the coal company's coal from Streator to Winona, over the road in question, at the price stipulated in the contract between the coal company and the Jacksonville Company. It was held that 'appellants placed their own construction upon this contract and of their obligations under it by carrying coal for three years. By doing this they expressly assumed the contract of the Jacksonville Company, * * * and they must be held estopped by their own act and conduct. ' These cases establish the proposition that the defendant may be held, under the testimony presented, to have adopted the contract of the Choctaw Company, and to be liable for its own breaches thereof.

3. The question next presents itself whether plaintiff's remedy is at law, or whether it must be sought in equity. The proceeding in the Wiggins Ferry Case for the recovery of damages was in equity in this respect: that the relief was sought under an intervening petition filed in a pending foreclosure suit in equity. And it is true that in that case the court said (without other discussion of form of remedy) that the railway company 'must be held in a court of equity to have adopted such contract and made it its own ' In that case it was necessary to the liability of the railway company that it should have acquired by virtue of its relations with the ferry company the rights held by the originally contracting railroad company. The defendant held no deed of the premises affected. The remark above quoted seems to refer to this situation, in connection with the conclusion that 'the railway company acquired an equitable estate in the premises of like character as the legal estate previously held by the railroad company. ' The decision contains not even an implication that a resort to equity would be necessary unless in a case where the acts of adoption were insufficient for the acquisition of legal rights. In the instant case no deed or instrument in writing was necessary to the adoption by the railroad company of its predecessor's contract. The original contract was not under seal. Under the view we have taken of the liability of the defendant, no question of answering for the default of another is involved. It is only for its own default that the liability of the defendant is under consideration. The provision of the statute of frauds requiring...