BRUSH SWA1'l ELECTRIC LIGHT CO. 11. BRUSH ELECTRIC CO.
37
BRUSH SWAN ELECTRIC LIGHT
Co. TRIC
OF NEW ENGLAND V. BRUSH ELEC-
Co.
(01h'cutt OO'Urt o.f .Appeals, Second Ol.rcutt. Oct. 4,1892.) 1. CONTRACT-MoDIFICATION-EvIDENCE.
Defendant corporation, engaged in manufacturing certain patented machines, constituted plaintiff corporation its exclusive "agent" for a certain territory, the latter to receive a specified commission, and to pay for each machine ordered by it in 75 days. Thereafter plaintiff became insolvent, and, being in default for payments, an interview was had between the presidents of the two companies, which resulted, as claimed by plaintiff, in an oral agreement that it should not be required to pay until it had received payment from its customers. Plaintiff's bookkeeper testified that this was the agreement as reported to him by the two president,s at the time. Defendant claimed that the agreement was only for a modification of the regular terms in special cases, each to be determined as it arose; and it appeareu that defendant continued, by letter, to urge payment according to the original contract. Afterwards another meeting was had between the presidents, and in a letter from defendant to plaintiff the result was stated in substance to be that when any variation from the old contract was necessary in order to make a sale the terms thereof should be reported to defendant with the order, and defendant would then promptly determine whether 'it would accept the same. The letter also urged paYment of existing debts. To this plaintiff replied that the matter as thus expressed was "quite satisfactory." Held, that there was never any modification of the contract, except as last stated.
J.
BAlIIE,,--SPECIFIC PERFORlIIA!'lCE.
The original contract provided that if at any time plaintiff's pecuniary responsibility became impaired so as to render it unsafe for defendant to transact its business through plaintiff. defendant might ,abrogate the contract, the questiou of finamiial responsibility being first determined by arbitration. Afterwards plaintiff became'insolvent, and, being largely in arrears to defendant, the latter refusM'to fill further orders unless, security was given in each case. The demand for secul'ity not being complied with, defendant requested an arbitration, but no ans;wver was made thereto, and later it declared the contract abrogated, and refused to .fill further orders. Beld, that as plaintiff had, itself violated the modified contract in the matter of payments, and was apparently unable to comply therewith in,the future, it was not entitled to speoifio performance of defendant's agreement to furnishmachines. ' , not being in a position to demand specific performance, it was iml!taterial, ina suit therefor, that defendant had based its request for an arbitratidn the ground that plaintiff had retused to :furnish security, whereas the contract did not require any security.
3. Same-ARBITRATIO!'l.
on
In EqUity. Bill by the Brush Swan Electric Light Company of New England against the Brush Electric Company for specific performance of a contract., This relief was denied by the circuit court on the ground that the contracts were of such a nature as to render specific performance impracticable, but the bill was retained for the purposes of injunctiort and ana<:lcounting, which were accordingly decreed. 41 Fed. Rep. 163. A rehearing was subsequently denied. 43 Fed. Rep. 225. Afterwards leave was given to file across bill, (ld. 701,) and, a hearing having been had thereon, it was held that the same could not be maintained, and that the original decree should not he disturbed. 49 Fed. Rep. 8. Defendant appealed. Reversed. Albert Stickney and Gilbert H. Crawford, for appellant. James C. Carter and If'm. G. Wilson, for appellee. Before LACOMBE and SHIPMAN, Circuit Judges. SHIPMAN, Circuit Judge. This is an appeal from a final decree ren-dered by the circuit court for the southern district of New York, which
ora was in general accordance with some of the prayers of the complainant's .bill !!o,®ntra.ct. On1vI;ty 21, 1878, the Telegraph Supply Company, by the name of the Brush Electric Company, and hereinafter called the Cleveland Company, the defendant in this ICase, entered into 8'&>ntract with 'Rowley&:Montgomery, to whose rights the complainant, the, Brush Swan Ele9tric Light Company of the Brush Swan ,Company, SliCceeded,' ,':Il nsa party in the place of its pred,Py:t1\'EbClevelalldCompany on July 12, 1882. The Cleveland machines and apparatus, whtch,were made undeuQndrypatimts which it aliloowned. By its amendIl1epts of June 21, virtue, 1880, and'February 23\ 1882, the Brua,h Swan Company became the exclusive iicens,ee to sell these ma.chines and apparatus within a specified territory. ItsbusinesBwas to furnIsh local electric companies or manufacturers or individuals, wh,o required an extensive plant for electric lighting'1withthe electrical machinery I apparatus, engines, wire, and equipment which they respectively Meded, and with the labor necessary to put thesanie in position, and, as a rule, under a single contract bought fr()m the Cleveland Company its mafor an entire plant. chines, ,di$count 1roDl tbe price which was fixed by said 'manufacturer of at least 20 per cent., alid was to accept drMts therefor payable in 75 dayafrom deliverYofthe machinery at Cleveland, and to pay the draftsatIUatUrity. The agreement was to continue for 17 years from April 24, 1877 ,unless sooner abrogated by mutual agreement or by the decision ofal'bitrators. The ninth article provides as follows: ; , II Ntnth. If at any time the pecuniary respoDslbility of the party 01 the second part becomes so Impaired as not to be sufficient to enable the party of the first part to safely their business in said tel'ritory through them, then this Qontraqt may beabrQgated, proyided that the question of the aforesaid pecuniarY responsibility of the party·ottbe second part must first be determined by the board of arbitration hereinafter named."
. If the Clf:l\"elar,ld Company.sold within the specified territory, it Was, to pay Swan Company the stipulated discount thus became, as a rule, thf:l exclusive purchaser from thta manutiwturer of its apparatus fOf use within such territory. It and the manq(IlQturer)lad the exclusive right to Elell, and it (}Ouldbe t11erefore agent, but it was not an agent upon a del creder6 co:rpmil;lSioPi its. cont),"acts with its customers were contracts to furnish an elltirE! :plllnt l and;itboQght like any other purchaaer from the Cleveland :C().mpany upon. its own credit. On October 27, 1887, the Cleveland Com,pany declared the cont1;act. abrogated and annulled, and refused to deliver apparatus to the Brush Swan Company, or to fill its perforrpanceof the contracts this suit was orders. To compel a Company. , thereafter instituted by propriety of '. the defendant's act in annulling The decision /),S to, the contract turns upon questions of fact, which relate to the extent of a modification of the conditions of the original agreement in regard to the
BRUSH SWAN ELECT&IG LIGHT CO. 'V. BRUSH ELECTRIC CO.
39
time of payment. If these. conditioriswere ·substantially unmodified, they were not complied with by the Brush Swan Company, and its. part of the contract was persistently left not performed" but, if they were modified so thal was not required to pay for its purchases until it collected from its own customers,· it did not violate its .contract, and was not guilty of any substantial breach, so far as is disclosed by the testimony. The circuit court was of opinion that the contract was modified to the extent and in the particulars which have been indicated. This is the crucial point in the case. When the Brush Swan Company entered into its oontract relations with th,fCleveland Company, it did so with high expectations of commercial· sUccess from anew storage battery to be' brought out by the Cleveland Company, which it was expected would be efficient both in arc and in incandescent lighting. These expectationl'j were based ulJon the confidence and the prophecies of the Clevelarid Company; contracts were eJitered into upon. fil,ith therein, but the battery was commercially a failure, 'and Mr. Brush turned his attention to other mechanism :for incandescent lightinf};, which was not perfected until June 1, 1885. MeanwMle,the Brush Swan Company's busineSa had waned inconsequence of this failure, and its debts had increased until it owed the Oleveland Company about.$107,OOO,and about 87,600 to other creditors. Its assets were nominally about $176,000. Their real value did not appear. The two corporations, on June 15, 1885, agreed upon Ii settlement by which the Cleveland Company took these assets and the Brush Swan's notes for $17,500, which were subsequently paid, discharged its own debt, and agreed to pay the other outstanding debts. This left the Brush Swan Company with a debt of $17,500 and its material of about 84,000 in value on hand, and its contracts with the Cleveland Company, which were unaltered. In the summer and fall of 1885, friction took place between the two companies in regard to the amount of discount and the time of payment for purchases. The Brush Swan Company was in a limping financial condition, as sufficiently appears from the letter dated Novemher4, 1885, of Col. Strong, its president. An interview between the presidents of the two companies took place on December 5,1885, which resulted in a verbal modification of the contract. The terms of this alteration are in dispute. Mr. Spear, the bookkeeper of the Brush Swan Company, who isconoeded to be an honest witness, and to whom the allef};ed modi· fication was orally communicated by the two presidents, says that, as to all apparatus furnished by the Cleveland Company for the erection of new plants, it was to wait for payment until the Brush Swan's customer had actually paid, though the customer's term of credit might have expired. The Cleveland Company claims that the terms of payment were to be modified only in special instances, each case to be separately considered upon its merits. Mr. Spear is the only person who testifies on the au\). ject; the deposition of the president of the Cleveland Company was taken, but he was not examined on this point. Thesubsequentcorrespondence of the parties does not sustain Mr. Spear's recollection. For example,
40:
REPORTEJt,
vol. 52.
QbJrlne,23, 1886, the Ole'Veland Company wrote to the Br1Jsh.Swan COIIJpflnyas follows:" We must, therefore, ask th.t her,eafter'in each require any departure from the contract in tiuHlliofL'Pl\yment, [75 days,] or in amount of commission, [2Q llnd 20 perllceM',lthat you accompany the request for it with full information anll !a:'t.opy, of the proposition or contract. We will then advise you what' we ican do in the premises." To this letter the Ilrush SWan Companyreplied on June 30th: "Your understanding, as expressed in yours of the 230., is correct, so far as I can understand, from Mr. Strong." AWLiuton:July 2, 1886,the Cleveland Company wrote to the complainant:, "It'is absolutely necessary that we should know the terms. all-d conditions of any sale that you make, in which you are to ask us for anythintpnore than the regular 20 and 20 per cent. on 75 days' time. * * you dQJqot givens the information to the contrary, w6iwHl,assttme that the:order is made on the basis o{ 20 and 20 per cent.,amd75 days' In ,view of Mr. Spear's positive Wstimony, and itlha ,fact that theOleveland ComJ>$.Uy's president did, not deny it, the tJu ElStion of the terwsof the modifica.tion of December5th,would p:oobably test upon SpeM'laitestimony, but the result of that cc;mversatiGnis·not of vital impor,tance, for in; ,september, 1886, another interiii New York between the officers of the compailies,:,which resulted in. an agreement: which, on the part oOhe Cleveland'Company, was stated, in a.lette1' to "the Brush Swan Compllny, dated September 17,1886, as follows: "You ate expected to sell to purchasers at thelbestprices obtainable under all the circumstances, not .to 201'61' from, our. list price. When you do sell, however, at< ahythitig'!l-bove this discount to the purchaser, you are to stateon the oropx'Which'you send ta'nafor the appll,ratusjustwhatdiscQunt you will need in order to enable you, to make the sale, and you &1'6 also to specify on theibrderany terms regarding time of paJ"ment which will reqllire a longer time to be .gilVen by, us than the. regular 75 days of your contract. "* advise you whether th,e order is accepted, by us, and there will thus be no delay whatever in filling it." The letter says further: ":We trust that you will not let these watters [debts due to,th'eBruSh' Company] go by default; as, if you do, the loss will ,be yours, and not ours." 'On Octoher25, 1886, the Brllsh Swan expressed by Company replied to this letter as follows: "The yourcoIi1municatiotlof the above date is quite satisfactory, and we will endeavor to abide, by the' arrangement as closely as possible." The letters oftheCleveland Company o£July 21, August 25, September 21, October:3,and 0ctober 15, 1887,'1,1.11 tend to show that payment ftomthe Brush Swan Company of the amount due upon its several orders, irrespectiveofthl'lreceiptby it of payment from its customers, was demanded., l.t was not,sod'arJ1S appears from the correflpondence which is inevidenee,nntil October 4, 1887,.that the :Brush Swan Company JDade the-point that another time or mode of payment had been agreed from the entire ofletters between the parwhicho6mmenced on September 17, 1886, is that the con-
BRUSH SWAN ELECTRIC LIGHT CO. V. BRUSH EI.ECTRIC CO.
41
tract in regard to terms of payment was not changed, except in the particular instances in which a special modification was made, and that the Brush Swan Company's obligation to make payment upon a credit of 75 days continued, irrespective of the fact of nonpayment to it, except as modified in particular instances. During the summer of 1887, the Cleveland Company was in a state of great irritation, in consequence of nonpayment on the part of the Brush Swan Company, from which it received from May 26, 1887, to September 15, 1887, only the sum of $1.50. It received no promise of money, except that, in July, the general manager of the Brush Swan Company said he thought he would send $1,000 upon the existing debtedness, which was not done. During this summer, payment of two large orders for machinery to be furnished by the Brush Swan Company to a company in SCranton ahd to the Erie Railroad Company was guarantied by the Brush Illuminating Electric Com pany, whicn owned a large portion of stock of the complainant. In July and August interviews were had with the president and vice president and Se(lretary of the Brush Swan Company, in which security. for the payment of its orders was requested, and the absolute unwillingness of the Cleveland Company to fill orders without security or definite prospect of payment was stated,bu-t withoutavail, until on September 24th .the Brush Swan Company was informed by letter in a positive manner that the Cleveland Company must know that payment would be made, and must ask for security in view of the insolvency of the complainant, or it would not fill orders which had not theretofore been accepted. The facts in regard to the financial condition of the complainant are as follows:· In Jone, 1885, it owed $17,500. In June, 1887, it owed $56,578.26, of which $24,395.36 was due to the Cleveland Company. Its deficiency waS $12,473.67. On September 1, 1887, its whole liabilities were $66,554.82, of which it owed the Cleveland Company $32,873.94. On November 5, 1887, it owed the Cleveland Company $31,389.92, of which $22,715.29 was for plants, payment for which had not been made to the Brush Swan Company. In this state of things, the letters of the Cleveland Company of August 13, 25, September 6, 16,19, 24,29, October 1, 3, 11, and 15, 1887, show its persistent attempts to induce the Brush Swan Company to make exertions in regard to payment. This urgency was met with both apparent indifference and inability t() gain financial strength. It is perfectly true that unless aid from outside sources or increased capital should be furnished to the Brush Swan Company, its capacity to pay its liabilititJs depended entirely upon the amount it should receive irom its own debtors, and that those payments were probably delayed from various causes beyond its control; but, on the other hand, the Cleveland Company, unless it had modified the contract, was reasonably unwilling to fill orders from an insolvent company, which was unable to pay its overdue debts, "and without substantial hopes of ability in the future. An arbitration was called for by the Cleveland Company, in technical compliance with the conditions of the ninth article of the contract, b.}· letters of October
42
,FEPERAL
,voL
and 19thl no reply in regard td· and 011 Ootober 27th theqevelan¢l Company declared the'CQ1lltmotJf\urogated" and. ther\:1after refl;lsed to fill orders sent by the Company" The iact that the call for an arbitration ,WilS placed by the Cleveland Compau, upon the refusal ()f the other party to furnish security is criticised by: the complainant, upon the ground that the contract did not compel ttteco,rnplainant to give security for the performance of its un'" This criticism would be a just one if the conduct of the Brush, Swan C(),Iupany ,in the, violation .of its agreement hud not been such as to'fully justify Oleveland Company in declaring the contract at an end.[, The correspondence shows that the Cleveland Company's claim,tbaUhe, SwaJ;l Company had broken its contract respecting for,;the amount due upon its purchases,had, been reiterated",'and;the reqQllliltfQr lIecnrity was made in the hope that a total cessation of:Q<lntract, might, be ,avoided. Inasmuch as the Brush Swan·Omnpany is iJ;l a court of equity asking fora specific performance'of'B euntrlliCt ,whiclit it has broken, and which it cannot promise to mithe ;it is useless to rely upon the point that the other pa:lltyhad :madea; techpical slip in the reason it gave for abrogatioo.,.!As ,the circuit cou,rt truly clearly defined failure to perform on: tbe partoftha complainant would have made proceedings under this, [9th] clause wholly ,nnnecessary, as the contracts could then have:been of the complainant's breach, although its financial condition at the time might, have been. good beyond all question." Thecircuit.Qourt having found that the Brush Swan Companybllc:lcotnmittedno bl'eMQ of its contract, as thought that the request f(lr an arbitration on the ground of failure to furnish secutitywas an·.lll1proper request; ,Inasmuch as we are of opinionthat,the company had broken its contract, which was not modified, ·and, that i.t is not in a position to ask for a specific performance by the :otbencontractiQg party, the particular phraseol(}gy in w.hich that .party placedits.6nal dem/lndforarbitration seems unimportant. In our view of the testimony, thecomplainllllt is aiSking a conrt of equity. to compel perfOrmal)ce ofa contract, which it has ,ootkep!, ,which it cannot truthJully that it wiU keep, ,and which apparently it ()tlnnot help violating, and desires to compel the defenda"t to 'furnish it with .l'nerchandise which ,it cannot pay for, and the nl·titnate payment for which it ,pa.nnot attempt to secure. The decree of the circuit court is reversed, and the bill is directed to ·be dismissed, with coats in, the circuit, court and in this court.
;
,:
NATIONAL FOUNDitY & PIP]; WORKS
v.
OCONTO WAT];R
co.
43
NATIONAL FOUNDRY
&
PIPE WORKS,
Limited, v.
OCONTO WATER
(Circuit Oourt, E. D. Wisconsin. October 3,1899.) 1. MECHANICS' LIENS-PROPERTY SUB.TECT TO-WATER COMPAllIES. Rev. St. Wis. § 3314, ,par. 3, whieh provides that, in case any person shall pur-
chase machinery to be placed on premIses in which the purchaser has not an inter. est SUfficient for a lien, the person furnishing the machinery shall have a lien on it and a right to remove it, does not apply to the pipes of a water company, laid through the streets of a town, and connected with the pumping works of the com· pany. The plant of the company is an integer, and cannot be separated under a vendor's lien. The public policy of Wisconsin is independent of that of other states, and under it the property of qua3'! public corporations is subject to the general lien laws. In this respect a water company does not differ from a railroad company. Hill v. Co., 11 Wis. 215, followed.
2. SAME.
3. SAME.
The entire plant of a water company, includ ing piping laid in the street!! of a city and the interest of the company in the premises, are, by Rev. St. Wis. § 8314, par. 1, SUbject to the lien of the material man furnishing the piping.
4. SAME-PROPERTY OF QUASI PUBLIC CORPORATIONS-ENFORCEMENT OF LIEN-FRANCHISE AND PLANT.
Where the law gives the material man a specific lien upon a certain plant, and the plant and franchise, being that of a water company, cannot be separated by judicial sale because of their peculiar public use, a court of equity has power to decree the sale of both plant and franchise in satisfaction of the lien.
In Equity. Bill by the National Foundry & Pipe Works, Limited, to foreclose a lien upon the plant and premises of the Oconto Water Company. Decree directing a sale of the plant, premises, and franchises. Geo. H. Noyes and Wm. D. Van Dyke, for complainant. W.H. Webster, for defendant. JENKIKS, District Judge. The complainants sold and delivered to the defendant, for the stip'\.1lated price of $22,483.41, certain iron pipe, to be used, and which was used, in the construction of a waterworks plant. designed to supply the city of Oconto and its inhabitants with water. The pipe was laid under the surface of various streets in the city, and connected with hydrants located upon the streets, and also with the pumping works, the latter being in turn connected with a well. Tllis well and these pumping works are situated upon certain premises in the city of Oconto. No part of the material furnished by the complainant was laid IIp'1U the premises, with the possible exception that one length of pipe was placed within the limits of Chicago street, extended, abutting the premises in question, and formed part of the connection of the water mains in Chicago street proper with the pumping works. The legal title to the land whereon the pumping works are situated is vested in the muniCipality of Oconto, the defendant corporation entering into and holding possession under contract with the city .for its conveyance. The complainant duly filed a claim for'll lien upon the waterworks plant and ·the interest of the defendant company in the premises whereon the pumping works and well are situated, and to which the pipes are