STURGISS et al. v. MEURER et al., 191 F. 9

BOYD, District Judge (after stating the facts as above). After this general outline of the facts, we will proceed to consider the several points which arise in the controversy, and will refer to such further facts in the record as may be necessary. It may be stated in the out•set that no creditor of the bankrupt is now interposing any objection to the payment of the claims involved, for even Meurer, who was at one time a creditor, has been paid his debt from the assets of the bankrupt’s estate.

The record shows that the trustee when he was urged to oppose the payment of these claims declined to do so on the ground that upon investigation he had ascertained that the said claims were valid.

Neither does the bankrupt as a legal entity in its corporate capacity object to the payment of the claims, but Meurer, an individual stockholder in the corporation and the owner of 90 per cent, of its stocks, as shown by the record, alone and upon his own responsibility is objecting to the payment of these claims, and insists that the money now in the hands of the trustee amounting to $51,174.70 should be distributed to the stockholders, instead of being paid upon the said claims or any of them.

The first of the questions we will dispose of is as to the Humbert claim which was passed upon and allowed by the referee, and his report in this respect was confirmed by the District Court sitting in bankruptcy over the objection of Meurer. In our opinion there is no force in the grounds assigned by M eurer in opposition to the payment of this claim, for upon the testimony taken by the referee he found the fact that the claim was due and was a valid one against the estate of the bankrupt. This finding of fact was sustained by the learned judge of the District Court.

We do not deem it necessary to further deal with this claim than to give our sanction to the action of the lower court thereon. The claim of $1,741.40 which was allowed by the referee as due to the Morgantown & Kingwood Railroad Company for freights and demurrage, and which was afterwards assigned to Geo. C.

Sturgiss, is, we think, also a valid one, that the findings and decisions of the referee with regard thereto were proper, and that the District Court was in.error in sustaining the objections which were filed to the said claim, and that the same should be allowed and paid from the assets arising from the estate of the bankrupt as found and reported by the referee. Lastly is the claim of Geo. C. Sturgiss for $17,500, being the amount which he paid as a bonus under the contract (reserving, as hereinbefore stated, $2,500 as provided in the contract in the stipulation relative to the conveyance of the coal lands).

Original and amended proof of this claim was filed as set out in the statement of facts above. The claim with interest thereon was allowed by the referee, but the District Court upon a review of the referee’s action sustained the objections of Jacob Meurer to the claim, reversed the report of the referee, and held that the said claim should not be paid. The conditions surrounding the making of the contract as clearly shown by undisputed facts fully enlighten us as to the motive which prompted Sturgiss to enter into it.

He was the owner of large landed estate adjacent to the site of the plant, which he desired to improve in value by the erection of the manufacturing concern. He was interested in the railroad which would be benefited by an increase in freights, and he had coal lauds, for .which a purchaser would be provided.

The desired end was to be accomplished by the erection of the rolling mill plant and its operation for five years with the employment of five hundred hands, and to secure this he entered into the contract, conveyed the land for the site, paid the bonus, and invested in the bonds anticipating the performance of the agreement on the part of the Tin Plate Company by the completion of the plant and its operation according to the terms of the contract.

Our view of the contract is that Sturgiss agreed to do three several material things antecedent to the completion of the plant and the beginning df its operations, namely, convey a site on which to erect the mill, to pay $20,000 bonus or inducement for the erection and operation of the plant as contemplated by the contract, and, when the company in the course of its work- had expended $100,000, he was to take $50,000 of the first-mortgage bonds.

We do not agree with the position of Meurer’s counsel that the provisions of the contract in reference to the coal lands and the freight rates were to be complied.with by Sturgiss and the Railroad Company before the plant was completed and coal was needed for its operation, and transportation facilities required for supplies and the output of the mill.

The counsel also sets forth in his brief á series of obligations which he alleges rested upon Sturgiss by the terms of the contract, and which he insists that Sturgiss failed to perform; but, under a proper construction of the contract, it is our conclusion that Sturgiss did all that was required of him which was necessary so far as he was concerned to the completion of the structures and the equipment of the plant for work.

It is true that other duties devolved upon 'Sturgiss after this was done, but the failure of the Tin Plate Company took place before the plant was ever completed or put in readiness for operation.

There is no sufficient evidence in the record to show that the failure of the Tin Plate Company to complete the plant and carry out its contract was due to any default on the part of Sturgiss, and there was no complaint that Sturgiss had failed to perform his part of the contract until after the company abandoned the contract, acknowledged its insolvency, was adjudgéd bankrupt, and this controversy arose about the payment of the debts.

Following the course of our reasoning upon this last-named claim, we are of the opinion that the $17,500 was paid by Sturgiss upon an express condition to be performed by the Tin Plate Company, which condition was the sole consideration of the payment, and that upon the failure of the company to perform its part there accrued to Sturgiss a cause of action based upon an implied contract to repay. This principle we think is well sustained in the case of Roehm v. Horst, 178 U. S. 1, 20 Sup. Ct. 780, 44 L.

Ed. 953, in which Chief Justice Fuller speaking for the court, after reviewing the American and English. cases relating to breaches of an executory contract by the refusal on the part of one party to perform it, lays down the rule to be: “That, after the renunciation of a continuing agreement by one party, the other party is at liberty to consider himself absolved from any future performance of it, retaining his right to sue for any damages he has suffered from the breach of- it.” * The same principle will be found very forcibly presented in the case of Griggs v. Austin, 3 Pick. (Mass.) 20-22, 15 Am.

Dec. 175, wherein it is said: “It is a clear principle of the common law that when money is paid or a promise made by one party in ‘Contemplation of some act to be done by the other, which is the sole consideration of the payment or promise, and the tiling stipulated to be done is not performed, the money may bo recovered back or the promise founded on such consideration may be avoided between the parties to the contract.” And in 3 Page on Contracts, § 1475, p. 2275, it is laid down that: "If money has been advanced or property delivered for a consideration which has failed, the injured party may recover what he had paid under the contract.” We do not deem it necessary to go further in disposing of the case than to state our conclusion as follows: That as to the claim filed in the name of George J.

Humbert, and which was assigned to Ceo. C. Sturgiss, the judgment of the District Court be affirmed, and that the said claim, together with interest as stated by the referee, be paid; that as to the claim filed in the name of the Morgantown & Kingwood Railroad Company, assigned to Geo. C. Sturgiss, the judgment of the District Court is reversed, and the claim allowed, together with interest according to the proof and statement filed in the case. As to the claim of $17,500 filed by Geo. C.

Sturgiss, the judgment of the District Court disallowing the same is reversed, and the claim is allowed to be paid, with interest from April 2, 1904, the date of the adjudication in bankruptcy of the Tin Plate Company. The case will be remanded to the District Court for the Northern District of West Virginia, with directions to proceed according to the views herein expressed.