Marathon Oil Co. v. Hadley

DUNKLIN, Chief Justice. The Marathon Oil Company has appealed from a judgment denying it a recovery against defendants J. Hall Hadley and his mother, Mrs. L. M. Hadley, for the purchase price of gasoline, lubricating oil, and other materials used in the operation of automotive machines which was sold by the Transcontinental Oil Company to the defendant J. Hall Hadley and the account transferred and assigned by that company to the Marathon Oil Company. The petition was based upon an account of such sales, which was duly verified, and upon a contract in writing, signed by the defendant Mrs. L. M. Hadley, guaranteeing payment of the articles so purchased. Following are special issues submitted to the jury with their findings thereon: “1. Do you find from a preponderance of the evidence that on or about April 1, 1930, the defendant, J. Hall Hadley, entered into a verbal contract with the Transcontinental Oil Company, through its agent Bruce Whitson, whereby the said T. Hall Hadley agreed that he would not sell, nor offer for sale at his filling station at 3923 Camp Bowie Boulevard any gasoline and oil other than the gasoline and oil of said Transcontinental Oil Company, other than such gasoline or oil as said Hadley had on hand at said station at the time said verbal contract was entered into, if you have found that such verbal agreement was entered into between them?- “Answer: Yes. — 885 — “2. Do you find from a preponderance of the evidence that on or about April 1, 1930, the defendant J. Hall Hadley verbally agreed with the Transcontinental Oil Company through its agent Bruce Whitson that he would sell whatever gasoline and oil he obtained from the Transcontinental Oil Company at his filling station at 3923 Camp Bowie Boulevard, at a price to be regulated and fixed by said Transcontinental Oil Company? “Answer: Yes. “3. Do you find from a preponderance of the evidence that all of the items set out in the plaintiff’s verified account introduced in evidence before you were purchased by said defendant, J. Hall Hadley, under a verbal agreement between said Hadley and the Transcontinental Oil Company, through its agent Bruce Whitson, the terms of which were that the price at which the gasoline and oil sold by said Hadley at his filling station at 3923 Camp Bowie Boulevard was to be regulated and fixed by the Transcontinental Oil Company, and that said defendant, J. Hall Hadley would sell, or offer for sale at said station only the gasoline and oil of the Transcontinental Oil Company? “Answer: Yes. “4. In the event you have answered questions One and Two or either of them in the affirmative, and in that event only, then answer: Do you find from a preponderance of the evidence that Bruce Whitson had authority from the Transcontinental Oil Company to make the verbal agreements inquired about in Questions One and Two, or in either of said questions? “Answer: Yes.” The facts so found by the jury were alleged in defendants’ answer in connection with the further allegation, which was sustained by evidence introduced, that the merchandise shown in the verified account was sold after that contract was entered into and pursuant thereto. Defendants further alleged that by reason of those facts plaintiff’s contract for the sales, evidenced by the verified account sued on, was in violation of the anti-trust statutes of tne state and therefore unenforceable. And upon the trial in the court below defendants admitted that the debt sued for by plaintiff was just and due unless defeated by the defense of illegality just mentioned. We believe the contract comes well within the prohibitive provisions of chapter 1, title 126, beginning with article 7426, Rev.Civ.Statutes, commonly designated as the anti-trust statutes. And by article 7437 in the same chapter, it is provided that any contract or agreement in violation of the provisions of any articles in that chapter “shall be absolutely void and not enforcible either in law or equity.” See 10 Tex.Jur. §§ 135 and 136, pages 232 and 233. And in section 142, page 248, same volume, the following is said: “Where the original contract is illegal, any subsequent contract which carries it into effect is also illegal. A mere change in the security or in the form or evidence of a demand will not remove the taint. If the subject matter of the contract can .be traced back between privies to an original illegal contract, the substituted security is void; and this is true even though the parties liable on the last security were not privy to the illegal bargain. “A contract guaranteeing performance of an illegal contract, or a lien securing its performance, is also invalid, and notes or checks given pursuant to such a contract, or a note given in renewal of, or in substitution for, a previous note which was founded on an illegal consideration, or a subsequent promise to pay the debt evidenced by such a note, cannot be enforced.” Section 144, page 251, announces that a promise which is entirely disconnected with an illegal act and founded on a new or different consideration is not tainted by the illegal act. In section 145, page 254, this is said: “The test for determining whether a demand connected with an illegal act can be enforced is whether the person seeking to enforce it requires any aid from the illegal transaction to establish his case. No recovery can be had if it is necessary for the plaintiff to prove, as part of his cause of action, his own illegal contract or other illegal transaction. But the plaintiff may recover if he can show a complete cause of .action without being obliged to prove his own illegal act, although such act may incidentally appear, and may be explanatory even of other facts in the case, it being sufficient if his cause of action is not essentially founded upon something which is illegal.” Many decisions are cited to support the foregoing announcements. Appellant insists that a prima facie showing for recovery was made out by the introduction of the verified account sued on — 886 — without the aid of the preliminary oral contract found by the jury and pursuant to which the merchandise was sold, and therefore the sales made were not tainted with the illegality of the preliminary agreement. That position is untenable since the preliminary contract necessarily entered into and became a part of the sales contract and constituted a part of the consideration therefor. See Edwards County v. Jennings, 89 Tex. 618, 35 S.W. 1053; Rawleigh Co. v. Gober (Tex.Civ.App.) 3 S.W.(2d) 845; Rawleigh Co. v. Land, 115 Tex. 319, 279 S.W. 810; Scoggins v. Furst & Thomas (Tex.Civ.App.) 9 S.W.(2d) 405. In McMullen v. Hoffman, 174 U.S. 639, 19 S.Ct. 839, 845, 43 L.Ed. 1117, this is said: “Upon the point as to the ability of the plaintiff to make out his cause of action without referring to the illegal contract, it may be stated that the plaintiff, for such purpose, cannot refer to one portion only of the contract upon which he proposes to found his right of action, but that the whole of the contract must come in, although the portion upon which he founds his cause of action may be legal.” One of the decisions cited in that case was Embrey v. Jemison, 131 U.S. 336, 9 S.Ct. 776, 779, 33 L.Ed. 172, in which Justice Harlan said: “Assuming the averments of the plea of wager to be true, it is clear that the plaintiff could not recover upon the original agreement without disclosing the fact that it was one that could not be enforced or made the basis of a judgment. He cannot be permitted to withdraw attention from this feature of the transaction by the device of obtaining notes for the amount claimed under that illegal agreement; for they are not founded on any new or independent consideration, but are only written promises to pay that which the obligor had verbally agreed to pay. They do not, in any just sense, constitute a' distinct or collateral contract based upon a valid consideration.” See, also, McManus v. Fulton, 85 Mont. 170, 278 P. 126, 67 A.L.R. 690. Since plaintiff’s suit was for merchandise alleged to have been sold to J. Hall Hadley, it is in no position to say that the preliminary contract with J. Hall Hadley was with him as an agent only. The testimony showed that the preliminary contract referred to above and found by the jury was made with Bruce Whitson for and in behalf of the Transcontinental Oil Company. Defendants introduced evidence sufficient, prima facie, to show that at the time the preliminary oral agreement, found by the jury, was made with Bruce Whitson, J. C. McCoy was the Texas sales manager of the Transcontinental Oil Company, and Bruce Whitson was assistant Texas sales manager, whose duties included the making of contracts with purchasers, which contracts were then passed upon by J. C. McCoy and also by H. C. Scott, the company’s representative at Tulsa, Old. J. C. McCoy testified that contracts made for the company by local representatives had to be submitted for approval to him or his assistant. Defendant J. Hall Hadley testified that he was not told and did not know that the contract made with him by Whitson had to be submitted to the Tulsa office for approval; and, according to his further testimony, prices realized by him for gasoline were fixed by McCoy and in some instances expressly authorized from the company’s Tulsa office. That testimony, and other facts in evidence, was sufficient, prima facie, to show that the act of Whitson in making the preliminary agreement for sale with J. Hall Hadley was within the apparent scope of his authority as assistant sales manager of the company and therefore binding upon the company. 2 Tex.Jur. § 39, p. 425; § 40, p.427; § 43, p. 431. The contract of Mrs. L. M. Hadley to guarantee the payment for purchases thereafter to be made by J. Hall Hadley was tainted with the same vice of illegality as that inuring in the original contract with J. Hall Hadley. 10 Tex.Jur. § 142, p. 248, and decisions there cited, such as Fuqua v. Pabst Brewing Co., 90 Tex. 298, 38 S.W. 29, 750, 35 L.R.A. 241; W. T. Rawleigh Co. v. Land, 115 Tex. 319, 279 S.W. 810. Appellant cites title 93, chapter 8, arts. 5737-5764, Rev.Civ.Statutes, authorizing the formation of “marketing associations,” and providing that the association and its members may execute marketing contracts requiring members to sell for a period of time not over ten years, all or any specified part of their agricultural products exclusively to or through the association or any facilities created by it; and article 5762 provides that no such an association nor any such contract with its members shall be deemed illegal or in restraint of trade. It is then insisted that the discrimination there made in favor of such associations and contracts now renders the enforcement of our Anti-Trust Statutes vio887 lative of section 1, article 14, of amendments to the Federal Constitution. We are referred to extensive briefs on this question, filed in the case of State of Texas v. Standard Oil Company et al., 82 S.W.(2d) 402, now pending in the Court of Civil Appeals of the Third Supreme Judicial District of Texas, discussing the same question. Our anti-trust statutes have often been sustained as constitutional when attacked on grounds other than the one now presented; and since it is not clear that this attack is meritorious, we shall overrule it without attempting a review of the voluminous arguments and authorities to be found in the briefs filed in the other case. State v. Shippers’ Compress & Warehouse Co., 95 Tex. 603, 69 S.W. 58, 10 Tex.Jur. § 131, p. 222. Courts will resolve every reasonable doubt in favor of the validity of a statute, and every reasonable intendment will be indulged in favor of its validity unless its repugnancy to the Constitution clearly appears. 6 R.C.L. § 98, p. 97; § 100, p. 101. It does not clearly appear to us that this classification in favor of farmers and farm products is arbitrary and not based on reasonable and justifiable distinctions; nor that the marketing associations act is in pari materia with the anti-trust civil statutes and the penal statutes enacted to insure their observance and therefore to be read as exemptions from their operation. 6 R.C.L. § 369, p. 373 et seq. Appellant cites such cases as State v. Gulf Refining Co. (Tex.Civ.App.) 279 S.W. 526; Cox, Inc. v. Humble Oil & Refining Co. (Tex.Com.App.) 16 S.W.(2d) 285; Jones Inv. Co. v. Great A. & P. Tea Co. (Tex.Com.App.) 65 S.W.(2d) 495, in which it was held that contracts there involved were not violative of the anti-trust statutes. We believe it sufficient to say that those cases are distinguishable from the case at bar in that the restraint against freedom of trade with other parties were not as far reaching as the preliminary oral agreement found by the jury in this case, and on which the defense was predicated. Defendant’s place of business was •changed from No. 3923 Camp Bowie boulevard to another location in the same city with the knowledge and without objection of the Transcontinental Oil Company; and thereafter Hadley continued business with the company under the original contract the same as before. Under such circumstances, the mere change in business location did not of itself render ineffective the preliminary parol contract found by the jury. All assignments of error are overruled and the judgment of the trial court is affirmed.