Clancey v. Onondaga Fine Salt Manufacturing Co.

By the Court, Mullin, J. The defendant was incorporated under the general law providing for the incorporation of companies for the purpose of carrying on any kind of manufacturing, mining, mechanical or chemical business. (2 R. S. 657, 5th ed.) The business specified in the charter of the defendant, filed pursuant to the aforesaid statute, is “ The business of manufacturing fine salt.” This is a perfectly legitimate business, and the corporation was legally created. That the intention of those who participated in its creation was to carry into effect illegal purposes, is doubtless true; but the subsequent abuse or perversion of corporate powers does not destroy the body corporate. It may furnish a reason why the legislature or the courts should annul the charter and annul the corporation. We must hold the defendant a legal entity, and bound to answer the plaintiff in this, action. It is found by the referee that the true object, purpose and intent of said pretended organization or corporation was to enable the manufacturers of fine salt on the Syracuse reservation, under cover of a corporate organization, to limit and fix the amount of salt to be manufactured on said reservation in 1858; to fix and control the price thereof, and to prevent competition in the price of salt. He also finds that an important part of the plan upon which said company was organized was, that each manufacturer should lease to said corporation the salt block or blocks owned by him ; and at the same time enter into an agreement with said pretended corporation to manufacture salt for the said cor [404] poration in the block or blocks so leased, under certain restrictions contained in said agreement, thereby giving to said corporation the control of the blocks and the salt manufactured in them. It is declared by chapter 183, section 16, of the •laws of 1841, that any owner, occupant or person having charge of any manufactory of salt, who shall combine or conspire with, or enter into any combination, arrangement, agreement or understanding with any person of persons, tq limit, restrict or fix the time of operating or running said works, or to increase, regulate or fix the price of salt, or the amount to be manufactured, shall be deemed guilty of a misdemeanor. The referee finds that Martin Mara & Co., the assignors of the plaintiff, were' the owners of salt block Ho. 25. He also finds that the object of the corporation was to fix and control the price of salt, and that the mode in which it was to be accomplished was by the owners leasing to the corporation the salt blocks owned by them, and thus giving control of the quantity and price to the corporation. The purposes of the arrangement were in violation of the statute, and those concerned in it guilty of a misdemeanor. This court has held repeatedly that the purposes which were attempted to be accomplished through the corporation, were illegal. The end to be attained being illegal, the contracts and agreements entered into to secure the end must be equally so. But as it is possible that a party may enter into contracts which may give effect to the illegal purpose, in ignorance of the unlawful design, it is necessary for those assailing such agreements to show that such agreements were entered into with knowledge of the illegal object. If Martin Mara & Co. went to the charter, they found the declared object of the incorporation a legal one. It was consistent with the declared purposes that the corporation should take leases and contract for the manufacture of the salt. So far there was nothing to charge Martin Mara & Co. with notice. And indeed the only fact relied on to charge [405] them with notice is, that they, or one of them, attended the first meeting of the manufacturers to form a corporation. That, of itself, is not enough; because, as I have already shown, the declared obj ect of the corporation was a legal one, and in the absence of evidence we cannot intend that an illegal one was discussed, or that term intended. The referee expressly finds, as matter of law, that Martin Mara & Co. are not chargeable with the illegal purposes of said company. If this conclusion was arrived at from conflicting evidence, we would be precluded from questioning its accuracy. But there is no conflict of evidence. The facts are un contradicted which bear upon this question of knowledge, and I am constrained to dissent from the finding of the referee, whether it be one of fact or of law. Mara admits that he attended one meeting for the purpose of considering the question of organizing a corporation. Ho plan was agreed on at the meeting; there was only talk on the subject of forming a company. Why were individual owners combining to form a corporation, if it was not to secure some advantage no.t already enjoyed ? If it was to combine capital, and thus to facilitate the operations of the new organization, it was not only legal but harmless. Mara & Co._ leased to the corporation. Why ? That it might thereafter carry on the business of making salt? Hot at all. The corporation, by a concurrent agreement, obligate the lessors to put and keep the salt block in first rate running condition during' the season, and manufacturc for and deposit in bin, all the salt required to be made in said blocks by the party of the second part, not less than 15000 bushels, to be well made, and kept in good order, at and for the price of sixteen cents per bushel, payable as fast as the same shall be shipped and sold and realized by them; and the defendant covenanted that it would not unreasonably delay the taking and selling the salt, and that all salt made under the agreement should be sold and paid for by the 1st of June of the following year. [406] Mara & Co. further agreed to‘pay the duties, in advance, on 200 barrels, which the defendant was to refund by the 1st of September then next. And it was further agreed that if more than 15,000 bushels, should be made, by mistake, on said block, the defendant should take and pay for it, at eight cents per bushel, subject to duties. But the said Mara & Co. should not have the right to make more than 15000 bushels. It is impossible, it seems to me, for any man, in reading this agreement, not to see that the object of the parties to it was to limit the production of salt. For 15,000 bushels, 16 cents is to be paid; for any larger amount 8 cents. Is this the contract men renting salt blocks, and intending to produce all the salt the works could produce, or all the market would require, would be likely to make ? Can it be possible that Mara & Co., "when they made this agreement, did not understand that the scheme was to limit the quantity of salt produced, and thereby increase the price ? Why did Mara & Co. agree to wait for their pay until sales were made, and proceeds realized by the company ? Was it not a mere shift—a pretense to avoid the consequences of a combination to effect the same object among the owners of salt blocks in Syracuse ? It is impossible, it seems to me, to say, in view of these •provisions, that Mara & Co. did not fully understand that the arrangement was to create a monopoly, and evade, if possible,-the statute forbidding it. It seems necessary, in order to render the arrangement between the defendant and Mara ■& Co. illegal, that the latter should know the illegal purposes for which the corporation was created. It would not be.proper to find such fact on the evidence in this case. But that is not the question. It is whether the arrangement between the defendant and Mara & Co. was illegal. It was as. much a violation of the statute to comí bine to raise the price of salt by limiting the produce of • one man for the year 1858 to 15,000 bushels, as to limit [407] that of 350 men to that or 'any other quantity. We must find that Mara & Go. knew that the object of the arrangement was to increase the price of salt, and that by the arrangement they were to receive the benefit of it. This fact being known, and the agreement made to aid in carrying out the illegal purpose, it is utterly void and cannot. be enforced by Mara & Co., or any one deriving title through them. (Hallett v. Novion, 14 John. 272. Pennington, v. Townsend, 7 Wend. 276. Nellis v. Clark, 20 id. 24; affirmed, 4 Hill, 424. Stanton v. Allen, 5 Denio, 434. Howard v. Vandewater, 4 id. 349. Thalimer v. Brinkerhoff, 20 John. 397.) [Oswego General Term, July 8, 1862. Mullin, Morgan and Bacon, Justices.] While a party to an illegal contract1 cannot enforce it, it is competent for him to resist its enforcement by reason, of its illegality. (Tylee v. Yates, 3 Barb. 222. Nellis v. Clark, 20 Wend. 24. Chitty on Cont. note, 695, &c.) I am of opinion that the judgment, on the report of the referee, should be set aside, and a new trial ordered, costs to abide the event. blew trial granted,