Judd v. Harrington

Pryor, J. For answer to the action defendant alleges that the contract sued on is void, because made in pursuance and furtherance of a combination to prevent competition in the supply of sheep meat in the market of New York.' The real plaintiff is the New York & New Jersey Sheep Brokers’ Association, suing in the name of its treasurer. On the 20th December, 1886, this association entered into an agreement with the Sheep & Lamb Butchers' Mutual Benefit Association, which, reciting that the parties of the first part are engaged in business as wholesale brokers in sheep and lambs, and the parties of the second part are engaged in the business of buying sheep and lambs for slaughter and sale, proceeds to stipulate, in substance, among other things, that the parties of the first part should not slaughter any sheep or lambs, except for export only, or sell any sheep or lambs, except to the parties, of the second part,—which stipulation is secured by a penalty,—and that the parties of the second part should make all their purchases of sheep and lambs from the parties of the first part, which stipulation also is secured by a penalty. Seeing that the brokers who sell and the butchers who buy in combination control the supply of sheep meat, it is clear-beyond question that the intent and effect of the agreement are to prevent competition with the brokers in selling and with the butchers in furnishing the meat to the market; and, such being the evident purpose and tendency of the agreement, the law adjudges it void without proof of its actual operation. “It is not necessary to inquire whether the effect of the agreement was in fact detrimental. [412] The true inquiry is, is it the natural tendency of such an agreement to injuriously influence the public interests? The rule is that agreements which in their necessary operation tend to restrain natural rivalry and competition, and thus result in disadvantage to the public, are against the principles of sound policy, and void. ” Fglobe, J., in Atcheson v. Mallon, 43 N. Y. 147. Salt Co. v. Guthrie, 35 Ohio St. 672; Richardson v. Buhl, (Mich.) 43 N. W. Rep. 1102; Anderson v. Jett, (Ky.) 12 S. W. Rep. 670; Hilton v. Eckersley, 6 El. & Bl. 47, 65; Clancey v. Salt Co., 62 Barb. 406; People v. Chicago Gas Co., (Ill. Sup.) 22 N. E. Rep. 798; Hooker v. Vandewater, 4 Denio, 349; Stanton v. Allen, 5 Denio, 434; Wire Cloth Case, special term, Feb. 1891,1 affirmed at general term. If, then, the particular agreement on which the action proceeds was connected with and auxiliary to this unlawful combination between the brokers and butchers, it is necessarily infected with the vice of its principal, and is equally and alike invalid. That it was so connected, and so auxiliary, is clear to demonstration. The agreement between the brokers and butchers was made 20th December, 1886; the agreement sued on was made 11th April, 1887. The latter refers in terms to the former, and makes provision for the distribution of money to be received from the butchers’ association pursuant to the combination contract. Indeed, it is impossible not to perceive that the organization of brokers effected by the agreement sued on was for the very purpose of carrying out the provisions and policy of the combination. It results, therefore, that whether the agreement sued on be not of itself and alone void, because suppressing competition,—to restrict competition is the object avowed in its preamble,—still, by reason of its implication and co-operation with the unlawful principle and provisions of the combination contract, it is poisoned with the same illegality, and is equally incapable of sustaining an action. But appellant objects that the agreement between the brokers and butchers is not lawfully in evidence, because “two legal rights”—the agreements under consideration—“cannot make one legal wrong,” i. e., produce the illegality of the contract in suit. The argument begs the question in assuming the validity of the brokers’ and butchers’ agreement, which, as already seen, is illegal and void. The invalidity of the contract in suit was pleaded in defense to the action; and it is always competent to show by proof aliunde that an apparently valid contract is vitiated by illegality. Flor does partial performance by a party of an illegal contract avail to estop him to assert its illegality at any stage of the controversy. • The combination agreement, then, being properly in evidence, and established by uncontroverted proof, and its necessary effect being to invalidate the contract sued on, it was at once manifest that in no event could the action be maintained; and the learned trial judge might, without more, have dismissed the complaint. But he allowed the litigation to proceed, and left it to the. jury to say whether the combination between the brokers and butchers was unlawful. The construction and legal effect of the contract in suit was, under the circumstances, the function of the court; and, had the verdict upheld the contract, the submission of the question to the jury would have been fatal error. But since by their finding they construed the contract correctly, the error in referring its validity to their decision is of no prejudice to the plaintiff. -From the fact that the moment the agreement between the brokers and butchers was in the case the action was irretrievably lost to the plaintiff, it follows that no error, if any, in the admission or exclusion of evidence, is of effect upon the validity of the judgment. We are not satisfied, however, of any error in the rulings on evidence. Appellant objects to a certain class of evidence, because it was admissible only after a confederacy had been shown; but a conspiracy was conclusively established by the agreement between the brokers and butchers, and then everything said or done by the parties to the [413] combination in furtherance of its design was competent evidence against the plaintiff. It was a favorite maxim with Chief Justice Marshall that the law regards with more favor him who would avoid a loss than him who would acquire a gain. Short v. Skipwith, 1 Brock. 103; Blane v. Drummond, Id. 62. If this action be sustained, the defendant, for a mere technical default, will suffer a forfeiture of $10,000. Our conclusion is that the judgment and. order be affirmed, with costs. All concur. 'MOTE. The opinion at special term, filed February, 1891, is as follows: “Pryor, J. In extinguishment of an admitted cause of action the defendant pleads-that an equivalent sum is due it from plaintiff in virtue of the following allegations of fact: That three incorporated companies and two copartnership firms, engaged in the-manufacture and sale of wire cloth, entered into an agreement whereby, for the avowed object of ‘ regulating the price ’ of the commodity, they constituted themselves an association, imposed upon themselves stipulated rates of charge, engaged that they ‘ will sell no cloth at less than the prices set forth; ’ and to insure obedience to this undertaking subjected themselves to a heavy penalty for its violation; that plaintiff and defendant are parties to this agreement and association; that, pursuant to a provision of the agreement, defendant deposited §3,000 with the United States Trust Company, to be forfeited to the other members of the association in the event defendant should violate inter alla its obligation not to sell below the stipulated price; that the association declared the §3,000 forfeited, and that of this sum plaintiff received and wrongfully retains §500, which defendant counterclaims against its indebtedness to plaintiff. The validity of the counterclaim is challenged for formal defects, but as I am of opinion that the plea is bad in substance I dismiss from consideration the technical grounds of demurrer. “The declared purpose of the agreement is to enable the association, as between its members, to ‘ regulate the price ’- of the commodity in which they deal, and this result is accomplished by empowering the association to fix a price, and by binding its members, under a penalty, not to sell below the sum so prescribed. Since all the members are to sell for the same price, of course competition between them is impossiblfe; and,, having power to fix the price, they will be impelled by the irresistible operation of self-interest to raise that price to the highest attainable figure. Here, then, is an agreement of which the inevitable effect is, in conformity with its proclaimed design, to restrict competition in trade, and to arbitrarily enhance the price of a commodity of commerce. That such a contract is repugnant to public policy, and so unlawful, is a settled principle in the jurisprudence of this country. The people have a right to the necessaries and conveniences of life at a price determined by the relation of supply and demand, and the law forbids any agreement or combination whereby that price is removed beyond the salutary influence of legitimate competition. ‘ With results naturally flowing from the law of supply and demand the courts have nothing to do; but when agreements are resorted to for the purpose of taking trade out of the realm of competition the courts cannot be successfully invoked, and their execution will be left to the-volition of the parties thereto.’ Santa Clara v. Hayes, 76 Cal. 387,18 Pac. Rep. 391. ‘In its very nature a right to exclude competition is injurious to thepublic.’ City v. Gas Co., 70 Mo. 69. ‘ Public policy favors competition in trade, to the end that its commodities may be afforded to the consumer as cheaply as possible.’ Salt Co. v. Guthrie, 35 Ohio St. 666. ‘Free competition is the life of business; and all combinations for the purpose of raising or controlling the prices of merchandise are monopolies, and intolerable, and ought to receive the condemnation of all courts.’ Richardson v. Buhl, (Mich.) 43 N. W. Rep. 1102. ‘The natural law of supply and demand is the best law of' trade.’ State v. Goodwill, 41 Alb. Law J. 53. ‘ Rivalry is the life of trade. The thrift and welfare of the people depend upon it.’ Anderson v. Jett, (Ky.) 12 S. W. Rep. 670. ‘ It is against the general policy of the law to destroy or interfere with free competition, or to permit such destruction or interference.’ Stewart v. Transportation Co., 17 Minn. 373, (Gil. 348.) ‘ Competition is the life of trade,’ and ‘combinations and confederacies to enhance the price of any article of trade or commerce are injurious to the-public,’ and therefore illegal. People v. Fisher, 14 Wend. 19. ‘Whatever destroys or even restricts competition in trade is injurious, if not fatal, to it.’ Hooker v. Vandewater, 4 Denio, 349,353. ‘ If the primary object oí the firm was to prevent competition, it might be considered as against public policy,’ and it would be ‘ condemned by proof' that it was part of a conspiracy to control prices.’ Marsh v. Russell, 66 N. Y. 292. ‘The agreement was to prevent competition, and such competition it was not lawful for the parties to prevent or attempt to prevent.’ Hartford, etc., R. Co. v. New York, etc., R. Co., 3 Rob. (N. Y.) 415. ‘ A combination to artificially enhance prices is inimical to the interests of the public, and all contracts designed to effect such an end are contrary to publicpolicy, and therefore illegal.’ Arnot v. Coal Co., 68 N. Y. 558. Acombination to raise the price Of lard is ‘ an unlawful plot,’ and an indictable misdemeanor. Leonard v. Poole, 114 N. Y. 371, 21 N. E. Rep. 707; Stanton v. Allen, 5 Denio, 434; Clancey [414] v. Salt Co., 62 Barb. 395; Craft v. McConoughy, 79 Ill. 349; Bagging Co. v. Kock, 14 La. Ann. 168; Hilton v. Eckersley, 6 El. & Bl. 47; People v. Chicago Gas Co., (Ill. Sup.) 22 N. E. Rep. 798; People v. American, etc., Co., (Cal.) 7 Ry. & Corp. Law J. 83; Watson v. Companies, 52 How. Pr. 348; Murray v. Vanderbilt, 89 Barb. 141; Wright v. Ryder, 36 Cal. 342; Morgan v. Donovan, 58 Ala. 242; Daniels, J., in People v. North River, etc., Co., (Sup.) 7 N. Y. Supp. 406. Thus, by the overwhelming, if not uniform, current of authority, the agreement under criticism is condemned as contrary to public policy, and illegal. “Nor is the operation of the rule forbidding contracts restricting.’competition and enhancing price limited to trade in the necessaries of life; but, as appears from the citations above, extends equally and alike to ail commodities of commerce. Neither need the agreement or combination, in order to expose it to the denunciation of the law, constitute a complete monopoly, or effect a total suppression of competition; but the language of courts and of writers is, that, if the agreement or combination tends to monopoly, or reduce or lessen competition, it is contrary to public policy, and unlawful, because operating pro tanto an artificial enhancement of price. Authorities supra. It results, therefore, that, as defendant’s counterclaim demands the repayment of money received by plaintiff upon an illegal agreement, the court will not interpose for its restitution. The familiar maxims ea: pacto 'illiaito non oritur actio, and in pari delicto potior est conditio possidentis, are fatal to defendant’s contention. Another Vice in the agreement with which defendant’s counterclaim is implicated would suffice to invalidate it. By the instrument constituting the Wire Cloth Manufacturers’ Association it is provided that upon complaint made of its violation the accused member shall be condemned to forfeit his §3,000 deposit, which shall thereupon be divided in equal parts among the members who have determined his guilt and declared the forfeiture, and the answer alleges that the §500 which defendant seeks to reclaim was received by plaintiff as its share of the §3,000 deposited and forfeited by defendant. Plainly the tribunal so created and so empowered is obnoxious to the criticism of the court of appeals in Austin v. Searing, 16 N. Y. 112, where said: ‘ An agreement by which the members of an association undertake to confer judicial powers upon a body of men as a tribunal having authority to adjudicate upon alleged violations of the rules of the association, and to decree a forfeiture of the rights of property of parties adjudged to have been guilty of such violation, is void as against public policy, and the courts will not enforce such a contract, nor lend their aid to give effect to the decrees of a tribunal thus constituted.’ And, if the courts will refuse to enforce such an agreement while executory, so will they decline to undo it when executed, but will leave the parties in the situation in which, by their illegal contract, they have placed themselves. Knowlton v. Congress, etc., Co., 67 N. Y. 518; Haynes v. Rudd, 83 N. Y. 251. The agreement under consideration is even more repugnant to law than that condemned in Austin v. Searing, for it constitutes the persons who are to benefit by the forfeiture the tribunal by which it is to be decreed,—contrary to the principle of natural jus tice that no man shall be a judge in his own cause, (Broom, Max. 116,)—a principle so inviolable that not even an dot of parliament can impugn it, (Day v. Savadge, Hob. 85, 87.) If, on the other hand, we suppose the agreement to be valid, and the tribunal that inflicted the forfeiture legal, the same result follows,—that defendant cannot reclaim money paid in conformity with its own contract and by the decree of a court of its own choosing. In any view the counterclaim is untenable, and the demurrer must be sustained. ” Footnotes [1] See note at end of opinion.