Fairbank v. Leary

Lyon, J. The clause in the copartnership agreement wherein each partner agreed not to transact on his individual account, within twenty miles of Waupun, the kind of business for the transaction of which the copartnership was created, is unobjectionable. It is the constant course to insert such clauses in copartnership articles; and in no correct sense can it be said that they operate as a restraint upon trade. On the contrary, they are reasonable and proper stipulations to [643] insure the fidelity of each partner to the interests of the firm, and have always been upheld by the courts, as the cases cited in the brief of counsel for the plaintiffs abundantly show. Neither is any other express stipulation in the agreement illegal on its face. By the terms of the instrument, a copart-nership between the parties to transact a lawful business in an apparently lawful manner, was formed. Of course it does not require argument or citation of authority to show that five or any other number of men may lawfully form a copartnership to buy the produce of the country and sell merchandise, at Waupun or any other place. But it does not necessarily follow that the agreement under consideration is a valid one. Although not expressed therein, if that agreement was in fact made for the purpose of preventing competition in the markets in which the firm might operate, and with the intention of keeping secret from the public the existence of the agreement, and if its existence was thus kept secret, and an appearance of competition between the partners maintained by them towards the public, such executed intention of secrecy and deception tainted the agreement itself, and rendered it illegal and void. In that case, no rights can be enforced under such illegal agreement by any party against another party thereto. The law does not and did not require that these parties shotdd compete in the purchase of produce. Individually each had an undoubted right to bid therefor as low as he pleased. Collectively, they had the same right, unless deception was practiced on the public. But if they held themselves out as competing purchasers, and knew that the people who sold in the' markets where they operated relied upon such competition (as well they might), as a guaranty that they were obtaining the full market value of their produce, while, at the same time, the purchasers were not in competition but in secret league to depress the market, the agreement under which the latter operated is illegal and void, and no court will lend its [644] aid to enforce any of its stipulations. The cases which hold that secret agreements between persons attending auction sales not to bid against each other, and to divide the property bid off by one of them, are illegal, go upon the same principle. These views are fully sustained by the authorities cited by counsel for the defendant; to which we add The Morris Run Coal Co. v. The Barclay Coal Co., 68 Pa. St., 173. The case of Graft v. Me ConoughVy, recently decided by the supreme court of Illinois, and reported in 3 Monthly West. Jur., 233, is an instructive case, and very similar in its facts to the case under consideration. It only remains to determine whether the complaint shows on its face that the agreement was entered into with the unlawful intention above mentioned. The only averment thereof which it is claimed shows such intention, is the following: “ Each of said firms operating independent of each other or any member of said copartnership, and in the same manner as they had theretofore done, and as though the said copartnership did not exist.” But we think the agreement cannot fairly be so interpreted. It may be true, and yet there may have been no intention of secrecy — no conspiracy, so to speak; the true relations between the parties may have been notorious, and all persons selling produce in the markets where the firm was a purchaser, may have known that the members of it were not in competition. If the agreement between the parties is valid and binding upon them, the complaint states a cause of action against the defendant. Finding nothing in the complaint which shows such agreement to be illegal, we must hold that the demurrer thereto was properly overruled. By the Oov/rt. — Order affirmed.