Ford v. Gregson

The opinion states the case. McConnell, G. J. This is an action for the breach of a written contract, brought by the appellant against the respondents in the- district court of Silver Bow County. Defendants demurred to the amended complaint of the plaintiff, and the demurrer was sustained by the court. There was judgment dismissing the plaintiff’s suit, and taxing hfm with the costs, from which he appealed to this court. Said appeal is based on the judgment roll and errors in law. The contract sued on is as follows, to wit:— “This agreement, made and entered into by and between William Hinkleman, Eli Gregson, Alexander Henninger, George Kessler, Thomas Ford, of Silver Bow County, Montana Territory, witnesseth, that the said parties hereto do hereby covenant, promise, and agree, to and with each other, in substance as follows, to wit:— “Whereas, the above-named parties hereto are the rightful owners and in the possession of certain water-rights in and on German Gulch and its tributaries, in said Silver Bow County, and also of certain placer-mining land in the same gulch, which is worked with the water above mentioned; and whereas, certain parties have endeavored and are now endeavoring to take from the said parties hereto, by wrong and unlawful means, and appropriate to their own use, a portion of the water hereinabove mentioned, which will be greatly to the damage of the said parties; now, therefore, these presents witnesseth, that the said parties hereto do hereby covenant, promise, and agree, to and with each other, that they, or either or any of them, will not sell said water-right, or their interest in the same, except by and with the written consent of all of the above-mentioned parties hereto; and without such written consent neither of said parties will make any sale to, or settlement or compromise with, said parties above referred to, or any — 94 — other person or persons, who may be now or hereafter endeavoring to obtain the possession of the said water-rights; and the better to enforce and compel the faithful observance of the stipulations aforesaid, the said parties hereto do hereby acknowledge themselves, and each of them, held and firmly bound unto each other, in the penal sum of ten thousand dollars, lawful money of the United States, as agreed and liquidated damages, for the payment of which, well and truly to be made, they severally bind themselves, their heirs and legal representatives, firmly by these presents; conditioned, however, that they severally comply with and hold inviolate the stipulations herein contained. “It is further understood and agreed that the said parties hereto will join together and make common cause, in defense of their common and several interests, in any contest or action at law which may arise in reference to the said water and water-rights and placer-mining ground hereinabove referred to, and that, of any and all expenses necessarily incurred in protecting their said water-rights, whether by action at law or otherwise, the said Thomas Ford agrees to and will pay the one half, and the other parties, to wit, William Hinkleman, Eli Gregson, Alexander Henninger, and George Kessler, will pay the other half; provided, however, that in case a sale be made of said -water and waterriglits, then the said Thomas Ford shall have and receive the one half of the money received in payment therefor, and the other contracting parties shall receive and have the remaining one half of the money received therefor. The said placer ground hereinabove referred to is better described and designated in the survey and plat filed with the application for patent as lot No. 44, in township No. 4 north, of range No. 10 west. “ In witness whereof the said parties hereto have set — 95 — their hands and seals this twenty-first day of August, A. D. 1884. [Signed] “William Hinkleman. “Elí Gregson. “Alex. Henninger. “George Kessler. “Thomas Ford.” Agreement duly verified before Caleb E. Irvine, notary public, on the twenty-first day of August, 1884. The demurrer is as follows, to wit:— “ Now come the above-named defendants, and demur to the complaint of plaintiff herein, filed April 15, 1885, and for causes of demurrer state:— “ 1. That said amended complaint does not state facts sufficient to constitute a cause of action. “ 2. Said amended complaint shows upon its face that the alleged contract, upon which this action is brought, was and is contrary to public policy and void in law, in so far as it attempts to restrain or to impose a condition upon the alienation of the property therein mentioned, or of any interest therein, or the settlement or the compromise of any controversy or litigation in reference thereto; and it is for the breach of the covenants not to sell or settle or compromise that this action is brought. “ 3. Said amended complaint is ambiguous, unintelligible, and uncertain, in that the allegations of the contract in said complaint do not correspond with, but differ from and contradict, the contract, as set out by copy and made part of the complaint, in that, — 1. The said amended complaint, in the first clause thereof, alleges certain considerations and objects and intentions in regard to said contract, and entering into the same, none of which are contained or expressed in the contract as set out by copy, but are inconsistent with said contract, and the terms thereof; 2. Said amended complaint alleges that by said contract the said parties there — 96 — ‘covenanted, promised, and agreed to and with each other that they, or either of them, without the written consent of the other parties to said contract, would not sell, compromise with, or settle with the parties referred to in said contract, or any other person or persons who were then or thereafter endeavoring to obtain possession of said water or water-rights’; whereas the copy of the contract set out provides that the parties thereto ‘ covenant, promise, and agree to and with each other that they, or either or any of them, will not sell said water-right, or their interest in the same, except by and with the written consent of all the parties; and that without such written consent, neither of said parties will make any sale to, or settlement or compromise with, said parties above referred to, or any other person or persons who may be now or hereafter endeavoring to obtain the possession of said water and water-rights ’; 3. Said amended complaint is many other respects ambiguous, unintelligible, and uncertain. “ Wherefore defendants asked judgment that this action be dismissed, and for their costs. [Signed] “W. W. Dixon, “Attorney for Defendants.” In order to ascertain whether this contract is obnoxious according to the above objections, we will briefly summarize its provisions: 1. The parties to said contract are the owners and in possession of certain water-rights in and on German Gulch and its tributaries, and also of certain placer mining land in the same gulch; 2. There were certain parties averred in the amended complaint to be Williams and Smith, but not named in the contract, who had endeavored, and were then endeavoring, unlawfully to deprive them of a portion of the water to which they were entitled; 3. They virtually covenant among themselves that no one should sell to said parties, or to any one else, his interest in said water-right, except by — 97 — the written consent of all the others, and that no one should make any compromise or settlement with said parties, or any one else, without the written consent of all the others; 4. They bind themselves in the penal sum of ten thousand dollars, each one to the other, as agreed and liquidated damages, conditioned that they severally comply with and hold inviolate the stipulations therein contained; 5. They obligate themselves, their heirs and legal representatives, to pay this penal sum, if the stipulations of the contract should be broken; 6. They enter into a compact with one another to make common cause in any contest or action at law, in reference to said water and water-right, and placer-mining ground, and apportion the expenses of such lawsuit, and the money that might arise from any sale made of such water-rights. It is alleged in the complaint that all the parties to this contract except Ford violated it by compromising with Williams and Smith, and selling to them their several interests in said wafer and placer-mining ground, without first having obtained his written consent. Hence he sues for the penal sum of ten thousand dollars as liquidated damages. The contract sued on at least is void on two grounds:— 1. It prohibits the owner of the water-right from selling it to any one, without the consent in writing of his four associates. By the terms of the contract, each appears to be the owner of a water-right in German Gulch and its tributaries, and he binds himself under the penalty of ten thousand dollars, as “ agreed and liquidated damages,” not to sell to certain parties, “ or any other person or persons who may be now or hereafter endeavoring to obtain the possession of the said water-rights.” Each binds himself, his heirs and legal representatives, in said penal sum of ten thousand dollars, to comply with said agreement not to sell at all, except by — 98 — the -written consent of the others. If any one of them, or his legal representative, should refuse to give his consent in writing, it would tie up the sale of the water-rights of the others forever. Such a contract is certainly against public policy. And especially is this the case in a' country like this, in which water is necessary for so many industrial pursuits. This is analogous to contracts which are in restraint of trade. They are against public policy, and void. In general, covenants which are contrary to public policy are void. Bier v. Dozier, 24 Gratt. 1. A covenant in restraint of trade generally will not be supported, although founded on a good consideration. Callahan v. Donnolly, 45 Cal. 152; Maier v. Homan, 4 Daly, 168; Oregon Steam Nav. Co. v. Winsor, 20 Wall. 64. It is true that a covenant not to trade in a particular place, and for a particular time, is good. Perkins v. Clay, 54 N. H. 518; Pierce v. Fuller, 8 Mass. 225. The counsel for the plaintiff insists that “ the portion of the contract that might be contrary to public policy, or in restraint of trade, is mere surplusage, and can be treated as such by the court in its construction thereof.” He seeks to have the court strike from the contract the provisions which prohibit the sale of the property to any one whatever, and thus limit the prohibition to the sale to Williams and Smith, and to strike from the contract the parts which bind the heirs and legal representatives of the parties, and thus limit the restraining part of the contract to the lives of the parties themselves. These are substantial parts of the contract, put into it by the parties themselves, and create an unlimited prohibition upon the sale of the property involved, upon a contingency that may never happen. The court does not make contracts, but interprets them as it finds them. 2. This contract is void upon another ground. It imposes a restraint and condition upon compromises of settlements of litigation and disputes, which are favored — 99 — by law. “ The courts, being established to conserve the law, good morals, and the due order of society, cannot lend their aid to parties conspiring to impede these objects.” Bishop on Contracts, sec. 59. “To settle or avoid litigation is an object of value.” Bishop on Contracts, sec. 57. This contract binds each one of the parties thereto not to make any “ settlement or compromise with said parties” (meaning Williams and Smith), or any other person or persons who may be now or hereafter endeavoring to obtain the possession of the said water-rights, without the written consent of the other parties, — a contingency that may .never happen. And having thus fortified themselves against the peaceful settlement of an anticipated lawsuit, they prepare for war, by entering into a solemn compact that they “ will join together, and make common cause, in defense of their common and several interests, in any contest or action at law which may arise in reference to the said water and water-rights and placer-mining ground.” Such a contract is obviously against public policy. Counsel for the appellant cities the case of Hoffman v. Vallejo, 45 Cal. 564, as authority for the position that a contract is not void for the reason that it provides that “ no settlement or compromise of the matter aforesaid shall be made without the consent of the parties of the second part, in writing.” But the principle there settled is not applicable to the facts of this case. In that case a contract existed between the parties as to land, ■which made the plaintiff the equitable owner of a half-interest therein. Hence the other party might well be bound not to compromise or settle without violating any rule of public policy. But in the case at bar the interests which the parties attempt to pool are separate and distinct, and the effect of the contract is to bind each party not to settle his lawsuit without the written consent of — 100 — the others, who may have similar suits, or suits involving similar interests. The law is a peacemaker, and will not recognize any contract which will not leave any litigant free to compromise and settle his suit if he chooses so to do. It is not necessary to notice the other grounds of demurrer, as those already passed upon are decisive of the ease. Let the judgment of the court below be affirmed, with costs. Judgment affirmed. McLeary, J., and Bach, J., concur.