Stewart v. Stearns & Culver Lumber Co. , 56 Fla. 570 ( 1908 )

Whitfield, J.

(After stating the facts) — The contract upon wthich the action is brought contains a lease to a partnership of a store house formerly used as a commissary in a village where a corporation, the owner of the store house, it is alleged, owned and operated a large saw mill employing a great number of persons. The contract also contains an agreement by the corporation to relinquish its right to establish and maintain a commissary for its employees, to use its influence to induce the employees, loggers and others to purchase their supplies, from the partnership, and to issue to its employees merchandise checks against their wages directed exclusively to the partnership., to be redeemed by the corporation through the partnership for cash at par every thirty days, if such issue is not illegal. The partnership agreed in the contract to establish a general store carrying $10,000 or more of feed, grain, dry goods, boots and shoes, furniture, drugs, stationery, notions, hardware, etc., to accept as cash the merchandise coupons issued by the corporation, and to pay the corporation every thirty days a commission of five per cent upon the gross sales of the business. The partnership alleges that its covenants have been performed, and that the covenants of the corporation have been violated, for which damages are claimed.

The demurrer to- the declaration presents the question whether the contract is one that the courts will enforce;. i. e.; whether it tends -to create a monopoly, to. restrain trade or to stifle competition, so as to. make it violative of the laws or of public policy of this State.

The principles of the common law, when not modified by express enactments or rules or by the requirements of governmental conditions, are in force as a part of the system of laws and rules of judicial procedure in this State.

There are no express declarations or modifications of the principles of the common law relating- to restraints of trade and monopolies in this State, except as have been made by Congress in its authority as to interstate and foreign commerce, and by sections 3x60-4 Gen. Stats, relating to restraints in sales of fresh meat, and by sections 3233, 3514, 3515, General Statutes, relating to coercing employees and to criminal conspiracies and to combinations against workmen, and perhaps some other provisions, all of which indicate a policy to extend and confirm rather than to restrict the common law principles relating to' restraint of trade and monopolies.

The industrial and governmental conditions ’here do not require a relaxation of the just principles of the common law in reference to monopolies and restraints of trade; but, on the contrary, the spirit and purpose of our government and institutions, and the commercial conditions of the country require'the maintenance and enforcement of those principles for the protection of freedom in trade and equal opportunities to all under like conditions, so that the •welfare of the public or any'considerable portion thereof may not be unjustly subordinated to the purposes and advantage of one or more individuals.

At common law any contract or agreement that in its operation has or may have a tendency to restrain trade, to stifle Competition in trade, to create or maintain a monopoly, or to unnaturally control the supply of or to increase the price of or to curtail the opportunity of obtaining' useful commodities, to the injury of the public 01 any considerable portion of the population of any locality, is regarded as contrary to just governmental principles and inimical to the public welfare and therefore against public policy.

'Contracts or agreements that violate the principles of public policy designed for the public welfare are illegal and will not in general be enforced by the courts in consideration of the principle expressed in the maxim, in pari delicto potior est conditio defendentis.

The courts will not in general aid either party to- enforce an illegal agreement, but will leave the parties where they place themselves with reference to- such illegal agreement, except where the law or public policy requires action by the courts, or where the parties are not in pari delicto, and perhaps in other cases not pertinent here. See 9 Cyc. 546; Broome on Common Law, 355; McMullen v. Hoffman, 174 U. S. 639, 19 Sup. Ct. Rep. 839; Burton v. McMillan, 52 Fla. 469, 42 South. Rep. 849, 8 L. R. A. (N. S.) 991; 2 Hughes on Proc. 679; 2 Eddy on Combinations, § 688, 737; I Eddy on Combinations, § 336, 585; Beach on Monopolies, p. 47; United States v. Addyston Pipe & Steel Co., 54 U. S. App. 723, 85 Fed. Rep. 271, 29 C. C. A. 141, 46 L. R. A. 122; Chapman v. Haley, 117 Ky. 1004, 80 S. W. Rep. 190, 4 Am. & Eng. Anno. Cases 712.

All the provisions of a contract should be considered and construed with reference to- controlling provisions and principles o-f law. Until the contrary appears it is assumed that a contract is made for and will accomplish only a lawful purpose; and no strained or unusual construction should be given to a contract so as to render it unlawful. But when it appears from a contract and the circumstances under which it was made, and from its purposes, operation and results, that in its terms or in its full operation it is unlawful, or its operation accomplishes or in realty tends to- accomplish an unlawful purpose, whether so intended by the parties thereto or not, the contract will not be enforced by the courts.

Public policy favors competition in trade, to- the end that commodities may be obtained with the greatest convenience and at the lowest possible prices; and opposes monopolies and restraints upon trade in useful commodities that tend to inconvenience or to control the supply or to higher prices to the injury of the public or any considerable portion thereof in any locality. Agreements that in -their operation and effect tend to facilitate, stimulate or promote trade are regarded with favor where they do not directly or indirectly injure the public.

Where an agreement is lawful in itself and is so limited as to time, place, subject-matter and purpose as that its operation will afford -only necessary and proper protection to the parties in the enjoyment of their rights, and will not materially or really injure the public, the agreement may be enforced, -even though it relates to and operates upon trade in useful commodities.

Whether a contract in its terms or -operation is or may be unreasonable because it extends to or may be extended to a longer time or to a greater territory or to other subjects -than is reasonably necessary for the protection of the rights of the parties inter sese, and whether the public is or may be appreciably injured thereby, cannot be ascertained by any accurately defined rules, but must be determined from a practical consideration of the circumstances of every -case as it arises in connection with such general principles of law and of construction as are applicable thereto. The validity o-f the contract should be determined not by what has been done under it, but by what may be done under it — by what will be its real tendency with reference to -trade and monopoly when in full operation.

Where a contract in its terms and in its operation transfers from- one party to another a lawful business, trade or occupation actually engaged in, or a lawful exclusive right, and as an incident thereto it is agreed that the vendor will not for a reasonable time engage in the same or a similar business within a reasonable territory covered by tire business, and such agreement does not unreasonably restrict the available supply of, or access to, or raise the price of any useful commodity, or tend to create a monopoly, it may not be against public policy or unlawful, and consequently may be enforced by the courts if otherwise legal and binding.

Bbt a contract not transferring a lawful business, trade, profession or occupation actually engaged in, or not transferring a lawful exclusive right, but containing an agreement to- relinquish to another a c-omm-on natural right not lawfully exclusive, or to- refrain from the exercise o-f a natural right common to all to- engage in a lawful business or occupation and other agreements that enable the parties, under the circumstances in which the contract will operate, to- control or unduly and injuriously influence the trade relations of a considerable portion of a small community as to necessary and useful commodities, may be opposed to public policy and not -enforceable. The fact that the agreements are contained in and are ancillary to a contract of lease of a store house does not relieve them of their illegal effect if their tendency is to restraint of trade or monopoly to the injury o-f the public.

Where a contract places it within the power of the contracting parties to at least partially control the available supply of commodities useful if not necessary to at least a considerable portion of the local public, or to unreasonably limit -the places where useful articles may be purchased, or to increase the price and consequently to restrain trade, it is substantially injurious to- the portion of the public affected thereby, and is an unreasonable and consequently an unlawful restraint of trade, and tends to monopoly, rendering the illegal portions, if not the entire contract, unenforceable because contrary to public policy.

Where the necessary tendency of a contract is to a monopoly and to a restraint of trade that is appreciably injurious to the public, the monopoly or restraint of trade need not be complete, and the degree of injury to the public inflicted or reasonably anticipated is immaterial. And this is so even though the agreement is 'ancillary to a lease of property or other lawful main purpose of the ■contract.

If an agreement contained in a contract is in effect illegal, it is not rendered legal by 'a direct or implied provision in the contract that its purpose is a lawful one, or by the fact that the illegal agreement is an incident to the accomplishment of a lawful purpose.

The illegality in the agreement or in its operation need not amount to a criminal offense. i The test is whether the agreement in full operation will be injurious to the public welfare. If so, it will not be enforced.

The inhabitants of a village have a right to protectioii from injurious restraint of trade and monopoly in useful ■commodities in the village without reference to the,opportunities afforded for obtaining the commodities in a neighboring town.

Where an agreement in operation has a necessarjitendency to restrain trade or to- monopoly to the appreciable injury of the public, limitations as to time, place or subjects contained in the agreement are immaterial.

The validity or invalidity of an agreement that in operation tends to restrain trade or to monopoly is in general determined by the element of whether it is or is not injurious to the public. If injurious in any perceptible degree to any considerable portion of the public the agreement is contrary to public policy and will not be enforced. If not so injurious it may be enforced if otherwise legal and binding. See Horner v. Graves, 7 Bing. 735, 20 E. C. L. 310; Clark v. Needham, 125 Mich. 84, 83 N. W. Rep. 1027, 84 Am. St. Rep. 559; Crawford v. Wick, 18 Ohio St. 190, S. C. 98 Am. Dec. 103; Pocahontas Coke Co. v. Powhatan Coal & Coke Co., 60 West Va. 508, 56 S. E. Rep. 264, 9 Am. & Eng. Ann. Cas. 667, 10 L. R. A. (N. S.) 268; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666; United States v. Addyston P. & S. Co., 85 Fed. Rep. 271, 29 C. C. A. 141; United States v. E. C. Knight Co., 156 U. S. 1, 15 Sup. Ct. Rep. 249; Tuscaloosa Ice Mfg. Co. v. Williams, 127 Ala. 110, 28 South. Rep. 669, 50 L. R. A. 175, 85 Am. St. Rep. 125; Fullington v. Kyle Lumber Co., 139 Ala. 242, 35 South. Rep. 852; Webb Press Co. v. Bierce, 116 La. Ann. 905, 41 South. Rep. 203; 27 Cyc. 898; 20 Am. & Eng. Ency. Law (2nd ed.) 849; 24 Am. & Eng. Ency. Law (2nd ed.) 849; Nester v. Continental Brewing Co., 161 Pa. St. 473, 29 Atl. Rep. 102, 24 L. R. A. 247; Harding v. American Glucose Co., 182 Ill., 551, 55 N. E. Rep. 577, 74 Am. St. Rep. 189, and notes; Oregon Steam Nav. Co. v. Winsor, 20 Wall. (U. S.) 64, L. Ed. 315; Merriman v. Cover, 104 Va. 428, 51 S. E. Rep. 817; Jones v. Clifford’s Exec., 5 Fla. 510; Hocker v. Western Union Tel. Co., 45 Fla. 363, 34 South. Rep. 901; 1 Page on Contracts, Secs. 373, 434; 7 Current Law, 787; Slaughter v. Thacker Coal & Coke Co., 55 West Va. 642, 47 S. E. Rep. 247; 2 Am. & Eng. Anno. Cases 335 and notes; Keene Syndicate v. Wichita Gas, Electric Light & Power Co., 69 Kan. 284, 76 Pac. Rep. 834; 2 Am. & Eng. Anno. Cases 949; 9 Am. & Eng. Anno. Cases 907; Anderson v. Shawnee Compress Company, 17 Okla. 231, 87 Pac. Rep. 315.

In this case no established business, trade, profession or occupation, or lawful exclusive right, was transferred with accompanying good will, but the contract contains a lease of a store house and an agreement to relinquish a- right common to all to establish .a. general store in a village, coupled with other agreements that in practical operation necessarily tend to substantially restrain freedom of trade and to monopoly whether so intended by the parties or not.

Assuming that the corporation had the right to establish and maintain a general store, it obviously had no lawful exclusive right to do so in the village named by the contract, and the agreement to relinquish a right common to all to establish and maintain a general store in the village, if of any benefit to the other contracting party, was not necessary to the protection of the rights in the lease of the store house. When this agreement to .relinquish a right common to all is taken in connection with the agreement as to the exclusive issuing and redeeming by the contracting parties of merchandise checks to a great number of persons in a village, employees of one of the parties, and with the character of goods the checks would purchase, the relation of the contracting corporation to its employees, the great number of the employees operating in a village, the agreement to induce the employees, loggers and others to- purchase their supplies at the one place, and the agreement to pay five per cent, commission on gross sales, it is manifest that the inevitable tendency of the- agreement, though ancillary to> a lease of a store house, is to- restrain trade, to stifle competition, to increase prices of useful if not necessary commodities, and to create and maintain a monopoly, so as to injure in some appreciable degree at least a considerable portion of the local public whether such result was intended or not. If the restraint of trade or the monopoly the 'contract tends to effectuate, in its operation, is injurious to the public to’ any appreciable degree, the 'limitations, expressed or implied, as to' time, place or objects are immaterial.

A mere influencing of trade, in a lawful manner is not necessarily illegal. The issuing by an employer to employees of “merchandise checks against their wages” to be redeemed exclusively through a merchandise house of another party as alleged in this case may not ipso fado and necessarily be illegal under all circumstances; but under the circumstances of this case such a course of dealing, whether so intended or not, tends to- aid in restraining trade and in maintaining a monopoly to' the injury of a large number of persons. It does not appear from the record whether the merchandise checks were to be issued before or after wages were due and payable, nor does it seem to be material in this case. Even if it should appear that the village where this contract operated is near a larger town, it would not redeem the contract, since the freedom, of trade may be restrained and a monopoly assisted to the injury of a local public by curtailing the convenience of the public in procuring ■supplies of useful commodities. Whether the corporation was or was not able to pay its employees in cash does not appear to be material in this case. No element of partnership express or implied appears from the contract or the declaration if -that would relieve the agreements of invalidity. 0

While the rent for a store house may properly be a percentage of the business done in the store house, yet in this case the agreement' to' pay five per cent, of gross sales, taken in connection with the other parts of the contract and conditions under which it was to' operate and with the claim for commissions paid, indicate that such a percentage covers not only the store rent but also profits from a business capable of being'so conducted as to in some, substantial degree restrain trade and maintain a monopoly to. the injury of at least an appreciable part of the public in the locality where the business was conducted ; and the intention of the 'parties is of no controlling'force.

The inevitable tendency of the contract operating under the circumstances alleged in the declaration is to restrain trade, to stifle competition, and to a monopoly, to the injury of at least a considerable portion of the public affected by the contract; and the contract is consequently violative of the public policy of the State or the implied principles of law recognized as existing in this State on this subject for the general welfare. This being- so, courts of justice will not aid the parties in enforcing- the invalid agreements, and the demurrer to the declaration was properly sustained.

The judgment is affirmed.

Shackleford, C. J., and Cockrell, J. concur Taylor, Hocker and Parkhill, JJ., concur in the opinion.