Washington Cranberry Growers Ass'n v. Moore , 117 Wash. 430 ( 1921 )

Main, J.

The purpose of this action was to restrain the breach- of a contract. The trial resulted in a permanent injunction, from which the defendant appeals.

The Washington Cranberry Association is a corporation organized under the laws of this state and is engaged in the business of marketing cranberries for those with whom it has contracts, and in some instances for independent growers. The appellant had entered into a contract with the corporation by which he agreed to deliver to it all the cranberries grown by him in Pacific county on land owned by him. The contract provides as follows:

“Witnesseth: That the grower, for and in consideration of one dollar paid him by the association, receipt of which is hereby acknowledged, and of the covenants and agreements herein contained, hereby nominates, appoints and agrees to employ the association as exclusive sales agents for the purpose of selling and marketing the entire crop of cranberries now growing or which shall be grown for shipment by the grower or for him, or in which he may have any interest as landlord or tenant, upon all those certain tracts of land situated in Pacific county, Washington, described as follows: Metes and bounds in section 27, township 16, north of range 11, west of Willamette Meridian, during the year 1916 and every year thereafter continually, provided, however that the grower may cancel this contract on the 15th day of January in any year by giving notice in writing to the association in writing at least 15 days prior to that date. Upon giving notice the grower shall, prior to said 15th day of January, pay any and all indebtedness due from him to the association and deliver his copy of the said contract to the manager of the association, and the same shall thereupon be cancelled.

“The grower agrees at his own expense to cultivate, care for and harvest said crops. All fruit to be delivered by the grower at the warehouse of packing' station of the association, at such place and at such time and in such manner as may be designated by the said association, which shall give notice to the grower for such delivery.

“In the event that grower shall fail to fulfill any or all of the requirements set forth in the foregoing paragraph, the association through its manager shall give to the grower written notice setting forth the default of the grower, and in event the default so specified shall not have been overcome or corrected within ten (10) days following delivery of such written notice to grower, it is mutually agreed that the association may consider this contract as cancelled, and shall be relieved from further responsibility with regard to marketing the grower’s fruit hereunder.

“The grower fully understands that the purpose, among others, of this agreement, is to maintain and increase to its greatest efficiency the association as well as the Central Selling Agency with which it is now or hereafter may be affiliated, and to accomplish this purpose it is necessary that he shall- strictly and fully comply with and perform the stipulations and agreements on his part agreed herein to be performed, and therefore he hereby stipulates and agrees that he will not sell or otherwise dispose Ms said fruit to any other firm, person or corporation other than the aforesaid association; and it is hereby further mutually agreed that inasmuch as it is impossible at this time to fix and estimate the actual damage which will be sustained by the association in the event that the grower shall fail to abide by his agreement to market his said fruit through the association, such damages are hereby estimated and agreed upon as one dollar per box for each box of cranberries grown or sold by the grower, which sum shall be allowed in any action brought by the second party to recover damages for the breach of this agreement by the grower should the association elect, as it may elect, to bring such action.

“In consideration of its appointment as exclusive sales agent of growers’ fruit crop, as above set.forth, and in further consideration of the agreements made by the grower with the association as hereinbefore set forth, the association agrees to receive, ship and sell all of said fruit to the best possible advantage. To promptly remit returns. therefor, less its regular charge for aforesaid services and for any other deduction, including money, due for advances for supplies furnished by the association to the grower, which indebtedness grower agrees may be treated by the association as a first lien on the proceeds from his fruit, and payment therefor to be deducted accordingly.

“In witness whereof the association has caused this contract to be signed and sealed in its name and behalf by its president and its secretary, and all other parties have heréto affixed their individual signatures. Washington Cranberry Growers’ Association, C. K. Cooper, President. Attest: W. M. Rounds, Secretary. A. B. Moore.”

The Columbia River Cranberry Association is a corporation engaged in the same business as that of the Washington Cranberry Association, as is also the Oregon Cranberry Association, a corporation. After the contract above referred to was made, the three corporations named entered into a contract whereby there was created what is referred to as the Pacific Cranberry Exchange, and appointed one 11. S. Martin as the exclusive agent for the sale, of all berries controlled by the three corporations. The cranberry exchange was composed of three members, a representative of each of the corporations. In the contract they are referred to as “the associations.” It is provided that the cranberries shall be delivered f. o. b. cars at points designated by Martin, and that he agrees that

“he will immediately upon acceptance by his representative of cranberries, upon surrender of bill of lading, advance to the Pacific Cranberry Exchange, the agent of said associations, the sum of $2.00 per box of the size heretofore indicated, said bill of lading hereinabove mentioned shall be forwarded by said Pacific Cranberry Exchange, with draft attached to the Bank of California, of Portland, Oregon.

“The representatives of the said L. S. Martin shall have access to the warehouses of the associations and to the warehouses or store-rooms of the individual members of the associations, to determine the quantity, conditions and quality of berries available at any given time. A representative of the Pacific Cranberry Exchange may at any reasonable time, have access to the books of the said L. S. Martin, at his offices in Portland,' Oregon, for the purpose of checking sales and returns made by the said L. S. Martin.

“All returns shall be made to the Pacific Cranberry Exchange, the agent of said associations, on or before thirty days after the expiration of the month in which the berries are shipped to the said L. S. Martin.

“The associations agree that the said L. S. Martin shall receive a five per cent commission on all gross sales of all berries sold by it to jobbers in the states of Oregon and Washington, and six and one-half per cent on all other berries sold by the said L. S. Martin and the said L. S. Martin hereby agrees to accept said commissions in full settlement for his services in the sale of said berries.

‘ ‘ The said L. S. Martin shall only be liable for actual negligence on his part, and no liability shall be attached to him' by reason of damages caused to the associations or to individual members thereof, by strikes, embargo, shortage of equipment, or any other cause beyond the control of said L. S. Martin by use of reasonable diligence.

“It is understood and agreed that the fullest cooperation of the associations and of the Pacific Cranberry Exchange will be extended to the said L. S. Martin in the handling and marketing of said berries.

‘‘A11 sales shall be made at the market price, or at a price to be mutually agreed upon by said L. S. Martin and the Pacific Cranberry Exchange. ’ ’

In Pacific county there were approximately eighty cranberry growers, and sixty of these had contracts with the respondent similar to the one set out. After the contract was entered into and during the year 1920, the appellant produced 1,300 boxes of cranberries, and five hundred of these were sold to parties other than the contract provided. As above • stated, this action was brought to restrain the appellant from selling cranberries to parties other than the respondent. The appellant makes three principal contentions. First, that the contract is void at common law as against public policy; second, that it is contrary to art. 12, § 22, of the constitution of this state, which is a section covering the matter of monopolies and trusts; and third, that the contract is void as being in contravention of the Sherman Anti-Trust Act passed by the Federal Congress on July 2, 1890 (U. S. Stat. at Large, vol. 26, p. 209, ch. 647).

To determine whether the contract is void for any of the reasons stated it is necessary td read the contract in connection with the procedure under it and the result which was produced thereby. The appellant contends that a monopoly is created, trade restrained, the output of cranberries limited and prices are controlled. It may be admitted that, if this is the effect of' the contract and the business transacted under it, it would be void and unenforcible. The contract required the appellant to deliver all cranberries grown by him to the respondent for marketing until it should be terminated in accordance with the terms therein stated. The purposes of the contract, among others as stated therein, are to maintain to its greatest efficiency the association, as well as the central selling agency with which it is now or may be hereafter affiliated. The corporation is made the exclusive sales agent for the growers ’ fruit crop. The evidence shows that the purpose of entering into the contracts, of which the one above set out is one, was as follows:

Before the corporation was organized, certain growers at times put upon the market cranberries of an inferior grade and this caused merchants to refuse to buy berries from Pacific county. In order to avoid this situation it was necessary to enter upon an advertising campaign to stimulate the use of berries and to cause berries of uniform grade to be placed upon the market. Another purpose was to secure a uniform price and avoid flooding any one market, as would be done if a large quantity of berries was shipped to a particular point at one time. Under the selling agency, the quantity of berries going to any one market was regulated, and in this way tended to maintain, or “hold up,” as the evidence shows, the price. It was also for the purpose of enabling ■ all growers to receive for their berries a uniform price. There is nothing in the contract or the operation under it that limits the production or controls the price in any particular locality. While the selling agency was located in Portland, the berries handled through the cranberry exchange representing the three corporations came in direct competition with eastern berries as well as with the berries of independent growers. The cranberry association controlled about two per cent of the berries produced in the United States, the independent growers, thirty-two per cent, and the American Cranberry Exchange, which was an organization operating in New York and Chicago, sixty-five per cent. The berries sold through the selling agency in Portland created by the three corporations sold at the market price and the berries were shipped by the corporations to such points as Martin, the selling agent, designated. The evidence is that the price of the berries in the various markets was fixed and controlled by the American Cranberry Exchange. If the Pacific berries could not be sold for the same price as the eastern berries the selling agent, after conferring with the members of the exchange, would sell for a lesser price. The contract and the delivery of berries under it not resulting in limiting the production, controlling or fixing of the price in any particular market, cannot be said to be void as against public policy, or under the constitutional provision above referred to, or under the anti-trust act.

The question as to when a contract is a restraint of trade was fully discussed in Fisher Flouring Mills Co. v. Swanson, 76 Wash. 649, 137 Pac. 144, 51 L. R. A. (N. S.) 522. It was there recognized that it was difficult to state the rule which would cover all cases, and that the circumstances of each particular case and the situation of the parties, in addition to the effect on the public welfare, must be considered in determining the validity of a contract. It was there said:

“The fact that the circumstances of each particular case and the situation of the parties, in addition to the effect on the public welfare must be considered, and that of all circumstances, the dominant consideration is the welfare of the public, makes it difficult to state by definition, except in the broadest way, any rule for determining the validity of any such contract as that here involved. Perhaps the following is as near a complete definition as we can formulate from the adjudicated cases: Contracts fixing prices as incidental to some main contract, and involving less than a controlling part of a given commodity in a given market, not proceeding from, nor tending to create or to maintain a monopoly, will be sustained when the restriction is, under the circumstances of the particular case, reasonable in reference to the interests of the parties, and reasonable in reference to the interests of the public; that is to say, when the price fixed is fairly necessary, to the protection of the covenantee, and fair to the public in that it furnishes only a reasonable profit to the contracting parties. Lacking these elements, such contracts are invalid as contrary to public policy.”

In Finck v. Schneider Granite Co., 187 Mo. 244, 86 S. W. 213, 106 Am. St. 452, it was stated that, in determining the validity at common law of a combination claiming to be in restraint of trade, the true test is “whether they afford fair and just protection to the parties thereto or whether they are so broad, as to interfere with the interests of the public.” In United States v. Addyston Pipe & Steel Co., 85 Fed. 271, in determining whether a contract was void at common law or under the anti-trust act, the test applied was whether there was a reasonable restraint of trade,

“considering whether the restraint is such only as a broad and fair protection of the interests of the public in favor of whom it is given and not so large as to interfere with the interests of the party. Whatever restraint is larger than the necessary protection of the public requires can be of no benefit to either. It can only be oppressive which, is, in the eye of the law, unreasonable. Whatever is injurious to the interests of the public is void on the ground of public policy.”

A large number of cases are cited in the briefs where contracts have been held void as being a restraint of trade, but it does not seem necessary to review these in detail. So far as we are informed, no case holds that a contract is void which does not limit the production or control or fix the price in a particular market. As above pointed out, the contract here under consideration, considered in connection with the evidence showing the operation under it, neither limits the production or fixes the price. The cases of Santa Clara Valley Mill & Lumber Co. v. Hays, 76 Cal. 387,18 Pac. 391, 9 Am. St. 211, and Cravens v. Carter-Crume Co., 92 Fed. 479, are cases where the combinations there in question limited the production and increased the price, and are therefore not in point in this case.

The next question which arises is whether the respondent is entitled to injunctive relief. The appellant contends that there should be recourse only for dam-

ages. The purpose of the action was not to enforce specific performance directly, but to accomplish that indirect result by restraining the appellant from selling berries to any other person than the respondent. It will be admitted that if the contract, by its terms, shows an intent to rely upon damages, or if there is an adequate remedy at law, injunctive relief cannot be had. The contract provides that, to accomplish its purpose, it is necessary that the appellant strictly and fully comply with and perform the stipulations and agreements on his part. While the contract provides for damages, it also recites that it is impossible to fix and estimate the actual damage sustained in event the grower shall fail to abide by the agreement, and the damages are only estimated. The contract, we think, fails to show an intent of the parties that, in the event of breach, the only recourse would be an action for damages. There was not an adequate remedy at law because an action for damages would not be sufficient to protect the respondent and the other growers which it represented in accomplishing the purposes of the undertaking. Those purposes are fully set out above and need not here be repeated. The fact that the contract is one which could not be specifically enforced in a court of equity by reason of the fact that it would require the performance of continuous duties does not prevent the court from entering an injunction restraining its breach, which indirectly accomplishes the same

result. Western Union Telegraph Co. v. Union Pacific R. Co., 3 Fed. 423; Chicago & Alton R. Co. v. New York, L. E. & W. R. Co., 24 Fed. 516; American Electrical Works v. Varley Duplex Marget Co., 26 R. I. 295, 58 Atl. 977. In the case last cited, upon this question it was said:

“The respondent, however, contends that the injunction should not be granted, because it would result in compelling indirectly a specific performance of the contract iñ the case, where the court would not directly order such performance.

“We do not think that this contention is in accord with the best and most modern authorities. The following cases, amongst others which might be cited, sustain the complainant’s position. (Citing numerous authorities.)

“A very clear and well-considered statement of the law upon the question under consideration according to the most modern authorities is to be found in the opinion of Judge Lowell in Singer Sewing Machine Co. v. Union But. & Em. Co., supra, in which he says: ‘The two points of law are not without difficulty. The relief asked is specific performance and injunction. It is argued with great ability by the defendants, that the complainant is not entitled to specific performance, and that, therefore, it can not have an injunction which is merely auxiliary. Granting the premises, I am not prepared to concede the conclusion. If the court can not order a contract for the mailing of button-hole machines to be specifically performed by reason of the impossibility of. superintending the details of such a business, it does not follow that the bill may not be retained as an injunction bill. It was formerly thought that an injunction would not be granted to restrain the breach of any contract unless the contract were of such a character that the court could fully enforce the performance of- it on both sides.’ Judge Lowell here examines the authorities and the development of the modern rule, and then proceeds: ‘I think the fair result of the later cases may be thus expressed: If the case is one in which the negative remedy of injunction will do substantial justice between the parties by obliging the defendant either to carry out his contract or lose all benefit of the breach, and the remedy at law is inadequate and there is no reason of policy against it, the court will interfere to restrain conduct which is contrary to the contract, although it may be unable to enforce a specific performance of it.’ ”

The fact that the contract provides that, in case of breach, the damage shall be as there admitted, does not of itself conclusively establish that the parties contemplated that, upon the breach thereof, damages would be an adequate remedy. It is a question of intention in each case, to be deduced from the whole instrument and the circumstances, and if it appear that the performance of the covenant was intended, and not merely the payment of damages in case of breach, thcontract will be enforced. Diamond Match Co. v. Roeber, 106 N. Y. 473,13 N. E. 419, 60 Am. Rep. 464; Harris v. Theus, 149 Ala. 133, 43 South. 131, 123 Am. St. 17, 10 L. R. A. (N. S.) 204; Wilkinson v. Colley, 164 Pa. St. 35, 30 Atl. 286, 26 L. R. A. 114; Heinz v. Roberts, 135 Iowa 748, 110 N. W. 1034; Ropes v. Upton, 125 Mass. 258; Zimmermann v. Gerzog, 13 App. Div. 210, 43 N. Y. Supp. 339.

Considering the terms of the contract and all the ■ attendant circumstances, we are of the opinion that it was not intended by the parties thereto that the damages claimed therein should be the only price of the appellant’s breach of the agreement, and that the remedy at law would not be adequate.

The judgment will be affirmed.

Parker, C. J., Mitchell, Tolman, and Bridges, JJ., concur.