1'IlWll:l\AL REPORTERj. :\'DI.64.·
made, inl Nbfth .Carolina . was delivered· :in. Geongiafora ·Ioan there made, and ilkwas held. to. be a contract made iIi Georgia.. In Hyde v. Goodnow, 3 Y. 266, two notes signed in Ohio were void by the tp.atstatej deliv red.in New York, it was held that thep1alceof delivery controlled the contract, as to!its validity. The contract in the case under consideration was not "obtained, made, executed, or incurred out of this state," and does not come within the of of limitations of Nevada, her,etofore quotEtll·;,:, .... ' .' 2. l':.l1e (iefense Pl1yment is I;lot sustained by the evidence. The .of evidence on the merits are in favor ofplain;U:f(.·, is tll,erefore ordered in 1avor of plaintiff for the sum of $4,000, with interest thereon from March 29, 1887, at payable in gold coin,-and for costs.
'(OltcUit Court. m.D; Missoud, E. D. December 17, 1894.)
Co." 'Which wll:$engaged ip. the manufacture of Qone tartar. Ri.?-dequipment; Ui!led to W. for ,W f$12,OOOpeJ:'·. 'rMll.,Chial. re:ntal value of, .the Ul.nd and building' was between $2,000 and $2,500' per year, but th'eprofits derived by the U. Co. from the business conducted'on tbepremiseS' with the leased ;trO,ID $,lO,OOOjo$\2,OOO per year. 'rile a cove .'. t'thll.t; l'j.uring its continuance, the U. Co. in the li!J1Ufil.Cture of bOne tartar, aJid other provisionS which, it was claimedj:, showed, that tbe intention walil not, to operate, but 'to' close, the ·. 011 ti;le, da,y the lease was. p1ade, it was assigned, with . t;J. Q.o.; totheP.90., which was engaged the same bUSiness, and had for many years been the chief producer '6f 'bone tartar. It appeared that the lease had been made with the intention that it should be'assigned to' the P.:()o.; and that it: was made for the ,purpose of remoyl11g U. Co.'scompetition frpm the market.. Other competitors after:wtlids sprUng up.'.l'he price of bone tartar declined. The P. Co. ceased .to pay the .1'ent, .and, being sued, set up in defense that the lease #as void, as being itl restraint of trade, and tending to create a monopOly. .Held, that·lis . the .contract conferred no special or exclusive .privilege,but left thettl;\de open to the competition of any-other parties, it had l1o,tllndency to .cl,'e8.te a monopoly; that it WRsno more than a lawful e:x;erhise of the power to contract for the protection of the business of the P,Co., and not against public policy, nor void.
This was. an action by the United States Ohemical Company against the Provident CheWical Company for rent, on a lease. Trial by the court, without a jury.
Action i.or that the is void, because antagonistic to pubUc policy. 'On the 2.5th of September, 1888, the plaiJ;ltifl company leased to Henry H; Welch, for the term of 10'years, from the'lst of September of that year, at&: monthly rental of $1,000 per 'moJ;lth, In advance, the bUilding and then used by it for the lDanufacture of bone tartar in camden, N. J..··. TJ1e mutual covenants are expressed in seven paragraphs. 'rhe first stipulatel( the right of entry fl>rdefault in the .payment of rent, and is of character. The secondp'rbbibits the. l.!-ssignment of the leasehold: :orlUl Underletting without the written consent of the lessor.
UNITED STATES CHEMICAL CO. V. PRQVIDENT CHEMICAL CO.
The third provides that, if the premises be destroyed by fire, the lessor shall have 20 days within which to elect to rebUild, and, if the lessor shall choose to rebuild. the rental should then continue for a period of three months, and not longer, until after the complete restoration of the rebuilding, when it would again revive. If the lessor elected not to rebuild, such fietermination. concluded the term. The fourth is a covenant that in the event the buildings shoUld be destroyed by fire, and the lessor elect not to rebuild, tben the lessor will not engage in tbe manufacture of bone tartar so long as the lessee sball continue to pay the rental of $1,000. Tha fifth .assures to the lessee the right to remove any engine, boilers, tools, machinery,or fixtures placed upon the premises. The sixth relates to the prudent use of the premises. so as not to increase the risk by fire, and restricts the employment of the premises to the manufacture of bone tart..t r. The st:!venth and concluding covenant is as follows: "Said lessor, for itself, its successors and assigns, hereby covenants to and with said lessee, his heirs, executors, administrators, and assigns, that it. said lessor, will not, during the period that this lease may be in foree, and that the rent hereill reserved shall be paid as it falls due, ever manufacture or sell any bone tartar." On the day the lease was executed, it was, with the consent of the lessor, assigned to the defendant, a corporation organized pursuant to the laws of Missouri. and which, for many years antecedent, had been engaged in the manufacture of bone tartar at the city of St. Louis. and whose trade in that product extended tbroughout the United states, wheresoever there was a demand for that article. Although the lease was made to Mr. Welch, it was understood by both parties that he was merely the representative of the defendant company, whose officers had negotiated and consummated the terms of the trade. 'I'he plaintiff was organized as a corporation under the laws' of New Jersey, and had for a number of years been engaged in manufactUring various kinds of chemical compounds, principally sulphuric acid, alum, rock tartar, fertilizers, and latterly bone tartar, at Camden, N. J. It used a separate building for each of the different kinds of its products, and each was operated by mechanical power dN'ived from a common motor. The building wbich the defendant leased had no power, and unless supplied with engine, as seems to have been contemplated by paragraph 5 of the lease, or power rented from the defendant, would be useless for tbe manufacturing purpose for wblcb it bad been rented. The defendant points to this incident as a clear indication of a design, of wbich both parfies must be cognizant, not to employ tbe building in the business to which it was especially adapted, but to close it up, so that the defendant would be in complete control of the trade in bone tartar. And there is some evidence that, in conversations attending the negotiations which culminated in the lease, the defendant expressed an intention not to operate the factory; and also that, at least for the immediate future, if the negotiations were conclUded, the. defendant would have complete control of the trade in the bone tartar commodity; and that this latter feature was utilized by the plaintiff to obtain the rental finally agreed upon. "Bone tartar" is a coined term for the chemical compound "acid phosphate of calcium," and is obtained by treating calcined bone or fossil arid kindred rock with sulphuric acid. Whether made of bone or fossil rock is not discernible in the finished product, either by taste, analysis, or effect in use. Bone and rock tartar are indiscriminately used as one of the prime components of baking powder. It was the trade of the manufacturers of baking powder that the defendant had been cultivating for years, and of which, so far as bone tartar, its exclusive product, was used, it had almost the exclusive patronage up to the time when the plaintiff began to produce bone tartar. The plaintiff's first manufacture of acid phosphate of cal· cium was from rock, but, for two or three years before the date of the lease, it had ,added to its works, at Camden, the building leased to the defendallt, espeqi<,!-Uy adapted to the making of bone tartar, and early began to press.. :this . upO,n the market, in competition with that of the defendant, and threatening to become a dangerous rival. The defendant, in order to protect Its trade,conceived the idea of perpetuating Its regency in .this. particular. ·field .by gaining control of the plaintiff's works
the rival iproti'llctwas made. Its effortsresutted In the lease which is the basis, of this 'suit. 'l'he quality of the plaintiff's bone tartar was equal to that C?fthS !defendant's. While the manufacture of acid phosphate of calclumwas o:pen,t() the talent and capital ()f anyone, yet, to successfully make 'It, great skill and experience were, required, and this skill had only been attafilM lly the plaintiff and defendant, with a few unimportant exception:sjui)'to the time' of'the lease. A Mr. McNab was the expert in charge of the plaintiff's works, and, after the execution of the lease, the defendant, requested the plaintiff to endeavor to keep him In its employment in the otherdeJ;>artments of Its business, so that he might not engage in starting a: b1lslness that would compete with the defendant's; and this the plaintitr,fu a spirit ofaccommooation, consented, so far as It could with propriety, to do. The defendant" after the lease was made, purchased of the plaintlffall of its finished products, both of rock and bone tartar, and the raw material for making them. The raw material was sent to the defendant's works at St. Louis, and the manufactured sold frgm Camden to customers, including' those who had been purchasers of the plaintiff, and to whom the plaintiff used its best endeavors to introduce defendant, under the name of the United States' Tartar Company, the defendant thinkIng it prudent to disguise thefaet that it had acquired the plaintiff's factory and bone tartar business. The value of the leased premises is shown to be between $17,000 and $24,000 and the annual rental to be from 10 to 15 per cent. of this value, while the rental ,stipulated in the lease is $12,000 per annum. Inasmuch as the lease' contains no grant of the good will of the plaintiff, the defendant contends this large monthly sum is but the price which the plaintiff demanded for Withdrawing its rivalry to the defendant; while, upon the other hand, the plaintiff contends that it is but a fair compensation for theprofl.t it had been realizing and might reasonably anticipate from that particular branch of its business, and the use of the leased property; and'I am convinced of the accuracy of the plaintiff's contention by the evidence. Up to May, 1893, the rental was promptly plild by the defendant. McNab, without the connivance of the plaintiff, had left its employment, and had started a factory for making bone tartar. Other rival institutions sprang up, and the prices of bone tartar were tending downward; and under these inll.uences the defendant repudiated the lease, as, contral'y to the polley of the law. The plaintiff sues for the rent in arrear.
John C. OlTick, for plafutifl'. Harmon, Colston, Goldsmith & Hoadley and .A. Moore Berry, for defendant. PRIEST, District Judge (after stating the facts). The question of. moment in this case is whether the seventh covenant of the lessor, not to manufacture or sell any bone tartar during the period the lease maybe in force, is in restraint of trade, and for that reason void. The .transaction in which this restriction appears is the leasing premises and equipment especlaJ.l.y, deyoted to the manufacture of bone tartar. The reJ,ltal value of the real estate and buildings was between $2,000 and $2,500. The profits derived by plaintiff from making and sale of bone tartar were from $10,000 to $12,000 peraj],num at the time the lease was made. It is manifest that moving the plaintiff to lease the premise$ was to obtain aftxed and certain sum, rather thana contingent and uricertain,olle; and the motive of the defendant was to get rid of a aggressive competitor in the tJ,'ade of theal"ticle of whiclj. .it was in, practical .and :to themlU\.1Ifacture of which it was exclusively devoted. The plaintiff sought a tra<Je.for this article throughout the United States,---an achie'Vementwhieh the
UNITED STATES CHl>MICAL CO. 11. PROVIDENT CHEMICAL CO.
defendant had already accomplished, being earlier in the field. In view of these condi·tions, is the covenant condemned by public policy? The restraint extends literally everywhere, but a fair construction would limit it to the United States. If valid to that extent, we have no concern with the broader boundary. It is commonly and casually said that contracts in general restraint of trade are void. This rule, whatever may have been its earlier character, is now neither arbitrary nor inflexible. The sense of the modern decisions is that, the restraint is only commensurate with the fair protection of the business sold, the contract is reasonable, valid, and enforceable. It is only where the restriction can be of no avail to the vendee, and unnecessarily hampers the vendor, that it becomes oppressive and void. Fowle v. Park. 131 U. S. 88. 9 Sup. Ct. 658; Ellerman v. Stock-Yards Co. (N. J. Ch.) 23 Atl. 287; Long v. Towl, 42 Mo. 545; Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 419; Lawson, Cant § 327. . Among the potent reasons first assigned against such contracts was that the person restrained by thus surrendering his chosen occupation-one for which he had been especially prepared-might become a public charge, and the public be injured in being deprived of his personal skill in the avocation to which he had been brought up. Such reasons cannot be applied to artificial persons without absurdity. The substantial ground in all cases, especially where corporations are concerned, is that such contracts tend to create monopolies. In discussing this phase of the subject, we must not lose sight of some other principles, the disregard of which would be more harmful to public interest than monopolies. The right to contract is a cardinal element of constitutional liberty, and, as such, should be jealously guarded. In one of the cases supra it is said:
"It is clear that publIc policy and the interest of society favor the utmost freedom of contract within the law, and reqUire that business transactions should not be trammeled by unnecessary rE'strictions. 'If,' said Sir George JesseIl, in Printing Co. v. Sampson, L. R. 19 Eq. 462, 'there is one thing more than any other which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that contracts, when entered into freely and voluntarily, shall be held good, and shall be enforced by courts of justice,''' Match Co. v. Roeber (N. Y. App.) 13 N. E. 422.
Private corporations are subject to the control of the states from which they derive their charters. From an abuse or misuse or excess of their powers, they can be called to an account by the state. It is better such control and regulation should be had by that ample authority than, indirectly, by a foreign forum, upon collateral quesmons of public expediency. The facts of this case disclose no tendency to monopoly. :Monopoly implies an exclusive right, from which all others are debarred, and to which they are subservient. Greene's Case, 52 Fed. 104. In :Match Co. v. Roeber, supra (a case very similar in facts to this), the court observed:
"To the extent that the control prevents the vendOr from carrying on the particular trade, it deprives the community ot any benefit ·itmight derive from hil' entering into competition. But the business is open to all .others, and there is Uttle danger that the pUblic will suller barm from
1a.Ck ofl':pelltsonS' to: engageirr (ajprofttaole' Industry. Suchcontract$ do not 'I'hey no special or exclusive privilege."
in thisl;\;tse was ineffectual to a monopoly t control,over tartar, 18 by the answer, whereIn It assumes, as a just repudiatbig the contract, competition subsequently i phosphate calciumjs made, b;y ·several processes. The t'Y0,-one from rock, and the other. fr.om. bone..'It}Ejased the plant for making qone tartar only, reservwg. ·. :Tp.e· process wl1$not discerniple in the finished product. w>Wing in the from which we can reasonably to create. a monopoly such as the law condemns. Eyen, if be necessity, the public is not w1thwb,q but onlY WIth the reasonableness of, the prIce. But it is said tIilltthe defendailt had, by its part in the transaction, such i9, .. may be. The intent is only condemned a as It IS III an unlawful act. I f a person does a lawful act with ;ty,ici,9ul!! is without the pale of legal punishment. WhatevWtrUtyhave been.the defendant's motive, and even ifrepreit!i¥i-e ,isno rule);r ",hich .reprimand the plaintiff for tbe 8efe]ldant's evil.or'wrongfullntentlOns or actB. Whether the is .conqemnedbYi law or nqt not affect the .fIle. plaintiff contributed something of the unlawful design than the mere more leasing'oritsIH·operty.· ':Labbe v. Corbett, 69 Tex. 503, 6 S. W. 808; Tied. ,B'qt'\'Veare of the opinion that defendant .has been The plaintiff was makbUEliness, and greatly, cutting the ing itir()ads' ILl>l?H. the' Drices' of its sole' roanuflicbIred product, while with the plaintiff thi!" product 'w4lSbut a single'fel1ture of itsm.anufacturing plant. The defendllJll,thad,.;t\;perfect tigpt,to buy off the competition of a danaggre\!isive rival. The law of Belf-defense and to one's business, as well aB to his person. But, if another springs uP. iil the stead of. the one silenced, the COurtB public expedience, relieve him from the imprOVidence of' his first contract. . Our attention has been called to many cases which condemn, in perhaps not tob sevel'e'terms, combinations and trusts. It is a nervous and a.larrned imagination which sees in every transaction involving large exchang1:lof properties a monster threatening public inte,tests. COnioinations:in the nature of modern trusts, so soundlv condemned,aire ·,those which aim at a union of energy, capital, and interest to stifle competition, and enhance the price of articles of priUle necessity'and stlfples of commerce. In such cases there is absenttha element of' exchange of onev'aluable right or thing for another.:)linthl:! contract here we fin'd none of the elemen,tB of 'a combination or trust. ;·'Wis a Bimple'lease and saIefor a fair and ;with stipulatiolll:l1 only commensurate with a. ':protection. The effect of"the" transaction, While not''$O:1itent»t' was to convey with the pJ,"emises the good itsboh'e' ta.rtar prodUct and trade.
SOUTHERN PAC. CO. V. JOHNSON.
cited in the briefs. Upon a topic of public expedience, adjudica· tions are, seemingly, necessarily inharmonious. Judgment for the plaintiff for the rent sued for, and 6 per cent. interest upon each installment from the date it became due.
It is both unnecessary and unprofitable to discuss the many cases
SOUTHERN PAC. CO. v. JOHNSON. (Circuit Court of Appeals, Ninth Circuit. November 5, 1894.)
'CONTRIBUTORY NEGLIGEKCE OF EMPLOYE.
An engineer who, to make necessary repairs, goes out on the running board of his locomotive while it is running 17 or 18 miles an hour, and while it is unusually dangerous bec,ause of the defects in the engine, when the engine and train can be stopped or the speed slackened in a short distance, is guilty of such contributory negligence as will preclude a recovery for his death, caused by being thrown from the engine.
Error to the Circuit Court of the United States for the District of Nevada. Action. by Eliza Ann Johnson, administratrix of the estate of Horace Johnson, deceased, against the Southern Pacific Company, to recover for the death of plaintiff's intestate, caused by defendant's negligence. There was a judgment for plaintiff, and defendant brings error. Reversed.
This action was brought by defendant in error, under an act of Nevada, against plaintiff in error, to recover damages for the death of her husband, alleged to have been caused by the carelessness and default of plaintiff in error. The defendant in error obtained a verdict for $25,000, but $10,,000 were remitted as an alternative to a new trial. At the close of the testimony in the court below,' plaintiff in error (there defendant) moved the court to instruct the jury to find a verdict for it. The court refused, and this is .assigned as error. The statute under which this action was brought provided as follows: "Whenever the death of a person shall be caused by wrongful acts, neglect. ,01' default, and the act, neglect, or default is such as would, (if death had not ensued,) have entitled the party injured to maintain an action and recover damages in respect thereof, then, and in every such case, the person who, or corporation which, would have been liable, if death had not ensued, shall be liable to an action for damages, nothwithstanding the death of the person injured. * * *" Gen. St. Nev. § 3898. The evidence of defects in the engine may be summarized from the testImony as follows: Freeman (who was the fireman on the train): "Engine No. 1,266, on the 14th day of August,1892, was a hard-running engine. I think it would be from looseness of the engine. Continual wear, I should think, would make it loose,-I mean wear of the boxes. The boxes were loose, and the cylinders were loose, and there would be a continual pounding and jarring. There was more or less swinging motion in cab and locomotive, occasioned by this looseness. At the time of the accident, as the engine was going down Brown's hill, there was considerable jarring. It was a hard-running engine." Peterson testified: "Her cylinders were loose, particularly on the left side, ,and her driving boxes were worn out, and probably her brasses also worn or in a bad condition. This would have the effect on the engine of giving it a swinging motion, especially on the curves. It would rock you from side to side very rapidly. The engine would ride like a dead-axe wagon. It will kind .Ql' strike solid. This would certainly increase the danger of the engineer in going out of his cab onto the footboaro when the engine was in motion quite