Opinion
Argued December 19, 1876
Decided March 20, 1877
H. Boardman Smith for the appellant. John Murdock for the respondent.
This action is brought to recover the price of about 2,700 tons of coal, sold and delivered to the defendant by the Butler Colliery Company in the month of August, 1869. The plaintiff claims under an assignment from the last-named company.
The findings of the referee establish that this coal was delivered pursuant to a contract between the two companies, dated August 3, 1869, and the defence mainly rests upon the alleged illegality of that contract. The referee has found that the circumstances under which the contract was made were as follows:
The Butler Colliery Company was a Pennsylvania corporation, engaged in mining and vending coal, at or near Pittston, Pennsylvania. The defendant was also a Pennsylvania corporation, engaged in the same business, but in addition had a coal depot at Elmira, New York, where it was largely engaged in vending anthracite coal, the product of the Pittston mines, and in distributing it, by canal and railway, from Elmira, to dealers and consumers, through a very large extent of country north and west of that point. Elmira was connected with Pittston by canal, and was the chief market for coal in western New York, and prices of coal were there established for the extensive district before mentioned.
The purpose of the defendant in making the contracts in question was so to control the shipment and supply of coal for the Elmira market as to maintain an unnaturally high price of coal in that market, and to prevent competition in the sale of coal therein, and, but for that purpose, the defendant would not have entered into the contract in question with the Butler Colliery Company. Of all these facts the Butler company had notice at the time of making the agreement.
As a further means of accomplishing the same purpose, the defendant had made contracts adapted to promote it with all the other mining proprietors at Pittston. Of these contracts the Butler company did not have actual notice.
The agreement in question, entered into for the purpose which has been stated, was as follows: The defendant agreed that it would take all the coal which the Butler company should desire to send north of the State line, not exceeding 2,000 tons per month, at the regular market-price established from time to time by the Wyoming Coal Exchange, less fifteen per cent per ton commission, and that settlements should be made on the tenth of each month for all the coal delivered during the preceding month.
The Butler Colliery Company agreed that it would not sell coal to any party other than the defendant, to come north of the State line, during the continuance of the agreement, which was during the season of canal navigation for 1869.
The other provisions of the agreement related to mere matters of detail, not affecting the legal question involved.
It is found as a fact in the case, that the product of the Butler Colliery Company largely exceeded 2,000 tons per month.
It cannot escape observation that by this agreement the Butler Colliery Company did not agree to sell or deliver to the defendant all of the product of its mines, nor any specific quantity or proportion thereof. It was entirely optional with it whether or not to deliver any coal to the defendant. But the defendant did agree to take all the coal which the Butler company might desire to send north, to the extent of 2,000 tons per month. This undertaking would have been utterly void for want of mutuality, had it not been for the agreement of the Butler company that it would not sell coal to any other party, to come north of the State line. The only consideration for the agreement of the defendant to take of the product of the Butler company to the extent of 2,000 tons per month, consisted in the stipulation of that company not to sell to any one but the defendant. Without that stipulation, the paper called a contract would have amounted to nothing. Neither party would have been bound to deliver or accept any coal. That stipulation was all that gave vitality to the contract.
Bearing in mind the fact found, that the product of the Butler company's mines was largely in excess of 2,000 tons per month, the object of the agreement is plain. The defendant, without binding itself to take the whole product of the mines of the Butler company, endeavored by this agreement to keep all of the coal of that company out of the market, except the limited amount which it agreed to take, and thus to artificially enhance the price of that necessary commodity. This purpose was the basis of the whole agreement, and, as is found by the referee, was understood by both parties at the time of entering into the contract.
That a combination to effect such a purpose is inimical to the interests of the public, and that all contracts designed to effect such an end are contrary to public policy, and therefore illegal, is too well settled by adjudicated cases to be questioned at this day. ( Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. R., 173; People v. Fisher, 14 Wend., 9; 4 Denio, 352; 5 id., 434; 44 N.Y., 87, and cases cited.)
Every producer or vender of coal or other commodity has the right to use all legitimate efforts to obtain the best price for the article in which he deals. But when he endeavors to artificially enhance prices by suppressing or keeping out of market the products of others, and to accomplish that purpose by means of contracts binding them to withhold their supply, such arrangements are even more mischievous than combinations not to sell under an agreed price. Combinations of that character have been held to be against public policy and illegal. If they should be sustained, the prices of articles of pure necessity, such as coal, flour and other indispensable commodities, might be artificially raised to a ruinous extent far exceeding any naturally resulting from the proportion between supply and demand. No illustration of the mischief of such contracts is perhaps more apt than a monopoly of anthracite coal, the region of the production of which is known to be limited. Parties entering into contracts of this description must depend upon each other for their execution, and cannot derive any assistance from the courts.
The plaintiff, however, contends, that notwithstanding the illegality of the stipulation of the Butler Colliery Company not to sell coal to other companies, he is still entitled to recover for the coal actually delivered to the defendant.
The coal was, as found by the referee, delivered under the illegal contract. The purpose of the vendee was against public policy, and the vendor knew it. This brings us straight to the question, whether the vendor, delivering goods under such a contract, can recover for the price. I think that under the circumstances of the present case, as found by the referee, he cannot. If an absolute purchase had been made by the defendant of the Butler Coal Company of any specified quantity of coal, or even of all the coal which the Butler company could produce, that contract would have been legal, notwithstanding that the object of the purchaser was to secure a monopoly and that the vendor knew it. He had a right to dispose of his own goods, and (under certain limitations) a vendor of goods may recover for their price, notwithstanding that he knows that the vendee intends an improper use of them, so long as he does nothing to aid in such improper use, or in the illegal plan of the purchaser. This doctrine is established by authority, and is sufficiently liberal to vendors. But — and this is a very important distinction — if the vendor does any thing beyond making the sale, to aid the illegal scheme of the vendee, he renders himself particeps criminis, and cannot recover for the price. ( Tracy v. Talmadge, 14 N.Y., 162.)
Now, to apply these principles to the case before us. If the Butler Colliery Company had sold to the defendant any specified number of tons of coal, or even the whole product of its mines, it had the right so to do and could recover for the price agreed upon, even though it knew that the object of the purchaser was to obtain a monopoly of the article. But when it agreed to sell only a part of its product to the defendant, and stipulated in the same agreement, and as part thereof, that it would not sell the residue to any other party to go north, knowing that the object of the defendant was to create a monopoly, and that such stipulation was intended as one of the means of averting competition, it made itself a party to the illegal scheme of the defendant. These mutual engagements cannot be separated. It is perfectly patent that one was the consideration for the other, and that the defendant would not have bought the coal in question unless the Butler company had agreed to aid it in preventing competition.
The illegality of the contract seems, by the opinion of the referee, to have been admitted by the parties when the case was submitted for his adjudication. In his opinion, which shows that he fully comprehended the subject, he yielded with apparent reluctance, to a decision of Assistant Vice-Chancellor HOFFMAN, in Jarvis v. Peck (Hoff. Ch., 479). The question presented in that case was different from the one now before us. The question there was, whether, when a bond and mortgage were given for two considerations, one legal and the other illegal, the bond and mortgage could be sustained on the legal consideration? Assistant Vice-Chancellor HOFFMAN argued, that, if the legal consideration was sufficient, the illegal one might be disregarded. Chancellor WALWORTH approved the result, on the ground that both covenants were legal. I do not think that this case throws much light upon the present one. The principle of Assistant Vice-Chancellor HOFFMAN'S decision seems to have been considerably shaken, to say the least, in the case of The Saratoga Bank v. King ( 44 N.Y., 87). It is difficult to reconcile those cases.
At the General Term the judgment of the referee was sustained upon two grounds; first, that the illegal provision of the agreement was independent of, and separate from, the legal part. This point has I think been sufficiently discussed. The second ground is, that the Butler Colliery Company, after having made the first month's delivery under the contract, rescinded it and refused to carry it out, and that this action is not upon the contract, but in disaffirmance of it, and to recover the value of the property which the defendant has obtained under it. This position introduces a new phase of the case. If the Butler company made the contract understandingly, as found by the referee, it is difficult to see how it could acquire any greater rights against the defendant by breaking it, than it would have had by keeping faith and performing it. To meet this difficulty it is suggested that the Butler company never made the illegal agreement. That it was made by an agent who exceeded his authority, and that when it came to the knowledge of the company it repudiated and disaffirmed it, and that this action is in disaffirmance of the contract. This position is not sustained by the facts. The action is not in disaffirmance of the contract. If the contract were rescinded, there would be no sale of the coal, and the claim of the Butler Coal Company would be for its re-delivery, or for damages for the conversion. But such is not the character of this action. The present plaintiff could not maintain such an action. He has no title to the coal, but is simply assignee of the claim of the Butler Coal Company for bill of coal sold and for advances made under the agreement. The complaint avers the sale and delivery of the coal at an agreed price, and claims to recover that price, together with certain advances made at defendant's request, less certain commissions, all of which claims, as the evidence and findings show, conform to the provisions of the contract. The plaintiff alleges in the complaint the assignment to him of this indebtedness, and thus seeks to enforce the claim of the Butler company so far as it had accrued under the contract, up to the time when it repudiated the obligations on its part which were favorable to the defendant. The case of Peck v. Burr ( 10 N Y, 294) is, I think, an authority directly adverse to the position of the plaintiff, and shows that no recovery can be had for the partial performance of an illegal contract, rescinded or repudiated after such part performance. (See, also Knowlton v. Congress and Empire Spring Company, 57 N.Y., 518, 530.)
But, furthermore, the referee did not rest his judgment on any such ground as now suggested, nor do his findings justify such a ground. He finds that the contract was made by the Butler Colliery Company. That it knew that the purpose of the defendant in making it was to obtain a monopoly of coal in the Elmira market and prevent competition therein, and that, but as a means of accomplishing that purpose, it would not have made the contract. He finds that the coal was delivered pursuant to that contract; that after its delivery the Butler company refused to deliver any more coal to defendant, and made sales to other parties north of the stipulated line. But there is no finding that the Butler company rescinded the agreement on the grounds of its illegality, or of any want of power in its agent to make it. The finding is that the rescission and refusal to perform were without reason or excuse. Upon these findings we do not think the alleged rescission gives the plaintiff any better right to recover for the part performance, than he would have had if the Butler company had performed all its stipulations.
The judgment should be reversed and a new trial ordered, with costs to abide the event.
All concur; MILLER, J., not sitting.
Judgment reversed.