rae re rata omer ined i een Pesce scott snes ectace at orisha eto cae Fea oto Pre Ditpriecicaaidl yy taresmaeesed asel Mena tioerrete- Setecrreteeteserersn saree oerstten ecipetrer ieee conte gutnosi eeratvuraerrannsiroie ieee ere ee erent Nie were reer wie) roebeivie of asjrinde feoeey Dilamubunegoneshbett P bisipradiigetetecr ne derek reer oe 7 Po ae 2 aed reds rie acre nwt oh ove ah is " rete ieee eee ee pouakent ah eeenre pied OW eee tr ee peeak tiene ort et hee eamtad a SOR lesen meh Pe Sees tae err are ieee ater teeitsar tinea Sepa Pattee ahiiaticl eat sat bad KF (O99 K/4 Col @a Edwin H. Woodruff, auith Canw Ginents of : Callaghaw & Compan | CORNELL UNIVERSITY LAW LIBRARY. THE GIFT OF gr81 KF 1648. Kis University Library v. Thi 3 1924 019 225 907 law CASES ON CONTRACTS AND COMBINATIONS IN RESTRAINT OF TRADE SELECTED FROM THE DECISIONS OF ENGLISH AND AMERICAN COURTS aril By ALBERT M. KALES Professor of Law in Harvard University IN TWO VOLUMES VOLUME I CHICAGO CALLAGHAN AND COMPANY 1916 (379 bb. Copyricut, 1916 BY CALLAGHAN & COMPANY PREFATORY NOTE Some experience with anti-trust litigation, some contact with men in the industrial world who were spending days upon the witness stand relating the ways and means by which great busi- ness enterprises had been built up, and some knowledge of the trials and tribulations of business men in conducting their busi- ness according to law, caused me to conclude that a subject of the last importance to the business interests of the country was that of the law relating to contracts and combinations in restraint of trade. An examination of the curricula of American Law Schools con- vineed me that the subject had been by them largely, if not wholly neglected. Students were graduated who had no knowl- edge of or opinions about such cases as the Northern Securities Case, or the Standard Oil Case—to say nothing of the princi- ples governing labor and business combinations and methods of competition. Finally, I met the amused contempt of eminent practitioners for law school authorities who for ten years had ignored a sub- ject of such vast importance developing in the view of all with clamorous publicity. I, therefore, undertook at once to do what I could to intro- duce the subject into the law schools by preparing this case book and offering a course based upon it. A. M. K. m CONTENTS CHAPTER I THE COMMON LAW SECTION PAGE 1. Contracts accompanying the sale of a business...... 1 2. Contracts accompanying the sale of property reserv- ing the seller’s business..............2.ee0eeee- 215 3. Exclusive contracts of sale and purchase............ 221 4. Contracts of buyers to keep up the price on re-sale... 251: 5. Combinations and competitive methods............. 256 CHAPTER II THE SHERMAN ANTI-TRUST ACT 1. The Act and its constitutionality................ «- 763 2. Contracts accompanying the sale of a business....... 781 3. Exclusive contracts of sale and purchase............ 799 4. Contracts of buyers to keep up the price on re-sale.. 838 - 5. Combinations and competitive methods............. 862 a. Of transportation units ..............0.0005 862 b. Of trading and manufacturing units......... 1047 ¢. Of labor: units: ce ii. Bose C5 oie os 1166 6. Who may invoke the violation of the Sherman Act. ..1195 CHAPTER II The Clayton Witte. cess swscws isis Coie vied 6eaW ae sa ea es 1229 CHAPTER IV Effect of patents and copyrights.........0scccesseceeees 1246 v TABLE OF CASES ‘Names of cases which make up the body of the collection and the pages on which the decisions may be found are printed in italics. [REFERENCES ARE TO PAGES] Addyston Pipe & Steel Co. v. United States, 175 U.S. 211.. SUL Sc cehe be Re wee ae amo eee eae 772, 1047, 648, 763 Aetna Ins. Co. v. Commonwealth, 106 Ky. 864............ 616 Alexander v. Searcy, 81 Ga. 586............000cceeceees 137 Alger v. Thacher, 19 Pick. (Mass.) 51..........0.00000e0s 49 Allen v. Flood, L. R. [1898] App. Cas. 1................ 337 American Strawboard Co. v. Peoria Strawboard Co., 65 Ill. App. 502 ...... Rade asiee ena nica tedina @ aarseae teste ets cada 136 Ames v. American Telephone & Telegraph Co., 166 Fed. S20) chs crane. ceite chet y Gee eck ows aa ain ee SR eee 1221 Anchor Electric Co. v. Hawkes, 171 Mass. 101............. 81 Anderson v. Jett, 89 Ky. 375.... 0... cc cece cee cece eee 641 Anheuser-Busch Brewing Ass’n v. Houck, 27 8S. W. 692 (Tex: CIV ADP a)a ud seria tsi wattle geet wt cies ate Wels 224, 230 Arnot v. Pittston & Elmira Coal Co., 68 N. Y.558......... 224 Atcheson v. Mallon, 43 N. Y. 147.............cee cee eeees 137 Badische, ete. v. Schott, L. R. [1892] 3 Ch. 447............ 44 Barnes & Co. v. Chicago Typographical Union, No. 16, 232 DN ADS acca rows aidiy satete-as Gnotetvguvacd aie adie aa eeeeeoie 443 Beal v. Chase, 31 Mich. 490............0 cece eeceeeeeeee 897 Belding. v. Pitkin, 2 Caines (N. Y.) 147.............0005: 137 -Bement v. National Harrow Co., 186 U.S. 70............. . 1246 Berlin Machine Works v. Perry, 71 Wis. 495............. 49 Berry v. Donovan, 188 Mass. 358.........0 cee eeeeeeeee 453 Bigelow v. Calumet & Hecla Min. Co., 155 Fed. 869 (s. ¢. 167 Fed. 704, 721)........ ccc cece eee cece eee 1195, 105 Bishop v. Palmer, 146 Mass. 469.........00ccccceeee sean 45 Blindell v. Hagan, 54 Fed. 40............... ccc e seen eee 1220 Blount Mfg. Co. v. Yale & Towne Mfg. Co., 166 Fed. 555... .1270 Bohn Mfg. Co. v. Hollis,.54 Minn. 228.................4. 473 Vil viii TABLE OF CASES [REFERENCES ARE TO PAGES] Brown v. Rounsavell, 78 Ill. 589.........- 00sec cece eee 224 Brown & Allen v. Jacobs’ Pharmacy Co., 115 Ga. 429...... 496 Camors-McConnell Co. v. McConnell, 140 Fed. 412....176, 794 Carter-Crume Co. v. Peurrung, 86 Fed. 439.........-++-+- 799 Casey v. Cincinnati Typographical Union, 45 Fed. 185..... 444 Central New York Telephone & Telegraph Co. v. Averill, 199 N.Y 128 nce de wine gee ta sees ae ee eed 249 Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666......... 690 Central Shade Roller Co. v. Cushman, 143 Mass. 353....... 601 Central Transp. Co. v. Pullman’s Palace Car Co., 139 ToS 5 24 eciviars ath gee ha Said & lesa ain aee os oes aan tees ba 137 Chapin v. Brown Bros., 83 Towa 156...........22 eee eevee 138 Chappel v. Brockway, 21 Wend. (N. Y.) 157............. 176 Chicago Gas Light & Coke Co. v. People’s Gas Light & Coke Con I2) Th, 580s. cnciaeats os eaaekaies ged salar en ys 735 Chicago, St. L. & N. O. R. Co. v. Pullman Southern Car Co., 139 U.S..19 cae yews eokia dees eee oe en eels 237 Cincinnati, P. B. S. & P. Packet Co. v. Bay, 200 U. S.179.. 781 Clancey v. Onondago Fine Salt Mfg. Co., 62 Barb. (N. Y.) BOD cease wisn Seas ateyatavare aa ae teats Seal ape cima saetevela oti ace 230 Clark v. Crosby, 37 Vt. 188.......... 2c cece cree cence nce 224 Clark v. Frank, 17 Mo. App. 602.............0e0eceeeee . 256 Clark v. Needham, 125 Mich. 84................ Heaieaede 196 Clemons v. Meadows, 123 Ky. 178............. 00 -ee ee eee 185 Collins v. Locke, L. R. 4 App. Cas. 674.............. 000 298 Columbia Wire Co. v. Freeman Wire Co., 71 Fed. 302..... 1270 Comer v. Burton-Lingo Co., 24 Tex. Civ. App. 251......... 794 Connolly v. Union Sewer Pipe Co., 184 U. 8. 540.......... ‘1199 Continental Securities Co. v. Interborough Rapid Transit Co, 165 Ped. 945 0. eiiaese ca veer sensws ee wee ae wes 1199 Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 MOEA 2D Ti cizn se areas cin artic vevecorecc nde eh atone eral aus aha aes 799, 1211 Conway v. Garden City Paving & Post Co., 190 Ill. 89...... 186 Cox v. Donnelly, 34 Ark. 762.......... ccc ccc ee ce cc eeees 185 Craft v. MeConoughy, 79 Ill. 346:........ eT ee 136 Crichfield v. Bermudez Asphalt Paving Co., 174 Ill. 466.... 136 Cummangs v. Union Blue Stone Co., 164 N. Y. 401........ 712 Curran v, Galen, 152 N.Y. 88...... ccc ccc ccc ee cee neee 408 Daniels v. Benedict, 50 Fed. 847.............ecccceeeees 135 TABLE OF CASES ix [REFERENCES ARE TO PAGES] Darius Cole Transp. Co. v. White Star Line, 186 Fed. 63.. 794 Davies v. Davies, L. R. 36 Ch. Div. 359............0.0005. 44 Davis v. A. Booth & Co., 181 Fed. 81................. 176, 794 Detroit Salt Co. v. National Salt Co., 184 Mich. 103...... 230 DeWitt Wire-Cloth Co. v. New Jersey Wire-Cloth Co., 14 N, Yo SOD: 2 saewas te twseeauedcuakigearavae weed 472 Diamond Match Co. v. Roeber, 106 N. Y. 478........ 55, 44, 897 Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. LD 7S cissvdig. baal eta Use tala tre ela a ethy Sram rela ve Ye Nee es ea 838 Dunbar v. American Telephone & Telegraph Co., 238 Tll. BOG oe and. cog wh wooed aeaanig albbameeea ie a ade oats 105, 648 Eastern States Retail Lumber Dealers’ Ass’n v. United States, 234 U. S. 600... ccc ccc eee eee e ee naee 1157 Ellerman v. Chicago Junction Railways & Union Stock Yards Co., 49 N. J. Hg. 217......... 0... eens 897 Elliman Sons Co. v. Carrington & Son, L. R. [1901] 2 Ch. Od Osa a Siaieatne asada NS eaoalataue Sia Dhacs AUSVal pigdacs anararerale aiarens 256 Emery v. Ohio Candle Co., 47 Ohio St. 320.............. 716 Employing Printers’ Club v. Dr. Blosser Co., 122 Ga. 509. 522 Erwin v. Hayden, 43 A. W. 610...............ce eee eee 785 Espenson v. Koepke, 93 Minn, 278............000cceeees 785 Evans v. American Strawboard Co., 114 Ill. App. 450...... 186 Farrer v. Close; L. R. 4 Q. B. 602.......... 2.2 eee eee eee 286 Ford v. Chicago Milk Shippers’ Ass’n, 155 Tl. 166........ 712 Fox Solid Pressed Steel Co. v. Schoen, 77 Fed. 29........ 94 French v. Parker, 16 BR. 1. 219.2... ccc cc cece nee 26 Fuller v. Hope, 163 Pa. St. 62...... 0.0... cc cee eee eee 224 Fuqua v. Pabst Brewing Co., 36 8. W. 479 (Tex. Civ. App.). 224 Gamewell Fire Alarm Co. v. Crane, 160 Mass. 50.......... 50 Garst v. Charles, 187 Mass. 144............ 0.0 cscs ee eee 256 Garst.v; Harris, 177 Mass, ‘72... ..cc cds ewes esas enews 256 Gates v. Hooper, 39 S. W. 1079...........0 2. eee eee ee eee 785 Gibbs v. Consolidated Gas Co. of Baltimore, 130 U. 8. 896.. 721 Gilman v. Dwight, 18 Gray (Mass.) 356................. 12 Goodrich v. Tenney, 144 Tl]. 422....................0005 135 Gorringe v. Reed, 28 Utah 120...........0.. cc cece ee eee 135 Greer Mills & Co. v. Stoller, 77 Fed. 1..............-.05- 1221 Griffin & Connelly v. Piper, 55 Tl. App. 218.............. 136 Grogan v. Chaffee, 156 Cal. 611........... 0... c cece eee 251 x TABLE OF CASES [REFERENCES ARE TO PAGES] Harding v. American Glucose Co., 182 Tl. 551............ 105 Harriman v. Northern Securities Co., 197 U. S. 244... .1381, 136 Hawarden v. Youghiogheny & Lehigh Coal Co., 111 Wis. FAD nah hcideia ewer a Ny eae ea Ree nanheele 552 Hilton v. Eckersley, 6 El. & Bl. 47.2.2... 0.0.2 e ween cease 256 Hitchcock v. Coker, 6 Adol. & El. 488............. 0005005 12 Hitchcock v. Davis, 87 Mich. 629..............2 eee eeeee 137 Hodge v. Sloan, 107 N. Y. 244....... 0... cece eee eee eee 215 Hooker v. Vandewater, 4 Denio (N. Y.) 349.............. 694 Hornby v. Close, L. R. 2 Q. B. 158.......... 2. 278 Hursen v. Gavin, 162 Ill. 3877.......... 20. cece eee eee 12 India Bagging Ass’n v. B. Kock & Co., 14 La. Ann. 168... 717 Jackson v. Mitchell, 18 Ves. Jr. 581. ......... 02.02 eee ees 1385 Jensen v. Cooks’ & Waiters’ Union of Seattle, 39 Wash. 531. 444 Johnson v. Cooper, 2 Yerg. (10 Tenn.) 524............... 135 Jones v. Fell, 5 Fla. 510........ 0... cc cece cece eee eee cee 472 Jones v. North, L. R. 19 Eq. 426.......... 0.2 c cee eee eee 94 Judd v. Harrington, 189 N. Y.105.......... 0.00. e eee eee 718 Kahn v. Walton, 46 Ohio St. 195............ cece eee ees 137 Kellogg v. Larkin, 3 Pin. (Wis.) 128.............000- 142, 224 King v. Journeymen-Taylors of Cambridge, 8 Modern 11 (LUTZ) )) ced ortteaiig faa tious eraaraeeeadadic 286 Klingel’s Pharmacy v. Sharp & Dohme, 104 Md. 218...... 590 Lange v. Werk, 2 Ohio St. 519.......... ccc cece cece eeeee 49 Lawlor v. Loewe, 2385 U. 8. 522....... 0. ce eee eee eee ee 1191 Leonard v. Poole, 114 N. Y. 871. ...... 00... cee cee eee eee 137 Leslie v. Lorillard, 110 N. Y. 519.2... . 0... cece eee 65, 897 Loewe v. California State Federation of Labor, 139 Fed. 71. 444 Loewe v. Lawlor, 208 U. 8. 274.0... 0. ccc ccc eee ee eee 1166 Long v. Towl, 42 Mo. 545...........ccccceeeeeeeceeeees 224 Lord St. John v. Lady St. John, 11 Ves. Jr. 525........... 135 Lufkin Rule Co. v. Fringeli, 57 Ohio St. 596.............. 49 Macauley Bros. v. Tierney, 19 R. 1. 255... 0 oo... eee eee 487 McMullen v. Hoffman, 174 U.S. 689............cc0 cee eee 136 Mandeville v. Harman, 42 N, J. Eq. 185..........-..00005 32 Mapes v. Metcalf, 10 N. D. 601.............0.cceececeees 17 Martell v. White, 185 Mass. 255......... ccc ce ceeeceeees 478 Martin v. McFall, 65 N. J. Eq. 91............. ccc cee eeee 444 Master Stevedores’ Ass’n v. Walsh, 2 Daly (N. Y.) 1...... 3888 TABLE OF CASES xi [REFERENCES ARE TO PAGES| Meech v. Lee, 82 Mich. 274..... (dae i eee He Re Saas 135 Meredith v. New Jersey Zine & Iron Co., 55 N. J. Eq. 211.. 81 Miles Medical Co. v. Dr. John D. Park & Sons Co., 220 U. S. B18 sacdaeiuieneid bed tahoe eeea gate eens +, 838 Milwaukee Masons’ & Builders’ Ass’n v. Niezerowski, 95 Wiss 129) soavce ceaens ns eae Liste in ons Raeeteag ta ate as 642 Mitchel v. Reynolds, 1 Peere-Williams, 181............... 1 Mogul Steamship Co. v. McGregor, Gow & Co., L. R. [1892] ADD? C48: 2 vs cigns pau a Segre any Ad ees we tes 809 Montague v. Lowry, 193 U.S. 38...... 2... cee ee ee eee 1049 More v. Bennett, 140 Tl. 69.......... 0... cece eee eee eee 463 Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 173... 680 Nash v. United States, 229 U.S. 873..... 0.0. cece eee eee 1152 National Benefit Co. v. Union Hospital Co., 45 Minn. 272.94, 897 National Enameling & Stamping Co. v. Haberman, 120 Fed. ANG cals as sae vnewmetoew etn G SOU eeu Sena tees 44 National Fireproofing Co. v. Mason Builders’ Ass’n, 169 P60: 259s ia cciee occ bie dee edhe eee eased 522, 1221 National Harrow Co. v. Bement & Sons, 21 App. Div. CONE Mia): 290 ieee tte anieetieie beak Gates 1270 National Protective Ass’n v. Cumming, 170 N. Y. 815...... 413 Nester v. Continental Brewing Co., 161 Pa. St. 473........ 472 Newell v. Meyendorff, 9 Mont. 254........... 02 cece ee eee 221 New York Ice Co. v. Parker, 21 How. Pr. (N. Y.) 302..... 256 Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co., | [1894] App. Cas. 585...... 0.0... ec cee ewes 33 Northern Securities Co. v. United States, 193 U. S. 197.910, 181 North Western Salt Co. v. Electrolytic Alkali Co., L. R. [1914] App. Cas. 461....... 0.0.2 eee eee eee 286 Oakdale Mfg. Co. v. Garset, 18 R. I. 484.................. 78 Old v. Robson, 62 L. T. N.S. 282......... 0.0. cc ee eee ces 286 Ontario Salt Co. v: Merchants Salt Co., 18 Grant (U. C.) DAO weaker ee hayacann esas ave ait get ee alenwge aa acceler 616 Pacific Factor Co. v. Adler, 90 Cal. 110.............. 224, 230 Park & Sons Co. v. National Wholesale Druggists’ Ass’n, DDN Neo. ecs ate Sie ein aa cate sateten Osa Oia aa wae eeetos 553 People v. Chicago Gas Trust Co., 180 Tll. 268............. 735 People v. Fisher, 14 Wend. (N. Y.) 10.................. 440 People v. Mitk Exchange, Lid., 145 N. Y. 267........... .. 707 xii TABLE OF CASES [REFERENCES ARE TO PAGES] People v. Nussbaum, 32 Mise. (N. Y.) 1, 66 N. Y. Supp. 129. 138 People v. Sheldon, 189 N. Y. 251.2... 0... ce ec eee eee ees 695 Perry v. United States School Furniture Co., 232 Tll. 101.. 136 Pidcock v. Harrington, 64 Fed. 821...........-- eee eeees 1219 Pittsburg Carbon Co. v. McMillin, 119 N. Y. 46........... 694 Pullman’s Palace-Car Co. v. Central Transp. Co., 171 U. S. UBB siehaesih argh acct sls SS iacand ule atelied aro auenterh aielor ate hie teuera ae 135 Queen Ins. Co. v. State, 86 Tex. 250...... 0... cee ccc e eee 605 Quinn v. Leathem, LR. [1901] App. Cas. 495............ 347 Rafferty v. Buffalo City Gas Co., 37 App. Div. (N. Y.) 618.. 762 Richards v. American Desk & Seating Co., 87 Wis. 503..... 897 Roller v. Ott, 14 Kan. 609.......... 0... c cee ewes Seite 224 Rousillon v. Rousillon, 14 Ch. Div. 351.............00000. 44 Rucker v. Wynne, 2 Head (Tenn.) 617.................. 185 St. Louis, V. & T. H. R. Co. v. Terre Haute & I. R. Co., 145 WS. 898 sesieiate tats ca eaanegian Saawedne cea ease 136, 137 Santa Clara Valley Mill & Lumber Co. v. Hayes, 76 Cal. OO oO tio stich Mice eNee ora c on natehite ens s SO MICS ire 230 Sayre v. Louisville Union Ben. Ass’n, 1 Duv. (Ky.) 143... 694 Schubart v. Chicago Gas Light & Coke Co., 41 Ill. App. 181.. 136 Schwalm v. Holmes, 49 Cal. 665..............cc cee eeees 224 Shawnee Compress Co. v. Anderson, 209 U. 8. 423....785, 1199 Skrainka v. Scharringhausen, 8 Mo. App. 522............. 605 Snell v. Dwight, 120 Mass. 9......... 0... ccc ccc ce ce eeees 137 Snow v. Wheeler, 113 Mass. 179..........00.c. cece eee 400 Southern Fire Brick & Clay Co. v. Garden City Sand Co., 28) LU G1 Gis 9: sees canwaes heat Aid os ea ccon Sea aad weds 230 Southern Indiana Exp. Co. v. United States Exp. Co., 88 eds G09 | 4.c35 evil alain ee uueaiesceuekra ees ue are bet 1221 Standard Oi Co. of New Jersey v. United States, 221 Se Mind sss cuteianre Fae ae seeteo es MaMa ol sarchoeanes 780, 1072 Standard Sanitary Mfg. Co. v. United States, 226 U. 8. Oca ea cdad esate thei et i eka ht ik ek th 1136, 1270 Stanton v. Allen, 5 Denio (N. Y.) 484...............0000. 694 State v. Creamery Package Mfg. Co., 110 Minn. 415....... 1270 State ex rel. Durner v. Huegin, 110 Wis. 189.............. 536 State v. Standard Oi Co., 49 Ohio St. 187...........2000. 649 Steele v. United Fruit Co., 190 Fed. 631.................. 800 Strait v. National Harrow Co., 18 N. Y. Supp. 224......... 1246 TABLE OF CASES xiii [REFERENCES ARE TO PAGES] Straus v. American Publishers’ Ass’n, 231 U. S. 222...... 1273 Superior Coal Co. v. E. R. Darlington Lumber Co., 236 TU, BSS said oie a eke tama eeedea iu sie waa ewes elena’ 224 Swift & Co. v. United States, 196 U.S. 875. ...........065 1056 Taylor v. Blanchard, 13 Allen (Mass.) 370............... 49 Texas Standard Oil Co. v. Adoue, 83 Tex. 650............. 472 Thomas v. Brownville, Ft. K. & P. Ry. Co., 2 Fed. 877..... 137 Thomas v. Cincinnati, N. O. & T. P. Ry. Co., 62 Fed. UE dee hahaa ty ea eee tanked see Serna 407, 444 Thomas v. Miles’ Adm’r, 8 Ohio St. 274..............0-- 49 Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. 507........ 161 Tuscaloosa Ice Mfg. Co. v. Williams, 127 Ala. 110......... 176 Twomey v. People’s Ice Co., 66 Cal. 233...............06- 224 Union Trust & Savings Bank v. Kinloch Long-Distance Tel. C05 2585 TM 202 ssc sores eed essa teed asa of ee aes beerace edo 242 United States v. Addyston Pipe & Steel Co., 85 Fed. 271... 625 United States v. American Tobacco Co., 221 U.S. 106...... 1136 United States v. Joint-Traffic Ass’n, 171 U.S. 505..... 765, 904 United States v. Kissel & Harned, 218 U.S. 601........... 1068 United States v. E. C. Knight Co., 156 U.S.1............. 763 United States v. Nelson, 52 Fed. 646...............000000: 624 United States v. Pacific & Arctic Ry. & Nav. Co., 228 U.S. Ee aes ascar cick aha aS aaa dos dag Rlata glare aie SGA maleate eusiers 1085 United States v. Reading Co., 226 U.S. 324.............. 1004 United States v. Terminal R. R. Ass’n, of St. Louis, 224 Wi Si 388 acecanen set eee nae ne eta enya etre 962 United States v. Trans-Missourt Freight Ass’n, 166 U. 8S. 290) se osna aaa pee Wee SEES AE EAS Raw Ee Bee EA 862 United States v. Union Pac. R. Co., 226 U. 8. 61, 470...... 981 United States v. Winslow, 227 U.S. 202............00005. 1270 Umted States Chemical Co. v. Provident Chemical Co., 64 WEG AOAC: dal dS aa tees geist Sy Os 4 ig CREME Wine mies 98 Urmston v. Whitelegg Bros., 63 L. T. N. 8. 455........... 472 Vegelahn v. Guntnor, 167 Mass. 92..............0 0c eee 440 Vulean Powder Co. v. Hercules Powder Co., 96 Cal. EI a cote rh rar gen aa cee gee 694, 1270 Wabash R. Co. v. Hannahan, 121 Fed. 563............... 408 West Virginia Transp. Co. v. Ohio River Pipe Line Co., 22 Wes Via G00 Wises eu snain sine wea dare uv ale warden ate 196 xiv TABLE OF CASES [REFERENCES ARE TO PAGES] Western Wooden-Ware Ass’n v. Starkey, 84 Mich. 76...... 189 Wheeler v. Russell, 17 Mass. 258...........00 ee eeeeeces 137 Whittingham v. Burgoyne, 3 Anst. Rep. 900............. 185 Wickens v. Evans, 3 Younge & Jervis, 318..............4. 84 Wilder Mfg. Co. v. Corn Products Refining Co., 236 U.S. LOD ein is eee sate Row KR Migs era nea eeN Uden nears 1211 Wiley v. Baumgardner, 97 Ind. 66............. cc eee eees 49 Wood v. Whitehead Bros. Co., 165 N. Y. 545.............- 72 Woodstock Iron Co. v. Richmond & D. Extension Co., 129 DiS 648i cnc a ceucta as whee cea bee eta eedts 137 CASES ON CONTRACTS IN RESTRAINT OF TRADE AND ILLEGAL COMBINATIONS CHAPTER I THE COMMON LAW : Section 1 CONTRACTS ACCOMPANYING THE SALE OF A BUSINESS MITCHEL v. REYNOLDS (King’s Bench, 1711. 1 Peere-Williams, 181.) Dest Upon a Bonp. The defendant prayed oyer of the con- dition, which recited that, whereas the defendant had assigned to the plaintiff a lease of a messuage and bakehouse in Liquor- pond Street, in the parish of St. Andrew’s Holborn, for the term of five years: now if the defendant should not exercise the trade of a baker within that parish during the said term, or, in case he did, should within three days after proof thereof made, pay to the plaintiff the sum of fifty pounds, then the said obliga- tion to be void. Quibus lectis & auditus, he pleaded, that he was a baker by trade, that he had served an apprenticeship to it, ratione cujus the said bond was void in law, per quod he did trade, prout et bene licuit. Whereupon the plaintiff demurred in law. And now, after this matter had been several times argued at the bar, Parxsr, C. J., delivered the resolution of the court. The general question upon this record is, whether this bond, being made in restraint of trade, be good? And we are all of opinion, that a special consideration being set forth in the condition, which shews it was reasonable for the 1 8 COMBINATIONS AND RESTRAINT OF TRADE parties to enter into it, the same is good; and that the true dis- tinction of this case is, not between promises and bonds, but between contracts with and without consideration; and that wherever a sufficient consideration appears to make it a proper and an useful contract, and such as cannot be set aside without injury to a fair contractor, it ought to be maintained; but with this constant diversity, viz. where the restraint is general not to exercise a trade throughout the kingdom, and where it is limited to a particular place; for the former of these must be void, being of no benefit to either party, and only oppressive, as shall be shewn by and by. The resolutions of the books upon these contracts seeming to disagree, I will endeavour to state the law upon this head, and to reconcile the jarring opinions; in order whereunto, I shall proceed in the following method :— First. Give a general view of the cases relating to the restraint of trade. Secondly. Make some observations from them. Thirdly. Shew the reasons of the differences which are to be found in these cases; and Fourthly. Apply the whole to the case at bar. As to the cases, they are either, first, of involuntary contracts, against, or without, a man’s own consent; or secondly, of volun- tary restraints by agreement of the parties. Involuntary restraints may be reduced under these heads :— First. Grants or charters from the crown. Secondly. Customs. Thirdly. By-laws. Grants or charters from the crown may be— First. A new charter of incorporation to trade generally, exclusive of all others, and this is void. 8 Co. 121. Secondly. A grant to particular persons for the sole exer- cise of any known trade; and this is void, because it is a monop- oly, and against the policy of the common law, and contrary to Magna Charta. 11 Co. 84. Thirdly. A grant of the sole use of a new invented art, and this is good, being indulged for the encouragement of ingenuity ; but this is tied up by the statute of 21 Jac. 1, cap. 3, sec. 6, to the term of fourteen years; for after that time it is presumed to be a known trade, and to have spread itself among the people. THE COMMON LAW 3 Restraints by custom are of three sorts :— First. Such as are for the benefit of some particular persons, who are alleged to use a trade for the advantage of a community, which are good.’ 8 Co. 125; Cro. Eliz. 803; 1 Leon. 142; Mich. 22 H. 6, 14; 2 Bulst. 195; 1 Roll. Abr. 561. Secondly. For the benefit of a community of persons who are not alleged, but supposed to use the trade, in order to exclude foreigners. Dyer, 279b; W. Jones, 162; 8 Co. 121; 11 Co. 52; Carter, 68, 114, held good. Thirdly. A custom may be good to restrain a trade in a par- ticular place, though none are either supposed or alleged to use it; as in the case of Rippon, Register, 105, 106. Restraints of trade by by-laws are these several ways :— First. To exclude foreigners; and this is good, if only to en- force a precedent custom by a penalty. Carter, 68, 114; 8 Co. 125.1 But where there is no precedent custom, such by-law is void. 1 Roll. Abr. 364; Hob. 210; 1 Bulst. 11; 3 Keb. 808.2 But the case in Keble is misreported; for there the defendants did not plead a custom to exclude foreigners, but only generally to make by-laws, which was the ground of the resolution in that case. Secondly. All by-laws made to cramp trade in general, are void. Moor, 576; 2 Inst. 47; 1 Bulst. 11. Thirdly. By-laws made to restrain trade, in order to the bet- ter government and regulation of it, are good, in some cases,? (viz.) if they are for the benefit of the place, and to avoid pub- lic inconveniences, nuisances, ete. Or for the advantage of the trade, and improvement of the commodity. Sid. 284; Raym. 288; 2 Keb. 27, 873; and 5 Co. 62b, which last is upon the by- law for bringing all broad-cloth to Blackwell Hall, there to be viewed and marked, and to pay a penny per piece for marking: this was held a reasonable by-law; and indeed it seems to be only a fixing of the market; for one end of all markets is, that the commodity may be viewed; but then they must not make people pay unreasonably for the liberty of trading there. 1—Wolley v. Idle, 4 Burr. 1951. 3—Wannell v. Chamber of the (Rep.) City of London, 1 Stra. 675; The 2—Vide Harrison v. Godman, 1 King v. Harrison, 3 Burr. 1322; Burr, 12; Hesketh v. Braddock, 3 Pierce v. Bartrum, Cowp. 269. Burr. (Rep.) (Rep.) 4 COMBINATIONS AND RESTRAINT OF TRADE In 2 Keb. 309, the case is upon a by-law for restraining silk- throwsters from using more than such a certain number of spindles, and there the by-law would have been good, if the reasons given for it had been true. Voluntary restraints by agreement of the parties, are either :— First. General, or Secondly. Particular, as to places or persons. General restraints are all void, whether by bond, covenant, or promise, ete., with or without consideration, and whether it be of the party’s own trade, or not. Cro. Jac. 596; 2 Bulst. 136; Aleyn, 67. Particular restraints are either, first, without consideration, all which are void by what sort of contract soever created. 2 H. 5. 5. Moor, 115, 242; 2 Leon. 210; Cro. Eliz. 872; Noy, 98; Owen, 148; 2 Keb. 377; March, 191; Show. 2 (not well reported) ; 2 Saund. 155. Or secondly, particular restraints are with consideration. Where a contract for restraint of trade appears to be made upon a good and adequate consideration, so as to make it a proper and useful contract, it is good. 2 Bulst. 1386, Rogers v. Parry. Though that case is wrong reported, as appears by the roll which I have caused to be searched, it is B. R. Trin. 11 Jae. 1; Rot. 223. And the resolution of the judges was not grounded upon its being a particular restraint, but upon its being a par- ticular restraint with a consideration, and the stress lies on the words, as the case is here, though, as they stand in the book, they do not seem material. Noy, 98; W. Jones, 13, Cro. Jac. 596. In that case, all the reasons are clearly stated, and, indeed, all » the books, when carefully examined, seem to concur in the dis- tinction of restraints general, and restraints particular, and with or without consideration, which stands upon. very good foundation; Volenti non fit injuria; a man may, upon a valu- able consideration, by his own consent, and for his own profit, give over his trade; and part with it to another in a particular place. Palm. 172, Bragg v. Stanner. The entering upon the trade, and not whether the right of action accrued by bond, promise or covenant, was the consideration in that case. Vide March’s Rep. 77, but more particularly Aleyn’s, 67, where there is a very remarkable case, which lays down this THE COMMON LAW 5 distinction, and puts it upon the consideration and reason of the thing. Secondly. I come now to make some observations that may be useful in the understanding of these cases. And they are :— First. That to obtain the sole exercise of any known trade throughout England, is a complete monopoly, and against the policy of the law. Secondly. That when restrained to particular places or per- sons (if lawfully and fairly obtained), the same is not a monopoly. Thirdly. That since these restraints may be by custom, and custom must have a good foundation, therefore the thing is not absolutely, and in itself, unlawful. Fourthly. That it is lawful upon good consideration, for a man to part with his trade. Fifthly. That since actions upon the case are actions injurt- arum, it has been always held, that such actions will lie for a man’s using a trade contrary to custom, or his own agreement; for there he uses it injuriously. Sizthly. That where the law allows a restraint of trade, it is not unlawful to enforce it with a penalty. Seventhly. That no man can contract not to use his trade at all. Eighthly. That a particular restraint is not good without just reason and consideration. Thirdly. I proposed to give the reasons of the differences which we find in the cases; and this I will do. First. With respect to involuntary restraints, and Secondly. With regard to such restraints as are voluntary. As to involuntary restraints, the first reason why such of these, as are created by grants and charters from the Crown and by-laws, generally are void, is drawn from the encourage- ment which the law gives to trade and honest industry, and that they are contrary to the liberty of the subject. Secondly. Another reason is drawn from Magna Charita, which is infringed by these acts of power; that statute says, nullus liber homo, etc., disseisetur de libero tenemento vel liber- tatibus, vel liberis consuetudinibus suis, etc., and these words have been always taken to extend to freedom of trade. But none of the cases of customs, by-laws to enforce these 6 COMBINATIONS AND RESTRAINT OF TRADE customs, and patents for the sole use of a new invented art, are within any of these reasons; for here no man is abridged of his liberty, or disseised of his freehold; a custom is lex loci, and foreigners have no pretence of right in a particular society, exempt from the laws of that society; and as to new invented arts, nobody ean be said to have a right to that which was not in being before; and therefore it is but a reasonable reward to ingenuity and uncommon industry. I shall shew the reason of the differences in the cases of volun- tary restraint. First. Negatively. Secondly. Affirmatively. First. Negatively; the true reason of the disallowance of these in any case, is never drawn from Magna Charta; for a man, may, voluntarily, and by his own act, put himself out of the possession of his freehold; he may sell it, or give it away at his pleasure. Secondly. Neither is it a reason against them, that they are contrary to the liberty of the subject; for a man may, by his own. consent, for a valuable consideration, part with his liberty; ag in the case of a convenant not to erect a mill upon his own lands. ‘W. Jones, 13, Mich. 4 Ed. 3, 57. And when any of these are at any time mentioned as reasons upon the head of voluntary restraints, they are to be taken only as general in- stances of the favour and indulgence of the law to trade and industry. Thirdly. It is not a reason against them, that they are against law, I mean, in a proper sense, for in an improper sense they are. All the instances of conditions against law in a proper sense, are reducible under one of these heads. First. Hither to do something that is malum in se, or malum prokibitum. 1 Inst. 206. Secondly. To omit the doing of something that is a duty. Palm. 172; 12, Norton v. Sims. Thirdly. To encourage such crimes and omissions. Fitzherb. tit. Obligation, 13; Bro. tit. Obligation, 34; Dyer, 118. Such conditions as these, the law will always, and without any regard to circumstances, defeat, being concerned to remove all ‘temptations and inducements to those crimes; and therefore, as THE COMMON LAW 7 in 1 Inst. 206, a feoffment shall be absolute for an unlawful condition, and a bond void. But from hence I would infer :— First. That where there may be a way found out to perform the condition, without a breach of the law, it shall be good. Hob. 12; Cro. Car. 22; Perk. 228. Secondly. That all things prohibited by law, may be re- strained by condition; and therefore these particular restraints of trade, not being against law, in a proper sense, as being neither mala in se, nor mala prohibita, and the law allowing them in some instances, as in those of customs and assumpsits, they may be restrained by condition. Secondly. Affirmatively; the true reasons of the distinction upon which the judgments in these cases of voluntary restraints are founded are, first, the mischief which may arise from them, first, to the party, by the loss of his livelihood, and the subsist- ence of his family; secondly, to the public, by depriving it of an useful member. Another reason is, the great abuses these voluntary restraints are liable to; as for instance, from corporations, who are per- petually labouring for exclusive advantages in trade, and to reduce it into as few hands as possible; as likewise from masters, who are apt to give their apprentices much vexation on this account, and to use many indirect practices to procure such bonds from them, lest they should prejudice them in their custom, when they come to set up for themselves. Thirdly. Because in a great many instances, they can be of no use to the obligee; which holds in all cases of general restraint throughout England; for what does it signify to a tradesman in London, what another does at Newcastle? and surely it would be unreasonable to fix a certain loss on one side, without any benefit to the other. The Roman law would not inforce such contracts by an action. See Puff. lib. 5, ¢. 2, sec. 3; 21 H. 7, 20. Fourthly. The fourth reason is in favour of these contracts, and is, that there may happen instances wherein they may be useful and beneficial, as to prevent a town from being over- stocked with any particular trade; or in case of an old man, 4—The instances there mentioned no need to trouble a magistrate on are, that if any should agree not to the breach of such agreements, which wash their hands, or change their would tend to no consequence when linen, for such a time, there could be put in execution. (Rep.) 8 COMBINATIONS AND RESTRAINT OF TRADE who finding himself under such circumstances either of body or mind, as that he is likely to be a loser by continuing his trade, in this case it will be better for him to part with it for a con- sideration, that by selling his custom, he may procure to himself a livelihood, which he might probably have lost, by trading longer. Fifthly. The law is not so unreasonable, as to set aside a man’s own agreement for fear of an uncertain injury to him, and fix a certain damage upon another; as it must do, if con- tracts with a consideration were made void. Barrow v. Wood, March’s Rep. 77; Mich. 7 Ed. 3, 65; Aleyn, 67; 8 Co: 121. But here it may be made a question, that suppose it does not appear whether or no the contract be made upon good considera- tion, or be merely injurious and oppressive, what shall be done in this case? Resp. I do not see why that should not be shewn by plead- ing; though certainly the law might be settled either way with- out prejudice; but as it now stands the rule is, that wherever such contract stat indifferenter, and for ought appears, may be either good or bad, the law presumes it prima facie to be bad, and that for these reasons :— First. In favour of trade and honest industry. Secondly. For that there plainly appears a mischief, but the benefit (if any) can be only presumed; and in that case, the presumptive benefit shall be over-borne by the apparent mischief. Thirdly. For that the mischief (as I have shewn before) is not only private, but public. Fourthly. There is a sort of presumption, that it is not of any benefit to the obligee himself, because, it being a general mischief to the public, every body is affected thereby; for it is to be observed, that though it be not shewn to be the party’s trade or livelihood, or that he had no estate to subsist on, yet all the books condemn those bonds on that reason (viz.) as taking away the obligor’s livelihood, which proves that the law presumes it; and this presumption answers all the difficulties that are to be found in the books. As first, That all contracts, where there is a bare restraint of trade and no more, must be void; but this taking place only where the consideration is not shewn can be no reason why, in cases where the special matter appears so as to make it a rea- THE COMMON LAW 9 sonable and useful contract, it should not be good; for there the presumption is excluded, and therefore the courts of justice will inforce these latter contracts, but not the former. Secondly. It answers the objection, that a bond does not want a consideration, but is a perfect contract without it; for the law allows no action on a nudum pactum, but every con- tract must have a consideration, either expressed, as in assump- sits, or implied, as in bonds and covenants, but these latter, ‘though they are perfect as to the form, yet may be void as to the matter; as in a covenant to stand seized, which is void without a consideration, though it be a complete and perfect deed. Thirdly. It shews why a contract not to trade in any part of England, though with consideration, is void; for there is something more than a presumption against it, because it can never be useful to any man to restrain another from trading in all places, though it may be, to restrain him from trading in some, unless he intends a monopoly, which is a crime. Fourthly. This shews why promises in restraint of trade have been held good; for in those contracts, it is always neces- sary to shew the consideration, so that the presumption of injury could not take place, but it must be governed by the special matter shewn. And it also accounts not only for all the resolutions, but even all the expressions that are used in our books in these cases; it at least excuses the vehemence of Judge Hall in 2 H. 5, fol. quinto; for suppose (as that case seems to be) a poor weaver, having just met with a great loss, should, in a fit of passion and concern, be exclaiming against his trade, and declare, that he would not follow it any more, etc., at. which instant, some designing fellow should work him up to such a pitch, as, for a trifling matter, to give a bond not to work it again, and afterwards, when the necessities of his family, and the cries of his children, send him to the loom, should take advantage of the forfeiture, and put the bond in suit; I must own, I think this such a piece of villainy, as is hard to find a name for; and therefore cannot but approve of the indignation that judge expressed, though not his manner of expressing it.® 5—Hall expressed himself thus: tre common ley, & per Dieu si le A ma intent vous purres aver de- plaintiff fuit icy, il irra al prison murre sur luy que le obligation est tang; il ust fait fine au Roy. (Rep.) void, eo que le condition est encoun- 10 COMBINATIONS AND RESTRAINT OF TRADE Surely it is not fit that such unreasonable mischievous contracts should be countenanced, much less executed by a court of justice. As to the general indefinite distinction made between bonds and promises in this case, it is in plain words this, that the agreement itself is good, but when it is reduced into the form of a bond, it immediately becomes void; but for what reason, see 3 Lev. 241. Now a bond may be considered two ways, either as a security, or as a compensation; and— First. Why should it be void as a security? Can a man be bound too fast from doing an injury? which I have proved the using of a trade contrary to custom or promise, to be. Secondly, Why should it be void as a compensation? Is there any reason why parties of full age, and capable of con- tracting, may not settle the quantum of damages for such an injury? Bract. lib. 3, c. 2, § 4. It would be very strange, that the law of England, that® de- lights so much in certainty, should make a contract void, when reduced to certainty, which was good when loose and uncertain ; the cases in March’s Rep. 77, 191, and also Show. 2, are but indifferently reported, and not warranted by the authorities they build upon. First Objection. In a bond the whole penalty is to be re- covered, but in assumpsit only the damages. Resp. This objection holds equally against all bonds whatso- ever. Second Objection. Another objection was, that this is like the case of an infant, who may make a promise but not a bond, or that of a sheriff who cannot take a bond for fees. Resp. The case of an infant stands on another reason (viz.) a general disability to make a deed; but here both parties are capable; neither ig it the nature of the bond, but merely the incapacity of the infant, which makes a bond by him void, since there a surety would be liable; but it is otherwise here. Also the case of a sheriff is very different; for at common law he could take nothing for doing his duty, but the statute has given’ him certain fees; but he can neither take more, nor a chance for more, than that allows him. 6—Post Grantham v. Gordon, 1 P. Wms. 612, 614. (BRep.) THE COMMON LAW 11 Third Objection. It was further objected, that a promise is good, and a bond void, because the former leaves the matter more at large to be tried by a jury; but what is there to be tried by a jury in this case? Resp. First. Tt is to be tried whether upon consideration of the circumstances the contract be good or not? and that is matter of law, not fit for a jury to determine. Secondly. It is to ascertain the damages; but cui bono (say they) should that be done? is it for the benefit of the obligor? Resp. Certainly it may be necessary on that account for these reasons :— First. A bond is a more favourable contract for him than a promise; for the penalty is a re-purchase of his trade ascer- tained before hand,? and on payment thereof he shall have it again; he may rather choose to be bound not to do it under a penalty, than not to do it at all. Secondly. However it be, it is his own act. Thirdly. We can suffer only by his knavery, and surely courts of justice are not concerned lest a man should pay too dear for being a knave. Fourthly. Restraints by custom may (as I have proved) be inforced with penalties which are imposed without the party’s consent, nay by the injured party without the concurrence of the other; and if so, then a fortiori he may bind himself by a penalty. Objection. It may perhaps be objected, that a false recital of a consideration in the condition may subject a man to an inconvenience, which the law so much labours to prevent. Resp. But this is no more to be presumed than false testi- mony, and in such a case, I should think the defendant might aver against it; for though the rule be, that a man is estopped from averring against anything in his own deed, yet that is, supposing it to be his deed; for where it is void, it is otherwise, as in the case of an usurious contract. The application of this to the case at bar is very plain: here the particular circumstances and consideration are set forth, upon which the Court is to judge, whether it be a reasonable and useful contract. 7—Sed vide Hardy v. Martin, 1 Bro. Cha. Rep. 419, note. (Rep.) 12 COMBINATIONS AND RESTRAINT OF TRADE The plaintiff took a baker’s house, and the question is, whether he or the defendant shall have the trade of this neigh- borhood; the concern of the public is equal on both sides. What makes this the more reasonable is, that the restraint is exactly proportioned to the consideration (viz.) the term of five years. To conclude: In all restraints of trade, where nothing more appears, the law presumes them bad; but if the circumstances are set forth, that presumption is excluded, and the Court is to judge of those circumstance, and determine accordingly; and if upon them it appears to be a just and honest contract, it ought to be maintained. For these reasons we are of opinion, that the plaintiff ought to have judgment.® HITCHCOCK v. COKER (King’s Bench and Exchequer Chamber, 1837. 6 Adolphus & Ellis, 438.) Assumpsit. The declaration stated that, before and at the time of making the agreement and the promise of defendant thereinafter mentioned, the plaintiff was a druggist, and had taken defendant into his service as an assistant in his said trade, at a certain annual salary, upon condition (amongst other things) that defendant should enter into and observe and perform the agreement thereinafter contained: that, in consideration of the premises, and in performance of the said condition, to wit, on 12th of April, 1832, by a certain agreement then made by and between defendant of the one part and plaintiff of the other (after reciting that plaintiff had taken defendant into his serv- ice as an assistant at a certain annual salary, upon condition, 8—So Chesman v. Nainby, 2 Stra. the city where the partnership busi- 739, and 3 Bro. Parl. Ca. 349, 8. C. ness was carried on); Gilman v. (Rep.) Dwight, 13 Gray, 356 (sale by phy- See Hursen v. Gavin, 162 Ill. 377 sician of his practice in a village (sale of livery business by one part- with covenant that no other person ner to the other with contract not would in four years establish himself to engage in the same business in as a physician in that village). THE COMMON LAW 13 amongst other things, that defendant should enter into and observe and perform the agreement thereinafter contained) the defendant did, in and by the said agreement, promise and agree to and with the plaintiff that, if defendant should at any time thereafter, directly or indirectly, either in his own name or in the name of any other person, use, exercise, carry on, or follow the trades or businesses of a chemist and druggist, or either of them, within the town of Taunton, in the county of Somerset, or within three miles thereof, then defendant, his executors, etc., should or would, on demand, pay plaintiff, his executors, etc., £500, as and for liquidated damages; and the said agreement being so made as aforesaid afterwards, to wit on etc. (mutual promises to perform the agreement): and, although etc. (alle- gation of performance by plaintiff), yet defendant hath not performed the said agreement on his part, but, on the contrary, afterwards, and after the making the said agreement, to wit 21st of April, 1832, defendant in his own name used and exer- cised, carried on and followed, the trades and businesses of a chemist and druggist within the said town of T., in the said county of S., contrary to the said agreement: and, although plaintiff afterwards, to wit 20th January, 1835, demanded of defendant the said £500, yet defendant, not regarding etc., hath not as yet paid etc. Plea, non assumpsit. On the trial, before GuRNEY, B., at the Somersetshire Spring assizes, 1835, the jury, by agreement of the parties, found a verdict for the plaintiff, assessing the actual damages at £500, whether the £500 in the agreement mentioned was to be con- sidered as liquidated damages or a penal sum. In aster term, 1835, Erle obtained a rule, in the Court of King’s Bench, to shew cause why judgment should not be arrested. Bompas Serjt. and Crowder shewed cause in Easter term last. [April 30, 1836, before Lorp Denman, C. J., LirtLepaLe, Patts- Son, and CoLEripGE, JJ.] The agreement recites that the plain- tiff had taken the defendant in consideration of his performing the agreement; and then there are mutual promises to perform, which are the consideration for each other. The promise alleged in the declaration to be broken is, therefore, on the whole, upon an executory. consideration. It is not as if the defendant had promised in consideration of the plaintiff having taken him. The general question is, whether the restraint of trade here be 14 COMBINATIONS AND RESTRAINT OF TRADE larger than the law will sanction. Some cases are collected in Com. Dig. Trade (D 3.), and in note (1) to Hunlocke v. Black- lowe [2 Wms. Saund. 156]. The leading case is Mitchel v. Reynolds, [1 P. Wms. 181. See notes on S. C. in 1 Smith’s Leading Cases, p. 181]. There a bond not to carry on the trade of a baker within a parish was held good; and Parxer, C. J., said that, whether by promises or bond, a general restraint was bad, but a restraint as to a particular place good, if there ap- peared a sufficient consideration. Many parishes are larger than the space to which the present contract extends. In Wick- ens v. Evans [3 Y. & J. 318], parties mutually agreed to abstain from interfering with each other in large districts of England, and it was held good. In Horner v. Graves [7 Bing. 735], an agreement not to practise as a dentist within 100 miles of York, without the plaintiff’s consent, while the plaintiff should be practising as a dentist, was held bad, on the ground that the restraint was larger than was needed for the plaintiff’s protec- tion. [CoLEriper, J. Here the agreement restrains the defend- ant, though the plaintiff should leave the place, or quit practice, or die.] The agreement would probably be construed as a per- sonal contract, expiring with the lives of the parties. Besides, the plaintiff might choose to bargain for a restraint enabling him to sell his practice, or to bequeath it. Many of the agree- ments which have been held good were in this form. In Davis v. Mason [5 T. R. 118], a bond conditioned that the defendant, who had been taken as assistant to the plaintiff, a surgeon and apothecary, should not practise within ten miles of Thetford, was held good. There the consideration was like that in the present case, even if it be held executed. In that case there was no limitation of the contract to the duration of the plaintiff’s practice or life: and there was none such in Chesman v. Nainby [2 Str. 739. 8. C. 2 Ld. Raym. 1456. 8. C. in Error, in Dom. Proc. 1 Bro. P. C. 234. (2d ed.)], or in Haywood v. Young [2 Chitt. 407], where the restraint extended over twenty miles. In Young v. Timmins [1 C. & J. 331. S. C. 1 Tyrwh. 226], the restraint was held to be bad, as being without adequate con- sideration, the one party being restrained from working with- out the consent of the other, who was not bound to find work, and was expressly allowed to employ others, and rescind the agreement at three months’ notice. When it is said that there THE COMMON LAW 15 must be adequate consideration, it is not meant that the Court will inquire whether the party submitting to the restraint made a judicious contract. There must be a legal consideration to support the promise; and the cases decide that the taking into service is such. In Mitchel v. Reynolds, [1 P. W. 190, 191, 192], one test put is the advantage to the party who imposes the restraint. In Homer v. Ashford [8 Bing. 322], it was held sufficient, on general demurrer, that the declaration stated the covenant to be ‘‘for the considerations therein mentioned.’’ This shews that the magnitude of the consideration moving the party promising is not to be weighed by the Court, if there be some legal consideration. Erle and Kinglake contra. No consideration appears for the agreement itself, except that the plaintiff had taken the de- fendant into his service: that is an executed consideration, and without a request. Mutual promises form a good consideration, where the agreement itself is good; but, according to the cases, an agreement in restraint of trade must itself be upon good consideration. It makes no difference that the agreement states the plaintiff to have taken the defendant on condition that the latter would perform an agreement not then existing. But, independently of this objection, there is no consideration unless the plaintiff part with, or the defendant receive, some advantage. Here the plaintiff is bound to nothing, and the defendant gets nothing. At all events the consideration is not adequate to the restraint. In Mitchel v. Reynolds [1 P. W. 186], Parker, C. J., says, ‘‘Where a contract for restraint of trade appears to be made upon a good and adequate consideration, so as to make it a proper and useful contract, it is good.’’ In Gale v. Reed [8 East, 86], Lord Ellenborough says, ‘‘The restraint on one side meant to be enforced should in reason be coextensive only with the benefits meant to be enjoyed on the other;’’ and he adds that the Courts will so construe the agreements as to make, if possible, the benefits coextensive. Therefore a mere technical consideration is not enough. In an Anonymous case in Moore [Moore, 115, pl. 259), it was held that no action lay on a bond, by an apprentice of a mercer of Nottingham to his master, not to exercise the trade in Nottingham for four years. In another Anonymous [Moore, 242, pl. 379, S. OC. 2 Leon. 16 COMBINATIONS AND RESTRAINT OF TRADE 210] case in the same book, a bond conditioned not to exercise the trade of a blacksmith in South Mims was held bad. No consideration appeared in these cases; and the Court presumed none, though the contracts were under seal. In Chesman v. Nainby [2 Str. 739, S. C. 2 Lid. Raym. 1456. 8. C. in Error, in Dom. Proce. 1 Bro. P. C. 234. (2d ed.)] the Court thought there was ground for inferring a covenant to instruct for three years. In Horner v. Graves [7 Bing. 735] the Court adverted to the question of the slenderness of consideration as a proper test, though the decision was principally on another point. Fur- ther, an agreement of this sort, to be good, must not be oppres- sive; which it is, if it impose a restraint greater than is necessary for the plaintiff’s protection. [Per Curiam, in Hor- ner v. Graves, 7 Bing. 748.] Here the time during which the defendant is restrained is longer than the plaintiff can require, inasmuch as it is not put an end to by the plaintiff’s death or retirement from business. Suppositions have been made for the plaintiff, upon which it might possibly be for his benefit that the restraint should not be put an end to by his own death or ceasing to carry on the business: but the restraint is general, and will, if the agreement be upheld, operate whether those suppositions be verified or not. The objections hitherto have been made principally to the extent of space to which the contract extended; but its duration is manifestly as much a test of its reasonableness. In Davis v. Mason [5 T. R. 118] and Homer vy. Ashford [3 Bing. 323] the duration was limited to fourteen years: in Mitchel v. Reynolds [1 P. W. 181] to five. It does not appear whether there was a limit in Hayward v. Young [2 Chit. 407]. If the agreement here be construed as limited to the time during which the defendant should re- main in the plaintiff’s service, the declaration is bad, for want of an allegation that the defendant was still in the service. So if it be construed as limited to the life of the plaintiff, or his carrying on trade by himself or his executors or assigns, the corresponding allegations are wanting. Cur. Adv. vult. LORD DENMAN, C. J., in Trinity term last (May 25th), delivered the judgment of the Court of King’s Bench. After stating the nature of the motion, his Lordship said: THE COMMON LAW 17 Some minor objections were taken to the declaration, which it is unnecessary to notice, as we are of opinion that the agree- ment itself is illegal. The law upon this subject has been settled by a series of decisions, from Mitchel v. Reynolds [1 P. W. 181] to Horner v. Graves [7 Bing. 735]; viz. that an agreement for a partial and reasonable restraint of trade upon an adequate considera- tion is binding, but that an agreement for general restraint is illegal. What shall be considered as a reasonable restraint was much diseussed in the case of Horner v. Graves [7 Bing. 735] ; where the Chief Justice of the Common Pleas observed [P. 743], ‘“We do not see how a better test can be applied to the question whether reasonable or not, than by considering whether the restraint is such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interests of the public. Whatever restraint is larger than the necessary protection of the party, can be of no benefit to either, it can only be oppres- sive; and if oppressive, it is, in the eye of the law, unreason- able. Whatever is injurious to the interests of the public is void, on the grounds of public policy.’’ It may indeed be said that all such agreements interfere in some degree with the public interest; and great difficulty may attend the appli- cation of that test, from the variety of opinions that may exist on the question of interference with the public interest which the law ought to permit. But, on the other hand, it appears quite safe to hold that the law will not enforce any agreement for curtailing the rights both of the public and the contracting party, without its being necessary for the protection of him in whose favour it is made. In that case, the question arose upon the distance to which the restraint extended: here it arises upon the time. The agreement as to time is indefinite; it is not limited to such time as the plaintiff should carry on business in Taunton, nor to any given number of years, nor even to the life of the plaintiff: but it attaches to the defendant so long as he lives, although the plaintiff may have left Taunton, or parted with his business, or be dead. None of the cases in the books turn upon this question; it is indeed alluded to in Chesman v. Nainby [2 Str. 739. 8. C. 2 Lid. Raym. 1456. 8. C. in Error, in Dom. Proce. 1 Br. P. C. 234, (2d ed.)]; and the Kales R. of T. Vol, I—2 18 COMBINATIONS AND RESTRAINT OF TRADE counsel for the plaintiff below, arguendo, seems to admit that the bond. on which that action was brought could not be put in force for a breach after the death of the obligee: but the breach was assigned on another part of the condition, and held good. In the present case, the agreement, not being under seal, and not being divisible, if bad in part, is bad altogether. In the absence of any authority establishing the validity of an agree- ment thus indefinite in point of time, and trying the reason- ableness of it by the test above alluded to, we think that the restraint is larger than the necessary protection of the party in favour of whom it is given requires, and that it is therefore oppressive and unreasonable. The consideration for this agree- ment appears to have been trifling; but, even if it had been much more valuable, the same result would have followed. The judgment must be arrested. Rule absolute. Error having been brought in the Court of Exchequer Chamber, the case was argued on Saturday, November 26, 1836, before Tinpat, C. J., Lorp Apinerr, C. B., Gasenze and VaucHaNn, Js., BoLLAND and ALDERSON, Bs. Sir W. W. Follett, for the plaintiff in error (the plain- tiff below). The plaintiff was not bound to take the defendant into his service: his doing so, therefore, constitutes a good consideration: the defendant has learned the secrets of the business, and has become acquainted with the customers. The objection as to the restraint being larger than is beneficial to the plaintiff was for the parties themselves to consider: but, in fact, it is not larger. First, as to the magnitude of the con- sideration, there is here a full consideration in fact: but it is necessary only that there should be a consideration capable of legally supporting an agreement: the magnitude of its value, provided there be a legal value, the Court cannot consider. This is all that the dicta to be found (for instance) in Mitchel v. Reynolds [1 P. W. 181], Horner v. Graves [7 Bing. 735], Davis v. Mason [5 T. R. 118], Gale v. Reed [8 East, 80], and Young v. Timmins [1 C. & J. 3381. S. C. 1 Tyrwh. 226], can mean. [ALDERSON, B. If the considerations were so small as to be colourable, the agreement would be bad.] That is the full extent to which the dicta can be held properly to go. The THE COMMON LAW 19 language which has been supposed to touch upon the amount of consideration had reference to the cases of bonds, where no consideration at all appeared, as in the case of the dyer who gave a bond without consideration. [Yearb. Pasch. 2 H. 5. fol. 5 B. pl. 26. Agreed to Per Curiam, in the Anonymous Case, Moore, 242. pl. 379. S. C. 2 Leon. 210; and see in Mitchel v. Reynolds, 1 P. W. 193.] In Horner v. Graves [7 Bing. 735] the amount of consideration was not the ground of decision. Secondly, the extent of the restraint is reason- able. In Horner v. Graves [7 Bing. 735] the restric- tion was thought to extend to a distance which could not be of any benefit to the plaintiff. [Lorp Aptnanr, C. B. I should have thought that both questions were for the jury.] It is difficult to see how the questions can be raised on the record. In Bunn v. Guy [4 East, 190] the restriction of an attorney’s practice extended to London and 150 miles round, and yet was held valid. Here the objection is to the time. The policy of the English law admits of restraints unlimited as to time: for, under the ancient corporate system, the carry- ing on trades within certain limits by any but a privileged class was often prohibited without any such limitation. The restraint here does not extend beyond the defendant’s life. These restraints commonly originate in contracts of service, in partnerships, and in sales of good-will. The restriction may be unlimited, as to time, in any of these cases. If the plaintiff had sold the good-will to a stranger, could it have been un- reasonable that he himself should have been restrained for life, without reference to the vendee’s life, since the vendee might afterwards wish to sell it? Or why should not the plaintiff have the power of bequeathing it? Good-will has been treated as assets in the hands of an executor [See 2 Williams on Executors, 1178. note (p), pt. iv. book 1. ch. i. (2d ed.).] So, if one partner quit a partnership on terms, it is reasonable that he should agree, for his own life, not to be a competitor with the remaining partners, or any new partners or assignees. There is no authority for the limitation con- tended for, except the argument of counsel in Chesman v. Nainby [2 Str. 743, 744], and the apparent concession of the opposite counsel, the point not being raised in the cause. If it be necessary to confine the restraint to the plaintiff’s life, 20 COMBINATIONS AND RESTRAINT OF TRADE then a restraint for fourteen years only, without reference to the life, would be bad: but it was held good in Davis v. Mason [5 T. R. 118] and Homer v. Ashford [3 Bing. 323]. In Mitchel v. Reynolds [1 P. W. 181], no such limitation is laid down in the judgment; and there the contract was for five years generally, without reference to the life of any party. In Bunn v. Guy [4 East, 190] and Hayward v. Young [2 Chitt. 407] there was no limitation as to time. In Bryson v. Whitehead [1 Sim. & Stu. 74] Sir John Leach, Vice-Chancellor, enforced an agree- ment by a trader, upon selling a secret in his trade, to restrain himself for twenty years absolutely from the use of such secret, and said that he might ‘‘restrain himself generally.’’ The limitation as to time might have been insisted on in Capes Vv. Hutton [2 Russ. 357], but was not. The reporter’s note on Williams v. Williams [2 Swanst. 254] collects the cases as to contracts in restraint of trade, but does not mention the ques- tion of duration. If the want of limitation to the life of the plaintiff render the defendant liable to the plaintiff’s executors, that must be on the ground that the restraint becomes part of the plaintiff’s personal estate: if so, the contract is not longer than is beneficial to the plaintiff. Further, the contract is for the defendant to pay £500 if he practise. The plaintiff might, if he pleased, have demanded the sum absolutely for taking the defendant into his service at all: why then may he not make the payment depend upon the defendant’s abstaining from practice? On a contract, shaped as this is, perhaps a court of equity would not restrain a party from practising, but would treat the agreement as simply a condition attached to the payment of the money. Erle, for the defendant in error (the defendant below). First, contracts in restraint of trade are void prima facie: but, where the consideration is adequate, it is an excepted case, and they are then allowed; Mitchel v. Reynolds {1 P. W. 181]. Here there is not such a consideration. The service is paid for by the salary, which must be presumed to be no more than adequate to the service, and which cannot form a consideration for the restraint. The agreement is made after the relation of master and servant is entered into: the consideration is there- fore executed; and there is no request. But, supposing a legal THE COMMON LAW. 21 consideration to exist, there is no adequate one; this has been always required to take the case out of’ the rule invalidating such contracts; and the Courts will notice the adequacy or inadequacy. The expressions of the Judges can be no other- wise construed. [ALDERSON, B., referred to the language of Lord Kenyon, in Davis v. Mason [5 T. R. 120.] There the introduction is put as a ‘‘fair’’ consideration. In Mitchel v. Reynolds [1 P. W. 186] the words of the Court are, ‘‘upon a good and adequate consideration, so as to make it a proper and useful contract.’’ [Lord Apincer, C. B. Do you say a bond would be bad, if it were conditioned for any abstinence from trade and no consideration appeared?] The Court, in Mitchel v. Reynolds [1 P. W. 192], say, in answer to such a question, ‘‘Wherever such contract stat indifferenter, and for aught appears, may be either good or bad, the law presumes it prima facie to be bad.’’ In the two Anonymous cases [Moore, 115. pl. 259, Moore, 242. pl. 379, S. C. 2 Leon, 210] in Moore, bonds were held void: yet, in the technical sense, a bond is presumed to be upon consideration. In Jelliet v. Broad [Noy, 98] a promise, for a good consideration, not to trade in a particular place, was upheld; but Leggate v. Batchelour [Noy, 98] was there cited and approved of, in which a bond on a condition not to trade in Canterbury or Rochester for four years, no con- sideration appearing, was held bad. [AwupErson, B. In Jel- liet v. Broad [Noy, 98] the consideration was the sale of goods for £200: it might be argued that the goods were to be pre- sumed worth the money.] Prugnell v. Gosse [Aleyn. 67] seems to shew that the adequacy of the consideration must be dis- cussed. In Young v. Timmins [1 C. & J. 331. 8. C. 1 Tyrwh. 226] the judgment turned entirely on the question of adequacy of consideration: there was a clear technical consideration, yet the contract was held bad. [AupERson, B. One party had the power to determine the contract, so that he gave up noth- ing: here there is an annual salary, which implies at least a contract for a year.] It does not appear that the plaintiff could not discharge the defendant; nor that the defendant was still in the plaintiff’s service when he signed the agreement. In Gale v. Reed [8 East, 80] Lord Ellenborough enquires, whether the consideration be ‘‘adequate,’’ whether ‘‘the re- straint on one side’’ be ‘‘co-extensive only with the benefits 22 COMBINATIONS AND RESTRAINT OF TRADE meant to be enjoyed on the other,’’ whether ‘‘the compensation and restraint’? be ‘‘commensurate with each other.’’ So in Chesman v. Nainby [2 Str. 739. 8S. C. 2 Ld. Raym. 1456. S. C. in Error, in Dom. Proc. 1 Br. P. C. 234 (2d ed.)] the question is discussed on the commensurability of the consideration with the restraint. The same criterion was recognised in Horner v. Graves [7 Bing. 735]. Assuming, then, that principle, it cannot be said that the being taken into service at an annual salary, at a time past, is a consideration adequate to a promise by a party to abstain during his whole life from exercising the business in the prescribed limits. Secondly, the restraint is more than is necessary for the plaintiff’s protection. It is said that the plaintiff may wish to sell or bequeath; but nothing of that kind appears: and, on that supposition, the contract should still have been limited to such time as the plaintiff, or his executors, ad- ministrators, or assigns, should carry on the business. Sir W. W. Follett, in reply. There are many expressions which at first sight appear to warrant the argument that the Court will measure the adequacy of the consideration to the restraint; but no decision has turned upon the degree. In Prugnell v. Gosse [Aleyn, 67] the words are, ‘‘no considera- tion,’’ and ‘‘a consideration.’’ Parxsr, C. J., clearly speaks only of technical adequacy in Mitchel v. Reynolds [1,P. W. 185, 186]; yet he uses the word ‘‘adequate,’’ which is the expression of the Judges, in Young v. Timmins [1 C. & J. 331. S. C. 1 Tyrwh. 226], insisted on here for the defendant. In Wickens v. Evans [3 Y. & J. 318] Hutuocg, B., uses the words, ‘sufficient consideration,’’ but afterwards ‘‘no consideration,’’ which shews that the technical sufficiency was meant. The expression of the Court in Horner v. Graves [7 Bing. 735] is “‘good and sufficient.’’ It is said that the plaintiff might dis- charge the defendant: but in Davis v. Mason [5 T. R. 118] such a discharge was admitted on the record. As to the tech- nical objections to the consideration, the original agreement, at the commencement of the service, clearly is that the plaintiff shall take the defendant into service, and that the defendant shall promise: the agreement is afterwards reduced into writ- THE COMMON LAW 23 ing. [Lorp AprnczR, C. B. Suppose the plaintiff to die with- out assigning the business: who is to sue?] The executors, if any action would lie. Cur. adv. vult. TINDAL, C. J., on this day delivered the judgment of Court. The ground upon which the Court of King’s Bench held, after a verdict obtained by the plaintiff in this case, that the judgment of that Court ought to be arrested, was, that the agreement set out upon the record, and upon which the action was brought, was void in law, being an agreement in unreason- able restraint of trade. For, although the inadequacy of the consideration, upon which the agreement was entered into, was urged in argument as one reason for holding the agreement to be void,—and, in the delivering the opinion of the Court, some reference was made to that objection,—yet it is manifest that it formed no part of the ground upon which the Court refused to give their judgment in favour of the plaintiff. The consideration for the agreement in question appears to have been, the receiving of the defendant into the service of the plaintiff as an assistant in his trade or business of a chemist and druggist, at a certain annual salary. And the agreement, on the part of the defendant, founded upon such consideration, is that, if he should at any time thereafter, directly or in- directly, in his own name or that of any other person, exercise the trade or business of a chemist and druggist within the town of Taunton, in the County of Somerset, or within three miles thereof, then that the defendant should, on demand, pay to the plaintiff, his executors, administrators or assigns, the full sum of £500 as and for liquidated damages. The ground upon which the Court below has held this re- straint of the defendant to be unreasonable is that it operates more largely than the benefit or protection of the plaintiff can possibly require; that it is indefinite in point of time, being neither limited to the plaintiff’s continuing to carry on his business at Taunton, nor even to the term of. his life. We agree in the general principle adopted by the Court, that, where the restraint of a party from carrying on a trade is larger and wider than the protection of the party with whom the contract is made can possibly require, such restraint must be considered 24 COMBINATIONS AND RESTRAINT OF TRADE as unreasonable in law, and the contract which would enforce it must be therefore void. But the difficulty we feel is in the application of that principle to the case before us. Where the question turns upon the reasonableness or unreasonableness of the restriction of the party from carrying on trade or business within a certain space or district, the answer may depend upon various circumstances that may be brought to bear upon it, such as the nature of the trade or profession, the populousness of the neighborhood, the mode in which the trade or profession is usually carried on; with the knowledge of which, and other circumstances, a judgment may be formed whether the restric- tion is wider than the protection of the party can reasonably require. But with respect to the duration of the restriction the case is different. The good-will of a trade is a subject of value and price. It may be sold, bequeathed, or become assets in the hands of the personal representative of a trader. And, if the restriction as to time is to be held to be illegal, if extended beyond the period of the party by himself carrying on the trade, the value of such good-will, considered in those various points of view, is altogether destroyed. If, therefore, it is not unreasonable, as undoubtedly it is not, to prevent a servant from entering into the same trade in the same town in which his master lives, so long as the master carries on the trade there, we cannot think it unreasonable that the restraint should be carried further, and should be allowed to continue, if the master sells the trade, or bequeaths it, or it becomes the property of his personal representative; that is, if it is reasonable that the master should by an agreement secure himself from a diminution of the annual profits of his trade, it does not appear to us unreasonable that the restriction should go so far as to secure to the master the enjoyment of the price or value for which the trade would sell, or secure the enjoyment of the same trade to his purchaser, or legatee, or executor. And the only effectual mode of doing this appears to be, by making the restric- tion of the servant’s setting up or entering into the trade or business within the given limit co-extensive with the servant’s life. And, accordingly, in many of the cases which have been cited, the restrictioa has been held good, although it continued for the life of the party restrained. And, on the other hand, THE COMMON LAW 25 no case has been referred to, where the contrary doctrine has been laid down. In Bunn v. Guy [4 East, 190] a covenant by an attorney, who had sold his business to two others, that he would not, after a certain day, practice within certain limits, as an attorney, was held good in law, though the restriction was indefinite as to time. In Chesman v. Nainby [In Dom. Proc. 1 Br. P. C. 234. (2d ed.), S. C., in K. B. 2 Str. 739. 2 Ld. Raym. 1456] (in error) the condition of the bond was that Elizabeth Vickers should not, after she left the service of the obligee, set up business in any shop within half a mile of the dwelling-house of the obligee, or of any other house that she, her executors or administrators, should think proper to remove to, in order to carry on the trade; and in that case the contract was held to be valid, though the restriction was obviously in- definite in point of time, and although one of the grounds on which the validity of the contract was sought to be impeached was, that the restriction was for the life of the obligor. Again, in Wickens v. Evans [3 Y. & J. 318] the agreement in restraint of trade was made to continue during the lives of the contract- ing parties; and no objection was taken on that ground. We cannot, therefore, hold the agreement in this case to be void, merely on the ground of the restriction being indefinite as to duration, the same being in other respects a reasonable restriction. But it was urged, in the course of the argument, that there is an inadequacy of consideration, in this case, with respect to the defendant; and that, upon that ground, the judgment must be arrested. Undoubtedly in most, if not all, the decided cases, the judges in delivering their opinion that the agreement in the particular instance before them was a valid agreement, and the restriction reasonable, have used the expression, that such agreement appeared to have been made on an adequate consideration, and seem to have thought that an adequacy of con- sideration was essential to support a contract in restraint of trade. If by that expression it is intended, only, that there must be a good and valuable consideration, such consideration as is essential to support any contract not under seal, we concur in that opinion. If there is no consideration, or a consideration of no real value, the contract in restraint of trade, which in itself is never favoured in law, must either be a fraud upon the 26 COMBINATIONS AND RESTRAINT OF TRADE rights of the party restrained, or a mere voluntary contract, a nudum pactum, and therefore void. But, if by adequacy of consideration more is intended, and that the Court must weigh whether the consideration is equal in value to that which the party gives up or loses by the restraint under which he has placed himself, we feel ourselves bound to differ from that doctrine. A duty would thereby be imposed upon the Court, in every particular case, which it has no means whatever to execute. It is impossible for the Court, looking at the record, to say whether, in any particular case, the party restrained has made an improvident bargain or not. The receiving instruc- tion in a particular trade might be of much greater value to a@ man in one condition of life than in another; and the same may be observed as to other considerations. It is enough, as it appears to us, that there actually is a consideration for the bargain; and that such consideration is a legal consideration, and of some value. Such appears to be the case in the present instance, where the defendant is retained and employed at an annual salary. We therefore think, notwithstanding the ob- jections which have been urged on the part of the defendant, that the plaintiff has shewn upon the record a legal ground of action; and, having obtained a verdict in his favour, that he is entitled to judgment. Judgment for the plaintiff. FRENCH vy. PARKER (Supreme Court of Rhode Island, 1888. 16 R. I. 219.) Bill for injunction. On demurrer. Bill by Charles H. French against Edward D. L. Parker to enjoin him from practicing medicine in violation of an agree- ment. Defendant demurred. William H. Clapp, for complainant. James M. Ripley and Nathan W. Littlefield, for respondent. DURFEE, C. J. The case stated in the bill is to the effect that in February, A. D. 1887, the defendant, who was then a physician and surgeon living and practicing his profession in THE COMMON LAW 27 the city of Pawtucket, published an advertisement offering to relinquish a very lucrative practice to the ‘‘right man, pur- chasing his real estate at its actual value;’’ that the complain- ant, likewise a physician and surgeon, was then living and practicing his profession in Waterbury, Conn.; that he was led by the advertisement to enter into negotiations with the de- fendant, which resulted in his purchasing the said practice and . estate, and his removal to Pawtucket with his family, at great expense, and there entering upon the practice of his profession as the successor of the defendant; that he paid the defendant $15,000, over $5,000 of which was for the practice, the assessed value of the estate being less than $10,000, and not of so much value to the complainant except for his use as a practicing physician ; that the defendant gave the complainant, in addition to the deed conveying the estate, a written covenant by which, in consideration of one dollar and other valuable considerations, the defendant assigned his practice to the complainant, and agreed to introduce and recommend the complainant to his patients, and also agreed not to engage, at any time thereafter, “‘in the practice of medicine or surgery in said city of Paw- tucket.’’ The bill alleges that the defendant has opened an office in Providence, advertised his card in the Pawtucket papers, visited his old patients, and is now practicing medicine and surgery in Pawtucket daily, to the great damage of the complainant, and that the defendant declares that he intends to continue to visit and prescribe professionally for all persons in Pawtucket who may call for him. The bill asks for an injunction to restrain the defendant from practicing in Paw- tucket. The defendant demurs. The defendant contends, in support of the demurrer, that the covenant, being a covenant in restraint of the exercise of a profession, is void because it is without limitation of time. The ground of this contention is that such a contract is valid only when it is reasonable, and it is not reasonable if the restraint which it imposes is larger than is necessary for the protection of the party in whose favor it is implored. This view is in accord with the language used by the judges in several English cases, but no case is cited in which it has been held finally that a contract in restraint of trade or business is void simply because the duration of the restraint is not limited. We know 28 COMBINATIONS AND RESTRAINT OF TRADE of no such case. In Hitchcock v. Coker, 1 Nev. & P. 796, 6 Adol. & E. 438, the defendant had agreed not at any time to engage in the business of chemist and druggist, or either of them, in the town of Taunton; and the Court of King’s Bench, on the authority of the language used by Trinpau, C. J., in Horner v. Graves, 7 Bing. 735, 748, decided that the agree- ment was void because it was unlimited as to time; but, on appeal to the judges in Exchequer Chamber, the decision was reversed, TinDAL, C. J., delivering the opinion. In the course of his opinion, he said: ‘‘We agree in the general principle that, where the restraint of a party from carrying on a trade is larger and wider than the protection of the party with whom the contract is made can possibly require, such restraint must be considered as unreasonable in law, and the contract which would enforce it must be therefore void.’’ But distinguishing between extent and duration of restraint, he held, speaking for the Court, that the contract was valid, because a trader has an interest in his trade beyond his own exercise of it, namely, the good-will, which may be sold, bequeathed, or become assets, and which it is therefore not unreasonable for him to have protected by a continuance of the restraint beyond his own life. The defendant contends that the ground of this decision is that there is, in the case of a trade, a good-will which may be bequeathed or may pass as assets, and which will therefore be the more valuable for a continuance of the restraint after the trader’s death; whereas, there is no good-will attaching to the profession of a physician or lawyer which can be bequeathed or pass as assets, and therefore any continuance of the restraint after the death of the lawyer or a physician is unreasonable because it will avail nothing. We think this is too narrow a view of the decision. One of the cases prominently cited in support of this decision was Bunn v. Guy, 4 East, 190, in which the covenant of an attorney not to practice within certain limits was held to be good, although the restraint was unlimited as to time. Of course, the Court would not have cited the case as authority for the decision if they did not regard it as falling within the principle of the decision. Moreover, a third reason was given for the decision, namely, that the good-will of the trade might be sold during the life of the trader, and would sell for more if protected from competition during the life of THE COMMON LAW 29 the party restrained than it would if it were protected only during the life of the trader. This reason is as valid in the case of a profession as of a trade; for whether, technically speaking, there be any good-will attending a profession or not, the professional practice itself would probably sell for more with the restraining contract, if the restraint were unlimited in duration, than it would if the restraint were for the life of the promisee or covenantee only. If the complainant here wished to retire from his practice, and sell it, he could probably sell it for more if he would secure the purchaser from com- petition with the defendant forever than he could if he could only secure him from such competition during his own life. So, if he wished to take in a partner, he could, for the same reason, make better terms with him. It seems to us that the real principle of decision in Hitchcock v. Coker was this: that, if the contract were otherwise valid, it would not be held to be invalid simply because the restraint might continue beyond the life of the party for whose benefit it was accorded, if, for any reason, it might be beneficial to him to have it so continue. In Archer v. Marsh, 6 Adol. & E. 959, which was decided after, though heard before, the decision of the Court of Exchequer Chamber in Hitchcock v. Coker, Lord DENMaNn, commenting on the reversal of the judgment of the Court of King’s Bench, said that the judgment was reversed ‘‘on the principle that the restraint of trade in that case could not be really injurious to the public, and that the. parties must act on their view of what restraint may be adequate to the protection of the one, and what advantage a fair compensation for the sacrifice made by the other.’’ This, if we understand it correctly, is equivalent to saying that, if the restraint be otherwise not unreasonable, the courts will leave the parties to make their own terms in regard to its duration; and this is consonant with the uniform course of decision both before and since Hitchcock v. Coker. Thus, the party restrained in Davis v. Mason, 5 Term. R. 118, was a surgeon, in Hayward v. Young, 2 Chit. 407, a surgeon and man-midwife, in Mallan v. May, 11 Mees. & W. 652, a surgeon and apothecary, in Bunn v. Guy, 4 East, 190, an attorney, in Butler v. Burleson, 16 Vt. 176, a physician and sur- geon, and in McClurg’s Appeal, 58 Pa. St. 51, a physician. In all these cases the contracts were sustained, though unlimited as 30 COMBINATIONS AND RESTRAINT OF TRADE to time, simply because the area of restriction was not unreason- able. See, also, Gilman v. Dwight, 13 Gray, 356, Atkyns v. Kin- nier, 4 Exch. 776, Hoyt v. Holly, 39 Conn. 326. In Butler v. Burleson, supra, the court say: ‘‘Dr. Burleson can be as useful to the public in any other town as at Berkshire, and the lives and health of persons in other villages are as important as they are there.’’ In Dwight v. Hamilton, 113 Mass. 175, it was decided that a contract by a physician for the sale of his ‘‘practice and good-will’’ in a particular town is valid, and carries with it an implied covenant on his part not to resume practice in the town; and that, if he attempts to do so, the Court will restrain him by injunction. In Whittaker v. Howe, 3 Beav. 383, an agreement by a solicitor not to practice as solicitor in Great Britain for twenty years without the consent of the plaintiff, to whom he had sold his business on those terms, was held to be valid, and an injunction was granted to prevent a breach. There the restraint was not unlimited, but, plainly, it might have lasted for years after the plaintiff’s death. The contract is necessarily subject to a natural limitation, since it must terminate with the life of the party restrained; and, abstractly, there is no presumption that he will outlive the other party. It probably seldom happens that it makes any real difference whether the restraint is limited to the life of the party who profits by it, or is left without limitation, since the physician, lawyer, or trader who sells out his business in one place, to engage in it elsewhere, is not likely, after a few years, if he has any ability, to want to break up and return to his old home and then start anew. The tree that is transplanted and retransplanted after coming into fruit is not often the better for it. And it may be questioned whether the consideration is not of itself reason enough for allowing the parties to suit themselves in the matter. In Hastings v. Whitley, 2 Exch. 611, the defendant had given his bond not to carry on the business of surgeon or apothecary at a particular place. In suit thereon by the ex- ecutors of the obligee, the bond was held to be good. The report states that one of the points for the defendant was that the bond was illegal and void if it should be construed to extend to the defendant’s practicing his profession after the obligee’s THE COMMON LAW 31 death. The Court held that the obligation was co-extensive with the life of the obligor: and Parks, B., in giving judgment, said: ‘‘It was held in Hitchcock v. Coker that there was nothing illegal in the restriction being indefinite as to duration, the same being in other respects reasonable.’’ The counsel for the defendant suggested, in the course of the hearing, the distinction which is here attempted, and the same judge re- plied: ‘‘What is the difference? The good-will of an apothe- cary is often disposed of.’’ And the Court took no further notice of it, though the restraint extended to the business of the defendant as a surgeon as well as to his business as an apothecary, if it can be supposed that Baron Parke meant to say that the calling of an apothecary was a mere trade. The case, among the cases cited for the defendant, which comes nearest to an authority for him is Mandeville v. Harman, 7 Atl. Rep. 37. In that case the defendant had covenanted not to engage in the practice of medicine or surgery in the city of Newark at any time afterwards. The suit was by the cov- enantee, in equity, for an injunction. The court refused the injunction on the ground that whether a restraint so unlimited as to time was reasonable or not had never been decided in that state. The Court did not decide that such a restraint was invalid, though its intimations were adverse to it. It referred to Keeler v. Taylor, 53 Pa. St. 467, as holding that such con- tracts, if not limited to a reasonable time, as well as confined to a reasonable space, were void at law. We have not been able to find any such doctrine in Keeler v. Taylor. The injunction was refused there because the terms of the contract were hard and complex; the injunction being, in the opinion of the Court, of grace, not of right. In McClurg’s Appeal, 58 Pa, St. 51, which was in all points almost identical with the case at bar, the same Court which had previously decided Keeler v. Taylor granted an injunction, with very strong remarks in favor of the jurisdiction. See per SHarswoop, J., 55. Mandeville v. Harman was a hard case for the defendant. Our conclusion is that it is not a sufficient reason for refusing the injunction that the contract is unlimited as to time. In this state the common-law and chancery jurisdiction are vested in the same tribunal, and it is the practice of the Court, sitting 32 COMBINATIONS AND RESTRAINT OF TRADE in equity, to decide questions of law, as well as of equity, for itself, and to grant or refuse relief according as it decides them. The defendant contends that it is not a breach of the contract for him to visit his old patients in Pawtucket when summoned by them from Providence. We think it is clearly a breach, his contract being not to engage at any time in the practice of medicine or surgery in the city of Pawtucket. It is true that the complainant may not get the patients if the defendant does not visit them, but it was the chance of getting them that would result from the defendant’s not practicing in Pawtucket which the complainant purchased, and this chance we think he is entitled to have secured to him. Demurrer overruled.® 9—In Mandeville v. Harman, 42 N. J. Eq. 185, at p. 193, Van Fleet, V. C., said: ‘¢Professional skill, experience, and reputation are things which can- not be bought or sold. They con- stitute part of the individuality of the particular person, and die with him. There can be no doubt, I think, that if the complainant was the most distinguished physician of the city of Newark, and had by far the most lucrative practice in that city, and he should be so unfortunate as to die next month or next year, it would be impossible for his personal rep- resentative to sell his good-will or practice, as a thing of property dis- tinct from the office which he had occupied prior to his death, for any price; and I think it is equally ob- vious that, if it were sold in connec- tion with his office, the only possible value which could be ascribed to it would be the slight possibility that some of the persons who had been his patients might, when they needed the services of a physician, go or send there for the next occupant of the office. The practice of a phy- sician is a thing so purely personal, depending so absolutely on the con- fidence reposed in his personal skill and ability, that when he ceases to exist it necessarily ceases also, and after his death can have neither an intrinsic nor a market value. And, if the complainant should make sale of his practice in his life-time, it is manifest all the purchaser could pos- sibly get would be immunity from competition with him, and perhaps his implied approval that the pur- chaser was fit to be his successor; but it would be impossible for him to transfer his professional skill and ability to his successor, or to induce anybody to believe that he had. ‘¢These considerations make it ap- parent, I think, that the reason which induced the court of exchequer cham- ber to hold a like restraint valid in Hitchcock v. Coker does not exist in this case. There a right or interest existed, which, according to the law of Great Britain, would, on the death of its possessor, pass to his personal representative. No such right or in- terest exists here. At least, its existence is as yet unrecognized in this state by law.’ THE COMMON LAW 33 NORDENFELT y. MAXIM NORDENFELT GUNS & AMMUNITION CO. (House of Lords, 1894. [1894] App. Cas. 535.) LORD HERSCHELL, L. C.:—!°My Lords, the question raised by this appeal is, whether a covenant entered into be- tween the parties can be enforced against the appellant, or whether it is void as being in restraint of trade. The covenant in question was contained in an agreement of the 12th of September, 1888, and was in these terms: “‘11The said Thorsten Nordenfelt shall not, during the term of 25 years from the date of the incorporation of the company if the company shall so long continue to carry on business, engage except on behalf of the company either directly or indirectly in the trade or business of a manufacturer of guns, gun-mountings, or carriages, gunpowder, explosives, or ammunition, or in any business competing or liable to compete in any way with that for the time being carried on by the company; provided, that such restriction shall not apply to explosives other than gunpowder or to subaqueous or submarine boats or torpedoes or castings or forgings of steel or iron or alloys of iron or of copper. Provided also that the said Thors- ten Nordenfelt shall not be released from this restriction by the company ceasing to carry on business merely for the pur- pose of reconstitution or with a view to the transfer of the business thereof to another company so long as such other company taking a transfer thereof shall continue to carry on the same.’’ The agreement also provided that the appellant should, for seven years from the incorporation of the re- spondent company, retain the share qualification of a director, and should act as managing director of the company, at a remuneration of £2,000 a year, together with a commission upon the net profit of the company. Before directing attention to the particular terms of the covenant, and to the considerations to which it gives rise, it is necessary to advert to the position of the parties at the time the agreement was entered into. 10—The concurring opinions of 11—114 Ch. Div. 351, 363. Lords Watson, Ashbourne, Macnagh- ten and Morris, are omitted. Kales R. of T. Vol. I—3 34 COMBINATIONS AND RESTRAINT OF TRADE The appellant had, prior to March, 1886, obtained patents for improvements in quick-firing guns, and carried on, amongst other things, the business of the manufacture of such guns and of ammunition. In that month he procured the registration of a limited liability company, which was to take over his business, with the business assets and liabilities. On the 5th of March, 1886, an agreement was made between the appellant and the Nordenfelt Guns and Ammunition Company by which the company was to purchase the good-will of the appellant’s business, and all the stock, plant, and patents con- nected therewith, he covenanting to act as managing director for a period of five years, and so long as the Nordenfelt com- pany should continue to carry on business ‘‘not to engage, except on behalf of such company, either directly or indirectly, in the trade or business of a manufacturer of guns or ammu- nition, or in any business competing or liable to compete in any way with that carried on by such company.’’ The agreement for purchase was duly carried into effect, and the price paid to the appellant, namely, £237,000 in cash, and £50,000 in paid-up shares of the company. In July, 1888, negotiations were entered into for the amalgamation of the Nordenfelt Company and the Maxim Gun Company, and for the transfer of their business and assets to a new company, to be called the Maxim-Nordenfelt Guns and Ammunition Com- pany. By an agreement for amalgamation of the two companies, dated the 3rd of July, 1888, and made between the Maxim Company, the Nordenfelt Company, and P. Thaine, on behalf of the new company, the Nordenfelt Company agreed that they would procure the appellant to enter into the agreement which was afterwards embodied in the instrument of the 12th of September, 1888. The respondents were incorporated on the 17th of July, 1888, and on the 8th of August the agreement of the 3rd of July was adopted by the company. It is to be noted that at the time when this agreement was entered into, to which the Nor- denfelt Company was a party, the appellant was managing director of that company, and that, in the memorandum of association of the amalgamated company which was signed by the appellant, the objects of the company were stated to be, THE COMMON LAW 35 inter alia, not only the adoption of the agreement of the 3rd of July, but also ‘‘to acquire, undertake, and carry on as succes- sors to the Maxim Gun Company and the Nordenfelt Guns and Ammunition Company, the good-will of the trade and busi- nesses heretofore carried on by such companies and each of them, and the property and rights belonging to or held in connection therewith respectively. ’’ This is of importance, because the appellant in a forcible argument pointed out that the judgment of the Court of Appeal was largely founded on the fact that the covenant in question was entered into in connection with the sale of the . good-will of the appellant’s business, and was designed for the protection of the good-will so sold, and he contended that this was an error, inasmuch as there was no sale by him of the good-will on that occasion, he having already parted with it to the Nordenfelt Company, the later sale being by that company and not by him. I think it is impossible to accede to this contention. Upon the sale by the appellant to the Nordenfelt Company, the good- will was conveyed to them, and was protected by a covenant in some respects larger than the one he entered into in September, 1888, but it was limited to the time during which that company should carry on business; it therefore necessarily ceased when the Nordenfelt Company and the Maxim Company were ab- sorbed by the new company. But in the agreement for the amalgamation (to the making of which, as I have said, the appellant was a party) the covenant which the Nordenfelt Company undertook to obtain from the appellant was to be in addition to the transfer by the Nordenfelt Company of the full benefit of any obligations which Mr. Nordenfelt was then under to that company, and by the terms of the memorandum of association of the new company the object was, as I have shewn, stated to the world to be the acquisition of the good- will of the Nordenfelt Company. My Lords, in view of these facts, I think the case must be treated on precisely the same footing as if the obligations of the covenant under consideration had been undertaken in con- nection with the direct transfer to the respondents of the good-will of the appellant’s business and with the object of protecting it, 36 COMBINATIONS AND RESTRAINT OF TRADE The appellant mainly relied upon the fact that the covenant was general, that is to say, unlimited in respect of area, and argued that it was therefore void. I think it was long regarded as established, as part of the common law of England, that such a general covenant could not be supported. In early times all agreements in restraint of trade, whether general or restricted to a particular area, would probably have been held bad; but a distinction came to be taken between covenants in general restraint of trade and those where the restraint was only partial. The distinction was recognised and given effect to by Lord Macclesfield in his celebrated judg- ment in Mitchel v. Reynolds [1 P. Wms. 181]. That was a case of particular restraint, and the covenant was held good, the Chief Justice saying, ‘‘that wherever a sufficient considera- tion appears to make it a proper and a useful contract, and such as cannot be set aside without injury to a fair contractor, it ought to be maintained; but with this constant diversity, namely, where the restraint is general, not to exercise a trade throughout the kingdom, and where it is limited to a particular place, for the former of these must be void, being of no benefit to either party, and only oppressive, as shall be shewn by-and- by.’’ And at a later part of the judgment, after dividing voluntary restraints by agreement into those which are, first, general, or secondly, particular as to places or persons, he formulates with regard to the former the following proposition : “‘General restraints are all void, whether by bond, covenant, or promise, &., with or without consideration, and whether it be of the party’s own trade or not.’’ In the case of Master, &e., of Gunmakers v. Fell [Willes, at p. 388], Wiis, C. J., said the general rule was ‘‘that all restraints of trade (which the law so much favours,) if nothing more appear, are bad. 5 But to this general rule there are some exceptions, as, first, if the restraint be only particular in respect to the time or place, and there be a good consideration given to the person restrained.’’ As I read the authorities, until the cases to which I shall call attention presently, the distinction between general and par- ticular restraints was always maintained, and the latter alone were regarded as exceptions from the general rule, that agree- ments in restraint of trade were bad. THE COMMON LAW 37 In the case of Horner v. Graves [7 Bing. 735], Trnpat, C. J., said: ‘‘The law upon this subject (i. e. restraint of trade) has been laid down with so much authority and precision by Par- Kur, C. J., in giving the judgment of the Court of B. R. in the case of Mitchel v. Reynolds [1 P. Wms. 181], which has been the leading case on the subject from that time to the present, that little more remains than to apply the principle of that case to the present. Now, the rule laid down by the Court in that case is, ‘that voluntary restraints, by agreements between the parties, if they amount to a general restraint of trading by either party, are void, whether with or without consideration ; but particular restraints of trading, if made upon a good and adequate consideration, so as to be a proper and useful con- tract,’ that is, ‘so as it is a reasonable restraint only,’ are good.”’ After stating that the case then before the Court did not ‘fall within the first class of contracts as it certainly did not amount to a general restraint,’’ he proceeded to consider whether the particular covenant was a good one. It is true that in a later part of his judgment the following passage occurs: ‘‘In the case above referred to, Parker, C. J., says, ‘a restraint to carry on a trade throughout the kingdom must be void; a restraint to carry it on within a particular place is good’; which are rather instances and examples, than limits of the application of the rule, which can only be at last, what is a reasonable restraint with reference to the particular case.’? But I cannot, in view of the passage which I have quoted from the earlier part of his judgment, understand this as an indication of opinion on the part of TinpaL, C. J., that there was no distinction in point of law between general and particular restraints; that in the case of both alike the only question is whether in the particular case the restraint is reasonable. If so, it could hardly be said that the law had been laid down with precision by Parxsr, C. J., nor could such contracts be accurately divided into two classes, if every par- ticular case, whether it fell within the one class or the other, was, in point of law, to be dealt with in precisely the same manner. I am confirmed in this view of TrnpaL, C. J.’s opin- ion by his judgment in the subsequent case of Hinde v. Gray [1 Man. & G. 195]. In that case the defendant had entered 38 COMBINATIONS AND RESTRAINT OF TRADE into a covenant with the plaintiffs, to whom he had demised a brewery in Sheffield, that he would not, during the continuance of the demise, carry on the trade of brewer or agent for the sale of beer in Sheffield or elsewhere; but would, so far as the same should not interfere with his private avocations, give all the advice and information in his power to the plaintiffs with regard to the management and carrying on of the brewery. The breach alleged was that the defendant had solicited and obtained orders for ale not purchased of the plaintiffs nor brewed by them, and that large quantities of ale had there- under been delivered and sold. There was a demurrer to this breach; judgment was given for the defendant, Tipu, C. J., saying that it was ‘‘assigned on a covenant which, according to the ease of Ward v. Byrne [5 M. & W. 548], was void in law.’’ This is, to my mind, only intelligible if Ward v. Byrne [5 M. & W. 548], which was the case of a bond conditioned not to follow or be employed in the business of a coal merchant for nine months, was regarded as establishing, as a matter of law, that a covenant in general restraint, though limited in point of time, was void; unless it were so, I do not see how it could be regarded as determining that the covenant in question in Hinde v. Gray [1 Man. & G. 195] was void; or, indeed, as an authority in the case of any covenant not practically identical in all respects. It is clear that there are material distinctions between the circumstances of the two cases; and, if the only question was whether the covenant was reasonable in view of the particular circumstances, considerations might well be urged (as indeed they were by the learned counsel for the plaintiffs) why the case then before the Court should not be regarded as governed by Ward v. Byrne [5 M. & W. 548]; but Tinpau, C. J., did not proceed to inquire whether, under the particular cireumstances appearing on the record in Hinde v. Gray [1 Man. & G. 195], the covenant was a reasonable one, or was wider than was requisite for the protection of the plain- tiffs, but treated the case as concluded, as matter of law, by' authority. I need not further refer to Ward v. Byrne [5 M. & W. 548], except to say, that although the learned judges in that case did express an opinion that the covenant exceeded what was neces- sary for the protection of the covenantee, they seem to me to THE COMMON LAW 39 recognise that covenants for a partial restraint, and these only, are exceptions from a general rule invalidating agreements in restraint of trade. In that case, the attempt was made, un- successfully, to maintain that a covenant otherwise general might be regarded as a particular restraint, if limited in point of time: a contention for which some colour was afforded by the language used in earlier cases. The views which I have expressed appear to me to have been entertained by that very learned lawyer Mr. John William Smith, as shewn by his notes to Mitchel v. Reynolds [1 P. Wms. 181]. He Jays down the law thus: ‘‘In order, therefore, that a con- tract in restraint of trade may be valid at law, the restraint, must be, first, partial, secondly, upon an adequate, or, as the, rule now seems to be, not on a mere colourable consideration, and there is a third requisite, namely, that it should be reason- able.’? This exposition of the law has, further, the very weighty sanction of Wiutes and Keatine, JJ., who, after the death of Mr. J. W. Smith, edited the notes to his collection of leading cases. In the year after the decision of Hinde v. Gray [1 Man. & G. 195] the case of Whittaker v. Howe [3 Beav. 383, 394] came before Lord Langdale. Howe had covenanted not to practice as a solicitor in any part of Great Britain for twenty years, having sold his business to the plaintiff. In spite of this he commenced against practising in London, where he had pre- viously carried on business. On an application for an inter- locutory injunction, it was contended that the covenant was void. The Master of the Rolls refused to accede to this conten- tion and granted the injunction. It was, of course, clear that a covenant not to practise in London, as he was in fact doing, would have been good, and it was natural that his conduct, should not find favour at the hands of the Court. But the question was whether so extensive a covenant as that entered into could be supported. The case of Mitchel v. Reynolds [1, P. Wms. 181] was cited in argument, but neither Ward v. Byrne [5 M. & W. 548] nor Hinde v. Gray [1 Man. & G. 195] appear to have been brought to the notice of the Court. Lord Langdale expressed himself thus (Whittaker v. Howe [3 Beav. 383, 394]): ‘‘Agreeing with the Court of Common Pleas, that in such cases ‘no certain precise boundary can be laid down 40 COMBINATIONS AND RESTRAINT OF TRADE within which the restraint would be reasonable, and beyond which excessive,’ having regard to the nature of the profession to the limitation of time, and to the decision that a distance of 150 miles does not describe an unreasonable boundary, I must say, as Lord Kenyon said in Davis v. Mason [5 T. R. 118], ‘I do not see that the limits are necessarily unreasonable, nor do I know how to draw the line.’ ”’ The learned judge distinctly indicated that he had not ar- rived at an irrevocable conclusion, for he added: ‘‘In the progress of the case it may become necessary to consider fur- ther the points which have been raised; but at present I am of opinion that the right claimed by Mr. Howe to act in violation of the contract for which he has received consideration, is, to say the least, so far doubtful, that he ought not to be permitted to take the law into his own hands.’’ It is not necessary to consider whether the decision can be supported, though it was regarded by Wities and Kzatine, JJ., as questionable, and it is certainly difficult to see why, if a covenant not to practise as an attorney in Great Britain is good, a covenant such as was in controversy in Hinde v. Gray [1 Man. & G. 195], should have been pronounced bad in point of law on demurrer. But I can- not accept it as a weighty authority on the question whether it was regarded as a rule of the common law that a general cove- nant in restraint of trade was void, in view of the authorities I have already referred to. There have been differing expressions of opinion on the sub- ject by distinguished equity judges in more recent times. I will only allude to two of these, in which the existence of the rule I have been considering has been questioned. In the case of the Leather Cloth Company v. Lorsant [Law Rep. 9 Eq. 345], James, V. C., said: ‘‘I do not read the cases as having laid down that unrebuttable presumption which was insisted upon with so much power by Mr. Cohen. All the cases, when they come to be examined, seem to establish this principle, that all restraints upon trade are bad as being in violation of public policy, unless they are natural, and not unreasonable for the protection of the parties in dealing legally with some subject- matter of contract.’’ And again, in Rousillon v. Rousillon [14 Ch. D. 351], Fry, J., thus expressed himself: ‘‘I have therefore, upon the authori- THE COMMON LAW 41 ties, to choose between two sets of cases, those which recognise and those which refuse to recognise this supposed rule; and, for the reasons which I have mentioned, I have no hesitation in saying that I adhere to those authorities which refuse to recog- nise this rule, and I consider that the cases in which an un- limited prohibition has been spoken of as void relate only to circumstances in which such a prohibition has been unreason- able.”’ I do not intend to throw doubt on what was decided in these cases, for reasons which will appear hereafter, but I respectfully differ from the view which appears to be indicated that there was not at any time a rule of the common law distinguishing particular from general restraints, and treating the former. only as exceptions from the general principle that contracts in restraint of trade are invalid. The discussion on which I have been engaged is, it must be admitted, somewhat academic. For, in considering the appli- cation of the rule, and the limitations, if any, to be placed on it, I think that regard must be had to the changed conditions of commerce and of the means of communication which have been developed in recent years. To disregard these would be to miss the substance of the rule in a blind adherence to its letter. Neweastle.upon-Tyne is for all practical purposes as near to London to-day as towns which are now regarded as suburbs of the metropolis were a century ago. An order can be sent to Newcastle more quickly than it could then have been transmitted from one end of London to the other, and goods can be con- veyed between the two cities in a few hours and at a compara- tively small cost. Competition has assumed altogether different proportions in these altered circumstances, and that which would have been once merely a burden on the covenantor may now be essential if there is to be reasonable protection to the covenantee. ‘When Lord Macclesfield emphasized the distinction between a general restraint not to exercise a trade throughout the kingdom and one which was limited to a particular place, the reason which he gave for the distinction was that ‘‘the former of these must be void, being of no benefit to either party, and only oppressive, as shall be shewn by-and-by.’’ He returns to the subject later on, when giving the reasons why all voluntary restraints are regarded with disfavour by the law, in these terms: Kales R. of T. Vol. I—4 42 COMBINATIONS AND RESTRAINT OF TRADE “Thirdly, because in a great many instances they can be of no use to the obligee; which holds in all cases of general restraint throughout England; for what does it signify to a tradesman in London what another does at Newcastle? And surely it would be unreasonable to fix a certain loss on one side, without any benefit to the other. The Roman Law would not enforce such contracts by an action. (See Puffendorf, lib. 5, ec. 2, §3, 21 H. 7, 20).’’ There are other passages in the judgment where this view is enforced. There is no doubt that, with regard to some professions and commercial occupations, it is as true to-day as it was formerly, that it is hardly conceivable that it should be necessary, in order to secure reasonable protection to a covenantee, that the covenantor should preclude himself from carrying on such pro- fession or occupation anywhere in England. But it cannot be doubted that in other cases the altered circumstances to which I have alluded have rendered it essential, if the requisite pro- tection is to be obtained, that the same territorial limitations should not be insisted upon which would in former days have been only reasonable. I think, then, that the same reasons which led to the adoption of the rule require that it should be frankly recognised that it cannot be rigidly adhered to in all cases. My Lords, it appears to me that a study of Lord Maccles- field’s judgment will shew that if the conditions which prevail at the present day had existed in his time he would not have laid down a hard-and-fast distinction between general and par- ticular restraints, for the reasons by which he justified that dis- tinction would have been unfounded in point of fact. Whether the cases in which a general covenant can now be supported are to be regarded as exceptions from the rule which I think was long recognised as established, or whether the rule is itself to be treated as inapplicable to the altered conditions which now prevail, is probably a matter of words rather than of substance. The latter is perhaps the sounder view. When once it is admitted that whether the covenant be general or particular the question of its validity is alike determined by the considera- tion whether it exceeds what is necessary for the protection of the covenantee, the distinction between general and particular restraints ceases to be a distinction in point of law. | I think that a covenant entered into in connection with the THE COMMON LAW 43 sale of the good-will of a business must be valid where the full benefit of the purchase cannot be otherwise secured to the pur- chaser. It has been recognised in more than one case that it is to the advantage of the public that there should be free scope for the sale of the good-will of a business or calling. These were cases of partial restraint. But it seems to me that if there be occupations where a sale of the good-will would be greatly im- peded, if not prevented, unless a general covenant could be obtained by the purchaser, there are no grounds of public policy which countervail the disadvantage which would arise if the good-will were in such cases rendered unsaleable. I would adopt in these cases the test which in a case of partial restraint was applied by the Court of Common Pleas in Horner v. Graves [7 Bing. 735, 743], in considering whether the agree- ment was reasonable. TinpaL, C. J., said: ‘‘We do not see how a better test can be applied to the question, whether reasonable or not, than by considering whether the restraint is such only as to afford a fair protection to the interests of the party in favour of whom it is given, and not so large as to interfere with the interests of the public. Whatever restraint is larger than the necessary protection of the party can be of no benefit to either; it can only be oppressive, and, if oppressive, it is, in the eye of the law, unreasonable.’’ The tendency in later cases has certainly been to allow a restriction in point of space which formerly would have been thought unreasonable, manifestly be- cause of the improved means of communication. A radius of 150 or even 200 miles has not been held too much in some cases. For the same reason I think a restriction applying to the entire kingdom may in other cases be requisite and justifiable. I must, however, guard myself against being supposed to lay down that if this can be shewn the covenant will in all cases be held to be valid. It may be, as pointed out by Lord Bowen, that in particular circumstances the covenant might neverthe- less be held void on the ground that it was injurious to the public interest. My Lords, I turn now to the application of the law to the facts of the present case. It seems to be impossible to doubt that it is shewn that the covenant is not wider than is necessary for the protection of the respondents. The facts speak for them- selves. If the covenant embraced anything less than the whole 44 COMBINATIONS AND RESTRAINT OF TRADE of the United Kingdom it is obvious that it would be nugatory. The only customers of the respondents must be found amongst the governments of this and other countries, and it would not practically be material to them whether the business were car- ried on in one part of the United Kingdom or another. So far I have dealt only with the covenant in relation to the United Kingdom. The appellant appeared willing to concede that. it might be good if limited to the United Kingdom; but he contended that it ought not to be world-wide in its operation. I think that in laying down the rule that a covenant in restraint of trade unlimited in regard to space was bad, the courts had reference only to this country. They would, in my opinion, in the days when the rule was adopted, have scouted the notion that if for the protection of the vendees of a business in this country it wére necessary to obtain a restrictive covenant em- bracing foreign countries, that covenant would be bad. They certainly would not have regarded it as against public policy to prevent the person whose business had been purchased and was being carried on here from setting up or assisting rival businesses in other countries; and for my own part I see noth- ing injurious to the public interests of this country in upholding such a covenant. When the nature of the business and the limited number of customers is considered, I do not think the covenant can be held to exceed what is necessary for the protection of the cove- nantees. I move your Lordships, therefore, that the judgment appealed from be affirmed, and the appeal dismissed.12 12—See to the same effect Rousil- lon v. Rousillon, 14 Ch. Div. 351; Badische, etc., v. Schott, L. R. [1892] 3 Ch. 447; Diamond Match Co. v. Roeber, 106 N. Y. 473, post, p. 55. In accordance with the principal case, upon the sale of a world-wide business a restriction which is un- limited as to time and territory should, it would seem, be valid: National Enameling & Stamping Co. v. Haberman, 120 Fed. 415 (contract unlimited in time and re- Striction operative throughout the United States—held legal). But Davies v. Davies, L. R. 36 Ch. Div. 359 (Ct. of Appeal, 1887), seems contra. THE COMMON LAW 45 BISHOP v. PALMER (Supreme Judicial Court of Mass, 1888. 146 Mass. 469.) Appeal from Superior Court, Suffolk county. Action of contract by Robert Bishop against Elisha L. Palmer et al. The plaintiff’s declaration was as follows: ‘‘And the plaintiff says that heretofore, to-wit, on March 16, 1886, the defendants made with the plaintiff the written contract of which a copy is hereto annexed; that by the terms of said contract, and for the considerations therein alleged, the defendants, among other things, promised to pay to the plaintiff the sum of $5,000 in ten equal monthly installments, on the first day of each month, thereafter, until all were paid; that the plaintiff has done and performed all things necessary, by the terms of said contract, to entitle him to receive the sum of $5,000, but that the defendants have not performed their said promise, and have failed and neglected to pay to the plaintiff the respective sums of $500 due on the first days of the months of July, August, September, October, and November, as aforesaid; wherefore the plaintiff says that the defendants owe him the sum of $2,500.’? The second count was for $2,500 upon an account annexed, the cause of action being the same as in the first count. To the declaration the defendants filed a demurrer. The con- tract was, in substance, as follows: ‘‘This agreement, made this sixteenth day of March, A. D. 1886, by and between Robert Bishop of Boston, party of the first part, and Elisha L. Palmer, Frank L. Palmer, Edward A. Palmer, and George S. Palmer, copartners, . . . parties of the second part, and the Massa- soit Manufacturmg Company, a corporation, . . . party of the third part, witnesseth, that, whereas, said party of the first part is engaged in the business of manufacturing and selling bed-quilts and comfortables, together with all his plant, machin- ery, and stocks, manufactured and unmanufactured, now on hand, and of wholly giving up and going out of said business for the next five years, and is also desirous of selling that part of his cotton-waste business which is done or transacted in whole or in part in the city of Fall River, . . . and with any and all of the mills doing business in said city; now, therefore, in consideration of the premises, and of the sum of $5,000, to be paid by the parties of the second and third parts, in the manner 46 COMBINATIONS AND RESTRAINT OF TRADE and times hereafter specified, the party of the first part hereby sells, assigns, transfers, and delivers unto the parties of the second part his entire business, plant, and enterprise as a manu- facturer of, and dealer in bed-quilts and comfortables, together with the good-will of said business, and all and singular, the machinery, etc., used by him in said business, and constituting said manufacturer’s plant, as follows, to-wit: [Then follows an itemized list of the machinery, ete., to be transferred and pro- visions for the delivery of the same.] And, for the considera- tion named, the party of the first part hereby sells, assigns, transfers, and conveys to the party of the third part all that portion of his waste business which is transacted or done in the city of Fall River . . . with any and all corporations doing business in said city; and he hereby assigns and transfers to said party of the third part all his existing contracts, whether verbal or written, with any of such corporations, or with firms or persons, and all rights thereunder, including rights of re- newal, and also the good-will of his said business and trade with the corporations in said city of Fall River. This clause does not have any reference to buying and selling from individuals, it being the intention of said party of the first part absolutely and completely to sell and transfer to said party of the third part his entire cotton-waste business, trade, and dealings, and the exclusive right to deal and do a cotton-waste business with, and purchase cotton waste of, any and all of said corporations, for the period of five years from, the date hereof. And said party of the first part hereby, for himself, his executors, and assigns, covenants and agrees w:th said parties of the second and third parts, and each of them, and their executors, adminis- trators, successors, and assigns, respectively, that, for and dur- ing the period of five years from the date hereof, he will not, either directly or indirectly, in his own name, or in the name of any other person or persons, continue in, carry on, or engage in the business of manufacturing, or dealing in, bed-quilts or com- fortables, or of any business of which that may form any part. And he further covenants and agrees, as aforesaid, that, for and during said period, he will not enter into the cotton-waste busi- ness in said city of Fall River with any corporation, firm, or person located and doing business in said city; and especially that he will not, directly or indirectly, in his own name, or in THE COMMON LAW 47 the name of any other person, buy, or influence or procure other persons to buy, any cotton waste from said mills, in said eity of Fall River, or belonging to or controlled by any corporation located in said city, and that he will not, either directly or indirectly, make any bid therefor, or influence any other person so to do, in connection with the waste business in said city, or the purchase of waste from such parties.’’ The party then fur- ther agreed not to buy, or offer to buy, any waste produced by certain specified corporations in Fall River; and the contract then provided that the payment of the. consideration should be in installments payable as set forth in plaintiff’s declaration. The Superior Court sustained defendants’ demurrer, and the plaintiff appealed to the Supreme Judicial Court. C. ALLEN, J: The defendants’ promise which is declared on was made in consideration of the sale and delivery of the business, plant, property, and contracts of the plaintiff, and the faithful performance of the covenants and agreements contained in the written instrument signed by the parties. The parties made no apportionment or separate valuation of the different elements of the consideration. The business, plant, property, contracts, and covenants were all combined as forming one en- tire consideration. There is no way of ascertaining what valua- tion was put by the parties upon either portion of it. There is no suggestion that there was any such separate valuation, and any estimate which might now be put upon any item would not be the estimate of the parties. It is contended by the defendants that each one of the three particular covenants and agreements into which the plaintiff entered is illegal and void, as being in restraint of trade. It is sufficient for us to say that the first of them is clearly so, it being a general agreement, without any limitation of space, that, for and during the period of five years, he will not, either directly or indirectly, continue in, carry on, or engage in, the business of manufacturing or dealing in bed-quilts or comfortables, or of any business of which that may form any part. Thus much is virtually conceded by the plaintiff, and so are the authorities. Taylor v. Blanchard, 13 Allen 370; Dean v. Emerson, 102 Mass. 480; Machine Co. v. Morse, 103 Mass. 73; Alger v. Thacher, 19 Pick. 51; Navigation Co. v. Winsor, 20 Wall. 64; Davies v. 48 COMBINATIONS AND RESTRAINT OF TRADE Davies, 36 Ch. Div. 359; 2 Kent, Comm. 467, note; Mete. Cont. 232. Two principal grounds on which such contracts are held to be void are that they tend to deprive the public of the services of men in the employments and capacities in which they may be most useful, and that they expose the public to the evils of monopoly. Alger v. Thacher, ubi supra. The question then arises whether an action can be supported upon the promise of the defendants founded upon such a con- sideration as that which has been described. As a general rule, where a promise is made for one entire consideration a part of which is fraudulent, immoral, or unlawful, and there has been no apportionment made, or means of apportionment furnished, by the parties themselves, it is well settled that no action will lie upon the promise. If the bad part of the consideration is not severable from the good, the whole promise fails. Robinson v. Green, 3 Mete. 161; Rand v. Mather, 11 Cush. 1; Woodruff v. Wentworth, 183 Mass. 309, 314; Bliss v. Negus, 8 Mass. 51; Clark v. Ricker, 14 N. H. 44; Woodruff v. Hinman, 11 Vt. 592; Pickering v. Railway Co., L. R. 3 C. P. 250; Harrington v. Dock Co., 3 Q. B. Div. 549; 2 Chit. Cont. (11th Amer. Ed.) 972; Leake, Cont. 779, 780; Pol. Cont. 321; Mete. Cont. 247. It is urged that this rule does not apply to a stipulation of this character which violates no penal statute, which contains nothing malum in se, and which is simply a promise enforceable at law. But a contract in restraint of trade is held to be void because it tends to the prejudice of the public. It is therefore deemed by the law to be not merely an insufficient or invalid consideration, but a vicious one. Being so, it rests on the same ground as if such contracts were forbidden by positive statutes. They are forbidden by the common law, and are held to be illegal. 2 Kent, Comm. 466; Mete. Cont. 221; 2 Chit. Cont. 974; White v. Buss, 3 Cush. 449, 450; Hynds v. Hays, 25 Ind. 31, 36. It is contended that the defendants, by being unable to en- force the stipulation in question, only lose what they knew, or were bound to know, was legally null; that they have all that they supposed they were getting, namely, a promise which might be kept, though incapable of legal enforcement; and that if they were content to accept such promise, and if there is another good and sufficient consideration, they may be held upon their THE COMMON LAW 49 promise. But this agreement cannot properly extend to a case where a part of an entire and inseparable consideration is posi- tively vicious, however it might be where it was simply invalid, as in Parish v. Stone, 14 Pick. 198. The law visits a contract founded on such a consideration with a positive condemnation, which it makes effectual by refusing to support it, in whole or in part, where the consideration cannot be severed. The fact that the plaintiff had not failed to perform his part of the contract, does not enable him to maintain his action. An illegal consideration may be actual, and substantial, and valu- able, but it is not, in law, sufficient. The plaintiff further suggests that, if the defendants were to sue him on this contract, they could clearly, so far as the ques: tion of legality is concerned, maintain an action upon all its parts, except, possibly, the single covenant in question. Mallan v. May, 11 Mees. & W. 653; Green v. Price, 13 Mees. & W. 695, 16 Mees. & W. 346. This may be so. If they pay to the plain- tiff the whole sum called for by the terms of the contract, it may well be that they can call on him to perform all of his agreement, except such as are unlawful, In such case, they would merely waive or forego a part of what they were to re- ceive, and recover or enforce the rest. It does not, however, follow from this that they can be compelled to pay the sum promised by them, when a part of the consideration of such promise was illegal. They are at liberty to repudiate the con- tract on this ground, and, having done so, the present action founded on the contract cannot be maintained; and it is not now to be determined what other liability the defendants may be under to the plaintiff, by reason of what they may have re- ceived under the contract. Judgment affirmed.}8 13—A fortiori, a restriction lack- ing in limitation as to time or terri- tory, would usually be held illegal, as in Alger v. Thacher, 19 Pick. (Mass.) 51; Berlin Machine Works v. Perry, 71 Wis. 495; Thomas v. Adm’r of Miles, 3 Oh. St. 274; Wiley v. Baumgardner, 97 Ind. 66 (five year limitation, but no limit as to territory—contract illegal). It has been held also that a Kales R. of T. Vol. I—4 restriction limited to the United States was illegal because not suffi- ciently limited as to territory: Lange v. Werk, 2 Oh. St. 519; Luf- kin Rule Co. v. Fringeli, 57 Oh. St. 596. The restriction has even been held illegal when operative throughout a state of the United States: Taylor v. Blanchard, 13 Allen (Mass.) 370. 50 COMBINATIONS AND RESTRAINT OF TRADE GAMEWELL FIRE-ALARM CO. v. CRANE (Supreme Judicial Court of Mass. 1893. 160 Mass. 50; 35 N. E. R. 98.) Appeal from Superior Court, Suffolk county. Bill by the Gamewell Fire-Alarm Telegraph Company against Moses G. Crane and Frederick W. Cole to enjoin defendant Crane from engaging in the manufacture and sale of fire alarm and police telegraph apparatus, in violation of his contract with plaintiff, and to enjoin defendant Cole from participating with Crane in the violation of said contract. Final decree was entered in plaintiff’s favor as against defendant Crane, but the bill was dismissed as against Cole. Plaintiff and defendant Crane both appeal. Modified. FIELD, C. J. The plaintiff company and the defendant Crane have each appealed from the decree of the Superior Court. The principal question is whether the following stipulation in the contract between the plaintiff and Crane is void. The stipu- lation is: ‘‘Said Crane further agrees not to engage in the business of manufacturing or selling fire alarm or police tele- graph machines and apparatus, and not to enter into competition with said Gamewell Company, either directly or indirectly, for the period of ten years next ensuing after the date of this agree- ment.’’ Crane had been a manufacturer of fire alarm and police telegraph apparatus from the year 1856 to 1886, when the con- tract was entered into which is the subject of this suit. From the year 1879 to January, 1891, he was a director of the plaintiff company. In 1881 he, or the firm of which he was a member, entered into a contract with the plaintiff company to do all of its manufacturing. He testified that the company ‘‘was to have the use of patents of mine for the term of ten years, and to give all its manufacturing to Moses C. Crane or Crane & Co., and they agreed not to compete with the Gamewell Company during that time.’’ This is the contract which was annulled by the con- tract in suit. By the contract in suit Crane sold and conveyed to the company all his machinery, tools, draw cases, and other property used in or connected with his business of manufactur: ing for said company, including ‘‘stock supplies partly manu- THE COMMON LAW 51 factured, and raw material of every kind in any way pertaining”’ to said business of manufacturing in his factory at Newton Highlands, in Massachusetts, and he agreed to transfer to said company exclusive rights under and control of all letters patent for fire alarm and police apparatus only, owned or controlled wholly or in part by him, together with exclusive rights under and control of all improvements in said fire alarm and police apparatus only, made by him up to the date of the contract, and he gave to said company the ‘‘first option to purchase or obtain exclusive control for fire alarm and police purposes only, under any and all letters patent, improvements applicable to such apparatus which may be made by said Crane during the term of ten years next ensuing after the date of this agreement,’’ etc. The consideration to be paid was $30,000 in cash and notes, and such unwrought stock, machinery, etc., as was on hand at the date of the transfer, and was not included in the schedule at- tached to the contract, was also to be paid for at the ‘‘cost price, to be fixed by appraisal.’’ Crane also agreed to let his factory to the company at a reasonable rent if the company de- sired to hire it. The company actually paid Crane about $47,000 as the consideration of the contract and the property conveyed. The plaintiff contends that the agreement ‘‘not to engage in the business of manufacturing or selling fire alarm or police telegraph machines and apparatus, and not to enter into com- petition with said Gamewell Company, either directly or in- directly, for the period of ten years,’’ etc., is not void as being in restraint of trade—First, because it is an agreement pertain- ing to ‘‘property and business protected by patents;’’ secondly, because the restraint is coextensive only with the business sold, and is necessary to enable the company to enjoy fully what it has bought and paid for; and, thirdly, because it relates to a single commodity, not of prime necessity, and not a staple of commerce. See Roller Co. v. Cushman, 143 Mass. 353; Machine Co. v. Morse, 103 Mass. 73; Gloucester Isinglass & Glue Co. v. Russia Cement Co., 154 Mass. 92. There seems to be no reason why the defendant Crane should . not assign the patents and inventions which he agreed to assign, if there are any, and no serious objection has been raised -by the defendant on this part of the case. The defendant contends that he has a right to assist in forming a corporation, and to act 52 COMBINATIONS AND RESTRAINT OF TRADE as one of its officers, the business of which is to manufacture and sell fire alarm and police telegraph machines which are not made under any patents owned by the plaintiff, or under any patents which he has agreed to assign to the plaintiff, or which the plaintiff has elected to purchase, under the option given in the contract, even although by so doing he enters into competition with the plaintiff in its business. He, in effect, concedes that, so far as the business is protected by patents which he has assigned or agreed to assign, the restraint is valid. It appears that there are ‘‘a dozen or fifteen concerns in the United States engaged in a somewhat similar business.’’ The defendant testi- fied that he looked up the number of patents pertaining to this branch of the art in 1881, and that there were then about 500. The defendant contends that he ought to be able to use his own patents for subsequent improvements applicable to such appara- tus if the plaintiff does not elect to purchase them; that he was previously a manufacturer of fire alarm and police telegraph apparatus, and not a seller thereof; that the good-will which attached to his business was that of a manufacturer who did not sell his manufactures in the market; and that it is against public policy that he should be restrained from exercising his peculiar skill anywhere in the United States or in the world for the period of 10 years. The apparatus, as the defendant contends, which he has a right to manufacture and sell is not secret ma- chinery, and is not protected by any patents which the plaintiff owns or has a right to control, but is apparatus either not pro- tected by patents at all, or by patents of his own, or of some other persons who may choose to employ the defendant. The only ground, then, on which this restriction can be main- tained is that it is reasonably necessary for the beneficial enjoy- ment by the plaintiff of the property it bought of the defendant, or, if this is not so, that the law in modern times does not regard such an agreement as against public policy. So far as we are aware, in every modern case in this commonwealth, except one where a contract in restraint of trade has been held valid, the restriction has been limited as to space. In Taylor v. Blanchard, 13 Allen 370, the parties entered into a partnership for carry- ing on ‘‘the trade or business of manufacturing shoe cutters,”’ and it was provided that ‘‘at whatever time the said copartner- ship shall be determined and ended’’ the defendant ‘‘shall not, THE COMMON LAW 53 nor will at any time or times hereafter, either alone or jointly with or as agent for any person or persons whomsoever, set up, exercise, or carry on the said trade or business of manufacturing and selling shoe cutters at any place within the aforesaid com- monwealth of Massachusetts, and shall not, nor will set up, make, or encourage any opposition to the said trade or business hereafter to be carried on’’ by the plaintiff. The manufacture of shoe cutters was an art, which could be carried on only by persons instructed in it, and the business was confined to the plaintiff and three other persons; but the court held the agree- ment void. In Bishop v. Palmer, 146 Mass. 469, the plaintiff, being en- gaged in the manufacturing and selling of bed-quilts and com- fortables, conveyed to the defendant his ‘‘entire business plant and enterprise as a manufacturer of and dealer in bed-quilts and comfortables,’? together with the good will of the business, and all the machinery, implements, and utensils used by him in said business, and agreed ‘‘that for and during the period of five years from the date hereof he will not, either directly or indirectly, in his own name or in the name of any other person or persons, continue in, carry on, or engage in the business of manufacturing or dealing in bed-quilts or comfortables, or of any business of which that may form any part.’’ It was held that this was clearly illegal and void as being in restraint of trade, because not limited as to space. See, also, Alger v. Thacher, 19 Pick. 51; Pierce v. Fuller, 8 Mass. 228, 226; Perkins v. Lyman, 9 Mass. 522; Stearns v. Barrett, 1 Pick. 43; Palmer v. Stebbins, 3 Pick. 188; Gilman v. Dwight, 18 Gray 356; Angier v. Webber, 14 Allen 211; Dean v. Emerson, 102 Mass. 480; Dwight v. Hamilton, 113 Mass. 175; Boutelle v. Smith, 116 Mass. 111; Ropes v. Upton, 125 Mass. 258; Handforth v. Jackson, 150 Mass. 149. The case of Machine Co. v. Morse, ubi supra, is the case re- ferred to as an exception. The question arose upon demurrer. The agreement of the defendant was not only to transfer his patents, machinery, ete., and all improvements and inventions, but ‘‘that he will use his best efforts for the perfecting of im- provements in the business and manufacture, and for such alter- ations and combinations as may tend to insure the success of the same and of the company,’’ and that he ‘‘will do no act that 54 COMBINATIONS AND RESTRAINT OF TRADE may injure the company or its business, and that he will at no time aid, assist, or encourage in any manner any competition against the same.’’ He also agreed ‘‘to serve as the superin- tendent of the company for three years,’’ ete. The plaintiff company was formed by the defendant and others, and the defendant’s business was transferred to it. He was a stock- holder, and was made superintendent. The plaintiff agreed to employ the defendant for three years, and he was actually em- ployed as superintendent up to the time he entered upon a com- peting business. The case seems to have been decided on the ground that the defendant had agreed to give to the plaintiff his exclusive services with reference to his mechanical skill and ingenuity in all improvements, alterations, and combinations which would tend to insure the success of the plaintiff in manu- facturing twist drills and collets. The court say that ‘‘the same principle that enables a partner -to bind himself to do nothing in competition with the business of the firm ought to apply to him.’’ The opinion proceeds to consider the English cases where the restriction was held not to extend beyond the good will of the business which was the subject of the sale, or was not greater than the interests of the vendee required, and was not unreasonable in view of all the circumstances. This doctrine, in England, has been carried very far. See Davies v. Davies, 36 Ch. Div. 859. In this country the courts generally have not gone so far, but the old law has been a good deal modi- fied in some jurisdictions in view of modern methods of doing business. See Navigation Co. v. Winsor, 20 Wall. 64; Fowle v. Park, 131 U. 8. 88; Ellerman v. Stockyards Co., (N. J. Ch.) 23 Atl. Rep. 287; Association v. Starkey, 84 Mich. 76; Matthews v. Associated Press, (N. Y. App.) 32 N. E. Rep. 981; Oliver v. Gilmore, 52 Fed. Rep. 562; Match Co. v. Roeber, 106 N. Y. 478; Whitney v. Slayton, 40 Me. 224, In the present case the plaintiff did not buy the good will of a mercantile business, and the defendant Crane had no customers for fire alarm and police telegraph machines and apparatus. The plaintiff gets everything it bought if it gets the tangible property and the letters patent and the improvements which the defendant Crane agreed to convey. The stipulation that Crane will not for 10 years manufacture or sell fire alarm or police telegraph machines and apparatus, although under patents, THE COMMON LAW 55 in which case it has refused to buy, or under no patent at all, will tend to give the plaintiff a monopoly of.the business. To exclude a person from manufacturing or selling anywhere in the United States or in the world machinery designed for certain purposes, in which that person has acquired great skill, may operate to impair his means of earning a living. The stipulation seems to us to be something more than is reasonably necessary to protect the plaintiff in the enjoyment of the property it bought, even if that should be adopted as the test, upon which we express no opinion. The principal object of the stipulation was, we think, to prevent the manufacture or sale by the defendant of any instruments which would serve the same purpose as those made and sold by the plaintiff, and thus to enable the plaintiff more completely to control the market. Large cities and towns cannot well do without some kind of fire alarm and police telegraph apparatus, and it is an article of necessity for such municipalities. We are of the opinion that under our decisions the stipulation must be pronounced void as against public policy. If there is to be a change in the law, as heretofore many times declared by this court, we think it is for the legislature to make it. See Factor Co. v. Adler, (Cal.) 27 Pac. Rep. 36; Taylor v. Sourman, 110 Pa. St. 3; Richardson v. Buhl, 77 Mich. 632; Herreshoff v. Boutineau, (R. I.) 19 Atl. Rep. 712; Strait v. Harrow Co., (Sup.) 18 N. Y. Supp. 224; Anderson v. Jett, (Ky.) 12 S. W. Rep. 670; Urmston v. White- legg, 63 Law T. R. (N. 8.) 455; Perls v. Saalfeld, [1892] 2 Ch. 149. For these reasons a majority of the court are of opinion that the decree against Crane should be substantially affirmed as to the assignment of patents and inventions and as to costs, and should be reversed as to the rest. The decree in favor of Cole should be affirmed. So ordered. DIAMOND MATCH CO. v. ROEBER (Court of Appeals of New York, 1887. 106 N. Y. 473.) ANDREWS, J. Two questions are presented—First, whether the covenant of the defendant contained in the bill of sale exe- 56 COMBINATIONS AND RESTRAINT OF TRADE cuted by him to the Swift & Courtney & Beecher Company on the twenty-seventh day of August, 1880, that he shall and will not at any time or times within 99 years, directly or indirectly engage in the manufacture or sale of friction matches (excepting in the capacity of agent or employee of the said Swift & Court- ney & Beecher Company) within any of the several states of the United States of America, or in the territories thereof, or within the District of Columbia, excepting and reserving, however, the right to manufacture and sell friction matches in the state of Nevada, and in the territory of Montana, is void as being a covenant in restraint of trade; and, second, as to the right of the plaintiff, under the special circumstances, to the equitable remedy by injunction to enforce the performance of the cov- enant. There is no real controversy as to the essential facts. The consideration of the covenant was the purchase by the Swift & Courtney & Beecher Company, a Connecticut corporation, of the manufactory No. 528 West Fiftieth street, in the city of New York, belonging to the defendant, in which he had, for several years prior to entering into the covenant, carried on the business of manufacturing friction matches, and of the stock and materials on hand, together with the trade, trade-marks, and good will of the business, for the aggregate sum (excluding a mortgage of $5,000 on the property assumed by the company) of $46,724.05, of which $13,000 was the price of the real estate. By the preliminary agreement of July 27, 1880, $28,000 of the purchase price was to be paid in the stock of the Swift & Court- ney & Beecher Company. This was modified when the property was transferred, August 27, 1880, by giving to the defendant the option to receive the $28,000 in the notes of the company or in its stock, the option to be exercised on or before January 1, 1881. The remainder of the purchase price, $18,724.05, was paid down in cash, and subsequently, March 1, 1881, the de- fendant accepted from the plaintiff, the Diamond Match Com- pany, in full payment of the $28,000, the sum of $8,000 in cash and notes, and $20,000 in the stock of the plaintiff; the plaintiff company having prior to said payment purchased the property of the Swift & Courtney & Beecher Company, and become the assignee of the defendant’s covenant. It is admitted by the pleadings that in August, 1880 (when the covenant in question THE COMMON LAW 57 was made), the Swift & Courtney & Beecher Company carried on the business of manufacturing friction matches in the states of Connecticut, Delaware, and Illinois, and of selling the matches which it manufactured ‘‘in the several states and terri- tories of the United States, and in the District of Columbia;”’ and the complaint alleges and the defendant in his answer admits that he was at the same time also engaged in the manu- facture of friction matches in the city of New York, and in selling them in the same territory. The proof tends to support the admission in the pleadings. It was shown that the defend- ant employed traveling salesmen, and that his matches were found in the hands of dealers in 10 states. The Swift & Court- ney.& Beecher Company also sent their matches throughout the country wherever they could find a market. When the bargain was consummated, on the twenty-seventh of August, 1880, the defendant entered into the employment of the Swift & Courtney & Beecher Company, and remained in its employment until January, 1881, at a salary of $1,500 a year. He then entered into the employment of the plaintiff, and remained with it dur- ing the year 1881, at a salary of $2,500 a year, and from Janu- ary 1, 1882, at a salary of $3,600 a year, when, a disagreement arising as to the salary he should thereafter receive, the plaintiff declining to pay a salary of more than $2,500 a year, the de- fendant voluntarily left its service. Subsequently he became superintendent of a rival match manufacturing company in New Jersey, at a salary of $5,000, and he also opened a store in New York for the sale of matches other than those manufactured by the plaintiff. The contention by the defendant that the plaintiff has no equitable remedy to enforce the covenant, rests mainly on the fact that contemporaneously with the execution of the covenant of August 27, 1880, the defendant also executed to the Swift & Courtney & Beecher Company a bond in the penalty of $15,000, conditioned to pay that sum to the company as liquidated dam- ages in case of a breach of his covenant. The defendant for his main defense relies upon the ancient doctrine of the common law, first definitely declared, so far as I can discover, by Cumzr Justice Parker (Lord Macclesfield) in the leading case of Mitchel v. Reynolds, 1 P. Wms. 181, and which has been repeated many times by judges in England and 58 COMBINATIONS AND RESTRAINT OF TRADE America, that a bond in general restraint of trade is void. There are several decisions in the English courts of an earlier date, in which the question of the validity of contracts restraining the obligor from pursuing his occupation within a particular locality was considered. The cases are chronologically arranged and stated by Mr. Parsons in his work on Contracts (volume 2, p. 748, note). The earliest reported case, decided in the time of Henry V, was a suit on a bond given by the defendant, a dyer, not to use his craft within a certain city for the space of half a year. The judge before whom the case came indignantly de- nounced the plaintiff for procuring such a contract, and turned him out of court. This was followed by cases arising on con- tracts of a similar character, restraining the obligors from pur- suing their trade within a certain place for a certain time, which apparently presented the same question which had been decided in the dyer’s case, but the courts sustained the contracts, and gave judgment for the plaintiffs; and before the case of Mitchel v. Reynolds it had become settled that an obligation of this character, limited as to time and space, if reasonable under the circumstance, and supported by-a good consideration, was valid. The case in the Year Books went against all contracts in re- straint of trade, whether limited or general. The other cases prior to Mitchel v. Reynolds sustained contracts for a particular restraint, upon special grounds, and by inference decided against the validity of general restraints. The case of Mitchel v. Reynolds was a case of partial restraint, and the contract was sustained. It is worthy of notice that most, if not all, the Eng- lish cases which assert the doctrine that all contracts in general restraint of trade are void, were cases where the contract before the court was limited or partial. The same is generally true of the American cases. The principal cases in this state are of that character, and in all of them the particular contract before the court was sustained. Nobles v. Bates, 7 Cow. 307; Chappel v. Brockway, 21 Wend. 157; Dunlop v. Gregory, 10 N. Y. 241. In Alger v. Thacher, 19 Pick. 51, the case was one of general restraint, and the Court, construing the rule as inflexible that all contracts in general restraint of trade are void, gave judg- ment for the defendant. In Mitchel v. Reynolds the Court, in assigning the reason for the distinction between a contract for the general restraint of trade and one limited to a particular THE COMMON LAW 59 place, says: ‘‘for the former of these must be void, being of no benefit to either party, and only oppressive;’’ and later on, ‘because in a great many instances they can be of no use to the obligee, which holds in all cases of general restraint throughout England; for what does it signify to a tradesman in London what another does in Newcastle, and surely it would be unrea- sonable to fix a certain loss on one side without any benefit to the other.’’ He refers to other reasons, viz., the michief which may arise (1) to the party by the loss by the obligor of his live- lihood and the substance of his family, and (2) to the public by depriving it of a useful member, and by enabling corporations to gain control of the trade of the kingdom. It is quite obvious that some of these reasons are much less forcible now than when Mitchel v. Reynolds was decided. Steam and electricity have for the purposes of trade and commerce almost annihilated dis- tance, and the whole world is now a mart for the distribution of the products of industry. The great diffusion of wealth, and the restless activity of mankind striving to better their condi- tion, have greatly enlarged the field of human enterprise, and created a vast number of new industries, which give scope to ingenuity and employment for capital and labor. The laws no longer favor the granting of exclusive privileges, and to a great extent business corporations are practically partnerships, and may be organized by any persons who desire to unite their capital or skill in business, leaving a free field to all others who desire for the same or similar purposes to clothe themselves with a corporate character. The tendency of recent adjudica- tions is marked in the direction of relaxing the rigor of the doctrine that all contracts in general restraint of trade are void, irrespective of special circumstances. Indeed, it has of late been denied that a hard and fast rule of that kind has ever been the law of England. Rousillon v. Rousillon, 14 Ch. Div. 351. The law has for centuries permitted contracts in partial restraint of trade, when reasonable; and in Horner v. Graves, 7 Bing. 735, Cer Justice TrvpaL considered a true test to be ‘‘whether the restraint is such only as to afford a fair protection to the interests of the party in favor of whom it is given, and not so large as to interfere with the interests of the public.”’ When the restraint is general, but at the same time is coextensive only with the interest to be protected, and with the benefit meant to 60 COMBINATIONS AND RESTRAINT OF TRADE be conferred, here seems to be no good reason why, as between the parties, the contract is not as reasonable as when the interest is partial, and there is a corresponding partial restraint. And is there any real public interest which necessarily condemns the one, and not the other? It is an encouragement to industry and to enterprise in building up a trade, that a man shall be allowed to sell the good-will of the business and the fruits of his industry upon the best terms he can obtain. If his business extends over a continent, does public policy forbid his accompanying the sale with a stipulation for restraint coextensive with the business which he sells? If such a contract is permitted, is the seller any more likely to become a burden on the public than a man who, having built up a local trade only, sells it, binding himself not to carry it on in the locality? Are the opportunities for employment and for the exercise of useful talents so shut up and hemmed in that the public is likely to lose a useful member of society in the one case, and not in the other? Indeed, what public policy requires is often a vague and difficult inquiry. It is clear that public policy and the interests of society favor the utmost freedom of contract, within the law, and require that business transactions should not be trammeled by unnecessary restrictions. ‘‘If,’’ said Sir George Jessell 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 con- tracting, and that contracts, when entered into freely and volun- tarily, shall be held good, and shall be enforced by courts of justice.’’ It has sometimes been suggested that the doctrine that con- tracts in general restraint of trade are void, is founded in part upon the policy of preventing monopolies, which are opposed to the liberty of the subject, and the granting of which by the king under claim of royal prerogative led to conflicts memorable in English history. But covenants of the character of the one now in question operate simply to prevent the covenantor from en- gaging in the business which he sells, so as to protect the pur- chaser in the enjoyment of what he has purchased. To the extent that the contract prevents the vendor from carrying on the particular trade, it deprives the community of any benefit. it might derive from his entering into competition. But the busi- THE COMMON LAW 61 ness is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry. Such contracts do not create monopolies. They confer no special or exclusive privilege. If contracts in general restraint of trade, where the trade is general, are void as tending to monopolies, contracts in partial restraint, where the trade is local, are subject to the same objection, because they deprive the local community of the services of the covenantor in the particular trade or calling, and prevent his becoming a competitor with the covenantee. We are not aware of any rule of law which makes the motive of the covenantee the test of the validity of such a contract. On the contrary, we suppose a party may legally purchase the trade and business of another for the very purpose of preventing competition, and the validity of the contract, if supported by a consideration, will depend upon its reasonableness as between the parties. Combinations between producers to limit production, and to enhance prices, are or may be unlawful, but they stand on a different footing. We cite some of the cases showing the tendency of recent judicial opinion on the general subject: Whittaker v. Howe, 3 Beav. 383; Jones v. Lees, 1 Hurl. & N. 189; Rousillon v. Rousillon, supra; Leather Co. v. Lorsont, L. R. 9 Eq. 345; Col- lins v. Locke, 4 App. Cas. 674; Steam Co. v. Winsor, 20 Wall. 64; Morse, etc. Co. v. Morse, 103 Mass. 73. In Whittaker v. Howe, a contract made by a solicitor not to practice as a solicitor ‘‘in any part of Great Britain,’’ was held valid. In Rousillon v. Rousillon a general contract not to engage in the sale of cham- pagne, without limit as to space, was enforced as being under the circumstances a reasonable contract. In Jones v. Lees, a covenant by the defendant, a licensee under a patent, that he would not during the license make or sell any slubbing machines without the invention of the plaintiff applied to them, was held valid. BRAMWELL, J., said: ‘‘It is objected that the restraint extends to all England, but so does the privilege.’’ In Steam Co. v. Winsor the Court enforced a covenant by the defendant made on the purchase of a steamship, that it should not be run or employed in the freight or passenger business upon any waters in the state of California for the period of 10 years. In the present state of the authorities, we think it cannot be said that the early doctrine that contracts in general restraint 62 COMBINATIONS AND RESTRAINT OF TRADE of trade are void, without regard to circumstances, has been abrogated. But it is manifest that it has been much weakened, and that the foundation upon which it was originally placed has, to a considerable extent at least, by the change of circumstances, been removed. The covenant in the present case is partial, and not general. It is practically unlimited as to time, but this under the authorities is not an objection, if the contract is otherwise good. Ward v. Byrne, 5 Mees. & W. 548; Mumford v. Gething, 7 C. B. (N. S.) 317. It is limited as to space since it excepts the state of Nevada and the territory of Montana from its operation, and therefore is a partial, and not a general, restraint, unless, as claimed by the defendant, the fact that the covenant applies to the whole of the state of New York consti- tutes a general restraint within the authorities. In Chappel v. Brockway, supra, Bronson, J., in stating the general doctrine as to contracts in restraint of trade, remarked that ‘‘contracts which go to the total restraint of trade, as that a man will not pursue his occupation anywhere in the state, are void.’’ The contract under consideration in that case was one by which the defendant agreed not to run or be interested in a line of packet- boats on the canal between Rochester and Buffalo. The atten- tion of the Court was not called to the point whether a contract was partial, which related to a business extending over the whole country, and which restrained the carrying on of business in the state of New York, but excepted other states from its opera- tion. The remark relied upon was obiter, and in reason cannot be considered a decision upon the point suggested. We are of the opinion that the contention of the defendant is not sound in principle, and should not be sustained. The boundaries of the states are not those of trade and commerce, and business i8 restrained within no such limit, The country as a whole is that of which we are citizens, and our duty and allegiance are due both to the state and nation. Nor is it true as a general rule that a business established here cannot extend beyond the state, or that it may not be successfully established outside of the state. There are trades and employments which from their nature are localized, but this is not true of manufacturing in- dustries in general. We are unwilling to say that the doctrine as to what is a general restraint of trade depends upon state lines, and we cannot say that the exception of Nevada and Mon- THE COMMON LAW 63 tana was colorable merely. The rule itself is arbitrary, and we are not disposed to put such a construction upon this contract as will make it a contract in general restraint of trade, when upon its face it is only partial. The case of Steam Co. v. Win- sor, supra, supports the view that a restraint is not necessarily general which embraces an entire state. In this case the de- fendant entered into the covenant as a consideration in part of the purchase of his property by the Swift & Courtney & Beecher Company, presumably because he considered it for his advantage to make the sale. He realized a large sum in money, and on the completion of the transaction became interested as a stockholder in the very business which he had sold. We are of opinion that the covenant, being supported by a good consideration, and con- stituting a partial and not a general restraint, and being, in view of the circumstances disclosed, reasonable, is valid and not void. In respect to the second general question raised, we are of opinion that the equitable jurisdiction of the court to enforce the covenant by injunction was not excluded by the fact that the defendant, in connection with the covenant, executed a bond for its performance, with a stipulation for liquidated dam- ages. It is of course competent for parties to a covenant to agree that a fixed sum shall be paid in case of a breach by the party in default, and that this should be the exclusive remedy. The intention in that case would be manifest that the payment of the penalty should be the price of non-performance, and to be accepted by the covenantee in lieu of performance. Insur- ance Co. v. Insurance Co., 87 N. Y. 405. But the taking of a bond in connection with a covenant does not exclude the juris- diction of equity in a case otherwise cognizable therein, and the fact that the damages in the bond are liquidated does not change the rule. It is a question of intention, to be deduced from thé 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 a breach, the covenant will be enforced. It was said in Long v. Bowring, 33 Beav. 585, which was an action in equity for the specific performance of a covenant, with a claim for liquidated damages: ‘All that is settled by this claim is that if they bring an action for damages, the amount to be recovered is 1,000 pounds, neither more nor 64 COMBINATIONS AND RESTRAINT OF TRADE less.’? There can be no doubt upon the circumstances in this case that the parties intended that the covenant should be per- formed, and not that the defendant might at his option repur- chase his right to manufacture and sell matches on payment of $15,000, the liquidated damages. The right to relief by injunc- tion in similar contracts is established by numerous cases. In- surance Co. v. Insurance Co., supra; Long v. Bowring, supra; Howard v. Woodward, 10 Jur. (N. S.) 1123; Coles v. Sims, 5 De Gex, M. & G. 1; Avery v. Langford, Kay, 663; Whittaker v. Howe, supra; Hubbard v. Miller, 27 Mich. 15. There are some subordinate questions which will be briefly noticed : First. The plaintiff, as successor of the Swift & Courtney & Beecher Company, and as assignee of the covenant, can maintain the action. The obligation runs to the Swift & Courtney & Beecher Company, ‘‘its successors and assigns.’’? The covenant was in the nature of a property right, and was assignable; at least, it was assignable in connection with a sale of the property and business of the assignees. Hedge v. Lowe, 47 Iowa, 137, and cases cited. Second. The defendant is not in a position which entitles him to raise the question that the contract with the Swift & Courtney & Beecher Company was ultra vires of that corpora- tion. He has retained the benefit of the contract, and must abide by its terms. Arms Co. v. Barlow, 68 N. Y. 34. Third. The fact that the plaintiff is a foreign corporation is no objection to its maintaining the action. It would be repug- nant to the policy of our legislation, and a violation of the rules of comity, to grant or withhold relief in our courts upon such a discrimination. Merrick vy. Van Santvoord, 34 N. Y. 208; Bank v. Lacombe, 84 N. Y. 367; Code Civil Proc. § 1779. Fourth. The consent of the Swift & Courtney & Beecher Company to the purchase by the defendant of the business of Brueggemann did not relieve the defendant from his covenant. That transaction was in no way. inconsistent therewith. Brueg- gemann was selling matches manufactured by the company, under an agreement to deal in them exclusively. There are some questions on exceptions to the admission and exclusion of evidence. None of them, we think, present any question requiring a reversal of the judgment. THE COMMON LAW 65 We think there is no error disclosed by the record, and the judgment should therefore be affirmed. All concur, except Peckuam, J., dissenting. LESLIE v. LORILLARD (Court of Appeal of New York, 1888. 110 N. Y. 519.) Appeal from Supreme Court, general term, Second depart- ment. Demurrer to complaint by defendants Lorillard and the Lorillard Steamship Company. The plaintiff is a stockholder of the defendant, the Old Dominion Steamship Company of Delaware. In the year 1873 the Old Dominion Steamship Company of New York was a cor- poration organized under the laws of New York, and was en- gaged in the business of running a line of steamships between the port of New York and certain ports in the state of Virginia. The defendant, the Lorillard Steamship Company, was also a New York corporation, organized for the business of navigating the ocean by steamships. The defendant Lorillard was a director and the president of the Lorillard company, and had entire control of it; the other directors, except one, who was a brother- in-law, being his clerks and employees. The complaint charges that in and prior to the summer of 1873 said Lorillard, ‘‘for the purpose of extorting large sums of money from the Old Domin- ion Steamship Company of New York, stated to. the officers of said corporation that the said Lorillard Steamship Company in- tended to put on and run a line of steamships between the ports above mentioned, in opposition to the steamships of said Old Dominion Steamship Company; and, to deceive the officers of said company, and cause them to believe that a formidable oppo- sition would be established against said company, said Lorillard caused said Lorillard Steamship Company to lease docks at Norfolk and other places, and to hire agents and servants at different points, and, in or about the month of October, 1873, said Lorillard caused said Lorillard Steamship Company to put on and run a line of steamships between said ports in opposi- tion to said Old Dominion Steamship Company of New York;’’ Kales R. of F. Vol. I—5 66 COMBINATIONS AND RESTRAINT OF TRADE that said Lorillard continued to run his steamships at great loss, and at his own expense, until his efforts were successful in deceiving the officers of the Old Dominion Company into the belief that a powerful opposition line had been established; and in January, 1874, an agreement running between the Old Dominion Company and Lorillard and his company was signed by the president of each company, and by Lorillard for him- self, by the terms of which, in consideration of a monthly pay- ment to him, Lorillard and his company agreed to discontinue running their vessels, or any others, between the ports men- tioned; and that they would not charter or sell the vessels to any other company or persons to be used on that route, and would not become in any way interested in the running of steamships between those places; that in February, 1875, the defendant, the Old Dominion Steamship Company of Delaware, was formed under the laws of that state, and succeeded to the business of the New York company, and ‘‘became vested with the property of said last-named company, which was duly con- veyed and assigned to it, and subjected to the liabilities and contracts of said company ;’’ that this new company continued making payments to Lorillard under the contract mentioned until February, 1878, when disputes arose between the various parties, and a new contract was entered into in October, 1878; that by this latter contract the previous contract was canceled, and, in consideration of the payment of a gross sum of money, and of certain monthly payments, to be continued through five years from February, 1879, Lorillard and his company again agreed not to run or to be in any way interested in the running of steamships between the ports named; that the Delaware Com- pany made all the payments called for under the second agree- ment up to August, 1881, when further payment of the monthly subsidies was enjoined in an action brought by this plaintiff. Plaintiff alleges that prior to the commencement of this action, and in February, 1884, he requested the Delaware Steamship Company to pay no more moneys, and to commence an action for the cancellation of the contract, and for the recovery back of the moneys paid under the contracts. This demand was in a letter, and the reply to it contains a resolution of the board of directors refusing to take the action requested. Plaintiff also alleges the commencement of an action in February, 1884, by Lorillard THE COMMON LAW: 67 against the Delaware Company to recover the monthly pay- ments payable under the contract from and after August, 1881, and that the Delaware Company did not intend to defend it. The relief demanded is an injunction against the Delaware Company’s making any payments under the contract, against Lorillard from prosecuting his action, the cancellation of the contract, and the re-payment by Lorillard of all moneys received. The demurrer having been overruled at. special term, and its decision having been affirmed at general term, defendants Loril- lard and the Lorillard Steamship Company appealed to this court. GRAY, J. The defendants Lorillard and the Lorillard Steam- ship Company have demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action. We are thus required to examine this pleading, and to see whether, allowing to its averments all the force and truth such a ground of demurrer concedes, it may be sustained as the foundation of an action for equitable relief. Our decision of the question will necessarily turn upon the validity of the contracts which are set forth. An extended discussion of the principles controlling the making and enforce- ment of corporate contracts is unnecessary. By frequent adju- dications certain principles are well settled, and have become familiar. The contracts of corporations are said to be ultra vires when they involve some adventure or undertaking, not within the scope of their charter, which is their rule of corporate action. In the granting of charters the legislature is presumed to have had in view the public interest, and public policy is (as the interest of stockholders ought to be) concerned in the restriction of corporations within chartered limits, and a departure there- from is only deemed excusable when it cannot result in prejudice to the public or to the stockholders. As artificial creations they have no powers or faculties, except those with which they were endowed when created; and when, as is frequently the case, they act in excess of their powers, the question will be, is the act prohibited as prejudicial to some public interest, or is it an act, not unlawful in that sense, but prejudicial to the stock- holders? The rule, however, is well settled that the plea of 68 COMBINATIONS AND RESTRAINT OF TRADE ultra vires should not prevail when it would not advance justice, but, on the contrary, would accomplish legal wrong. - In suits between the corporation and strangers dealing with it the question is whether the act is one the corporation is not authorized to perform under any circumstances; or one that it may perform for some purposes, or under certain conditions. In the first case it is ultra vires, and there can be no recovery, because the party dealing with the corporation is bound to know from the law of its existence that it has no power to per- form it. In the second case the issue will turn upon whether the party dealing with it is aware of the intention to perform the act for some unauthorized purpose, or whether the attendant circumstances justify its making and its performance. In ac- tions by stockholders, which assail the acts of their directors or trustees, courts will not interfere unless the powers have been illegally or unconscientiously executed; or unless it be made to appear that the acts were fraudulent or collusive, and destructive of the rights of the stockholders. Mere errors of judgment are not sufficient as grounds for equity interference, for the powers of those intrusted with corporate management are largely dis- eretionary. Testing by these rules the case made by plaintiff in his com- plaint, in approaching the consideration of that pleading, we find that the only respect in which the contracts in question could be viewed as prejudicial to public interests, and therefore become the subject of judicial condemnation as against public policy, would be that they were in restraint of competition, and tended to create a monopoly. The tendency of modern thought and of the decisions, however, has been no longer to uphold in its strictness the doctrine which formerly prevailed in respect of agreements in restraint of trade. The severity with which such agreements were at first treated became more and more relaxed by exceptions and qualifications, This change was gradual, and may be considered, perhaps, as due mainly to the growth and spread of the industrial activities of the world, and to enlarged commercial facilities, which render such agreements less dangerous as tending to create monopolies. The earlier doctrine, of course, obtained in respect of agreements between individuals. The limitation which became imposed was that the agreement should operate as to a locality and not as to the THE COMMON LAW: 69 whole land. In later times the danger in such agreements seems only really to exist when corporations are parties to them; for their means and strength would better enable them to buy off rivalry, and to create monopolies. The object of government, as interpreted by the judges, was not to interfere with the free right of man to dispose of his property or of his labor; it was to guard society, of which he was a member, from the injurious consequences of his agree- ment, whether they would arise from his own improvidence in bargaining away his means of gaining a livelihood, or in the deprivation to society of the advantages of competition in skilled labor. At the present day there is not that danger, or at least it does not seem to exist to an appreciable extent, except, pos- sibly, as suggested, in the case of corporations. In their super- vision and in their restriction within the limits of their chartered powers the government and the public are directly interested. Corporations are great engines for the promotion of the public convenience, and for the development of public wealth, and so long as they are conducted for the purposes for which organized they are a public benefit; but if allowed to engage without super- vision, in subjects of enterprise foreign to their charters, or if permitted unrestrainedly to control and monopolize the ave- nues to that industry in which they are engaged, they become a public menace, against which public policy and statutes design protection. Where, therefore, the provisions of agreements in restraint of competition tend beyond measures for self-protection, and threaten the public good in a distinctly appreciable manner, they should not be sustained. The apprehension of danger to the public interests, however, should rest on evident grounds, and courts should refrain from the exercise of their equitable powers in interfering with and restraining the conduct of the affairs of individuals or of corporations, unless their conduct, in some tangible form, threatens the welfare of the public. The doctrine relating to contracts in restraint of trade has been elaborately discussed in a careful opinion of ANprews, J., in the recent case of Match Co. v. Roeber, 106 N. Y. 473. Under the authority of that case it may be said that no contracts are void, as being in general restraint of trade, where they operate simply to prevent a party from engaging or competing in the 70 COMBINATIONS AND RESTRAINT OF TRADE same business. It is there said (106 N. Y. 483): ‘‘To the ex- tent that the contract prevents the vendor from carrying on the particular trade, it deprives the community of any benefit it might derive from his entering into competition. But the business is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry. Such contracts do not create monopolies. They confer no special or exclusive privileges.’’ Under the doctrine of that case it is difficult to see how these contracts which are complained of here are open to the objection suggested by counsel. Regarded only in the light of what they tended to effect, these agreements removed a business rival, whose competition may have been deemed dangerous to the success or maintenance of the business of the Old Dominion Company. They could not, of course, exclude all competition in the business, but could in that particular case. How, then, is the result different from the simpler case of the sale by an individual of his business and his right to conduct it in a particular part of the land. The doctrine held by this Court in Match Co. v. Roeber, supra, should control in the case at bar, and these contracts, therefore, cannot be considered ob- jectionable on the ground that they restrained competition. Whether competition in this particular business would be a public benefaction, or its restraint a source of prejudice, we are unable, of course, to judge. I do not think that competition is invariably a public benefaction, for it may be carried on to such a degree as to become a general evil. The conclusion at which we have arrived as to these contracts would seem to dispose of this case, and make further considera- tion useless, for the plaintiff makes them the basis of his action. The relief he has sought is the prevention of a misappropriation of corporate funds by the officers of the company, and the annulment of these contracts as obtained by deception. We do not question the undoubted right of stockholders to complain of any diversion of the capital and assets to purposes not authorized by the charter, and to arrest by suit an un- authorized course of dealing which results in such diversion. The powers of a court of equity may be put in motion at the instance of a single stockholder, if he can show that the corpora- tion are employing their statutory powers for the accomplish- THE COMMON LAW 71 ment of purposes not within the scope of their institution. Ang. & A. Corp. § 393. But this is not such a case. The contracts were within the power of the corporation to make, and if they were free from the taint of fraud, and were not procured to be made by some collusion or conspiracy, then they are binding upon the company, and constitute an obligation which the offi- cers must discharge. If this is a controversy between a stock- holder and directors or other shareholders, who may be acting distinctively towards the property in which he has an interest, it is one with which these defendants are not concerned, and into which they should not be brought. They dealt with the directors, in respect of matters which were within the dis- cretionary powers of a board of management. If it were charged that some fraud was practiced by Lorillard, to which the officers of the New York Company were parties, and that they had colluded with him, the equitable jurisdiction of the Court might be invoked by the plaintiff; for fraud vitiates all contracts, and it is a general rule that in cases of fraud, or where the charge is of conspiracy or of a fraudulent combina- tion, equity has concurrent jurisdiction with the law, and will give redress. But in every case the exercise of jurisdiction in equity rests in the sound discretion of the Court, and depends upon the special circumstances disclosed. McHenry v. Hazard, 45 N. Y. 580; Dodge v. Woolsey, 18 How. 331. In Hawes v. Oak- land, 104 U. S. 450, Miuurr, J., asserted the doctrine estab- lished in the case of Dodge v. Woolsey to be that, to enable a stockholder in a corporation to sustain in a court of equity, in his own name, a suit founded on a right of action existing in the corporation itself, there must exist as a foundation for the suit, ‘‘some action or threatened action of the managing board of directors or trustees of the corporation, which is beyond the authority conferred on them by their charter or other source of organization; or such a fraudulent transaction, completed or contemplated by the acting managers, in connection with some other party, or among themselves, or with other share- holders, as will result in serious injury to the corporation, or to the interests of the other shareholders; or where the board of directors, or a majority of them, are acting for their own interest in a manner destructive of the corporation itself, or of 72 COMBINATIONS AND RESTRAINT OF TRADE the rights of the other shareholders.’? We concur in the adop- tion of these principles for application to such actions. But it is not made to appear here that there was any collusion between the officers of the New York Company and these de- fendants; and as to the second contract, which was made between these defendants and the Delaware Company, of which plaintiff was a stockholder, there is no allegation whatever of any decep- tion or collusion. We think that, as these contracts were not ultra vires, or assailable on grounds of public policy, that they were such as came within the discretionary powers of the board of management to make in the interests of the corporation. Within the limits of the chartered authority the officers of a corporation have the fullest power to regulate the concerns of the company according to their best judgment. It is true that the powers conferred upon its agents by the charter of a cor- poration cannot be transcended by any considerations of expediency which they suppose may result to the stockholders from an act not within the scope of their authority [McCullough v. Moss, 5 Denio, 567]; but these contracts were such as the corporation could legitimately make, and consequently came within the scope of the ordinary powers of corporate manage- ment. The conclusions at which we have arrived render further discussion of the questions in this record unnecessary. The interlocutory judgment overruling the demurrer should be reversed, the demurrer sustained; and the complaint dis- missed, with costs. All concur, except Rugzr, C. J., not voting. \ WOOD v. WHITEHEAD BROS. CO. (Court of Appeals of New York, 1901. 165 N. Y. 545.) This action was brought to recover a sum claimed to be due to the plaintiff under a contract made orally with the defendant in May, 1895, by the terms of which the latter had agreed to pay to the former $30 each month while he lived and while it remained a corporation, in consideration of his agreement to give up the business of dealing in molding sand obtained from THE COMMON LAW 73 sandbanks in the county of Albany, and not to engage further in it personally, or as agent for any other than the defendant. Both parties were, and had been for some years before, en- gaged in the business of dealing in molding sand. The $30 were paid monthly to the plaintiff until the end of the succeed- ing year, when further payments were refused, and subsequently the present action was brought to recover the amount remaining unpaid at the time of the bringing thereof. Prior to the making of the contract, and in the month of April, 1893, the plaintiff had executed and delivered to the defendant a writing of which the following is a copy: ‘Albany, N. Y., April 15, 1893. ‘Received this day of Whitehead Bros. Company the sum of two hundred and fifty dollars, the receipt of which is hereby acknowledged, the same being payment in full for all debts, dues, demands, services, and all or any obligations whatsoever; and I hereby agree to render to said company my services in selling molding sand for them, and in any other way or manner they may require; and I further agree not to allow any other person to use my name in the purchase of, or the sale of, molding sand, from this date on. I hereby agree to accept from this date from the said Whitehead Bros. Co., in full compen- sation for the services as described above, the sum of fifteen dollars per month, the same to terminate whenever said com- pany give me thirty days’ notice that they no longer require my services. [Signed] Harvey Wood. Witness: P. J. Rora- beck.’’ Thereafter the defendant paid to the plaintiff $15 a month, until about two months before May, 1895, the time when the contract now sued upon was made. The trial judge, before whom the trial was had without jury, made findings of fact, which included the facts stated; and he found, further, that when the defendant ceased paying the $15 a month under the agreement of 1893, it had not required of the plaintiff any services whatever, nor did the plaintiff tender any services, or demand any payment under that agreement, and that both parties had treated the same as at an end, although no notice as provided in the writing was ever given. As conclusions of law, he found that the agreement of 1893 was not supported by 74 COMBINATIONS AND RESTRAINT OF TRADE mutual promises, but, if valid and enforceable because acted upon, it was abandoned by both parties; that there was a sufficient consideration for the contract of May, 1895; that that agreement, was not void as being in restraint of trade; and that the plaintiff was entitled to recover. The plaintiff’s judgment was affirmed at the appellate division, in the Third department, and the defendant appealed to this court. GRAY, J. (after stating the facts). The appellant has raised two questions with respect to the validity of the contract sued upon. In the first place, it is contended that it was wholly without any consideration, for the reason that when it was made there was in force a prior contract, made in 1893, which required the plaintiff to do every act and thing required of him by the contract of 1895, invoking a familiar principle in the law of contracts. Vanderbilt v. Schreyer, 91 N. Y. 392, 401. I think that there are two answers to this. The writing of 1893 was of a twofold nature. It was in part an acknowledg- ment by the plaintiff of the receipt of the sum of $250 as payment in full for all debts, services, demands, ete., and it was in part an agreement by the plaintiff to render to the defendant his ‘‘services in selling molding sand for them,’’ and ‘‘not to allow any other person to use his name in the purchase or the sale of molding sand.’’ The payment of $250 would not appear to be the consideration for the agreement by the plaintiff to render future services, but rather to be simply the receipt or acknowledgment of payment of something which was then due the plaintiff. The further statement as to com- pensation for those services confirms this interpretation, and it is, in fact, borne out by the plaintiff’s evidence that the $250 was paid him at the time on an old contract. But, if we could assume that it was the consideration for the plaintiff’s agree- ment to render the future services, still I think it is clear that that agreement was essentially other than the contract which the parties made in 1895. The plaintiff, by his agreement of 1893, was to serve the defendant in selling molding sand for it and in any other way it might require. He agreed to become its agent, and his agreement did not compel him to cease dealing in the sand for his own account. But, by the subsequent con- tract of 1895, such an obligation to cease the business of deal- THE COMMON LAW 75 ing in Albany molding sand was imposed upon and assumed by him. Then, further, I do not think that the finding of fact that the agreement of 1893 was treated by the parties as at an end is without support in the evidence. The trial judge could reasonably infer from the facts testified to that the defendant had stopped paying to the plaintiff the $15 a month for some two months before the agreement of 1895, and that the plaintiff thereupon had resumed his dealings in sand until the contract of 1895 was made; that the parties regarded their arrangement as terminated, and had abandoned it. I think, therefore, that the contract of 1895, which is found to have been made by the parties and carried into execution, was valid and enforceable, unless, as it is, in the second place, contended by the appellant, it was against public policy, as being in restraint of trade, and therefore void. The argument in that respect seems to be that the contract was the plaintiff’s covenant not to do business in molding sand anywhere, and was not connected with a transfer of anything in the way of a business or a plant. As to the plaintiff’s agreement, the appel- lant is incorrect as to the general nature of its restraint upon the plaintiff. The finding is, and the evidence supports it, that the plaintiff’s agreement related only to the purchase and sale of Albany molding sand; that is, molding sand from the county of Albany. However, I should not regard it as of any con- trolling importance if it were as broad as the appellant claims. The feature which is said to distinguish this case from our prior decisions upon the subject is that the plaintiff’s agreement was unaccompanied by the sale of any business plant or stock. At the time of contracting with the defendant he had neither. He was engaged in the business of buying and selling Albany molding sand, and was, presumably, a business rival of the defendant. By this contract he agreed to discontinue his busi- ness, and to turn over to the defendant all orders for sand which he then had or might thereafter receive. The effect of the arrangement was to transfer to the defendant the good will or custom of the business which he had built up, and to cease to be its competitor to the extent described. That a man may not contract as he will with respect to himself or to his property rights demands the intervening of some authoritative reason, founded in considerations of public policy. The denial of the 76 COMBINATIONS AND RESTRAINT OF TRADE right can only be reasonable when to permit its exercise is seen to be fraught with consequences injurious to the interests of society. The state has a right to limit individual rights where their exercise touches the public interests, and, if unrestrained, would be prejudicial to order or to progress. The doctrine which avoids a contract for being one in restraint of trade is founded upon a public policy. It had its origin at a time when the field of human enterprise was limited, and when each man’s industrial activity was, more or less, necessary to the material well-being and welfare of his community and of the state. A discussion of the doctrine and the history of the law appear in the cases of Match Co. v. Roeber, 106 N. Y. 473, and of Leslie v. Lorillard, 110 N. Y. 519, 1 L. R. A. 456. The conditions which made so rigid a doctrine reasonable no longer exist. In the present practically unlimited field of human enterprise there is no good reason for restricting the freedom to contract, or for fearing injury to the public from contracts which prevent a person from carrying on a particular business. Interference would only be justifiable when it was demonstrable that, in some way, the public interests were endangered. But contracts between parties, which have for their object the removal of a rival and competitor in a business, are not to be regarded as contracts in restraint of trade. They do not close the field of competition, except to the particular party to be affected. To say, at the present day, that such a contract as was made in this case was affected by a public interest and was a matter of public concern would be, in my opinion, unreasonable. Such a contract not only does not obstruct trade, but it may be for the advantage of the public as well as of the individual. Story, Cont. § 551. Heretofore, in most of the cases which have come before the courts, the covenant to refrain from a calling within a territory described accompanied a sale of the business itself, with all its appliances or appurtenances. For obvious reasons, that would be so; but, if the calling be one which is followed without a business plant, is any principle of public policy the more violated by a covenant to discontinue it? Clearly not, and this court has not held to that effect. Indeed, its utterances have intimated to the contrary. Leslie v. Lorillard, supra, is much in point, where the contract was that a steamship company would, in consideration of monthly payments, discontinue its THE COMMON LAW 17 business of running vessels between certain ports. The contract was not considered to be objectionable. Quite recently it was said by Judge Landon, speaking for this court, in the case of Cummings v. Stone Co., 164 N. Y. 401, that ‘‘it may be conceded that the law, as now understood, restrains no one from selling his property, nor does it compel any one to continue a business which he can sell or finds it to his interest to abandon, much less to continue it for any time or in any particular manner or place.”? The Match Case, the Leslie Case, and the case of Tode v. Gross, 127 N. Y. 480, 18 L. R. A. 652, were cited and relied upon. In Brett v. Ebel, 29 App. Div. 256, Mr. Justice Barrett considered a similar question, and it was there held that the contract in question, which involved only the sale of the good will of the particular business, was not within the application of the doctrine. The plaintiff exercised his right to agree to go out of the business, for an advantage deemed to be gained by him in so agreeing, and he also agreed to turn over to the defendant his good will and custom. I think the contract did not come within the condemnation of the law. The case of Francisco v. Smith, 143 N. Y. 488, is not at all opposed to this view. It was stated in the opinion, what is an evident fact, that an agreement not to engage in a particular business is a valuable right, in connection with the business it was designed to protect, and that if the business had not been disposed of there would have been nothing for the agreement to operate upon. In that case the covenant accompanied the transfer of the business, and the vendee was held capable of further assigning the covenant, in connection with his sale of the business, to another. I think the judgment should be affirmed, with costs. PaRKER, OC. J., and O’Brien, CULLEN, and WeERrNEs, JJ., con- cur. Haieut, J., absent. Lanpon, J., not sitting. Judgment affirmed.14 14—See Mapes v. Metcalf, 10 No. strued as sale of good-will of a Dak. 601 (contract to refrain from printing business pure and simple carrying on printing business, the and a restriction by the covenantor consideration being a share in the —held legal). covenantee’s printing business—con- 78 COMBINATIONS AND RESTRAINT OF TRADE OAKDALE MANUF’G CO. v. GARST (Supreme Court of Rhode Island, 1894. 18 R. I. 484.) Bill in equity by the Oakdale Manufacturing Company and others against Sebastian Garst for an injunction to restrain the defendant from carrying on business in violation of the follow- ing agreement: ‘And it is further mutually covenanted and agreed by and between the parties hereto, each for himself, however, and not for the others, that they will not engage, directly or indirectly, in any business of the same kind, or for the same purpose or purposes, as that to be carried on by the corporation to be formed; nor will they directly or indirectly be concerned in or be interested in any firm, firms, corporation, or corporations engaged in the same business or business similar to the business of the corporation to be formed for the period of five years from and after the date of this agreement.’’ The complainant, the Oakdale Manufacturing Company, is the corporation organized by the other parties to the suit, under the laws of the state of Kentucky, in pursuance of the agreement referred to in the opinion of the court. Arnold Green, Richard B. Comstock, and Rathbone Gardner, for complainants. Simon 8. Lapham, for respondent. STINESS, J. The complainants seek an injunction against the respondent to restrain him from violating his covenant that he would not engage or be concerned in, directly or indirectly, the manufacture or sale of butterine or oleomargarine, for the space of five years from the date of the covenant. Prior to April 30, 1891, the parties carried on that business separately, when they agreed to unite and form a corporation for the pur- pose of carrying on their business together. To this end, all the parties turned in the stock, machinery, accounts, and good will of their respective concerns, at a valuation greatly in excess of the value of the property itself, taking an amount of stock in the corporation represented by such valuation. The corpora- tion has carried on the business since that time. In August, 1892, the defendant sold his stock in the company, to present holders, for $60,000, although, as he says, the property it repre- sented was worth only about $28,000. After this he entered the THE COMMON LAW: 79 same business again, and claims the right to do so upon the following grounds, viz. : (1) That he was induced to enter into the contract through false and fraudulent misrepresentations of the complainants. (2) That the contract is void as a combination to raise the price of a necessary and useful commodity in trade, and to stifle competition. (3) That one purpose of the contract was to form a corpora- tion in violation of the laws of this state. (4) That, the contract being in restraint of trade, its enforce- ment is unreasonable. As to the first defense, it is sufficient to say that we do not find it to be supported by the evidence. The respondent knew perfectly well what he was doing in making the arrangement, and agreed to it freely. The facts that one of the companies was using a secret process to preserve the freshness of the prod- uct, so that it could be exported to tropical climates, and that it was engaged to some extent in such export are shown by the proof. In support of the second ground of defense, the respondent cites cases of contracts to create a monopoly and to force prices. Such was People v. North River Sugar Refining Co., 54 Hun. 354, a proceeding to vacate the charter of the company because it had become a partner in the ‘‘Sugar Trust.’’ The unlaw- fulness of such a combination was largely dwelt upon, but in the court of appeals (121 N. Y. 582) the decision was sus- tained only upon the ground that the company had prac- tically relinquished its corporate functions, and so had for- feited its franchise. Arnot v. Coal Co., 68 N. Y. 558; Craft v. McConoughy, 79 Ill. 346; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 178; and Emery v. Candle Co., 47 Ohio St. 320, were cases where contracts, based upon a monopoly, were held to be invalid. Undoubtedly, there may be combinations so destructive of the right of the people to buy and sell and to pursue their business freely that they must be declared to be void upon the ground of public policy. In such cases the injury to the public is the controlling consideration. But it does not follow that every combination in trade, even though such combination may have the effect to diminish the number of competitors in business, is therefore illegal. Such 80 COMBINATIONS AND RESTRAINT OF TRADE a rule would produce greater public injury than that which it would seek to cure. It would be impracticable. It would for- bid partnerships and sales by those engaged in a common busi- ness. It would cut off consolidations to secure the advantages of united capital and economy of administration. It would pre- vent all restrictions and exclusive privileges, and hamper the familiar conduct of commerce in many ways. There may be many such arrangements which will be beneficial to the parties, and not injurious to the public. Monopolies are liable to be oppressive, and hence are deemed to be hostile to the public good. But combinations for mutual advantage, which do not amount to a monopoly, but leave the field of competition open to others, are neither within the reason nor the operation of the rule. This is well put in Skrainka v. Scharringhausen, 8 Mo. App. 522, where 24 owners of stone quarries, on account of a ruinous com- petition, which made it impossible to work their quarries at a profit, made an agreement to sell through a common agent for the space of six months, and the agreement was sustained. The court says: ‘‘But not every agreement in restraint of trade is illegal. Where the contract injures the parties making it, by diminishing their means for supporting their families, tends to deprive the public of the services of useful men, discourages the industry, diminishes the production, prevents competition, enhances prices, and, being made by large companies or cor- porations, excludes rivalry, and engrosses the markets,—tends to ‘make a corner,’ to use the slang of the stock and provision gamblers,—it is against the policy of the law. But restraints upon trade imposed by agreement, under limitations as to local- ity, time, and persons, are not necessarily restraints of trade in the general sense which is objectionable.’’ So in Tode v. Gross, 127 N. Y. 480, the defendants had sold their busi- ness of making cheese by a secret process, under a general restriction not to engage in the business for five years, with reference to which it is said: ‘‘The covenant was not in gen- eral restraint of trade, but was a reasonable measure of mutual protection to the parties, as it enabled the one to sell at the highest price, and the other to get what they paid for. It imposed no restriction on either that was not beneficial to the other by enhancing the price to the seller or protecting the purchaser. Recent cases make it very clear that such an agree- THE COMMON LAW 81 ment is not opposed to public policy, even if the restriction was unlimited as to both time and territory. The restriction under consideration, however, was not unlimited as to time.’’ These two cases state a very sensible rule, both as to the public and the parties, and they are exactly like the case before us. Here there is no monopoly. Three of the four companies in New England in this line of manufacture agreed to unite; one inducement being to stop the sharp competition then existing between them. But even so, not only is the field open to the other company, equal in strength to either of these, but it is also open to com- petition from companies in other parts of the country and to the formation of new companies. This is neither monopoly, nor such an approach to it as amounts to the same thing. It is the common occurrence of.a consolidation of firms. It is not illegal on the ground of reducing competition.!® 15—Accord: Anchor Electric Co. v. Hawkes, 171 Mass. 101; Mere- dith v. New Jersey Zine & Iron Co., 55 N. J. Eq. 211. In the latter case Pitney, V. C., said: **Tt remains to consider the ques- tion of illegal combination, which would subject the new corporation to an attack by the attorney gen- eral. Upon such consideration as the four days allowed me for that purpose has permitted me to give the subject, I think that there is nothing in that ground. ‘‘The circumstances show that it is not the object or purpose of the contract to create a monopoly. The affidavit of the president of the New Jersey Zinc & Iron Com- pany shows that the zine ores which ‘will be controlled by it after these several purchases constitute but a small fraction of the world’s supply, and that its product of zine will also be but a small fraction of that produced throughout the country. Besides, buying up by one corporation of the property of another, and consolidating the Kales R. of T. Vol. I—6 whole into one business, to the ex- tent and in the manner provided for in this agreement, is not, in my judgment, contrary to publie pol- icy, nor does it tend to create a monopoly. The question was care- fully examined by Vice Chancellor Green in Ellermann v. Stockyards Co., 49 N. J. Eq. 217, and that opin- ion was reviewed and reaffirmed in the subsequent case of Willoughby v. Stockyards Co., 50 N. J. Eq. 656, heard by both Vice Chancellor Green and Vice Chancellor Van Fleet, and they concurred in the same result. “It must be remembered, in this connection, that these companies are not exercising any public fran- chise of carrying passengers or goods, but only the franchise of being a corporation. Their busi- ness is one that may be conducted by private individuals. They are simply the owners of a certain species of property which in its natural state is of no use to man- kind, and which after it. has been manufactured and made fit for use can hardly be classed as a neces- 82 COMBINATIONS AND RESTRAINT OF TRADE With reference to the third ground of defense, it does not appear that the agreement in any way violates the laws or policy of this state, and if it did, the defendant, being a party to it, could not set it up. Chafee v. Manufacturing Co., 14 R. I. 168. The mere fact that the complainant corporation is created under the laws of the state of Kentucky is not sufficient to warrant a dismissal of its case, for foreign corporations have frequently been recognized as suitors in this court. Bank v. Kendall, 7 R. I. 77; Machine Co. v. York, 11 R. I. 388; Smelting Co. v. Smith, 13 R. I. 27; Manufacturing Co. v. King, 14 R. I. 511. They are also recognized as doing business here by comity. Pierce v. Crompton, 13 R. I. 312. While the fact that citizens of Rhode Island go to Kentucky for an act of incorporation is one that naturally excites curiosity, if not suspicion, as to the motives and good faith of the concern, yet so long as it pursues a lawful business, and violates no law of this state, we do not see how we can refuse to recognize it. True, the advantages of yearly statements and liability of stockholders, given to creditors under our statute, are wanting; but that is a matter for those who deal with the corporation to consider. We can hardly deny the right of a foreign corporation to do business in this state, upon considerations of public sity. The law forbidding forestall- ing the market does not, in my judgment, apply to the purchase of such property. Jac. Law Dict.; Bouv. Law Dict. tit. ‘Forestall- ing.’ By the law of the land these owners have the right to ex- ercise their own judgment as to when, if ever, and how, they will spend their money in preparing their property for market and ren- dering it fit for use by mankind. Now, I am unable to find any foun- dation, either in law or in morals, for the notion that the public have the right to have these private owners of this sort of property con- tinue to do business in competition with each other. No doubt the public has reasonable ground to policy, when our own statutes entertain the hope and expectation that its individual members will generally, in their several strug- gles to acquire the means of com- fortable existence, compete with each other. But such expectation is based entirely upon the exercise of the free will and choice of the individual, and not upon any legal or moral duty to compete, and can never, from the nature of things, become a matter of right on the part of the public against the indi- vidual. In fact, the essential qual- ity of that series of acts or course of conduct which we call ‘competi- tion’ is that it shall be the result of the free choice of the individ- ual, and not of any legal or moral obligation or duty.’’ THE COMMON LAW 83 (Pub. Laws, ec. 1200) expressly provide for corporations formed in this state for carrying on business out of the state. The fourth ground of defense involves the reasonableness of the restrictive covenant. The test of reasonableness is the test of validity in contracts of this kind. The test is to be applied according to the circumstances of the contract, and it is not to be arbitrarily limited by boundaries of time and space. There has been much discussion upon this subject, which need not be repeated. The law has advanced, pari passu with social progress, to a point of practical unanimity. The rule, now generally received, has been recognized in this state, that contracts in restraint of trade are not necessarily void by reason of universality of time (French v. Parker, 16 R. I. 219, nor of space (Herreshoff v. Boutineau, 17 R. I. 3; but they depend upon the reasonableness of the restrictions under the conditions of each case. The diversity of these conditions produces an apparent diversity of decision, and yet it will be found upon examination that most of the cases really turn upon the reasonableness of the restriction. For example, in Wiley v. Baumgarden, 97 Ind. 66, cited by the respondent, sale was made of a dry-goods store, with the vendor’s agreement not to engage in the dry-goods business for five years; and in Herreshoff v. Boutineau the agreement was not to teach within this state. In these cases the subjects of the contracts were of a purely local character, and outside restraint was unreasonable. On the other hand, in Thermometer Co. v. Pool, 51 Hun. 157, where the business was extensive, restraint within the entire territory of the United States, and in Tode v. Gross, 127 N. Y. 480, unlimited restraint as to territory, were sus- tained. The contract is to be determined by its subject- matter and the conditions under which it was made; by considerations of extensiveness or localism, of protection to inter- ests sold and paid for, or mere deprivation of public rights for private gain, of proper advantage on one side, or useless oppres- sion on the other. In this case the contracting parties were all capable business men. They knew what they were about. The clause objected to was mutually beneficial and equally restrict- ive. The respondent was to gain as much advantage from it as any of the others, so long as he remained in the company, and in case of sale it would enhance the value of his stock. And this 84 COMBINATIONS AND RESTRAINT OF TRADE it did; for, when he sold his stock, he received for it more than double what he testified the property was worth. Having received this large price for his stock, he now seeks to destroy . its value upon the ground that the original agreement was unrea- sonable. The circumstances show that it was not unreasonable. The parties contemplated an extensive business, with a special effort to develop an export trade. No limitation of foreign coun- tries could be made in advance, for the company was to seek its markets. In this country it might need to set branches in dif- ferent parts for the sale or manufacture or exportation of its products. Time was needed to ascertain what could be done, and where, and so the term of five years was agreed upon within which the company should be free to seek its field of operation. To allow the respondent now to overthrow that agreement would be grossly inequitable. We think the complainants are entitled to the relief prayed for. WICKENS v. EVANS (Court of Exchequer, 1829. 3 Younge & Jervis, 318.) Assumpsit. The first, count of the declaration stated, that, before and at the time of making the articles of agreement, and the promise and undertaking of the said defendant there- inafter next mentioned, the said plaintiff was a box-maker, and the trade, business, and calling of a box-maker had used, exer- cised, and carried on, and still did use, exercise, and carry on, on to-wit, at Oxford, in the County of Oxford; and whereas, before and until the making of the said articles of agreement, the said plaintiff, from time to time, traveled, by himself and his servants, into various parts of the country, and of the several districts in the said articles of agreement mentioned and referred to, for there vending trunks and boxes, by him made in his said trade, business, and calling; and the said defendant and one William Fletcher also severally and re- spectively exercised and carried on the said trade, business, and calling of box-makers, and, severally and respectively, traveled into various parts.of the country and of the several districts aforesaid, for there severally and respectively vending THE COMMON LAW 85 and selling trunks and boxes, to-wit, at Oxford, aforesaid, in the county aforesaid; and thereupon, theretofore, to-wit, on, &e., at, &c., by certain articles of agreement, bearing date a certain day and year, to-wit, &c., then and there made and entered into, between the said William Fletcher, of the first part; the said defendant, of the second part; and the said plaintiff, of the third part; reciting, that, whereas the said William Fletcher, Daniel Evans, and Joseph Wickens had, for several years last past, traveled into various parts of the coun- try, vending trunks and boxes for sale, but, on account of the inconvenience and loss which they severally acknowledged to sustain, by reason of their exercising their trade and calling in places which they wished to keep separate and distinct from each other, they, the said William Fletcher, Daniel Evans, and Joseph Wickens, had, in consideration thereof, agreed to divide the same, and enter into the terms and conditions thereinafter mentioned relative to such division, (that is to say), the said William Fletcher, Daniel Evans, and Joseph Wickens did thereby, severally and respectively, agree with each other to divide, and not interfere with certain districts of the several cities, boroughs, towns and villages, set, forth on Bowles’s Post- map of England and Wales, thereto annexed and referred to, and signed with the respective proper handwriting of the said William Fletcher, Daniel Evans, and Joseph Wickens, it being the true intent and meaning of the said parties thereto, and of those present, that the said William Fletcher should and might, at all times thereafter, during the life of the said William Fletcher, by himself and his agents (duly authorized only), travel into, to sell trunks and boxes in his way of business, without any interruption whatsoever by the said Daniel Evans and Joseph Wickens, or either of them, during their joint natural lives, in the several cities, boroughs, towns and villages, marked with ink, and set out with black cotton, so set forth and described on the said map, as aforesaid; and also, that the said Daniel Evans should and might, at all times thereafter, during the life of him and the said Daniel Evans, by himself and his agents (duly authorized only), travel into, to sell trunks and boxes in his way of business, without any interruption what- soever by the said William Fletcher and Joseph Wickens, or either of them, during their joint natural lives, in the several 86 COMBINATIONS AND RESTRAINT OF TRADE cities, boroughs, towns, and villages, marked with ink, and set out with black cotton, so set forth and described on the said map, as aforesaid; and also, that the said Joseph Wickens should and might, at all times thereafter, during the life of him the said Joseph Wickens, by himself and his agents (duly authorized only) travel into, to sell trunks and boxes in his way of business, without any interruption whatsoever by the said William Fletcher and Daniel Evans, or either of them, during their joint natural lives, in the several cities, boroughs, towns, and villages, marked with ink, and set out with black cotton, so set forth and described on the said map, as aforesaid. And it was thereby further agreed by and between the said parties thereto, that they, and each of them, should also be at liberty to travel, for such purposes of trade as aforesaid, during their joint natural lives, as aforesaid, to all such other places as might thereafter be built, although not set forth on the said map, so as such trading should not interfere with either of the said districts of the said parties thereto, so respectively marked out on the said map as aforesaid; and also, it was thereby further agreed by and between the said parties thereto, that they should not, directly or indirectly, allow or suffer any goods in their said trade to be manufactured at their respective shops or warehouses, or be sent from their or his respective shops, houses, or warehouses, or from any other place, for the purpose of being sold or disposed of, on the ground to be traveled by the said parties thereto, so marked out on the said map as aforesaid, or in any manner whatsoever participate in any profits arising from any sale of the said goods in such respective districts as aforesaid, and so thereby agreed to be divided as aforesaid; and also, should not aid and assist any person or persons whomsoever, to oppose all, any, or either of the said parties thereto, in the said trade, in England and Wales; and it was thereby further mutually agreed by and between the said parties thereto, that they and each of them should not nor would, during their joint natural lives, as afore- said, buy or purchase any tea chest or chests, black or green, at a higher price than 6d. or 8d. each, in Oxford; and it was thereby lastly agreed by and between all the said parties thereto, that they should not, by themselves, or either of them by him- self, nor should their, or either of their servants or agents in THE COMMON LAW 87 that behalf, travel into the districts of each other, so set forth on the said map, or into any other place which might be there- after built, forming the route of either of the said parties thereto, in the way of their or his said trade and business, to the injury and prejudice of each other. And for the true performance of that agreement, each of the said parties thereto bound himself unto the other of them, in the sum of £40 as to the sale of trunks and boxes, and £10 as to the purchase of any tea chest or chests, black or green, at a higher price than above stated, for each and every offense or infringement of all or any of the clauses above contained, to be recovered by way of liqui- dated damages, against the party or parties who should be guilty of any breach of that agreement, or of any part thereof. And, moreover, it was further agreed, that if, at any time thereafter, during the joint natural lives of the said parties thereto, any person or persons should set up and oppose any or either of the said parties, in the said trade of box and trunk making in England and Wales, then, that the said parties thereto should and would meet together, and enter into such mutual agreement, to the intent therein above agreed to, as should be beneficial to the mutual interests of the said parties thereto, it being their, and each of their, true intention, not to do any act, prejudicial to the interests of each other, but to aid and assist each other in the said trade and business, to the utmost of their power. Breach—That the said defendant, not regarding the said articles of agreement, nor his said promise and undertaking, did, afterwards, to wit, on, &., and at and on divers, to wit, nine other times and occasions, between that day and the day of exhibiting the bill of the said plaintiff against the said de- fendant, travel, by himself and his servants and agents in that behalf, into the district of the said plaintiff, so set forth on the said map, in the way of his, the said defendant’s, said trade and business, to the injury and prejudice of the said plaintiff, and did thereby commit divers, to wit, ten offenses and infringe. ments of the said articles of agreement against him the said plaintiff, whereby, and according to the form and effect of the said articles of agreement, the said defendant forfeited and became liable to pay to the said plaintiff the sum of £40 of lawful money of Great Britain, for each and every of said 88 COMBINATIONS AND RESTRAINT OF TRADE offenses and infringements of the said articles of agreement by him the said defendant, amounting together to a certain large sum of money, to-wit, the sum of £400, &c. The second count, after setting forth the agreement as in the first count, proceeded to aver, as breaches, that the defendant, on divers, to-wit, nine times and occasions, did travel, by him- self, and his servants and agents in that behalf, into the district of the plaintiff, in the way of the defendant’s trade and busi- ness, and did, at and on each of those times and occasions, sell and dispose of divers large quantities of trunks and boxes, in the way of his said trade and business, amounting, in the whole, to a large sum of money, to-wit, the sum of £3,000, and thereby. hindered and prevented the said plaintiff from selling and disposing of divers and very many trunks and boxes, which he otherwise might and would have there sold and disposed of, &c. General demurrer to the first and second counts, and joinder therein. Taunton, W. H., in support of the demurrer.—The agree- ment stated in the first and second counts of this declaration, operates in general restraint of trade, and is, therefore, void, or it is an agreement for a partial restraint, without a sufficient consideration. From the recitals, it appears to have been the object of the parties, to avoid the inconveniences they ex- perienced, as competitors, from underselling each other, which, however, although a loss and a prejudice to them, was a benefit to all the subjects of the realm. The intent of each party is, to monopolize the business of a box-maker, and to secure to him- self an exclusive sale in the particular district marked out on the map; and, for this purpose, each engages not to manufac- ture or sell goods, or to aid other persons in manufacturing or selling goods, to be sent into the districts of the other parties, and not to travel into those districts. They are not to purchase tea chests in Oxford at a higher price than is agreed upon; and, if they meet with any opposition, they are to concert measures for their own benefit. All these stipulations are in- consistent with the policy of the law; and the combination is illegal. Now, it is quite clear, that any agreement for the total restraint of trade, that is to say, an agreement whereby an individual is restrained from trading throughout the whole THE COMMON LAW 89 realm, during his life, is bad; but it is conceded, that a partial restraint may be good, provided there is sufficient legal con- sideration. This distinction has been long admitted and acted upon. Prugnell v. Goss, All. 67, Broad v. Jollyfe, Cro. Jac. 596, Anonymous, Moore, 114, 2 Wms. Saunders, 156, n. 1. In Claygate v. Batchelor, Ow. 143, S. C. Cro. Eliz. 872, it was held, that the condition of a bond, restraining an apprentice from using the trade of a haberdasher within the county of Kent and the cities of Canterbury and Rochester, for the space of four years, was against law. Three reasons are assigned for this judgment: ‘‘It is against the liberty of a freeman, and against the statute of Magna Charta, cap. 20, and is against .the commonwealth. And Anderson said, that he might as well bind himself that he would not go to church.’’ This decision is noticed by Parker, L. C. J., in his judgment in Mitchel v. Reynolds, 1 P. Wms. 181, wherein all the law upon this subject is fully explained. In Comyns’s Digest, Tit. ‘‘Trade’’ (D.), all the cases are collected, and the author lays it down, on his own authority, that ‘‘an obligation or promise, which restrains the total use of a man’s trade for four years, will be void.’’ In Davenant and Hurdis, cited in the Case of Monopolies, 11 Rep. 86, an ordinance by the company of Merchant Tailors of London, directing that every brother of the society should put out one-half of his clothes to some brother of the said society, who exercised the art of a cloth-worker, was declared to be against the common law and the freedom of the subject, and was, therefore, adjudged void. In that case, nothing operated to the total restraint of trade, inasmuch as the ordinance re- lated only to the brothers of the society. [Huiitocx, B.—But there was no consideration for the partial restraint.] There was a latent consideration arising from the obedience due from every member to the laws of the company, and an indirect benefit springing out of this by-law. The result of the decisions relative to the adequacy of the consideration is, that there must be an extrinsic, foreign and collateral consideration, dehors the instrument, and not merely such as arises, as in this case, only upon the face of the instrument itself. That was the case in Horner v. Ashford, 3 Bing. 322 (E. C. L. R. vol. 11). But, supposing that is not necessary, the only consideration here expressed amounts to an illegal combination between the three 90 COMBINATIONS AND RESTRAINT OF TRADE parties, to obtain a monopoly in their trade, throughout England. Such a combination, if good in the case of three persons, must be equally so with regard to any number. Thus, the brewers or distillers in London might enter into a similar agreement to divide the Metropolis into districts, the effect of which might be to supply the public with a commodity prepared with inferior ingredients, at a higher price. Cross, G. R., contra.—The law is correctly stated, when it is said, that no consideration can support an agreement operating as a general restraint of trade. Here, however, the restraint contemplated is not general, but confined to particular limits; and there is also an adequate and good consideration. The judgment in Mitchel v. Reynolds, 10 Mod. 180, and all the antecedent cases there referred to, clearly establish, that a contract, not to exercise a trade within a particular place or parish, is good, if made upon a fair and just consideration. That judgment also shows, that it is no good objection to a voluntary restraint, that it is against Magna Charta, or the liberty of the subject, for ‘‘Magna Charta provides against force and power, and not the voluntary acts of men; and if I sell my liberty to trade, it is no longer mine, but his to whom I sell it.”’ (10 Mod. 134.) In Colmer v. Clark, 7 Mod, 230, a bond, restraining the obligor from carrying on his trade within the city and liberty of Westminster and the bills of mortality, for a limited time, was held good in law, the restraint from the exercise of trade being confined to a particular district, and founded on a valid consideration. The case of Chesman v. Nainby, 2 Stra. 739, 8. C. Lord Raym. 1456, S. C. Bro. Parl. Ca. 349, was an action on a bond conditioned not to set up the trade of a linen-draper, or to assist or instruct any other person in the managing and carrying on of that trade, within the space of half a mile from the plaintiff’s dwelling-house, or of any other house, to which she, her executors or administrators, might think fit to remove. This bond was held to be valid, and the plaintiff obtained judgment, which was affirmed on error. In like manner, in Davis v. Mason, 5 Term. Rep. 118, a bond, not to practice as a surgeon, for fourteen years, within ten miles of the town of Thetford, where the plaintiff lived, was held good, although it was objected that the limits, as to time THE COMMON LAW. 91 and place, were unreasonable. Lorp Kenyon, C. J., in that case, observed: ‘‘I do not see that the limits are necessarily unreasonable, nor do I know how to draw the line. Neither are the public likely to be injured by an agreement of this kind, since every other person is at liberty to practice as a surgeon in this town.’’ This last observation applies forcibly to the agreement now in question, inasmuch as every other box- maker is at liberty to carry on business in any of the districts to which the agreement is referable. Nor is the consideration insufficient or invalid. ‘‘A consideration of loss or inconven- ience, sustained by one party at the request of: another, is as good a consideration in law for a promise by such other, as a consideration of profit or convenience to himself.’’—Per Lorp ELLENBOROUGH, C. J., in Bunn v. Guy, 4 East, 190-4. Here, then, there appears, upon the face of the agreement, to be a benefit obtained by the defendant, and a loss incurred by the plaintiff, at the same time that the public will not be deprived of the advantages arising from the competition of other box- makers, and, it is to be presumed, will obtain boxes and trunks cheaper from these three parties, by reason of the deduction of two-thirds from the expenses of traveling. The stipulation of the parties to aid and assist each other, is nothing more than is com- monly undertaken by all partners, and, therefore, cannot vitiate the contract. Taunton, in reply.—It is the policy of the law to support the freedom of trade; and, therefore, all contracts imposing particular restraints, are, prima facie, presumed to be void. In former times they were looked upon by the Courts with great jealousy, as appears from the strong expressions of Judge Hall (2 H. 5, f.5): ‘‘A ma intent vous purres aver demurre sur luy que le obligation est void, eo que le condition est encounire common ley, et per Diew si le plaintiff fuit icy, a trra al prison tang: ill ust fait fine au roy.’’ In all the cases cited there was an extrinsic consideration, independent of the agreement, and a loss and benefit before the agreement was entered into, as in the ordinary instances of a tradesman giving up the good-will of his business to his shopman or apprentice. GARROW, B.—This question, as it appears to me, is confined within a narrow compass; and, as we have all formed the same 92 COMBINATIONS AND RESTRAINT OF TRADE opinion, I shall state my view of it very shortly. The principles upon which the decisions upon subjects of this nature are founded, have been accurately stated; and, indeed, have so frequently and so long been acted upon, that they are now indisputable. A general, universal, restraint of trade, inas- much as it affects the public property, and the interests of the community, is bad; and those to whose interests it more immediately relates, cannot make it good by any consideration passing between themselves. But, it is submitted, that there may be, upon a good consideration, a partial restraint of trade; and that an agreement for that purpose is sustainable, and has been sustained. The legality of a partial restraint of trade has been established in a variety of cases; and the general trans- actions of mankind furnish daily instances of its existence. Without resorting to the aid of black cotton lines, in order to divide all England into districts, there is no man engaged in trade who does not, in effect, impose some restraint upon him- self in point of practice, by confining himself within a particular district, and circumscribing his trade within certain bounds. It has been supposed that the public are interested in preclud- ing the parties from entering into the agreement now in question; but, I think it very doubtful, whether the benefit of the public would be best consulted by these three persons continuing to travel over the whole country, or by each con- fining himself to the district marked out in the map. Let us see what is the case now presented. It appears, according to the recital in the agreement, that these three persons, in carry- ing on their business of box-makers, had traveled into various parts of the country to vend their boxes and trunks, and had sustained great loss and inconvenience by reason of exercising their trade in the same places. This is the mischief and evil recited in the agreement; and what is the remedy they propose? Not a monopoly, except as between themselves; because every other man may come into their districts and vend his goods: all they propose is, that they shall not carry on a rivalry, nor continue any longer to trade throughout the country. This, then, is only a partial restraint of trade. But, it is said that, admitting that to be so, there is no consideration extrinsic of the agreement itself; and that argument is illustrated by the cases of a master giving up his business to his apprentice or to THE COMMON LAW: 93 his journeyman. It strikes me, however, that, in the present ease, there is as good a consideration as in either of those al- luded to. Each party here, before the agreement is entered into, has a trade in all the districts; and he agrees to retire, and to relinquish that trade in two of those districts, in order to secure the others in undisturbed possession. An objection is then made to that part of the agreement, by which it is stip- ulated, that, in case other persons shall begin to trade as box- makers in any of the districts, the parties shall meet to devise means to promote their own views. What those means may be, it is unnecessary to surmise; but we cannot presume that they will be illegal; and, therefore, this stipulation does not affect the validity of the agreement. HULLOCK, B.—I think this demurrer ought to be disallowed. The question is properly stated, when it is said to be, whether there be a sufficient consideration. It is conceded that there may be an agreement for a partial restraint of trade, provided there be a good consideration. This doctrine is to be found in Comyns’s Digest, and is laid down in all the cases cited in the argument; and the question is said by Lord Kenyon, in Davis v. Mann, 5 East, 120, to have been at rest ever since the case of Mitchel v. Reynolds. I do not understand the principle upon which it is argued, that there is here no consideration, because it is not extrinsic or foreign to the instrument. The law makes no distinction of that kind, but looks whether there is, upon the face of the instrument, a good and valid consid- eration, that is to say, either a benefit to one party, or a loss to the other. Upon that rule I should say, that, upon the face of this instrument, there is a sufficient consideration. But, it is said, that the effect of this agreement is to create a monopoly; and that, by upholding its validity, we shall lead to other combinations for monopolizing trades. If the brewers or dis- tillers of London were to come to the agreement suggested, many other persons would soon be found to prevent the result anticipated; and the consequence would, perhaps, be, that the public would obtain the articles they deal in at a cheaper rate. Upon the whole, then, I cannot distinguish this case from any of those cited in which an agreement for a partial restraint of trade has been supported. 94 COMBINATIONS AND RESTRAINT OF TRADE VAUGHAN, B.—I am entirely of the same opinion. The only question is, whether there appears upon the face of this agreement a sufficient consideration for the partial restraint of trade it contemplates. In consequence of the loss and in- convenience which it is recited the parties has before sustained, they entered into this agreement, by which the loss and benefit to each is reciprocal. In my opinion, this was an honest and upright contract, which has been the question in all the cases; and a contract by which the public are not injured, as they may be supplied upon easier terms. Judgment for the plaintiff.1® NATIONAL BENEFIT CO. v. UNION HOSPITAL CO. (Supreme Court of Minnesota, 1891. 45 Minn. 272.) MITCHELL, J. This appeal is from an order overruling a demurrer to the complaint, and the sole question is whether it appears that the contract declared on is void on grounds of public policy as being in restraint of trade. The plaintiff, an Illinois corporation, and the defendant, a Wisconsin corpora- tion, were each organized for and engaged in the same business, to-wit, ‘‘issuing and selling, to such persons as might desire to purchase the same, certificates entitling the holders thereof, when sick or injured, to maintenance and to medical and sur- gical care, attention, and treatment in any hospital provided by said corporation, and to such support during the time said holders might be confined in such hospitals; and to provide hospitals, infirmaries, and such other places as might be neces- sary for the reception of the holders of the certificates issued by it without cost other than the cost of such certificates.’’ The plaintiff was carrying on this business in a large number of the states of the Union, and had established a large and lucrative 16—Jones v. North, L. R. 19 Eq. Co. v. Schoen, 77 Fed. 29 (where 426 (association of quarrymen by each party gave up some business which all sold their products to one for the benefit of the other and the who was to sell to the city, and the covenant of one party was held others agreed not to sell to the city. legal). Held legal) ; Fox Solid Pressed Steel THE COMMON LAW 95 business of the character described in the states of Minnesota and Wisconsin and in the northern peninsula of Michigan, and had acquired many valuable contracts with hospitals through- out that territory entitling the holders of its certificates to treatment in said hospitals. Thereupon the parties entered into the contract sued on, the principal features of which were: (1) That the plaintiff company agreed to refrain for the term of three years from selling certificates in the states of Minne- sota, Wisconsin, and the northern peninsula of Michigan, except to railroad employes. (2) The plaintiff also agreed, by every proper means in its power, to secure to the defendant partici- pation in all contracts and arrangements which it already had within that territory with hospitals, and whenever by such contracts it had the exclusive right to hospital service, so far as any company doing the same business was concerned, it would not consent to the substitution of parties other than defendant. (3) In consideration of these agreements on part of the plain- tiff, the defendant agreed to pay to it certain sums of money, and also to refrain, during said term of three years, from selling certificates to the employes of any railway corporation doing business within the territory mentioned. The business carried on by these two companies was open to be engaged in within this territory by any other person or corporation organized for that purpose. Shortly stated, the legal effect of this contract was a sale by _ plaintiff, for a valuable consideration, to defendant, of its busi- ness and good-will within the territory mentioned (except the right to sell certificates to railroad employes), with a stipulation that it would refrain from engaging in such business within that territory for three years, and a like stipulation on part of defendant not to engage in the department of the business reserved by plaintiff. It will be observed that the restriction is not general, but limited both as to space and time, and is only coextensive in space with the business transferred. Also, that the contract does not require either company to wholly refrain from engaging in the business for which it was organized, each remaining free to engage in it without restriction anywhere except within the designated territory; and, even in that, each may still pursue a certain department of such business. More- over, both companies are purely private corporations, organized 96 COMBINATIONS AND RESTRAINT OF TRADE for purposes of private gain, and hence not charged with any public duty. Neither one nor both of these companies have any exclusive right to engage in this business, it being one open to all; hence this contract does not, and cannot, create any monopoly. The most that can be claimed against it is that it reduces by one the number of competitors. Nor can it tend to exclude any one from hospital treatment, its only effect being to reduce by one the number of companies from whom persons desiring to secure in this form the right to hospital treatment could purchase these ‘‘benefit certificates.’ We feel safe in asserting that no modern decision can be found holding any such contract, under a similar state of facts, void because in restraint of trade. Formerly in England the courts frowned with great severity upon every contract of this kind. The reasons for this partly grew out of the English law of apprenticeship, by which, in its original severity, no person could exercise any regular trade or handicraft except after having served a long apprenticeship. Hence, if a person was prevented from pursuing his particular trade, he was practically deprived of all means of earning a livelihood, and the state was deprived of his services: No such reason now obtains in this country, where every citizen is at liberty to change his occu- pation at will. Moreover, as cheaper and more rapid facilities for travel and transportation gradually changed the manner of doing business, so as to enable parties to conduct it over a vastly greater territory than formerly, the courts were neces- sarily compelled to readjust the test or standard of the reason- ableness of restrictions as to place. And again, modern investigations have much modified the views of courts as well as political economists as to the effect of contracts tending to reduce the number of competitors in any particular line of business. Excessive competition is not now accepted as neces- sarily conducive to the public good. The fact is that the early common-law doctrine in regard to contracts in restraint of trade largely grew out of a state of society and of business which has ceased to exist, and hence the doctrine has been much modified, as will be seen by comparison of the early English cases with modern decisions—both English and American. A contract may be illegal on grounds of publie policy because in restraint of trade, but it is of paramount public policy not THE COMMON LAW 97 lightly to interfere with freedom of contract. It is unnecessary at this time to go over ground so often traveled by others, and enter into any extended consideration of the decisions on this branch of the law. The principal cases on the subject, from the Year Books down, will be found collated in 2 Parsons on Contracts, 748, and also in the notes to Mitchel v. Reynolds, 1 Smith, Lead. Cas. (9th Ed.) 694. See, also, Alger v. Thacher, 19 Pick. 51; Match Co. v. Roeber, 106 N. Y. 473; Beal v. Chase, 31 Mich. 490; and Navigation Co. v. Winsor, 20 Wall. 64. The general consensus of all the authorities, at least the later ones, is that there is no hard and fast rule as to what contracts are void as being in restraint of trade, but each case must be judged according to its own facts and circumstances; that a party may legally purchase the business and trade of another for the very purpose of removing or preventing competition, coupled with an undertaking on the part of the seller not to carry on the same business in the same place or within the same territory ; and the question of the reasonableness of the restraint of trade depends upon whether it is such only as to afford a fair protection of the party in whose favor it is made; and the limits of restraint as to space depend upon the kind of trade or business which is the subject of the contract. Tested by these rules we find nothing legally objectionable in the contract under consideration. In addition to cases cited above, see, also, Moore & H. Hardware Co. v. Towers Hardware Co., 6 South. Rep. 41. There are two classes of cases, some of which appellant has cited, which are often confounded with, but are clearly dis- tinguishable from, cases like the present and stand upon an entirely different footing. The one is combinations between producers or dealers to limit the production or supply of an article so as to acquire a monopoly of it and then unreasonably enhance prices. The other is where a corporation of a quast public character charged with a public duty, as a railway company, gas company, or the like, enters into a contract restrictive of its business which would disable it from perform- ‘ing its duty to the public. Neither of these elements enters into this case. Order affirmed. VANDERBURGH, J., did not sit. Kales R. of T. Vol. I—7 98 COMBINATIONS AND RESTRAINT OF TRADE UNITED STATES CHEMICAL CO. v. PROVIDENT CHEMICAL CO. (United States Circuit Court, Eastern Distr. of Missouri. 64 Fed. 946.) This was an action by the United States Chemical Company against the Provident Chemical Company for rent, on a lease. Trial by the Court, without a jury. AcTION For Rent. Defense that the lease is void, because antagonistic to public policy. On the 25th of September, 1888, the plaintiff company leased to Henry H. Welch, for the term of 10 years, from the 1st of September of that year, at a monthly rental of $1,000 per month, in advance, the building and equip- ment then used by it for the manufacture of bone tartar in Camden, N. J. The mutual covenants are expressed in seven paragraphs. The first stipulates for the right of entry for default in the payment of rent, and is of the usual character. The second prohibits the assignment of the leasehold or an underletting without the written consent of the lessor. 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 determination 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, then the lessor will not engage in the manufac- ture of bone tartar so long as the lessee shall continue to pay the rental of $1,000. The 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 tartar. The seventh 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 as- signs, that if said lessor will not, during the period that this lease may be in force, and that the rent herein reserved shall be paid as it falls due, ever manufacture or sell any bone tar- THE COMMON LAW: 99 tar.’’? 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 through 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. The plain- tiff was organized as a corporation under the laws of New Jersey, and had for a number of years been engaged in manu- facturing 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 derived from a common motor. The building which 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 the manufacturing purpose for which it had been rented. The defendant points to this incident as a clear indi- cation of a design, of which both parties must be cognizant, not to employ the 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 imme- diate 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 cal- cined bone or fossil and 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 manu- 100 COMBINATIONS AND RESTRAINT OF TRADE facturers of baking powder that the defendant had been culti- vating for years, and of which, so far as bone. tartar, its exclusive product, was used, it had almost the exclusive patron- age up to the time when the plaintiff began to produce bone tartar. The plaintiff’s first manufacture of said phosphate of calcium 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 defendant, especially adapted to the making of bone tartar, and early began to press this product upon 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 whereat the rival product was made. Its efforts resulted in the lease which is the basis of this suit. The quality of the plaintiff’s bone tartar was equal to that of the defendant’s. While the manufacture of acid phosphate of calcium was open to the talent and capital of any one, yet, to successfully make it, great skill and experience were required, and this skill had only been attained by the plaintiff and defendant, with a few unimportant exceptions, up 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 other departments of its business, so that he might not engage in starting a business that would compete with the defendant’s; and this the plaintiff, in a spirit of accommodation, consented, so far as it could with propriety, to do. The defendant, after the lease was made, purchased of the plaintiff all 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 from 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 the fact 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 THE COMMON LAW 101 in the lease is $12,000 per annum. Inasmuch as the lease con- tains 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 defend- ant; while, upon the other hand, the plaintiff contends that it is but a fair compensation for the profit 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 paid 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 in- fluences the defendant repudiated the lease, as contrary to the policy of the law. The plaintiff sues for the rent in arrear. 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 may be in force, is in restraint of trade, and for that reason void. The transaction in which this restric- tion appears is the leasing of premises and equipment especially devoted to the manufacture of bone tartar. The rental value of the real estate and buildings was between $2,000 and $2,500. The profits derived by the plaintiff from making and sale of bone tartar were from $10,000 to $12,000 per annum at the time the lease was made. It is manifest that the inducement moving the plaintiff to lease the premises was to obtain a fixed and certain sum, rather than a contingent and uncertain one; and the motive of the defendant was to get rid of a danger- ous and aggressive competitor in the trade of the article of which it was in practical control, and to the manufacture of which it was exclusively devoted. The plaintiff sought a trade for this article throughout the United States—an achievement which the defendant had already accomplished, being earlier in the field. In view of these conditions, is the covenant condemned by public policy? The restraint extends literally everywhere, but a fair con- struction would limit it to the United States. If valid to that 102 COMBINATIONS AND RESTRAINT OF TRADE 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, if 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 unneces- sarily hampers the vendor, that it becomes oppressive and void. Fowle v. Park, 181 U. 8. 88; 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; Lawson, Cont. § 327. Among the potent reasons first assigned against such con- tracts was that the person restrained by thus surrendering his chosen occupation—one for which he had been especially pre- pared—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: “Tt 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 unneces- sary restrictions. ‘If,’ said Sir George Jessell, 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 mis- use or excess of their powers, they can be called to an account by the state. It is better such control and regulation should be THE COMMON LAW 103 had by that ample authority than, indirectly, by a foreign forum, upon collateral questions 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 of any benefit it might derive from his entering into competition. But the business is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry. Such contracts do not create monop- olies. They confer no special or exclusive privilege.’’ That the contract in this case was ineffectual to create a monopoly, or even to confer a dominating control over the trade in bone tartar, is confessed to some extent by the answer, wherein it assumes, as a just reason for repudiating the con- tract, competition subsequently started. Acid phosphate of calcium is made by several processes. The plaintiff employed two—one from rock, and the other from bone. It leased the plant for making bone tartar only, reserving the other. The process was not discernible in the finished product. There is nothing in the contract from which we can reasonably infer a tendency to create a monopoly such as the law condemns. Even if an article be of prime necessity, the public is not concerned with who makes, but only with the reasonableness of, the price. But it is said that the defendant had, by its part in the trans- action, such a purpose in view. This may be. The intent is only condemned as it is manifested in an unlawful act. If a person does a lawful act with a vicious intent, he is without the pale of legal punishment. Whatever may have been the de- fendant’s motive, and even if reprehensible, there is no rule by which we may reprimand the plaintiff for the defendant’s evil or wrongful intentions or acts. Whether the defendant’s purpose is condemned by law or not does not affect the validity of the contract, unless plaintiff contributed something more to the accomplishment of the unlawful design than the mere leas- ing of its property. Labbe v. Corbett, 69 Tex. 503; Tied. Sales, § 294. But we are of the opinion that defendant has been 104 COMBINATIONS AND RESTRAINT OF TRADE hastily and unnecessarily self-accusing. The plaintiff was making inroads upon the defendant’s business, and greatly cutting the prices of its sole manufactured product, while with the plaintiff this product was but a single feature of its manu- facturing plant. The defendant had a perfect right to buy off the competition of a dangerous, powerful, and aggressive rival. The law of self-defense and protection applies to one’s business, as well as to his person. But, if another springs up in the stead of the one silenced, the courts cannot, under the guise of public expedience, relieve him from the improvidence of his first contract. Our attention has been called to many cases which condemn, in perhaps not too severe terms, combinations and trusts. It is a nervous and alarmed imagination which sees in every transac- tion involving large exchange of properties a monster threaten- ing public interests. Combinations in the nature of modern trusts, so soundly condemned, are those which aim at a union of energy, capital, and interest to stifle competition, and en- hance the price of articles of prime necessity and staples of commerce. In such cases there is absent the element of exchange of one valuable right or thing for another. In the contract here we find none of the elements of a combination or trust. It is a simple lease and sale for a fair and reasonable com- pensation, with stipulations only commensurate with a reason- able, necessary protection. The effect of the transaction, while not so literally expressed, was to convey with the premises the good will of the plaintiff in its bone tartar product and trade. It is both unnecessary and unprofitable to discuss the many cases cited in the briefs. Upon a topic of public expedience, adjudications 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. THE COMMON LAW 105 DUNBAR v. AMERICAN TELEPHONE AND TELEGRAPH COMPANY (Supreme Court of Illinois, 1909. 238 Ill. 456.) VICKERS, J. Francis W. Dunbar and others, minority stock- holders 17 of the Kellogg Switchboard & Supply Company (here- inafter called the ‘‘Kelloge Company’’) filed a bill in equity in the Circuit Court of Cook county against the American Tele- phone & Telegraph Company (hereinafter called the ‘‘ American Company’’), the Western Electric Company (hereinafter called the ‘‘Electric Company’’), the Kellogg Switchboard & Supply Company, Milo G. Kellogg, Wallace De Wolf, and others, for the purpose of having a sale of the majority of the stock of the Kellogg Switchboard & Supply Company made by Milo G. Kellogg and others to the American Company set aside and held for naught, and for an injunction and other relief. Milo G. Kellogg answered the bill, in which he substantially admitted all its averments, and filed a cross-bill, in which he repeated, with some variations and additions, the substantial averments of the original bill, and prayed that the pretended sale of the capital stock held by him in the Kellogg Company should be adjudged illegal and void and be canceled and set aside. Some of defendants below answered both the bill and the cross-bill, while others demurred to both. The demurrers were sustained, and the bills both dismissed for want of equity. This decree was affirmed by the Appellate Court, but upon further appeal to this court the decree sustaining the demurrer and dismissing the original bill was reversed, while the decree dismissing the cross-bill on demurrer was affirmed. This court remanded the cause to the Circuit Court, with directions to proceed in con- formity with the views of this court expressed in its opinion. Our former opinion is reported as Dunbar v. American Tele- phone & Telegraph Co., 224 Ill. 9, 115 Am. St. Rep. 182. Upon the reinstatement of the cause in the Circuit Court most of the defendants who had not already filed answers answered the bill. 17—For the proposition that a v. American Glucose Co., 182 Ill. 551, minority stockholder may maintain 625-633; also Bigelow v. Calumet & a bill based upon the illegal acts of Hecla Mining Co., 155 Fed. 869, the corporation in becoming a party post, p. 1195, and cases there cited. to an illegal combination: Harding 106 COMBINATIONS AND RESTRAINT OF TRADE Those not answering were either mere formal parties, or parties whose interests were represented and protected by the answers filed. After the issues were made up the cause was heard in the Circuit Court, the Hon. Thomas G. Windes presiding, upon oral evidence taken in open court, except certain portions of the testimony which was submitted in depositions. The findings of the Circuit Court were that the allegations of the bill were substantially true, and by its decree the purchase of the stock of the Kellogg Company by the American Company was de- elared void and of no effect, and the relief granted was such as the court deemed equitable, proceeding upon the assumption that the title to the stock of the Kellogg Company had never passed out of the persons who made the alleged sales to the American Company. The scope of the decree of the Circuit Court, both in its findings and its equity-adjusting features, will be more specifically stated hereinafter. Upon a writ of error being sued out of the Appellate Court, that court, while agreeing in the main with the Circuit Court in its findings, dis- agreed with the relief granted, and accordingly reversed the decree and remanded the cause to the Circuit Court, with direc- tions to enter a decree in accordance with the specific directions expressed in the opinion of the Appellate Court. The complain- ants in the original bill have appealed to this court, and here insist upon a reversal of the Appellate Court and an affirmance of the Circuit Court. Milo G. Kellogg has assigned cross-errors, as have also the American Company and Enos M. Barton. The cross-errors assigned by Kellogg do not materially differ from the errors assigned by appellants, while the cross-errors assigned by the American Company and Barton bring in question the decree of the Circuit Court. Upon the former hearing of this cause in this court the sub- stance of the bill filed by appellants was set out in the state- ment preceding the opinion. Since the American Company and others question by cross-errors the sufficiency of the evidence to support appellants’ bill, it will be necessary to restate the essen- tial features of the bill upon which the cause was finally heard. Appellants allege in their amended and supplementary bills that the Kellogg Company was an Illinois corporation, organized for the purpose of manufacturing, selling, hiring, leasing, or otherwise procuring, owning, and disposing of, electric tele- THE COMMON LAW 107 phone and telegraph instruments of all kinds; that the capital stock consisted of 5,000 shares, of $100 each; that Wallace L. De Wolf was the president, E. H. Brush the vice president, and Leroy D. Kellogg the secretary and treasurer of the company ; that upon its organization Milo G. Kellogg became the prin- cipal stockholder, owning about two-thirds of the capital stock. It is further alleged that the American Company was a corpora- tion organized under the laws of New York, and was doing business in this state and most of the other states of the Union; that said last-named company had become the owner of the business and stock of the American Bell Telephone Company of Boston, and that F. P. Fish was its president; that the American Company was the owner of a large amount of stock of numerous licensee or subsidiary telephone companies, and operated a large system of telephone and telegraph lines in the United States; that said American Company owned a majority of the capital stock of the Electric Company; that said corpora- tion and the Electric Company formed what is known as the ‘Bell Telephone Monopoly,’’ which for many years had exclu- sive control of the business in the United States as to the use of both telephone and telegraph apparatus, due to the numerous patents owned and controlled by said American Company; that the president of the American Company is also a director of the Electric Company; that the Electric Company is an Illinois corporation, engaged in the manufacturing, buying, and selling of electric apparatus used in the construction, operation, and maintenance of telephone and telegraph systems; that E. M. Barton is president of said Electric Company, and that he is dominated by Fish and the American Company through the latter’s control of the board of directors of said Electrie Com- pany. It is further alleged in the bill that telephones, switch- boards, and instruments and other apparatus of the independent telephone companies throughout the United States have been manufactured by a number of companies, the most important of which are the Kellogg Company and the Stromberg-Carlson Company, both of which are located in Chicago, and each of which exceeds in capacity the business of any other telephone manufacturing company in the United States except the Electric Company; that the business of the Kellogg Company exceeded that of the said Stromberg-Carison Company in supplying 108 COMBINATIONS AND RESTRAINT OF TRADE switchboards and other apparatus for the larger independent exchanges throughout the country; that, in consequence of the conditions and circumstances thus stated, it is charged in the bill that in order to stifle competition and create a monopoly in itself and its licensee companies, and to enable them to exact unreasonable and excessive rates and charges, the American Company conceived the illegal purpose of acquiring at least two-thirds of the stock of the Kellogg Company, and through said ownership to elect and maintain a board of directors which should not act in the real interest of the Kellogg Company, but in the interest of and subservient to the interest of the American Company, and thereby free that company and its licensees from the competition of the Kellogg Company and independent ex- changes. The bill charges, on information and belief, the method that said American Company contemplated adopting to accom- plish its unlawful purpose. The bill then sets out the circum- stances under which the American Company acquired, by purchase from De Wolf, an agent of Milo G. Kellogg, 3,307 shares of the Kellogg Company stock, and the acquirement, with like unlawful purpose, of 1,004 other shares of stock from other stockholders in the said Kellogg Company. The bill charges that these purchases were made by Barton, president of the Electric Company; that the money to pay for said stock was furnished by the American Company, and that the stockholders of the Kellogg Company of whom these shares were purchased by Barton were ignorant of the fact that they were selling to the American Company. It is charged that, by the contract entered into between De Wolf and Barton in regard to the sale of the Kellogg shares, Barton agreed to pay $45 per share in cash upon the delivery of the certificates, and also to pay, in addition, per share, the proceeds of any and all bills and ac- counts receivable due and owing to said Kellogg Company on December 1, 1901, amounting to $323,248.09, as the same are paid and collected; that it was also agreed that the business of the Kellogg Company should be carried on in the usual manner for the space of one year; that these transactions were all con- summated while Milo G. Kellogg was in California on account of ill health, and without his knowledge or personal participa- tion therein, and that as soon as he learned of said sale he heartily disapproved thereof and sought in every way to repur- THE COMMON LAW 109 chase his stock, in order that the Kellogg Company might be managed in the interest of its stockholders and not be used as an instrument to create and perpetuate in the American Com- pany a monopoly of the telephone business; that Barton and Fish, while willing to sell a portion of said stock, insisted upon retaining two-thirds thereof. The bill further charges a series of acts done by Barton through the officers and agents that had been placed in control of the Kellogg Company through the control it had acquired of a majority of the Kellogg Company stock, all of which acts are charged to be in furtherance of the illegal purpose of the American Company to disorganize and dissolve the Kellogg Company. The prayer of the bill was that a temporary injunction might issue, which, upon final hearing, should be made perpetual, restraining the American Company, Barton, Fish, and the Electric Company from selling or other- wise disposing of the shares of stock which they held in the Kellogg Company, aggregating 4,311 shares; that a meeting of the stockholders be convened, under the direction of the court, for the election of a new board of directors, and that the holders of the stock in question be enjoined from voting in said meeting any of said shares of stock, and that the said American Com- pany, Barton, Fish, the Electrie Company, and all of their officers and agents, be enjoined from attempting to dissolve or otherwise interfere with the interest and business of the Kel- logg Company, and that the sale of the shares of stock in the Kellogg Company to the American Company be set aside and held for naught. By a second supplemental bill filed by Francis W. Dunbar, Kempster B. Miller, and George L. Burlingame it is charged that in January, 1907, the meeting of stockholders of the Kel- logg Company was held in Chicago; that all the stock of said company was represented at the said meeting either by owners or proxies, and that Milo G. Kellogg attended said meeting and nominated for election a board of directors consisting of Dun- bar, Miller, Burlingame, Milo G. Kellogg, Leroy D. Kellogg, Edwards, and James G. Kellogg, and that one Charles S. Holt nominated the following board of directors: Buckingham, Brush, Hanford, Dommerque, De Wolf, Edwards, and Coffeen; that votes were cast for the directors as above named, by Milo G. Kellogg 3,405 shares, and by other persons, making a total 110 COMBINATIONS AND RESTRAINT OF TRADE of 3;736 shares out of 4,970 shares present, and that said board of directors were duly declared elected by Dunbar; that De Wolf, as president, presided at the said meeting; that Charles S. Holt, counsel for the American Company, was present, and claimed to be the proxy and owner of 3,305 shares of the 3,405 shares so owned and voted by Milo G. Kellogg in person; that said De Wolf, acting in the interest of the American Company and the Electric Company, refused to recognize the vote of Milo G. Kellogg in respect to 3,305 shares of stock, and claimed and pretended that the directors so chosen were not elected, but that in their place and stead the second set of nominees were elected, and that said second set of directors, other than Edwards, under the direction of the American Company, the Electric Company, and Fish and Barton, have assumed and pretended to be, and have acted as, the directors of said Kellogg Company. It is averred that Milo G. Kellogg was the owner of and entitled to vote the 3,305 shares of stock, and that the vote of such stock by Holt was void and of no effect. Said supplemental bill prays that Dunbar, Miller, Burlingame, Milo G. Kellogg, Leroy D. Kellogg, James G. Kellogg, and Edwards may be declared elected and to constitute the duly elected board of directors of the Kel- logg Company, and prays for an injunction against all persons interfering with the exercise of their duties as such board. Sub- sequently, by amendment, and supplemental bill, it was charged that on the 19th day of December, 1906, the Kellogg Company declared a dividend of 50 per cent upon all its capital stock, and that said company on that date paid to such American Company a dividend amounting to $215,550 upon 4,311 shares of stock of said Kellogg Company. The American Company denied, by supplemental answer, that it had received a 50 per cent. dividend, or a dividend of any per cent. or any amount, on any shares of stock of the Kellogg Company. A plea was interposed setting up the dismissal of the cross-bill and the affirmance thereof by this court as an adjudication that Milo G. Kellogg was not the owner nor entitled to said shares of stock, and for that reason was not entitled to vote said shares at the stockholders’ meeting on January 15, 1907. The foregoing statement is sufficient to show the general character of the bill. The findings and decree of the Cireuit Court may be summarized as follows: After reciting in detail THE COMMON LAW 111 the averments of the bill and finding the facts substantially as therein charged to be true, and specifically finding that the pre- tended purchase of 4,311 shares of stock by the American Com- pany, in its necessary operation at the time it was made tended and tends to materially suppress competition and creates in said American Company and its licensee companies a monopoly in the rendering of telephone service to the public throughout the United States and in the different cities and other places thereof, and that it was the intention and purpose of said American Company, in making each of the pretended purchases of said shares of stock, to so restrict and suppress competition in said telephone service and create in itself a monopoly in said service, and that said attempted purchases of stock by the American Company were contrary to the public policy of the state of Illi- nois and void, the decree finds that no title to said stock passed thereby from any of said sellers to said American Company or to said Barton, but that, despite said attempted sales, each of said sellers still remains the owner of the shares of stock so attempted to be purchased from him. The decree finds that the American Company paid De Wolf, as attorney in fact of Milo G. Kellogg, for the stock obtained from him, $351,229.44, and that the said American Company paid to the several owners thereof $114,036.48 for the other shares of stock, being a total of $465,265.92 which the said American Company paid for 4,311 shares of stock. The decree finds that on December 19, 1906, the Kelloge Company declared a dividend of 50 per cent. upon all its capital stock being then under the control of the Amer- ican Company, and on that date paid to said American Company, and said American Company received, the dividend of 50 per cent. upon the 4,311 shares of stock which the said American Company claimed to own. The dividend paid to the American Company on this date was $215,550. The decree recites the pro- ceedings of the stockholders’ meeting in January, 1907, and finds that the set of directors nominated and voted for by Milo G. Kellogg were duly elected directors of the Kellogg Company, and that said Kellogg was entitled to be recognized as a stockholder of the Kellogg Company, with the right to vote the shares of stock attempted to be sold by De Wolf to the American Com- pany, and that the other set of directors, other than Edwards, were not elected directors of the said company. Following 112 COMBINATIONS AND RESTRAINT OF TRADE these findings, the decree of the Circuit Court ordered, adjudged, and decreed that Milo G. Kellogg and the other stockholders of the Kellogg Company who had made a pretended sale to the American Company are still severally the owners of such shares of stock, aggregating 4,311 shares, and a permanent injunction is granted restraining the Kellogg Company, and its agents and officers, from refusing to recognize such parties as stockholders and from rejecting the votes of any of them except in so far as the injunction might be modified, and also from recognizing and treating said American Company, or any of its assigns, as the owner or owners of any of the said 4,311 shares of stock; that the temporary injunction heretofore issued against the American Company and others be made perpetual. The board of directors declared to have been elected by De Wolf at the January meeting are enjoined perpetually from exercising any of the powers or privileges of directors of said Kellogg Com- pany, and from in any way interfering with the conduct or management of the business affairs or the possession or control of the property, books, or papers of said Kellogg Company, unless hereafter duly elected such directors in said company. De Wolf and Dommerque were perpetually enjoined from act- ing as president and secretary, respectively, of the Kellogg Com- pany. By the seventh paragraph of the decree it was ordered, adjudged, and decreed that the American Company, within 10 days from the 15th day of February, 1908, deposit with the clerk of the Circuit Court, duly indorsed in blank or to the order of the clerk of said court, all of the certificates of stock representing or purporting to represent 4,311 shares of stock so attempted to be purchased by said American Company, and, if necessary to enable him to make distribution of said shares ac- cording to the decree, said clerk ig authorized to surrender such certificates, and that the Kellogg Company should issue in lieu thereof other like certificates of stock, aggregating 4,311 shares. By the eighth paragraph of the decree it is ordered, adjudged, and decreed that within 20 days after said certificates shall have been deposited with said clerk, and any of said sellers to the American Company of said stock shall have been served with notice of the deposit of said certificates with said clerk, said seller may deposit with such clerk a certified check upon a Chi- cago bank, payable to the American Company, for the difference THE COMMON LAW 113 between the purchase price paid by the American Company for the said stock, plus the interest at the rate of 5 per cent. per annum thereon from the time or times when payment or pay- ments were made to the date of said deposit of said check, and the sum of 50 per cent. of the par value of said stock, plus inter- est thereon at 5 per cent. per annum from. December 19, 1906, to the date of the deposit of said check, and upon delivery of such certified check to the clerk said clerk shall forthwith de- liver to the seller so depositing such check a certificate, duly indorsed, for the number of shares so attempted to be sold by said seller to the American Company, and shall deliver said check to the American Company. The decree names the several sellers of stock and the number of shares that each is entitled to receive under this clause of the decree. By paragraph 9 of the decree it is ordered, adjudged, and decreed that in the event the said American Company shall not, in compliance with this decree, deposit the said certificates for 4,311 shares of stock within 10 days from the 15th day of February, 1908, the said certificates of stock for said 4,311 shares shall, each of them, be, and the same are, canceled and held for naught, and the Kellogg Company is directed to immediately issue and deliver to the clerk of the court new certificates for said 4,311 shares of stock, such certificates to be for the several numbers of shares of stock which will permit the distribution to the several parties as in the decree contemplated, and the several sellers of such stock are permitted to receive the shares to which they are severally entitled, by depositing a check for the amount and in the man- ner provided in paragraph 8 of the decree, and upon his doing so the clerk shall deliver to such seller such new certificate of stock for the number of shares specified opposite his name in paragraph 8, and said Kellogg Company shall have and recover from the American Company the sum of $215,550, with interest thereon at the rate of 5 per cent. per annum from December 19, 1906, crediting, however, in reduction of said judgment, all sums received by said American Company in respect of dividends or interest thereon which any seller shall have applied, by way of offset, in a settlement for his stock under the provisions of the decree, and in default thereof execution to issue therefor. Any money collected by the Kellogg Company on said judgment is to be held by it subject to the further order of the court, and Kales R. of T. Vol. I—8 114 COMBINATIONS AND RESTRAINT OF TRADE any checks delivered to the clerk by any seller under the pro- visions of this paragraph shall be turned over and paid to the American Company. Paragraph 10 of the decree makes pro- vision for a public sale by the master in chancery of all or such part of the certificates of stock as should not be accepted and paid for by the sellers thereof in accordance with the preceding provisions of the decree. Out of the proceeds of the sale the master was directed to deduct his commission, and pay from the proceeds of said sale to the American Company the differ- ence between the purchase price paid by the said American Com- pany to said seller to it, for the shares of stock so sold by the master, plus interest at 5 per cent. on said payments from the date when they were made to the day of sale, and the sum of 50 per cent. of the par value of the said stock so sold, plus interest thereon at 5 per cent. from December 19, 1906, to the date of said sale by the master, and if there is a balance remain- ing in the hands of the master of said proceeds he is directed to pay it to the sellers of the stock. A provision is made in the decree modifying the injunction so as to permit the board of directors elected by the votes of the American Company in January, 1907, to continue in the management of the affairs of the Kellogg Company until all of the sellers of said stock shall have complied with the provisions of the decree in regard to making a deposit with the clerk to reimburse the American Company in accordance with the provisions of paragraphs 8 and 9 of the decree, or until a sale of said stock. There are some general provisions in the decree intended to regulate the conduct of the affairs of the Kellogg Company pending the execution of the decree which are not necessary to be set out, since they are subsidiary in their nature and intended to regulate matters of detail consistently with the general relief granted by the decree. Upon a review of the foregoing decree by the Appellate Court for the First District the decree of the Circuit Court was reversed and the cause remanded to the Circuit Court, with directions to enter a decree in accordance with the views expressed in the opinion of said Appellate Court. The Appellate Court held that the evidence sustained the material averments of the bill, but refused to hold that the purchase of the stock by the American Company was void as between the parties to the sale. It held THE COMMON LAW 115 that the sale was void as to the minority stockholders, and only voidable as to Kellogg and other sellers. The decree of the Cir- cuit Court was held to be erroneous in that it recognizes in the minority stockholders the right to have the title to the 4,311 shares of stock determined and adjudged upon their bill, holding that such relief could not be granted under the pleadings in this record. Another point of difference between the Circuit and Appellate Courts is in regard to the election of a board of directors at the January meeting, 1907. The Appellate Court held that owing to an irregularity in the manner of voting the shares of Milo G. Kellogg the persons for whom he attempted to vote were not elected, independently of the question as to who had the right to vote said shares, and that therefore De Wolf, Hanford and Buckingham, who had previously been elected directors prior to this meeting, held over until their successors were duly elected; that, eliminating the 4,311 shares of stock from the January meeting, there was no quorum and no election, hence the result is reached that the old board is still holding over in office under the by-laws, which provide that the directors shall hold their office until their successors are duly elected. The Appellate Court held that by the alleged sale by De Wolf of the Kellogg stock a title passed which is good until set aside, and that such sale could only be set aside on a bill for that purpose upon equitable terms requiring a return of the pur- chase money ; that the decree dismissing Kellogg’s cross-bill was an adjudication that he had no right to the stock. The relief which the opinion of the Appellate Court directs to be given is limited to a perpetual injunction against the American Com- pany from voting the stock and from receiving any dividends thereon, and a like injunction against the Kellogg Company from permitting such stock to be voted by the American Com- pany or any one representing it, and from paying such Amer- ican Company any dividends upon such stock. While briefs have been filed in this court on behalf of four parties, it is apparent that there are only two real adversary interests—the American Company and those identified with it, on the one hand, and those who are seeking to maintain the in- tegrity and independence of the Kellogg Company, on the other. All the parties can readily be located on the one side or the other of this line of division. The American Company, its 116 COMBINATIONS AND RESTRAINT OF TRADE president, Fish, and other officers and agents; the Electric Com- pany, its president, Barton, and its other officers and agents; De Wolf, and other officers and agents of the Kellogg Company, who owe their official relation to it to the American Company from its control of the majority of the stock of the Kellogg Company—are all identified in interest with the American Com- pany; on the other hand, Milo G. Kellogg and others who, made the alleged sales of stock to the American Company, the minority stockholders who filed the original bill, and the board of di- rectors for which Kellogg cast his votes at the January meeting, in 1907, represent the other side of the controversy. We will consider the several questions arising on this record with this general classification in view. The first question which requires consideration arises on the cross-errors assigned by the American Company, which call in question the findings of the Circuit Court that the tendency of the stock purchased by the American Company was to suppress competition and that such purchase was made for such unlawful purpose. This question involves the right of appellants to any relief whatever. If appellees’ contention is sustained upon this point, it would necessarily follow that the judgment of the Appellate Court and the decree of the Circuit Court should both be reversed and the cause remanded to the Circuit Court, with directions to that court to dismiss appellants’ bills. A preliminary question is presented as to the degree of proof required to establish the charges in the bill. On behalf of the American Company and Barton, it is contended that the bill charges them with a criminal offense, in that the bill, in effect, charges a violation of sections 1 to 4 of the anti-trust law of 1891 and sections 1 to 6 of the anti-trust act of 1893, both of which acts are found in chapter 38, sections 269a to 269t, Hurd’s Rev. St. 1905. Without deciding what the rule as to quantity of evidence would be if a violation of the anti-trust laws were charged in the bill, it is sufficient to say that the law of 1893 has been held unconstitutional by the Supreme Court of the United States in Connolly v. Union Sewer Pipe Co., 184 U. S. 540, 46 L. Ed. 679, and that as to the act of 1891 it is leveled against creating, entering into, or becoming a party to any pool, trust, agreement, or combination to fix or limit the amount or quantity of any article of merchandise or fix the price or lessen THE COMMON LAW 117 the production and sale of any such article, which offenses are not charged in the bill either by direct averment or necessary implication. The charge in the bill is that the purpose and tendency of the purchase of the stock in question by the Amer- ican Company were to stifle competition, and the purchase was therefore illegal and void because contrary to the public policy of this state. Whether any of the provisions of the anti-trust act were violated by any of the parties to the transactions involved in this suit is not necessary for us to now discuss or determine. It is a sufficient answer to this contention that such violation is not charged in the pleadings, nor is it necessary to prove such offense to maintain the action or defense set up in these plead- ings. It is not necessary that the proof should exclude every reasonable doubt of the truth of the averments of the bill to justify a decree in favor of appellants. Does the evidence sus- tain the averments of the bill upon the truth of which the unlawful character of the stock purchases depend? The evi- dence in this record, which is largely directed to a solution of this question, is very voluminous. It would not be practicable within any reasonable limits of an opinion to discuss it in detail. In the bill of appellants, as the same was presented upon the former hearing in this court and as the same stood, with some slight amendments and additions, when the cause was heard, the facts relied upon to establish the unlawful purpose and tendency of the stock purchases were set out in detail, as will appear from the summary of those averments already set out in this opinion. The proof shows that the American Company and the Kellogg Company were competitors in business, and that their fields of operation extended not only throughout the United States, but to foreign countries as well. That the American Company re- garded the so-called independent exchanges throughout the coun- try as offering the most serious obstacle in the way of its complete monopoly of the telephone business in the United States cannot, under the evidence in this record, be denied. The Kellogg Com- pany manufactured multiple switchboards and other telephone apparatus and supplies, and sold its products to the independent exchanges throughout the country. The interest, therefore, of the Kellogg Company was identified with the independent ex- changes, since they were the only customers for its products. It is shown that Milo G. Kellogg was an expert in telephony 118 COMBINATIONS AND RESTRAINT OF TRADE and a successful inventor of many new and valuable appliances in the telephone business. Patents for these appliances were owned and controlled by the Kellogg Company, and contributed much to the success both of the Kellogg Company and the inde- pendent exchanges which bought and used them. The evidence shows that the independent exchanges, to the number of 7,000, maintained friendly relations with each other through a central organization, which holds annual conventions for the purpose of discussing questions of mutual interest and with a view of advancing the interests of the independent exchanges in their rivalry and competition with the American Company and its subsidiary exchanges. It is also shown that the American Com- pany controlled its licensee companies through the ownership of a majority of stock of the local Bell Telephone Companies, and that the local Bell Telephone Companies obtained their equipment entirely through the Electric Company, which the American Company also controlled through the ownership of a majority of the capital stock of the Electric Company. Thus the profits of the American Company depended upon the num- ber and success of its subsidiary companies. The Electric Com- pany manufactured only for the subsidiary American companies. The independent companies were compelled to procure their apparatus and equipment from independent manufacturers, the principal one of which was the Kellogg Company. Continuance in business of the independent exchanges throughout the coun- try depended upon the continued existence of the independent manufacturers of whom they could procure equipment. If the independent manufacturers should go out of business or pass under the control of the American Company, the independent exchanges would be reduced to the alternative of going out of business or becoming subsidiary to the American Company. In addition to selling equipment to independent companies, the Kellogg Company and other independent manufacturers would promote and finance the independent exchanges by furnishing money for construction purposes and taking pay in securities. This feature of the independent manufacturers was a source of no little concern to the American Company. The evidence shows that in November, 1901, Milo G. Kellogg, being much alarmed about his health, hastily placed the affairs of the Kellogg Company in the hands of his brother-in-law, THE COMMON LAW 119 Wallace De Wolf, and on or about the 23d day of that month went to California, where he remained until the latter part of the following summer. The Kellogg Company, and Milo G. Kellogg personally, had become liable, as indorsers, for a large amount of paper made by the Everett-Moore syndicate, and, in anticipation that it would be necessary to raise money to meet these liabilities and other accruing bills of the Kellogg Com- pany, Milo G. Kellogg gave De Wolf a general power of attorney to sell or hypothecate all the shares of stock in the Kellogg Com- pany which were the individual property of Milo G. Kellogg. The evidence shows that, soon after the departure of Kellogg for California, De Wolf entered into negotiations with Barton for the sale of a controlling interest in the Kellogg Company. After one or two interviews between Barton and De Wolf, Bar- ton went to New York and had a conference with Fish, the president of the American Company. The result of this inter- view was that Barton returned to Chicago with full authority from Fish to purchase a controlling interest in the Kellogg Com- pany. The contract of sale was entered into between Barton and De Wolf on January 4, 1902. The money to pay for this stock was forwarded by Fish to Barton and by him delivered to De Wolf. The stock was assigned to Barton, although he was not the real purchaser, and, so far as the record shows, had no personal interest in the transaction. It was understood and agreed between Barton and De Wolf that the transaction should be kept secret. De Wolf did not inform Milo G. Kellogg of the sale until the 4th day of July, 1902. De Wolf testifies that Kellogg was a very sick man, and that he told Barton that he had gone to California, and that he doubted whether he would ‘“ever recover.’? De Wolf was continued in charge of the Kel- logg Company, but after the sale of this stock he consulted with Barton with reference to its affairs. On July 4, 1902, De Wolf met Milo G. Kellogg in Denver, Colo., and then for the first time told Kellogg about the sale of the stock to Barton. The evidence shows that Kellogg heartily disapproved of the course that had been taken. He entered into negotiations for the pur- pose of buying this stock back, but Fish and Barton refused to sell him the stock, although he offered a profit of $25 per share. In the contract that was entered into between Barton and De Wolf it was stipulated that the Kellogg Company should be 120 COMBINATIONS AND RESTRAINT OF TRADE run for one year as it had been theretofore. It was also pro- vided in the contract that Barton should purchase any other shares of stock that might be offered, upon the same terms he had contracted for the Kellogg stock, and under this clause the purchase of the other shares followed. The purpose and intent of De Wolf in making this sale is not of controlling importance. Whatever his purpose may have been does not assist us in determining the buyer’s purpose. It may be that De Wolf’s purpose was to relieve the financial situa- tion of the Kellogg Company, which seems to have been greatly exaggerated in his estimation. At all events he makes this ex- cuse for himself, and we are disposed to take a charitable view and accord him the benefit of his own explanation. It is certain that neither Fish nor Barton was actuated by sympathy for any real or imaginary financial distresses that surrounded the Kellogg Company. The reasonable inference from the evidence in this record is that, if Barton and Fish had been sure that the Kellogg Company was on the brink of financial ruin, they would not have invested in this stock, but would have trusted to the desired end working itself out through the downfall and failure of the Kellogg Company. We cannot conceive of the American Company rushing in to aid a rival in business by investing nearly a half million dollars in the stock of a company of doubtful solvency. What, then, must have been the purpose of this purchase? In answer to this question three possible motives may be suggested: (1) The purpose may have been to acquire additional manufacturing facilities; or (2) to invest idle funds of the American Company in stocks which would make a fair return upon the money; or it may have been (3) to advance the interests of the American Company by lessening the competition of the independent exchanges which were being supplied with apparatus and financial aid by the Kellogg Com- pany. Let us inquire, in the light of the testimony, which of these motives actuated the American Company in making this purchase. Mr. Fish, in his testimony given in a case against the Amer- ican Company in New York, which was a proceeding to set aside a contract by which the American Company obtained con- trol of the Stromberg-Carlson Company, another independent manufacturing concern, testified as follows: ‘‘The question that THE COMMON LAW 121 was troubling me was not as to the value of the Stromberg- Carlson Company’s plant to any one who wanted a telephone manufacturing company. We did not want a telephone manu- facturing company, because we had one of our own. We have had trouble in supplying all the wants of our companies through our present sources of manufacture, but it was a trouble we could meet by the developments of our own factory.’’ He testi- fies that the Electric Company turned out last year a product of $69,000,000, and these additional companies, being so small in comparison with the Electric Company, would not weigh in the balance. The first motive suggested must be eliminated as entirely without the range of reasonable probability. Was this stock purchase made as a legitimate investment of surplus funds by the American Company? To this question a negative answer must be given for the following reasons: (1) The American Company is not an investing company, except in the stocks of its subsidiary companies. Mr. Fish says in his testimony: ‘‘I couldn’t tell you what percentage of this capital is invested in the stocks of these subcompanies. It is a very large per cent. Besides this, something over $35,000,000, if I recollect aright, is invested in the long-distance lines. Of course, the company has real estate, and also, of course, a large invest- ment in the telephones that are leased to these subcompanies. Those are the substantial items. I don’t recall any of large magnitude outside of that. To no substantial extent that I remember has it been an investor in other stocks than stocks of companies connected with the telephone service. It has to a negligible extent—to no large extent, that I recall—all its invest- ments of stock have been in these telephone companies, largely for the purpose of developing those companies. In the very old days there was undoubtedly a period when the company bought stock for the purpose of bringing them into the sphere, but it is many years since there has been any change in the relations, and since my time it has been substantially all for the purpose of developing the business of the companies whose stock was already held, and this stock-buying has substantially been along that line.’’ (2) The evidence does not show that the American Company had any surplus money to invest. At the time this stock was purchased the American Company was contemplating the issuance of $30,000,000 of its bonds, and within a few 122 COMBINATIONS AND RESTRAINT OF TRADE months after this stock was purchased these bonds were issued and sold, together with issues of its stock for the purpose of raising funds to extend its business. (3) If the American Com- pany bought this stock as an investment, why refuse to sell it to Kellogg when, within a few months after the purchase, he offered it a profit of $25 per share? This offer was refused when this litigation was threatened, and, if the purchase had been made for the purpose of an investment, it is reasonable to con- elude that the American Company would have preferred a large profit rather than to imperil the whole investment in uncertain and vexatious litigation. Eliminating from consideration the possible motives already suggested and considered, we are brought to the conclusion that the only conceivable purpose the American Company had in making this purchase was to decrease to the minimum the com- petition of the independent exchanges, the existence and success of which were due in a large degree to the Kelloge Company. Is there any evidence to justify this inference aside from that by which all other rational motives are eliminated ? Mr. Fish says in his testimony: ‘‘The Kellogg Company and the other manufacturers for the so-called independent com- panies were in the habit, and are today, of financing them; that is, carrying the large indebtedness and taking pay in securities. I have no doubt that in the course of the discussion [with his executive committee] I made reference to that fact, for I had frequently considered it with the executive committee before, and probably did say that with the Kellogg Company run strictly as a business concern it would no longer jeopardize its own interests and hurt us by unduly financing the inde- pendent telephone companies. . . . If I said anything at all—and I don’t remember that I did say it, although I have often said the same thing to the members of the executive com- mittee—it was that if this arrangement were made the Kellogg Company would no longer give extended credits to customers like the Everett-Moore syndicate, that were enabled to develop at the expense of the manufacturing companies from whom they bought their supplies, and, to the small extent that the Kellogg Company was in the field as a promoting company, that was an element to be taken into account. . . . The only way in which our companies were injured by the financing by the manu- THE COMMON LAW 123 facturing companies of independent telephone companies was not the competition that those independent companies, when financed, created in our field, but the kind of competition, which was one based upon absolutely false ideas of cost and rates that were and have been found to be impossible, . . . and when I speak of the injury to my companies, what I mean is, the plain proposition that there was an illegitimate business developed at the expense of the manufacturing companies.’’ Again he says: “*T have no doubt that we should have used our interest in the Kellogg Company exactly as we used our interest in the Western Electric Company, or any other interest—to benefit our organ- ization as a whole.’’ Again, he testifies that it ‘‘was an ad- vantageous investment for us to make of a small amount of money in view of our general interests.’’ By ‘‘advantageous”’ he explained: ‘‘I mean advantageous pecuniarily to the Amer- ican Telephone & Telegraph Company and its stockholders. The ultimate motive is everywhere and always the advantage of the American Telephone & Telegraph Company and its stock- holders.’’ He testifies that in some instances his company has incidentally fostered and advanced independent telephone com- panies, ‘‘and in some of them we have done it knowing what we were about,’’ but he distinctly takes this transaction out of that class by saying: ‘‘I don’t think in this we fostered or under- took to foster or advance independent interests.” Again he says: ‘‘We had no purpose to save the Kellogg Company from a collapse out of consideration for the independent interests.”’ Again Mr. Fish says, in his testimony: ‘‘These transactions of which you are inquiring were taken with the end in view of working out the telephone situation as well as we could. If it were practicable to work it out so as to eliminate the competition in the same territory, that would be clearly for every one’s in- terest, and it would have undoubtedly worked out in that way. It was our thought that by making this purchase we could get rid of this ruinous competition in the end, and be of substantial benefit not only to our company, but to the competitors to our company and the public.”’ In view of these admissions of the president of the American Company, the conclusion is irresistible that the purchase of the stock of the Kellogg Company was made with the purpose and intent on the part of the American Company to ultimately de- 124 COMBINATIONS AND RESTRAINT OF TRADE stroy, as far as possible, the competition of the independent exchanges which were being financed and furnished equipment by the Kellogg Company. That it was contemplated that ulti- mately there should be an increase in the rates charged the public for telephone service as fast as the independent. exchanges could be put out of business and the American subsidiary com- panies installed in their stead is virtually admitted by Mr. Fish in his testimony, both in respect to the Kellogg purchases ag well as in his evidence in regard to the Stromberg-Carlson deal in New York. Mr. Fish’s contention is that the independent companies were furnishing service to the public from 30 per cent. to 35 per cent. cheaper than it should be. He testifies that ‘in his opinion the so-called independent companies did not figure a sufficient sum for renewal of worn-out equipment, and by thus disregarding this important factor in the telephone busi- ness the independent exchanges were engaged in ‘‘ruinous’’ competition. Mr. Fish also testifies that ‘‘the American Com- pany is a dividend-paying company. Its object is to make dividends as large as possible.’? While he does not say so, it is not impossible that the desire ‘‘to make dividends as large as possible’? may also be a factor which has much to do with the price which Mr. Fish thinks any well-regulated telephone com- pany ought to charge the public for telephone service. The evidence is entirely satisfactory in this record that this stock was purchased with the intent and purpose charged in the bill, and at the time it was contemplated that the Kellogg Com- pany would cease business if the original plan and purpose had been carried out. Mr. Fish admits that he and Barton dis- cussed the probable loss that would result from winding up the affairs of the Kellogg Company, and that it was estimated that the loss would not exceed $100,000. That the original purpose was to wind up the affairs of the Kellogg Company is manifest from a clause in the contract entered into between De Wolf and Barton, by which it was agreed that there should be a distribu- tion of the proceeds of bills and accounts receivable to the sell- ing stockholders. This clearly contemplated the liquidation of the Kellogg Company. This clause of the contract was com- mented on by this court on the former hearing, on page 23 of 224 Ill. (115 Am. St. Rep. 132), as follows: ‘The averment of the bill to the effect that it is the purpose of the American THE COMMON LAW 125 Company to suppress competition and create in itself a monopoly is further aided by the averment that Barton, through whom the purchase was made, agreed to pay, as part of the purchase price, so much per share in cash and the balance by applying thereto the pro rata proceeds of any or all bills and accounts reasonably due and owing to the Kellogg Company on December 1, 1901, the same to be settled and paid to said seller as the same are paid and collected by said company, plainly indicating that a dissolution of the Kellogg Company was contemplated, because in no other event could the American Company appropriate the assets of the Kellogg Company to pay a stockholder of that com- pany for the stock purchased by the former company from him; also, that by the contract of purchase the Kellogg Company should be carried on in the usual manner for the space of one year in order that bills and accounts receivable could be col- lected in the usual course of business, thus showing a purpose to dissolve the Kellogg Company after the expiration of one year.” If further evidence were necessary to fix upon the American Company the unlawful purpose of eliminating competition in the purchase of this stock, the fact might be pointed out that, about the time this purchase of stock in the Kellogg Company occurred, Mr. Epps called on Mr. Stromberg and said that he ‘“‘represented one of the largest stockholders in the Kellogg Company,’’ and wanted to buy a controlling interest in the Stromberg-Carlson Company. Mr. Stromberg refused to enter- tain a proposition to sell. Epps was sent to Stromberg by De Wolf, who admits that he had talked with Barton about it, and Barton does not deny his participation in this transaction. The evidence shows that afterwards the Stromberg-Carlson Com- pany’s plant was removed to Rochester, N. Y., where it con- tinued to manufacture equipment for the independent telephone companies, and that afterwards the American Company again attempted to buy the Stromberg-Carlson Company’s plant by purchasing a control of another company which owned a ma- jority of the stock of the Stromberg-Carlson Company. This transaction resulted in a suit by the Attorney General of New York, which caused the abandonment of the proposed purchase. If a controlling interest in these two large independent manu- facturing companies could have been obtained by the American 126 COMBINATIONS AND RESTRAINT OF TRADE Company, it would have seriously crippled independent ex- changes throughout the country. Again, the evidence shows that the American Company, al- most immediately after the purchase of the Kellogg stock, made an attempt to get control of $275,000 of notes of the Everett- Moore syndicate. Everett and Moore were promoters. They had behind them a syndicate which had built a large number of street railways and telephone plants in Ohio, Illinois, and elsewhere. About the time of the purchase of the Kellogg stock, the Everett-Moore syndicate became temporarily embarrassed financially, and it was at this time and under these circumstances that the American Company sought to acquire the notes of the Everett-Moore syndicate. Mr. Fish in his testimony frankly admits the attempt to obtain control of this large amount of indebtedness against a concern which was giving aid and assist- ance in promoting and maintaining independent telephone ex- changes at a time when the Everett-Moore syndicate was temporarily embarrassed, and the reason given by Mr. Fish for desiring to obtain control of these. notes is thus explained by Mr. Fish himself: ‘‘You are undoubtedly referring to the thing I referred to a short time ago, that some time in the spring there was a suggestion made that we should buy the claims against the Everett-Moore syndicate; and my further impression is that they were claims of Mr. Kellogg’s, and not of the Kel- logg Company, and that we should buy those for a substantial discount from their face value, which would give us the claims for adversary purposes, if we chose to use them in that way. By adversary purpose I mean for the purpose of taking such steps against Everett and Moore and the Federal Telephone Company as were to our interest; that we should get such ad- vantage as there should be by coming into the possession of these ereditors’ claims.’’ This circumstance is mentioned as throw- ing a sidelight on the general methods of warfare against the independent telephone interests that Mr. Fish and his company sanctioned and employed. There can scarcely be any doubt that the purchase of the stock of the Kellogg Company pro- ceeded from the same general purpose which Mr. Fish confesses he had in seeking to obtain the Everett-Moore syndicate notes. Without attempting to analyze the evidence in detail or fur- ther discussing it in general, our conclusion is that the finding THE COMMON LAW 127 of the Circuit Court that the purpose of the American Com- pany in making this purchase, as well as the inevitable tendency of the same, was to lessen competition in the business of fur- nishing the public with telephone service, is abundantly sus- tained by the proofs. This question of fact being settled, the law applicable thereto was determined by this court upon the former hearing already referred to. It would not be necessary for us to do more than call attention to our previous decision in order to establish the general legal conclusion to be drawn from these facts, were it not that a serious difference of opinion seems to exist as to what this court really did decide on the former hearing. Appellees contend that, conceding the facts to be as found by the Circuit Court, still the stock purchase was only voidable, and that such contention is consistent with the pre- vious decision of this court in this cause. This view was adopted by the Appellate Court, hence the widely different results reached by that court and the Circuit Court in the adjustment of the equities of the parties. We do not think there is any uncer- tainty or ambiguity in the language employed by Mr. Justice Wilkin in rendering the opinion of this court on the former hearing. 224 Ill. 9, 115 Am. St. Rep. 132. A careful reading of that opinion will show that the right of the minority stock- holders to maintain their bill is placed on two grounds: First, that there was a total want of power in the American Company to purchase a controlling interest in a competing Illinois corpora- tion. This question is discussed on pages 26 to 29 ofthe opinion of 224 Ill. (115 Am. St. Rep. 1382), and it is there held, as clearly as language can express it, that no title to the stock passed by the alleged sale under the facts averred in the bill, and that the ‘‘whole transaction is null and void,’’ and that the minority stockholders had a standing in equity to restrain the pretended holders of such stock from any participation in the affairs of the company. A second ground upon which this court held that the bill might be maintained by the minority stock- holders was that treating the sale simply as an excessive and wrongful exercise of a power which the American Company lad, for the purpose of making the Kellogg Company subservient to the American Company, thereby freeing that company and its licensees from the competition of the Kellogg Company and in- dependent exchanges, was such a fraud against the stockholders 128 COMBINATIONS AND RESTRAINT OF TRADE of the Kellogg Company that the plainest principles of equity gave them a right to relief. This view is presented on pages 29 to 32 of 224 Ill, 115 Am. St. Rep. 132. The discussion of the second ground upon which the bill was maintainable in no way detracts from the force of the decision in regard to the first. Both the American Company and the Kellogg Company were engaged in this state in the same general line of business. They were indirectly, if not directly, competitors in the business of supplying the public with telephone service. This business is impressed with the public use. The American Company could exercise no powers in this state which could not be exercised lawfully by a domestic corporation in the same line of business. The attempt by the American Company to purchase a controlling interest in the Kellogg Company was unlawful. The word ‘‘un- lawful,’’ as applied to the purpose and acts of corporations, is not used exclusively in the sense of malum in se or malum pro- hibitum. It is often employed to designate powers which cor- porations are not authorized to exercise or contracts which they are not authorized to make—or, in other words, such acts, powers, and contracts as are ultra vires. Neither a foreign nor a domestic corporation can lawfully become a stockholder in another corporation unless such power is expressly given or necessarily implied, and especially is this true where the object is to obtain the control of such other corporation. There is no provision of our general incorporation law authorizing one cor- poration to purchase and hold shares of stock in other corpora- tions, and there is no implied power to so purchase stock in other corporations except where it is necessary to carry into effect the objects for which such corporation was formed. ‘The purchase of a controlling interest in the Kellogg Company by the American Company cannot be sustained on the ground of implied power. As a general proposition, all contracts and agreements, of every kind and character, made and entered into by those engaged in an employment or business impressed with a public character, which tend to prevent competition between those engaged in like employment, are opposed to the public policy of this state and are therefore unlawful. All agreements and contracts tending to create monopolies and prevent proper competition are by the common law illegal and void. People v. Chicago Gas Trust Co., 180 Ill. 268, 8 L. R. A. 497, 17 Am. St. THE COMMON LAW 129 Rep. 319. The public policy of the state on any question is to be sought for in the Constitution and legislation as interpreted and expounded by the courts. Section 22 of article 4 of the Constitution of 1870 provides that the General Assembly shall pass no local or special law for ‘‘granting to any corporation, association or individual any special or exclusive privilege, im- munity or franchise whatever.’’ This is a clear declaration that the public policy of this state is opposed to all exclusive and monopolistic franchises and powers, of whatsoever kind or character. It is also contrary to the public policy of this state to charter a corporation for the purpose of buying and selling real estate. The Connecticut Land Company was a corporation organized under the laws of the state of Connecticut, and by its charter it was authorized to deal in real estate. That cor- poration invested $500,000 in Illinois lands. In the case of Carroll v. City of East St. Louis, 67 Tl. 568, 16 Am. Rep. 632, this court held that the Connecticut Land Company had no power to purchase land in this state contrary to the public policy thereof, and that no title passed to said company, and it had no power to pass title to its grantees, This case is an illustration of the application of the doctrine, announced by this court on the former hearing of this case, that a contract made in viola- tion of the public policy of this state is utterly void. It logically follows that the attempt of the American Company to acquire the control of the Kellogg Company is void, and that the con- tracts entered into in pursuance of this purpose are mere nulli- ties, and that the title to the stock in question never passed from the sellers to the American Company. This was, in effect, what this court decided on the former hearing. The next question that requires consideration is whether the Appellate Court erred in its direction to the Circuit Court in respect to the relief to be granted appellants. As already shown, the Appellate Court limits the relief to be granted to an injunc- tion against the American Company exercising the rights of a stockholder and from receiving any dividends upon the stock in question. A decree confined to such relief would leave this stock in the hands of the American Company, which is inconsistent with the previous decision of this court, wherein it is held that the American Company had no corporate power to buy the stock, and that the attempt to purchase it was ultra vires. The Kales R, of F. Vol. F—9 130 COMBINATIONS AND RESTRAINT OF TRADE interests of the minority stockholders could not be as well pro- tected by allowing the American Company to retain this stock as they will by requiring this stock to be returned to its rightful owners. It is not conceived how it would be practicable to con- tinue the business of the Kellogg Company with a controlling interest in its stock tied up by injunction in the hands of an unfriendly competitor. No method of conducting the affairs of the Kellogg Company is suggested by the opinion of the Appel- late Court, and it may be that that court took the view that was urged upon this court in the oral argument, that the decree which the Appellate Court directed to be entered would, oper- ating from the self-interest of the American Company, force it to sell its holdings of Kellogg Company stock. This might or might not be the result, but if the American Company is allowed to sell this stock, it will, of course, determine who the purchaser or purchasers will be. A decree entered under the direction of the Appellate Court would leave the American Company with liberty either to retain the stock or to sell it to any person to whom, it saw fit to sell, and the purchasers from the American Company would enjoy all the rights, privileges, and benefits of stockholders. If the American Company should sell this stock to some one who was friendly to the American Company, it is not at all improbable that the decree which the Appellate Court directs to be entered would be entirely barren of any substantial relief to the minority stockholders. It seems to us that the only way any substantial and permanent relief can be given to these minority stockholders is to require the American Company to surrender its stock to its rightful owners upon equitable terms. This relief the Circuit Court granted, and in our opinion prop- erly so, since nothing short of this will afford the minority stock- holders complete relief. It is contended by appellees that the decree of the Circuit Court cannot be sustained because it grants affirmative relief to Milo G. Kellogg without a cross-bill being filed by him. When this case was before us on the former héaring it was held that the court below properly sustained a demurrer to Kellogg’s eross-bill. One of the reasons then given why the decree was affirmed is found on page 32, where this Court said: ‘‘We think the decree of the Circuit Court sustaining the demurrer to and dismissing the cross-bill is right and should be affirmed. THE COMMON LAW 131 No necessity whatever for that bill is shown. At most, Milo G. Kellogg was a mere nominal party to the original bill. No re- lief was prayed against him, and, if a decree granting the prayer of that bill had been rendered, he would have obtained all he was in equity entitled to.’ The relief which Milo G. Kellogg obtains under the decree of the Circuit Court is a necessary incident. to the complete relief to which the minority stockholders are entitled. As we have already attempted to point out, if a controlling: interest in the Kellogg Company is left in the hands of the American Company, or some friendly ally to whom it might choose to sell, it is apparent that the interest of the minority stockholders would be exposed to all the dangers which led them to file their bill in the first instance. It therefore be- comes necessary, in order to fully protect the complaining stock- holders, to divest the American Company of all advantages it has secured through its unlawful attempt to obtain control of the Kellogg Company. When the court grants the minority stockholders adequate relief, it is clear that the relief resulting to Kellogg and other stockholders who sold to the American Company is merely incidental to the main relief sought by the bill.18 A eross-bill is wholly unnecessary. Kellogg answered the original bill, in which he admitted all of the material aver- ments thereof, so that there was no issue as to him to be tried, and no relief was prayed against him in the original bill. In Boone v. Clark, 129 Ill. 466, 5 L. R. A. 276, this court held that a cross-bill filed by junior mortgagees, filed in a proceeding to foreclose the senior mortgage, was properly dismissed for want of equity. On page 493 of 129 Ill. (5. L. R. A. 276), this court said: ‘‘It is further insisted that at least these appellants were entitled to a decree, under their cross-bill, foreclosing their trust deed as against. W. H. Colehour, and the court, therefore, erred in dismissing the cross-bill. The filing of a cross-bill is not 18—Observe that in Harriman v. Northern Securities Co., 197 U. 8. 244, 295, Harriman after the decree of dissolution of the Northern Se- eurities Company at the suit of the United States, affirmed in Northern Securities Co. v. United States, 193 U, S. 197, sought to recover the shares of stock in the Northern Pacific Railroad Company which he had transferred to the Northern Securities Company in return for stock of the Northern Securities Company. This he was not -per- mitted to do because he was in pari delicto, 132 COMBINATIONS AND RESTRAINT OF TRADE necessary for the preservation of the rights of a junior mort- gagee to the same premises, as has been seen; and, if the appel- lants desire, they may, under their answer, move the court, and it will be the duty of the chancellor—and which may yet be done in this cause—to preserve their rights, as against Cole- hour, in any surplus remaining from the sale of the property after the payment of the amount due appellees.’’ Again, appellees contend that the dismissal of the Kellogg cross-bill for want of equity was an adjudication of all his rights. This contention is answered by the quotation which we have already made from Boone v. Clark, supra. The dismissal of a cross-bill for want of equity, under circumstances rendering the cross-bill unnecessary in order to obtain the relief sought by it, is not an adjudication that the complainant in the cross-bill has no rights in the subject-matter of the litigation. It would be a judicial outrage on the rights of Kellogg to dismiss his cross- bill on the ground that he could obtain all the rights he was entitled to under the original bill, and then deny him, upon the hearing of the original bill, such relief as he in equity is clearly entitled to, on the ground that his rights had already been ad- judicated. Courts of equity were never designed to work out such unconscionable absurdities. Again, the appellees insist that the decree of the Circuit Court cannot be sustained for the reason that Kellogg and the other selling stockholders are in pari delicto with the American Com- pany. To this we cannot assent. In the first place, the unlaw- ful features in this transaction are largely imported into it by reason of the unlawful purpose of the American Company. It was the American Company that expected to profit by suppress- ing competition and the creation of a monopoly in this state. There is no evidence that this unlawful purpose was entertained by Kellogg or the other sellers of this stock. If it be said that De Wolf is particeps criminis in this transaction, it may be replied that Kellogg could not and did not attempt to authorize him to enter into a contract against the laws or public policy of the state. Kellogg gave De Wolf a power of attorney to sell his stock if necessary to raise funds to protect his interest and that of the Kellogg Company. This was a perfectly legal and proper thing to do. If De Wolf wrongfully, and in violation of the confidence reposed in him by Kellogg, entered into a secret THE COMMON LAW 133 intrigue with the representatives of the American Company for the purpose of violating the laws of public policy of the state of Illinois, it cannot be said, with any show of reason, that Kellogg, who was then in California and in total ignorance of what his agent was doing in Chicago, is equal in guilt with the American Company. If wrong at all is to be imputed to Kellogg, it is only in a highly technical sense and limited degree. He is certainly less blameworthy than the American Company. One of the exceptions to the rule that courts will not interpose to grant relief to either party to an illegal agreement where both parties stand in part delicto is that in some instances the party least blameworthy may, in furtherance of justice and a sound public policy, obtain full affirmative relief. This principle is thus stated by Mr. Pomeroy in his work on Equity Jurisprudence (section 942) as follows: ‘‘Lastly when the contract is illegal, so that both parties are to some extent involved in the illegality —in some degree affected with the unlawful taint, but are not in pari delicto; that is, both have not, with the same knowledge, . willingness, and wrongful intent engaged in the transaction, or the undertakings of each are not equally blameworthy—a court of equity may, in furtherance of justice and of a sound public policy, aid the one who is comparatively the more innocent, and may grant him full affirmative relief by canceling an executory contract, by setting aside an executed contract, conveyance, or transfer, by recovering back money paid or property delivered, as the circumstances of the case shall require, and sometimes even by sustaining a suit brought to enforce the contract itself, or, if this be impossible, by permitting him to recover the amount justly due by means of an appropriate action not directly based upon the contract. Such an inequality of condition exists, so that relief may be given to the more innocent party, in two distinct classes of cases: (1) It exists where the contract is intrinsically illegal, and is of such a nature that the undertak- ings or stipulations of each, if considered by themselves alone, would show the parties equally in fault, but there are collateral and incidental circumstances attending the transaction and af- fecting the relations of the two parties which render one of them comparatively free from fault. Such circumstances are imposition, oppression, duress, threats, undue influence, taking advantage of necessities or of weaknesses, and the like, as a 134 COMBINATIONS. AND RESTRAINT OF TRADE means of inducing the party to enter into the agreement, or of procuring him to execute and perform it after it had been vol- untarily entered into. (2) The condition also exists where, in the absence of any incidental and collateral circumstances, the contract is illegal but is intrinsically unequal; is of such a nature that one party is necessarily innocent as compared with the other; the stipulations, undertakings, and position of one are essentially less illegal and blameworthy than those of the others.”’ But there is something else here. It must be borne in mind all the while that in this proceeding a court of equity is seeking to protect the public against an infringement of the public policy of the state, and, having’ determined that the transactions in question in their purpose and inevitable tendency are to stifle competition and create a monopoly of a business impressed with a public character, the court will not be deterred from admin- istering full relief by forms of procedure or technical rules which might control its action under other circumstances. Re- gard for the public welfare is the highest law of the land. Broom’s Legal Maxims, p. 1. Pomeroy, in his work on Equity Jurisprudence (section 941), thus states the principle now under discussion: ‘‘Hven where the contracting parties are in pari delicto, the courts may interfere from motives of public policy. Whenever public policy is considered as advanced by allowing either party to sue for relief against the transaction, then relief is given to him. In pursuance of this principle and in compliance with the demands of a high public policy, equity may aid a party equally guilty with his opponent, not only by canceling and ordering the surrender of an executory agree- ment, but even by setting aside an executed contract, convey- ance, or transfer, and decreeing the recovery back of money paid or property delivered in performance of the agreement.’’ The cases cited by the author in the footnotes fully sustain the text. Story’s Equity Jurisprudence (13th Ed.) vol. 1, § 298, recognizes the same principle. This author says: ‘‘But in cases where the agreement, or other transactions are repudiated on account of their being against public policy, the circumstance that the relief is asked by a party who is particeps criminis is not, in equity, material. The reason is that the public interest requires that relief shall be given, and it is given to the public THE COMMON LAW 135 through the party.’’19 The rule that courts will not interpose to grant relief when an illegal agreement has been made and both parties stand in pari delicto®° cannot be invoked by ap- pellees as a defense in this case. 19—Johnson v. Cooper, 2 Yerg. (10 Tenn.) 524 (land lost at gaming and conveyed to winner, recovered by the loser in equity) ; Whittingham v. Burgoyne, 3 Anst. Rep. 900 (pur- chaser of commission in the army recovered the amount paid); Rucker v. Wynne, 2 Head (Tenn.), 617 (loser in gaming transaction re- covered property transferred to winner); Jackman v. Mitchell, 13 Ves. Jr. 581, 587 (bond to secure to one creditor the deficiency of a com- position not communicated to the other creditors decreed to be de- livered up with costs though the one who gave the bond was particeps criminis to the illegal transaction. The court said: ‘‘In these cases, which proceed upon grounds of pub- lic policy, the relief is given on account, not of the individual, but of the public’’) ; Lord 8t. John v. Lady St. John, 11 Ves. Jr. 525, 535 (equity might require the delivery up of a deed even to a particeps criminis where it was made pursuant to an illegal separation agreement by hus- band and wife. The court said: ‘*The authorities go to this: that where the transaction is against policy, it is no objection, that the plaintiff himself was a party to that transaction, which is illegal’’) ; Pull- man Palace Car Co. v. Transporta- tion Co., 171 U. S. 1388 (the Pullman Company made a lease of all its assets to another company, which was illegal and void as against pub- lic policy because it involved an abandonment by the Pullman Com- pany of its duty to the public. The Pullman Company in suing for rent on the lease discovered this fact, for the recovery was denied in 139 U. 8. 24. The Pullman Company then took the affirmative and sued to set aside the lease and recover the property conveyed. This it was permitted to do); Meech v. Lee, 82 Mich. 274 (mother who had mortgaged to save her son from criminal prosecution was permitted to set aside the mort- gage in equity and recover the land) ; Gorringe v. Reed, 23 Utah 120 (deed given by wife to prevent prosecution of husband set aside at the suit of the wife); Daniels v. Benedict, 50 Fed. 347 (wife agreeing that suit for divorce might be begun against her on the sole ground of desertion allowed to set aside a decree obtained against her on the ground of adul- tery) ; Cox v. Donnelly, 34 Ark. 762 (the court said, p. 766: ‘‘ Although in general, courts of equity will not interpose to grant relief to persons who are parties to agreements or other transactions against public policy, there are cases where the public interest requires that they should, for the promotion of public policy, interpose, and the relief in such cases is given the party’’). 20-—-Goodrich v. Tenney, 144 Ill. 422 (a contract between a person and an attorney representing creditors, that such person would procure affi- davits of the debtor and two others showing that a sale made by the debtor was fraudulent and also depositions to the same effect, for which such person is to be paid 25% of the debt collected is illegal 136 COMBINATIONS AND RESTRAINT OF TRADE We have discussed the questions, both of law and fact, upon which the right of the appellants to relief depends. There are some other questions of minor importance treated in the briefs of counsel for appellees—such as that appellants are not prose- cuting the suit in good faith for their own benefit,-and that there is a collusion between Kellogg and appellants—which we have considered, but we do not deem these matters of sufficient im- portance to require discussion. From what has been said, it follows that the decree of the Circuit Court is based upon a correct solution of the questions involved. That part of the decree which adjusts the equities of the parties is attacked by appellees on the ground that it proceeds from an erroneous de- cision of the questions involved. and void and the person cannot recover from the attorney. The law leaves the wrongdoer where it finds him. It made no difference that the attorney had received the money. He was not obliged to account for it and. no implied assumpsit arose in plaintiff’s favor); Perry v. U. S. School Furniture Co., 232 Ill. 101 (equity would not enforce a judg- ment obtained upon a contract which was in violation of the anti-trust law); Conway v. Garden City Paving Co., 190 Tl 89 (contract between bidders for a public contract tending to stifle competition between them is illegal and the plaintiff is not entitled to recover the consideration promised, although he had rendered the service required); Crichfield v. Bermudez, 174 Ill. 466 (contract to promote passage of special assess- ment ordinance illegal and plaintiff could not recover on it); Craft v. MecConoughy, 79 Ill. 346 (contract in restraint of trade which took the form of a partnership for the pur- pose of dealing in grain. No accounting for profits allowed by one partner against the other). See also Schubart v. Chicago Gas Light & If the sale of stocks in question Coke Co., 41 Ill. App. 181, 186; Griffin & Connelly v. Piper, 55 Ill. App. 213; American Strawboard Co. v. Peoria Strawboard Co., 65 Il. App. 502; Evans v. American Straw- board Co., 114 Ill. App. 450; Me- Mullen v. Hoffman, 174 U. 8. 639 (contract to suppress bidding and competition); St. Louis R. R. v. Terre Haute R. R., 145 U. S. 393 (lease by one railroad to another which is ultra vires of one or both, not set aside in equity at the suit of the lessor. The in pari delicto doctrine applied, see especially p. 407); Harriman v. Northern Securi- ties Co., 197 U. 8. 244, 295, 298. (In the government suit against the Northern Securities the United States enjoined the voting of the railroad stock held by the Northern Securities Company. The decree, however, did not cancel the Northern Securities stock held by the stock- holders of the Northern Securities Company which had been issued in return for the stock of the two rail- roads transferred to the Northern Securities Company. The court doubted its power to do this in view of the fact that the stockholders THE COMMON LAW 137 were void and no title passed, as the Circuit Court found and as we have sought to show, we perceive no objection to the extent of the relief granted or the methods adopted by the Circuit Court to adjust the equities between the parties. No other or better method of settling this controversy occurs to us, and none is suggested or pointed out by appellees. The 15th of February, 1908, the date fixed by the decree of the Circuit Court from which the time when the various acts in the execu- tion of the decree were reckoned, having passed, it is ordered that all acts which in the terms of said decree were to be per- formed within a given number of days from the 15th day of February, 1908, shall be performed in like manner as in said decree directed within a like number of days from the 15th day of April, 1909, and that said decree of the Circuit Court shall be executed in all respects as therein directed, except the were not made parties. In the Harriman suit those who had given. up railroad stock for the stock of the Northern Securities Company came into court to get their stock back. It was held that they were not entitled to do so. (1) Harriman was particeps criminis and the usual rule that he would be left where he was applied. (2) The exception that on grounds of public policy and to vindicate the public right the wrong- doer might recover what he had transferred, was inapplicable be- cause the public right had been completely vindicated by the Attor- ney-General in the governinent suit. Hence Harriman was left without any excuse for attempting to get back the stock transferred) ; Central Transportation Co. v. Pullman’s Car Co., 139 U. 8. 24 (the Central Com- pany was not permitted to sue for rent on a lease it had made of all its aasets); Woodstock Iron Co. v. Extension Co., 129 U. 8. 643 (agree- ment to build a railroad on a longer line in order that it should pass by plaintiff’s factory. Railroad carried out its part of the bargain but could not recover ‘the consideration). See also Hitchcock v. Davis, 87 Mich. 629, 632; Belding v. Pitkin, 2 Caines (N. Y.) 147; Atcheson v. Mallon, 43 N. Y. 147; Leonard v. Poole, 114 N. Y. 371; Wheeler v. Russell, 17 Mass. 258, 281; Snell v. Dwight, 120 Mass. 9; Kahn, Jr. v. Walton, 46 Oh. St. 195; Thomas v. Brownville Rail- way, 2 Fed. 877 (here a contract between a railroad and a construc- tion company was held void because the directors of the railroad were interested in the construction com- pany. This contract was so far against public policy that no equi- table relief by way of foreclosure was permitted on the bonds held by it. Furthermore, the stock- holders were not estopped by long acquiescence in such a contract). 138 COMBINATIONS AND RESTRAINT OF TRADE 15th day of April, 1909, shall be substituted for the 15th day of February, 1908. Believing that the decree of the Circuit Court does justice between the parties, enforces the law and upholds a sound public policy, and that there is no reversible error therein, the decree should be affirmed. The judgment of the Appellate Court for the First District is therefore reversed, and the de- eree of the Circuit Court affirmed. Appellate Court reversed, Circuit Court affirmed.?1 CHAPIN v. BROWN BROS. (Supreme Court of Iowa, 1891. 83 Ia. 156.) ROTHROCK, J. It appears from the petition that in the month of March, 1890, the plaintiffs entered into a written agreement with the defendants and other parties. The follow- ing is a copy of said agreement: ‘‘We, the undersigned grocerymen of Storm Lake, finding the business of purchasing butter of farmers and handling the 21—People v. Nussbaum, 66 N. Y. Supp. 129 (1900); Chester, J., said: **It is also asserted that under the laws of this state, as well as those of Maine and of New Jersey, it was lawful for the American Ice Com- pany to exchange its capital stock for the capital stock of the Consoli- dated and Knickerbocker Ice Com- panies. It is true that, under section 40 of the stock corporation law (Laws 1892, c. 688), this is so; and it has been held that that section authorizes one corporation to pur- chase stock in another, although the result might be to destroy competi- tion. Rafferty v. Gas Co., 37 App. Div. 618. But it may happen that an act otherwise legal, if done with an illegal purpose or intent, be- comes, by virtue of such purpose or intent, illegal, and therefore to be condemned. While the law permits one corporation to buy and hold stock of another corporation, the attorney-general sufficiently alleges that this was done in this case for an unlawful purpose. He al- leges, in effect, that the purpose of the alleged agreement or arrange- ment between these companies to so combine their interests was to create & monopoly in the ice business, and destroy competition in the produc tion, supply, and sale of ice in the city of New York, in violation of law, and that in pursuance of such agreement and arrangement the THE COMMON LAW 139 same very burdensome, and of material loss to us, and believing the same could be handled as advantageously by persons who would make butter buying and handling an exclusive business, and whereas, the firm of D. & E. Chapin, through their agent, assure us of their ability to handle butter to the best advantage, and that they will engage in the business extensively in our town, we make a solemn engagement and pledge ourselves to each other and to the said firm of D. & E. Chapin that we will buy no more butter or take no more in trade, except for our family use, and all butter so bought shall be delivered by the seller to the buyer’s place of residence. This, however, shall not prevent any merchant from buying butter to retail from any regular butter buyer who buys all the butter he handles in this town for cash. It is further provided that the said firm of D. & E. Chapin, in whose favor we abandon the business, shall open rooms conveniently located for buying butter; that they shall keep a man in attendance during all business days and hours in the year from as early in the morning and until as late in the evening as the season of the year and state of the weather might seem to require. They shall accept all the butter offered, and shall pay for the same as high price in cash, or by giving check against a suitable deposit in some bank in this town, as merchants or butter buyers in the town of Newell, this county, are at the time paying in cash for a similar grade of butter, except in extreme cases, where they may be paying materially more than the markets will warrant. It is also provided that the said D. & E. Chapin shall not direct their checks or persons taking the same to any particular store for payment. That they shall not buy in connection with any dry goods or grocery store. Whenever a majority of the merchants signing this article of agreement are convinced that the engagements herein entered into are not being complied with, or whenever they are dis- American Ice Company acquired the stock of the other two companies. I think, therefore, that he brings the case within the provisions of the law which condemns every contract, agreement, arrangement, or com- bination having for its purpose the creation or maintenance within this state of a monopoly of the produc- tion or sale of an article of common use, or the restraining or preventing competition in the price or supply of any such article, and that his written application is sufficient to justify the order for examination which has been granted.’’ 140 COMBINATIONS AND RESTRAINT OF TRADE satisfied with this arrangement or the manner in which it is being carried out, any merchant whose name is hereto appended may appoint a meeting by notifying each grocery firm in town of the time and place for the purpose of considering who may be guilty of a breach of faith in carrying out these engage- ments, or whether it is advisable to continue the same; and if, at such meeting, a majority of the subscribers hereto shall cer- tify in writing that they think it advisable for the interest of the town to withdraw from this engagement, this contract shall become null and void. This engagement shall take effect and be in force from and after such time as when it shall have been subscribed to by each grocery house in this town, and when the firm of D. & E. Chapin shall designate, provided they are then prepared to handle the butter, and shall continue two (2) years unless sooner dissolved, as herein provided. ‘We also agree not to pay a higher price for eggs than shall be fixed by the said firm of D. & E. Chapin, provided said firm shall fix as high price as eggs are at the time worth to ship. W. C. Kinne & Co., Frep ScHoiizer, Brown Bros., J. O. Douauas, W. A. Jones, Geo. E. Forp & Bro., W. Lownsszrry, Lissy & Raz, D. & E. Cuarin.”’ It is averred in the petition that the plaintiffs, in pursu- ance of said written contract, came and located at Storm Lake, and engaged in the business of buying butter at that place, and were at the commencement of the suit still so engaged, and have made arrangements to continue the business for the said period of two years, and that they have thus far fully complied with said written agreement, but that the defendants, in viola- tion thereof, have opened a butter store in said town, and have engaged in the business of buying butter generally, and have thereby interfered with plaintiffs’ business, and alienated their trade to the extent of 5,000 pounds of butter, upon which plain- tiffs would have realized a profit of 3 cents a pound, making in all $150 damages suffered by plaintiffs. Judgment is de- manded for said sum, and an injunction is prayed restraining the defendants from continuing in said business. Among the several grounds of objection to the granting of an injunction we regard two of them as material. They are as follows: ‘First, that the agreement in writing is void for want of consideration, as there is no money value inuring to THE COMMON LAW 141 the benefit of the defendants herein; and, second, that said con- tract by its terms is for the purpose of creating a monopoly in purchasing and selling butter at Storm Lake, and is therefore in restraint of trade, to the detriment of the producers and consumers of butter at that place and in that vicinity.’’ The history of the law upon the question of contracts in restraint of trade is an interesting subject of investigation. The books abound in cases upon the subject. Anciently all contracts were void which in any degree tended to the restraint of trade, even in a particular locality, and for a limited time. This ancient rule has been so far modified that, although agreements in general restraint of trade are invalid, because they deprive the public of the services of the citizen in the occupation or calling in which he is most useful to the community, and expose the people to the evils of monopoly, and prevent competition in trade, yet an agreement in partial restraint of trade will be upheld where the restriction does not go beyond some particular locality, is founded upon a sufficient, consideration, and is limited as to time, place, and person. It is accordingly every- where now held that when one engaged in any business or occupation sells out his stock in trade and good-will he may make a valid contract with the purchaser binding himself not to engage in the same business in the same place for a time named, and he may be enjoined and restrained from violating his contract. This is about as far as contracts in restraint of trade have been upheld by the courts in this country or in England. The general principles above announced will be found in all text-books upon contracts, and find support in many adjudged cases. We have not thought it necessary to set out or cite the cases. They will be found collected in 3 Amer. & Eng. Enc. Law, p. 882, and 10 Amer. & Eng. Ene. Law, p. 943; 2 Pars. Cont. p. 747. Applying these rules to the contract under consideration, we are to inquire first whether there is a sufficient consideration for the promise of the defendants and the other parties who executed the instrument not to engage in dealing in butter at Storm Lake. It is very plain that there was no money paid to them as a consideration. The plaintiffs did not purchase any stock of butter which the defendants had on hand. They paid nothing for an established plant or place of doing business, nor 142 COMBINATIONS AND RESTRAINT OF TRADE for the good-will of any business. So far as appears, they went into the town of Storm Lake, and proposed to go into the butter business if the other persons then engaged in that business would agree to quit that line of trade for two years. In all the search we have made for authority upon this branch of the controversy we have found no warrant in any precedent for holding that this is a sufficient consideration. There are cases which hold, and the law is well settled, that where a party proposes to expend money in erecting a manufactory or other plant which may be a public benefit, subscriptions in aid of the enterprise are valid obligations. But such contracts are widely different in principle from the agreement under consideration. Suppose the plaintiffs had made a proposition to the dry goods merchants of Storm Lake that if they would all quit the busi- ness for two years, without any consideration being paid to them for so doing, the plaintiffs would establish a dry goods store at that place, and the proposition had been accepted; it would be a marvelous decision if any court would hold that there was any consideration for such a contract. II. But it appears to us that the decision of the District Court is manifestly right upon the question that the agreement is against public policy. It plainly tends to monopolize the butter trade at Storm Lake, and destroy competition in that business. It is not necessary that the enforcement of the agree- ment would actually create a monopoly in order to render it invalid, and surely, where all the dealers in a commodity in a certain locality agree to quit the business, and the plaintiffs are installed as the only dealers in that line, the tendency is, for a time at least, to destroy competition, and leave the plain- tiffs as the only dealers in that species of property in that locality. Such contracts cannot be enforced. Affirmed. KELLOGG v. LARKIN (Supreme Court of Wisconsin, 1851. 3 Pinney 123.) Error to the County Court for Milwaukee County. Action of covenant for the recovery of rent. Two pleas filed by the defendants. THE COMMON LAW 148 To these the plaintiff demurred. Joinder in demurrer and judgment for plaintiff thereon ; and the defendants brought this writ of error. HOWE, J. The plaintiff below, Larkin, declared in covenant for the rents reserved in a lease executed by him to Kellogg & Webb, of one portion of a certain warehouse, situated in the Fifth Ward of the City of Milwaukee. The lease contained a covenant on the part of the plaintiff by which he obliged him- self, during the term for which the premises were demised, to wit: from the 7th of January to the Ist day of August follow- ing, ‘‘not to purchase, store, or handle any wheat in the Mil- waukee market, except under the direction’’ of the defendants. This covenant, as is said, being in partial restraint of trade, is prima facie bad, and should be aided by an averment of some special circumstances, showing a good reason, independent of a mere pecuniary consideration, to support it. And the want of any such covenant, it is further said, is a substantial defect in the declaration which entitles the defendants to judg- ment upon the demurrer, notwithstanding the insufficiency of their plea. The only reason ever assigned in support of such restrictions is, that they are necessary or useful to the party with whom the contract is made, as a protection to him in the prosecution of his business. And it is not necessary that such reason should be expressly averred, if it sufficiently appears from the contract itself. Here the lease is set forth at length in the declaration, and that sufficiently discloses the interest which the defendants had in requiring protection against the competition of the plaintiff. And so the interest or reason is usually made to appear. See, for instances, Mitchel v. Reynolds, 1 P. Wms. 181; Mallan v. May, 11 Mees & W.'652; Chappell v. Brockway, 21 Wend. 157. I have found no case in which these circumstances or reasons have been expressly averred, although it is suggested that they might be set out by averment when they did not appear upon the face of the contract. Ross v. Sadgbeer, 21 Wend. 166. The declaration is therefore sufficient in substance, to support the judgment of the County Court. Let us consider if the plea demurred to discloses a good answer to that declaration. 144 COMBINATIONS AND RESTRAINT OF TRADE This plea, in its character, is quite original. I think it would be difficult to say what precedent gave form to it. But in its structure it is ingenious; J think it would be quite as difficult to say what canon of good pleading was violated by it. But I have to consider, not its form, but its body in substance. Its material averments, I think, may be stated as follows: 1. That the lease declared upon ‘‘was made, entered into and executed for the further countenancing and proceeding in the undertakings, schemes and plans of the produce association,’’ of which the parties to the lease were severally members. 2. That the produce association was composed of the pro- prietors of certain warehouses, to the number of eleven, and the owners of certain mills in the City of Milwaukee. 3. That the produce association, on the 29th day of Decem- ber, 1849, entered into an agreement by which the mill owners were parties of the first part, and the warehousemen were par- ties of the second part, the prominent features of which agree- ment were as follows: First, The mill owners agree to pay the warehousemen ‘‘ four cents per bushel commission, or storage, on each and every bushel of wheat coming to the Milwaukee market to be disposed of, by sale in the street, or by storage (so far as they are able to control the same,’’ from that date to the 1st day of August, then next. Second. The warehousemen, in consideration thereof, agree “‘to give to the parties of the first part, full, absolute and uninterrupted control of the Milwaukee wheat market, from the date hereof, up to the first day of August, A. D. 1850, so far as they shall be able to do so by virtue of their capacity as warehousemen or vessel and dock owners; that they will not themselves, or through the agency of others, directly or in- directly, under any name or pretense whatsoever, purchase, contract or bargain for any wheat in the Milwaukee market, from the date hereof, up to the 1st day of August, A. D. 1850, nor make any contracts for the storage of wheat during the time aforesaid, except as agents under the direction and control of the parties of the first part.’’ Third. That nothing herein contained is to give the said parties of the first part, any right to close the warehouses THE COMMON LAW. 145 against the storage of wheat, or to fix a higher rate of storage than 4 cents per bushel. Fourth. That ‘‘the parties of the second part shall at all times hold themselves in readiness to purchase, store and de- liver, or ship wheat for account of the parties of the first part, at the rate of 4 cents per bushel, as aforesaid,’’ and, Fifth. That the mill owners shall pay to the warehousemen 4 cents per bushel upon all wheat received into the mills for shipment or grinding, ‘‘grist work excepted.’’ 4. It is averred that the objects and purposes of the associa- tion were to carry out and perform these agreed plans and schemes. 5. It is averred that the association, its general plans, schemes, attempts and undertakings, tended to the manifest injury and restraint of trade, the depression of the wheat market, to reduce the price of the commodity of wheat and to stifle fair and lawful rivalry and competition of dealers therein. Upon this last averment a point was raised upon the argu- ment, which, as it seems preliminary to the main question, I will here dispose of. It was said that because it is expressly averred that the ‘association, its agreed plans, schemes,”’ etc., ‘‘tended to the manifest injury and restraint of trade,’’ ete., and because the truth of this averment is admitted by the demurrer, and be- cause whatever contracts do have such tendency, are held to be void as contravening public policy, therefore the judgment of the County Court should have been for the defendants. The answer to this objection is manifest. Undoubtedly a demurrer admits the verity of every fact well pleaded; but I have to say, that if the ‘‘agreed plans and schemes’’ which are alleged to have such pernicious tendency are any other than those that are developed in the articles of the 29th of Decem- ber, 1849, then they are not well pleaded, and for these two reasons: 1. Because (as I think) they should be set forth in terms; not by describing their symptoms or effects, but stating their essence and nature, leaving the court to judge of their tend- encies and probable effects; and 2. Because, in such case, this averment would be clearly repugnant to that other averment, to wit: that the ‘‘objects and Kales R. of T. Vol. I—10 146 COMBINATIONS AND. RESTRAINT OF TRADE purposes of which association were to carry out and perform all the acts, plans and schemes contemplated and agreed upon in the said article of agreement.’’ But doubtless the pleader referred to the articles themselves, which he sets forth in extenso, as developing the plans and schemes alleged to be so injurious to the public interests. The agreement is therefore laid before the court for construction— to have its character and tendencies determined by judicial interpretation—not proved to the satisfaction of a jury. Whether such an agreement existed—whether the lease sued upon grew out ’of it, or was connected therewith so as to be tainted by it, if taint was in it, were questions which, if raised, must be settled by a jury. But what the agreement essentially was, and whether it violated any law of the land or any rule of public policy, were purely questions of law, to be determined by the Court. Therefore no averment could give to the agree- ment a character which it had not, and no admission could’take from it the character which it had. Millan v. May, 11 Mees & W. 652, was an action upon a covenant not to carry on the business of a surgeon dentist in London, or in any of the places or towns in England or Scot- land, where the plaintiffs might have been practicing within four years, for which term the agreement ran. Plea to the second breach assigned that the plaintiffs, before the expiration of the term, had practiced in many towns in England, and that divers of them were distant from each other one hundred and fifty miles; wherefore the said stipulation was an unreasonable restriction of trade. Upon demurrer, the plea was held bad for attempting to put in issue a matter of law. The County Court, then, we think, properly assumed the responsibility of passing upon the nature and effect of the agreement, and I come now to consider the gravest question presented upon this record, to wit: whether that court erred in its estimate of the character of that agreement. The plaintiffs in error aver that this agreement ‘‘tended to the manifest injury and restraint of trade, the depression of the wheat market, to reduce the price of the commodity of wheat, and to stifle fair and lawful rivalry and competition of dealers therein,’’ and this view was enforced by an argument of great length, and exhibiting much ingenuity and research. THE COMMON LAW 147 Before proceeding to discuss the question whether this agree- ment does in fact contravene public policy, I desire to refer to the very happy and every way timely remarks of Mr. Story. He says: ‘‘Public policy is in its nature so uncertain and fluctuating, varying with the habits and fashions of the day, with the growth of commerce and the usages of trade, that it is difficult to determine its limits with any degree of exactness. It has never been defined by the courts, but has been let loose and free from definition, in the same manner as fraud. This rule may, however, be safely laid down, that wherever any contract conflicts with the morals of the time, and contravenes any established interest of society, it is void, as being against public policy.’’ Story on Conf. Laws, § 546. And I desire to add that as a general rule, the immediate representatives of the people, in legislature assembled, would seem to be the fairest exponents of what public policy requires, as being most familiar with the habits and fashions of the day, and with the actual condition of commerce and trade, their consequent wants and weaknesses. And a legislative enactment would seem to be the least objectionable form of exposition, for these two reasons: 1. Because it would operate prospectively as a guide to future negotiations, and would not, like a judgment of a court, annul a contract already concluded in good faith, and upon a valuable consideration; and 2. Because a rule so established has a wider circulation among the people, and enters more generally into the information of the public. I by no means intend to deny the right or the propriety of judicially determining, that a contract which is actually at war with any established interest of society is void, however in- dividuals may suffer thereby, because the interest of individuals must be subservient to the public welfare. But I insist that before a court should determine a contract which has been made in good faith stipulating for nothing that is malum in se, noth- ing that is made malum prohibitwm, to be void as contravening the policy of the state, it should be satisfied that the advantage to accrue to the public for so holding is certain and substantial, not theoretical or problematical. And I submit that he is the safest magistrate who is more watchful over the rights of the 148 COMBINATIONS AND RESTRAINT OF TRADE individual, than over the convenience of the public, as that is the best government which guards more vigilantly the freedom of the subject, than the rights of the state. And having ventured upon these few preliminary reflections I disclaim all aid from any one of them in the determination of this cause, but I affirm, that, upon the spirit of the letter of the law, as it has been adjudicated for one hundred and forty years, the agreement disclosed in the plea of the plaintiff in error is not against public policy. Contracts against public policy are divided, by Mr. Story, into seven classes, as follows: 1. Contracts in restraint of trade; 2. Contracts in restraint of marriage; 3. Marriage bro- kerage contracts; 4. Wagers and gaming; 5. Contracts to offend against the laws and public duty; 6. Usury, anc 7. Trading with an enemy. This agreement clearly does not fall under either of the six heads last above mentioned. If objectionable at all, then it must be as a contract in restraint of trade. In that light alone it was considered by the counsel for the plaintiffs in error upon the agreement. But contracts in restraint of trade are divided by Parxsr, J., in Mitchel v. Reynolds, 1 P. Wms. 181, into involuntary and voluntary, the former comprising restraints arising from either: 1. Grants or charters from the crown; 2. Customs, or 3. By- laws, and the latter comprising those restraints which arise from the agreement of parties. When I have said, then, that the agreement we are consider- ing, most certainly does not present a case of involuntary restraint, I think I have dispensed with the necessity of ex- amining that large class of cases, cited by counsel upon the argument, and which arose upon royal grants and charters, customs or by-laws. These decisions rest upon reasons appli- cable to those cases, and different from the reasons which have entered into the adjudications upon cases of voluntary restraint. These latter cases are again distinguished as, first, General; or, second, Particular; as to places or persons, or time. A general restraint which is defined to be ‘‘an agreement not to carry on a certain business anywhere’’ (Story on Conf. Laws, § 550) is against public policy, and is void. So it was held after several ayguments in Mitchel v. Reynolds, supxa, and THE COMMON LAW 149 the doctrine has been affirmed and reaffirmed in numerous cases since, and I am not aware of the propriety of the rule being questioned in any single case. ParKer, J., in Mitchel v. Rey- nolds, states the reasons upon which the rule is founded, as follows :, “First. The mischief which may arise from them. 1. To the party by the loss of his livelihood, and the subsistence of his family. 2. To the public by depriving it of a useful mem- ber. Another reason is the great abuses these voluntary re- straints are liable to, as for instance, from corporations who were perpetually laboring for exclusive advantages in trade, and to reduce it into as few hands as possible; as likewise from masters who are apt to give their apprentices much vexation on this account, and to use many indirect practices to procure such bonds from them, lest they should prejudice them in their custom when they come to set up for themselves. 3. Because in a great many instances they can be of no use to the obligee, which holds in all cases of general restraint throughout Eng- land, for what does it signify to a tradesman in London, what another does at Newcastle? And surely it would be unreason- able to fix a certain loss on one side, without.any benefit to the other.”’ I do not notice here the fourth and fifth reasons assigned, because the fourth is declared by the learned judge to be in favor of the contract, and so opposed to the rule, and the fifth applies to contracts with a consideration, which he evidently supposes to be without the rule, and which he says the law is not so unreasonable as to declare void, ‘‘for fear of an uncertain injury to the party.”’ Now, in applying the rule to any given case, it is important that we attend to the reasons upon which it is founded. ‘‘Whoso knoweth not the reason of the law, knoweth not the law.’’ And in regard to the reasons above stated, I have to say that I very much question whether, here in Wisconsin at the present time, and in view of our present social and political position, more than one of them is entitled to any considerable impor- tance, in our consideration. The opportunities for employment are so abundant, and the demand for labor on all sides is so pressing and urgent and the supply so limited, that I much question, were we to consider the subject as res integra, if we 150 COMBINATIONS AND RESTRAINT OF TRADE should feel authorized to hold that a man had endangered his own livelihood and the subsistence of his family, by an agree- ment which merely excluded him from exercising the trade of a blacksmith or a shoemaker, leaving all the other departments of mechanical, agricultural and commercial industry .open to him. And while we have no privileged classes here, but little in- dividual, and less associated capital, and while our resources are so imperfectly developed, while the avenues to enterprise are so multiplied, so tempting and so remunerative, giving to labor the greatest freedom for competition with capital, per- haps, that it has yet enjoyed, I question if we have much to fear from attempts to secure exclusive advantages in trade, or to reduce it to few hands. ‘While so much more remains to be done that all hands can do, I question if the better way to foster individual effort be not to secure it the greatest possible freedom, either to direct it to any particular calling, or to abandon that calling to another for an equivalent. And while apprentices are sought for oftener than they seek apprenticeships, we need hardly fear, I think, that they will be subject to great vexation by their masters on account of any anticipated prejudice to their custom. Besides, if such indirect practices should be resorted to here to obtain similar bonds, as Lord Macclesfield says was the case in his time, perhaps the courts would find those indirect practices themselves as good a pretext for setting aside the bonds as any real or fancied injury to the public policy arising therefrom would afford. As to the third reason, I apprehend it would be thought a dangerous precedent were a court to annul any other voluntary bond for which a voluntary consideration has been received, upon the ground that it was of no use to the obligee. Ordinarily, we say, let parties who are competent to contract determine for themselves what contracts will profit them. And certainly I do not understand why that should be called a certain loss on one side when, for what the party has abandoned, he has re- ceived an ample equivalent. If the loss is supposed to arise from a total want of consideration, or from its inadequacy, these are distinct grounds for interference. ‘It is enough, however, that one good reason still remains to THE COMMON LAW 151 uphold the rule. The loss to society of a valuable member is as great a public injury now as it ever was, and as great here as anywhere. I hope, indeed, that the market value of a human being is higher now than it was in England at the beginning of the eighteenth century, when the case of Mitchel v. Reynolds was decided. The capacity of an individual to produce (using that word in its largest sense) constitutes his value to the public. That branch of industry in which a man has been educated, and to which he is accustomed, and for the abandon- ment of which he demands compensation, is supposed to be the one in which he can render the greatest profit. The value of what he produces belongs to himself. The actual product be- longs immediately to him who employs him, but mediately to the state, and goes to swell the aggregate of public wealth. Therefore, the law says to each and every tradesman: You shall not, for a present sum in hand, alien your right to pursue that calling by which you can produce the most and add the most to the public wealth, and compel yourself to a life of supineness and inaction, or to labor in some department less profitable to the state. And if any man, mindful of his own gain alone, but not of the public good, will bargain with you to that effect, you are held discharged from such bargain, because of the advantage that will arise to the public from so holding. But none of these reasons apply to what are called partial or limited restraints, or to agreements not to exercise a particular calling in a particular place. Indeed these seem to be not so much restraints upon trade as upon tradesmen. For when a silversmith obligates himself not to pursue that particular busi- ness in Milwaukee, the trade need not necessarily be restrained thereby, for he can pursue if he pleases in Racine, or elsewhere in the state; and to all legal intendment with equal advantage to himself and to the public. Accordingly, such agreements have uniformly been upheld by the courts, when founded upon a sufficient consideration. This modification of the rule is said to have obtained as early as 1621. Brand v. Joliffe, Cro. Jac. 596. In Mitchel v. Reynolds, 1 P. Wms. 181, the law is declared so to be, and so to have been. The cases which have been decided in accordance with this doctrine are numerous. I will only instance Bunn v. Guy, 4 152 COMBINATIONS AND RESTRAINT OF TRADE East, 190; where an attorney bound himself not to practice within London and one hundred and fifty miles from thence. In Leighton v. Wales, 3 Mees & W. 545, the restraint was against running any coach on a particular road. Pierce v. Fuller, 8 Mass. 223; Palmer v. Stebbins, 3 Pick. 188; Pierce v. Wood- ward, 6 id. 201; Nolles v. Bates, 7 Cow. 307; Chappel v. Brock- way, 21 Wend. 158; Perkins v. Lyman, 9 Mass, 532; which latter case arose upon an agreement not to be interested in any voyage to the northeast coast of America, or any traffic with the natives of that coast for seven years, and the agreement was adjudged good. Now it is manifest, that by every known rule of construction, the agreement. exhibited to us in the defendant’s plea is one falling within the principle of the cases above cited. The re- straint it imposed upon trade, if any, was partial and limited; limited in every particular referred to in the books. It was limited as to persons, as to object, as to place, and as to time (though this last is not essential). As to persons, it was limited to the proprietors of eleven warehouses; as to object, it was limited to the traffic in wheat; as to place, it was limited to the Milwaukee market; and as to time, to a period of about seven months. It was indeed objected upon the argument that there was nothing upon the record to show the extent of the Milwaulsee market. But surely this objection cannot be well taken. Ad- mitting for the purpose of the argument, the law to be that only so much restraint upon the obligor will be upheld by the courts as shall appear to the court to be necessary to the protection of the obligee, still the agreement is before us, and if we are to construe it as a contract, and with reference only to the ap- parent intention of the parties, I think we would find no diffi- culty in holding that the contracting parties intended by that term to confine themselves to the market in Milwaukee, a city which we judicially know to exist, and the market or place of sale in which, I think we may legally infer, is not more exten- sive than the "bountlanies of the city. If on the contrary we are to construe it as a part of the plea in the case, having reference to that degree of certainty requisite in good pleading, I have simply to remark, that what- ever is uncertain in this behalf, is the fault of the plaintiffs in THE COMMON LAW 153 error, from whom the pleading comes; and because they have not averred the Milwaukee market to have an unreasonable extent, we are to presume that it has not. 1 Ch. Pl. 345. In either point of view the restraint was limited, and the limits were reasonable. But the parties are said to have combined and agreed not to engage in trade, and that this was clearly against public policy; and in the plea, the plaintifis and defendants, together with divers other persons, are averred to have formed themselves and entered into an association. Let this matter be understood, and we need not be frightened by the terms employed to char- acterize it. The agreement discloses no combination and no association in the sense in which the words are evidently used. It is of two parts. It creates mutual obligations, and provides mutual equivalents, as every contract, inter partes, does. But there is no identity of interest or of duty between the parties of the second part, no more than always exists between landlord and tenant. The warehousemen received their daily compen- sation, and the millers received their daily profits. And there was no combination between the parties of the second part, the warehousemen. Perhaps they must be eonsid- ered. to have jointly promised the party of the first part, but it is not disclosed that they have promised each other, which I understand they must have done, before they can be said to have combined. Besides, if the design be lawful, as the abandonment of trade in a particular place is, what matter how many combine in it? But at all events, it is said, that as creating a particular re- straint, the contract is prima facie bad; and the facts and cir- cumstances which will justify it, if any such exist, skould be made to appear. And upon this point, the authority of Lord Macclesfield is -again invoked, who says in Mitchell v. Reynolds that ‘‘a partic- ular restraint is not good, without just reason and considera- tion.’? And again, ‘‘In all restraints of trade, where nothing more appears, the law presumes them bad.’’ Special circum- stances may exclude the presumption, and the court is to judge of those circumstances, and determine accordingly, and if, upon them, it appears to be a just and honest contract, it ought to be maintained. 154 COMBINATIONS AND RESTRAINT OF TRADE What were those special circumstances in that very case? Why, that the plaintiff was the assignee of a lease of a messuage and bakehouse in Liquor Pond street, in the parish of St. Andrews, Holborne, for the term of five years. This was held a sufficient reason to support a covenant not to exercise the trade of a baker within that parish during the said term. What are the special circumstances in this case? The obligees are the proprietors of several mills in the City of Milwaukee, for the manufacture of wheat into flour. Will any one presume to say here is not as good a reason for upholding a promise not to traffic in wheat in Milwaukee, to the prejudice of these pro- prietors, for the term of seven months? But how should these special circumstances be made to ap- pear? By averment in the pleadings and by proof upon the trial? Certainly not. It was not so in the case just cited. They appeared upon the face of the instrument sued upon, by way of preamble to the conditions, were set out on prayer of oyer, and the question arose upon demurrer to the declaration. Here these circumstances appear in the agreement which is set out in the plea, and the question arises upon demurrer to the plea. It is insisted further that the contract of the 29th December, 1849, discloses an attempt to create a monopoly of the wheat market. And in support of this position we are again referred to the leading case. “Tt may be useful,’’ says ParKer, J., ‘‘and lawful to restrain him from trading in some places, unless he intends a monopoly, which is a crime.’’ But the word monopoly is used to signify something which is very different from aught that could have been intended by this contract. The learned judge himself interprets it in another part of the same opinion. He says, ‘‘that to obtain the sole exercise of any known trade throughout England is a complete monopoly, and against the policy of the law.’’ He adds that when restrained to particular places or persons, if lawfully and fairly obtained, the same is not a monopoly. Now could the parties possibly have intended by this simple contract, to vest in the mill owners the sole exercise of the traffic in wheat, throughout the State of Wisconsin? If go, there was the most extraordinary disproportion of means to the THE COMMON LAW 155 end ever betrayed in the negotiations of business men. But they intended nothing of the kind. Not even a monopoly of the market in Milwaukee. On the contrary, these mill owners who desired to purchase wheat for manufacturing, evidently sought to protect themselves against the competition (doubtless often sharp and injurious) of the warehousemen. The obligors possessed large facilities as warehousemen, ves- sel and dock owners, for storing and freighting the produce which came to that market. Their interests led them to deal in that produce in the bulk, because so it would pay the most storage and the most freight. On the other hand, to give employ- ment to their mills, the obligees sought the same produce for manufacture. Here their interests clashed. The contract before us is the result of a compromise of those conflicting interests. And if the argument needed any such beggarly support, I think it might well be asked if the public interests were not promoted, rather than prejudiced by an arrangement which saved to the wealth of our state, the earnings from the manu- facture of so large a quantity of wheat as we may reasonably suppose to have been floured in the Milwaukee mills, and which, but for this arrangement, would have been floured in the mills of some eastern state. I waive this consideration. I say there was no monopoly in- tended, none effected. We cannot fail to perceive, that in spite of this contract, all the rest of Wisconsin was an open and unrestricted market for the sale of wheat. And even in Mil- waukee, the market was open to the fiercest competition of all the world, except these obligors. True, the language of the contract is, that the parties of the second part, ‘‘agree to give the parties of the first part, full, absolute and uninterrupted control of the Milwaukee wheat market ;’’ and had it stopped here it might well have been urged that there was an agreement for a monopoly of the trade in that market. And if that had been the only market for Wiscon- sin (which it is not), it might well be said the agreement was as pernicious as an agreement to strike the sun from the system. Hither, if performed, would be ruinous to the farmers of Wisconsin; but I submit that the impossibility of performing, would constitute as good a reason for holding either of them yoid, as the injurious consequences certain to result from per- 156 COMBINATIONS AND RESTRAINT OF TRADE formance. But this stipulation is qualified by adding the words, ‘‘so far as they shall be able to do so,’’ and had they stopped here, to any objection that a monopoly was agreed upon, it might well be answered, that the giving of such control or such monopoly (if they are synonymous terms), of the Mil- waukee wheat market as those parties could give, was no mo- nopoly at all. But the agreement is still further limited by the words, ‘‘by virtue of their capacity of warehousemen, vessel and dock owners.’’ It is then simply an agreement to give to the mill owners, such control of that market as they can give by virtue of those specified employments. In other and equivalent terms, it is a transfer of such control as the obligors possessed in right of their employment as warehousemen, etc. Such are the general terms selected by the draftsmen to express the complete aban- donment of that trade in that market to the obligees. Personally, the obligors were to do nothing to confirm the mill owners in that trade to the exclusion of anybody but them- selves. Accordingly they go on to render the nature and meaning of the stipulation more definite, by specifying several things which the parties of the second part shall not do, but not one which they shall do. It is unnecessary to examine the cases cited by counsel in support of the proposition I have here been combatting. They all arose upon royal grants or by-laws, and consequently were cases of involuntary restraints. They do establish the doctrine that the grant of a monopoly is void; but they do not support the averment of the plaintiff in error, that this contract disclosed a monopoly. Upon this point, better authority may be found in the language used by Bronson, J., in Chappell v. Brockway, 21 Wend. 157. To a similar averment, he replied: ‘‘The de- fendant can gain nothing by giving the transaction a bad name, unless the facts of the case will bear him out. He calls this a monopoly. That is certainly a new kind of monopoly which only secures the plaintiff in the exclusive enjoyment of his business as against a single individual, while all the world beside are left at full liberty to enter upon the same enter- prise.’’ But the crowning objection urged against the validity of this agreement is, that it tends ‘‘to depress the wheat market; to THE COMMON LAW 157 reduce the price of the commodity of wheat, and to stifle the fair and lawful rivalry and competition therein.’’? It is quite observable that the word ‘‘stifle’’ is used more adroitly than aptly. But if its use is insisted upon, I admit that it does tend to stifle the competition of these obligors, and I assert that the right to stifle competition by contract, so far as it is injurious to the parties contracting, has not before been denied or ques- tioned for two hundred years, unless two cases reported in 4 Denio 349, and 5 Denio 434, are to be considered as denying the right. Nor can I perceive how this agreement can reduce the price of wheat, below its actual market value. Wheat, being an article of almost universal consumption, has a market everywhere, and a value in every market. And that value in any particular place is determined, less by the number of purchasers in that place, than by its distance from, and means of communication with the great central markets of the country and of the world. It is fluctuating to be sure, but usually it is very accurately ascertained, and well understood by the people. And I cannot suppose that the agreement of those warehousemen not to purchase that great staple upon their own account would affect its value, more than the agree- ment of so many brokers not to take foreign gold in a particular place would diminish the current value of such coin. Even if this contract had removed all competition from that market, and the mill owners had taken advantage of that exemption to lower their bids, one of two results must have followed. Either that product would have been wholly driven from the market, or new competitions would have entered the field to purchase. Either result would have defeated the very object which the parties had in view. It was said, indeed, upon the argument, that foreign capital was excluded from the market by this con- tract, because the essential facilities of trade were denied thereto. But the agreement will not warrant any such inter- pretation. On the contrary, the power to close the warehouses against the storage of wheat, or to demand exorbitant prices therefor is denied to the obligees by the express terms of the instrument. Numerous cases were cited upon the argument in support of this last averment. Few of them, however, bear any analogy to the case before us. Most. of those cases arose upon secret 158 COMBINATIONS AND RESTRAINT OF TRADE agreements not to bid at auction sales, or upon the employment of secret bidders. All such secret arrangements are very prop- erly discountenanced by the courts, and forbidden by the law. They are frauds upon the party who is uninformed of them and who acts in good faith. When a man publicly offers his property to the highest bidder at an auction sale, thereby obligating himself to take the highest sum offered for it, however disproportioned that sum may be to its actual worth, it seems very reasonable that he should be protected against secret agreements between the bidders, by which one may be enabled to make the purchase upon his own terms. No such consequence could follow the making of the contract we are considering, for the simple reason that the obligees were not enabled thereby to purchase a bushel of wheat unless they offered a price for it which the vendor chose to take. But the distinction between the case at bar, and the case referred to, is too apparent to require illustration. And I would not have felt called upon to notice those cases at all, but that they have been supposed to sustain two other decisions. pronounced by the Supreme Court of New York, and which are claimed by the plaintiffs in error to be entirely decisive of the main question presented upon this record. I refer to the cases of Hooker v. Vanderwater, 4 Denio 349, and Stanton v. Allen, 5 id. 484. These cases arose upon contracts between different transportation companies upon the Erie canal, by which the parties agreed to stock their capital, and turn their earnings into a common fund, to be then apportioned between the dif- ferent proprietors, under certain regulations contained in the articles of agreement. The purpose assigned for the arrangement was the establish- ing of fair and uniform rates of freight, so equalizing the busi- ness among themselves as to avoid all unnecessary expense in doing the same. In the case first mentioned, the agreement was held to be void as conflicting with a statute of that state. In the second case the same court held the agreement void at com- mon law. In the former case, Jzwnrt, J., remarks: ‘“‘It is a familiar maxim that competition is the life of trade. It follows that whatever destroys or even relaxes competition in trade is injurious, if not fatal to it.’’ And in the latter case, Mc- Kissock, J., observes that: ‘‘While the introductory terms of THE COMMON LAW 159 the agreement proposed nothing apparently objectionable, the ultimate object is very manifest, and is of a different character. It is nothing less than the attainment of an exemption of the standard of freights, and the facilities and accommodations to be rendered to the public from the wholesome influence of rivalry and competition.’’ And again: ‘‘ As the canals are the property of the state, constructed at great expense, as facilities to trade and commerce, and to foster and encourage agriculture, and are at the same time a munificent source of revenue, what- ever concerns their employment and usefulness deeply involves the interests of the whole state. If then, in addition to the evils already pointed out, as incident to this confederacy, .a diminution of the revenue of the state would follow, of which there can be no doubt, as our canals have rivals by no means impotent, in the great inland carrying trade of the north and west, the question whether the association can be upheld, be- comes one of momentous import.”’ Such reasons are assigned in support of the judgments pro- nounced in those cases. I would be reluctant to subscribe to them. I think it would be unsafe to adopt as a rule of law, every maxim which is current in the counting room. It was said some three hundred years ago, that trade and traffic were the life of every commonwealth, especially of an island. City of London’s Case, 8 Co. 125. If it be true, also, that competition is the life of trade, it may follow such premises, that he who relaxes competition commits an act injurious to trade; and not only so, but he commits an overt act of treason against the commonwealth. But I appre- hend it is not true that competition is the life of trade. On the contrary, that maxim is one of the least reliable of the host that may be picked up in every market place. It is in fact the shibboleth of mere gambling speculation, and is hardly entitled to take rank as an axiom in the jurisprudence of this country. I believe universal observation will attest. that for the last quarter of a century, competition in trade has caused more individual distress, if not more public injury, than the want of competition. Indeed, by reducing prices below or raising them above values (as the nature of the trade prompted), competition has done more to monopolize trade, or to secure exclusive advan- * 160 COMBINATIONS AND RESTRAINT OF TRADE tages in it, than has been done by contract. Rivalry in trade will destroy itself, and rival tradesmen seeking to remove each other rarely resort to contract unless they find it the cheapest mode of putting an end to the strife. And it seems to me not a little remarkable that in the case of Stanton v. Allen, 5 Denio 434, it should have been urged against the agreement, that its object was to exempt the standard of freights, etc., from the wholesome influence of rivalry and competition. For it is very certain that because of that very purpose, because they did tend to protect the party against the influence of rivalry and com- petition, courts of law have upheld like agreements in partial restraint of trade, ever since the case of Mitchell v. Reynolds, supra, was decided. And upon the argument of this cause it was earnestly contended that some such object should have been expressly averred by the plaintiff in his declaration, in order to support the restraint imposed upon the lessor by one of the covenants in the lease declared upon. But upon the abstract question whether the agreements dis- closed in those cases did contravene public policy, the decisions therein pronounced are entirely conclusive upon us. And if the policy of that great state imposes upon her citizens the obligation of unrestrained and unrelenting competition in the business of transportation upon her canals, in order to swell the revenues from that already munificent source, I have nothing to urge against it. I am not sure I should have discovered the rule applied in the determination of those cases, had it not been disclosed to me by the high authority of that court. Entertaining the views I do of the extreme caution to be observed in setting aside bona fide contracts in behalf of public policy, I am not sure I should have found, as a legal presumption, that when the parties to those contracts had combined their efforts and capital in order to diminish their expenses and increase their profits, they would have so abused the advantages thereby secured as to drive the, carrying trade into the hands of those potent rivals, and thus. sacrifice all profit. But entirely controlling as those judgments are upon the question decided, they are far from being decisive of the case before us; for those agreements are broadly distinguished from the one I am considering, in the following characteristics: The THE COMMON LAW 161 theater upon which the restraint was imposed by those contracts was the property of the state, was built by the state, from which the state received the revenues. Here the theater is the City of Milwaukee, from which the state receives no revenue except what is derived from ordinary taxation. There the theater was the only one within the state affording like facilities to the same trade. Here the City of Milwaukee is only one (though doubtless the most considerable) of very many markets within the state for the sale of wheat. There the combination com- prised, in one case, a large portion, and, in the other, all the facilities employed upon the canal. Here the record does not inform us what portion of the facilities for the wheat trade existing in Milwaukee are placed under the control of the mill owners. There, an unlimited power was reserved to raise the price of transportation. Here the right to increase the price of storage above 4 cents per bushel is expressly denied. Because, therefore, the restraint imposed by this agreement is limited and reasonable, and because it is supported by a good consideration, in the judgment of this court, the same does not contravene public policy, is not void; and the judgment of the County Court must be affirmed. TRENTON POTTERIES CO. v. OLIPHANT (Court of Errors and Appeals of New Jersey, 1899. 58 N. J. Eq. 507.) Appeal from Court of Chancery. MAGIE, C. J. The appeal in this cause is from a decree of the Court of Chancery, made upon the advice of Vice Chan- cellor Grey, dismissing appellant’s bill of complaint, and denying the relief sought thereby. The pleadings in the cause, the issues presented, and the facts established by the proofs, are set out with such completeness in the opinion of the learned vice chancellor, and the statement preceding it, reported in 56 N. J. Eq. 680, 39 Atl. 9238, that it is unnecessary to repeat them here. The bill was filed by appellant against the seven defendants and respondents to restrain the breach of contracts alleged to Kales R. of T. Vol. I-11 162 COMBINATIONS AND RESTRAINT OF TRADE to have been made by them with it. It wag dismissed as to all the respondents upon the ground that the contracts in question were in illegal restraint of trade, and against the public policy of the state. As to three of respondents, the dismissal was also put on other grounds. As to James V. Oliphant, one of respond- ents, one additional ground was that he had not become bound to appellant by any such contract. As to him, and also as to Richard C. and Henry D. Oliphant, also respondents, the addi- tional ground for dismissal was that the proofs disclosed no breach of the contracts on their parts. The appeal is from the whole decree, but counsel for appel- lant conceded in the argument that, although Richard C. and Henry D. Oliphant were proved to have been bound to ap- pellant by the contracts which the bill sought to enforce, yet that no sufficient evidence of any breach of those contracts by them appeared. It results that so much of ‘the decree as dis- misses the bill as to them must be affirmed. But appellant contends that the dismissal of the bill as to James V. Oliphant cannot be supported upon the additional grounds assigned therefor. This contention requires a review of the proofs touching the relation of James V. Oliphant to the contracts in question, which were contracts to abstain from the manufacture of pottery ware. The first contract claimed was contained in a letter addressed to one Tapscott, dated January 23, 1891, and signed, ‘‘Oliphant & Co.,’’ which is set out in the prefatory statement of the vice chancellor. The other contract relied on was contained in a sealed instrument dated July 6, 1892, purporting to be made between the seven respondents and Tapscott, also to be found in that statement. This writing was executed by all the respondents except James V. Oliphant. The proofs show that, at the date of the letter in question, James V. Oliphant was not a member of the firm of Oliphant & Co. He became a member about January 1, 1892. The letter gave Tapscott an option to purchase at a stated price the pot- tery business carried on by Oliphant & Co., including the real estate, plant, and good will, which option was to be exercised within a limited period. That period had expired when James V. Oliphant became a member of the firm. On February 1, 1892, all the members of the firm, including James V. Oliphant, signed a writing, addressed to Tapscott, extending the option THE COMMON LAW 163 originally given for a period of 90 days. The option was accepted by him on May 20, 1892. On May 21, 1892, an agree- ment of sale was signed by all the members of the firm except James V. Oliphant. But on May 23, 1892, he executed under seal a memorandum of agreement to the terms and conditions mentioned in the agreement of the other owners of the property which was the subject of the sale. The sale was consummated on June 6, 1892. Tapscott was acting in the transaction for those who formed the corporation which is the appellant, and for that corporation after its formation on May 27, 1892. Ap- pellant acquired all Tapscott’s rights in the contracts with respondents. The vice chancellor reached the conclusion that the bill should be dismissed as to James V. Oliphant, because, not having executed the sealed instrument of July 6, 1892, he had not become bound by its covenants, and because the contract of the letter of January 23, 1891, adopted and ratified by him by his joining in the extension of the option by the writing of Feb- ruary 1, 1892, was a joint, and not a several, contract, and merely bound the firm of Oliphant & Co. not to engage in a competitive business. The omission of James V. Oliphant to execute the instru- ment of July 6, 1892, unquestionably deprives appellant of any right to enforce its provision against him in this cause. If necessary to construe the contract contained in the letter of January 23, 1891, I think it would be difficult, if not im- possible, to hold it to be a mere partnership undertaking. No doubt, an obligation entered into by more than one person is presumed to be joint, and a several responsibility will not arise, except by words of severance. Alpaugh v. Wood, 53 N. J. Law 638. But the purpose of this letter was to give an option to purchase a business carried on by individuals who were partners. It recites that ‘‘we, the undersigned,’’ do business under a firm name, and own and control the Delaware Pottery, which was the subject of the offer to sell. It contains an agree- ment that in case of sale ‘‘we will not, directly or indirectly,’’ engage in a competitive business. In my judgment, it would not be an unnatural or strained construction to attribute to these words a several force, and to find that the firm signature thereto bound the members of the firm, not merely jointly, but 164 COMBINATIONS AND RESTRAINT OF TRADE also severally. Upon any other construction, it is obvious that the protection of the business and good will proposed to be sold would only be partially secured. But we are not required to construe the terms of the letter by themselves. By the extension of the option by the writing executed by all the firm members, including James V. Oliphant, on February 1, 1892, a several quality in the contract contained in that letter either was recognized as originally in it, or was imparted to it. By that instrument each partner agreed to an option of purchase for a fixed period, and that such agreement should be part of the original option given by that letter. When they all executed that instrument, and declared that it was to be attached to, and become part of, the original option, the then owners made a new contract in the terms of the former contract, which bound those signing as if they had signed the original option with the extended term. The contracts thus amal- gamated stipulated that in the event of sale ‘‘we will not, directly or indirectly,’’ engage in a competitive business. These words, over individual signatures respecting a business pre- viously averred to be a partnership business, indicate several as well as joint undertakings. It is as if they undertook that they would not directly by their joint act as a firm, or indirectly by any several act of any member, engage in a competitive busi- ness. This construction is greatly aided by the exception from the undertaking, whereby the proposing vendors are permitted to engage in the business of manufacturing pottery ware as agents or employees of the proposing purchaser. ‘These words indicate a relation which might be formed between vendors and purchaser in case of sale effected. While the firm could become the purchaser’s agent, it could not in any other sense become his employee. Individual members of the firm might become either agents or employees. The exception therefore indicates that the contract it limited was one affecting individual members of the firm. As James V. Oliphant, upon this construction, became bound by the contract, and as the proofs show that he had broken it, the decree dismissing the bill as to him cannot be supported on this ground. It is next to be considered whether the decree can rest upon THE COMMON LAW 165 the ground that the contracts sought to be enforced are ‘in illegal restraint of trade. The contract contained in the letter of January 23, 1891, and the covenant of June 6, 1892, are the obligations which the bill was filed to enforce. They are identical in terms, and purport to bind respondents to absolutely refrain from engaging in the business of manufacturing pottery ware ‘‘within any state in the United States of America, or within the District of Colum- bia, except in the State of Nevada and the Territory of Arizona, for the period of fifty years.’’ They are contracts in restraint of trade. This Court, speaking by Chief Justice Beasley, more than 30 years ago, declared that contracts in general restraint of trade are illegal. Brewer v. Marshall, 19 N. J. Eq. 537. The learned chief justice found that to have been the undisputed rule of the English and of our own courts since the decision, in 1711, of Mitchel v. Reynolds, 1 P. Wms. 181. In that celebrated, ease Lord Macclesfield placed the illegality of such contracts upon the sole ground of their being inimical to the public in- terest or public policy. To the same origin the rule denying validity to such contracts was attributed by the chief justice in our leading case above cited. Our Court of Chancery has an- nounced and applied the rule, and upon the same ground. Mandeville v. Harman, 42 N. J. Eq. 185; Sternberg v. O’Brien, 48 N. J. Eq. 370; Althen v. Vreeland, 36 Atl. 479. In determining what is the public policy in this regard, we have, however, to take into account certain contracts which restrain trade. It is of public interest that every one may freely acquire and sell and transfer property and property rights. A tradesman, for example, who has engaged in a manufacturing business, and has purchased land, installed a plant, and acquired a trade connection and good will thereby, may sell his property and business, with its good will. It is of public interest that he shall be able to make such a sale at a fair price, and that his purchaser shall be able to obtain by his purchase that which he desired to buy. Obviously, the only practical mode of accomplishing that purpose is by the vendor’s contracting for some restraint upon his acts, preventing him from engaging in the same business in competition with that which he has sold. His contract to abstain from engaging in 166 COMBINATIONS AND RESTRAINT OF TRADE such competitive business is a contract in restraint of:trade, but one which, from the time of Mitchel v. Reynolds to this time, has been recognized as not inimical to, but permitted by, public policy. Therefore, while the public interest may be that trade in general shall not be restrained, yet it also permits and favors a restraint of trade in certain cases. Contracts of this sort, which have been sustained and enforced by courts, have been generally declared to be such as restrain trade—not generally, but only partially, and no more exten- sively than is reasonably required to protect the purchaser in the use and enjoyment of the business purchased, and are not otherwise injurious to the public interest. This is the doctrine declared and applied in the Court of Chancery, and recognized in this court by our affirmance of its decrees. Richardson v. Peacock, 26 N. J. Eq. 40; Id., 28 N. J. Eq. 151; Id., 33 N. J. Eq. 597; Mandeville v. Harman, 42 N. J. Eq. 185; Finger v. Hahn, 42 N. J. Eq. 606; Id. 44 N. J. Eq. 604; Sternberg v. O’Brien, 48 N. J. Eq. 670. It is observable that of late, and elsewhere, it has been ques- tioned whether the rule as thus stated is not too broad to be applicable to present conditions. In 1711 trade was subject to limitations which have largely diminished or ceased to exist. When orders and responses had to be transmitted by mail or messenger, and the mail and travelers were carried by coaches drawn by horses, and goods were transported by pack or wagon, the area of the trade of a manufacturer or tradesman was necessarily limited by those conditions. Now that orders and responses may be transmitted for long distances by telephone, and over the world by telegraph, and goods and travelers may have quick transit over land and sea, the area of such trade may be immensely greater. Thereupon it is contended with great force that the true test of the validity of such contracts in restraint of trade is to be found alone in their being reason- ably essential to the protection of the purchaser, and that, considering the vast extent of the area of some trades, there are cases in which a general restraint cannot be held to be unreasonable. Match Co. v. Roeber, 106 N. Y. 478; Nordenfelt v. Ammunition Co. [1894] App. Cas. 585; Rousillon v. Rousil- lon, 14 Ch, Div, 351; Cloth Co, v, Lorsont, L. R. 9 Eg. 345; THE COMMON LAW 167 Machine Co. v. Morse, 103 Mass. 73; Gibbs v. Gas Co., 180 U. S. 396; Underwood v. Barker [1899] 1 Ch. 300. The question thus suggested does not arise in this case, unless the contracts before us are found to be contracts in general restraint of trade. This leads us to inquire whether they are general, or only partial, in their restraint, and, if the latter, whether they extend beyond what is reasonable for a fair pro- tection of the business and good will which appellant purchased from respondents. The contention on the part of respondents is that the con- tracts in question restrain them from engaging in the business of manufacturing pottery ware in an area comprising the whole United States, and that the exception of one state and one terri- tory was illusory and colorable, because they claim the proofs show that such manufacture cannot be carried on in those localities with profit. It is insisted that a restraint extending over the whole nation is a general, and not a partial, restraint. It was well said by Judge Andrews in his opinion in Match Co. v. Roeber, ubi supra, that ‘‘the boundaries of the states are not those of trade or commerce.’’ It may also be said that in these days the business of many a concern extends, not only beyond the boundaries of the state in which it has a local habitation, but even beyond the limits of the nation. Yet the public policy of that state may be involved in favor of or against the restraint of such trade, however widely extended. It is possible to conceive of a business so widely extended that a restraint of it within the limit of one country might be in fact but a partial restraint. In the case last cited an exception of one state and territory similar to that contained in the contracts in question was pro- nounced not colorable, but the case does not indicate that the exception was shown by the proofs to be of territory in which the restrained manufacture could not be carried on with prac- tical results. In this case the proofs establish that to be the fact as to the area included in exception. It is contended for appellant, however, that the fact so established is immaterial, because the rule against general restraint of trade is an arbi- trary one, and an exception from the restraint, however unsubstantial or illusory, will make the restraint partial. It is not easy to perceive how a rule of this character, founded on 168 COMBINATIONS AND RESTRAINT OF TRADE considerations of public policy, and applied in the public in- terest, can be rightly deemed arbitrary in the sense intended in this contention. Nor is it obvious that the courts would permit the evasion of the rule by illusive contrivances. But the question presented need not be decided, unless the contracts, properly construed, extend the restraint of respond- ents over the whole area of the United States, except the excepted parts. If by the true construction the contracts are divisible, and bind respondents to a restraint in one or another of separately described areas, and, as applied to one or more of such areas, the restraint is not unreasonable, the suggested question need not be solved. The area or areas within which the restraint upon respond- ents is engaged for in these contracts is described as being not, as stated in the opinion below, within any state ‘‘of’’ the United States of America, but ‘‘within any state im the United States of America.’’ In seeking the meaning of this description, we are to be guided by the ordinary rules of construction. We may pre- sume that the contracting parties intended to make a valid contract in this case, under the doctrine enunciated in Brewer v. Marshall, that they designed to contract for a restraint which would be partial, and not general, and reasonable, in their judgment, for the protection pf the purchaser in the enjoyment of the subject of the purchase. The contracts are to be con- strued so as to give them validity, if such construction does no violence to their language; and the subject-matter of the con- tracts is to be considered, and their terms are to be construed, in reference thereto. Here the transaction was the sale and purchase of an established business with its good will, and the contracts in question were plainly intended to furnish protec- tion to the purchaser in the enjoyment of the things purchased. Respondents received a large sum of money for what they sold appellant, which they yet retain, and it is clear that the con- sideration thus received and retained must have been enhanced in amount by the obligation of the contracts now in question, and that so much could not have been obtained by respondents if no obligation to restrict competition had been made. Examining thus the description of the area within which the restraint agreed to by respondents is to operate, I have reached THE COMMON LAW 169 the conclusion that, without doing any violence to the language, or straining its import, it may be and ought to be held to be a divisible description, embracing, not one whole area, but several areas disjunctively described. The exception of the territory of Arizona is urged as inconsistent with this construction. But the express inclusion of the District of Columbia equally mili- tates against the contrary construction, for, if the description covers the whole area of the United States of America, the District of Columbia was already included. Looking at the subject of the contracts, their presumed intent, and the purpose of any agreement to restrain respondents from engaging in a competitive business, the description can be read as applicable disjunctively to different areas—as within the State of Maine, within the State of New Hampshire, or within the State of New Jersey, etc., or within the District of Columbia, excepting, etc., and such should be its construction. Thus read, the contracts in question are applicable to all the described areas, and are enforceable in those of them within which the restraint contracted for is reasonably required for the protection of appellant in the use and enjoyment of the business and good will acquired from respondents. An instructive case on this point has lately been decided in England. The question arose upon a covenant by an employee with his employer that within twelve months after leaving his employment he would not engage in a similar business ‘‘in the United Kingdom or in France, or in the Kingdom of Belgium or Holland, or in the Dominion of Canada.’’ The employee voluntarily left the service of his employer, and entered into the employment of a merchant in the same trade in England. Upon a bill by the first employer, Krxewicu, J., allowed an injunction against the breach of the covenant. Upon appeal the cause was heard in the Chancery Division, before LinpLEy, M. R., and Riepy and VaucHan Wuuiams, L. JJ. The master of the rolls and Ricsy, L. J., held that the covenant was a sep- arable one, and was not unreasonable, as to the restraint im- posed on the covenantor within the United Kingdom, and they sustained the injunction. Vaughan Williams dissented, but upon the ground that the restraint within the whole of the United Kingdom was unreasonable. Underwood v. Barker, ubt supra. 170 COMBINATIONS AND RESTRAINT OF TRADE It is next to be considered whether the contracts in question, thus construed, were reasonably required for the protection of appellant, and to what extent, if any, they should be enforced, under the proofs in the cause. It appears by the proofs that the business which appellant purchased of respondents had been carried on by them within an area, roughly speaking, covering the states east of the Mis- sissippi river, and north of a line drawn through Richmond and _ Louisville, including the District of Columbia. Appellant contends that such contracts were reasonably re- quired to protect it, not only in the areas in which the business it purchased of respondents had been carried on, but also in other states to which it might extend that business. But this conten- tion I deem to be inadmissible. The validity in this respect of such contracts is to be tested by the effect upon the business and good will sold and purchased. What is reasonably required to protect that may be upheld. But the vendor can no more contract to restrict his use of his trade or calling beyond such protection than he could do if he had made no sale at all. Such a contract would be opposed to public policy. But while it results from this view that the contracts in question, so far as they restrain respondents from engaging in the same business in localities in which the business. purchased by appellant of them had never been carried on, may be op- posed to public policy, it does not follow that they are wholly unenforceable. Contracts including distinct and separable ob- ligations, some of which are legal, and some prohibited, are enforceable as to such obligations as are legal. Union Locomo- tive & Exp. Co. v. Erie Ry. Co., 35 N. J. Law, 240; Stewart v. Railroad Co., 38 N. J. Law, 505. These contracts, as to areas described therein in which the acquired business had been ecar- ried on, may be enforced upon proper proofs. Upon the proofs, how far may these contracts be enforced ? The prayer of the bill is for an injunction in the terms of the contracts. But this would be too broad a restraint on respond- ents, because it would include localities in which the purchased business had never been carried on, and where no protection of it was required. Upon the proofs, I conclude that no restriction can be imposed upon respondents as to any area beyond the State of New Jersey. In this state all the respondents, except THE COMMON LAW 171 Richard C. and Henry D. Olyphant, are actively engaged in the very business they contracted not to engage in. There is some proof of sales and solicitation of trade in other prohibited areas, but it lacks the requisite certainty to justify a broader injunction. It remains to consider other objections to the reasonableness of these contracts. It is contended that they are unreasonable because they restrain respondents from the manufacture of any pottery ware, while the business sold is claimed to have been that of manufacturing sanitary pottery ware. But the plant respondents sold was adapted to the manufacture of other kinds of ware, and they had in fact manufactured other ware. The business purchased was not the mere manufacture of sanitary pottery ware, and the contracts were not too broad, in furnish- ing appellant protection in respect to the manufacture of all pottery ware. It is further objected that the contracts in question extend the restraint upon respondents over too great a period of time. The ages of respondents, it is said, show that at the expiration of the limit of 50 years probably some of them will have died, and all of those surviving will have passed the age of business activity. The contracts are not unlimited in time, but the insistment is that they are unreasonable because of the long limit of restraint. But whether they are reasonable is not to be determined by their disadvantageous effect upon respond- ents, but by considering whether the restraint to which, for what they received as a sufficient consideration, they bound themselves, was reasonably required to protect the purchaser in the enjoyment of his purchase. As they were dealing with a corporation which had acquired a corporate life of 50 years for the purpose of carrying on this business, the limit of time fixed by the contracts is not unreasonable. The fact that the limit exceeds the corporate life of appellant by a few days does not, in my judgment, require a different conclusion. It remains to consider whether the contracts in question are otherwise against the public policy of. our state. The learned vice chancellor held them to be opposed to the public interest, because he conceived that they tended to create a monopoly in | the business of manufacturing sanitary pottery ware. This effect he deemed established by the proofs that appellant, simul- 172 COMBINATIONS AND RESTRAINT OF TRADE taneously with its purchase from respondents, also purchased four other plants used in the manufacture of such ware in Trenton, and the property, business, and good will of their owners, and took from each of those vendors contracts restrain- ing them from engaging in the business of manufacturing pot- tery ware, substantially identical with the contracts taken by it from respondents. The contracts procured from respondents he deemed to be part of a scheme to control the production, distribution, and sale of sanitary pottery ware, and to exclude competition therein. Such ware he declared, on the authority of the promoters of appellant, to be a necessity of life. The scheme held to be reprehensible was found in the situa- tion disclosed in the proofs. Respondents, as owners of the business sold to appellant, had, several years before the sale, united with the owners of seven other potteries in Trenton, which made, among other things, sanitary pottery ware, in an association called the American Sanitary Potters’ Association. That association had in some way controlled the prices at which such ware produced by its eight members (counting the owners of each pottery as one member) should be put upon the market. The action of the association in that regard was determined by a majority of its eight members. By its purchases appellant acquired the interest of five of the members, and seems to have been permitted to cast a vote for each in controlling the action of the association. After appellant’s purchases, prices were so controlled for some time, and until the association fell to pieces. Contracts by independent and unconnected manufacturers or traders looking to the control of the prices of their commodities, either by limitation of production, or by restriction-on distribu- tion, or by express agreement to maintain specified prices, are, without doubt, opposed to public policy. The contract of the Sanitary Potters’ Association in this regard was inimical to public interest when respondents were members of it, and none the less so when appellants acquired the property of five of its members. However solemnly the members of that association may have obligated themselves to obey the behests of the ma- jority in respect of the control of prices of their ware, no court would have enforced their agreements, or awarded damages for any breach of them. But the contracts by which appellant acquired the property THE COMMON LAW 173 and business of respondents and of four other members of the association contained no term stipulating for the continuance of the association, or for the enforcement of any objectionable agreements it had entered into. At the most, so far as appears, the contemporaneous purchases by appellant gave it an oppor- tunity to use the majority vote in the association for such control of prices as its agreements provided for. Although the con- trol of the voting majority of the association may have been one of appellant’s motives for making its simultaneous purchases, it is inconceivable that any one of the five vendors could have repudiated his contract to sell to appellant on the ground that such sale, if consummated, would enable appellant to obtain such control. The public interest would be amply protected by invalidating the agreement of the association for the control of prices, and the disconnected agreement of sale would be enforced as other contracts. It is further urged that the simultaneous contracts procured by appellant create or tend to create a monopoly, because they stipulate for the removal of many competitors in the business of manufacturing sanitary pottery ware. The owners of five of the eight potteries in Trenton manufacturing that kind of ware (and there were but few, if more than one, elsewhere) thereby agreed not to engage in that business for a long period of time, and over a great extent of country. The engagement of respondents in that respect has been found not to be an im- proper restraint of trade, nor inimical to public policy on that ground, but a contract partially enforceable upon respondents, if not otherwise objectionable. The engagements of the other vendors who sold their properties and business to appellant are similar in terms to that entered into by respondents, and furnish a reasonable protection to appellant of the business and good will purchased by it of each of them. EHach sale and each incidental contract against competition are, for reasons before given, unobjectionable. Are they rendered objectionable by the fact that, being simultaneously made, they excluded from engaging in the business of manufacturing sanitary pottery ware so large a proportion of those previously engaged in that manufacture? t is to be observed that the contracts of respondents and the other vendors to appellant restricted them from engaging in the 174 COMBINATIONS AND RESTRAINT OF TRADE business of manufacturing, not sanitary pottery ware alone, but all pottery ware. \\ The proofs show that a large number of per- sons are engagéd in manufacturing pottery ware in various parts of the country, and that the contracts in question would exclude from competition a very small proportion of them. But as the proofs also show that the main purpose of appellant was to engage in the manufacture of sanitary pottery ware, I have stated the proposition in a more restricted form. Whether sanitary pottery ware has become a necessity of life is open to question. It is certain that many persons manage to exist without using it.) But if its use is of importance to health and comfort, and’a considerable and increasing number of persons desire to acquire and use it, the public may have such an interest in its manufacture and sale that public policy will justify judicial interference and refusal to enforce illegal com- binations to enhance its price. The elimination of competition may produce that result, The contracts in question were not intended to withdraw, and do not appear to have withdrawn, from work, a single workman in that industry. They restrain a comparatively small number of capitalists, who had previously employed their capital in such manufacture, from continuing so to do. The entire capital of the country, except theirs, is free to be employed in the manufacture. There seems no ground for the claim that we should refuse to enforce respondents’ contracts by injunction, when the proofs furnish no reason for the belief that the public will suffer if they are held to their bargains. The contemporaneous contracts were all made as incidental to the sale and purchase of competing concerns engaged in the manufacture of sanitary pottery ware. They were, as we have seen, reasonably appropriate to the protection of the purchaser in each ease. While contracts to restrain or limit competition in the production of that ware may be repugnant to the public interest, such a restraint or limit may result from contracts which the courts are bound to enforce. A person engaged in any manufacture or trade, having the right to acquire and possess property, and to do with it what he chooses, may law- fully buy the business of any of his competitors. His first pur- chase would at once diminish competition. If he continued to purchase, each succeeding transaction would remove another competitor. If his capital was large enough to enable him to THE COMMON LAW 175 buy the business of all competitors, the last purchase would com- pletely exclude competition, at least for a time. But in the absence of legislative restrictions, if such could be imposed, upon the acquisition of such property, and its use when so acquired, courts could impose no limitation. They would be obliged to enforce such contracts, notwithstanding the effect was to diminish, or even to exclude, competition. But appellant is a corporation, and not an individual. Cor- porations, however, may lawfully do any acts within the cor- porate powers conferred on them by legislative grant. Under our liberal corporation laws, corporate authority may be ac- quired by aggregation of individuals, organized as prescribed, to engage in and carry on almost every conceivable manufacture or trade. Such corporations are empowered to purchase, hold, and use property appropriate to their business. They may also purchase and hold the stock of other corporations. Under such powers it is obvious that a corporation may purchase the plant and business of competing individuals and concerns. The legis- lature might have withheld such powers, or imposed limitations upon their use. In the absence of prohibition or limitation on their powers in this respect, it is impossible for the courts to pronounce acts done under legislative grant to be inimical to public policy. The grant of the legislature authorizing and per- mitting such acts must fix for the courts the character and limit of public policy in that regard. It follows that a corporation empowered to carry on a particular business may lawfully purchase the plant and business of competitors, although such purchases may diminish, or for a time, at least, destroy, compe- tition. Contracts for such purchases cannot be refused enforce- ment. Since contracts by individuals, and by corporations having legislative authority, for the purchase of competing plants and business, may be made, and are enforceable, although, as a re- sult thereof, competition is diminished or temporarily destroyed, it further follows that contracts reasonably required to make such purchases effective by protecting the purchaser in the use and enjoyment of the thing purchased cannot be declared by the courts to be repugnant to public policy. The interference with competition resulting from such purchases under legislative permission being found not to invalidate contracts for such pur- 176 COMBINATIONS AND RESTRAINT OF TRADE chases, the like interference by contracts reasonably required for the protection of the purchaser cannot be held to invalidate them. The result is that the decree appealed from must be affirmed as to Richard C. and Henry D. Olyphant, but as to the other respondents it must be reversed, and a decree be made enjoining them, according to the prayer of the bill, within the state of New Jersey.?? For reversal (in part)—Tue Cuter Justice, VAN SYCKEL, Drxon, Garrison, GumMmMeErs, LupLow, Bogert, Nixon, ADAMS, VEEDENBURGH—10, For affirmance—Liprincotr, Hanprickson—2. TUSCALOOSA ICE MFG. CO. v. WILLIAMS (Supreme Court of Alabama, 1899. 127 Ala. 110.) McCLELLAN, C. J.22 B. H. Williams is plaintiff, and the Tuscaloosa Ice Manufacturing Company is defendant, in this action. The complaint is as follows: ‘‘The plaintiff claims of the defendant the sum of three hundred and twenty-five dollars, with interest from the 1st day of September, 1898, as damages for the breach of a contract or agreement entered into between the plaintiff and defendant on, to wit, the 1st day of January, 1898, in substance as follows: This agreement, made and en- tered into between the Tuscaloosa Ice Mfg. Co., of which Henry B. Gray is president, of the first part, and B. H. Williams, sole owner of an ice machine located near the Alabama Great South- ern Railroad depot, at Tuscaloosa, Ala., of the second part, witnesseth that the party of the first part, for and in considera- tion of the covenants of the party of the second part herein- after mentioned, agrees to pay the party of the second part the sum of eight hundred and seventy-five dollars ($875.00), in five equal payments, of one hundred and seventy-five dollars each 22—See also Davis v. Booth & Co., 23—Only the opinion of the court 131 Fed. 31, 37; Camors-McConnell is given. Co. v. McConnell, 140 Fed. 412; Chappel v. Brockway, 21 Wend. (N, Y.) 157. THE COMMON LAW 177 ($175.00), the first payment to be made this day, and the other four payments on the 1st day of June, 1898, 1899, 1900, 1901, respectively. In consideration of the promise of the foregoing payments, the party of the second part hereby agrees not to run his ice machine as described above, nor suffer it to be run, for the term of five years, at Tuscaloosa, Ala., unless the party of the second part shall make a sale of the same to be run at Tuscaloosa, Ala., in which event he releases the party of the first part from making all subsequent payments to him, and also agrees to refund on any payment made by [to] him during the year such sale is made such a part of said payment as the re- mainder of that year bears to the entire year. It is further agreed that, if the said party of the second part shall sell his ice plant between January Ist and June Ist of any year, he shall be entitled to his proportional payment for that year. It is further agreed that in case some unknown party should erect or operate an ice machine in the city of Tuscaloosa, Ala., or in the vicinity of said city of Tuscaloosa, that the party of the second part, known in contract as B. H. Williams, shall release all subsequent payments to the party of the first part at the time of the erection of an ice plant to compete with said first party, provided that the sum of $500 shall have been paid to the party of the second part. It is further agreed that, if said plant or opposition should disturb the party of the first part before the amount of five hundred dollars is paid to the party of the second part, that the party of the first part shall only pay to the party of the second part the difference between the total payments made and the $500.00, and, should said ice plant be erected after $500.00 had been paid to the party of the second part, no other payments will be required. And plaintiff says that although he has complied with all its provisions on his part, and has not sold his said ice machine to be operated at or in the vicinity of Tuscaloosa, the defendant has failed to comply with its provisions on its part in the particulars following, viz.: Some time during the summer of 1898, to wit, in July or August, the Tuscaloosa Gas, Electric Light & Power Co., a corporation having its office and principal place of business at Tuscaloosa, Ala., amended its corporate charter, changing its name to the ‘Tuscaloosa Light & Ice Company,’ and having conferred upon it the power to manufacture agd sell ice at Tuscaloosa, Ala., and Kales R. of T. Vol. I-12 178 COMBINATIONS AND RESTRAINT OF TRADE erected an ice plant and began the manufacture of ice at Tusca- loosa; and although the defendant had, at the time of the establishment of said Tuscaloosa Light & Ice Co.’s ice plant at Tuscaloosa, only paid to plaintiff the first payment of $175.00 mentioned in said contract as paid on the day of its execution, it has wholly failed and refused to pay plaintiff the difference between said payment of $175 and $500.00, as it agreed in said contract to do in the event of the erection of an opposition ice plant; hence this suit.”’ To this complaint the defendant interposed the following plea: ‘‘At the time said contract was entered into the plaintiff owned and operated the only ice factory in Tuscaloosa or its vicinity, and the only factory which was then selling ice to the people of Tuscaloosa and immediately surrounding territory, other than defendant’s factory. Said population, consisting of, to wit, seven thousand people, was drawing its whole supply from, and was dependent upon said two ice factories for the same, and the demand for ice in said community was sufficient to consume and render marketable the output of both of said factories. Prior to said contract the price of this article of necessity and com- fort was lessened to said community of consumers by competi- tion between these two said ice factories. The object and effect of said contract was to wholly discontinue the manufacture of ice by plaintiff, to close down plaintiff’s factory, to end all com- petition with defendant’s ice trade, to leave defendant’s plant the sole source of ice supply for said community, and to give to defendant the complete control and monopoly of said ice market, enabling it to increase the price thereof regardless of the cost of its manufacture; wherefore said contract was one cornering said ice market, stifling competition, creating monopoly, closing down heretofore active manufacture, and hence the same is void as in restraint of trade and against public policy.’’ The trial court sustained a demurrer to the plea, defendant declined to plead over, and judgment was entered for plaintiff. The pres- ent appeal from that judgment presents the question of whether the contract sued on, considered in connection with the facts averred in the plea, involves a vicious restraint of trade, and is therefore violative of the public policy of the state and void. The argument in support of the contract is largely based upon the considerations that the restraint it imposes is limited both THE COMMON LAW 179 as to time and to territory,—to five years at the most, and to the town of Tuscaloosa and its vicinity,—and many cases have been determined upon these considerations alone. But they were so determined, or at least at the present day they could be so determined, only because the contracts involved in them were unobjectionable upon other grounds. As the principles obtain- ing here are understood in their application to existing condi- tions of traffic and commerce, we apprehend that circumstances in respect of a particular business might exist under which a covenant against engaging in it covering all time and the whole country would be upheld by the courts. All such covenants are for the protection of the business of the covenantee, and the logical rule would seem to be that their scope may be as broad as to time and territory as the business intended to be protected. It is upon this principle that contracts not to engage at any time in particular businesses in the United Kingdom, or in the United States, or even in Great Britain and Holland, or in the United States and Canada, have been held valid; the business in each instance being co-extensive with the territory embraced in the covenant, and of probable indefinite continuance. And, on the other hand, the same principle is potent to the conclusion that such covenant, having reference to a particular county or even town only, and confined to a year or other definite time, may be void, in whole or in part, for being broader as to time or place than the business designed to be protected by it; as where the business extends only to a part of the county or town, or must cease short of the time of the covenant. But however extended or circumscribed the business may be, how- ever broad or narrow may be the covenant in respect of time and place, and however exactly the covenant may respond in time and place to the exigencies of the business, the contract may yet fall under the ban of public policy, and call for con- demnation by the courts upon other and distinct considerations, growing out, it would seem, of the nature of the transaction upon which it is based, or looking to the protection of the public from the strangulation of legitimate and necessary competition. One of these considerations—that resting on the nature of the transaction in which the covenant not to engage in a particular business is made—is this: Leaving to one side and out of view those cases in which property is sold, and as part of the con- 180 COMBINATIONS AND RESTRAINT OF TRADE sideration the vendee agrees not to employ it in a business being earried on by the vendor, or within the territory covered by the vendor’s business, and that other class of cases in which an employee covenants with his employer not to engage in the busi- ness about which he is employed on his own account or for an- other after the termination of his employment, and that yet other class of cases involving secret or patented processes, or patented devices and instrumentalities, it seems that the only cases, apart, as we have indicated, from those just mentioned, in which there can be any legitimate occasion for a covenant on the part of one not to engage in the business proposed to be carried on by another, are those in which the covenantor has sold to the covenantee his stock in trade, as in the case of a merchant, or his part of it, as where one mercantile partner sells out to the other or to a stranger, or being a professional man with an established practice, as a physician, dentist, and the like, or mechanic with a shop and accustomed patronage, as a blacksmith and the like, or, if he be a manufacturer, sells out his practice or business or plant, with or without an express stipulation as to its good will, and in the same transaction, and as part of the thing sold, and as in part the consideration for the price paid, agrees not to engage in that business, profession, or trade, as the case may be, within the territory covered or supplied by the business, practice, or factory purchased, during the time the vendee shall be interested therein. In line with this view, it is said by Mr. Beach: ‘‘The modern doctrine is well-nigh universal that, when one engaged in any business or occupation sells out his stock in trade and good will or his pro- fessional practice, he may contract with the purchaser and bind himself not to engage in the same vocation in the same locality for a time named, and he may be enjoined from violating this contract. This is about as far as contracts in restraint of trade have been upheld by the American courts or those of England. While the law, to a certain extent, tolerates contracts in restraint of trade or business when made between vendor and purchaser, and will uphold them, it does not treat them with any special indulgence. They are intended to secure the purchaser of the good will of a trade or business a guaranty against the competi- tion of the former proprietor. When this object is accomplished, it will not be presumed that more was intended.’’ 2 Beach, THE COMMON LAW 181 Cont. § 1575. And to the same effect is the declaration of the Supreme Court of Illinois in More v. Bennett, 140 Ill. 69, 80, 15 L. R. A. 364: ‘‘Contracts in partial restraint of trade which the law sustains are those which are entered into by a vendor of a business and its good will with his vendee, by which the vendor agrees not to engage in the same business within a limited territory, and the restraint, to be valid, must be no more exten- sive than is reasonably necessary for the protection of the vendee in the enjoyment of the business purchased ;’’ and this language is quoted approvingly by the Supreme Court of Pennsylvania. Nester v. Brewing Co., 161 Pa. St. 473, 481, 24 L. R. A. 250. The Supreme Court of Iowa adopts the same view (Chapin v. Brown [Iowa] 48 N. W. 1074, 12 L. R. A. 428); and so have other courts, where this phase of the general question has been discussed (Oliver v. Gilmore [C. C.] 52 Fed. 562). There are several reasons for upholding the covenant on the part of the vendor in all such cases to desist from the business in competition with the purchaser which do. not obtain in other cases. In the first place, the restraint is partial in the sense that it covers only the time and locality during and in which the vendee carries on the business purchased, and beyond these limitations the seller is at liberty to carry on the same business. Then, too, the vendor receives an equivalent for his partial abstention from that busi- ness in the increased price paid him for it on account of his covenant; and his entering into and observance of the covenant not only does not tend to his pauperization to the detriment of the public, but, to the contrary, by securing to him the full value of his business and its good will,—a value which he has an abso- lute right to secure in this way,—the covenant operates to his affirmative pecuniary benefit and against his impoverishment, involving, the theory is, imminency of his becoming a public charge or a criminal, in that, while being paid for desisting from the particular business in the locality covered by it, he may still enter upon other pursuits of gain in the same locality or upon this one in other localities. And, finally, while such covenants preclude the competition of the covenantor, it is neither their purpose nor effect to stifle competition generally in the locality, nor to prevent it at all in a way or to an extent injurious to the public; for the business in the hands of the purchaser is carried on just as it was in the hands of the vendor; the former merely 182 COMBINATIONS AND RESTRAINT OF TRADE takes the place of the latter; the commodities of the trade are as open to the public as they were before; the same competition exists as existed before; there is the same employment furnished to others after as before; the profits of the business go, as they did before, to swell the sum of public wealth; the public has the same opportunities of purchasing, if it be a trading business; they are served in the same way, if it be a profession; and pro- duction is not lessened, if it be a manufacturing plant. As said by Purwam, C. J., in Oliver v. Gilmore (C. C.) 52 Fed. 568: “*. . . When the covenantor surrenders his trade or pro- fession, an equivalent is given to the public, because, ordinarily, as a part of the transaction, the covenantee assumes and carries on the trade or profession, nothing is abandoned, and only a transfer is accomplished. The same occupation continues. The same number of mouths are fed.’? And these considerations obtain where one already engaged in a business in good faith, for the purpose of enlarging and increasing his business, pur- chases the stock in trade or practice or plant of a rival, and incident thereto takes the covenant of the seller not to engage in the same business within the territory covered by the con- solidated enterprise, and in all such cases the covenant in re- straint of trade is a reasonable one and valid. But there is no room for the application of these reasons to cases in which the covenantee does not purchase the business, practice, trade, or plant of the covenantor, and the transaction involves nothing but a bald covenant in restraint of trade, for which there is no other consideration than the payment of money for the obliga- tion itself. In such case the business of the covenantor is not transferred merely; it is destroyed. Hig plant is not continued by the covenantee in useful production, but is left to rust and canker in disuse. The public loses a wealth-producing instru- mentality. Labor is thrown out of employment. ‘‘The same number of mouths’’ are not fed. The consideration the cove- nantor receives is not the just reward for his skill and energy and enterprise in building up a business, but is a mere bribery and seduction of his industry, and a pensioning of idleness. The motives actuating such a transaction are always, in a sense, sinister and baleful. Its purpose and effect are not to protect the covenantee in the legitimate use of something he has acquired from the covenantor, but to secure to him the illegitimate use, THE COMMON LAW 183 or the use in an illegitimate way, of that which he already has, in respect of which there is no reason or occasion for the cove- nantor to assume any obligation of protection. Such an under- taking in restraint of trade, however limited as to time and place, would seem, upon all general principles, though we know of no case expressly and directly so deciding, to be necessarily unreasonable and vicious on the consideration alone that it is not entered into nor has it the effect of protecting some busi- ness, practice, trade, or interest which the covenantor has sold to the covenantee. The undertaking involved in this case is precisely of that class, and must fail upon the principle we have been discussing. But this contract is clearly bad upon the other consideration adverted to above: It tends to injure the public by stifling com- petition and creating a monopoly. Its manifest purpose, even upon its face, and certainly when taken in connection with the facts averred in the plea, was to secure to the covenantee a monopoly in the production and sale of ice in the town of Tuscaloosa and vicinity, and such is its operation and effect. Indeed, on the allegations of the plea, it was even worse than this; for one of its results was to reduce the available supply of ice below the needs of the locality affected by it. It thus oper- ated not only to put it in the power of the covenantee to arbi- trarily fix prices, but directly and necessarily to create a partial ice famine, upon which the defendant company could batten and fatten at its own sweet will. But, aside from this, the monopoly itselfi—the putting in the power of the covenantee to control the production, and to fix its own prices whatever the production— is quite sufficient for the utter condemnation of the contract as being against public policy. The purpose to create a monopoly is obvious. It is well-nigh expressed in the writing itself. That a monopoly was created is clear beyond all dispute. That ends the case against the validity of the covenant. Nothing more need be said. All that has been said for the appellee against that conclusion is vain and useless. Given the purpose and effect of this contract, its condemnation would follow even had the plain- tiff, as a part of the transaction, sold his ice plant to the de- fendant; and the limitation of the covenant as to time and place, though reasonable in itself, is of no redeeming importance or efficacy whatever. So of the suggestion that no monopoly 184 COMBINATIONS AND RESTRAINT OF TRADE was created because the contract itself evidences a contempla- tion that ‘‘unknown parties’’ might come to Tuscaloosa, establish an ice factory, and enter upon the production and sale of ice in competition with the covenantee. There was no other such plant there at the time the contract was entered into (it would not have . been entered into at all had there been), and it is of no sort of consequence that another might be established, or even that another was in fact established, soon after its execution,—as soon, probably, as one could be established after defendant’s monopoly began to grind. Nor is there the least merit in the suggestion that ice could be brought to Tuscaloosa from other places, and hence that defendant had no monopoly. Even with ordinary commodi- ties, a covenant tending to create a monopoly in a given city or to unduly control prices is not relieved by the consideration that its baneful effects may be counteracted in greater or less degree by importations; and the position is exceedingly nude and bald when taken in respect of a commodity like ice or water, the chief cost of which, apart from the plant for its manufacture or collection, is in the transportation to the consumer, and it may be safely said that an ice factory in a town beyond the ordinary reach of deliv- ery wagons from another town has a monopoly of the ice business in that town. And so of the argument that public policy has to do in this connection only with the necessaries of life, and that ice is not a commodity of that class. Both the propositions thus asserted—the one of law, the other of fact—are unsound. To say the least, it is against public policy to monopolize in this way any commodity of common utility, or of common consump- tion or use among the people, or even of considerable utility or consumption, whether it be one of the necessaries of life or not; and, in the second place, we feel entirely assured of conservatism in declaring that in this latitude, and especially in towns as populous as Tuscaloosa, ice is one of the common necessaries of life. All of the foregoing propositions, sustaining the conclusion that the contract sued on is violative of public policy as stifling competition and promoting monopoly to the manifest injury of the public, are fully supported by the following authorities: 2 Beach, Cont. §§ 1579-1592; Clark, Cont. p. 458 et seq.; Craft v. McConoughy, 79 Ill. 346; Arnot v. Coal Co., 68 N. Y. 558 ; More v. Bennett, 140 Ill. 69, 15 L. R. A. 361; Lumber Co. v. Hayes, 76 Cal. 387; Hooker v. Vandewater, 4 Denio 349; Stan- THE COMMON LAW 185 ton v. Allen, 5 Denio 434; Salt Co. v. Guthrie, 35 Ohio St. 666; Association v. Kock, 14 La. Ann. 168; Oil Co. v. Adoue, 83 Tex. 650, 15 L. R. A. 598; Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. St. 173; Chaplin v. Brown (Iowa) 48 N. W. 1074, 12 L. R. A. 428;.Oliver v. Gilmore (C. C.), 52 Fed. 562; Nester v. Brewing Co., 161 Pa. St. 473, 24 L. R. A. 247; Anderson v. Jett, 89 Ky. 376, 6 L. R. A. 390. It follows that, in our opinion, the court below erred in sus- taining the demurrer to defendant’s plea. The judgment of the law and equity court will be reversed, and a judgment will be here entered overruling said demurrer. The cause will be remanded. Reversed, rendered in part, and remanded. CLEMONS v. MEADOWS (Court of Appeals of Kentucky, 1906. 123 Ky. 178; 98 S. W. 13.) PAYNTER, J. This action was instituted upon a writing which reads as follows: ‘‘This agreement entered into this 12th day of July, 1904, by and between W. W. Meadows, of the New Meadows Hotel, and Clemons & Wade Bros., of the Usona Hotel, both of Fulton, Ky., witnesseth: That for a period of three years from date hereof W. W. Meadows, who agrees to close and keep closed his hotel, known as the ‘New Meadows Hotel,’ re- serving to himself the right to rent the same for offices of all kind and description, and also to all roomers for one week or more, when opportunity may occur. That for and in considera- tion of the aforesaid elimination of the New Meadows Hotel as a factor in the hotel situation for the time named, of Fulton, Ky., Clemons & Wade Bros. agree to pay in advance to W. W. Meadows one hundred dollars cash, and one hundred dollars additional on the 12th day of each succeeding month for three years from this date. It is agreed by both parties that, should any rush of patronage greater than the Usona Hotel ean accom- modate occur, W. W. Meadows agrees to entertain, for lodging only, any and all guests sent to him by Clemons & Wade Bros., and to receive therefor as compensation 50 per cent of any 186 COMBINATIONS AND RESTRAINT OF TRADE revenue derived therefrom. It is further agreed that the price for said lodging shall never be less than $1 per person. How- ever, it is agreed and understood that absence from home or any other good reason shall be sufficient and good reason for W. W. Meadows declining to take such guest. All rooms occu- pied by guests at the New Meadows Hotel to be cared for by ‘W. W. Meadows.’’ The appellants claim that the contract is not enforceable, and that they cannot be required to pay the sums of money therein stipulated to be paid, because the contract is against public policy and without consideration. It is averred in the answer that at the time of the execution of the contract Fulton was a town of 5,000 inhabitants; that it was situated at the crossing of the Illinois Central Railroad, running from Chicago to New Orleans and from Louisville to Memphis and New Orleans; that it was the headquarters of the Kentucky & Tennessee Division of the road, and a large number of local and transient persons stopped at the hotels for meals and lodging; that the New Meadows and Usona Hotels were first-class hotels, and were the only hotels of that class in the town; that they were rivals and competitors; that there was no consideration for the execution of the contract, except that which is stipulated therein; that it was entered into between the parties for the purpose of remov- ing competition that existed in the hotel business in Fulton, and for the purpose of giving the Usona Hotel a monopoly of the hotel business of its class; and that the contract is against public policy. The court sustained a demurrer to the answer, and, the appellants failing to plead further, judgment was rendered against them. So far as we are aware, the exact question presented by this record has never been decided by this court. This court has upheld contracts which were in partial restraint of trade. Pyke v. Thomas, 4 Bibb 486, 7 Am. Dec. 741; Grundy v. Edwards, 7 J. J. Marsh, 368, 23 Am. Dec. 409; Sutton v. Head, 86 Ky. 156, 9 Am. St. Rep. 274; Warehouse Co. v. Hobson, 16 Ky. Law Rep. 869. It was said in Sutton v. Head, 86 Ky. 156, 9 Am. St. Rep. 274: ‘Indeed, a particular trade may be permitted by being limited for a short period to a few persons, and the public benefited by preventing too many from engaging in the same calling at the same place. If, therefore, the limitation be a rea- THE COMMON LAW 187 sonable one, it will be upheld.’’ Beach on Contracts, § 1575, announces the rule as follows: ‘‘The modern doctrine is well- nigh universal that when one engaged in any occupation sells out his stock in trade and good will, or his professional practice, he may contract with the purchaser and bind himself not to en- gage in the same vocation in the same locality for a time named, and he may be enjoined from violating this contract. This is about as far as contracts in restraint of trade have been upheld by the American courts, or those of England. While the law, to a certain extent, tolerates contracts in restraint of trade or business, when made between vendor and purchaser and will uphold them, it does not treat them with any special indulgence.’’ The cases in which this and other courts have recognized this rule as correct, are where parties sell their business or trade, together with good will. For instance, cases where a merchant sells to his partner, or to a stranger, or where one being a pro- fessional man, with an established business as a physician or dentist, sells it, and as part of the consideration the vendor agrees not to engage in the business for a time, in that locality, and in such cases the courts have sustained such a contract, although they be in partial restraint of trade. Such contracts are intended to secure to the purchaser the good will of the trade or business, and as a guaranty the vendor agrees not to engage in like business or trade at that place for a specified time. In these cases the restraint to be valid must be more ex- tensive than is reasonably necessary for the protection of the vendee, in the enjoyment of the business which he has purchased. In this class of cases the court recognizes that the vendor has received an equivalent for his agreement to partially abstain from business at the place where his business was formerly con- ducted. In such cases the agreement does not contemplate that the business or trade purchased shall be discontinued and thus perhaps thrown out of employment those whose services were necessary to carry on the business, but on the contrary, it is contemplated that the business will be carried on and that the public will continue to receive benefits which may accrue from the conduct of the business. It results that the agreement does not have the effect of depriving the public of any benefits which it has enjoyed from the conduct of the business, or pursuit of the trade which has been transferred to another. Such con- 188 COMBINATIONS AND RESTRAINT OF TRADE tracts do not have the effect of destroying the competition which existed by reason of which the public enjoyed benefits. From the terms of the contract and the averments of the answer it is perfectly manifest that the purpose of entering into the contract was to eliminate the New Meadows Hotel from the hotel busi- ness in Fulton, and prevent competition between it and the Usona Hotel conducted by the appellants, and to give to the latter a monopoly of the hotel business of the class to which these hotels belong. They were the only first-class hotels in town, and the effect of the contract was to enable the Usona Hotel to serve all the patrons whose tastes and financial condi- tion induce them to stop at first-class hotels. The question for our solution is: Is the contract against public policy and without consideration? Hotels are established and maintained for the purpose of serving the public. The opening of a hotel is an invitation to the public to become its guests. Hotels are not conducted for the social enjoyment of the owners, but for the convenience of the public, that is, those whose business or pleasure may render it necessary that they shall ask and receive food and shelter at a place of public enter- tainment for compensation. A hotel is a quasi public institu- tion. Those who desire to conduct a hotel must first obtain a license from the commonwealth allowing them to do so. Laws have been enacted for the purpose of protecting the proprietors of hotels because of the public character of the business. It is the duty of hotel proprietors to receive guests of good character, well demeaned and who are free from any contagious or in- fectious disease, and who have the financial ability to pay the charges. When a hotel agrees not to perform a duty imposed upon them by law, and agrees not to serve the public with a view of giving a competitor in business a monopoly of the hotel business, its act is in contravention of a sound public policy. The contract relied upon in this case is plainly in restraint of trade, the only consideration being the payment of money for such an agreement. No property is sold or good will transferred. The business is destroyed, not continued for the benefit of the public. The laborers that were necessary to run the hotel are thrown out of employment, and the public is deprived of the benefits which would accrue should the competition continue. The contract was not for the purpose of protecting the appel- THE COMMON LAW 189 lants in the legitimate use of something, which they acquired by it, for, nothing was conveyed to them. The purpose and effect of the contract was to enable the appellants to enjoy an illegiti- mate use of something which they already had. Our conclusion is that the contract is against publie policy and the demurrer to the answer should have been overruled. Chapin v. Brown (Iowa), 12 L. R. A, 428, 32 Am. St. Rep. 297; Clark v. Need- ham (Mich.), 51 L. R. A. 785, 84 Am. St. Rep. 539; Tuscaloosa Tee Mfg. Co. v. Williams (Ala.), 28 South. 669, 50 L. R. A. 175, 85 Am. St. Rep. 125; Anderson v. Jett, 89 Ky. 375, 6 L. R. A. 390. In Anderson v. Jett, 89 Ky. 375, 6 L. R. A. 390, this Court well said: ‘‘Rivalry is the life of trade. The thrift and wel- fare of the people depend upon it. Monopoly is opposed to it all along the line. The accumulation of wealth out of the brow sweat of honest toilers, by means of combinations, is opposed to competing trade and enterprise. That public policy that en- courages fair dealing, honest thrift and enterprise among all the citizens of the commonwealth, and is opposed to monopolies and combinations because unfair to fair dealing, thrift, and enterprise, declares all combinations whose object is to destroy or impede free competition between the several lines of business engaged in, utterly void. The combination or agreement, whether or not in the particular instance it has the desired effect, is void. The vice is in the combination or agreement. The prac- tical evil effect of the combination. only demonstrates its char- acter; but if its object is to prevent or impede free and fair competition in trade, and may, in fact, have that tendency, it is void as being against public policy.’’ The judgment is reversed for proceedings consistent with this opinion. Petition for rehearing by appellee overruled. WESTERN WOODEN-WARE ASSN. (A CORPORATION) v. STARKEY (Supreme Court of Michigan, 1890. 84 Mich. 76.) LONG, J. The bill in this cause is filed for the purpose of having the defendants Starkey, Ferris, and Olmsted enjoined 190 COMBINATIONS AND RESTRAINT OF TRADE from engaging in the business of manufacturing pails, tubs, and other articles of wooden-ware during the period of five years, from the 29th day of June, A. D. 1888; to enjoin the other defendants from carrying on that business with them; to enjoin all the defendants from using certain premises in the village of St. Louis, Gratiot county, for the purpose of manufacturing tubs, pails, etc. The bill asks for an accounting touching com- plainant’s damages, for a decree requiring the same to be paid, and there is also a prayer for general relief. The bill shows that the complainant is a corporation organ- ized under the laws of the state of Illinois for the purpose of carrying on the business of manufacturing, buying, and selling wooden-ware, and the materials which enter into wooden-ware; that it was engaged in the business prior to June 29, 1888; that on that date the defendants Starkey, Ferris, and Olmsted were doing business at St. Louis as partners under the name of the St. Louis Wooden-Ware Company; that they were engaged in business similar to that of complainant, and owned and occu- pied certain premises, with a manufacturing establishment, and were possessed of a large quantity of manufactured articles, materials, tools, and other chattels used in their business; that on that date the complainant and the members of said copartner- ship entered into a contract which is attached to the bill, the material parts of which will be referred to. By this contract, the firm, in consideration of $6,000, agree to sell to the com- plainant their stock on hand, materials, tools, implements, and chattels. The contract contains this clause: ‘‘And the said first parties also agree not to become engaged in the manufacture of tubs and pails during the next five years in the states of Michigan, Wisconsin, Illinois, Minnesota, Iowa, Missouri, Indiana, and Ohio, or allow their property at St. Louis, Mich., to be used for that purpose, nor to sell said prop- erty to any one for that business, except by consent of said second parties; and in case any of the parties of the first part violate this agreement, they do hereby agree to pay to said second party $2,000 for damages, for violating this contract.’’ The contract also contains certain other provisions not neces- sary here to be noticed. After making the contract the com- plainant paid the copartnership the $6,000, and received the chattels. The defendants Starkey, Ferris, and Olmsted violated THE COMMON LAW 191 the contract in that they are now engaged in the manufacturing and selling wooden-ware in the premises in question, and, as the bill alleges, have confederated with the other defendants Palmerton, Fowler, and Newman to carry on the business with them, and, for the purpose of concealing their transactions, pro- cured the defendants Palmerton, Fowler, and Newman to or- ganize a corporation under the name of the F. G. Palmerton ‘Wooden-Ware Company, Limited, with intent to engage in said business. The bill further charges that the defendant Starkey pre- tended to convey the lands in question to his son-in-law Palmer- ton; that Palmerton has conveyed them to the Palmerton Wooden-Ware Company, and that the business of manufacturing wooden-ware has been carried on in said premises by the Palmer- ton Wooden-Ware Company; that the defendants Starkey and Ferris have active supervision, control, and management of said corporation, and have been making sales of their pails and tubs in all the states of Michigan, Wisconsin, Illinois, Iowa, Missouri, Indiana, and Ohio. The bill charges that the corporation so organized by the defendants is a mere pretense and cover pro- cured to be organized by the defendants Starkey and Ferris; that Starkey and Ferris furnish the capital therefor; that the stock of the corporation is held for their benefit and advantage; that the breach of the contract on the part of the defendant has greatly injured and damnified the complainant. To this bill the defendants filed a general demurrer, which the circuit judge sustained ; and on the 14th day of March, 1890, entered a decree dismissing the bill. From this decree com- plainant appeals. Complainant’s counsel raised but three questions in this court : (1) That the clause of the contract wherein the defendants Starkey, Ferris, and Olmsted agree not to become or engage in the manufacture of tubs, etc., during the next five years, in any of the eight states named, or permit the premises in question to be used for that purpose, without the consent of the complainant, is valid; (2). that the clause of the contract which provides ‘‘in case any of the parties of the first part violate this agreement, they do hereby agree to pay to said second party $2,000 for damages 192 COMBINATIONS AND RESTRAINT OF TRADE for violating this contract,’’ does not preclude the complainant seeking relief by injunction; (3) that Act No. 225 of the Public Acts of 1889, declaring certain contracts, agreements, undertakings, and combinations unlawful, and to provide punishment for those who shall enter into the same, or do any act in the furtherance thereof, has no application in this case. Counsel for complainant contends, under his first proposi- tion, that this covenant is limited in respect to time; that it is also limited in regard to territory,—that is, to Michigan and the seven other states named; that it is a covenant embodied in the contract, of which contract the defendants Starkey, Ferris, and Olmsted sell certain property, the price being fixed at one sum, both for the value of the property and for the covenant; that how much of this price is applicable to the property sold, and how much to the covenant not to engage in business, neither the contract nor the circumstances enable us to say; but that it would be presumed, that, by reason of the covenant, a larger price was paid by the complainant than would be necessary merely to cover the value of the property sold. Counsel insists that this question has been settled decisively by this court, and, in support of that proposition, counsel cites Hubbard v. Miller, 27 Mich. 15; Beal v. Chase, 31 Mich. 490. Counsel also con- tends that the rule laid down in Beal v. Chase, supra, is ap- proved in Doty v. Martin, 32 Mich. 462; Caswell v. Gibbs, 33 Mich. 331; Grow v. Seligman, 47 Mich. 610; Watrous v. Allen, 57 Mich. 366. From the view we take of this case, we need discuss but one question. The contract must be declared void on the ground of public policy. The cases cited by counsel for complainant do not sustain the doctrine he contends for here. This case does not fall within that class of cases where contracts have been upheld though the parties, by the contract, were to abstain from carrying on the same business for a particular length of time, and within a designated territory. In Hubbard v. Miller, supra, the complainant was engaged in carrying on the business of a general retail hardware store, in the city of Grand Haven, including the tubing and all necessary apparatus and tools for sinking drive-wells, and was also carrying on the business of putting down drive-wells. Two of the defendants, Miller and THE COMMON LAW 193 Decker, partners under the firm name of George W. Miller & Co., kept a like hardware store in the same city, and like the complainant kept on hand the tubing and other materials used in putting down such wells, and were also engaged in putting them down for those who chose to employ them. Complainants purchased the stock, tools, etc., of the defendants Miller and Decker, and paid their price on condition that they would cease to do that kind of business, and would not keep well-drives, tools, and fixtures. The defendants violated this contract. The firm of George W. Miller & Co., was dissolved, and afterwards reorganized, with the defendant Akeley as a member of the firm. The new firm shortly after went into business, and kept the same kind of tools and materials as complainant, and carried on the well-driving business. Defendant Decker went into busi- ness for himself, and also carried the same line of stock, and commenced putting down drive-wells. It is true that this court, on the hearing here, granted a perpetual injunction. But Cuter Justice CHRIsTIANcy, who wrote the opinion in the case, said: ‘“‘Whether such contracts can be supported or not, depends upon matters outside of and beyond the abstract fact of the contract or the pecuniary consideration. It will depend upon the situation of the parties, the nature of their business, the interests to be protected by the restrictions, its effect upon the public; in short, all the surrounding circumstances, and the weight or effect to be given to these circumstances, is not to be affected by any presumption for or against the validity of these restrictions. If reasonable and just, the restriction will be sustained; if not, it will be held void.’’ The court construed this contract as limited to the city of Grand Haven and vicinity. It will be noticed that the circum- stances surrounding that case and the situation of the parties show that the complainant purchased a business which was simi- lar to the one which he was then carrying on, and which he con- tinued to carry on thereafter in the same place. The public may have been as well served by this means as though the two or three firms continued the business. In Beal v. Chase, 31 Mich. 490, to which the learned counsel refers as sustaining his position, it appears that Chase was the publisher of a receipt-book, and carried on the business of print- ing. Chase sold to Beal his printing eatahBchment, the receipt- Kales R. of T. Vol. I-18 194 COMBINATIONS AND RESTRAINT OF TRADE book and copyrights, the good-will of the business, and the right to use the name of Dr. Chase in connection with the book and business, and agreed not to engage in the business of printing and publishing in the state of Michigan, so long as Beal remained in the printing and publishing business at Ann Arbor. The whole business was turned over to Beal, and he was to fulfill all contracts entered into by Dr. Chase, and was to furnish the paper, the ‘‘Courier and Visitant,’’ to all subscribers, etc. It appears that the business was to be carried on as Chase had carried it on, and the property purchased was devoted to the business in which it had theretofore been used. It was not, like the present case, closed up and taken out of the channels of business, and the court upheld and enforced the contract which the parties themselves had made. The complainant here is a corporation organized and existing under the laws of the state of Illinois, and having its place of business in Chicago. It is alleged in the bill that they are engaged in the business of manufacturing, buying, and selling pails, tubs, and other articles of wooden-ware, and manufactur- ing, buying, and selling staves, heading, hoops, and other articles of wooden-ware; also for the owning and operating machinery, tools, and implements connected with and used in the manu- facture of pails, tubs, and other articles of wooden-ware; that it sells products in the eight great states named. It is not alleged by the bill that, in the making of the contract the complainant intended to take the business and good-will of Starkey, Ferris, and Olmsted, and carry on the business of manufacturing these articles in this state; but, from the terms of the contract, it is manifest that they not only intended to take these parties out of the manufacturing business, but to ship the machinery which was used for that purpose out of the state, and close the doors of the shops. Complainant did not purchase the realty. It purchased all the machinery there in use, and the contract shows that it was to be taken down and placed on board the cars. The interests of the parties alone are not the sole considerations involved here. It is the duty of the court to see that the public interests are not in any manner jeopardized. The state has the welfare of all its citizens in keeping, and the public interest is the pole-star to all judicial inquiries. Here a large manufacturing business had been established, THE COMMON LAW 195 and presumably it gave employment to quite a number of peo- ple. By the contract these people are thrown out of employ- ment, and deprived of a livelihood, and no other of the citizens of Michigan are called in to take their places. The business is no longer to be carried on here, but is removed out of the state. The parties are not only bound by the contract, if valid, not to manufacture here for a period of five years, but in seven other of the states of the great northwest teeming with its millions of people. If the complainant could enforce this contract against Starkey, Ferris, and Olmsted, and shut the doors of that shop, and prohibit their again opening them for five years in any one of those states, they could as well make valid and binding con- tracts to shut the shop of every manufacturing institution in the state, and in the other seven states, and compel the parties now owning and operating them to remain out of business for a term of years, and hold the doors of these shops shut during such period; for the contract which complainant seeks to enforce provides that these parties shall not allow their property to be again used for that purpose within the time limited, nor sell it to any one for that business, except by consent of the complain- ant, and this under a penalty of $2,000. A somewhat similar question arose in Wright v. Ryder, re- ported in 36 Cal. 342. There a contract had been entered into for the purchase by the Oregon Steam Navigation Company of the California Steam Navigation Company of a steamboat called the ‘‘New World,’’ for the sum of $75,000, and also an agree- ment by the Oregon Steam Navigation Company that the steam- boat should not be run upon any of the routes of travel on the rivers, bays, or waters of the state of California, for the period of 10 years thereafter. The validity of this contract was before the court, it being claimed that it was void on the ground of public policy, and it was held void, the court there saying: “Tf the California Steam Navigation Company, which now occupies our bays, rivers, and inlets with its fleet of steamboats, should suddenly convey them all to a purchaser on condition that they were not to be employed in navigating any of the waters of this state for a period of 10 years, no one could doubt that this would operate as a great present calamity to the public, and the condition would be void as a restraint upon trade. On the other hand, if a sloop or schooner of 50 tons burden should 196 COMBINATIONS AND RESTRAINT OF TRADE be sold on a similar condition, the injury to the public would be scarcely appreciable. In like manner, if all the carpenters and masons in a large city should bind themselves not to prosecute their business in this state for a period of 10 years, it might produce great public inconvenience; whereas, if only one car- penter or mason should enter into a similar contract, the loss of his service might not be felt by the public. And yet, in the latter case, we should be bound by a long line of adjudications in England and America to hold the contract void in restraint of trade.”’ In the present case, the defendants Starkey, Ferris, and Olm- sted were not only to remain out of such business for the full time specified, but the premises which had been used to carry on the manufacturing by them, though not sold and conveyed under the contract, could not be again used for such time by them or any other party for the same business. I do not think it needs the citation of authorities to show that contracts of this nature have frequently been condemned by the courts, and held void as unreasonable restraints of trade, and therefore void on the ground of public policy. The decree of the court below must be affirmed, with costs. The other justices concurred.?4 WEST VIRGINIA TRANSPORTATION CO. v. OHIO RIVER PIPE CO. (Supreme Court of Appeals, West Virginia, 1883. 22 W. Va. 600.) Bill to enjoin certain defendants from laying and construct- ing any line of pipe or tubing for the transportation of oil upon and from a tract of land known as the ‘‘Gale tract,’’ or from interfering in any manner with the sole and exclusive right thereon acquired by the complainant by the deeds hereafter mentioned in the opinion of the Court. 24—In Clark v. Needham, 125 _ privilege of renewing the contract Mich. 84, a contract to cease manu- for four years more, was held il- facturing certain articles for one legal. year, the promisee having the THE COMMON LAW 197 Defendants demurred and filed their joint and several answers. On the final hearing it was decreed that the said injunction awarded the plaintiff be dissolved and the bill of the plaintiff be dismissed. From this decree the West Virginia Transportation Company appealed. GREEN, J. The real question involved in this case is: Should the courts at the instance of the West Virginia Transportation Company enforce the grants and contracts made with it by E. L. Gale and wife dated respectively January 31, 1870, and October 23, 18732 These two contracts are identical in lan-. guage, except that the first applied to lands in Ritchie county and the second to lands in Wood county adjoining. The first of these contracts is in the following language: “We, the undersigned, for and in consideration of the sum of one dollar, receipt of which is hereby acknowledged, do ‘hereby grant unto the West Virginia Transportation Company, a com- pany incorporated under special act of the Legislature of West Virginia, passed February 26, 1867, and their assigns, the ez- clusive right of way and privilege to construct and maintain one or more lines of tubing for the transportation of oil, water or other liquids along, through and under lands owned by the undersigned in Ritchie county in the State of West Virginia; also the right to construct and maintain a telegraph along said tubing, and the privilege to remove said tubing and telegraph at pleasure. ‘‘Witness our hands and seals this 31st day of January, 1870. “KE. L. Gate. ([Seal.] ‘““Mary Gaue. ([Seal.]’’ It was duly acknowledged and admitted to record in Ritchie county on March 15, 1870. ; When these grants and contracts were made, Mary Gale, the wife of E. L. Gale, owned a tract of land lying partly in Wood and partly in Ritchie county, West Virginia, containing about two thousand acres, which had been conveyed to Mary Gale, the wife of E. L. Gale, as long ago as March 7, 1854. Subsequently to the recordation of said grants and contracts of January 31, 1870, and October 23, 1873, that is, on January 198 COMBINATIONS AND RESTRAINT OF TRADE 26, 1875, said Gale and wife in consideration of eight thousand one hundred and forty-six dollars and fifty-six cents, conveyed to James M. Stephenson, Thomas Leach, W. Vrooman, C. H. Shattuck and H. H. Moss a moiety of one thousand acres of this land with general warranty of title, which deed was duly re- corded on July 6, 1875. These grantees afterwards for con- venience in managing said property assumed the name of the Wood County Petroleum Company. They claim, that, if these grants and contracts of date January 31, 1870, and October 23, 1878, were binding grants and contracts, which the courts would enforce between the original parties to them, nevertheless they would not be enforced against them, as they were purchased for valuable consideration without notice of their existence; and they insist, that the recordation of these grants and contracts cannot be regarded as giving them any constructive notice of their existence, because they profess to grant ‘‘exclusive rights of way and privilege to contract and maintain one or more lines of tubing for the transportation of oil along, through and under lands owned by the grantors in Ritchie and Wood counties in the State of West Virginia;’’ that this description of the lands, through which said rights of way were granted, is so utterly vague and indefinite, that it would not operate when recorded as any constructive notice to a subsequent purchaser without notice, as they claim to be. To sustain this position they rely on Munday v. Vawter, 3 Gratt. 518, and Carrington v..Goddin, 18 Gratt. 609. On the other hand, the description of the land contained in these grants and contracts, the West Virginia Transportation Company insist, is legally equivalent to ‘‘all the lands owned by Gale and wife in Ritchie and Wood counties,’’ and this being the legal signification of the description of the land in these grants and contracts, that the recordation of them was con- structive notice to every one of the existence of these grants and contracts. To sustain this they rely on Warren v. Syme, 7 W. Va. 474. They also insist, that, even if this were not so, the evidence shows, that they were after the making of said grants and contracts in the actual possession of all this ‘‘Gale tract,’’ so far as the exclusive possession and control of many lines of tubing through it was concerned, and that subsequent purchasers of any portion of this ‘‘Gale tract’’ were bound to inquire into THE COMMON LAW 199 the nature of their possession; and had they done so, they must have discovered, that they claimed the exclusive right of way for tubing to transport oil either through this tract or such as was produced upon it; and therefore they are chargeable with implied notice of the claim of the West Virginia Transporta- tion Company. To sustain this position they rely upon Daniels v. Davison, 16 Ves. 249; Wilson v. Wall, 6 Wall. 83; French v. Loyal Co., 5 Leigh 627; Campbell v. Fetterman’s Heirs, 20 W. Va. 398. From the views I take of this case I deem it unnecessary to consider or determine, whether the persons known as the Wood County Petroleum Company are or are not to be regarded as having either constructive or implied notice of these contracts and grants by Gale and wife with and to the West Virginia Transportation Company. As all questions involved in this cause can be determined without considering this question and by confining our attention to the question, whether the courts ought to enforce in favor of the West Virginia Transportation Company these grants and contracts as against the original obligors and grantors, we will consider this latter question only. These grants and contracts are on their face ambiguous; and it has been held, that, when this is the case, the courts will look at the surrounding circumstances existing, when such am- biguous contracts were made, at the situation of the parties and the subject-matter of the contract, and sometimes even call in aid the acts done by the parties under such contracts, as afford- ing a clue to the intention of the parties; but the court never resorts in such cases to the verbal declarations of the parties either before or after or at the time of the execution of the contracts to aid it in construing its language. See Crislip’s Guardians v. Cain, 19 W. Va., p. 483, and the authorities there cited. The contracts were in the case before us made respectively on July 31, 1870, and October 28, 1873. The parties to them had made on September 23, 1868, another contract in precisely the same language, except that by it was granted ‘‘the right of way to construct and maintain one or more lines of tubing for the transportation of oil along, through and under lands owned by them in Ritchie county,’’ while these new contracts under con- sideration granted instead of such ‘‘right of way’’ and ‘‘exclu- 200 COMBINATIONS AND RESTRAINT OF TRADE sive right of way.’’ When these contracts were made the grantors owned a large tract of land of about two thousand acres in Ritchie and Wood counties, West Virginia, which was and for a long time had been very productive in valuable petro- leum oil. The land had been divided into small lots and leased to numerous parties for terms generally of twenty years, who sunk wells on their respective lots, paying as a royalty or rent for working such wells one-fourth of the oil produced from them. The production of oil from these wells was.some twenty thousand barrels a year, and there were upon it some fifty tenants. The oil produced each year was worth from sixty to one hundred thousand dollars. On February 26, 1867 (Acts of 1867, p. 110), the Legislature of West Virginia had incorporated the West Virginia Transpor- tation Company with the right to ‘‘lay out and conduct a line or lines of tubing for the purpose of transporting oil through the same in, through or along the oil district in the County of Wirt.’’ This charter had been amended February 20, 1868 (see Acts of 1868, pp. 63 and 64), so that the company organ- ized under this act of February 20, 1867, was authorized ‘‘to construct and maintain a line or lines of tubing for the purpose of transporting petroleum or other oils through pipes in the counties of Wirt, Wood, Ritchie and Pleasants. And the said company shall have power to enter and condemn lands and to acquire right of way in the counties aforesaid for the purposes of said company in the manner prescribed by the fifty-sixth chapter of Code of West Virginia.’’ And on February 9, 1869 (see Acts of 1869, p. 8), the charter of this company was again amended and it was declared said company should ‘‘have power to construct or maintain pipes or tubing, together with all necessary and proper machinery, telegraphs, buildings and other appurtenances, for the purpose of transporting petroleum or other oils or liquids through such pipes or tubing; and said eompany shall also have the right to construct, own and run tank-cars, boats and other receptacles for the transportation of petroleum or other oils or liquids and to receive and hold such petroleum or other oils in storage and to buy and sell the same on commission or otherwise.’’ Said act further provided the means and manner whereby lands might be condemned and THE COMMON LAW 201 rights of way acquired in said counties for constructing such pipe-lines and works. , When oil was first struck on this Gale tract, he induced this company to lay a line connecting this tract with petroleum. He then with his wife executed the contract and grant, whereby he gave said company a right of way through said land; but this right of way was not an eaclusive right of way. After- wards oil was struck on other portions of said Gale tract of land; and he proposed to this company, that, if they would lay a pipe-line to these new points of production, he and his wife would grant them an exclusive right of way through this ‘‘Gale tract,’’ so far as it lay in Ritchie county. This was agreed to, and the contract and grant dated January 31, 1870, was ex- ecuted, and subsequently the contract and grant of like kind, so far as the ‘‘Gale tract’’ lay in Wood county, was executed on October 25, 1873. Under these contracts this company laid down pipe-lines to a large number, probably to fifty wells on this ‘‘Gale tract.’’ On June 26, 1875, H. L. Gale and wife conveyed a moiety of one thousand acres of this ‘‘Gale tract’’ for eight thousand one hundred and forty-six dollars and fifty cents to persons since constituting the Wood County Petroleum Company; and they, believing that the West Virginia Transportation Company, was exacting from them and their tenants illegal charges for trans- portation; and by mixing different oils and by other violations of their charter injuring them, concluded to lay down pipes to the various wells on their part of this ‘‘Gale tract,’’ and connect them with the pipes of the Ohio River Pipe-Line Company, another corporation organized for transporting oils. This was about being done, when it was prevented by injunction awarded in this suit. These facts show that the grants and contracts of January 31, 1870, and October 25, 1873, made by E. L. Gale and wife to and with the West Virginia Transportation Company, while ambiguous on their face when interpreted by the aid of the circumstances of the case, and the situation and conduct of the parties in carrying them out were designed not only to confer on the West Virginia Transportation Company the right of way for their pipes through this ‘‘Gale tract’’ of two thousand acres in Ritchie and Wood counties, but also to confer on them the 202 COMBINATIONS AND RESTRAINT OF TRADE exclusive right of way, that is to say, to bind the grantors in their deeds and contracts not themselves to use pipe-lines to transport oil from said ‘‘Gale tract’’ and not to grant to any other person or persons authority to lay pipe-lines through said ‘‘Gale tract’’ to transport petroleum oil produced either on it or any other lands. That this is the true interpretation of these grants and contracts is, I think, apparent from Western Union Telegraph Co. v. Chicago & Paducah Railroad Co., 86 Tl. 246 (29 American R. 28), and from Western Union Tele- graph Co. v. American Union Telegraph Co., 65 Ga. 160 (38 American R. 781). It remains for us to decide whether these are such contracts, as the court ought on the application of the West Virginia Transportation Company to enforce against the obligors or those claiming under them, assuming that those so claiming are doing so with notice, at the time they purchased, of these grants and contracts with the West Virginia Transportation Company and of the character of their claim under these con- tracts. The reason why, it is insisted by the counsel of the appellees, these contracts ought not to be enforced is, that they are con- trary to public policy. The common law will not permit individuals to oblige themselves by a contract either to do or not to do anything, when the thing to be done or omitted is in any degree clearly injurious to the public. (Chappel v. Brock- way, 21 Wend. R. 159.) It is upon this principle that it is settled, that contracts in restraint of trade are in themselves, if nothing shows them to be reasonable, bad in the eye of the law; and though such contract be for a pecuniary consideration, or, what is the same thing, though it be under seal and stipulate only that a certain trade or profession shall not be carried on in a particular place, if there be no recitals in the deed or contract or no averment and proof showing circumstances, which render such contract reasonable, the contract or instru- ment is void, though it be but in partial restraint of trade. (Horner v. Graves, 7 Bing. 744; Pierce v. Fuller, 8 Mass. 223.) Contracts in restraint of trade are for the most part contrary to sound policy and are consequently to be held void. This is the general rule. There may be cases where the contract, though in apparent restraint of trade to some partial extent is THE COMMON LAW 203 neither injurious to the public at large nor even to the obligors, and when this is made to appear affirmatively, the courts hold such contracts valid, though apparently to some extent in re- straint of trade. If the contract go to the total restraint of the trade in the state where it is made, it is necessarily void, what- ever be the condition on which it was based. Such a contract must be injurious to the citizens of the state in which it is to operate. For however small the state in which he was, the man making such contract would at least compel himself to transfer his residence and allegiance to another state in order to pursue his avocation. (Chappel v. Brockway, 21 Wend, 159; Taylor v. Blanchard, 13 Allen, 374; Dunlap v. Gregory, 10 N. Y. 241; Horner v. Ashford, 3 Bing. 328; Mitchel v. Reynolds, 1 P. Wms. 181; Alger v. Thacher, 19 Pick. 51; Smith’s Leading Cases, Vol. 1, Part 2, p. 508.) On the other hand, if the contract be but in partial restraint, it may not be invalid; for there may be good reason, so far as the public interest is concerned, for allowing parties to contract for an apparent limited restraint, as that a man will not exercise his trade or profession in a particular ease. And if such good reasons are shown, such contract will be upheld as not contrary to public policy. (Chappel v. Brock- way, 21 Wend. 159; Ross v. Sadgbeer, 21 Wend. 166; Lange v. Werh, 2 Ohio State R. 420.) I presume that it is not absolutely necessary, however, that such good reasons should be set out on the face of the contract. I suppose this might be averred in the pleadings and proven. (Ross v. Sadgbeer, 21 Wend. 168; Mitchel v. Reynolds, 1 P. Wms. 181, and Horner v. Ashford, 3 Bing. 322.) Though a contract in restraint of trade be in all other re- spects reasonable, and be not otherwise in any manner preju- dicial to either the public or the obligor, yet the simple fact, that it restrains trade over an unreasonable extent of territory, though it be not a general restraint of trade, will render such contract invalid as contrary to public policy. Thus in Lawrence v. Kidder, 10 Barb. 641, the court held, that a contract, whereby the party covenanted that he would not sell mattresses in New York west of Albany, was held because of the large extent of the territory, in which this restraint operated, as contrary to public policy and void. But while the burden is on the party claiming the benefit of every contract in restraint of trade to 204 COMBINATIONS AND RESTRAINT OF TRADE show, that under the particular circumstances of the case the partial restraint of trade is of no prejudice to the public, yet by what circumstances this burden would be met would seem to be difficult to state, and has apparently depended a good deal on the particular judge, who has had to pass judgment on the circumstances. Thus, in Whitney v. Slayton, 40 Me. 231, the court held, that ‘‘an agreement not to engage in the business of jron-casting within sixty miles of Calais for the term of ten years’’ was valid; but they based their judgment in part on the fact, that much of the country within sixty miles of Calais was but sparsely settled, and there were but few places of business within this territory, and also in part on the fact, that Calais was on the extreme border of Maine. In The Oregon Steam Navigation Company v. Winsor, 20 Wall. 64, the court laid down the rule in such cases in a manner substantially corresponding with the views which I have ex- pressed in the syllabus, saying ‘‘Questions about contracts in restraint of trade must be judged according to the circum. stances in which they arise, and in subservience to the general rule, that there must be no injury to the public by its being deprived of the restricted party’s industry, and that the party himself must not be precluded from pursuing his occupation and thus prevented from supporting himself and family.’’ But in applying these principles the court held, that when A., engaged in navigating waters in California alone, sold in 1864 a steamer to B., who was engaged in the business of navigating the Columbia river in Oregon and Washington territories, and B. agreed that for the period of ten years he would not employ this steamer in the waters of California, the contract was not void, this stipulation being reasonable and not prejudicial to the public interest, as the vendor of the steamer, who thus contracted not to navigate with it the waters of California, proposed, when he purchased it, to navigate with it the waters of Puget Sound. In Wright v. Ryder, 36 Cal. 342, a California company en- gaged in navigating the waters of California sold one of its steamboats to an Oregon company engaged in navigating Ore- gon waters, and the purchasers agreed not to navigate the waters of California for ten years with this steamboat; and the court THE COMMON LAW 205 held this contract to be void, being contrary to public policy and an unreasonable restraint of trade. In all such cases the difficulty lies.in determining what are reasonable and what unreasonable restrictions in respect to the area, within which the trade is to be confined. As is said by Justice Bradley in the Oregon Steam Navigation Company v. Winsor, 20 Wall. 69, ‘‘It is obvious on first glance, that what is a reasonable restraint must depend upon the circumstances of the particular case; although from the uncertain character of the subject much latitude must be allowed to the judgment and discretion of the parties. It is clear, that a stipulation, that another shall not pursue his trade or employment at such a distance from the person to be protected, as that it could not possibly affect or injure him, would be unreasonable and absurd. On the other hand, a stipulation is unobjectionable and binding, which imposes the restraint only to such an extent of territory, as may be necessary for the protection of the party making the stipulation, provided it does not violate the two indispensable conditions, that the other party be not prevented from pursuing his calling, that the country be not deprived of the benefit of his exertions.”’ I will here say, that this last condition is the one which the courts must: ever keep in view, that is, that the restriction is not prejudicial to the interest of the public. If it is, the contract is contrary to public policy and will not be enforced. The cases show, that whether the public interest is prejudiced by a con- tract, which restricts a business or profession with impartial limits, will often depend very largely on the character of the profession or calling. Thus in Bunn v. Guy, 4 East, 190, a contract made by an attorney, solicitor and conveyancer, that he would not practice his profession in London or within one hundred and fifty miles thereof, was held valid as not an unreasonable restriction; but in Sainter v. Ferguson, 7 Man. G. & Seott, 716 (62 Eng. Com. L. R:.), the question was dis- cussed whether Macclesfield or within seven miles thereof was a reasonable restriction, within which a surgeon and apothecary was to be restrained from practicing his profession, the court holding that it was. The reason why the courts regard as a reasonable restriction to the practice of the legal profession a territory so. much larger than would be allowed as a reasonable 206 COMBINATIONS AND RESTRAINT OF TRADE restriction to the practice of a surgeon’s profession is obviously because a lawyer can practice his profession effectually at a long distance from his residence, say fifty or one hundred miles, by correspondence and occasional visits, while a surgeon can practice his profession at but a short distance from his resi- dence, as nothing can be done by him except by personal visits. The public therefore may not be injured by a lawyer being required to live fifty miles distant, while they would be en- tirely deprived of a surgeon’s services, if he was required to live at that distance from them. According to the modern and better authorities, if the re- striction of the particular trade or business be partial and reasonable, when all the circumstances are considered, including the restriction and object of the parties and the nature of the business, which is restricted, as well as the extent of the restric- tion in reference to time and space, then such contract imposing such reasonable restrictions will be upheld without regard to the adequacy or inadequacy of the consideration. (Hitchcock v. Coker, 6 A. & E. 438; Leighton v. Wales, 3 M. & W. 545; Archer v. Marsh, 6 A. & E. 959. In Pilkington v. Scott, 15 M. & W. 657, the law is thus stated by ALperson, B.: ‘‘That if it be an unreasonable restraint of trade, it is void altogether; but if not, it is lawful; the only question being whether there is a consideration to support it and the adequacy of the consid- eration the court will not enquire into, but will leave the parties to make the bargains for themselves. Before the case of Hitch- cock v. Coker, 6 A. & E. 439, a notion prevailed, that the con- sideration must be adequate to the restraint; that was in truth the law making the bargain instead of leaving the parties to make it and seeing only that it is a reasonable and proper bar- gain.’’ And this is the law in this country. See Hubbard v. Miller, 27 Mich. 15. Guerand v. Dandelet, 32 Md. R. 562. It may be regarded as established as a general rule, that when a covenant in restraint of trade is reasonable and is valid at common law, it will be specifically enforced in equity by en- joining the obligor from violating such covenant. See Harrison v. Gardner, 2 Madd. R. 444; Whitekar v. Howe, 3 Beav. 383; Guerand v. Dandelet, 32 Md. 562; Beard v. Dennis, 6 Ind. 200; Butler v. Barleson, 16 Vt. 176. The cases established, that the restrictions, which may be put THE COMMON LAW 207 upon any trade or business, are only such as in the judgment of the courts will not be prejudicial to the public; and that the extent of the restriction allowed must therefore depend largely on the character of the trade or business. In most cases: the trade or business has been strictly local in its character, and a contract prohibiting one from engaging in such strictly local business, which is held to be valid, has been only such as pro- hibited the obligor from engaging in such business in a ‘par- ticular place, as a named town or city. To permit the obligee to stipulate that the obligor should not engage in such strictly local business in an extent of country exceeding the bounds of a given town or city would be to permit him to enforce a contract clearly prejudicial to the public interest. According to the spirit pervading the decisions everywhere a barber would be allowed to make a contract, whereby the obligor should not be allowed to carry on a business in opposition to the obligee in a certain village, town or city. But if the contract prohibited the obligor from carrying on such a business in such town or village or for a space of ten miles around it, such a contract would be no doubt held to be void, so far as it restricted the obligor from engaging in the business outside of the limits of such town or village, though according to the decisions such contract would be enforced, so far as it restricted the business within the limits of the town or village. (Price v. Green, 16 M. & W. 346; Chesman et ux. v. Nainby, 2 Strange 739; Woods v. Benson, 2 Cromp. & J. 94; Mallan v. May, 11 M. & W. 653; Nicholls v. Stretton, 10 Q. B. 346; Oregon Steam Navigation Company v. Winsor, 20 Wall. 70; Lange v. Werk, 2 Ohio St. 520; Horner v. Graves, 7 Bing. 738; Guerard v. Dandelet, 32 Md. 561.) The reason for such holding is obvious; for as a barber could not have customers for a space of ten miles around his shop, such a restriction on another person could be of no possible benefit to the obligee in such a contract, while it might obviously injure the public by depriving another community of the services of a barber. But if the restriction was confined to a village, the contract would be upheld, as it might be actually of benefit to the inhabitants of the village, that the business of barbering should not be overdone, and as a village could support but one barber, the villagers would probably be better served, if only one attempted to do such business in the village. 208 COMBINATIONS AND RESTRAINT OF TRADE But on the other hand, the courts might uphold as valid a contract in which the obligor bound himself not to engage in the business of a surgeon-dentist or milkman within ten miles of a village, for such a circuit is not greater than could be reasonably occupied by a person engaged in business of this description. (Cook v. Johnson, 47 Conn. 175; Proctor v. Sar- gent, 2M. & G. 31.) If the business was that of iron-making, the extent of country, within which the court would permit an iron-founder to restrain another from engaging in the business, would be still larger. Thus in Whitney v. Slayton, 40 Me. 224, the court upheld a contract, which prohibited the obligor from engaging in a business of this character for a space of sixty miles around Calais. But this, it is believed, is a space greater than would under ordinary circumstances be allowed to be included in such a restriction in this sort of business. A lawyer has been allowed to stipulate with another, that the obligor should not practice in London or within one hundred and fifty miles thereof (Bunn v. Guy, 4 East. 190) ; and in Whittaker v. Howe, 5 Beav. 383, the court went still further, upholding a contract, which prohibited an attorney from practicing in Great Britain for twenty years. It is believed, that such contract ought to be held as prejudicial to public interest and void; but there is no question that the restriction in point of space upon the practice of the legal profession would be allowed to an extent much greater than in most professions or occupations, as the profession of law can be well carried on over an extent of country much larger than most professions or occupations. There is, however, one sort of business which requires for its proper prosecution a still larger extent of territory than even the profession of a lawyer, that is, navigating or steam-boating; and accordingly the courts have shown a disposition to uphold contracts prohibiting an obligor to engage in this character of business over a very large extent of territory. Thus the Supreme Court of the United States in Oregon Steam Navigation Co. v. Winsor, 20 Wall. 64, upheld a contract, which prohibited the obligor from navigating with a particular boat the waters of the State of California. But the Supreme Court of California, in Wright v. Ryder, 36 Cal. 342, refused even in the case of steam- boating to uphold a contract, which went to this extent in re- stricting steam-boating. The cases almost universally lay down THE COMMON LAW 209 the rule, that any contract, whereby any obligor stipulates, that he will nowhere engage in any specified business, will be held void as against public policy; but to even this rule there are exceptions, it being regarded by the courts that there are some species of employments which may be legitimately subjected to such general restraint. For instance, this rule is held not to extend to a business, which is secret and not known to the public. The public is regarded as not being prejudiced by a contract restraining generally such a business, because the public has no rights in the secret. (Bryson v, Whitehead, 1 Sim. & Stu. 74; Peabody v. Norfolk, 98 Mass. 452.) It has been held, too, that if a party purchase out a magazine, he may stipulate with the vendor, that he shall not publish another periodical of a like nature though this restriction be general. (Ainsworth v. Bentley, 14 Weekly Rep. 630; Ingram v. Stiff, 5 Jur. [N. S.] 947.) So too in Stiff v. Cassell, 2 Jur. (N. 8.) 348, it was held, that a party might agree to write a tale for a periodical, and that he would not write another for any other periodical for a year. In Leather Cloth Co. v. Lorsont, Law Rep. 9 Eq. 345, and Morse Twist Drill & Machine Co. v. Morse, 103 Mass. 73, these principles are laid down, that while contracts are void, if their object is to deprive the state of the benefit of the labor, skill or talent of a citizen, yet public policy requires, that when a man has by skill or other means obtained something, which he wants to sell, he should be at liberty to sell it in the most advantageous way in the market, and in order to enable him to do this, it is necessary that he should be able to preclude himself from en- tering into competition with the purchaser, provided the restric- tion is not unreasonable by going beyond the extent to which it would be a benefit to the purchaser. If a general restraint in such case is necessary for the benefit of the purchaser, it will be enforced, if inserted in the contract. In such eases the public interest on the whole is regarded as not prejudicial but rather promoted by even a general restraint, if necessary to enable the inventor to realize from his invention; for the public are interested, that inventors should be fairly compensated. On the other hand, the cases lay it down as a general rule, that any trade or business may be subjected by contract to a partial restraint, provided that the restraint, to which it is subjected, Kales BR. of T. Vol. I—14 210 COMBINATIONS AND RESTRAINT OF TRADE is so limited as that it may benefit the public or at least not be prejudicial to the public interest; and the cases show that the extent to which this restraint may be legally imposed depends largely upon the character of the business restrained. From the principles, which underlie all the cases, the in- ference must be necessarily drawn, that if there be any sort of business, which from its peculiar character can be restrained to no extent whatever without prejudice to the public interest, then the courts would be compelled to hold void any contract imposing any restraint, however partial, on this peculiar busi- ness, provided, of course, it be shown clearly that the peculiar business thus attempted to be restrained is of such a character that any restraint upon it, however partial, must be regarded by the court as prejudicial to the public interest. Are there any sorts of business of this peculiar character? It seems to me that there are, and that they have been recog- nized as possessing this peculiar character, both by the statute- law and by the decisions of the court. Are not railroading and telegraphing forms of business, which are now universally recognized as possessing this peculiar character? Look at the Legislature of our own state in reference to these sorts of business and see if it does not distinctly recognize them as pos- sessing this peculiar character. Our statute-law provides for the condemnation of lands by railroads and telegraph com- panies; and by pursuing the provisions of the statute-law these companies may acquire lands for their purposes without the consent of the owners of such lands. (Ch. 52 and Ch. 42 of the Code of West Virginia.) In conferring on such companies the power to exercise at their pleasure the state’s power of eminent domain and the power thus to take land without the owner’s consent for railroading and telegraphing, the Legislature has emphatically declared that the business of railroading and tele- graphing is business in which the people of the state have such great and direct interest, that no individual land-owner shall prevent this business of railroading and telegraphing being carried on at every locality in the state, where any company may choose to engage in such business. After such a legislative declaration the courts could not say that in any particular locality, however limited, the public had not such a direct interest in railroading and telegraphing that its interest would THE COMMON LAW 211 not be prejudiced by any person or corporation entering into a contract with another, whereby the obligor should bind him- self to impede the making of such railroad or telegraph through any locality, however small, by refusing to grant a right of way through such locality or by refusing to permit a railroad or telegraph to pass through such locality. Such a contract would be necessarily prejudicial to the public interest, as the Legis- lature has recognized the public interest to have a telegraph or railroad through every parcel of land as so clear as to justify the condemnation of every such parcel of land without any kind of enquiry as to the public utility of the particular railroad or telegraph through that parcel of land. The statute-law assumes as self-evidence, that the public in- terest is promoted in the building of a railroad or telegraph through each particular parcel of land; and the courts must therefore act on this assumption in every case, and as a con- sequence upon the principle, that the public interest is promoted by the business of railroading and telegraphing being done on each parcel of land, the courts must hold in accordance with the principles underlying all the decided cases, that no person or corporation can restrict this business being done on any parcel of land, however small, by a contract, which by giving to another an exclusive right of way or in any other manner requires the obligor to refuse to permit the doing of such business on said land by any and all companies, who are willing to pay a just compensation for the land which may be actually used in the doing of such business. In the Western Union Telegraph Company v. American Union Telegraph Company, 65 Ga. 160 (38 Am. R. 781), it was ex- pressly decided, that ‘‘a contract by a railroad company grant- ing to a telegraph company the exclusive use and occupation of its right of way for telegraph purposes is void as in restraint of trade and against public policy.’’ The court, after first show- ing the public necessity for the telegraph, says: ‘‘Shall the means then, by which information is transmitted, be monop- olized by a contract? When such exclusive rights exist, or such monopolies are established, the same should be done by legis- lative grant and not by an individual contract. Our judgment therefore is, that these contracts are especially made and en- tered into to cripple and prevent competition, and they thereby 212 COMBINATIONS AND RESTRAINT OF TRADE enable the party to fix its tariff of rates at a maximum, governed alone by the necessities of its patrons. Such contracts are not favored by the law; they are against the public policy because they tend to create monopolies and are in general restraint of trade.’’ The latter words above quoted, ‘‘they are in general restraint of trade,’’ may not be entirely accurate language, as the contract prevents the erection of another telegraph line only on the land of the grantors, which may be ever so small a parcel of land. But it is true that to some extent ‘‘such contract is in restraint of this telegraphing business;’’ and for the reasons, which we have given, any restraint of that particular kind of business is contrary to public policy and a prejudice to public interest. The court subsequently say truly: ‘‘The state’s right of eminent domain extends over every foot of its territory, and the same is held by its owners in subordination to that fixed and co-existing right, and may be taken for public uses upon just compensation’’ (p. 784). The inevitable infer- ence from this is, that no one can give to a railroad or a telegraph company the exclusive right of way for a railroad or telegraph line through his land, however small a parcel it may be. Such contract is contrary to public policy. And if it were a valid contract, it would defeat the state’s right of eminent domain. The foregoing decision is, as I understand the case, followed in the case of Western Union Telegraph Co. v. Chicago and Pa- ducah Railroad Co., 86 Ill. 246 (29 American R. 31). There the railroad company had contracted with the telegraph com- pany, that it would furnish and distribute along its track cedar poles, and furnish all the labor necessary to erect the poles and place wires and insulators thereon, and furnish the labor to keep the telegraph-wire in repair, the wire, insulators, batteries and instruments and all other material being furnished by the telegraph company, the telegraph company to give the use of new patents. And the railroad company agreed to assure to the telegraph company, so far as it legally might, an exclusive right of way along the railroad line and lands for commercial ‘and public purposes, and agreed to discourage competition by withholding facilities and assistance, performing to competing lines its legal duty and no more. There was proof, which ap- pears to have satisfied the court, that two lines of wire on the same telegraph-poles, under the management of different com- THE COMMON LAW 213 panies, could not be worked without serious annoyance and inconvenience and injury to each other. The court held, that this contract was valid and could be executed, so far as it pre- vented the railroad company from permitting another telegraph company from putting up wires on the same poles; but that it was contrary to public policy, if it was to be interpreted as preventing another telegraph company from erecting another line of poles along the railroad and placing on them another line of wires. If I am right in the views which I have expressed, it would be contrary to public policy for the owner of a water grist-mill to contract with another person the owner of a mill-site in the neighborhood, that he would not erect on it a water grist-mill, because the business of grinding corn, like that of railroading, is regulated by the statute-law as one in which the public has a direct interest, and the necessary land may be condemned for the erection of such water grist-mill. We will now proceed to apply these principles of law to the case before us. Examining the contracts betweeen Gale and wife and the West Virginia Transportation Company of date January 31, 1870 and October 25, 1873, the first thing which strikes us is, that while they are for the exclusive right of way and privilege to maintain lines of tubing for transportation of oil, ete., through this Gale tract, yet these contracts expressly reserve the privilege to remove such tubing at the pleasure of the West Virginia Transportation Company. Now, if we were to assume that a proper contract might be made for such ez- clusive right of way, we should be compelled to hold, that these were not proper contracts, because of this proviso authorizing the West Virginia Transportation Company to remove at their pleasure this tubing, and of course at their pleasure to decline to transport the oil raised on this ‘‘Gale tract’’ of land. It is true that this does not make these contracts void because of a want of consideration; for the trouble which the West Virginia Transportation Company was at in laying down this tubing would be a sufficient consideration to support these contracts, if they were contracts for such reasonable restraint of trade as that they ought to be supported. But this provision, that this tubing might be removed at the pleasure of the West Virginia Transportation Company itself, made these contracts unreason- 214 COMBINATIONS AND RESTRAINT OF TRADE able restraints of trade, so far as the public and the fifty tenants on this ‘‘Gale tract’’ of land were concerned. The position of the public was, that no one by these contracts could with any convenience transport to market the oil made on this ‘‘Gale tract’’ of land except the West Virginia Transportation Com- pany; and by these contracts they could cease to do so, when- ever they pleased and thereafter, as no one else could lay down tubing, the public would necessarily in a large degree be de- prived of the oil, which would otherwise have been produced on this land. Even if a proper contract for this exclusive use of a right of way for such tubing could have been made, this would have made these contracts unreasonable restraints on trade, contrary to public policy and void. But there are much more serious objections to these contracts than these provisions. And had these obnoxious provisions not been in these contracts, they must still have been held void as contrary to public policy. The West Virginia Transportation Company could not ask, that the courts should enforce these contracts against Gale and wife, much less against their as- signees, because these contracts are void as contrary to public policy. It is an attempt to restrain trade of a particylar form, which from its character is recognized by the statute as such a business as can not be restrained even partially. A business, in which the general public has such a direct interest, that the statute has provided, that it may be carried on upon any tract of land in the state without the owner’s consent. Hence it follows, that any contract made by the owner intended in any degree to restrain this business is contrary to public policy. This business of transporting oil in tubes is, like railroading and telegraphing, a business recognized by our statute-law as one in which the public has so great and direct an interest, that to promote it the statute authorizes the state’s right of eminent domain to be exercised by any corporation to acquire a right of way for its tubing through any parcel of land in the state. And from what has been said it must follow, that no person can lawfully contract with any corporation for an exclusive right of way for tubing through his land, whereby oil is to be trans- ported. For if he could, he would thereby defeat the state’s right of eminent domain. Our conclusion therefore is, that such a contract, so far as THE COMMON LAW 215 it confers on the corporation a right of way through the grant- ors’ land, is valid and binding on him and on every subsequent assignee or grantee of the land; but so far as it attempts to deprive the grantor or his assignee or any other corporation from exercising the right to lay other tubing through said land for the transportation of oil, such contract is wholly inoperative and void, being contrary to public policy and an unreasonable restraint on trade. I feel confident that I am justified in hold- ing this attempted restraint on the original grantor and cove- nantor as inoperative and void for this reason, and, of course, if this be true, it cannot bind any subsequent grantee of the land, or impéde any .other corporation in acquiring in a legal manner a right of way for the transportation of oil through such land. {In the balance of the opinion it is argued that ‘‘if such contract were obligatory on the original covenantor or grantor it could not possibly be binding upon a grantee of the land or any other corporation seeking a right of way through such land.’’] Judges SNYDER and Woops concurred. Affirmed. Section 2 CONTRACTS ACCOMPANYING THE SALE OF PROPERTY RESERVING THE SELLER’S BUSINESS HODGE v. SLOAN (Court of Appeals of New York, 1887. 107 N. Y. 244.) Appeal from general term, Supreme Court, Third depart- ment. The original action in this case was begun by Edward Null against Richard Sloan to restrain the defendant from selling sand off of a parcel of land sold by plaintiff to the defendant’s grantor, John D. Sloan. Judgment was entered for defendant upon an order which affirmed a judgment for defendant dis- missing the complaint, entered upon a decision of the court at special term. After appeal to this court, the plaintiff died, and his executor, Augustus M. Hodge, was substituted as appel- lant. On the 9th day of May, 1868, Edward Null was the 216 COMBINATIONS AND RESTRAINT OF TRADE owner of certain land containing deposits of sand, the sale of which constituted his whole business. The land included about forty acres and upon being applied to by John D. Sloan for a portion of the land, about half an acre, he refused to sell, because by selling he would injure his business. Afterwards, upon Sloan’s agreeing not to sell any sand off of the land, the plaintiff sold to him the portion of the land he wished. A contract of sale was made which contained such agreement, and, in fulfillment of the contract, a warranty deed was given from plaintiff to Sloan containing a covenant by the grantee ‘‘not to sell any sand off of said premises.’’ The deed was received and duly recorded, and possession taken. Afterwards, Sloan conveyed to his son, the defendant, Richard Sloan, by deed containing no reference to the covenant in the deed from plaintiff; but defendant, at the time of taking the land, had full knowledge of the existence of the covenant. Against the protest of plaintiff, he opened a sand-pit, and proceeded to sell the sand therefrom. The court held that the covenant was void as against public policy, being in restraint of trade, and the complaint was dismissed. DANFORTH, J. The conclusion of the trial court is against our ideas of natural justice; for it takes from one party an advantage which he refused to sell, and secures to the other, without price, a privilege which his grantor was unable to buy. Nor do we find that this denial of private right is required by any rule of public policy. Assuming, with the respondent, that the covenant is in restraint of trade, it is still valid if it imposes no restriction upon one party which is not beneficial to the other, and was induced by a consideration which made it reason- able for the parties to enter into it; or, in other words, if it was a proper and useful contract, or such as could not be disregarded without injury to a fair contractor. This is the doctrine of Chappel v. Brockway, 21 Wend. 157, and Ross v. Sadgbeer, Id. 166, derived by a learned court from the leading case of Mitchel v. Reynolds, 1 P. Wms. 181, and an examination of subsequent decisions. It is also so amplified and discussed in a case just decided by this court (Match Co. v. Roeber, 106 N. Y. 478, opinion by ANpDREWws, J.) as to make any elaboration of the general rule quite superfluous. THE COMMON LAW 217 The subject of the contract at the bottom of this controversy was a piece of land which Sloan wanted to buy, and which the plaintiff was willing to sell, provided it should not be made an instrument for the destruction of his means of livelihood, or detrimental to his business. The principle which favors free- dom of trade requires that every man shall be at liberty to work for himself, and shall not deprive himself or the state of the benefit of his industry by any contract that he enters into. The same principle must justify a party in withholding from market the tools or instruments or means by which he gains the support of his family, or if, as in the case before us, the instru- ment or means are susceptible of several uses, one of which will work mischief to himself by the loss or impairment of his liveli- hood, there is no reason of public policy which requires him, upon a sale of the instrument, to consent to that use, or prohibits him from binding his vendee against it. We see nothing unreasonable in the restriction which the grantee imposed upon himself. He was not a dealer in sand. He wanted to buy the land on the best terms and in the most advantageous way; and, in order to do this, it was necessary that he should preclude himself from so using it as that, by its means, he should enter into competition with the vendor. I cannot find that such a covenant contravenes any rule of public policy, nor that it is mcapable of being enforced in a court of equity. It stands upon a good consideration, and is not larger than is necessary for the protection of the covenantee in the enjoyment of his business. But the question presented is, upon the conceded facts, really one of individual right, with which the question of public policy has little if anything to do. Parties competent to contract have contracted, the one to sell a portion of his land, but only upon such conditions as will protect himself in the prosecution of business carried on upon the residue, the other agreeing to buy for a consideration af- fected by that condition, and enabled to do so only by acceding to it, and he therefore binds himself by contract to limit the use of the land purchased in a particular manner. There seems no reason why he and his grantee, taking title with notice of the restriction, should not be equally bound. The contract was good between the original parties, and it should, in equity at Kales R. of T. Vol. I—15 218 COMBINATIONS AND RESTRAINT OF TRADE least, bind whoever takes title with notice of such covenant. By reason of it, the vendor received less for his land; and the plain and expressed intention of the parties would be defeated if the covenant could not be enforced as well against a purchaser with notice as against the original covenantor. In order to uphold the liability of the successor in title, it is not necessary that the covenant should be one technically attaching to and concerning the land, and so running with the title. It is enough that a purchaser has notice of it; the question in equity being, as is said in Tulk v. Moxhay, 11 Beav. 571, 2 Phil. Co. 774, not whether the covenant ran with the land, but whether a party shall be permitted to use the land inconsistently with the con- tract entered into by his vendor, and with notice of which he purchased. This principle was applied in Tallmadge v. Bank, 26 N. Y. 105, where the equity in regard to the manner of im- provement and occupation of certain land grew out of a parol contract made by the owner with the purchaser, and was held binding upon a subsequent purchaser with notice, although his legal title was absolute and unrestricted. In Trustees v. Lynch, 70 N. Y. 440, the action was brought to restrain the carrying on of business on certain premises in the City of New York, of which the defendant was owner, upon the ground that the premises were subject to a covenant reserving the property exclusively for dwelling-houses. The court below held, among other things, that the covenant did not run with the land, and that the restriction against carrying on any busi- ness on the premises was liable to conflict with the public wel- fare, and judgment was given for the defendant. Upon appeal it was reversed; the covenant held to be binding upon a sub- sequent grantee with notice, as well upon the original covenan- tor. So the restraint may be against the use of the premises for one or another particular purpose, as that no building thereon ‘‘shall be used for the sale of ale, beer, spirits,’’ etc., “‘or as an inn, public-house, or beer-house’’ (Carter v. Williams, L. R. 9, Eq. 678); and it is said a man may covenant not to erect a mill on his own lands (Mitchel v. Reynolds, supra). Many other instances of restraint might be referred to; and where it is of such nature as concerns the mode of occupying or dealing with the property purchased in the way of business operations, or even the omission of all business, or certain kinds THE COMMON LAW 219 of business, or the erection or non-erection of buildings upon the property, we see no reason to doubt the validity of an agree- ment, fair and valid in other respects, which secures that restraint. Indeed, it seems well settled by authority that a per- sonal obligation so insisted upon by a grantor, and assumed by a grantee, which is a restriction as to the use of the land, may be enforced in equity against the grantee and subsequent pur- chasers with notice. Parker v. Nightingale, 6 Allen, 341, 344; Burbank v. Pillsbury, 48 N. H. 475. Nor is it essential that the assignees of the covenantor should be named or referred to. Morjand v. Cook, L. R. 6, Eq. 252. In Tulk v. Moxhay, 1 Hall & Tw. 105, it was said that the jurisdiction of the court in such cases is not fettered by the question whether the covenant does or does not run with the land. In that case the purchaser of the land, which was conveyed to him in fee-simple, covenanted with the vendor that the land should be used and kept in orna- mental repair as a pleasure-garden, and it was held that the vendor was entitled to an injunction against the assignee of the purchaser to restrain them from building upon the land. Upon the appeal, the chancellor (CorrenHaM) said: ‘‘I have no doubt whatever upon the subject. In short, I cannot have a doubt upon it, without impeaching what I have considered as the settled rule of this court ever since I have known it. Where the owner of a piece of land enters into contract with his neigh- bor, founded, of course, upon a valuable or other good consid- eration, that he will either use or abstain from using his land in such a manner as the other party by the contract particularly specifies, it appears to me the very foundation of the whole of its jurisdiction to maintain that this court has authority to enforce such a contract. It has never, that I know of, been disputed.’’ The question before the court was stated to be whether a party taking property with a stipulation to use it in a particular manner, will be permitted by the court to use it in a way diametrically opposite to that which the party has stip- ulated for. . . . ‘‘Of course,’’ he says, ‘‘of course, the party purchasing the property which is under such restriction gives less for it than he would have given if he had bought it unin- cumbered. Can there, then, be anything much more inequitable or contrary to good conscience, than that a party who takes property at a less price because it is subject to a restriction 220 COMBINATIONS AND RESTRAINT OF TRADE should receive the full value from a third party, and that such third party should then hold it unfettered by the restriction under which it was granted? That would be most inequitable, most unjust, and most unconscientious; and, as far as I am informed, this court never would sanction any such course of proceeding.’’ And, in language very applicable to the case before us, he adds: ‘‘Without adverting to any question about a covenant running with land or not, I consider that this piece of land is purchased subject to an equity created by a party competent to create it; that the present defendant took it with distinct knowledge of such equity existing; and that such equity ought to be enforced against him, as it would have been against the party who originally took the land from Mr. Tulk.’’ This case is cited and followed, as to restrictive covenants, in many cases. Brown v. Railway Co., 2 Q. B. Div. 406; Railway Co. v. Gomm, 20 Ch. Div. 562, 576. Each case will depend upon its own circumstances, and the jurisdiction of a Court of Equity may be exercised for their enforcement, or refused, according to its discretion (Trustees v. Thacher, 87 N. Y. 311); but, where the agreement is a just and honest one, its judgment should not be in favor of the wrong-doer. Such seems to us the character of the covenant in question. It is restrictive, not collateral to the land, but relates to its use; and, upon the facts found, the plaintiff is entitled to the equitable relief demanded. Brewer v. Marshall, 19 N. J. Eq. 587, is cited by the respond- ent as requiring a different construction. The general rules in regard to such covenants are not stated differently in that case; but, in the opinion of the court, it was not one for the interfer- ence of the Court of Equity. Among many other cases, Tulk v. Moxhay, supra, is cited; and the learned court say: ‘‘It will be found, upon examination, that these decisions proceed upon the principle of preventing a party having knowledge of the just rights of another from defeating such rights, and not upon the idea that the engagements enforced create easements, or are of a nature to run with the land. In some of the instances the language of the court is very clear on this point.’’ And, from a “‘review of the authorities,’’ the court say ‘‘it is entirely satis- fied that a Court of Equity will sometimes impose the burden of a covenant relating to lands on the alience of such lands, on a THE COMMON LAW 221 principle altogether aside from the existence of an easement, or the capacity of such covenant to adhere to the title.’? The only question which the court regarded as possessed of difficulty was whether the covenant then in controversy was embraced within the proper limits of this branch of equitable jurisdiction. By a divided court, an injunction was denied. The circumstances were quite unlike those before us, and the decision furnishes no precedent for us to follow. The judgment appealed from should be reversed, and new trial granted, with costs to abide the event. All concur, except PrckHam, J., not voting, and ANDREWS and Ear, JJ., dissenting, because, in their opinion, the covenant was a personal one, and did not bind the grantee of the land. Judgment reversed. Section 3 EXCLUSIVE CONTRACTS OF SALE AND PURCHASE NEWELL v. MEYENDORFF (Supreme Court of Montana Territory, 1890. 9 Mont. 254.) DE WITT, J.25 The record in the case presents the following history: The complaint is for the price of cigars sold and delivered by plaintiffs to defendant. Defendant answered, and admitted the sale and delivery, and set up in recoupment a con- tract, the terms of which were, generally, that in 1886 he was dealing in cigars; that plaintiffs approached him to sell their ‘Flor de B. Garcia Cigars,’’ agreeing that defendant should have the sole and exclusive right of selling, handling and deal- ing in said cigars in Montana; that plaintiffs would not sell said cigars to any one else in the territory; that defendant would cease advertising and selling various other valuable brands of cigars in which he was dealing, and from the sale of which he was deriving much profit; that he would accept said sole agency, would purchase said brand of cigars from plaintiffs, 25—Only that part of the opinion of the court below sustaining a de- is given which relates to the ruling murrer to the answer. 222 COMBINATIONS AND RESTRAINT OF TRADE and would introduce and promote the sale thereof to the best of his ability. The answer further alleges, in detail, the per- formance by defendant of his part of the contract, and the expenditure of large sums of money in placing said cigars upon the market. Then follows the allegation of breach by plaintiffs, in that they sold the said brand of cigars to other dealers in the territory, by which breach the defendant suffered great damage in his business, which damage he recoups against the plaintiff’s account for the cigars sold. The court below sustained a de- murrer to this answer, on the ground that the contract pleaded was void, as against public policy, being in restraint of trade, and could not be pleaded in recoupment. We will first construe the contract as to whether it must be considered void as in restraint of trade. The rule that contracts that are in restraint of trade shall be void, as against public policy, is among our most ancient common-law inheritances. In Alger v. Thacher, 19 Pick. 51, Morton, J., says: ‘‘As early as the second year of Henry V. (A. D. 1415), we find, by the year- books, that this was considered to be old and settled law. Through a succession of decisions, it has been handed down to us unquestioned, till the present time.’’ The learned judge traces the history of the rule to its modern modification, that “‘contracts in restraint of trade, generally, have been held to be void; while those limited as to time or place or persons have been regarded as valid, and duly enforced.’’ He gives the reasons for the rule in the following language: ‘‘(1) Such contracts injure the parties making them, because they diminish their means of procuring livelihoods, and a competency for their families. They tempt improvident persons, for the sake of present. gain, to deprive themselves of the power to make future acquisitions, and they expose such person to imposition and oppression. (2) They tend to deprive the public of the services of men in the employment and capacities in which they may be most useful to the community as well as themselves. (3) They discourage industry and enterprise, and diminish the products of ingenuity and skill. (4) They prevent competition, and enhance prices. (5) They expose the public to all the evils of monopoly; and this especially is applicable to wealthy com- panies and large corporations, who have the means, unlesg re- strained by law, to exclude rivalry, monopolize business, and THE COMMON LAW 223 engross the market. Against evils like these, wise laws protect individuals and the public, by declaring all such contracts void.’’ See, also, cases in that opinion cited. The doctrine is again well stated in Lawrence v. Kidder, 10 Barb. 641, in which case the court, SELDEN, J., cites with ap- proval Bronson, J., in Chappel v. Brockway, 21 Wend. 157, as follows: ‘‘There may be cases where the contract is neither injurious to the public nor the obligor, and then the law makes an exception, and declares the agreement valid.’’ In Naviga- tion Co. v. Winsor, 20 Wall. 68, Mr. Justice BrapLEy says: ‘‘There are two principal grounds on which the doctrine is founded that a contract in restraint of trade is void as against public policy. One is the injury to the public by being deprived of the restricted party’s industry; the other is the injury to the party himself by being precluded from pursuing his occupation, and thus being prevented from supporting himself and his family. It is evident that both these evils occur when the con- tract is general, not to pursue one’s trade at all, or not to pursue it in the entire realm or country. The country suffers the loss in both cases; and the party is deprived of his occu- pation, or is obliged to expatriate himself in order to follow it. A contract that is open to such grave objections is clearly against public policy. But if neither of these evils ensue, and if the contract is founded on a valid consideration, and a reason- able ground of benefit to the other party, it is free from objec- tion, and may be enforced.”’ We have cited these reasons for the rule in full, in order to apply them to the contract under construction. They embody the modern doctrine, as held by the authorities. A recitation alone, of the rule and its reasons, seems to us sufficient to take the contract under consideration out of the operation of its prohibitions. The contract is not general; it is limited as to place and person. The public is not deprived of the alleged restricted party’s industry. On the contrary, the contract pro- vides for the placing upon the Montana market the product of the plaintiffs’ industry, by the selection and services of a local Montana agent, interested in the success of sales, and to be rewarded by such success. Nor is there any injury to the party himself, the plaintiffs, by their being precluded from pursuing their occupation. Rather, by the contract, they seem to have 224 COMBINATIONS AND RESTRAINT OF TRADE sought a means of extending the field of their operations, and not of restricting them. In the light of the authorities, the rule and the reasons therefor, and the facts, we are clearly of the opinion that the contract was not in restraint of trade, and not void. It was simply a contract, for a consideration, for the enlistment of the services of an agent for the plaintiffs in their business. The court below was therefore correct in his last view of the contract. It follows that he was wrong ‘in his first position in sustaining the demurrer to the original answer. [Balance of opinion omitted.] Buakg, C. J., and Harwoop, J., concur.?® ARNOT v. PITTSTON & ELMIRA COAL CO. (Court of Appeals of New York, 1877. 68 N. Y. 558.) RAPALLO, J. 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 de- livered pursuant to a contract between the two companies, dated August 3, 1869, and the defense 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 corpora- tion, engaged in mining and vending coal, at or near Pittston, Pennsylvania. The defendant was also a Pennsylvania cor- poration, engaged in the same business, but in addition had a 26—Accord: Schwalm v. Holmes, 49 Cal. 665; Long v. Towl, 42 Mo. Brewing Ass’n v. Houck, 27 8. W. 692 (Tex.), 545; Brown v. Rounsavell, 78 Ill. 589; Superior Coal Co. v. Lumber Co., 236 Tl. 83; Clark Adm’r v. Crosby, 37 Vt. 188; Roller v. Ott, 14 Kan. 609; Pacific Factor Co. v. Adler, 90 Cal. 110; Fuller v. Hope, 163 Pa. St. 62; Anheuser-Busch Similarly, exclusive contracts of purchase have been held valid: Fuqua v. Pabst Brewing Ass’n, 36 S. W. 479, 480 (Tex.); Kellogg v. Larkin, 3 Pinney 123; Twomey v. People’s Iee Co., 66 Cal. 233. THE COMMON LAW 225 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 pre- ceding 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 Kales RB. of T. Vol. I—15 226 COMBINATIONS AND RESTRAINT OF TRADE 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 com- pany 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 vendor 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 arti- ‘ficially 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 ar- THE COMMON LAW 227 rangements 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 en- tering 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 de- fendant 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 im- portant distinction—if the vendor does any thing beyond mak- ing 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 228 COMBINATIONS AND RESTRAINT OF TRADE Butler Colliery Company had sold to the defendant any speci- fied 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 pur- chaser 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, know- ing 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 consid- eration 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 ap- parent 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 mort- gage 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 re- sult, 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 sus- tained 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 THE COMMON LAW 229 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 eoal, 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, to- gether 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 acerued 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 re- pudiated after such part performance. (See also Knowlton v. Congress & 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 230 COMBINATIONS AND RESTRAINT OF TRADE 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 de- livered 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 ; Misr, J., not sitting. Judgment reversed.27 SOUTHERN FIRE BRICK CO. v. GARDEN CITY SAND CO. (Supreme Court of Illinois, 1906. 223 Ill. 616.) The Garden City Sand Company, the Hillsdale Fire Brick & Clay Company (both Illinois corporations, and Maria Warner and Jacob B. Warner, of Indianapolis, Ind., filed their joint bill in the Superior Court of Cook county, April 4, 1903, against 27—See also Santa Clara Valley Mill Co. v. Hayes, 76 Cal. 387; Pacific Factor Co. v. Adler, 90 Cal. 110; Detroit Salt Co. v. National Salt Co., 134 Mich. 103 (contract for sale of entire product); Clancey v. Onondago Fine Salt Co., 62 Barb. 395, In Anheuser-Busch Brewing Ass’n v. Houck, 27 8. W. 692, 696 (Tex.), it was held that an exclusive contract for the sale of beer to one of a num- ber of sellers of beer who were associated together to suppress com- petition and secure a monopoly, was not in violation of the common law, because the subject-matter dealt with was beer. The contract was held illegal only because of the provi- sions of the statute. THE COMMON LAW 231 the Southern Fire Brick & Clay Company, also an Illinois cor- poration, and Dick N. Lanyon, by which they sought to enjoin the defendants from mining fire clay upon a certain tract of land in Vermilion county, Ind., and from selling the same to any parties other than the complainants at any time prior to September 10, 1909, and from making the clay into fire brick or other clay products, and for an accounting for fire clay already manufactured and sold. An amended and supplemen- tal bill was filed September 24, 1904, alleging that on September 10, 1901, a contract was entered into in writing between Dick N. Lanyon, first party, James A. Heber and Willis 8. Bone- brake, second party, the Garden City Sand Company, third party, the Hillsdale Fire Brick & Clay Company, fourth party, and J. B. Warner and Maria Warner, fifth party, which pro- vided as follows: The second party, James A. Heber and William S. Bone- brake, agreed to mine, grind, and operate for the first party, Dick N. Lanyon, his fire clay grinding plant located at Jones- dale Switch, Vermilion county, Ind. Said first and second parties agreed that they would deliver f. o. b. cars at said switch first-class marketable fire clay at 7714 cents per ton, in such quantities and at such times as the third, fourth, and fifth parties might order. The first party agreed to erect and equip a new plant at his own expense for the grinding of the clay, and the second parties were to give their individual personal atten- tion to the operation of said plant. The first party also agreed not. to operate any other fire clay grinding plant on any land that he owned or controlled in the state of Indiana, and the first and second parties agreed not to sell fire clay to any other persons than the third, fourth, and fifth parties during the time of the contract. The second, third, fourth, and fifth parties agreed to cease to operate a certain plant located at Russell Switch, Ind., but, in case the new plant could not supply the demand, the old plant at Russell Switch was to be reopened. The third, fourth, and fifth parties agreed that they would not buy fire clay produced in the state of Indiana, except such as was produced by the parties to the contract, and they would make the greatest possible effort to sell all the fire clay so pro- duced, and would jointly order and pay for not less than an average of forty tons for every working day during the period 232 COMBINATIONS AND RESTRAINT OF TRADE of the contract, for which they were to pay 7714 cents per ton, and not enter into any combination or trust for the purpose of limiting the output of either plant. The contract was to be in full force and effect for a period of eight years, and after ita execution on October 26, 1901, was filed for record in the re- corder’s office of Vermilion county, Ind. The bill further alleged that Lanyon began the erection of the plant on his land at Jonesdale Switch, but that it was never completed; that on September 17, 1902, the defendant, the Southern Fire Brick & Clay Company, received from Lanyon and wife a warranty deed conveying about ninety-three acres of the lands contained in the contract, with full notice of the con- tract and its terms, and commenced the erection of a plant upon the same, and was subsequently notified by complainants that, if necessary, legal steps would be taken to restrain it from operat- ing a plant or selling fire clay in violation of the terms of the contract; that on May 28, 1902, the complainants served notice on the first and second parties that more than enough time to equip the plant which was to be built by Lanyon had expired, and demanded that forty tons per days be delivered to them, as provided in the contract; that notwithstanding the warning and notice the Southern Fire Brick & Clay Company constructed its plant and placed the product upon the open market for sale. It is further alleged that the complainants were the first persons to introduce and place upon the market fire clay of this quality, under the name of ‘‘Dome Fire Clay” as a trade-mark, and they had built up a large trade therein, and the Southern Fire Brick & Clay Company had entered the market in direct com- petition with the complainants, and represented that it would sell at reduced prices the same clay under the same name. The complainants further alleged that they were ready, willing, and able to accept and handle the fire clay to be furnished by the contract, but that the first and second parties had failed and refused to deliver it, the prayer being for an injunction, as above stated. The answer of the defendants admitted most of the material allegations of the bill, but denied that complainants had any interest in or lien upon the lands in controversy, and averred they had an adequate and complete remedy at law. Issue being joined, the cause was referred to a master to take the evidence THE COMMON LAW 233 and report his conclusions. On January 18, 1904, during the taking of the evidence, the defendant Lanyon notified the com- plainants, in writing that he had constructed on his lands de- scribed in the contract a plant, and was ready to enter upon and carry out his part of the contract and awaited the order of the complainants. The master, in his report, found that the bill was filed to secure the specific performance of the contract and for an in- junction to restrain the violation of the negative covenants thereof; that such an action would not lie; that the injunction prayed for would not obtain fire clay for the complainants, but would merely prevent the defendants from selling the same elsewhere; also that the complainants had an adequate remedy at law. On the coming in of that report the cause was re- referred to the same master and additional evidence taken and a second report made, in which the master found that the con- tract was in the form of a trust in restraint of trade, and that the sole object of the complainants’ bill was, not to obtain fire clay, but to prevent the defendant company from entering the market in competition with complainants. Objections were filed to the report, which stood as exceptions, and they were over- ruled by the chancellor and the bill dismissed. The complain- ants prosecuted an appeal to the Appellate Court for the First District, where the decree of the superior court was reversed. This appeal is from that judgment of reversal. WILKIN, J. (after stating the facts). The first question discussed in the argument of counsel is whether the agreement of September 10, 1901, is a valid contract, as was held by the Appellate Court, or is in restraint of trade and violative of the anti-trust law of this state or of the United States, as found by the superior court, and thercfore void. The appellants, in support of the latter contention, insist mainly upon that part of the contract by which the first party agrees not to operate any other fire clay grinding plant on any land owned or con- trolled by him in the state of Indiana, or to sell to any other person during the time of the contract, and in which the third, fourth, and fifth parties agree not to buy fire clay produced in that state other than from the first and second parties. The federal statute which, it is claimed, prohibits such a con- 234 COMBINATIONS AND RESTRAINT OF TRADE tract, provides that ‘‘every contract or combination in the form of a trust, or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal.’’ The statute of this state pro- vides: ‘‘If any corporation organized under the laws of this or any other state or country for transacting or conducting any kind of business in this state, or any partnership or individual or other association of persons whosoever, . . . shall enter into, become a member of or party to any pool, agreement, con- tract, combination or confederation to fix or limit the amount or quantity of any article, commodity or merchandise to be manufactured, mined, produced or sold in this state, such cor- poration, partnership, or individual or other association of per- sons shall be deemed and adjudged guilty of a conspiracy to defraud, and be subject to indictment and punishment, as pro- vided in this act.’? Hurd’s Rev. St. 1905, c. 38, p. 725, § 269a. The object of these statutes is to prohibit the formation of trusts and combinations and remove all obstructions in restraint of trade and free competition. It was not the purpose of either law to hinder or prohibit contracts on the part of corporations or individuals made to foster or increase trade or business, But a contract may incidentally restrain competition or trade with- out violating the statutes, if its chief purpose is to promote and increase the business of those who enter into it. ‘‘ Agreements in general restraint of trade are void, but those in reasonable partial restraint, founded upon a valid consideration, may be sustained. But this rule does not apply to corporations engaged in a public business. A contract embracing parts of several states, and contracts to sell the goods of a certain manufacturer, not to lease a certain store for a particular business, not to transact a particular business in a certain town, particularly if the period is limited, agreements that certain land shall not be used for ferry purposes, and an agreement by a physician not to practice within a six-mile territory, have been held valid. Agreements not to do business in a certain state or elsewhere where it would compete with a certain person, agreements em- bracing an entire state and agreements confined to a certain territory, where such territory is the only one in which the busi- ness may be carried on, have been held invalid.’’ 2 Ill. Cye. Dig. 658, § C, and cases cited in notes. The authorities agree THE COMMON LAW 235 that contracts in partial restraint of trade, in order to be valid, must be reasonable as to time, place, terms, etc., manifesting an intention to simply protect the party relying upon the covenant in the reasonable restraint of unjust discrimination against him. Such contracts usually grow out of sales of property with the good-will of a business, profession, partnership, etc., but they are not confined to such contracts. Speaking of the federal statute in the well-considered case of Whitwell v. Continental Tobacco Co., 60 C. C. A. 290, 64 L. BR. A. 689, it is said: ‘‘If it [the contract] promotes or accidentally restrains competition, while its main purpose and chief effect are to foster the trade and increase the business of those who made and operated it, then it is not a contract, combination, or conspiracy in restraint of trade within the true meaning of this act, and is not subject to its denunciation. ’’ Are the foregoing terms of the contract of September 10, 1901, violative of the law under the rules of construction above set forth. That is, are the restrictions partial, reasonable, and calculated to foster the business rather than to destroy com- petition? Looking into the facts and circumstances surrounding the parties at the time the contract was entered into, we find that Lanyon, the first party, possessed a large tract of land con- taining fire clay in the state of Indiana which was undeveloped and produced no adequate income as compared with its capabili- ties. He had the money to develop it and make it productive, but was without experience in the business of dealing in the product and without means, within himself, of obtaining a market for the same. Heber and Bonebrake were experienced miners of fire clay, and in a small way engaged in the business, which, if properly extended, would make Lanyon’s property valuable. The appellee corporations had for many years been engaged in selling the product and were looking for opportuni- ties to increase their business. Naturally the ‘several interests of these parties drew them together and prompted them to make the contract in question. It was of mutual benefit; and advan- tage to each of them. Without it each party would labor at a disadvantage and fail to realize the full limit of his or its re- sources and opportunities. The contract seems Just and reason- able in the light of these facts. The corporations might reason- ably refuse to enter into the contract or purchase the 40 tons 936 COMBINATIONS AND RESTRAINT OF TRADE of fire clay daily, unless they could be protected against the selling of the same product by Lanyon in competition with them. The contract was to run for eight years—a time not un- reasonable for the development of the business entered upon. The limitation applied to only about 180 acres of land in a territory of many hundreds of acres underlaid with the same fire clay deposits. The contract in no way sought to control the labor or experience of all or any considerable number of experienced fire clay workers. The evidence also shows that large deposits of this same fire clay are found in localities out- side of the state of Indiana, i. e., in Illinois, Ohio, Pennsylvania, and perhaps other states. Considering the contract as a whole, in the light of the facts surrounding the parties, we are of the opinion that it is not invalid, that the object of it was to foster and establish a legitimate business, and, although to a limited extent it may have restrained competition, there was not such a limitation or restriction as should defeat its validity under the law. It needs little argument to show that the case is clearly dis- tinguishable from that of Arnot v. Pittston & Elmira Coal Co., 23 Am. Rep. 190, relied upon by counsel for appellant and said by them to be absolutely and directly in point. In that case, as found by the referee, the purpose of the defendant in making the contract was to so 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 with the Butler Colliery Com- pany. In this case, as we understand the facts, there was no such purpose or intention whatever. That case is distinguish- able from this in other material facts. [The court then deals with the question as to whether the contract can be specifically enforced in equity and concludes that it may be.] We find no reversible error, and the judgment of the Appel- late Court will be affirmed. Judgment affirmed. THE COMMON LAW 237 CHICAGO, ST. L. & N. O. R. CO. v. PULLMAN SOUTHERN CAR CO. (Supreme Court of United States, 1891. 139 U. S. 79.) MR. JUSTICE HARLAN delivered the opinion of the court: This action was brought by the Pullman Southern Car Com- pany to recover from the Chicago, St. Louis & New Orleans Railroad Company the damages alleged to have been sustained on account of the destruction by fire of two of the plaintiff’s sleeping cars, the Great Northern and the Louisiana, while on the premises of the defendant. There was a verdict and judg- ment for the sum of $19,000, with interest from September 20, 1886, the date of judicial demand, at the rate of 5 per cent per annum until paid, with costs. The assignments of error relate entirely to instructions given on behalf of the plaintiff, and to the refusal to give instructions asked by the defendant. The action is based upon a written agreement between these corporations, dated April 5, 1879, showing that the business of the plaintiff was to operate drawing-room and sleeping cars which it hired, under written contracts for a term of years, to be used and employed on and over the lines of railway com- panies, receiving therefor income and revenue by the sale to passengers of seats, berths, and accommodations therein; and that the defendant was desirous of availing itself of their use, on its own routes, and also of connections, by means of such drawing-room and sleeping cars, with other railroads over which the plaintiff was running its ears. In order to effect the objects of the parties it was, among other things, agreed as follows: (1) The plaintiff was to furnish drawing-room and sleeping cars ‘‘sufficient to meet the requirements of travel,’’ on and over the defendant’s railway, and such roads as the latter then or thereafter controlled as owner, lessee, or otherwise; the cars so furnished to be satisfactory to the general manager or super- intendent of the railroad company, and to be in part certain named cars, 10 in number, among which were the Louisiana and the Great Northern, then operated on the defendant’s lines. (2) Each of the plaintiff’s cars was to be manned, at its own cost, by one or more of its employees, as might be needful for the collection of fares and the comfort of passengers; such em- ployees to be subject to the rules and regulations established 238 COMBINATIONS AND RESTRAINT OF TRADE by the defendant for its own employees. (3) ‘‘In consideration of the use of the aforesaid cars,’’ the defendant was to haul them on passenger trains on its own lines of railroad, and on passenger trains on which it might, by virtue of contracts or running arrangements with other roads, have the right to use them, ‘‘in such manner as will best accommodate passengers during the use of said cars.’”’ (4) By article sixth of the agree- ment, all necessary lubricating material, ice, fuel, and material for lights were to be supplied, and the washing and cleansing of the cars furnished under the contract to be done, by the de- fendant at its expense, which should also renew and replace, as often as necessary, links, pins, bell-cord, and couplings for air- brake hose, without charge to the plaintiff. (5) The plaintiff was to keep the cars furnished under the contract in good order and repair; renew and improve them, when necessary, at its own expense; keep them up to the average standard of the best and most approved sleeping cars on any road using an equal number of cars, ‘‘excepting repairs and renewals provided for in article sixth of this agreement, and such as are made neces- sary by accident or casualty, it being understood that the rail- way company shall repair all damages to said cars of every kind occasioned by accident or casualty during the continuance of this contract, except that the Pullman Company assumes all responsibility for any loss or damage occurring to said cars arising from defective heating apparatus or lights furnished by it.’”’? (6) As proper compensation for the maintenance of the running gear and bodies of the cars, the defendant was to pay plaintiff ‘‘three cents per car per mile for every mile run by said cars upon the road of the railway company or upon the roads of other companies, by direction of the officers of the rail- way company, while in service under this contract ;’’ and at all times, when requested by the plaintiff, to make promptly such repairs to the cars furnished under the contract as might from time to time become necessary, and, without request, make such repairs as were required ‘‘to insure their safety, rendering bills monthly to the Pullman. Company for repairs to ears, and charging for the same only the actual cost of material and labor expended on such repairs, with an addition of ten per cent to cover general expenses, all settlements and payments for mile- age and repairs to be made monthly between said companies.’’ THE COMMON LAW 239 (7) Whenever the revenue from sales of seats and berths equaled an average of $7,500 per car per annum upon the num- ber of cars furnished under the contract, then, and while such revenue continued, the defendant should not pay mileage for any car so furnished; the plaintiff, in such case, to bear the expense of all repairs and improvements to its cars, ‘‘except such repairs as are rendered necessary by accident or casualty, and such as are provided for in article sixth of this agreement, which shall be made by the railway company, as hereinbefore mentioned.’’ (8) The plaintiff was to have the exclusive right, for a term of 15 years from the date of the agreement, to fur- nish drawing-room and sleeping cars for the defendant’s use on all its passenger trains on roads then or subsequently controlled or owned by it, and on roads over which it had the right to run such cars; the defendant not to ‘‘contract with any other party to run said class of cars on and over said lines of road during said period of fifteen years.’’ (9) In case either party failed to cleanse or repair any of the cars, according to the conditions of the agreement, and the party so in default should neglect and refuse to perform its agreement in this respect within a reason- able time after notice of such default, the other party had the right to cleanse and make or cause to be made all necessary repairs and renewals to said cars, at the cost of the party in default. (10) If either party failed, at any time, to keep and perform its covenants, as set forth in the agreement, the one not in default, after the expiration of a reasonable time from the service of written notice of such default, was at liberty to de- clare the contract at an end. (11) The defendant was given the option to terminate the contract at the end of five, eight, or eleven years, upon written notice to the plaintiff, served six months before the day fixed for such termination; and, if the contract was so terminated, without default upon the part of the plaintiff, the defendant was required to purchase the cars and equipments of the Pullman Company ‘‘then in use, or as- signed and accepted for use,’’ under the contract, or such inter- est therein as the defendant may not have previously acquired under the provisions of this contract, ‘‘at the actual cash value of the same,’’ with the right to use them without charge for patent-rights for their interior arrangements. For the pur- poses of the option given to terminate the contract, it was 240 COMBINATIONS AND RESTRAINT OF TRADE agreed ‘‘that the cars now {then] running on said railroad, and which should form part of the cars and equipments to be fur- nished under this contract, together with such additional cars and equipments as may hereafter be assigned to the railway company, shall be appraised,’’ ete. (12) The taxes upon all cars furnished to the defendant by the plaintiff were to be paid equally by the parties. : 3. It is assigned for error that the court refused to instruct the jury that the agreement sued on was void, as against public policy, because of the exclusive rights given to the plaintiff for the term of fifteen years in respect to drawing-room and sleep- ing cars furnished by it to the defendant, supplemented by the stipulation that the defendant would not ‘‘contract with any other party to run the said class of cars on and over said lines of road during said period of fifteen years;’’ and because the law will not permit individuals to oblige themselves by a con- tract, when the thing to be done or omitted is injurious to the public. Navigation Co. v. Winsor, 20 Wall. 64, 66; Chappel v. Brockway, 21 Wend. 157, 159. Such a contract, it is argued, is in general restraint of trade. The authorities cited in support of this contention have no application to such a contract as the one before us. The defendant was under a duty, arising from the public nature of its employment, to furnish for the use of passengers on its lines such accommodations as were reasonably required by the existing conditions of passenger traffic. Its duty, as a carrier of passengers, was to make suitable provisions for their comfort and safety. Instead of furnishing its own drawing-room and sleeping cars, as it might have done, it em- ployed the plaintiff, whose special business was to provide cars of that character, to supply as many as were necessary to meet the requirements of travel. It thus used the instrumentality of another corporation in order that it might properly discharge its duty to the public. So long as the defendant’s lines were supplied with the requisite number of drawing-room and sleep- ing cars, it was a matter of indifference to the public who owned them. Express Cases, 117 U.S. 1, 24, 25. We cannot perceive that such a contract is at all in restraint of trade. The plaintiff was at liberty, so far as that contract was concerned, to make similar arrangements for the accommodation of passengers on all other railroads in the country, even those that are rivals or competi- THE COMMON LAW 241 tors in business with the defendant. It is, however, a funda- mental condition in all such contracts that their provisions must not be injurious to the public. As said by this court in Cherokee Nation v. Railway Co., 185 U. 8. 641, 657, a railroad is a public highway, established primarily for the convenience of the people and to subserve public ends. A railroad corporation cannot, therefore, without the sanction of the government creating it, make any agreement that militates against the public conven- ience, or that, will defeat the public objects for which it was established. If the contract in suit was liable to objection upon these grounds, a different question would be presented for our determination. But we are of opinion that public policy did not forbid the railroad company from employing the Pullman Southern Car Company to supply drawing-room and sleeping cars to be used by its passengers, and, as a means of inducing the plaintiff to perform this public service and to incur the expense and hazard incident thereto, from giving it an exclusive right to furnish cars for that purpose. The defendant did not, by such an agreement, abandon the duty it owed to the public; for the cars so furnished, while in its possession and use, be- came, as between. it and its passengers, its own cars, subject to such regulations as it might properly establish for the comfort and safety of passengers on its trains. Pennsylvania Co. v. Roy, 102 U. 8. 451, 457. And the contract is to be interpreted in view of the condition, implied by law, that the plaintiff should furnish cars not only adequate and safe but sufficient in number for the use of the public desiring to travel over the defendant’s roads. These conditions exist independently of the particular clause giving the railroad company the option to terminate the agreement at the end of five or eight or eleven years. Being imposed by law, as necessary to the public interests, they could not be dispensed with by agreement of the parties. The desig- nation of particular periods of time, at the end of either of which the defendant might, of right and upon notice, terminate the agreement, did not tie its hands so that it could not con- tinuously discharge its duty to the public in respect to the adequacy or safety of cars in which it conveyed passengers. The stipulation, therefore, that the plaintiff, not being in default, should have the exclusive right for 15 years to furnish drawing- room and sleeping cars for the defendant’s use, and that the Kales R. of T. Vol. I—16 242 COMBINATIONS AND RESTRAINT OF TRADE defendant should not, during that period, contract for cars of that kind with any other party, rightly construed, is not unrea- sonable, and, properly performed, will promote the convenience of the public, in that it enables the defendant to have on its lines, at all times, and as the requirements of travel demand, drawing-room and sleeping cars for use by passengers. It is a stipulation that does not interfere in any degree with its right and duty to disregard the contract whenever the plaintiff fails in furnishing cars that are adequately safe and sufficient in num- ber for the travel on defendant’s lines. The suggestion that the agreement is void, upon grounds of public policy, or because it is in general restraint of trade, cannot, for the reasons stated, be sustained. [Remainder of the opinion is omitted. On other grounds the judgment was reversed and the cause remanded for a new trial in conformity with the opinion.] UNION TRUST & SAVINGS BANK v. KINLOCH LONG- DISTANCE TEL. CO. (Supreme Court of Illinois, 1913. 258 Dl. 202.) DUNN, C. J. The Farmers’ & Merchants’ Bank of Vandalia, as the owner of certain bonds of the Vandalia Telephone Com- pany, and the Union Trust & Savings Bank of East St. Louis, as the trustee in a trust deed securing such bonds, filed a bill to foreclose the trust deed, which was dated June 1, 1907, and conveyed the telephone exchange, switchboard, poles, wires, in- struments, and all property of every description of the Vandalia Telephone Company. The Kinloch Long-Distance Telephone Company of Missouri was made a defendant upon the allegation that it claimed some interest in the premises, and it answered, setting up its interest. The cause was heard on the bill, the separate answers of the defendants, replication, and evidence, and a decree of foreclosure was rendered finding that the Kin- loch Company had no lien on or interest in the property. The Appellate Court for the Fourth District affirmed the decree and granted a certificate of importance and appeal to the Kinloch Company alone. No question is made as to the foreclosure, but only as to the validity and effect of the contract hereafter men- ‘THE COMMON LAW 243 tioned between the long-distance and the telephone companies, by which names the telephone companies designated themselves, and will hereafter be called. The telephone company is an Illinois corporation, authorized to construct, maintain, and operate a telephone system and do a general telephone business, and in April, 1906, was constructing and intending to operate a telephone exchange in the city of Vandalia and lines reaching other places in Fayette county. The long-distance company is a Missouri corporation, authorized by its charter to construct, own, operate, and maintain local ex- changes and long-distance telephone lines throughout the states of Missouri and Illinois, and also authorized, by having com- plied with the laws of this state, to exercise here the rights and privileges granted to foreign corporations. These corporations on April 27, 1906, entered into a contract whereby the long- distance company granted to the telephone company a license to attach cross-arms to 12 poles of the long-distance company in the city of Vandalia, and the telephone company granted a license to the long-distance company to connect its telephone system with that of the telephone company through its switch- boards, so that there could be an interchange of business at all times between the parties, the license thus granted to be irrev- ocable during the existence of the agreement, and the agree- ment to remain in force during the life of the telephone company’s franchise to operate in the city of Vandalia and during any renewals or extensions thereof. Other material provisions of the contract are as follows: ‘‘Fourth. No connection with any other line or lines, except those actually owned, controlled and operated by the telephone company, is contemplated or intended by the long-distance com- pany in this agreement, and no connection with any other line will be given, or allowed to be given, by the telephone company to the long-distance company’s lines, under penalty of forfeiture of the rights herein contained, unless special agreement in writ- ing is entered into between the parties hereto and the third parties who desire to connect to the long-distance company’s system through the telephone company’s lines, in which agree- ment the telephone company becomes responsible to the long- distance company for every message delivered to the long-dis- tance company’s lines by the third parties, and makes said 244 COMBINATIONS AND RESTRAINT OF TRADE parties’ lines in every other respect a part of its own system and bound by the terms and conditions of this agreement. Nothing in this section, however, shall be construed to prevent the long- distance company from connecting with other companies and exchanges at points outside of said city of Vandalia. ‘‘Fifth. The telephone company agrees to deliver to the long- distance company all messages originating on its own line or exchange and which terminate at points reached by the long- distance company or its connecting lines, and the long-distance company agrees to deliver to the telephone company all mes- sages it receives which terminate at points reached by the tele- phone company in the county of Fayette, aforesaid. If the lines of the telephone company reach points outside of said county of Fayette, which points are also reached by other ‘independent’ or ‘opposition’ lines, the long-distance company hereby agrees to distribute the business destined for such common point as equally as practicable between the telephone company and such other ‘independent’ or ‘opposition’ line or lines, but the long- distance company reserves the right to transmit all business to such common point over such line or lines as will enable it: to render the best service.’’ ‘““Twelfth. The telephone company shall not sell or lease any of its wires or exchanges to any telephone company, or to any corporation or individual whatsoever, so as to impair the pro- visions of this contract, without the consent of the long-distance company; nor have the right to connect or exchange business with any company at or for points reached by the long-distance company or its connecting lines; nor have the right to do any- thing which will in any manner impair the obligations of this contract or impair the efficiency of the long-distance business or its connection with the long-distance company.’’ The answer of the long-distance company, after setting up this contract, alleged that it was operating lines for long-distance telephone service reaching numerous cities, towns and villages of the states of Illinois, Missouri, Kansas, Indiana, Ohio and Kentucky ; that the service of the telephone company was limited to the city of Vandalia and the county of Fayette; that there was no competition between the two companies, but the contract was entered into to enable the telephone company to furnish to its subscribers and to the public long-distance telephone service ; THE COMMON LAW 245 that the parties to the contract assumed a greater public duty than either could have assumed without the aid of the other, and that they have operated in competition with the Bell tele- phone system and have furnished long-distance telephone service at reasonable rates; that at the time the trust deed was executed the contract was in force, both parties were carrying it out and were mutually using the property of one another in doing so, the appellees had full knowledge of these facts, and for that reason the long-distance company had an interest, in the property which was not subject to the lien of the trust deed. Upon excep- tion by the appellees all the allegations in the answer having any reference to the contract were stricken out as impertinent. ‘It is manifest from the terms of the contract that its object was to restrict long-distance telephone service, so far as the city of Vandalia and Fayette county were concerned, to the Kinloch Company. The patrons of the telephone company were deprived of the opportunity of communication with persons in distant cities except over the Kinloch lines, though such persons had telephones connected with another company’s lines running to Vandalia, and the telephone company contracted not to give them this opportunity so long as it was engaged in the telephone business in Vandalia. The contract was adapted to secure a monopoly of the business to the Kinloch Company, and was entered into for that purpose. By it the telephone company deprived itself of the power to render to the public a part of the service which it was organized to render. Combinations and contracts of corporations and of individuals having for their object the restraint of trade, the destruction of competition, the creation of a monopoly, and the raising of prices are unlaw- ful, even though they violate no statute. The contract is in restraint of trade and commerce, and is therefore void unless the circumstances of the particular case exempt it from the general rule. The rule that at common law contracts in general restraint of trade are illegal and void is well settled, but agreements in partial restraint of trade only may be good under certain cir- cumstances if reasonable in their nature, and made upon a suffi- cient consideration. The cases in which such contracts in par- tial restraint of trade have been regarded as reasonable have ‘usually been cases in which the vendor of property or business 246 COMBINATIONS AND RESTRAINT OF TRADE has been restricted in its use so as not to injure the vendee, or the vendee has been restricted so as not to injure the business of the vendor, or a partner or employee has been restrained from competition with the partnership or employer to the injury of the business. In all cases the restraint of trade has been auxiliary to the main purpose of the contract, and has been necessary to protect one party from injury by the unfair use of the subject-matter of the contract by the other party. More v. Bennett, 140 Ill. 69, 15 L. R. A. 361, 33 Am. St. Rep. 216; Oregon Steam Navigation Co. v. Winsor, 20 Wall. 64, 22 L. Ed. 315. The ordinary rule that contracts in partial restraint of trade are not invalid does not, however, apply to corporations engaged in a public business in which all the public are interested. ‘Whatever tends to prevent competition between them or to create a monopoly is unlawful. Chicago Gaslight Co. v. Peo- ple’s Gaslight Co., 121 Ill. 530, 2 Am. St. Rep. 124; People v. Chicago Gas Trust Co., 130 Tl. 268, 8 L. R. A. 497, 17 Am. St. Rep. 319. The business of such corporations is public in its nature, and is the exercise of a franchise granted by the state, not for the private benefit, of the corporation, only, but for the benefit of the public as well. A corporation receiving such a grant owes a duty to the public, and it cannot, without the con- sent of the state, disable itself from performing any part of the functions which its charter authorizes it to perform. A contract to do so is a violation of its duty to the state and is void, as -against public policy. Chicago Gaslight Co. v. People’s Gaslight Co., supra; People v. Chicago Gas Trust Co., supra; South Chi- cago City Railway Co. v. Calumet Street Railway Co., 171 Ill. 391; Thomas v. West Jersey Railroad Co., 101 U. S. 71, 25 L. Ed. 950; Gibbs v. Consolidated Gas Co., 180 U. S. 396, 32 L. Ed. 979. The duty of the corporations to use their franchises for the public interest cannot be restrained by contract, and it is no justification for an agreement which tends to prevent the dis- charge of that duty that the telephone company was not under an express duty to give long-distance telephone service to the public. It was a public service corporation which had the power, by virtue of the franchise granted it by the state, to extend its lines when and where the interests of the public and its own interest demanded. It is argued that the effect of the contract THE COMMON LAW 247 was to create competition, and not to destroy it. It is said that the Bell system had a local exchange at Vandalia, connecting with its long-distance lines, when the Vandalia Telephone Com- pany was organized in 1906, and that the effect of the contract with the Kinloch Company was to enable the telephone company to increase its service by giving long-distance connections and to give the public at Vandalia two local and two long-distance telephone systems. It is not the effect of the contract that there are two long-distance telephone lines in Vandalia. Without the contract the telephone company would be at liberty to contract with both the Kinloch and Bell systems for long-distance connections. Under such contracts the patrons of the telephone company could be connected directly with any telephone on either system, and the patrons of either system in distant cities could be connected directly with patrons of the telephone company. Such service, how- ever desirable, is now impossible. It will continue to be im- possible, unless contracts can be made with both long-distance companies, These contracts cannot be compelled, but none of the corporations can by any contract deprive themselves of the power to make them. It may. be that the telephone cém- pany cannot be compelled to give long-distance service or to connect its exchange with any other system, or, having con- nected with one system, to permit a connection with another. It may decline to undertake any service which cannot be be- gun and completed over its own lines. If it does undertake such service it may select its own lines and it may confine it- self to one agent, but it may not bind itself to do so and con- tract away its right and power to use more than one agency, and thus limit its power to serve the public to that part of the public reached by the one agency. The object of telephone systems is to enable individuals to talk to one another at dis- tances too great for ordinary conversation. A line connecting two cities with a single instrument at each end would be of comparatively little use. It is the possibility of connection with a large number of instruments that gives usefulness to the system. The use of the telephone has come to be quite generally regarded not as a luxury or convenience, but a neces- sity, and it is essential to the greatest public convenience that all users of telephones should be able to secure, as nearly as 248 COMBINATIONS AND RESTRAINT OF TRADE possible, direct connection with all other users. This perfec- tion of service is not now possible, but a telephone company is avoiding the performance of its duty to the public when it contracts to restrict its field of operations to communications to and from the patrons of one long-distance line. Any con- tract thus to deprive itself of the power to render to the public that service which it was incorporated to give is violative of the public right. The language used in South Chicago City Railway Co. v. Calumet Street Railway Co., supra, is applicable here: ‘‘To say the defendant was not bound to extend its lines, though it might be necessary to do so to serve the public convenience is one thing; but to say that it shall not do so because of the binding force of its contract with an individual or corporation is quite another and very different thing.’’ If neither of the long-distance companies at Vandalia would contract with the telephone company for long-distance service without an exclusive clause in the contract, the latter had still the right to construct its own long-distance lines and the long- distance companies the right to establish local exchanges. A general interchange of business among all the companies would be more beneficial to the public. While this cannot be compelled, it cannot be said that competition would be in- creased by the combination of two of the systems through an exclusive contract for the interchange of business. While no statute has been enacted declaring such exclusive contracts criminal or giving a right of action to persons prejudiced by them, the courts have declared the public policy of the state, in accordance with the common law, to be opposed to such con- tracts which tend to put the power to render public service in the hands of one corporation and to take it away from all others. The legislature has the power to change this policy. It is a legislative question whether the public interest will be promoted by monopolistic rather than competitive service. In the absence of legislative action, the contract in controversy must be held to be illegal and void. The Supreme Court of Missouri has held a contract for the exclusive interchange of business very similar to the one now under consideration to be for the purpose of competition and not of monopoly. Home Telephone Co. v. Sarcoxie Light & Telephone Co., 236 Mo. 114, 36 L. R. A. (N. 8.) 124. It was so THE COMMON LAW 249 held in Cumberland Telephone & Telegraph Co. v. State, 100 Miss. 102, 54 South. 670, 39 L. R. A. (N.S.) 277. The opposite view is sustained by the case of United States Telephone Co. v. Central Union Telephone Co. (C. C.) 171 Fed. 130; same case on appeal (C. C. A.) 202 Fed. 66; and to some extent by State v. Cadwallader, 172 Ind. 619; and Central New York Telephone & Telegraph Co. v. Averill, 199 N. Y. 128,28 32 L. R. A. (N. 8.) 494, 189 Am. St. Rep. 878. Such contracts can be regarded as favoring competition only on the theory that they are necessary to enable a weaker competitor to contend against one stronger and already established. This might be the effect for a time; but, when by exclusive contracts control of territory had been secured, then by new contracts and com- binations all competition could be eliminated, and the last state of that community would be worse than the first. It is not an answer to say that the effect of the contract has not been to destroy competition, that competition still exists, and that the service is rendered at reasonable prices. The material con- sideration is, not that the effect of the contract has been to raise prices, but that the power exists to do so; not the degree of injury inflicted on the public, but the tendency to inflict injury. Harding v. American Glucose Co., 182 Ill. 551, 64 L. 28—In this case it was held that a private subscriber’s contract which contained a clause that the instru- ments used by such subscriber ‘‘are not to be connected with or used in connection with any exchange, office or telephone, except those of the first party, or its connections, and only by lines connecting said switch- board with the company’s office and switchboard as within provided,’’ was illegal. The court said, p. 138: ‘‘The evil in such an agreement is its antagonism to the interests of the public. If a telephone company may make a contract of exclusion with one of its customers it may make such a contract with all—and thus preclude all from any tele- phonic communication with persons who happen to be served by a rival company. It is true that the cus- tomers who had voluntarily entered into the agreement of exclusion would have no just ground of com- plaint themselves; but how about the customers of the rival company who are thereby shut out from communication by telephone with their neighbors? They are not par- ties to the contract and yet they suffer its consequences, although they constitute a portion of the pub- lie for whose benefit the franchise was granted to the corporation whose action deprives them of the more extended telephone service which otherwise they might enjoy.’’ On p. 139, the court said: ‘‘To recapitulate the reasons which lead 250 COMBINATIONS AND RESTRAINT OF TRADE R. A. 738, 74 Am. St. Rep. 189; Salt Co. v. Guthrie, 35 Ohio St. 666; State v. Standard Oil Co., 49 Ohio St. 137, 15 L. R. A. 145, 34 Am. St. Rep. 541; State v. Portland Natural Gas Co., 153 Ind. 483, 53 L. R. A. 413, 74 Am. St. Rep. 314. Cases have been cited involving the contracts of railroad companies for the exclusive use of sleeping cars, express cars, wharves, and docks. The character of such contracts is essen- tially different from that involved here. The nature of the use to be made of the property, the character of the service to be rendered, the agents to be employed and the agencies to be maintained, were such as would interfere materially with the railroad company’s control of its own business if the busi- ness provided for in such contracts were to be free to all appli- cants. The same difficulty does not exist in regard to the telephone service, in which it is entirely practicable to take on long-distance connections with many companies, and the cases cited have therefore little analogy here. The judgment of the Appellate Court is affirmed. Judgment affirmed. to the conclusion that this contract (the exclusive clause) is injurious to the public interest generally, the argument may be simply stated. The public franchises which telephone corporations enjoy are granted to promote the transmission of vocal messages between the largest num- bers of persons who can be brought into communication with one an- other under satisfactory economic conditions. This purpose is frus- trated by any agreement which op- erates to prevent the rendition of telephone service where otherwise it could be obtained. A contract be- tween a telephone corporation and one of its subscribers whereby the latter excludes all other telephone service from his premises deprives all the patrons of that other tele- phone service from telephonic com- munication with such subscriber and all the occupants of his premises. Though the number affected by one such exclusive contract may not be large, if exclusion may be exacted from one customer it may be exacted from all, and so a corporation first in the field might establish a mo- nopoly to the detriment of a large proportion of the community and their deprivation of telephonic inter- communication. This illustration sorves to show the danger to the public which would arise from per- mitting any such exclusive contracts at all. The validity of a single one cannot be recognized without peril to the public interest.’’ THE COMMON LAW 251 Section 4 CONTRACTS ON THE PART OF BUYERS TO KEEP UP THE PRICE ON RE-SALE GROGAN v. CHAFFEE (Supreme Court of California, 1909. 156 Cal. 611.) © THE COURT PER CURIAM. A judgment of reversal hav- ing been heretofore rendered herein, a rehearing was ordered. The opinion originally filed was prepared by Stoss, J., and read, in part, as follows: “The plaintiff appeals from a judgment against him, fol- lowing an order sustaining a demurrer to his amended com- plaint. The demurrer is based upon both general and special grounds. On this appeal, however, the respondent limits his argument in support of the ruling on the demurrer to the ground that the complaint fails to state facts sufficient to con- stitute a cause of action. We are satisfied that there is no merit in any of the other specifications, and shall address our- selves to the single proposition discussed by counsel. ‘‘The case stated by the complaint is this: The plaintiff has for 10 years been engaged in the manufacture and production of pure olive oil by a process of his own discovery. The oil so produced is sold and used for food, medical and commercial purposes, and plaintiff has extensively advertised to the public the fact that he manufactures a pure olive oil, and that such oil is guaranteed to be pure and wholesome. In his advertising the plaintiff has used certain designs copyrighted by him, and these designs are placed on every bottle or package of oil manufactured and sold by him, as a trade-mark. By reason of these methods of advertising and dealing, the plaintiff’s oil has become well known, and a large quantity thereof is sold throughout the United States, and more particularly in the city of Pasadena, and elsewhere in the county of Los Angeles. The plaintiff has affixed to every bottle or package of his oil a notice stating that the article ‘is sold upon the condition that ,the purchaser, if he retails these goods, will maintain my fixed retail selling price on them; and that, if he wholesales them, he will sell them subject to this same condition.’ This notice specifies the fixed retail selling price as $1.35 per half gallon 252 COMBINATIONS AND RESTRAINT OF TRADE can and $2.50 per gallon can. All persons buying said olive oil agree not to sell or deliver any of it at a price less than that provided for in the notice. “The defendant is a retail grocer, engaged in business in the city of Pasadena. He has bought of plaintiff olive oil un- der the express contract and condition that the same should not be sold at a price or prices less than those fixed by plaintiff. He has, however, refused to comply with his contract, and sells and offers for sale said oil at the price of $1.20 per half gallon, and has advertised such offer by publication in a news- paper and by posters and notices posted in the windows of his store. This conduct has been continued by defendant not- withstanding plaintiff’s demand that he comply with his contract. The complaint alleges that plaintiff has sustained irreparable damage, that it is impossible to ascertain the damage sus- tained and to be sustained, and that there is no adequate remedy at law. The prayer is for an injunction restraining defendant from advertising, selling, or offering for sale the oil at prices less than those fixed by the contract, and for damages. “In support of the ruling sustaining the demurrer it is urged that the contract relied on by plaintiff is unenforceable as being in restraint of trade. ““We have here no question of an attempted monopoly. ‘A monopoly exists where all, or so nearly all, of an article of trade or commerce within a community or district, is brought within the hands of one man or set of men, as to practically bring the handling or production of the commodity or thing within such control to the exclusion of competition of free traffic therein. Herriman v. Menzies, 115 Cal. 16, 35 L. R. A. 318, 56 Am. St. Rep. 81. It was the tendency to create a monopoly, thus defined, that was the objectionable feature of the agreements declared invalid in such cases as Pacifie Factor Co. v. Adler, 90 Cal. 117, 25 Am. St. Rep. 102; Mill, etc., Co. v. Hayes, 76 Cal. 387, 9 Am. St. Rep. 211; Vulcan Powder Co. v. Hercules Powder Co., 96 Cal. 510, 31 Am. St. Rep. 242. See, also, Cummings v. Union Blue Stone Co., 164 N. Y. 1, 79 Am. St. Rep. 620; Cohen v. Envelope Co., 166 N. Y. 292. The con- tract here relied on does not relate to any olive oil except that manufactured by plaintiff. There is no suggestion that this comprises all, or any large proportion, of the olive oil manu- THE COMMON LAW 253 factured or sold in the market supplied by plaintiff. While plaintiff alleges that he manufactures oil by a process of his own discovery, there is nothing exclusive in the product result- ing from this process. All that he claims for his oil is that it is pure and wholesome. The court must assume, as a matter of common knowledge, that others may and do manufacture pure olive oil in considerable quantities. “‘Under these circumstances we see no reason why the con- tract alleged by plaintiff should not, as between the parties to it, be held to be valid. It violates no canon of public policy. By its terms the buyer is not precluded from engaging in any lawful trade. He may sell other olive oil at any price and on any conditions satisfactory to him. The producer was, in the first instance, under no obligation to sell his oil, and when he did sell it had the right to exact, as part of the consideration for the sale, a promise by the purchaser that he would not sell it at less than a stipulated price. There is nothing either un- reasonable or unlawful in the effort by a manufacturer to maintain a standard price for his goods. It is simply a means of securing the legitimate benefits of the reputation which his product may have attained. Contracts similar to the one under discussion have been considered in a number of cases, and have generally been upheld where, as here, they had no tendency to create a monopoly. Fowle v. Park, 131 U.S. 88, 658, 33 L. Ed. 67; Bement v. National Harrow Co., 186 U. S. 70, 46 L. Ed. 1058; Park & Sons Co. v. National Druggists’ Association, 175 N. Y. 1, 62 L. B. A. 632, 96 Am. St. Rep. 578; Garst v. Harris, 177 Mass. 72; Dr. Miles Med. Co. v. Goldthwaite (C. C.) 133 Fed. 794; Dr. Miles Med. Co. v. Platt (C. C.) 142 Fed. 606; Dr. Miles Med. Co. v. Jaynes Drug Co. (C. C.) 149 Fed. 838; Walsh v. Dwight, 40 App. Div. 513. Many of these decisions, it is true, deal with contracts concerning the sale of patented or proprietary articles, and are based, to some extent, upon the principle that a monopoly right is inherent in a patent or in an article produced according to a formula known only to its manufacturer. It has been questioned whether the fact that an article is produced under a secret formula is of any impor- tance in determining the validity of contracts regulating its sale. Hartman v. John D. Park & Sons Co. (C. C.) 145 Fed. 358; s. ¢., on appeal, John D. Park & Sons Co. v. Hartman, 254 COMBINATIONS AND RESTRAINT OF TRADE 82 0. C. A. 158, 12 L. RB. A. (N. 8S.) 185. However this may be, we are cited to no case which holds that a contract like the one at bar is invalid as between the parties to it, whether it deals with an article produced under patent or secret formula or one that may be produced by any one. The tendency of the modern decisions has been to view with greater liberality con- tracts claimed to be in restraint of trade. It is not every limi- tation on absolute freedom of dealing that is prohibited. As is said by the Supreme Court of the United States in Gibbs v. Consolidated Gas Co., 180 U. S. 396, 409, 32 L. Ed. 979: ‘Pub- lic welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other requires, the contract may be sustained. The question is whether, under the particular circumstances of the case, and the nature of the particular contract involved in it, the con- tract is, or is not, unreasonable.’ So in People’s Gaslight Co. v. Chicago Gaslight Co., 20 Ill. App. 492, the court says: ‘The tendency of the courts is to regard contracts in partial restraint of competition with less disfavor than formerly, and the strict- ness of the ancient rule has been greatly modified by the modern decisions.’ Many decisions announcing views similar to those declared in these quotations are cited with approval by this court in Herriman v. Menzies, supra, and it must be taken to be settled that the sections of Civ. Code, §§ 1673, 1674, 1675, relating to contracts in restraint of trade, are to be construed in the light of these principles. Herriman v. Men- zies, 115 Cal. 16, 46 Pac. 730, 35 L. R. A. 318, 56 Am. St. Rep. 81. In Smith v. 8S. F. & N. P. Ry. Co., 115 Cal. 584, 604, 35 L. R. A. 309, 56 Am. St. Rep. 119, this court said: ‘The rule in- validating contracts in restraint of trade does not include every contract of an individual by which his right to dispose of his property is limited or restrained. Section 1673 of the Civil Code makes void every contract by which one is re- strained from ‘‘exercising a lawful profession, trade or busi- ness,’’ except in certain instances. But this is far different from a contract limiting his right to dispose of a particular piece of property, except upon certain conditions. As. the owner of property has the right to withhold it from sale, he can also, at the time of its sale, impose conditions upon its use without violating any rule of public policy. . . .’ THE COMMON LAW 255 “‘The necessary result of what we have said is that the com- plaint must be held sufficient. It is alleged that the defendant bought oil under an express agreement that he would not sell it at less than given prices, and that he had sold and threatened to sell it at less than such prices. This is a violation of plain- tiff’s rights under his contract. Whether this contract could be enforced against persons who might come into possession of plaintiff’s oil, with notice of the restriction imposed by him on its sale, but without having made any direct agreement to respect such restriction is a question not here presented. See Garst v. Hall & Lyon Co., 179 Mass. 589, 55 L. R. A. 631.”’ The rehearing was ordered to enable the court to give further consideration to the views of the United States Circuit Court of Appeals for the Sixth Circuit, as declared in Park & Sons Co. v. Hartman, 82 C. C. A. 158, 12 L. R. A. (N. 8S.) 185, and restated in Miles Med. Co. v. Park & Sons Co., 90 C. C. A. 579. Judge Lurton was the author of each of these opinions. The first contains a very elaborate and learned discussion of the law governing some of the questions involved. It may be said that neither of these cases involved the ques- tion here presented; i. e., the enforceability as between the parties of a contract of the kind here shown. The corporation complainant in each instance sought to obtain relief against persons who had entered into no contractual relation with it. It must, however, be confessed that the views there expressed upon the general question of the validity of a system of con- tracts like that here involved is opposed to what was declared by us in our opinion. Most of the cases cited by us in our opinion heretofore filed are reviewed by Judge Lurton in Park v. Hartman and are either disapproved or sought to be dis- tinguished. It does not appear to us, however, that the attempt to distinguish has in all instances been entirely successful, and, notwithstanding the great respect entertained by us for so able and learned a court as that which decided the cases of Park v. Hartman and Miles V. Park, we must remain of the opinion that the conclusion there reached, so far as it is ap- plicable to the case before us, is contrary to the weight of authority. In our former opinion something was said about the effect upon this litigation of the so-called Cartwright act (St. 1907, p. 256 COMBINATIONS AND RESTRAINT OF TRADE 984, c. 530), which had been enacted after the date of this appeal. That statute has recently been amended. St. 1909, p. 593, c. 362. The constitutionality of the amending act is not here questioned, nor is it suggested that the contract relied on appears on the face of the complaint to be obnoxious to the terms of the law as it now stands. Whether or not a defense to the action could be based on the Cartwright act is a question not now before us. At the present time, and on the record and argument here presented, there is no occasion to discuss the construction or applicability of the statute. The judgment is reversed, with directions to the superior court to overrule the demurrer, granting leave to the defendant to answer.?2® Beatty, C. J., dissented. ‘Section 5 COMBINATIONS AND COMPETITIVE METHODS HILTON v. ECKERSLEY (Queen’s Bench and Exchequer Chamber, 1855. 6 Ellis & BL. 47.) Action on a bond for £500, of which plaintiff was obligee and defendant obligor. The plea set out the bond, whereby William Johnson, of Wigan, in the county of Lancaster, cotton spinner; Nathaniel Eckersley (defendant), cotton spinner and manufacturer, and eleven others each described as cotton spinner or spinster and one also as manufacturer, all of Wigan aforesaid, and five others, each described as cotton spinner, all of Hindley, in 29—Accord: Elliman, Sons & Co. y. Carrington & Son, L. R. [1901] 2 Ch. 275 (damages allowed) ; Garst v. Harris, 177 Mass. 72 (damages allowed); Garst v. Charles, 187 Mass. 144 (injunction allowed against the defendant who secured a dealer to purchase for the purpose of breaking the contract upon a re-sale to the defendant); Clark v. Frank, 17 Mo. App. 602 (contract to maintain the price of thread); New York Ice Co. v. Parker, 21 Howard Practice (N. Y.) 302 (con- tract to maintain price of ice). THE COMMON LAW 257 the county of Lancaster, were respectively and separately bound to Caleb Hilton (plaintiff), of Wigan aforesaid, attor- ney at law, in £500, subject to the following condition: ‘“Whereas the above bounden, William Johnson, Nathaniel Eckersley,’’ &¢. (naming the eighteen obligors), ‘‘are re- spectively owners or occupiers of mills and premises in Wigan and the neighborhood, in the county of Lancaster, for the spinning and manufacturing of cotton, yarn, and cloth, and employ therein many workpeople and servants; and whereas there are certain societies, or combinations, or implied ar- rangements, or understood agreements, subsisting in the said county amongst divers persons, whereby persons otherwise willing to be employed in the said works are deterred, by a reasonable fear of social persecution and other injuries, from hiring themselves to work in the said establishments, and whereby the legal control and management of the said obli- gors®° of their property and establishments are injuriously in- terfered with; and whereas the said combinations are sus- tained by funds arbitrarily levied and extorted by way of tax or rate upon the persons employed by the same obligors respectively, and receiving wages from them; and it hath become necessary in the opinion of the said obligors to take measures for vindicating their legal rights to the control and management of their own property; which will also best sustain the rights of the laborer to the free disposal of his skill and industry: and therefore the said several obligors have agreed to carry on their said works, in regard to the amount of wages to be paid to persons employed therein, and the times or periods of the engagement of workpeople, and the hours of work, and the suspending of work, and the general discipline and management of their said works and establishments in conformity to law, for the period of twelve calendar months from the date of the above written bond, in conformity with the resolution of a majority of the said obligors present at any meeting to be convened as hereinafter mentioned: and, 30—Throughout the condition, the quence of this mistake, the case be- word ‘‘obligees’’ was written in- ing argued as if the condition had stead of ‘‘obligors.’’? The plea set been correctly written; and the text out the condition as it was written, is corrected accordingly. (Rep.) but no point was made in conse- Kales R. of T. Vol. I-17 958 COMBINATIONS AND RESTRAINT OF TRADE for the purpose of carrying the said agreement into effect, the said obligors have entered into the above written bond or obligation, conditioned as hereinafter mentioned: Now the condition of the above written bond or obligation is such that, if the said several obligors, and their respective partners in the business carried on at the said works, shall, for the period of twelve calendar months from the date of the above written bond or obligation, carry on and conduct, or wholly or par- tially suspend the carrying on of, their said works and estab- lishments, in regard to the several matters aforesaid, in conformity with the resolutions in that behalf of a majority of the said obligors present at a meeting to be held as here- inafter mentioned, then the above written bond or obligation, in regard only of the persons respectively so performing this condition, shall, as to the sum of £500, in which he is bond, become void, or otherwise the same to remain in full force. And it is hereby declared that, on the 3rd and 8th days of October instant, meetings of the said obligors were held at the Victoria Hotel, at the hour of four in the afternoon; at which meetings a chairman and secretary were appointed; and which said meetings had authority to make, and did make and prescribe, times, rules, and regulations for the holding and conducting of ordinary meetings and the conven- ing of special meetings; and which times, rules, and regula- tions may, at any ordinary or special meeting, be varied or rescinded, and others substituted; and all resolutions agreed to by a majority of the obligors present at any such meeting shall be deemed the resolutions of the said meeting; and every meeting so held as aforesaid shall be deemed to be a meeting within the meaning of the above written condition. Provided, always, and it is hereby declared, that all moneys which shall be received by the said Caleb Hilton, his executors or admin- istrators, upon the above written bond, shall be held by him or them in trust for the equal benefit of all the obligors, their respective executors, administrators, and assigns. Provided also that the said bond shall not be put in suit without the consent of a majority of the said obligors present at a meeting to be held as aforesaid. Provided, also, that it shall be lawful for a majority of the said obligors present at any such meet- ing to pass a resolution releasing and discharging the said THE COMMON LAW 259 obligors respectively from the further performance of the said condition. In witness,’’ &¢. Allegation that, save as appears by the said condition, there was no consideration for the execution of the said bond by the defendant. And that, by reason of the premises, the said bond was and is a bond in restraint of trade, illegal and void. Demurrer. Joinder. The case was argued in the Court of Queen’s Bench, in last Easter Term, [April 27th, 1855. Before Lord Campse ut, C. J., Erte and Crompton, Js.| by Cowling for the plaintiff and Mellish for the defendant. It is considered sufficient, for the argument, to refer to the argument in the Exchequer Cham- ber and the judgments delivered in the two courts. Cur. adv. vult. On this day, there being a difference of opinion upon the Bench, the learned Judges delivered judgment seriatim. CROMPTON, J.—In this case the plaintiff declared upon a bond for £500. The defendant in his plea set out the bond; by which it appeared that the defendant and seventeen others were bound to the plaintiff, each in a separate and distinct sum of £500. The plea then set out the condition of the bond; whereby, after reciting that the obligors were respectively owners of mills, in Wigan and the neighborhood, for spinning and manufacturing, and employed therein many workpeople and servants, and that there were certain societies or com- binations amongst divers persons, whereby persons, otherwise willing to be employed, were deterred by fear of social perse- cution and other injuries from hiring themselves to work, and whereby the legal control of the said obligors of their prop- erty was injuriously interfered with; and that, whereas the said combinations were sustained by funds arbitrarily levied and extorted by way of tax or rate upon the persons employed by the said obligors and receiving wages from them, and it had become necessary, in the opinion of the said obligors, to take measures for vindicating their legal rights to the control and management of their own property, which would also best sustain the rights of the laborer to the free disposal of his skill and industry; and therefore the said several obligors had agreed to carry on their said works, in regard to the 260 COMBINATIONS AND RESTRAINT OF TRADE amount of wages to be paid to persons employed therein, and the times or periods of the engagement of workpeople, and the hours of work, and the suspending of work, and the gen- eral discipline and management of their said works and establishment, in conformity to law, for the period of twelve calendar months from the date of the above written bond, in conformity with the resolutions of a majority of the said obligors present at any meeting to be convened; and after reciting that, for the purpose of carrying the said agreement into effect, the said obligors entered into the above written bond: the condition of the obligation was declared to be that, if the said several obligors and their respective partners should, for twelve calendar months from the date of the bond, carry on and conduct, or wholly or partially suspend the carrying on of, their said works and establishments in regard to the several matters aforesaid in conformity with the resolutions in that behalf of a majority of the said obligors present at a meeting to be held as mentioned in the agreement, then the above-written bond, in regard only of the persons respectively so performing this condition, should, as to the sum of £500 in which he was bound, become void; or otherwise the same to remain in full force. The condition then proceeded to state the days and place of meeting, and that all resolutions agreed to by a ma- jority of the obligors present should be deemed the resolutions of the said meeting, and that every meeting so held should be held to be a meeting within the meaning of the above written condition: also that the plaintiff should hold all moneys recov- ered by him in trust for all the obligors, etc.: provided that the bond should not be put in suit without the consent of a ma- jority of the obligors present at a meeting: provided, also, that it should be lawful for a majority of the said obligors present to pass a resolution releasing the said obligors respectively from the performance of the said condition. The plea then stated that, except as it appeared by the condition, there was no consideration for the execution of the bond by the defend- ant; and that the bond was in restraint of trade, illegal and void. The plaintiff having demurred to this plea, the demurrer was argued before us in the course of last Easter Term. And the question for our consideration is, Whether a bond of this nature can be enforced at law. THE COMMON LAW 261 I am of opinion that the bond is void, as being against public policy. I think that combinations like that disclosed in the pleadings in this case were illegal and indictable at common law, as tending directly to impede and interfere with the free course of trade and manufacture. The precedents of indict- ments for combinations of two or more persons to raise wages, and for other offenses of this nature, which were all framed on the common law and not under any of the statutes on the subject, sufficiently show what the common law was in this respect. In Rex v. Mawbey, 6 T. R. 619, 636, Gross, J., as- sumed the illegality of such combinations as well known law. Combinations of this nature, whether on the part of the work- men to increase, or of the masters to lower, wages, were equally illegal, By recent enactments, carefully worded, combinations to raise or lower the rate of wages, and to regulate the hours of labor, are made no longer punishable. But these enactments do not make such combinations legal agreements in the sense that the breach of them can be enforced at law; and still less do they apply to make enforceable at law an agreement, not being a mere stipulation among the parties themselves which any one might withdraw from at his pleasure, but binding and tying themselves up, under a penalty, to close their works if a ma- jority of a particular body shall dictate to them so to do. I think this bond void, as being in restraint of the freedom of trade, and from its mischievous and dangerous tendency, pointed out in the argument, with respect to strikes and com- binations. The general principle of contracts in restraint of trade being void is perfectly well established: and this case does not appear to me to fall within any of the exceptions and relaxations which have been allowed as to that principle. Most of such cases have occurred where one party has sold a trade or profession to another, or where one party has learned the trade and its secrets from the other, and where, on such considerations, stipulations have been entered into whereby the one party undertakes not to exercise the trade or profession within reasonable limits as to time and distance. In the present case, the agreement is that, in a certain event, all the parties contracting are to close their works. And the consideration of the promise of each is the promise of the others likewise to 262 COMBINATIONS AND RESTRAINT OF TRADE close their works. So that the public are not recompensed for the ceasing of one party by the other parties being able to carry on their trade with increased facilities. It is, I believe, the first case where the mutually abstaining from trade has been the consideration for a bond of this nature. The case of a bond, whereby a number of persons, who manifestly appear to con- stitute a great body of master manufacturers, mutually bind themselves to close their works at the will of the majority present at a meeting, and whether or no they individually think it right or desirable so to do, seems to me entirely beyond any relaxation that has ever been made of the general rule appli- cable to agreements in restraint of trade. Here, instead of the arrangement being that one party shall not carry on trade in order that another may do it more advantageously, the object is that all shall close as a means of compulsion against the workmen. One of the most objectionable parts of this bond is that it takes away the freedom of action of the individual to carry on the trade, and to open and close his works according as it may be for his interest or that of the public. It appears to me obviously mischievous that the parties should give up this right of judging for themselves, and place themselves and their trades under the dictation either of a majority or of a commit- tee of delegates, which seems the same in principle. The agreements or combinations allowed, or rather rendered not punishable, by the modern Acts of Parliament, are much less mischievous, and seems less contrary to the free course of trade, if every party can withdraw from the association at his free will and pleasure. And it is accordingly permitted by the Legislature that either masters or workmen may join in agree- ing to work or be’worked for according to certain rates or times. At least the Legislature has sanctioned this, so far as to prevent its being punishable. But, as soon as the party agrees to bind himself by penalties to give up his right of retiring from such combination, that freedom of trade which it is the policy of the law to protect seems directly interfered with. Suppose, in the present case, that the workmen agree to proper and reasonable terms, and that the majority still insist on closing: the individual obligor is bound to shut up his own mill, and to be in effect a party to the closing of seventeen others, although THE COMMON LAW 263 he is perfectly satisfied that in doing so he is acting contrary to his own interests, as well as to the interests of the workmen, the trade, and the public. The same observation applies to the case of the workmen themselves. If this bond is legal, in the sense of being enforce- able at law, a promise on the part of any individual workman not to retire from the strike, or to pay a weekly subscription to it, or to pay a penalty if he went to work without the leave of the majority of a meeting, or disobeyed the dictation of the delegates, would be binding upon him: and no workman would be able to free himself from the tyranny of such dictation, whatever might be the state of his family, however reasonable he might think the offer of his masters as to wages, and al- though he might be perfectly satisfied, in his own mind, that the longer continuance of the strike was ruining himself, his family, and his fellow-workmen, and was doing incalculable injury to the public. It is said, indeed, that the object of the bond is to defend the parties, and to enable them to meet the combination of work- people. But I think that agreements of this nature, on the one side or other, or both, really tend to prolong the mischief: and, however right it may be that the masters or workmen should respectively stand by and assist each other in resisting what they consider unfair demands, yet that the giving up their individual right of judging and acting for themselves in mat- ters so greatly affecting the public is mischievous and danger- ous in the extreme. I think it not to be endured that majorities and delegates, of workmen or masters, should in effect be allowed to legislate upon questions immediately affecting the happiness of the working classes and the prosperity of the trade and commerce of the whole nation. If agreements like the present were enforceable at law, I see no reason why (as observed by Mr. Mellish) they should not be enforceable in equity: and our Courts of Equity might be ealled upon to enjoin masters against opening their mills, or workmen from going to work or discontinuing a strike ; whilst our county courts would have to make decrees for the con- tributions to strike, or to enforce penalties from workmen who have felt it their duty to resume employment. It was contended, on the part of the plaintiff, by Mr. Cow- 264 COMBINATIONS AND RESTRAINT OF TRADE ling, that some part of this agreement might be good, and that the bond, with reference to such part, would not be invalid. But I think that the illegality pervades the whole agreement, and that, part of the consideration of the bond being that the works should be closed according to the dictation of the ma- jority, the whole instrument is illegal, even if part of the engagement of each obligor were held according to Mr. Cow- ling’s argument to be legal. I am clearly of opinion that the whole instrument is tainted with illegality; and I therefore think that our judgment ought to be given for the defendant. ERLE, J.—The question, whether the bond declared on is void, is raised under the circumstances appearing in the con- dition: which recites that the obligors are manufacturers in Wigan and Hindley, and that combinations of workmen, pre- venting free labor by fear of social persecution, injuriously interfere with the management of their manufactories; and that these combinations are sustained by funds extracted from workmen employed by the obligors; and that measures are necessary to protect as well the obligors in the free manage- ment of their capital as the workmen in the free disposal of their labor: wherefore the obligors have agreed, in regard to the amount of wages, the periods of engagement, the hours of work, and the general management of their establishments, to act in conformity with the lawful resolutions of a majority of the obligors present at a meeting; and declares that the bond shall be void if this agreement is performed. The masters have thus contracted to co-operate for the protection of their interests against injurious results from existing combinations of workmen. It was contended that this agreement was unlawful, on account of being in restraint of trade. But, according to the recital, the purpose of the agreement and its tendency was for the advancement of trade. The workmen, by combining not to work for one master while they are supported by wages from the others, may ruin each separately: and, unless the masters can protect themselves more effectually than by indictment, there is danger of the trade being destroyed, and the capital being removed from the neighborhood or from the country to a more secure place. Also, as the agreement is to act in con- THE COMMON LAW 265 formity with the resolutions of the majority, and those resolu- tions may require the business to be carried on to the fullest possible extent, the agreement ought not to be held void as in restraint of trade unless it was shown by averment that it do so operate. Even if the agreement was construed to be in restraint of trade because it interfered with the free will of the masters in their management, still it does not follow that it is illegal; as agreements in restraint of trade are legal if required for the protection of the lawful interests of the contracting ‘parties. Thus, masters may contract to restrain their servants and ap- prentices from trade in a certain neighborhood. So also the purchaser of the good-will of a business may restrain the vendor from trading within a certain area: and the landlord of a house may restrain his lessee from trade therein, if it would be likely to lower the value of the property. The right to agree for a restraint of trade on account of the protection of a lawful interest is fully explained in Hitchcock v. Coker, 6 A. & EH. 438 (E. C. L. R. vol. 33), and Mallan v. May, 11 M. & W. 653. In the present case the obligors are shown by the recital to have an important interest, for the protection of which this agree- ment was necessary ; and there is no reason for saying that the restraint was greater than was required for that protection. The opinion that this agreement is valid at common law derives confirmation from a consideration of the statute law. The Legislature, by various statutes, from the reign of Ed. 1 to that of G. 4, prohibited agreements, either of masters or of workmen, for the purpose either of lowering or raising wages, or of altering hours, or otherwise affecting their mutual rela- tions. These agreements were by some statutes enacted to be, and by others declared to be, illegal; and the parties entering into them were liable to punishment. By stat. 6 G. 4, c. 129, an entire change of the law was made. By section 2 all the statutes prohibiting such agreements are enumerated and abso- lutely repealed. By section 3 future prohibition is confined to endeavors, by force, threats, intimidation, molestation, or ob- struction, to affect wages or hours, which are made illegal and punishable; and, by sections 4 and 5, it is declared that neither masters nor workmen shall be punishable for any agreements 266 COMBINATIONS AND RESTRAINT OF TRADE in respect of wages or hours unless they infringe the prohibi- tions in the 3rd section. Since this statute, such agreements as the present, if illegal, must be made so by the common law. But no principle or decided case has been adduced showing such to have been the law before these statutes passed: and it seems to me that the Legislature intended by this statute to make all agreements to which it relates legal, if not comprised within the section of prohibition ; the statute repealing, as well the clauses of former statutes which render these agreements illegal, as those that made them punishable. The Judges, in expounding this statute, have used language denoting that in their opinion the agreements either of masters or of workmen respecting wages or hours are legal: and, if an agreement is legal, it follows that it may be enforced by law. I refer to the charge of Trnpau, C. J., in Regina v. Harris, Car. & M. 661, note (a), and the summing up of Rours, B., in R. v. Jones and Others, [Qu. Regina v. Selsby, note (a) to Row- land’s Case, 2 Den. C. C. R. 384] and of Erte, J., in Regina v. Rowlands, 17 Q. B. 671, 686, note (b), (E. C. L. BR. vol. 69); 2 Den. C. C. R. 388, note (a), with the judgment of Parrsson, J., thereon in Rowland’s Case, 2 Den. C. C. R. 389, note (a). Considerations of policy confirm this view of the law. It is supposed that attempts to affect wages by intimidation would be more rare, and that the misery resulting from strikes would be diminished, if it was held that no agreements for the pur- pose of affecting wages or hours should be enforced by the law. But it seems to me that the opposite effect would result. If all such agreements were excluded from the law, I assume that they would still be made; because they were frequently made, even when prohibited under severe penalties, and are now in constant course: and the Legislature probably thought them irrepressible by prohibition. Then, if, when made, they cannot be enforced by law, the parties making them resort to social persecutions, fear and force for their enforcement: and, as the control, where law is excluded, frequently devolves upon men either unprincipled or ill informed, greater misery is caused by the control of such leaders than would arise from the sanctions of the law. If the agreements could be enforced by law, they would be made with a knowledge of rights and liabilities: and THE COMMON LAW 267 the enforcement of them would be within the limits of the law, and for the most part free from purposeless evil. If the law protected them, it would be for the law to decide whether they were in restraint of trade beyond what was required for the protection of any lawful interest; and, if so, to declare them void for the excess. While, on the other hand, if they should be valid, they would be enforced only as far as they were judged to be reasonable. Therefore, in my opinion, judgment should be for the plaintiff. LORD CAMPBELL, C. J. [This judgment was read by Crompton, J.] I concur with my brother Crompton in think- ing that there ought in this case to be judgment for the defend- ant. And, agreeing with him in most of the reasons he has given for his opinion, I have not much to add in support of it. But I am not prepared to say that the combination which has been entered into between the parties to this bond would be illegal at common law, so as to render them liable to an indict- ment for a conspiracy. Such a doctrine may be deduced from the dictum of Gross, J., in Rex v. Mawhbey, 6 T. R. 636: ‘‘As in the ease of journeymen conspiring to raise their wages: each may insist on raising his wages, if he can; but if several meet for the same purpose, it is illegal, and the parties may be indicted for conspiracy.’’ Other loose expressions may be found in the books to the same effect: and, if the matter were doubtful, an argument might be drawn from some of the lan- guage of the statutes respecting combinations. But I cannot bring myself to believe, without authority much more cogent, that, if two workmen who sincerely believe their wages to be inadequate should meet and agree that they would not work unless their wages were raised, without designing or contem- plating violence or any illegal means for gaining their object, they would be guilty of a misdemeanor and liable to be pun- ished by fine and imprisonment. The object is not illegal; and, therefore, if no illegal means are to be used, there is no in- dictable conspiracy. Wages may be unreasonably low or un- reasonably high: and I cannot understand why in the one case workmen can be considered as guilty of a crime in trying by lawful means to raise them, or masters in the other can be 568 COMBINATIONS AND RESTRAINT OF TRADE considered guilty of a crime in trying by lawful means to lower them. Nor can I say that there is any statutable enactment which goes the full length of rendering this bond illegal and void. The 3rd section of stat. 6 G. 4, c. 129, comes very near it, and shows the great dislike of the Legislature to such proceedings. For it is thereby enacted that, ‘‘if any person shall use or employ violence to the person or property of another, or threats or intimidation, or shall molest or in any way obstruct another for the purpose of forcing or inducing such person to belong to any club or association, or to contribute to any com- mon fund, or to pay any fine or penalty, or on account of his not belonging to any particular club or association, or not having contributed or having refused to contribute to any common fund, or to pay any fine or penalty, or on account of his not having complied or of his refusing to comply with any rules, orders, resolutions, or regulations’’ ‘‘to regulate the mode of carrying on any manufacture, trade, or business, or the man- agement thereof,’’ every person so offending may be imprisoned and kept to hard labor for three calendar months. If suing upon such a bond could be considered as molesting or obstruct- img the obligor within the meaning of this section, the bond would be illegal and void. But the molestation and obstruction here contemplated would probably be considered to be an unlawful act of the same kind with those specifically described. I am therefore obliged to bring the bond within the category of written instruments which are not avoided by positive statute, and are not so far illegal at common law as that the framing of them is a criminal offence, but which cannot be enforced by action, being considered void as against public policy. I enter upon such considerations with much reluctance, and with great apprehension, when I think how different gen- erations of judges, and different judges of the same generation, have differed in opinion upon questions of political economy and other topics connected with the adjudication of such cases. And I cannot help thinking that, where there is no illegality in bonds and other instruments at common law, it would have been better that our courts of justice had been required to give effect to them unless where they are avoided by Act of Parliament. By following a different course, the boundary THE COMMON LAW 269 between judge-made law and statute-made law is very difficult to be discovered. But there certainly is a large class of de- cisions, which will be found collected in the report of the recent Bridgewater Case in the House of Lords, [Egerton v. Earl Brownlow, 4 H. L. Ca. 1] to the effect that, if a contract or a will is, in the opinion of the judges before whom it comes in suit, clearly contrary to public policy, so that by giving effect to it the interests of the public would be prejudiced, it is to be adjudged void. When I look at this bond, I have no hesitation in concluding that the association which it establishes ought not to be per- mitted, and that the enforcing of the bond will produce public mischief. I therefore feel compelled as a judge, to say that it is void. The object of the association of the master manufac-' turers of Wigan is very laudable to put down an illegal asso- ciation of the workmen, the funds of which are arbitrarily levied by extortion, and to protect the just rights of the mas- ters which have been infringed. But the means sought to be employed are such as I think the law will not sanction. There are agreements which, although to a certain degree in restraint of trade and of the free action of individuals, may be enforced by action: but I am not aware of any contract, so far in re- straint of trade and of the free action of individuals as this bond, to which courts of justice. have given effect. I do not think that any averment is necessary as to what has been done under it, or as to any mischiefs which it has actually produced. We are to consider what may be doné under it, and what mischiefs may thus arise. All the master manufacturers in a large district are obliged for a twelvemonth to carry on their trade in the manner in which a majority of them may direct; and during that time they may all be compelled entirely to shut up their manufactories and to dismiss their men: they are obliged to contribute to the funds of the association, and cannot withdraw from it, although they may think that its object has been effectually gained, or however much they may disapprove of its proceedings. If such an association is good for such a district, it would be equally good for the whole county of Lancaster, or for the whole realm of England. And, if the will of a majority may be the rule of action for all who are associated, so may the will of a single individual. Again, 2170 COMBINATIONS AND RESTRAINT OF TRADE there must be entire reciprocity between liberty to the masters and liberty to the men: and it seems to me that a decision in favor of this bond would establish a principle upon which the fantastic and mischievous notion of a ‘‘Labor Parliament”’ might be realized for regulating the wages and the hours of labor in every branch of trade all over the empire. The most disastrous consequences would follow to masters and to men, and to the whole community. I should have been much better pleased if a clear rule has been expressly laid down to me by the Legislature: but, being required to form and to act upon my own opinion, I am bound to say that I think this bond is contrary to public policy, and that we ought to give judgment for the defendant. Judgment for defendant. IN THE EXCHEQUER CHAMBER (Feb. 20.) The plaintiff below alleged error in the above judgment. The defendant denied the allegation. The case was argued in last Michaelmas Term [November 16th, 1855. Before WmLiams, CRowpER, and WILLEs, Js., and Parke, ALDERSON, and Puart, Bs.] and Vacation. [November 29th, 1855. Before the same Judges, and CresswE1L, J.] COWLING, for the party alleging error (plaintiff below). The plea containing no averment of fact, but relying on what appears upon the face of the bond and condition as set out, the facts recited must be assumed to be true. It does not appear that the obligors comprehend all the cotton manufacturers in the neighborhood of Wigan and Hindley. It is shown that the association is purely defensive, and that its object is to liberate the trade from a control by a combination of workmen. Such an object, at any rate, is not merely legal but praiseworthy. That, it is true, would not constitute a defense of the proceed- ing if the object. were to be furthered by illegal means. But no such means appear. The number of the obligors is eighteen; but the obligation is not less legal than it would be if there THE COMMON LAW 271 were only three. Nor can any objection be urged against the duration of the obligation for twelve months which would not be valid if it were to last only for three. It is not, properly speaking, a bond in restraint of trade: there is no agreement either to give up or to suspend trade: that could have been done without any agreement. The trade is already suspended or checked; and the agreement is entered into for the purpose of enabling it to go on freely. [AtprRson, B.—If the agree- ment had merely the effect of closing all the mills when there was a strike against a single mill, that should be shown: all that appears is that the steps to be taken were at the discretion of the majority.] The majority even of the obligors could not, under this agreement, suspend the trade for more than a few months. Nor is it to be necessarily inferred that any suspen- sion will take place at all. [ALpErson, B.—Do you say that, if there were no combination among the workmen, this asso- ciation would be legal? If not, can one illegality cure an- other?] An illegal act may well render that legal which would be otherwise illegal, just as a poison may act as an antidote to another poison. [ALDERSON, B.—May you poison another be- cause he means to poison you?] What acts medicinally is no poison at all. The plea of son assault demesne is a good answer to an action for an assault, because a blow struck in pure self- defense is not a battery. It appears that Crompron, J., was much impressed by the circumstance that every obligor here gives up his private judgment in deference to that of the ma- jority. But why should he not? He could not if, by his doing so, trade was restrained: but the contrary appears on this record. The association is for doing away with that restraint of trade which would otherwise be affected by the combined workmen coercing the single employers in succession.