Arnold & Co. v. Jones, Cotton Co. , 152 Ala. 501 ( 1907 )

SIMPSON, J.

The action in this case was by the appellant against the appellee, to recover for the breach of a contract, and the assignments relate to the sustaining of demurrers to the complaint. The provisions of the contract, as alleged, were that the defendant agreed to pay to the plaintiff one-sixteenth of a cent per pound on all cotton purchased by the defendant in a certain region of Alabama, called the “Sand Mountain, Attalla & Gadsden District,” the consideration being that the plaintiff was to pay to the defendant one-sixteenth of a cent per pound on all cotton purchased by the plaintiff .in the same district; also that the plaintiff (who was at that time engaged-in purchasing cotton for certain cotton mills at and near Gadsden, Ala.) when be desired to purchase cotton for said mills at a certain price, was to first communicate with the defendant, and give the defendant the option of furnishing said cotton at the price named, and, if the defendant could not furnish the •cotton at the price named, then the plaintiff was at liberty to purchase from others. The complaint alleges that the contract was made on. or about October 13, 1904, and Avas to be performed within a reasonable time, which has expired; that plaintiff has complied with the stipulations of the contract on its part; and that the defendant, haying purchased largely more in said territory, is indebted to the plaintiff to the amount of SI,-■023, according to said contract, and refuses to pay. The ■only point insisted upon in the brief of the appellant, as raised by the demurrers, is that the contract set out in the complaint is not contrary to public policy and yoid.

The decisions as to what contracts are considered as in restraint of trade, and therefore contrary to public policy and void, are so numerous and variant that an ■analysis of them Avould extend this opinion beyond all reasonable proportions, and then it would be difficult to ■extract any definite and satisfactory rule which would meet the facts of every case. The only cases, and a very large proportion of those of later date, relate to those agreemnts by which one person agreed with another that he would not engage in a certain business, either generally or specially as to time and place; and there is a very general consensus of opinion that a general agreement, without limit as to time and space, is absolutely void, but that an agreement for a limited space upon proper consideration is valid. The consideration Avhich has been universally recognized as proper is the sale by one to the other of his business and good will. In this class of cases the doctrine has been considerably relax-eel, owing to the changed conditions of business, and the question of validity is referred rather to that of reasonableness vel non than to the limit of space. The restriction is allowed to such extent as is reasonable to^ protect the interests involved, as in the case of the Diamond Match Company, whose interests extended all over the United States. — 9 Cyc. 525-529; 2 Beach on Contracts, §§ 1562-1582, 1590; 2 Parsons on Contracts-(9th Ed.) pp. 909-916 (*747-753); Diamond Match Company v. Roeber, 106 N. Y. 473, 13 N. E. 419, 60 Am. Rep. 464. The test of reasonableness and the necessities of the interest to be protected, adopted in the modern decisions, necessarily refers to the court the peculiar circumstances of each case, in order to determine whether or not it is violative of the public policy of the country. While the utmost liberty of contract, consistent with the rights of others, must be allowed, yet it must be seen that the exercise of that liberty does not impinge upon the rights of the public generally or of individuals. Combinations to enhance or depress prices are recognized as contrary to public policy and void.

Nearly all of the decisions on the subject of preventing and “stifling” competition involved combinations among those having commodities for sale to hold up the prices; but the principle is the same, whether the combination be upon the part- of the sellers or of the purchasers. He who has commodities to sell in the market has the same right to competition among buyers as the purchaser has to competition among sellers. — Nester v. Continental Brewing Co., 161 Pa. 473, 29 Atl. 102, 24 L. R. A. 247, 41 Am. St. Rep. 894; Bailey v. Master Plumbers’ Ass’n., 103 Tenn. 99, 52 S. W. 853, 46 L. R. A. 561; Harding v. American Glucose Co. 74 Am. St. Rep. 255, note; Central Ohio Salt Co. v. Guthrie, 35 Ohio St. 666; Texas Standard Oil Co. v. Adone, 83 Tex. 650, 19 S. W. 274, 15 L. R. A. 598, 29 Am. St. Rep. 690; State v. Smiley, 65 an. 240, 69 Pac. 199, 67 L. R. A. 909, 913. It is true, also, that in the greater number of cases the combination were among a considerable number of persons, with the evident purpose of creating a monopoly; but, as stated in the case of Salt Go. v. Guthrie, supra, “courts will not stop to inquire as to the degree of injury inflicted upon the public. It is enough to know that the inevitable tendency of such contracts is injurious to the public.” — 85 Ohio St. 672; Pingree’s Extraordinary, etc. Contracts, § 321. In the Stenographer’s Case it is said: “True, the restraint is not so far-reaching as it would have been if all the stenographers in the city had joined the association; but, so far as it goes, it is of precisely the same character, produces the same results, and is subject to the same legal objection.”— More v. Bennett, 140 Ill. 69, 29 N. E. 888, 15 L. R. A. 861, 364, 33 Am. St. Rep. 246. A secret combination among grain dealers, in the nature of a partnership, was held void, as tending to “stifle all competition.” — Craft et al. v. McCnoughy, 79 Ill. 346, 350, 22 Am. Rep. 171. “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.” — Anderson v. Jett, 89 Ky. 375, 380, 12 S. W. 670, 6 L. R. A. 390; Judd v. Harrington (Com. Pl.) 19 N. Y. Supp. 406, 412. Although a partnership may be formed for otherwise legal purposes, yet if its existence be kept secret, and an appearance of competition between the partners maintained by them towards the public, it is illegal and void.— Fairbank et. al. v. Leary, 40 Wis. 637, 643. In our own state the ease of Moore & Handley Hardware Co. v. Towers Hardware Co., 87 Ala. 206, 6 South. 41, 13 Am. St. Rep. 23, has no relevancy to this case. It was a sale of a certain class of business, with the agreement not to engage in it — being under the first division of the subject above alluded to. Under the same head are the later cases which hold that, where there is no sale of any interest, such agreements tend to “stifle competition,” and are void. — Tuscaloosa Ice Mfg. Co. v. Williams, 127 Ala. 111, 28 South. 669, 50 L. R. A. 175, 85 Am. St. Rep. 125; Fullington et al. v. Kyle Lumber Co., 139 Ala. 242, 35 South. 852.

In the case under consideration there was no business sold and no interest to be protected. The effect of the agreement was that each was to have an interest in the purchase of the other, thus stifling competition, while the appearance of competition was kept up to the public. While it' is true, as suggested by counsel for appellant, that cotton has a market value, which is regulated by the market reports in the business centers, yet it is nevertheless true that the people who raise and sell their cotton do not have any access to those market reports ; but, on the contrary, their knowledge of what cotton is worth in the market is derived entirely from what is offered by the buyers at the place where they offer their cotton for sale. So, if two men are in the market, offering to purchase, and having'a secret arrangement between them by which they are practically partners, it operates as a deception to the sellers, stifles competition, and is void. It matters not that others may come ino the market:. The tendency and the probable result are the same, and the case is governed by the same principle. It is similar to the agreements between persons not to bid against each other at auctions, which have always been held to be void.

The judgment of the court is affirmed.

Tyson, C. J., and Haralson and Denson, JJ., concur.