author: Mb. Justice Dean,

text:
    Monongahela River Consolidated Coal & Coke Company v. Jutte.

      Contract—Monopoly—Agreement in restraint of trade—Interstate commerce —Divisible contract.

    An agreement by which in consideration of a very large sum of money the owner of coal lands, coal mines and coal boats sells the same and covenants not to engage directly or indirectly “in the business of mining, marketing or shipping of coal in the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries for a period of ten years from the date hereof,” is a-reasonable contract, and is not contrary to the public policy of Pennsylvania, although it appears that the purchaser had similar contracts with a large number, although not all, of the coal operators and shippers doing business in the Monongahela valley in Pennsylvania.
    The above contract, in so far as it affects business carried on in the territory contiguous to the Ohio and Mississippi rivers outside of the limits of Pennsylvania, violates the act of Congress of July 2, 1890, known as the antitrust or Sherman act and entitled: “An act to protect trade and commerce against unlawful restraints and monopolies.” The contract, however, is divisible and the seller may be enjoined from engaging in the business of mining coal and marketing or shipping coal on the Monongahela river within the state of Pennsylvania for the period of ten years.
    Argued Oct. 26, 1904.
    Appeal, No. 6, Oct. T., 1904, by defendant, from decree of C. P. No. 2, Allegheny Co., Jan. T., 1902, No. 28, on bill in equity in case of Monongahela River Consolidated Coal and Coke Company v. William C. Jutte.
    Before Mitchell, C. J., Dean, Fell, Mesteezat, Pottee and Thompson, JJ.
    Affirmed.
    Bill in equity for an account.
    Shaeee, J., filed the following opinion:
    The bill is for an injunction to restrain the defendant from carrying on the business of mining and shipping coal in the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries, contrary to his agreement not to do so, made with the plaintiff company on his sale of his mining and shipping business and the good will thereof to the plaintiff company.
    BINDINGS OB BACT.
    1, The Pittsburg coal vein is traversed by the Monongahela river for some eighty or more miles above its junction with the Allegheny river at Pittsburg, the vein lying throughout this distance above the river level. The river is made navigable by dams and locks, and can be navigated during the whole year except when closed by ice, and has been used for many years as a means of transporting coal to the head of the Ohio river.
    2. The Ohio river, not being improved with dams and locks, is navigable only during periods of high water. The coal vessels are, therefore, tied up at the head of the Ohio until high water, and they are then floated down that river to the Mississippi on the current, but controlled and guided by powerful stern wheel steamboats made fast at the rear of a number of coal-containing vessels lashed together, and not in front, as their very inappropriate name of “ towboats ” would imply. These tows, as they are called, are landed at various points on the lower river, and the coal sold, and sometimes the vessels containing it also.
    3. The coal within reach of the river in the first pool, i. e., at the side of the pool formed by the first or lowest dam in the Monongahela river, has been practically worked out for a number of years, and the river mining operations have for some years been practically confined to the second, third, fourth and fifth pools, and are mostly in the third and fourth. It does not appear very definitely how far back from the river the coal is mined to be brought to it for transportation, but it seems to be not more than ten miles on each side, and usually much less. There are railroads on each side of the river, which also transport coal. The Pittsburg vein is worked for a considerable distance on each side of the river tract above mentioned, and the product shipped by rail.
    4. In 1898, the promotion of the plaintiff company was begun by Mr. J. JB. Finley, now its president, by taking options from a large number, if not all, of the persons who were then engaged in the business of either mining or shipping coal from the Monongahela river. These options were all alike, upon a printed form, and provided that the bill of sale, if made, should contain a stipulation that the vendor would not, directly or indirectly, “ engage in mining, marketing or shipping coal on the Mississippi, Ohio and Monongahela rivers, or their tributaries, for a period of ten years, except in conjunction with vendee or his assigns.”
    5. The defendant, William C. Jutte, was then engaged in the mining and shipping of coal and marketing of it by means of the river, at wholesale and retail, on the Monongahela, Ohio and Mississippi rivers, shippingit to and selling it at Pittsburg, East Liverpool, Cincinnati and New Orleans, as a member of the firms of C. Jutte & Company, the Coal Bluff Coal Company and other companies and firms. On April 8, 1899, the defendant, W. C. Jutte, with the other members of the firm of C. Jutte, made with J. B. Finley a contract or option, containing the above-mentioned agreement as to remaining out of the business. At and about the same time, like agreements were made with J. B. Finley by other firms of which W. C. Jutte was a member, which were signed by him. Afterwards, in September, 1899, these options were assigned by J. B. Finley to the plaintiff company, and thereafter certain supplementary agreements were made with that company, fixing the prices of some of the properties.
    6. On September 27, 1899, the plaintiff company accepted the options held by it as above stated, and on September 30, 1899, the Flinn Coal Company, one of the companies of which Jutte was.a member, made a bill of sale of all its property, with the good will of the company, in the business of mining and shipping coal, to the plaintiff company; and on October 2, 1899, the firm of C. Jutte & Company transferred its property and good will to the plaintiff company, for the price of something over 11,000,000, and as a part of the same transaction, in consideration thereof and of this sale the firm of C. Jutte & Company, and each of its members severally and jointly, stipulated with the plaintiff company, “ not to engage directly or indirectly, individually or through partnership or partnerships, limited partnerships, corporations (except in conjunction with the said The Monongahela River Consolidated Coal & Coke Company), in the business of mining, marketing or shipping of coal in the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries for the period of ten years.” At or about the same time, similar agreements were made with the plaintiff company by the other firms of which Jutte was a member, and signed by those firms and each of their members, including W. C. Jutte, the only difference in the terms of said agreements being that they prohibited the mining, marketing or shipping of coal “in the territory traversed by the Monongahela, Ohio or Mississippi rivers and their tributaries,” this being the printed form which was used by the parties, the words “ in the territory traversed by ” being struck out of the agreement signed by C. Jutte & Company.
    7. The plaintiff company then was, and is, a corporation of the state of Pennsylvania, having its principal office in the city of Pittsburg, and is authorized to mine, market and ship coal. About the same time, the plaintiff company purchased nearly all the mines then opened on the Monongahela river from which coal was shipped by river, and acquired all the coal-containing vessels and towboats then engaged in the business, except those of Jones & Laughlin, a manufacturing company not engaged in the coal business except for its own supply, and a few others owned in Cincinnati, which were not regularly engaged in the transportation of coal from Pittsburg. It also acquired nearly all the coal landings about Pittsburg, taking from all the persons who sold mines or boat, or both, stipulations similar to that which they took from Jutte in regard to their future engagement in the coal business on the rivers. The plaintiff company since its formation has been engaged in the business of mining coal in the district on the Monongahela river, above described, and shipping the same by that river to Vicksburg, Cincinnati, Louisville, New Orleans, and other cities on the Ohio, Monongahela and Mississippi rivers, and also to a limited extent in the coal fields of Alabama, where shipments are made by rail. At this time the plaintiff company ships eighty-five to ninety per cent of all the coal shipped by river out of the Monongahela valley, and of the remainder from one to two per cent is shipped by companies with which the defendant is connected.
    8. W. 0. Jutte and the firms with which he was connected received from the plaintiff company payment for the property transferred by them almost, if not altogether, in stock and bonds of the plaintiff company, which were afterwards sold by him to other persons, and he was instrumental in inducing other parties engaged in the coal business in the Monongahela valley to enter into similar agreements with the plaintiff company.

      9. Some time thereafter, W. C. Jutte organized, companies, one of them being a company called C. Jutte & Company, chartered under the laws of the state of New Jersey for the purpose of carrying on the business of mining and shipping coal on the Monongahela, Ohio and Mississippi rivers, in competition with the plaintiff, and has purchased large tracts of coal near the Monongahela river within the district above described, and has purchased coal boats, barges and towboats for the purpose of transporting coal to the lower river, substantially as alleged in the plaintiff’s bill except as to the Castle Shannon mines, notwithstanding the denials of the answer which there was no attempt to sustain by the defendant’s evidence, and the defendant Jutte is now actively engaged as a member and promoter of one or more companies in mining, shipping and marketing coal on the Monongahela, Ohio and Mississippi rivers.
    10. Within the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries, or, -in other words, in the Mississippi valley, thei’e are extensive coal fields now worked on the Allegheny, Kanawha, Cumberland, Tennessee, the upper Mississippi, the Wabash and the Missouri rivers, in which neither the plaintiff nor the defendant ever did any business in the way of mining or shipping coal. On the Monongahela river the territory in which coal is mined and shipped upon the river is as above described. It does not appear that any coal is or can be shipped upon the tributaries of that river. No coal appears to be mined in any territory which may be said to be for coal-shipping purposes on the Ohio river, but coal is largely mined on its tributaries above mentioned.
    CONCLUSIONS 03? LAW.
    It plainly appears from the above findings of fact, that the defendant has violated, and is violating, his agreement with the plaintiff company, and that if the plaintiff has standing in court, and the agreement of the defendant is valid and binding, the plaintiff is entitled to the relief sought for by the bill. The defendant, however, contends that the plaintiff company has no valid charter and has no right to sue; that it is organized in contravention of the act of congress of July 2, 1890, commonly called the “Sherman act,” and further that the contract of defendant not to enter into the coal business, as above set out, is illegal and void.
    That partial and reasonable restraint of trade may be lawfully created by contract between parties, and may be enforced by injunction, has been frequently decided in Pennsylvania. In the case of Smith’s Appeal, 113 Pa. 579, Mr. Justice Trunkey said: “ The principle is this: public policy requires that every man shall not be at liberty to deprive himself or the state of his labor, skill or talent, by any contract that he enters into. On the other hand, public policy requires that when a man has by skill, or by any other means, obtained something that he wants to sell, he should be at liberty to sell it in the most advantageous way, and in order to enable him to sell it is necessary that he should be able to preclude himself from entering into competition with the purchaser. In such case the same public policy enables him to enter into any stipulation, however restrictive it is, provided the restriction in the judgment of the court is not unreasonable, having regard to the subjecrimatter of the contract.”
    As we understand the cases, it has uniformly been held that a contract restraining the defendant from carrying on his business through an extent of territory greater than that in which he had before carried it on, or which was within the fair reach of his business, is unreasonable and, therefore, void. A contract, therefore, which would exclude the defendant from the mining and shipping of coal either in the territory traversed by, or on, the Mississippi river and its tributaries, considering the number of places at which coal may be there mined, is undoubtedly an unreasonable restraint upon one whose business sold to the plaintiff was that of mining coal on the Monongahela river and shipping it down the Ohio and Mississippi for sale. We are of opinion, therefore, that the plaintiff is not entitled to an injunction restraining the defendant from mining and operating throughout the whole extent of territory embraced by the Mississippi river and its tributaries.
    [It is contended, however, by the defendant that the stipulation is divisible, and that even if it is void, as applied to the largest extent of territory described, it is not invalid as to parts of it. There is no question that such contracts are divisible, and. that one part or stipulation thereof may be void while the other is not: Oregon Steam Navigation Co. v. Winsor, 87 U. S. 64. It seems to us that the contract in question may be fairly said to speak of six different districts, viz: each of the rivers, Monongahela, Ohio and Mississippi, and the district included by each of them and its tributaries; and if any of the districts so designated shall appear to be not more than is reasonable for the protection of the purchaser of the defendant’s good will, the contract as to it would be valid.] [4]
    We have already said that the territory included by the Mississippi and its tributaries is too large. For the same reason it appears to us that the territory included by the Ohio river and its tributaries is too large. No coal was ever mined by the defendant on either the Ohio or the Mississippi rivers, and the marketing or shipping of coal which was done by him on those rivers was merely incidental to the mining done by bim on the Monongahela, his sales being confined to four or five places along the whole extent of both rivers. It would seem, therefore, that a contract restraining the defendant from marketing or shipping coal at any and every point on these rivers is unreasonable and void.
    [It remains to consider whether or not the contract not to mine, market or ship coal on the Monongahela river is reasonable. The expression, “ mining coal on the Monongahela,” we take to mean mining the coal adjacent to that river, which might be conveyed to and shipped upon the river within the limits above mentioned. The defendant was engaged, at the time of selling out the business and good will of the companies with which he was connected, in mining generally in the Monongahela river district, which, as above stated, is a small and fairly well-defined district. We see nothing unreasonable in an agreement connected with the sale of the good will of the mining business in that district to remain out of the business of mining and shipping coal in such a district, although there were parts of the district in which the defendant did not actually operate mines or ship coal.] [5]
    As to the allegation that the plaintiff company has no valid charter and is, therefore, not entitled to bring suit, we are of opinion that the charter cannot be declared void collaterally in a suit brought by the company upon contracts made with it, and especially in a suit against one who has dealfwith the company as a corporation.
    It is further claimed by the defendant that the contract sought to be enforced by this proceeding is void under the act of congress of July 2, 1890, which declares to be illegal every contract in restraint of trade or commerce between states. So far as the business of mining is concerned, it is very plain that an agreement or combination in regard to it is not within the purview of the act of congress, mining not being in any sense commerce, at least not interstate commerce : United States v. Knight Co., 156 U. S. 1 (15 Sup. Ct. Repr. 249). It remains to consider the effect of that part of the contract which probits the marketing or shipping of coal on the Monongahela river. The Monongahela river lies partly in the state of West Virginia and partly in Pennsylvania. The contract not to market or ship coal on the Monongahela river, so far as it prohibits the shipping of coal mined in West Virginia into Pennsylvania, or vice versa, would, therefore, seem to be a restraint of interstate commerce. It is true that, in fact, the plaintiff company does not market or ship coal except that which it mines, but the language of the contract is sufficient to cover all marketing and shipping of coal whatsoever. We are, therefore, of opinion that the contract, so far as it prohibits the marketing and shipping of coal between or within the states on the Monongahela river, is made void by the act of congress. This, however, does not affect the validity of the contract so far as marketing and shipping coal within the state of Pennsylvania is concerned : Addyston Pipe and Steel Co. v. United States, 175 U. S. 211 (20 Sup. Ct. Repr. 96).
    We are, therefore, of opinion that the plaintiff is entitled to an injunction restraining the defendant from engaging directly or indirectly, individually or through partnership or partnerships, limited partnerships or corporations (except in conjunction with the plaintiff company), in the business of mining, marketing or shipping of coal on the Monongahela river within the state of Pennsylvania, for a period of ten years from October 2, 1899, and that the defendant pay the costs.

      Errors assigned, among others, were (4, 5, 6) portions of opinion as above, quoting them and the decree.

      Wm. B. Rodgers, with him Renry A. Davis and J. Rodgers McCreery, for appellants.
    The decree is founded upon a number of agreements between complainant and defendant, and corporations and partnerships in which he was interested, containing trade restrictions. We contend that the agreements referred to, with others of a similar character taken at the same time, constituted, or tended to constitute, a monopoly in complainant: Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. 178 ; Nester v. Brewing Co., 161 Pa. 473.
    Unless a covenant in restraint of trade is merely auxiliary to a lawful contract, it is void: United States v. Addyston Pipe & Steel Co., 85 Fed. Repr. 271.
    We contend that the contract was inseparable; that the restriction being too broad or extensive was illegal, and that the restriction falls.
    While a trade restriction may be reformed by striking out such part of it as is unreasonable, the general rule applies that the reason for the severance must appear in the agreement itself so that, a new contract be not made for the parties : Mills v. Dunham, L. R. 1 Ch. (1891), 576.
    The agreement affected interstate commerce and is in violation of the Sherman act: Gibbs v. McNeeley, 118 Fed. Repr. 120; United States v. E. C. Knight Co., 156 U. S. 1 (15 Sup. Ct. Repr. 249).

      George 0. Wilson, with him Chas. G. Mcllvain, for appellee.
    Plaintiff company is not a monopoly: Oregon Steam Nav. Co. v. Winsor, 87 U. S. 64.
    The contract is divisible : Smith’s App., 113 Pa. 579; Leather Cloth Co. v. Lorsont, Law Rep. 9 Eq. 345 ; Chitty on Contracts, 987; Oregon Steam Nav. Co. v. Winsor, 87 U. S. 64; Rousillon v. Rousillon, L. R. 14 Chan. Div. 351; Carter v. Ailing, 43 Fed. Repr. 208.
    The existence of the plaintiff company is not a violation of the Sherman act: Addyston Pipe & Steel Co. v. United States, 175 U. S. 211 (20 Sup. Ct. Repr. 96); United States v. Knight Co., 156 U. S. 1 (15 Sup. Ct. Repr. 249); United States v. Joint-Traffic Assn., 171 U. S. 505 (19 Sup. Ct. Repr. 25) ; United States v. Trans-Missouri Freight Assn., 166 U. S. 290 (17 Sup. Ct. Repr. 540.)

      December 31, 1904:
   Opinion by

Mb. Justice Dean,

In the year 1899 Finley and Whitney commenced taking options in writing from owners and operators of coal properties on or adjacent to the Monongahela river. The river was navigable for coal shipping about eighty miles southwest from its junction with the Allegheny river at Pittsburg, and for the greater part of this distance is in Pennsylvania. At the time the options were being taken a large number of persons, partnerships and companies were engaged in the business of mining and shipping coal down the river from the Monongahela territory to points on the Monongahela, Ohio and Mississippi rivers as far south as New Orleans, reaching points in all the states through which the rivers flowed. The object of the promoters was to take options from all the coal operators on the Monongahela from whom they could buy at a price to be agreed upon. Out of the whole number of operators, they agreed with and took an optional purchase from many of them, among these last this defendant and his partners in the coal business. The purchase from defendant and his partners included all the property of the latter then operated by them on the Monongahela river, coal mines, coal boats, towboats, steamers, shipping and landing wharves from Pittsburg to New Orleans. Finley and Whitney also took like options from all the coal operators with whom they could agree, and who were engaged in a like business to Jutte and his partners. It was not a conspiracy or combination between all of the selling companies who, along with defendant, gave options on their properties to plaintiff to purchase and then contracted not to enter into competition with plaintiff on that river for a fixed period, for, so far as appears, each vendor contracted for himself alone, without reference to any other; but as concerned results the consequences to interstate commerce were the same as if all the vendors had joined in one contract with plaintiff. To that extent traffic was stopped on their part the same as if a direct combination among them all had been made. A large number of mines, going operations on the Monongahela, they did not buy or obtain options for. There was also a large number of steamboats and other transportation property on which options were not taken.

On October 2, 1899, in pursuance of the optional agreements with defendant and his partners, for the consideration of over $1,000,000, which was paid, all the property was 'transferred to plaintiff. The other operators who had given options but had no connection with the defendant, about the same time transferred their properties to plaintiff. The plaintiff company was at the time of the- transfer and still is a Pennsylvania corporation. Within fifteen months after this transfer by Jutte and after he had received the consideration money, he joined with others and obtained from the state of New Jersey a charter for a coal company, purchased and opened large tracts of coal land upon the Monongahela, also boats for transportation, and is now actively engaged in the business of mining and transporting coal upon the Monongahela, Ohio and Mississippi.

There is no dispute as to the main facts; so far as a man can bind himself by a written stipulation not to do a particular thing, the defendant, after receiving the full consideration for his promisé, is openly and defiantly violating it. He justifies this violation on two grounds : (1) The contract with the others entered into between him and plaintiff constituted a monopoly and is therefore void because against public policy. (2) The contract is in violation of the act of congress of July 2, 1890, commonly known as the anti-trust or Sherman act, and is therefore void.

Each of the transfers directly to the plaintiff company embodies this stipulation :

“We severally and jointly stipulate, covenant and agree to and with the said the Monongahela River Consolidated Coal and Coke Company, not to engage directly or indirectly, individually or through partnership or partnerships, limited partnerships, ■ corporations (except in conjunction with the said the Monongahela River Consolidated Coal and Coke Company) in the business of mining, marketing or shipping of coal in the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries for the period of ten (10) years from the date hereof. ”

It may be argued, as is argued here, that it was the intention of these contracting parties to create a monopoly in the plaintiff of the coal mining business adjacent to the Monongahela river, but that is an inference from the circumstances dehors the agreement. So far as appears from the face of the agreement, except as to the restriction of defendant to time and place, it was simply a purchase at full price by one coal producer of another’s plant. To monopolize, according to the Century Dictionary, is “to obtain or engross the whole of; obtain exclusive possession of. ” Assume that the plaintiff bought in addition to defendant’s plant, forty-nine others and that it had a capital of $40,000,000 in stock and bonds ; then at the rate it paid for this property it could not have been far from the end of its resources. The evidence shows without contradiction, that there were eighteen mines in operation which the plaintiff did not buy, besides there were many thousands of acres of workable coal land accessible to the river which could have been bought had it desired to obtain or engross the whole. The defendant himself within a few months bought other coal lands and opened mines on the Monongahela ; he has also purchased and built boats and acquired all the means of transportation to successfully compete with plaintiff company. Whatever may have been the undisclosed intention of plaintiff at the date of its purchase, neither the agreement it made with defendant nor those it made with his covendors, nor any of the surrounding facts at the date of the agreement, unless it be the restriction before quoted, show any intention to obtain exclusive possession of either all coal or means of transportation in the Monongahela valley.

That stipulation does undoubtedly exclude the defendant and all others signing similar agreements from mining coal on the Monongahela, or shipping on that river, the Ohio and Mississippi or their tributaries and to that extent the stipulation constitutes a monopoly, that is, a monopoly in so far as it debars those particular individuals for a specified term of years from engaging in that particular business on certain rivers. Is that stipulation void because contrary to public policy? As we understand the public policy of this commonwealth, both as disclosed in the constitution of 1874 and as apparent in all the legislation since, it is to encourage and promote large aggregations of corporate capital for the development of all the commonwealth’s resources.

The last case in this state distinctly following the older rulings, is Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. 173. That casejheld to the principle that all restraints on trade are injurious to the public, and, therefore, presumably illegal and void on the ground of public policy. In that case five coal companies had entered into an agreement to mine coal and then practically pool the product, each through a committee to equalize their respective shares in the fund according to the award of the committee, which committee was to determine and control the output of the mines so as not to lower the market price of coal. A draft drawn by one of the coal companies on the other to equalize the division between them, after acceptance, was protested for nonpayment. Suit was brought and the defense was made, that being based on the pooling agreement, that agreement was in restraint of trade and was void because against public policy. This court so decided and the plaintiff was not permitted to recover. That case was decided in 1871. While we have no doubt as to the soundness of the general principle laid down in that case, we doubt if today the court would hold on the particular facts developed, that the principle was applicable to those facts.

We think that perhaps at this day we would go further, and inquire whether in view of the purpose of the contract and the slight restraint it imposed on trade, it was unreasonable and therefore void, and not void solely because it to a certain extent monopolized the production of coal. For in a certain sense every coal corporation with a large capital engrosses the business to the exclusion of individuals of small means ; it is able to buy and develop a large acreage and open upon it many coal mines; then to supply itself at a heavy outlay with all the means of transportation to market. It buys up the stock of smaller corporations and the property of individuals and consolidates them in some form into one company under one management. Probably, at this day, if the five companies in the case cited desired to stop competition among themselves and cheapen production by cheapening the cost of management, they would, under our corporation act of 1874, and its supplements, adopt some scheme of consolidation under one charter and thus to a greater extent and far more effectually suppress competition than they did under their pooling agreement which was declared illegal because against public policy. The professed purpose in organizing these large corporations is not to kill competition, but to cheapen production in the interest of the public. Yet whatever the real purpose competition is stopped by an entirely lawful method. Prior to the adoption of our present constitution, to obtain authority to organize a coal corporation it was necessary in each instance to resort to the legislature for a special act. Compared with the number now in existence of such corporations but few were organized. But the present constitution prohibited all such special acts and declared in effect, that in the future all such corporations should be organized under the general laws to be adopted by the legislature. The legislature enacted the general corporation act of 1874, a most liberal act in its requirements. Very soon a host of coal corporations sprang into existence which with their large capital bought out, or by their cheaper production drove out, individual producers, so that to-day there is but little competition in the business with individuals. We have only to peruse our own constitution and the statutes adopted in pursuance of its mandate, to learn what has been the public policy in this regard in the commonwealth. If competition has been largely suppressed, if the courts more liberally interpret in their application the common-law rules on the subject of monopoly, it is only because a more rigorous interpretation would defeat the true intent and meaning of our constitutional and statutory legislation on the subject. Our decisions on this subject may not be in accord with those in some other states and possibly not in accord with those in the federal courts, but in so far as they affect matters only within the territorial jurisdiction of this commonwealth and do not conflict with the constitution of the United States or statutes adopted in pursuance thereof, we believe they are sound because in accord with the public policy of this state, and we shall adhere to them.

The opinion in the case cited is a very able one by the late Chief Justice Agnew in which most of the English authorities and those of our own states up to that day, 1871, are noticed. But since then both in England and this country the doctrine has been much relaxed as to all such contracts. A full review of the cases is found in Carter v. Alling, 43 Fed. Repr. 208, decided in 1890. In that case Blodgett, J., says :

“ The only defense seriously insisted upon in the case is that this contract is void as a contract in restraint of trade. ... In the earlier English doctrine upon the subject of contracts, it was held that they were contrary to public policy, and void; but as the later cases came before the court, this doctrine was much relaxed, and the first modification of the doctrine was the recognition of the validity of contracts of this nature where the restraint was limited as to space or time and reasonable in its nature. And the reported cases are abundant in which an undertaking by one person not to carry on a given business within a limited area and within a fixed period of time has been sustained. ... In later years a further relaxation of the old rule has- grown up in England and America and the courts have repeatedly recognized the validity of contracts in the restraint of trade throughout the entire country, where such restraint was not unreasonable in view of the nature and extent of the business of the covenantee.”

This is the general current of decision in this day. When a contract is,presented which in some degree restrains trade, we do not at dnce decide that it is void as against public policy, but we go further and inquire, is it limited as to space or time, and is it reasonable in its nature ? We are approaching nearer and nearer to the conclusion, although we have not yet reached it, that common honesty is the true public policy.

This contract is limited as to time, ten years; it is limited as to space, the immediate territory adjacent to three navigable rivers and their tributaries. This is its plain interpretation, although these words are not used; the boats purchased could reach no further than the landings and wharves thereon. Then is the restriction reasonable ? The time was not an indefinite period as in some of the cases; shipments could be made owing to the uncertainty of navigation but once or twice a year. The time and space covered by the restriction were each, considering the character and extent of the business, reasonable. The defendant also sold his good will in the-business. Considering the facts and that a full price was paid, even though the agreement restrained defendant, we think the restraint reasonable and therefore the contract was not a violation of the public policy of this state, and hence as concerns that point it ought to be enforced in equity.

The next question is, is it prohibited by the act of congress of July 2,1890, known as the anti-trust or Sherman act? That act is entitled: “ An act to protect trade and commerce against unlawful restraints and monopolies.” The first section of the act declares that: “ Every contract, combination in the form of trusts or otherwise or conspiracy in restraint of trade or commerce among the several states or with foreign nations is declared illegal.”

The leading facts in the Northern Securities case, as stated, by Justice Hablan who rendered the majority opinion of the court, are very briefly these: The Great Northern, and Northern Pacific Railway Companies, having in view the ultimate placing of their systems under a common control, purchased the capital stock of the Chicago, Burlington & Quincy Railway Company and exchanged therefor the joint bonds of the two purchasing roads, thus became the owners of $107,000,000 of the $112,000,000 of the whole capital stock of the purchased road, whose lines aggregated about 8,000 miles, main line and branches, and which after running through several states connected at the western end with the Northern Pacific, one of the purchasing roads. By this operation the purchasing roads obtained full control of the purchased road with its main line and branches. Then Hill and Morgan, holders of stock respectively in the two purchasing companies, with associate stockholders in each company respectively, entered into a combination to form under the laws of New Jersey a holding corporation to be called the Northern Securities Company with a capital stock of $400,000,000; to this company in exchange for its capital stock was to be turned over the capital stock, or a controlling interest in it, of each of the railways forming the combination, with power in the holding company to vote such stock and in all respects to act as the owner thereof. This, practically, would enable the holding company to pursue a policy which would benefit all the constituent companies at the expense of the public, take away all inducement to competition between them and be a virtual monopoly of interstate and foreign commerce, theretofore carried on by competitors. The organization was completed according to the terms proposed in the original combination. It was declared illegal by the supreme court of the United States. Justice Hablan speaking for the court says: “ In our judgment the evidence fully sustains the material allegations of the bill and shows a violation of the act of Congress, in so far as it declares illegal every combination or conspiracy in restraint of commerce among the several states and with foreign nations, and forbids attempts to monopolize such commerce or any part of it.”

The facts and the inferences from them in that case, popularly known as the Northern Securities Company case, are distinctly different from those in the case before us. As Justice Harlan says in the course of the opinion : “Necessarily also the constituent companies ceased under such a combination to be in active competition for trade and commerce along their respective lines, and have become practically one powerful consolidated corporation by the name of a holding corporation, the principal, if not the sole object for the formation of which, was to carry out the purpose of the original combination, under which competition between the constituent companies would cease.” The New Jersey charter of the holding company does not disclose, at least only very vaguely, the real purpose of the combination, but the case of the United States was supplemented by depositions, which left no doubt of its purpose; that purpose was, by agreement, to stifle all competition in freight and passenger business between what had theretofore been competing railroads engaged in interstate commerce, a commerce which had been conducted by rail, which could be conducted nowhere etóe than on the narrow way owned and under the complete control of the holding company. This in the very words of the first section of the anti-trust act, was a “ combination or conspiracy in restraint of trade ” between the states. It placed the entire control of the charges for interstate commerce on these railroads in the holding company, a New Jersey corporation, which could exercise its despotic control solely in the interest of its stockholders regardless of the interests of the people. But those are not the facts with reference to this plaintiff corporation. It carried nothing across the continent on a railroad of which it was in absolute control; its traffic was on a natural highway of which it had no control whatever, either as to rates or facilities for shipment. The contract between defendant and the other persons from whom plaintiff purchased was between them alone. Except in so far as the contract bound defendant to withdraw from a limited market for a limited period the public was in no way affected by that contract; everybody was as fre'e to navigate the three rivers and their tributaries as before; no one could place a contract obstruction in them for they are navigable waters of the United States as uncontrollable by artificial means as the tides of the sea.

But notwithstanding this freedom of the highway, does the contract constitute a combination or conspiracy under the antitrust act in restraint of trade or commerce? The United States enforces no public policy as a state policy, except so far as established by the United States constitution and the laws made in pursuance thereof. The opinion of Justice Harlan, already noticed, after citing the authoritative interpretations of the anti-trust act by that court asks this question: “ Do former adjudications determine the controlling questions raised by the pleadings and proofs ? ” (in the case before him). To this he answers: “ Although the act of congress known as the antitrust act has no reference to the mere manufacture and production of articles or commodities within the limits of the several states, it does embrace and declare to be illegal every contract, combination or conspiracy, in whatever form, of whatever nature and whoever may be parties to it, which directly or necessarily operates in restraint of trade or commerce among the several states or foreign nations; that the act is not limited to restraints of interstate and international trade or commerce that are unreasonable in their nature but embraces all direct restraints imposed by any combination, conspiracy or monopoly upon such trade or commerce.”

Although Justice Brewer, while concurring in the judgment did not concur in all the reasons therefor, and particularly the last clause of the preceding sentence of Justice Harlan, in which it is declared that the act of congress includes all direct restraints upon commerce without considering their reasonableness. As to that question he says: “ Instead of holding that the anti-trust act included all contracts reasonable or unreasonable in restraint of interstate trade, the ruling should have been, that the contracts there presented (the Northern Securities case) were unreasonable restraints of interstate trade and as such within the scope of the act.” While, if the decision had been based on the unreasonableness of the Northern Securities contract, this would have been a decision by a minority of the court, yet Justice Brewer., while not concurring in that reason, does concur in the announcement of Justice Harlan, that the contract in that case operated as a direct restraint upon interstate commerce. It is, therefore, the law, not only the statute itself but its interpretation by the highest federal court. In fact, that interpretation is not new, it only follows many older ones, not all on the same statute of course, for it was only passed in 1890, but on the power of congress to legislate on subjects, where that power has been expressly conferred upon it by the constitution of the United States.

We are of opinion that this contract is in direct restraint of interstate commerce, not only under the Northern Securites decision already cited, but under other decisions of the same court cited in the opinion in that case, not that we think, in view of the purpose of this contract and the limited territory and time covered by it, the restriction is unreasonable, but because the United States statute as interpreted by the United States court so declares.] If it were a Pennsylvania statute, reaching only Pennsylvania territory, then under common-law rules of interpretation we would decide differently, but the 2'estriction in this contract reaches into and restricts traffic in many states. It is no answer to say that the restriction as to time is short and as to territory comparatively very limited. That the neeessitjr of some protection to the purchaser is so manifest in view of the large price paid defendant, that at least, as to him, it is not unreasonable. These considerations have little or no weight with us when we are called upon to interpret a contract the stipulations1 of which clash with an act of congress regulating interstate commerce. In such case we must follow the United States courts. This, however, does not take away our jurisdiction over contracts made in Pennsylvania so far as they affect only Pennsylvania territory. Justice Jackson, then a circuit judge, afterwards justice of the supreme court of the United States, In re Greene, 52 Fed. Repr. 104, uses this language : “ But congress has not the power or authority under the commerce clause, or any other provision of the constitution to limit and restrict the right of corporations created by the states or the citizens of the states in the acquisition, control and disposition of property. ” The learned judge of the court below recognizing tbis as the law, and that this contract by its terms reached beyond the boundaries of this state, nevertheless held that the contract was divisible and that part of it which stipulated that defendant would not mine, market or ship coal on the Monongahela, being divisible from that part which restricted him from carrying on interstate traffic, the contract so far as confined to this state should be enforced. This is the latter part of the third conclusion of law:

“ It remains to consider whether or not the contract not to mine, market or ship coal on the Monongahela river is reasonable. The expression, ‘ mining coal on the Monongahela,’ we take to mean mining the coal adjacent to that river, which might be conveyed to and shipped upon the river within the limits above mentioned. The defendant was engaged at the time of selling out the business and good will of the companies with which he was connected, in mining generally in the Monongahela river district, which, as above stated, is a small and fairly well-defined district. We see nothing unreasonable in an agreement connected with the sale of the good will of the mining business in that district to remain out of the business of mining and shipping coal in such a district, although there were parts of the district in which the defendant did not actually operate mines or ship coal.”

This conclusion only bears directly on the reasonableness of the restriction, at the same time the limited territory in which it may be enforced is designated; but in tlie second conclusion of law the court says :

“ It is contended, however, by the defendant, that the stipulation is divisible, and that even if it is void as applied to the largest extent of territory described, it is not invalid as to parts of it. There is no question that such contracts are divisible, and that one part or stipulation thereof may be void while the other is not: Oregon Steam Navigation Co. v. Winsor, 87 U. S. 74. It seems to us that the contract in question may be fairly said to speak of six different districts, viz : each of the rivers, Monongahela, Ohio and Mississippi, and the district included by each of them and its tributaries ; and if any of the districts so designated shall appear to be not more than is reasonable for the protection of the purchaser of the defendant’s good will, the contract as to it would be valid.”

We consider these two conclusions together for they are somewhat interdependent. Both are earnestly attacked as error by appellant’s counsel. It is argued: “ That while a trade restriction may be reformed by striking out of it such part as is unreasonable, the general rule applies, that the reason for the severance must appear in the agreement itself, so that a new contract be not made for the parties.” It is argued, that the court itself must on a mere inspection of the agreement be able to separate the good from the bad. This, as the court below demonstrates, is not an exact statement of the rule nor the correct rule as held in Smith’s Appeal, 113 Pa. 579, and 1 Parsons on Contracts, 457: “ Where one gives a good consideration and thereupon another promises to do two things, one legal and the other illegal he shall be held, to do that which is legal unless the two cannot be separated.” The defendant, in consideration of the purchase money, covenanted not to engage directly or indirectly in the business of mining, marketing or shipping coal in the territory traversed by the Monongahela, Ohio and Mississippi rivers and their tributaries for the period of ten years. The anti-trust act does not apply to manufacturing, mining or other productive industries: United States v. Knight Co., 156 U. S. 1; ' United States v. Freight Association, 166 U. S. 290 ; United States v. Joint-Traffic Association, 171 U. S. 505. Hence, of itself the mining and shipping of coal as a mere productive industry, no matter how large may be the capital of the producing corporation, how many smaller operators or corporations it may have absorbed, as long as it does not directly repress competition, is not obnoxious to the anti-trust act. This contract so far as it restrained defendant from mining and shipping coal in Pennsylvania is good; so far as it tended to restrain him from carrying on interstate commerce it is bad and cannot be enforced. We have found no authority, nor has appellant pointed us to one, which! holds that if a contract be illegal and not on its face severable the whole contract is void. We think the true rule to be, that if any part of an illegal consideration be not divisible the contract falls. Here the consideration for defendant’s promise was $1,000,000 ; his covenant was not to mine and ship on these rivers ; the law steps in and severs the contract by declaring it is unlawful as concerns two of those rivers but lawful as to the third; why is not this a severance of the good part from the bad as much so as if he had specified that for a distinct part of the consideration he covenanted not to mine and ship on the Monongahela in Pennsylvania, and for another and distinct part of the consideration he covenanted not to mine and ship on tire Ohio and Mississippi ? And this divisibility of the contract was as clear the day it was executed as to-day, for that part agreeing not to ship on the Ohio and Mississippi was unlawful then and that part agreeing not to mine and ship on the Monongahela was good then. The defendant knew or ought to have known when he accepted the consideration, that part of his covenant was worthless and part good.

The Addystorr Pipe & Steel Co. v. United States, 175 U. S. 211, a case cited here by both parties, suggests such severance by judicial decree, though that was not the point decided. The defendants, six in number, entered into a combination by which there was to be no competition between them in thirty-six states and territories, in the sale of cast-iron pipe. The combination was declared illegal under the interstate commerce act, and all of defendants were enjoined by the court below. The contract was not on its face severable. Justice Peckham, who rendered the opinion affirming the judgment, said : “ In one aspect however that judgment (of the court below) is too broad in its terms—the injunction is too absolute in its directions—as it may bo construed as applying equally to commerce wholly within a state as well as to that interstate or international only. This was probably an inadvertence merely. Although the jurisdiction of congress over commerce among the states is full and complete it is not questioned that it had none over that wholly within the state and therefore none over combinations and agreements so far as they relate to a restraint of such trade or commerce. It does not acquire any jurisdiction over that part of a combination wholly within the state by reason of the fact that the agreement covers and relates to commerce which is interstate. . . . The combination herein described covers both commerce which is wholly within a state and also that which is interstate. In regard to such of these defendants as might reside and carry on business in the same state, where the pipe provided for in any particular contract was to be delivered. . . . The statute would not be applicable to them. ... To the extent that the present decree includes in its scope the enjoining of defendants thus situated from combining in regard to contracts for selling pipe in their own states it is modified and limited to that portion of the combination or agreement which is interstate in its character.” We cite these remarks of Justice Peokham only as showing that an agreement, which on its face bound all, yet as to some was bad under the interstate commerce law. Because they only carried out the combination between themselves, residents of the same state, the court severed them in framing its decree from their colleagues in the agreement who had violated the law. The able counsel for, appellant has advanced nq convincing reason in his argument why the court below shopld be convicted of error in treating part of this contract as lawful and part as unlawful as it clearly is.

We discover nothing in the specifications of error which warrants further discussion; they are all overruled and the decree is affirmed.

      Also reported 15 Sup. Ct. Repr. 249.

       “ “ 17 “ “ “ 540.

       “ “ 19 “ “ “ 25. Reporter.

       Also reported 20 Sup. Ct. Repr. 96. Reporter.


source: Caselaw Access Project

license: Public Domain

text:
    Monongahela River Consolidated Coal and Coke Company v. Jutte.
    Argued Oct. 26, 1904.
    Appeal, No. 64, Oct. T., 1904, by plaintiff, from decree of O. P. No. 2, Allegheny Co., Jan. T., 1902, No. 28, on bill in equity in case of Monongahela Eiver Consolidated Coal and Coke Company v. William O. Jutte.
    Before Mitchell, C. J., Dean, Fell, Mestbezat, Potter and Thompson, JJ.
    Affirmed.
    December 31, 1904:
   Opinion by

Mb. Justice Dean,

In this case the court below refused an injunction to restrain defendant from what, under the authority of the anti-trust act of congress and the exposition of that act by the United States supreme court, would have been an interference with interstate commerce; at the same time it did enjoin him from violating his agreement with plaintiff so far as that agreement operated in the state of Pennsylvania. From the first mentioned part of this decree, plaintiffs have brought this appeal. We think the decree was right and have said so as fully as we care to in the opinion handed down this day on appeal by defendant from same decree.

Decree affirmed.


author: Mb.. Justice Mestbezat,

text:
    Humbird v. Davis, Appellant.

      A dims—Joint adions—Parties plaintiff—Secret profits—Partnership.

    Where several persons combine together to raise a fund which they hand over to one of their number to be used by him as their agent in buying a mine, and the agent is discovered to have made a secret profit in the purchase of the mine, the parties injured may maintain a joint action of assumpsit, for money had and received, against the agent to recover their share of the secret profits; and in such a case it is immaterial that the contributions of the plaintiffs to the fund were in unequal amounts.
    When a joint deposit is made in the usual course of business, a joint action cannot be defeated by proof that it was owned in different proportions by the depositors. The difference in their interests and whether they be separate or joint, is a matter resting with themselves, with which the recipient of the money has nothing to do.
    Where the defendant is proved to have in his hands the money of the plaintiff, which aequo et bono, he ought to refund, the law conclusively presumes that he has promised so to do, and the jury are bound to find accordingly; and, after verdict, the promise is presumed to have been actually proved.
    The count for money had and received may be supported by evidence that the defendant obtained the plaintiff’s money by fraud, or false color or pretense. So, if the money of the plaintiff has in any other manner come to the defendant’s hands for which he would be chargeable in tort, the plaintiff may waive the tort, and bring assumpsit upon the common counts.
    Argued Oct. 27, 1904.
    Appeal, No. 68, Oct. T., 1904, by defendants from judgment of C. P. No. 2, Allegheny Co., Jan. T., 1901, No. 738, on verdict for plaintiffs in case of James S. Humbird et al. v. Edward J. Davis and W. E. Griffiths.
    Before Mitchell, C. J., Dean, Fell, Brown, Mestrezat, Potter and Thompson, JJ.
    Affirmed.

      Assumpsit for money had and received. Before Shaker, J.
    The facts appear by the opinion of the Supreme Court.
    The defepdants presented the following points :
    1. The plaintiffs have failed to show any right of action against the defendants or either of them, and the plaintiffs, therefore, are not entitled to recover in this action. Answer : Refused. [1]
    2. That the plaintiffs have failed to show any joint obligation or liability on the part of the defendants to them, the said plaintiffs, jointly, and plaintiffs, therefore, are not entitled to recover in this action. Answer: Refused. [2]
    3. That the plaintiffs have failed to show any joint obligation to plaintiffs either jointly or severally, the said plaintiffs, therefore, are not entitled to recover in this action. Answer: Refused. [3]
    4. That the present action is simply an action of assumpsit, based upon the waiver of an alleged tort, and in such action, even though the defendants may have been joint tort feasors, no implication of a joint promise can arise to make good the alleged loss! arising by reason of the alleged tort. Answer : Refused. [4]
    8. That in no phase of the case can plaintiffs recover in an action of assumpsit. Answer: Refused. [5]
    9. That under all the evidence in the case the verdict of the jury must be in favor of the defendants. Answer: Refused. [6] j
    10. Defendant Griffiths asks the court to charge the jury that as plaintiffs’ action is based on deceit, and there is no evidence that defendant Griffiths participated in, or had any knowledge of, such alleged deceit, the verdict of the jury must be in favor of Griffiths. Answer: Refused. [7]
    Verdict and judgment for plaintiffs for 142,958.49. Defendants appealed.

      Errors assigned were (1-7) above instructions, quoting them.

      J. S. Ferguson, with him E. Gr. Ferguson, for appellant.
    If a tort has once been waived, the defendant cannot afterwards be treated as a wrongdoer: Lythgoe v. Vernon, 5 H. & N. 180.

      The old rule was that what was tort in its inception could not by any subsequent transaction bo made, the foundation of implied assumpsit: Jones v. Hoar, 22 Mass. 285; Thompson v. Bond, 1 Camp. 4.
    Each of the plaintiffs in this case has held on to what he got. The case, therefore, is not like Smith v. Bellows, 77 Pa. 441.
    The tort which may be waived to ground an action of assumpsit must not rest in pure invention: Girard Township v. Girard Borough, 86 Pa. 23.

      John S. Wendt, with him Johns McQleavé, for appellees.
    Under the facts, it is clear and well settled that the plaintiffs can recover jointly against the defendants in this case: Yeaney v. Keck, 138 Pa. 532; Barrett v. Bemelmans, 163 Pa. 122; Mytinger v. Springer, 3 W. & S. 405; Griffith v. Willing, 3 Binn. 317; Steelman v. Dougty, 5 W. N. C. 166; Benjamin v. Zell, 100 Pa. 33; Lee v. Gibbons, 14 S. & R. 105; Boggs v. Curtin, 10 S. & R. 211; McIntyre v. Coal Co., 118 Pa. 108; Gihnore v. Wilbur, 29 Mass. 120; Hill v. Tucker, 1 Taunt. 7; Given v. Kelly, 85 Pa. 309; Agnew v. Johnson, 17 Pa. 373; McNair v. Wilcox, 121 Pa. 437; Meason v. Kaine, 67 Pa. 126.
    Where tort is committed against several jointly, and the tort be waived and assumpsit brought, the action must be joint: Irwin’s Administrator v. Brown’s Executors, 35 Pa. 331.
    And this is true whether the wrong is a technical or merely a fraud: Gilmore v. Wilbur, 29 Mass. 120; Reeside v. Reeside, 49 Pa. 322.
    The plaintiffs may be regarded as tenants in common of the money which they jointly advanced to Davis to be used in purchasing the property, and part of which he and Griffiths converted to their own use. If this be so, they must sue jointly for the damages arising from the conversion, and if the tort be waived, still the action remains joint: Decker v. Livingston, 15 Johns (N. Y.), 479; State v. True, 25 Mo. App. 451; Little v. Harrington, 71 Mo. 390; Louisville, etc., Ry. Co. v. Hart, 119 Ind. 273 (21 N. E. Repr. 753); Gilmore v. Wilbur, 29 Mass. 120-124 ; Irwin’s Adm’r v. Brown’s Ex’rs, 35 Pa. 331; White v. Brooks, 43 N. H. 402; Hill v. Gibbs, 5 Hill (N. Y.), 56; Seay v. Sanders, 88 Mo. App. 478.
    In cases of alleged combinations to defraud, the preliminary proof of the combination has been held to be sufficient where the circumstances amount to some evidence of collusion, though slight: Rogers v. Hall, 4 Watts, 359; Gibbs v. Neely, 7 Watts, 305; Deaker v. Temple, 41 Pa. 234; Kimmell v. Geeting, 2 Grant, 125; Simons v. Vulcan Oil & Mining Co., 61 Pa. 202; McCabe v. Burns, 66 Pa. 356 ; Peterson v. Speer, 29 Pa. 478.
    Assumpsit and not action for an account is the proper remedy to recover a share of the profit ot' a single joint completed transaction, as where the transaction consists of a purchase and resale: Howell v. Kelly, 149 Pa. 473; Brubaker v. Robinson, 3 P. & W. 295; Galbreath v. Moore, 2 Watts, 86; Cleveland v. Farrar, 4 Brewster, 27; Jackson v. Emmens, 119 Pa. 356 ; Wright v. Cumpsty, 41 Pa. 102; Meason v. Kaine, 63 Pa. 335; Miller v. Ord, 2 Binney, 382; Paton v. Clark, 156 Pa. 49; Fleming v. Alter, 7 S. & R. 295; Haldane v. Fisher, 1 Yeates, 121; Martzell v. Stauffer, 3 P. & W. 398; Bixler v. Kunkle, 17 S. & R. 298.
    An action of assumpsit in Pennsylvania is a substitute for a bill in equity in many cases, and this is especially so where there is fraud or a breach of trust and no complicated accounts are involved : Lee v. Gibbons, 14 S. & R. 105.
    At common law, where one tenant in common has been constituted bailiff by the others to receive the rents and profits, an action of account render can be maintained against him ; and under the statute of 4 Anne, c. 16, sec. 27, which is in force in Pennsylvania, where one tenant in common receives from a third party more than his proportionate share of rents or payments due in respect of the common property, his co-tenants may maintain the action against him: McAdam v. Orr, 4 W. & S. 550 ; Griffith v. Willing, 3 Binn. 317 ; Swint v. McCalmont Oil Co., 184 Pa. 202; Winton Coal Co. v. Pancoast Coal Co., 170 Pa. 437.
    Account render lies between client and attorney, Bredin v. Kingland, 4 Watts, 420 ; against a guardian, Irvine v. Hanlin, 10 S. & R. 219; against a trustee, Bredin v. Dwen, 2 Watts, 95 and Dennison v. Goehring, 7 Pa. 175; by a principal against agent, McLean’s Ex’rs v. Wade, 53 Pa. 146.
    It is settled that the action of account render lies between partners in Pennsylvania, and is to be liberally extended: New-bold and others v. Sims, 2 S. & R. 317 ; James v. Browne, 1 Dallas, 339 ; Whelen v. Watmough et al., 15 S. & R. 153; Tutton v. Addams, 45 Pa. 67-69.
    Assumpsit is a substitute for account render in Pennsylvania: Winton Coal Co. v. Pancoast Coal Co., 170 Pa. 437 ; Albright v. Mercer, 14 Pa. Superior Ct. 63 ; McFadden v. Erwin, 2 Whart. 37.
    December 31, 1904:
   Opinion By

Mb.. Justice Mestbezat,

This is an action of assumpsit brought by the plaintiffs jointly against the two defendants who are sued jointly to recover a sum of money which the plaintiffs allege the defendants unlawfully and fraudulently obtained from them. The case was submitted to the jury and the verdict in favor of the plaintiffs must be regarded as establishing the alleged fraudulent acts on the part of the defendants, that they did realize a profit in the purchase of the mine of which none of the plaintiffs had any knowledge, and that the defendants were acting together in carrying out the fraud on the plaintiffs. The questions raised on this appeal are (1) whether an action by the plaintiffs jointly will lie against the defendants and (2) whether the evidence justified a verdict against the defendants jointly.

Under the facts found by the jury, it is well settled that an action may bo maintained by the injured party for his share of the secret profits realized in the transaction by the other party: Simons v. Vulcan Oil, etc., Co., 61 Pa. 202; Yeaney v. Keck, 183 Pa. 532; Emery v. Parrot, 107 Mass. 95. The parties here were engaged in a common enterprise and each was bound to act in the utmost good faith toward the others. In the purchase of the mine, the defendants were acting as the agents of their associates and could charge them only with their share of the moneys actually expended for the property. The secret arrangement by which the mine was purchased for less than the option price will inure to the benefit of the plaintiffs and the defendants alike and equity will require the latter to account for the money received from their associates in excess of what they paid the owners of the mine. The principle expressed in the following language of the court in Emery v. Parrot, supra, is applicable here: “ He obtained these commissions while his associates had a right to expect that he would effect and was effecting the best bargain he could for them and himself jointly and on the terms of equality. Benefits and advantages thus obtained, the principles of equity will not allow him to retain for himself. He must account for them and share them with his associates, the plaintiffs.”

The facts disclosed on the trial of the case clearly warranted a joint action by the plaintiffs. In furnishing the money to the defendants to make the purchase of the property, they acted jointly and not severally. The plaintiffs formed an association having a treasurer who received the subscriptions made by the plaintiffs and, acting for them jointly and not for each of them separately, sent the common fund thus raised to Davis, whom the plaintiffs by their joint agreement authorized to act for them in the purchase of the mine. As stated by the trial judge in his opinion: “ The evidence is not that each of the plaintiffs placed in the hands of Davis a distinct sum for the purpose of purchasing his share, but that all the plaintiffs contributed to the sum which was placed in Davis’ hands, that sum being composed of the various unequal contributions of the plaintiffs and money raised by a joint note of the plaintiffs, or most of them, on which they were each liable for the whoie.” It appearing that Davis was the agent of the plaintiffs and that the money received by him was their common and joint property, deposited as such with him, the consideration would be joint and the implied promise to reimburse would be to the plaintiffs jointly and hence would support a joint action by them: Archer v. Dunn, 2 W. & S. 827; Mytinger v. Springer, 3 W. & S. 405 ; Boggs v. Curtin, 10 S. & R. 211. “ The action of assumpsit,” says Gibson, J., in Boggs v. Curtin, “ must be joint or several, according as the promise on which it is founded is joint or several. Where the promise is express, there can be little difficulty in determining to which class it belongs, as its nature necessarily appears on the face of the contract itself; and if it be joint, all to whom it is made must, or, at least, may, sue on it jointly, and after having recovered, settle among themselves the proportion of the damages to which each is respectively entitled; as in the case put in the note to Coryton v. Lithebye, (2 Saund, 116a, note 2), where there was a promise to two in consideration of ten £ to procure the redelivery of their several cattle which had been distrained. But an implied promise, being altogether ideal, and raised out of the consideration only by intendment of law, follows the nature of the consideration; and as that is joint or several, so will the promise be. ” In Mytinger v. Springer, it was said by this court: “ When a joint deposit is made in the usual course of business, a joint action cannot be defeated by proof that it was owned in different proportions by the depositors. The difference in their interests, and whether they be separate or joint, is a matter resting with themselves, with which the recipient of the money has nothing to do. ” And in Lee v. Gibbons, 14 S. & R. 105, Duncan, J., delivering the opinion, says: “ But it is said, they should each one have brought an action for their separate proportion. The action is founded on a promise, implied or expressed. If it be on an implied promise, then it must follow the nature of the consideration, and as that is joint or several, so must the action be. ”

If there is a liability here on the part of the defendants to account to the plaintiffs for the money in excess of what was actually paid for the mine, it is clear that a joint action by the plaintiffs does not injure the defendants. On the contrary, it prevents a multiplicity of suits which is against the policy of the law and saves the defendants the additional costs and expense incident to an action by each of the different plaintiffs. As said by Paxson, J., in McIntire v. Coal Co., 118 Pa. 108 : “ A recovery in such (joint) suit would be a bar to any subsequent action by either (of the plaintiffs) for the same cause. Aside from this, the defendant will have to incur the risk of having to pay more money with two actions than with one, besides additional costs. The only inconvenience in the case, which we can see, would be the difficulty of apportioning the damages, in case of recovery, between the life tenant and the remainderman. But this is a difficulty with which the defendant has no concern. He would be protected in any event.”

It is admitted by the defendants, Davis and Griffiths, that in the purchase of the mine they realized a profit, divided equally between them, out of the money they received from the plaintiffs who were jointly interested with the defendants in the venture, The jury has found that this fact was unknown to any of the plaintiffs during the negotiations for the purchase of the property and until a short time prior to the bringing of this suit. The evidence fully justified the jury in finding that in all his communications with the plaintiffs with reference to the matter, Davis was acting for Griffiths as well as for himself, and that his assurances to the plaintiffs that there was no profit being realized on the purchase of the property were made for Griffiths as well as himself. The only plausible theory in the case, supported by the evidence, is that Griffiths authorized, and was cognizant of, every move made by Davis toward consummating the purchase. Griffiths testified: “ I introduced Mr. Davis to him (Terrazzes) ; told Mr. Terrazzes that Davis was a friend of mine and I had known him a great many years, and that Mr. Davis thought he could float that property and that I was willing as I was to have half the profits in that transaction, and I would divide my profits with Davis, which was all agreeable to Terrazzes. That was on my return in April, 1899. ... I said to Terrazzes, I will be very busy about September 1st; it is a hard journey backward and forward, and Mr. Davis will take up this matter for me. I said I have every confidence in Mr. Davis and anything he does is all right, so far as this option is concerned. Q. Who conducted the transactions leading to the final purchase of the various interests in mine and mill? A. Mr. Davis. I had nothing to do with it. It was part of my agreement with Davis that he was to do this work. . . . I told Mr. Terrazzes that Mr. Davis would handle that mine ; that any prpfits that would arise from it, though, I was to give Mr. Davis a half. Q. It was with that understanding and arrangement that Davis came north and got the persons to go into it? A. That was his mission, to see if he could raise that amount of money.”

It is therefore apparent that what was done by Davis toward procuring a purchaser of the mining property was done by both himself and Griffiths. When Davis solicited the plaintiffs to join the defendants in making the purchase and made the false representations to the former that the option price was the amount actually paid for the property he spoke for both the defendants and they are both responsible for his representations. Davis’ fraud was the fraud of both and neither can escape responsibility. Changing the names of the parties, the following language in the opinion of the court in Emery v. Parrot, 107 Mass. 95 may be pertinently quoted here : “ He (Griffiths) was thus fully cognizant of the illegal conduct of Davis, and co-operated with him in inducing the plaintiffs to make the purchase. He participated in the profits of the transaction; and the court are of the opinion that he as well as Davis must disgorge the secret gain which they thus jointly obtained and divided with each other. ”

We think the evidence in the case in hand was ample to sustain a verdict against the defendants jointly.

This was assumpsit for money had and received and we think the action was properly brought. Under the finding of the jury the defendants unlawfully and fraudulently received the money of the plaintiffs and hence have no right to retain it. The plaintiffs, waiving the tort, brought this action to recover the money of which they had been fraudulently deprived. The action lies on the implied promise to repay the sum unlawfully withheld. Mr. Greenleaf (2 Greenl. Ev. sec. 102) says: “ Where the defendant is proved to have in his hands the money of the plaintiff, which aequo et bono, he ought to refund, the law conclusively presumes that he has promised so to do, and the jury are bound to find accordingly; and, after verdict, the promise is presumed to have been actually proved.” And in section 120 of the same work it is said: “ The count for money had and received may also bo supported by evidence that the defendant obtained the plaintiff’s money by fraud, or false color or pretense. . . . So, if the money of the plaintiff has in any other manner come to the defendant’s hands for which he would be chargeable in tort, the plaintiff may waive the tort, and bring assumpsit upon the common counts.” Mason v. Waite, 17 Mass. 560 was an action of assumpsit to recover the amount of certain bank notes, done up in a package, which were delivered by the owner to a carrier, who, without authority, paid them to a third party for a loss at a faro table. It was held that assumpsit by the owner would lie against the party to whom they were paid. In the opinion of the court it is said: “We do not see, however, why the action for money had and received will not lie. The notes were paid and received as money, and as to any want of privity or any implied promise the law selems to be that where one has received money of another, and has not a right conscientiously to retain it, the law implies a promise that he will pay it over. ” These authorities are cited with approval in the opinion of this court in Hindmarch v. Hoffman, 127 Pa. 284,where it is held that assumpsit will lie by the owner of stolen money against the party with whom it is deposited after the latter had notice of the theft. The judgment is affirmed.


author: Mb. Justice Potter,

text:
    American Home Savings Bank Company v. Guardian Trust Company, Appellant.

      Contract—Parol agreement—Affidavit of defense.

    A written order for goods cannot be varied by parol representations alleged to have been made by one of the parties prior to the execution of the written agreement. Even if the parol agreement were contemporaneous, it is inadmissible, unless there is proof that it was omitted from the written agreement by fraud, accident or mistake.

      Contract—Sale—Warranty.

    Where a known, described and definite article is supplied, there is no warranty that it shall answer the particular purpose intended by the buyer.
    If a thing bb ordered by the manufacturer for a special purpose, and it be supplied and sold for that purpose, there is an implied warranty that it is fit for that purpose. But this principle is limited to cases where a thing is ordered for a special purpose, and must not be applied to those where a special thing is ordered, although this be intended for a special purpose.
    Argued Oct. 27, 1904.
    Appeal, No. 133, Oct. T., 1904, by ^defendant, from order of C. P. No. 3, Allegheny Co., May T., 1904, No. 446, making absolute rule for judgment for want of a sufficient affidavit of defense in case of American Home Savings Bank Company v. Guardian Trust Company of Pittsburg.
    Before Mitchell, C. J., Dean, Fell, Brown, Mestkezat, Pottee and Thompson, JJ.
    Affirmed.
    Assumpsit for goods sold and delivered.
    Rule for ¡judgment for want of a sufficient affidavit of defense.

      The goods were sold under the following written order:

    “ Offices Pennsylvania Building,
    “ Philadelphia, January 9,1904.
    “ American Home Savings Bank Company,
    “ Factory, Woodbury, N. J.
    “ Dear Sirs :—You will please ship at your earliest convenience Two Thousand Clock Home Savings Banks : finish, Gun metal finish, numbered to follow, for which we agree to pay as before, each net cash, F. O. B., Philadelphia, Pa.
    “ The above order to be shipped on or before sixty days from date, five hundred to be shipped next week.
    “ Mark the Banks : as before.
    “Yours respectfully,
    “ Guardian Trust Co. of Pittsburg,
    “ Geo. L. Stephenson,
    Treasurer.”
    Defendant filed the following affidavit of defense:
    That prior to October 80, 1903, the plaintiff was a manufacturer or dealer in the sale of a device known as “ Home Saviugs Banks,” intended to supply domestic means of accumulating savings for the purpose of deposit in banking institutions; that one W. Scott Smith, agent of the plaintiff company, entered into a contract with the defendant company, prior to October 30, 1903, whereby he agreed in the event that the defendant company should make purchases of same, that the sales of said device should be limited to three banking institutions within the radius of twelve miles from city of Pittsburg, namely, the defendant company, the Home Trust Company, and the Land Title & Trust Company ; that the devices should be in perfect order, so that money deposited therein could not be extracted therefrom, except by the bank distributing the same ; that the plaintiff would provide three competent men to introduce the said devices for the aid and benefit of the defendant company in procuring prospective customers and depositors with the said bank of savings so accumulated in said devices; and that the said defendant would be enabled to rent the said boxes to customers and depositors at a rental equal to the cost of the said devices in the city of Pittsburg, estimated to be $2.00.
    Relying upon the said representations, the defendant did enter into a contract prior to October 30, 1903, for 500 of said clock banks, and pursuant to said contract gave an order substantially as set out in plaintiff’s affidavit of claim therefor, of which they received the whole number at or about the times mentioned in the said affidavit of claim, but affiant says that while the said company did send three operators, in accordance with the said contract, they almost immediately withdrew two who were expert and left a comparatively inexperienced person in charge, and he remained but a short time.
    Affiant further says that the greater number of said 500 clocks were distributed among customers, but that they were so imperfect in this, that they would not preserve moneys deposited therein from removal by unauthorized persons, and in many instances would not permit of the entry of moneys by reason of faulty construction and were returned to the defendant,. and the defendant lost a large number of those who returned the same as customers.
    That the plaintiff company was immediately and repeatedly advised of the faulty construction of these devices, and promised to replace the same, and did in point of fact replace about fifty, but the same were in no sense free from the defects already complained of.
    Affiant further saith that before the discovery of these defects and in pursuance of the said verbal contract, the said defendant did order 2,000 additional clock savings banks with gun metal finish, upon á rush order for 500, and the remainder of said ordjer to be shipped only upon the order, from time to time, of the defendant bank. Affiant says that they did receive the 500 of the rush order, but that many of them were deficient in construction as aforesaid, and also to such an extent that standard silver dollars could not be forced through the slot in the said banks. That complaints were made, but notwithstanding the said plaintiff continued to ship against the remonstrance of the defendant, and in violation of the last mentioned order, until a total of 1,400 banks had been shipped to this defendant, and delivered by express at the defendant’s banking house.
    Affiant further says that the plaintiff company, in violation of its contract, has sold to a pawnbroker of the city of Pitts-burg numbers of these devices, to be used fox the purpose of selling rings and jewelry and otherwise, and thereby depreciating the value of the same for defendant’s purpose; that defendant employed agents to install these devices among prospective customers, and has paid them a commission of forty cents. That the failure of these devices to work properly has caused great loss to the company; that they are unable to successfully lease these defective banks by reason of the defects in construction ; that they have lost customers and depositors to whom they have been rented, who returned them and withdrew their accounts, and that the said bank has lost the amount of money paid in commissions to its agents.
    That the credit allowed by the plaintiff to the defendant company is applicable to the first order, and was paid by the defendant on account of the first order in said statement of claim mentioned, and is not a general credit on the entire account.
    Affiant says that the damage it has sustained by the breach of contract exceeds in amount the full demand of the plaintiff.

      Error assigned was the order of the court.

      S. Sehoyer, Jr., with him John P. Hunter, for appellant.
    The parol agreements set up in the affidavit of defense were admissible in evidence : Thomas & Sons v. Loose, Seaman & Co., 114 Pa. 85; Coal & Iron Co. v. Willing, 180 Pa. 165; Ferguson v. Rafferty, 128 Pa. 337.
    The facts set up in the affidavit of defense constitute a good defense to the plaintiff’s claim: Haines v. Young, 13 Pa. Superior Ct. 303; McCormick Harvesting Machine Co. v. Nicholson, 17 Pa. Superior Ct. 188.

      Charles P. Orr, of Lazear £ Orr, for appellee.
    The parol agreement set up in the affidavit of defense was not admissible in evidence : Rearick’s Executors v. Rearick, 15 Pa. 66; Wodock v. Robinson, 148 Pa. 503; Hatfield v. Thomas Iron Co., 208 Pa. 478.
    Where parties, without any fraud or mistake, have deliberately put their engagements in Writing, the law declares the waiting to be not only the best, but the only evidence of them agreement: Martin v. Berens, 67 Pa. 459; Clarke v. Allen, 132 Pa. 40 ; Hunter v. McHose, 100 Pa. 38 ; Jackson v. Payne, 114 Pa. 67; Wodock v. Robinson, 148 Pa. 503; Ziegler v. McFarland, 147 Pa. 607.
    Where a buyer orders a specified article from the manufacturers thereof by its trade name, there is no implied warranty that the article will serve the purpose intended by the buyer : Jarecki Mfg. Co. v. Kerr, 165 Pa. 529; Haines v. Young, 13 Pa. Superior Ct. 303 ; Seitz v. Brewers’ Refrigerating Machine Co., 141 U. S. 510 (12 Sup. Ct. Repr. 46).
    A purchaser takes the risk of the quality of an article, unless there be fraud or warranty. Mere representation is not warranty: Whitaker v. Eastwick, 75 Pa. 229.
    December 31, 1904 :
   Opinion by

Mb. Justice Potter,

This was an action of assumpsit in which judgment was entered for want of a sufficient affidavit of defense. The appellant contends that this was error, because it had set up in the affidavit a parol contract modifying the written order upon which the goods were furnished. But this contract as alleged by the defendant does not appear to have been contemporaneous with the written order, and for that reason the learned court below was justified in ruling that it could not be permitted to vary or contradict the latter. The first written order was given to the plaintiff by the defendant, under date October 30, 1903. The affidavit of defense alleges that prior to this time, but without stating when or where, certain agreements were made, which do not appear in the written order. So long ago as Rearick v. Rearick, 15 Pa. 66, Justice Bell said (p. 72) : “-It is recognized as a settled maxim, that oral evidence of an agreement or understanding between parties to a deed or other written instrument, entertained before its execution, shall not be heard to vary or materially affect it. Accordingly, the settled rule is that, when a contract has been reduced to writing, it is understood as expressing the final conclusions of the contracting parties, and fully accepted as merging all prior negotiations and understandings, whether agreeing or (in) consistent with it.”

In Hatfield v. Thomas Iron Co., 208 Pa. 478, the facts are quite like those of the present case. There the written contract was a sale memorandum sent by the plaintiffs to defendants and accepted by them. The language of the court there used (p. 484) is appropriate here. We said: “ The court below very properly held that the sales memorandum was the contract between the parties by which the plaintiffs agreed to sell and deliver the coke to the defendant company, and that the parol testimony offered by the defendant was not admissible to contradict the written agreement. The defendant did not propose to show a parol contemporaneous agreement inducing the execution of the written contract between the parties, nor that the execution of the agreement was procured by fraud, accident or mistake. The offer was simply to contradict the written agreement by showing by parol evidence certain negotiations prior to June 10, 1899, the date of the sales memorandum,” etc.

In the case now before us, the first order given by the defendant was for 500 clock banks, and 400 of these were shipped prior to January 9, 1904, at which date the defendant gave a second order for 2,000 more of the clock banks. It directed that they be shipped at the earliest convenience of the plaintiff, 500 of them the following week, and all within sixty days from date. It appears that in so far at least as the first order was concerned, all of the banks were delivered and accepted, and payment made upon account thereof. An inspection would certainly have disclosed the defects, had they existed, of which complaint is now made. The second order was for a known, described and definite article. And where such an article is supplied, there is not under the authorities any warranty that it shall answer the particular purpose intended by the buyer. See Jarecki Mfg. Co. v. Kerr, 165 Pa. 529 ; Seitz v. Refrigerating Machine Co., 141 U. S. 510. This latter case has been approved and followed in Pullman Palace Car v. Street Ry. Co., 157 U. S. 94.

It is true that if a thing be ordered of the manufacturer for a special purpose, and it be supplied and sold for that purpose, there is an implied warranty that it is fit for that purpose. But this principle is limited to cases where a thing is ordered for a special purpose, and must not be applied to those where a special thing is ordered, although this be intended for a special purpose: Port Carbon Iron Co. v. Groves, 68 Pa. 149. We do not see in the allegations of the affidavit of defense, sufficient to support the theory, that the representations made by the agent of the plaintiff amounted to a warranty. But in any event the defendant has not rescinded the contract. It received and has retained and used the clock banks, so that if entitled to damages, the measure would be the difference between the value as warranted, and the real value of the goods as delivered: Himes v. Kiehl, 154 Pa. 190; Seigworth v. Leffel, 76 Pa. 476.

But upon the broad ground, that it is sought to vary a written contract by parol representations previously made by one of the parties, we think the affidavit was insufficient to prevent judgment. As was said by our Brother Brown, in Krueger v. Nichola, 205 Pa. 38 : “ To contradict or vary the terms of a written contract by an oral, contemporaneous agreement between the parties, there must be allegation as well as proof, not only of it, but of its omission through fraud, accident or mistake, from the writing. This has been ruled so frequently that reference is hardly needed to one or two of the many authorities on the subject; ” citing Wodock v. Robinson, 148 Pa. 503 and Hunter v. McHose, 100 Pa. 38.

The affidavit of defense contains no allegation that by means of fraud or mistake, the real agreement of the parties was not expressed in the written orders for the goods.

The assignments of error are overruled, and the judgment is affirmed.