G. W. McNear, Inc. v. American & British Mfg. Co.
G. W. McNear, Inc. v. American & British Mfg. Co.
Dissenting Opinion
dissenting. I .am unable to agree with the majority of the court in sustaining the exceptions of the defendant numbered ‘239, 240, 254, 256, 257 and 274.
While the defendant’s requests to charge, covered by exceptions numbered 239 and 240, embrace substantially correct statements of the law they had been fully covered *320 in the charge already given and the court was not in error in refusing to give them undue prominence through repetition.
The remaining four exceptions relating to portions of the charge given upon the requests of the plaintiff, numbered 3, 5, 6 and 23, I will discuss briefly.
The third request is, “That there is no evidence in the case that the plaintiff knew of or had any scheme to monopolize quicksilver and that if Joseph H. Hoadley or the defendant had any such scheme in his mind which was illegal, which was not communicated to the plaintiff’s agent such illegal scheme in the mind of Hoadley could not be imputed to the plaintiff, the McNear Company.”
The twenty-third request is, “Thereis no evidence of any conspiracy or agreement between the plaintiff and defendant to control or fix prices or to restrain trade.”
The defendant argues that the charge of the third request took from the jury the question whether the plaintiff knew of or had any scheme to monopolize quicksilver and that the charge of the twenty-third request was virtually telling the jury to find for the plaintiff upon the question of the restraint of trade and that these requests as charged were inconsistent with, and contradictory of, another portion of the charge which is, “And so you take the testimony relating to the communications from Hoadley to McNear and from McNear to Hoadley and determine from the evidence whether or not there was a conspiracy between them in view of what happened between these gentlemen and the American and British Company.”
The two portions of the charge covered by the third and twenty-third requests may be considered separately. Taking the first part of the third request, “That there is no evidence in the case that the plaintiff knew of or had any scheme to monopolize quicksilver” there is certainly no evidence that the plaintiff had originated or adopted any such scheme. The defendant says that the plaintiff knew of such a scheme and in substantiation of that statement makes *321 reference to the testimony of John F. McNear that he knew Hoadley was trying to buy up all the output and that he was doing all in his power to help him. To treat this testimony fairly it must be considered in connection'with other testimony in the case. In the first place the purchase of or the attempt to purchase the entire output of the California mines could not be considered as an attempt to obtain a monopoly in restraint of trade and for the purpose of unduly enhancing prices if the object of the purchase was legitimate. This admission of McNear that he was trying to help Hoad-ley buy up the California output, in view of other undisputed facts, cannot be characterized as evidence showing knowledge on the part of McNear that Hoadley was engaged in conducting an illegal enterprise and there was no evidence that McNear participated in or had any knowledge of any plan on the part of Hoadley to fix the selling price of quicksilver at a figure which would operate as a restraint of trade.
The object of Hoadley as it was again and again brought to the attention of McNear was to obtain quicksilver for the Russian and Canadian governments and the quantity which Hoadley contemplated acquiring for that purpose was within the limits of their reasonable requirements. To say, as the defendant does, in substance, that because McNear knew that Hoadley was trying to get the California output he must have known that it was for an,illegal purpose, is assuming something which the testimony does not warrant. I think the trial court was correct in saying that there was no evidence That the plaintiff knew that Hoadley was trying to create a monopoly for illegal purposes.
As to the latter part of the third request it is unnecessary to argue that any illegal scheme in the mind of Hoadley which was not communicated to the plaintiff or to its agent John F. McNear could not be imputed to the plaintiff. The defendant also, further argues that the latter portion of the third request took away from the jury any consideration as to whether it might be inferred from facts and circumstances that the plaintiff’s agent knew of an illegal scheme *322 although Hoadley had not directly communicated it. This question however was distinctly left to the jury as I shall have occasion to point out later.
The meaning of the twenty-third request seems to me to be clear. Conspiracy has been defined to be a combination of persons for'an evil purpose; an agreement between two or more persons to commit in concert some reprehensible, injurious or illegal act. There was no evidence of any such agreement between the plaintiff and the defendant. The court had already pointed out to the jury that the plaintiff and defendant were both corporations and that they could only act through authorized agents. The language of the court that there was no evidence of any conspiracy or agreement to fix prices, etc., between the plaintiff and defendant was strictly correct. That the court was referring to the parties ‘as corporations is obvious. That such was the meaning of the court is clearly evidenced by a later portion of the charge in which the cóurt submitted to the jury the question, “Was there an agreement between the pláintiff and the defendant, these two corporations, acting through their respective agents to do an unlawful act” and further on the court charged the jury to “take the testimony relating to the communications from Hoadley to McNear and from McNear to Hoadley and determine from the evidence whether or not there was a conspiracy between them in view of what happened between these gentlemen and the American & British Company.”
Again the court said, “it is for you gentlemen to determine if there was a conspiracy between the McNear Company and the American & British Company for that purpose and in violation of the law.”
Still later the court said, “If you find from the evidence that Joseph H. Hoadley and John A. McNear conspired to artificially raise the price of quicksilver in this country or any state thereof, and the contracts sued upon were executed in furtherance of such conspiracy, then your verdict must be for the defendant.”
*323 And finally the court said, “it is for you gentlemen to consider the evidence relating to those matters and to the-excuse offered by the defendant, and, if the defendant shows by a fair preponderance of the evidence that it was justified in repudiating the contracts and in not going on with them or with either of them or both of them, then your verdict would be for the defendant.”
So far as appears the only authority which was vested in Hoadley by the defendant was the negotiation of the contracts of January 28 and February 9 and the only evidence that the defendant conferred that authority is its acceptance of the transfer and its undertaking to assume all liabilities of the plaintiff thereunder which it later repudiated.
There is no inconsistency between these two requests, numbered three and twenty-three, and that portion of the charge wherein the court instructed the jury to take the testimony relating to the communications from Hoadley to McNear and from McNear to Hoadley and determine from the evidence whether or not there was a conspiracy between them, in view of what happened between these gentlemen and the American & British Company.
From the reading of the charge as a whole it is apparent that the trial court sought to distinguish between a conspiracy evidenced by an actual agreement between the parties and a conspiracy which might be inferred from their relations evidenced by the letters, telegrams and telephonic conversations which passed between Hoadley and McNear and to bring to the minds of the jury the precise question which, under the testimony, it was their province to decide, th¡ t is, Did the communications which passed between McNear and Hoadley show a conspiracy between the plaintiff and the defendant ?
It must be remembered that these contracts were entered into between the plaintiff and defendant and not between the plaintiff and Hoadley. There is absolutely no direct evidence that the plaintiff and .defendant conspired together and there is no direct evidence that Hoadley was endeavor *324 ing to set up a conspiracy at the instigation of the defendant, with its knowledge or for its benefit. If there was such a. conspiracy it must be determined by way of inference from facts and circumstances connected with the transactions carried on between McNear and Hoadley. The trial court in submitting the case to the jury - explicitly stated to them, no less than four times that the question of conspiracy must in determined by them after considering the testimony relating to the communications between McNear and Hoadley.
This instruction having been repeatedly given to the jury with such distinctness, I cannot see how any doubt or confusion could have arisen in their minds as to whether the question of conspiracy was left to them. There is nothing in the record suggesting that any such doubt or confusion existed and there was sufficient testimony upon which the jury might find the verdict which it did.
The majority opinion finds reversible error in that portion of the charge of the trial court relating to the Sherman Act. Assuming that the view expressed by the court was an erroneous one, it was harmless error under the circumstances of the case. As before stated the question of conspiracy, as evidenced by the various communications between Hoadley and McNear, was submitted to the jury and upon consideration of the evidence the jury found that there was.no conspiracy. If there was no conspiracy then there could have been none under the Sherman Act and the exclusion of that Act from the jury would not be prejudicial to the defendant. The jury were left free to find conspiracy at common law or under the laws of California if, in their judgment, the evidence warranted such finding.
I think that the exceptions which the majority opinion sustains should be overruled and that the case should be remitted for judgment for the plaintiff on the verdict.
Opinion of the Court
This is an action in assumpsit brought by the plaintiff, a corporation organized under the laws of California, against the defendant, a corporation organized under the laws of New York and doing business in the city of Providence, to recover damages for the alleged breach of two contracts in writing, dated respectively January 28, 1916 and February 9, 1916.
The case was tried before a justice of the Superior Court sitting with a jury and resulted in a verdict for the plaintiff for $124,295.94, being the full amount of the plaintiff's claim with interest. The defendant duly filed its motion for new trial which was denied by said justice. The case is before us upon the defendant’s exception to this action of said justice and upon certain exceptions taken by the defendant in the course of the trial.
The declaration alleges that on January 28, 1916, the plaintiff entered into a written contract with one Murray Innes by which it agreed to buy and said Innes agreed to sell 240 flasks of quicksilver at $275 a flask; and also that *304 on February' 9, 1916, by another contract in writing the plaintiff agreed to buy and said Innes agreed to sell the full output of the “Oceanic” quicksilver mine owned by said Innes for six months from the date of the contract at $275 per flask. Said Innes reserved from said full output 25 flasks, sold to another concern, and the 240 flasks which were the subject of the contract of January 28, 1916. The declaration further alleges that by written agreements the plaintiff assigned said contracts to the defendant, which assumed them; that the defendant refused to accept or to pay for any of the flasks of quicksilver delivered under said contract; that the plaintiff has been obliged to receive and pay for them and has sold said flasks at auction at a loss of $111,606.93, which with interest was the amount of the verdict. The defendant 'in addition to the general issue set up a number of pleas in defence to the effect that said contracts, and the assignments of the same to it, were part of conspiracy between the plaintiff and itself to obtain a monopoly of quicksilver and sell it at an unreasonable profit in violation of the common law, of the statutes of California, and of the act of Congress known as the Sherman Act. The defendant also pleaded that the contracts- sued upon were ultra vires the defendant.
It appears that the plaintiff was an old established concern of San Francisco carrying on extensively the business of a general shipping and commission merchant on the Pacific coast, handling merchandise in large quantities by carload and shipload lots, buying and selling on its own account and as agent for others, engaged in chartering cargo ships, “shipping to the Orient and Europe, merchandise of any kind,” and having “a large grain warehouse in California.”. The active managers are George W. McNear, Jr., and John A. McNear. The business was founded and built up by their father, G. W. McNear, Sr., and was incorporated in 1908. The finding is warranted that the transactions involved in the case before us were carried on for the plaintiff by John A. McNear, its Vice-President, and that on the part of the *305 defendant these transactions were conducted by its agent, Joseph H. Hoadley.
Quicksilver or mercury is used in making certain chemical and medicinal drugs, in the manufacture of certain kinds of paint, of thermometers and other articles, and much more extensively in the manufacture of fulminate of mercury. This latter substance is indispensable in the manufacture of cartridges and the primers of other ammunition. With the beginning of the late war the demand for quicksilver increased. Its production in this country was chiefly in California, some was produced in Texas and small quantities in other western states. Outside of this country the chief sources of supply were from mines in Spain and Austria. The war closed the Austrian mines-to the world outside the Central European powers. The British controlled the output of the Spanish mines and had placed an embargo upon the exportation of quicksilver from Great Britain. Quicksilver is sold on the market, contained in iron cases about twelve inches high with a screw stopper. Each case contains seventy-five pounds of' quicksilver. These cases are called flasks and the market price is fixed per flask.
John A. McNear met Joseph H. Hoadley in New York in December, 1916. Mr. and Mrs. Hoadley entertained Mr. and Mrs. McNear at dinner one evening and during that entertainment, as the plaintiff claims, Mr. Hoadley intentionally “planted” in the mind of Mr. McNear that he had intimate relations with some body of men which he called indefinitely the Russian syndicate. Throughout the testimony reference is made to this group as the “Russians,” the “Russian syndicate” and the “Russian representatives.” After the return of Mr. McNear to California, on January 6,1916, he received the following telegram from Mr. Hoadley in New York : “Put yourself in touch with controlling interests to purchase output for 1916 of quicksilver of following producers act quick wire fully 18 East Eighty Second Street will care for your interests want number of flasks price and monthly deliveries get ten days to accept New *306 Idria Mines San Benito County New Almadén and Guada-loupe Santa Clara Oceanic San Luis Obispo St. John Solano Oathill Napa Mercy Fresno Great Western Lake County Parkfield Monterey Wondeer Hernadez San Benito Cambria Karl San Luis Obispo Los Prietes Santa Barbara Phoenix Santa Clara Great Eastern Sonora Reed Colo.” Mr. Mc-Near immediately began the study of the whole quicksilver situation, acted as he was requested in the telegram of January 6, and reported to Mr. Hoadley. He found that the yearly output of quicksilver in this country was between 18,000 and 20,000 flasks; that the largest source of supply was California which produced about 15,000 or 16,000 flasks per year; and that the list of mines mentioned in the telegram of January 6, 1916, embraced about all the large producers of quicksilver. Following the telegram of January 6, 1916, there were a large number of communications between Mr. McNear and Mr. Hoadley in regard to securing control of the output of various mines for 1916. These communications were almost daily, to some extent they were by letter but largely by means of telegrams and by conversations over the telephone. On January 6, 1916, the market price of quicksilver was about $150. per flask. The price rose rapidly thereafter until it reached $275. and $300. per flask between January 26 and February 15. As a result of the negotiations of Mr. McNear, the plaintiff procured an agreement for the sale to the defendant of the total output of the New Idria mine, the largest producer in California. Its estimated production was 7,500 flasks per year with a possible output of 10,000 flasks per year. This contract, however, did not become effective through the failure of the defendant later to furnish the required guaranty of performance. Mr. Mc-Near also negotiated with the owners of other mines and progress was made toward securing options upon the output of a number of smaller mines. Mr. McNear through his dealings with Mr. Murray Innes obtained the contracts which are involved in this suit for the product of the Oceanic mine, the third largest producer in California. Mr. Innes *307 refused to execute these contracts with the defendant without a satisfactory guaranty that the contracts would be kept by the defendant. After a series of promises on the part of the defendant to furnish a satisfactory guarantor, which promises it did not keep, in order to prevent a failure of the negotiations the plaintiff took the contracts in its own name and was allowed a rebate or concession on the price of the quicksilver by Mr. Innes. According to the testimony the facts relating to the rebate were communicated to the defendant and approved by its agent Mr. Hoadley. The defendant received assignments of these contracts and assumed the obligation of receiving the quicksilver from the seller and paying for the same. According to the testimony soon after this time, upon the urgent request of certain large manufacturers of ammunition who were users of fulminate of mercury, the British government permitted two-shipments of quicksilver to be made to this country of about 2,000 and 1,000 flasks, respectively. These shipments resulted in bringing about a rapid decline in the market price of quicksilver which in the month of August, 1916, reached $68 per flask. For the rest of 1916 the price fluctuated between $70. and $80. per flask.- The defendant failed to keep its agreements named in the assignments of said contracts and the plaintiff was obliged to receive and pay for the output of the Oceanic mine as delivered, which quicksilver it afterwards sold at a loss.
*308
As to the issue of illegality it is the contention of the plaintiff that the transactions between these parties, with reference to the purchase of the 1916 output of quicksilver, were of such a nature that the only inference properly to be drawn from them is that the plaintiff was unaware of any illegal purpose on the part of the defendant; that if the defendant had such illegal intent the plaintiff was not a party to it or combined with the defendant to promote it; that the acts and purposes of the plaintiff were plainly those of an agent arranging for the purchase of a commodity on behalf of a principal who is seeking to supply the legitimate requirements of a ready customer or customers, viz., the Russian government and perhaps the Canadian government. It is the contention of the defendant that the evidence warranted the finding, and that the jury should have found, that the purpose of the defendant was to create an illegal monopoly in quicksilver; that the plaintiff was well aware of such purpose and combined with the defendant to promote it with the expectation of sharing in the profits which should accrue from its successful accomplishment.
*309 In his general charge to the jury said justice, after calling to their attention the defendant’s claim of a conspiracy between the plaintiff and the defendant and after instructing the jury as to what constituted a conspiracy, and as to the right of an owner of property to fix the price at which he will sell the same, continued as follows: “but there must be a combination between two or more persons in order to have a conspiracy, and so you take the testimony relating to the communications from Hoadley to McNear and from McNear to Hoadley and determine from the evidence whether or not there was a conspiracy between them in view of what happened between these gentlemen and the American & British Company.” At the request of the defendant said justice charged the jury, reading from the defendant’s first request, as follows: “1. If you find from the evidence that the plaintiff and defendant conspired to create a corner in quicksilver, then your verdict must be for the defendant.” Later, upon the request of the plaintiff, he instructed the jury as follows, reading to them from the plaintiff’s third request to charge: “3. That there is no evidence in the case that the plaintiff knew of or had any scheme to monopolize quicksilver and that if Joseph H. Hoadley or the defendant had any such scheme in his mind which was illegal, which was not communicated to the plaintiff’s agent, such illegal scheme in the mind of Hoadley could not be imputed to the plaintiff, the McNear Company.” And further instructed them, reading from the plaintiff’s twenty-third request to charge: “23. There is no evidence of any conspiracy or agreement between the plaintiff and the defendant to control or fix prices or to restrain trade.” Later, upon his own motion, the court instructed the jury as follows: “I think, Gentlemen, I have covered the provisions of the law relating to this case and now it is for you to take the case and consider the evidence under the law as stated to you by the Court, and if you come to the conclusion that the defendant has not shown by a fair preponderance of the evidence that there was a contract or that *310 these contracts were made in conspiracy for the purpose of advancing the price of quicksilver on account of the defendant and the plaintiff obtaining a monopoly on it, or that the contracts were not in contravention of the Statute Laws of the United States, the Sherman Act or the laws of the State of California, why you will return a. verdict for the plaintiff for the sum stated in the amended Bill of Particulars which has been filed as evidence in this case.” Still later, after an inquiry from counsel for the defendant the justice instructed the jury as follows: “All the requests to charge which I have read to you, both for the plaintiff and for the defendant, are granted as read to you.”
*311 In Marrash v. United States, 168 Fed. 225, the court said, at page 229 : “It is argued that there was no direct evidence of conspiracy and the circumstantial evidence was insufficient to warrant a conviction. . . . It is not necessary to establish the conspiracy by direct evidence. Conspirators do not go out upon the public highways and proclaim their purpose; their methods are devious, hidden; secret and clandestine. It is enough that they have a common purpose to defraud and that they act together for that purpose.
“It is not necessary that a formal agreement be proved; it is sufficient if the testimony shows that the parties are acting together understandingly to accomplish the same unlawful purpose, even though individual conspirators may do acts in furtherance of the common unlawful design apart from and unknown to the others. It is manifest, therefore, that in many and, indeed, in most cases of conspiracy the corrupt agreement is proved by circumstantial evidence.” Alaska S. S. Co. v. International Longshoreman’s Ass’n., 236 Fed. 964; United States v. Keitel, 211 U. S. 370; United States v. Newton, 52 Fed. 275; In Re Friedman, 164 Fed. 131.
*313
There are other facts and circumstances appearing in the correspondence between the parties from all of which a jury might with reasbn conclude that a conspiracy existed between these parties; there are other circumstances which some minds might regard as strongly supporting the contention of the plaintiff. The case was one requiring a submission of the issues to a jury upon the conflicting evidence.
*315
7. “If you find from the evidence that the contracts sued upon were entered into as a part of a scheme to artificially raise the price of quicksilver then your verdict must be for the defendant.”
8. “If the plaintiff through John McNear knew the purpose for which Hoadley or the defendant was purchasing the quicksilver and that purpose was so to control the market *317 that it could raise the price of quicksilver the verdict must be for the defendant.” (Tr. p. 856.)
These requests are correct statements of the law. The plaintiff contends that individuals can not set up the Sherman Act as a defense against such contracts as are here sued upon. That contention is unsound. Courts will not enforce contracts which are tainted with illegality. In Continental Wall Paper Company v. Voight and Sons Co., 212 U. S. 227, the court said : “In such cases the aid of the court is denied, not for the benefit of the defendant, but because public policy demands .that it should be denied without regard to the interests of individual parties. It is of no consequence that the present defendant company had knowledge of the alleged illegal combination and its plans, or was directly or indirectly a party thereto. Its interest must be put out of view altogether when it is sought to have the assistance of the court in accomplishing ends forbidden by the law.” McMullen v. Hoffman, 174 U. S. 639; Bement v. National Harrow Company, 186 U. S. 70; Oscanyan v. Arms Company, 103 U. S. 261. The plaintiff claims that its position in this regard is supported by Wilder v. Corn Products Refining Company, 236 U. S. 165. That case is not in point and its language does not justify the plaintiff’s conclusion that the United States Supreme Court after some uncertainty as to its position has in the Wilder case finally decided that individuals could not set up the act as a defense against such contracts as are here sued upon. As we have said above the question should have been submitted to the jury as to whether there was an illegal conspiracy between these parties to create á monopoly and to restrain trade contrary to the provisions of the Sherman Act. If it should be found that there was, then the contracts sued upon were clearly in furtherance of that conspiracy, and the illegality by reason of the violation of the Federal statute is inherent in the' contracts. The United States Supreme Court has never indicated any uncertainty in its position that in such circumstances the illegal combination, of which such con *318 tract was a part, might be set up as a defense to its enforcement, although the illegal scheme did not appear in any of its provisions. And in Wilder v. Corn Products Co. that position of the court was plainly set forth. That case is-authority for the proposition, stated in its headnote, that "a party cannot assert .as a defense to a suit for money otherwise due under a contract, not inherently illegal, the fact that the party otherwise admittedly entitled to recover is an illegal combination under the Anti-Trust Act.”
The defendant has included in its bill of exceptions about three hundred which relate to rulings of said justice made in the course of the trial upon the admission and exclusion of testimony. We have examined them. Most of them are upon the refusal of said justice to permit the defendant to ask certain questions in cross-examination of the plaintiff's witnesses. In many instances we are of the opinion that there is merit in the exception, but none of them relate to matters which are vital in the case, and in view of our determination upon other exceptions, we will not extend the opinion by a discussion of this large number of rulings. They all relate to rather elementary principles with regard to the latitude properly allowed in the cross-examination of witnesses; they indicate that in a number of instances the defendant was unduly restricted in such examination.
All exceptions which relate to the defendant’s claim that the contracts of the defendant were ultra vires are overruled. The powers given to the defendant by its charter are clearly broad enough to authorize the making of such contracts.
The exceptions which concern the defendant’s claims that said contracts are not enforceable against the defendant; because the forms of guaranty attached thereto were not executed are without merit.
The testimony of Joseph H. Hoadley given at a former trial, in the circumstances appearing in the transcript was properly excluded.
We are of the opinion that the defendant’s exceptions should not be sustained to the judge’s rulings excluding the *319 declarations of Hoadley to the witness Beach and evidence as to the acts of Hoadley at the time of. the formation of the Mercury Products Company. The defendant urges that after the introduction of evidence of a conspiracy the acts and declarations of each conspirator in pursuance of its objects are admissible against all. We have already indicated that in our opinion there was sufficient circumstantial evidence of conspiracy to require the submission of the question of its existence to the jury. We think, however, that in the state of the proof and the uncertainty as to the connection of the declarations and the acts-in question to the conspiracy alleged in this case, said justice was acting well within his discretion' in excluding such testimony from the jury.
As to the defendant’s exceptions to rulings relating to the alleged bad faith of the plaintiff in receiving rebates on the price of the quicksilver which is the subject of the contracts sued upon, it is the uncontradicted testimony that full disclosure was made by the plaintiff’s agent to the defendant’s agent with regard to these rebates. The allegations of bad faith are unsupported.
The justice’s rulings with regard to the admission of evidence of damages accruing subsequent to the date of the writ are without error as are his rulings as to the allowance. of interest in case the plaintiff should be permitted to recover the principal of its claim.
The defendant’s exceptions numbered 239, 240, 254, 256, 257 and 274 in its bill of exceptions are sustained; all of its other exceptions are overruled.
The case is remitted to the Superior Court for a new trial.
Reference
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