Case ID: ohio-st_35/html/0666-01.html
Source: Caselaw Access Project
Author: {"author": "McIlvaine, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Central Ohio Salt Company v. Stephen H. Guthrie.
    voluntary association of salt manufacturers was formed for the purpose of' selling and transporting that commodity. By the articles of association, all salt manufactured or owned hy the members, when packed in barrels, became the property of the company, whose committee was authorized and required to regulate the price and grade thereof, and also to control the manner and time of receiving salt from the members; and each member-was prohibited from selling any salt during the continuance of the association, except by retail at the factory, and at prices fixed by the company: Held,, that such agreement was in restraint of trade, and void as against public policy.
    Error to the District Court of Muskingum county.
    The original action was brought in the Court of Common Pleas of Muskingum county by the plaintiff in error against defendant in error, to recover the possession of a thousand barrels of salt. An order of delivery was issued to the sheriff of said county. The defendant, by answer, denied the right of the plaintiff to the possession of the property, and by cross-petition alleged, among other things, that the contract under which the plaintiff claimed was illegal and void, and prayed for an injunction, restraining the plaintiff from interfering in any manner with the property in dispute. The salt in question was manufactured by defendant at bis salt furnace, known as the Harrison furnace, In the Muskingum valley. The plaintiff is an unincorporated, association of salt manufacturers, doing business in the Muskingum and Hocking valleys, formed for the purpose of controlling the manufacture and sale of salt in those valleys, and is composed of thirty or more parties, engaged separately and independently in the manufacture of salt. The articles of association are in writing, of which the following is a copy :
    “ "We, the undersigned, owners of and lessees of the salt furnaces of the Muskingum and Hocking valleys, for the purpose of regulating the prices and sustaining the quality of salt made by and for us, do hereby agree, and do bind ourselves, each with and to the others, jointly and severally, and our heirs, executors, administrators, and a.ssigns, to the terms and conditions of the following contract, to wit: We agree that from this fifteenth day (15th) of September, 1871, and for a period of five years from the above date, we do hereby form ourselves into an association for the Sale and transportation of salt.
    “ The association shall be called and known by the name-of the Central Ohio Salt Company.”
    “ The officers of the company shall consist of a president and five directors ; two of the said directors shall be chosen from the Hocking valley and two more from .the Muskingum valley, and one from Guernsey county, Ohio.
    “ The aunual meeting of the company shall be holden at the company’s office, on the second Tuesday of May of each year, for the election of directors and the transaction of such other business as may come before the meeting,, except that the first election shall be held immediately after the organization of the association, at such time and place as may be agreed upon by the members of the association.
    “ The representation of the stockholders shall be one vote to each furnace.
    
      “ It shall be the duty of the directors to regulate the-price and grades of salt, and settle all disputes and- questions in regard to the same; also to employ an agent or agents, who shall be governed by them in all matters per-tabling to the business of the company. The directory «hall require a satisfactory bond from the agents for the faithful discharge of his or their duties, and safe-keeping •of the funds of the company while in his possession.
    “ A majority of the board of directors shall constitute a quorum to do business.
    “ The manner and time of receiving and distributing salt shall be under the control of the directory.
    “ All salt made or owned by the members of this association shall be branded as the directors may require, and becomes the property of the company when packed out in barrels.
    “ Each member of the association binds himself to sell «alt only at retail, and then only to actual consumers at the place of manufacture, and at such prices .as may be fixed by the directors from time to time.
    “ And it is further agreed by the members of this association, that in case of any sale, lease, or other disposition •of any furnace or furnaces now owned, operated, or controlled by them, such sale, lease, or transfer, shall be subject to each and all of the conditions of this agreement, and the vendee or lessee shall at once become a member of this association.
    “ Eor the faithful performance of the covenants and stipulations herein named, we do severally bind ourselves, executors, heirs, administrators, and assigns, to the association in the sum of two thousand dollars ($2,000), which sum shall be taken as liquidated damages, to be paid by any party who may fail in such faithful performance.
    “ This contract may be amended by a two-thirds vote of the members of- this association.
    “In case of any removal, resignation, or death of any member of the directory, it shall be the duty of the assoeiation to elect some one to fill the vacancy without delay.
    “ In testimony whereof, we have hereunto subscribed our names and affixed our seals, this 31st day of August, 1871.
    “ Salina Salt and Coal Co. [seal.] by G. T. Gould.
    Hocking Valley Coal and Salt Co., by John McCracken,. Acting Director.
    Ben. G. Converse. E. M. Scott, [seal.]
    Abraham Morrison. Henry Krigbaum.
    S. A. Guthrie. J. R. Patterson.
    George McClure. John T. Havener.
    C. Kinsel. Jesse S. Baker.
    H. Blandy. James Moore.
    Hiram Cowell. John Stevens.
    Caleb Wilson, Sen. S. H. Guthrie.
    0. Ballou.
    “ I, James Morrison, for myself and Charles Stone, do-hereby agree to pay to the directors of the Central Ohio-Salt Company ten cents per barrel for all the salt that we-shall manufacture and sell, so long as the said company shall keep the price at not less than one dollar and seventy-five cents per barrel, at Zanesville, Ohio, for the term of five years from this date, and we do .bind ourselves to be-governed by the Central Ohio Salt Company’s rates, and not to undersell them at any time during said term of five-years.
    James Morrison. September 27,1871.
    William Sherwood. “ W. 0. Sherwood.
    Havener & Benjamin. E. M. Stanberry.
    J. W. Kinzel. C. Wilson, Jr.
    Henry Stainbrook. E. Sherwood.
    B. Kinzel. B. Wilson.
    S. H. Guthrie, Agent Harrison Furnace, and for his wife.”'
    “Amended September 7, 1871 :
    “ It is understood and agreed, that the penalty in the-foregoing article of association (of $2,000) shall only apply to each individual who may violate the same.
    “ These articles of association shall not be binding upon any until all the salt-makers and lessees in Hocking and Muskingum valleys have signed the same.
    
      “Joseph Kelly, Jonathan Barnes, Joseph Herrald, to have privilege of retailing salt at my mill.”
    The ease made by the cross-petition of defendant was "tried in the court of common pleas, where a decree was rendered in his favor. On appeal to the district court a like decree was rendered.
    On the trial, testimony was offered showing that salt manufactured in other localities was placed in the same markets with the salt under the control of the plaintiff, and .also, that the association does not include all the manufacturers of salt within the valleys of the Muskingum and Hocking rivers. It also appears that defendant, for some "time after the organization of the plaintiff, complied with the terms of the articles, but afterward refusing to deliver to "the company, salt manufacture by him, the original action was brought to enforce the agreement.
    
      Harrison, Olds & Marsh, for plaintiff in error:
    This contract is not subject to any objection on the ¡ground that the public are, by it, exposed to any of the evils of a monopoly,; or that the parties to it are injuriously affected by it. Hence, Alger v. Thacker, 19 Pick. 54; Mitchell v. Reynolds, 1 P. Wms. 181; Morris Run Coal Co. v. Barclay Coal Co., 68 Penn. St. 173; Hilton v. Eckersly, 6 Ellis & B. 47, are not applicable to this case.
    If it appears, from the pleadings and proof, that the restraint is partial; that the contract is founded on a valuable consideration, and is reasonable and not oppressive, it will be enforced. Lange v. West, 2 Ohio St. 519. See also Grasselli v. Lowden, 11 Ohio St. 349.
    Contracts in restraint of trade, which, considered with reference to the situation, business, and object of the parties, and in the light of all the surrounding circumstances, .appear to have been made for a just and honest purpose and for the protection of legitimate interests, and are rea.sonable as between the parties, and not specially injurious to the public, will be upheld; and the weight or effect to ■•be given to the surrounding circumstances is not affected by any presumption for or against the validity of the restriction. Such a restriction is valid, even if it extends over a large district. Hubbard v. Miller, 27 Mich. 15; Moore Twist Drill and, Machine Co. v. Moore, 103 Mass. 73; Beal v. Chase, 31 Mich. 490; Jones v. North, L. R., 19 Eq. Cas. 426; s. c., 12 Moak’s Eng. Rep. 826; Hedge et al. v. Lowe, The Reporter, vol. 7, p. 368; Dunlap v. Gregory, 10 N. Y. 241; Avery v. Langford, Nay’s Rep. 663 (appended to this case is a short summary of the decisions on this question since 1711, arranged in chronological order); Pierce v. Woodward, 6 Pick. 206; Ewing v. Johnson, 34 How. Pr. 202. Eor a list of cases, see 10 Moak’s Eng. Rep. 837, note.
    The attention of the court is specially called to Jones v. North, L. R., 19 Eq. Cas. 426, s. c. 12 Eng. Rep. 826; Palmer v. Stebbins, 3 Pick. 188; Addison on Contracts, 892.
    
      Stephen H. Guthrie, for defendant in error,
    on the question of contracts in restraint of trade, cited: Crawford v. Wick, 19 Ohio St. 190; Stanton v. Allen, 5 Denio, 434; 4 Denio, 349; 68 N. Y. 558; 68 Penn. St. 173; 53 Penn. St. 467; 29 Conn. 538; 79 Ill. 346; 14 La. Ann. 168; 6 Am. Rep. 621; 36 Cal. 358 ; 1 Minn. 230; 6 E. & B. 17; 13 Allen, 375; 6 Sheldon, 241.
   McIlvaine, C. J.

The only questions made in the argument of this ease relate to the validity of the contract of association. No objection has been made, in this court, or the courts below, as to the nature of the relief sought by the cross-petition of defendant, and that question has not been considered. That all contracts in partial restraint of trade are not void as against public policy, is too well settled to be gainsaid ; while, on the other hand, it is as fully established, as a general rule, that contracts in general restraint of trade are against public policy, and, therefore, absolutely void. Upon the authorities, however, the line, between such as are void and those that are binding, is not very clearly defined.

Public policy, unquestionably, favors competition in trade, to the end that its commodities may be afforded to the consumer as cheaply as possible, and is opposed to monopolies, which tend to advance market prices, to the injury of the general public.

We think the contract before us should not be enforced. Hy it all the salt manufacturers (with one or two exceptions) in a large salt-producing territory, and whose aggregate annual product is about 140,000 barrels, have combined for the expressed purpose of regulating the “ price and grade of salt.” A board of directors is chosen. All salt made or owned by the membe'rs, as soon as packed into barrels, is placed under the control of the directors. “ The manner and time of receiving and distributing salt shall be under the control of the directory.” “ Each member of the association binds himself to sell salt only at retail, and then only to actual consumers, at the place of manufacture, and at such prices as may be fixed by the directors from time to time.” The directors make monthly reports of sales, and pay over the proceeds to the members, in proportion to the amount of salt received from each.

The clear tendency of such an agreement is to establish a monopoly, and to destroy competition in trade, and for that reason, on grounds of public policy, courts will not aid in its enforcement. It is no answer to say that competition in the salt trade was not in fact destroyed, or that the price of the commodity was not unreasonably advanced. Courts 'will not stop to inquire as to the degree of injury inflicted upon the public; it is enough to kuow that the inevitable tendency of such contracts is injurious to the public.

Nor is this agreement within the principle which permits a person to bind himself not to engage in trade at a particular place. Here the restraint was general. A member of this association, under this agreement, could not engage in the traffic at any place during the life of the association, except only to retail to actual consumers, at the place of ■manufacture, and then only from salt in bulk, and at the-price named by the company.

It is also claimed, on behalf of the plaintiff, that this-agreement does not affect the right of the members to continue the industry in which they are engaged without restraint; that the company can not control or limit the-quantity of salt to be manufactured, and, therefore, the-contract does not injuriously affect the interests of labor. We think that the provision that “ the manner and time of receiving and distributing salt shall be under the control of the directory,” confers upon the company ample power to embarrass the freedom of the members as to the quantity of salt which they might wish to manufacture. There is no agreement that the company will receive all the salt manufactured, and at the time when it may be ready for sale.

On the whole case, we are clearly of opinion that this agreement is void as against public policy.

Judgment affirmed.