Court Opinion

ID: 9767320
Source: CourtListenerOpinion
Date Created: 2023-08-29 05:16:42.200686+00
Date Added: 2024-06-11T13:37:24.709201
License: Public Domain

*654On Rehearing.
YOUNG, Justice.
The State’s anti-trust suit for final injunction and penalties (against Fairbanks-Morse, $50 to $1,500' per day from January 1, 1938 to date of petition, June 9, 1948) is for all practical purposes a criminal action and subject to the same rules of strict construction. Ford Motor Co. v. State, 142 Tex. 5, 175 S.W.2d 230; also subject to the stringent rule of pleading applicable to injunctions “that ‘the aver-ments of material and essential elements must be sufficiently certain to negative every inference of the existence of facts under which petitioner would not be en-Jitled to relief’ ”; Powell v. City of Baird, Tex.Civ.App., 132 S.W.2d 464, 468; the petition, in other words; being nowise aided by presumption or intendment.
Above rules should be borne in mind; further that only two subdivisions of our comprehensive and highly drastic laws against monopolies and restraints of trade are here involved. They provide in part: Article 7426: “A ‘trust’ is a combination of capital, skill or acts by two or more persons, firms, corporations or associations of persons, or either two or more of them for either, any or all of the following purposes: (1) * * * to create or carry out restrictions in the free pursuit of any business authorized or permitted by laws of this State.” Art. 7428: “Either or any of the following acts shall constitute a conspiracy in restraint of trade: 1. Where any two or more persons, firms, corporations or associations of persons, who are engaged in buying or selling any article of merchandise, produce or any commodity, enter into an agreement or undertaking to refuse to buy from or sell to any other person, firm, corporation or association of persons, any article of merchandise, produce or commodity.”
It is also obvious upon analysis of appellant’s petition (second amended original) that the principal target or object of attack is Fairbanks-Morse Company and Texas sales of its Diesel engines. Nevertheless and despite this simple fact, the first count of the State’s indictment consists of the novel but formidable charge that such 'Chicago concern and others named have combined their capital, skill and acts for the purpose of creating and carrying out restrictions on the free pursuit of the business of constructing municipal tight and power systems. In the first .place, it is quite evident that the construction of a light plant is not in legal significance a commodity or an article of commerce and therefore outside the scope of Art. 7426, defining “trusts.” In Dannel v. Sherman Transfer Co., Tex.Civ.App., 211 S.W. 297, 298, this court long ago- held that: “The ‘combination of capital, skill or acts by two or more persons’ * * * contemplated by the statutes must be in relation to articles or commodities of merchandise, produce, or commerce, or where they are in any manner affected or controlled”; and in Duggan Abstract Co. v. Moore, Tex.Civ.App., 139 S.W.2d 198, 201, it was ruled that the Anti-Trust statutes were passed “to protect the general public in the manufacture, sale, distribution, etc., of merchandise, produce and commodities * * See also Forrest Photographic Co. v. Hutchinson Gro. Co., Tex.Civ.App., 108 S.W. 768; Smythe v. Fort Worth Glass & Sand Co.) 105 Tex. 8, 142 S.W. 1157. Such holdings, definitive of “commodities” or “articles of Commerce,” are not peculiar to Texas Courts. In Kidd v. Pearson, 128 U.S. 1, 9 S.Ct. 6, 10, 32 L.Ed. 346, it is said: “Manufacture is transformation— the fashioning of raw materials into- a change of form for use. The functions of commerce are different.” And in People of State of New York ex rel. Rogers v. Graves, 299 U.S. 401, 57 S.Ct. 269, 271, 81 L.Ed. 306, it is pointed out that “The building * * * 0f * * * a road or a canal is not commerce in the substantive sense, * * *»
Secondly, in my opinion the statutory language of free pursuit of any business authorized or permitted by law was never intended to comprehend any work . of construction en masse. Appellant says that since passage of Art. 1108, V.A.S., authorizing municipalities to construct their own light systems, the result is the creation of a new business authorized or *655permitted by law; citing in support, Lewis v. Weatherford, M. W. & N. W. Railway Co., 36 Tex.Civ.App. 48, 81 S.W. 111 and Fort Worth and D. C. Ry. Co. v. State, 99 Tex. 34, 87 S.W. 336, 70 L.R.A. 950, which decisions do not sustain the contention made. These were Anti-Trust cases with the same subdivision, Art. 7426, subd. 1, under examination. In the first, Lewis’s appeal, complaint was made of one Green’s exclusive contract with the railroad to solicit baggage hauling on its trains; the other predicated on the railroad’s exclusive contract with the Pullman Company for hauling its sleeping cars. Relief in both instances was denied, the Supreme 'Court concluding that no violation of the subdivision was involved; going on to say that while the hauling of baggage was a business permitted by law, it was only with the railroad’s approval that same could be conducted on its own premises; and similarly in the Pullman case that the hauling of sleeping cars was a business that could only be done “pursuant to an understanding” with the railroad company. So here and similarly, the construction of a municipal light plant is a legitimate business, but surely it cannot be carried on in a particular municipality except by agreement or contract with its City Council. The AntiTrust statute does not create a new business for any person, nor does it confer a new right in the property of others. Fort Worth & D. C. v. State, supra. The conclusion is inescapable that the building of a municipal light system — always and necessarily an isolated transaction — does not constitute in any statutory sense the free pursuit of a business authorized by law; and the derelictions of these defendants must be found, if at all, in some other subdivision of these penal laws.
This brings us to the only other point in the State’s indictment, predicated on Art. 7428-1, V.A.S., (appellant’s point 2), complaining of the court’s error “in dismissing the suit because the agreement between Fairbanks-Morse and Universal Electric whereby FairbanksTMorse would sell its Diesel engines only to Universal Electric, and Universal Electric reciprocal agreement to buy such engines only from Fairbanks-Morse as alleged in paragraph XV of appellant’s second amended original petition, constituted a violation of Article 7428(1), Revised Civil Statutes of Texas.” The court’s ruling above will be considered in view of the following facts alleged in the State’s petition and otherwise of record:
The charge is made that defendant Moore was employed as City Engineer on recommendation of Fairbanks-Morse -by three cities, Weatherford, Baird and Sonora, and that he prepared specifications in accordance with an agreement under which only Fairbanks-Morse could submit bids on the Diesels required, because of which Universal Electric was the successful bidder at Sonora. As to defendant Gieb, it is charged that he was appointed City Engineer upon recommendation of Fairbanks-Morse by the cities of San Augustine, Sanger, Garland, Crosbytown, Seymour, Winters, Angleton, Jasper, Levelland and Littlefield, and that he prepared specifications so as to exclude all bidders except Universal Electric; as a result of which it was the successful bidder at Winters and Jasper.
Not referred to in majority opinion, but part of the record, is the plea .in abatement of appellee Fairbanks-Morse reading as follows: “That this suit should abate and be dismissed for want of jurisdiction in that: (a) Neither this court nor any other court of this State has jurisdiction of the subject matter of this proceeding in so far as this defendant is concerned, same constituting an attempt to regulate commerce between the States of the United States, in respect of which only the Courts of the United States have been given jurisdiction, and in this connection defendant avers that it does not now, and did not at any of the times described in plaintiff’s petition, have either a factory for the manufacture of its product in the State of Texas, or a stock of Diesel engines therein; that any and all transactions described in said petition then or now, or contemplated or in prospect in Texas, related to the manufacture of such engines in a State or States of the United States other than the State of Texas and the shipment thereof from such oth*656er State into the State of Texas.” A jurisdictional issue being thus raised, the court heard evidence pertinent thereto in limine (pretrial), Pecos & Northern Texas Ry. Co. v. Cox, 106 Tex. 74, 157 S.W. 745; Watson v. Baker, 67 Tex. 48, 2 S.W. 375; Galley v. Hedrick, Tex.Civ.App., 127 S.W.2d 978; and made findings thereon, viz.: “* * * that at the time of the transaction involved in this suit, as described in plaintiffs pleadings, the defendant Fairbanks, Morse and Company did not have within the State of Texas a factory for the manufacture of Diesel engines or any stock of such engines in this State, and that (the transactions relative to any sales by it of such engines or attempts to sell the same to any of the other parties hereto or to any of the cities mentioned in said pleadings heretofore related to and involved the manufacture of such engines in another State of the United States, and the shipment thereof into the State of Texas, which would be interstate commerce, but the court finds that such Interstate Commerce would only be incidental to the transactions as described in plaintiff’s pleadings) * * Wording of the above order,- “transactions as described in plaintiff’s pleadings,” obviously refers to the successful bidding by Universal Electric in the towns of Sonora, Winters and Jasper; and notwithstanding, the fact of Fairbanks-Morse having a permit to do business in Texas, aforesaid findings would undoubtedly stamp the transaction between this corporation and the construction company as interstate in character. “The transaction under consideration was commerce between a citizen of New York and a citizen of Texas, whereby the former agreed to manufacture the albums in New York and to deliver them at Galveston, Texas. Therefore it was interstate commerce which was not subject to- the antitrust laws of this state. * * Al-bertype Co. v. Gust Feist Co., 102 Tex. 219, 114 S.W. 791, 792.
But even assuming a sound basis for the further court finding that such interstate dealing was “only incidental to the transactions as described in plaintiff’s pleading” (having reference to the agreement between Fairbanks-Morse and Universal Electric whereby such manufacturer would sell its Diesels only to Universal on its Texas jobs of municipal construction and the latter to buy the necessary engines from Fairbanks-Morse), the result would not be offensive of Anti-Trust Laws. Our Supreme Court has repeatedly held that so long as only a definite and determinable portion of a purchaser’s requirements are affected by the contract under examination, there is no violation. In this case, from a reading of plaintiff’s petition and as ap-pellee Fairbanks-Morse correctly states: “It is only alleged that Universal agreed to purchase from Fairbanks-Morse such units as it might require in connection with contracts to erect municipal light plants, which, under the allegations amounted to three units in ten years. It is not alleged that Universal was under any obligation to purchase such units from Fairbanks-Morse required for any other purpose, such as privately-owned utility plants, municipal or privately-owned water works, irrigation systems, 'oil mills, cotton gins, hotels, heavy trucks, or the hundred other uses to which they can be properly put. Nor is it made to appear that Fairbanks-Morse was under any restraint upon sales for such other purposes.” See Norton v. W. H. Thomas, etc., 99 Tex. 578, 91 S.W. 780; Cox, Inc. v. Humble Oil & Ref. Co., Tex.Com.App., 16 S.W.2d 285; Jones Inv. Co. v. Great A & P Tea Co., Tex.Com.App., 65 S.W.2d 495; Twaddell v. H. O. Wooten Grocer Co., 130 Tex. 42, 106 S.W.2d 266; Guadalupe-Bianco River Authority v. City of San Antonio, 145 Tex. 611, 200 S.W.2d 989; Padgitt v. Lone Star Gas Co., Tex.Civ.App., 213 S.W.2d 133. The court in the Humble Appeal, supra [16 S.W.2d 287], goes on to say: “ * * * Here plaintiff in error did not agree to buy all of the gasoline purchased by him from defendant in error. The agreement was that he would buy the amount used in the operation of a certain filling station. He was at liberty to purchase any amount of gasoline from any other company which might be used in the operation of any other similar business. The effect of the agreement made by him was to contract to purchase gasoline from defendant in error, the amount to be meas*657ured by that used in the operation of a particular filling station. Such agreement did not constitute a conspiracy in restraint of trade, but was a valid and enforceable one.” (First emphasis by the Court, second mine.)
Of the cases cited by appellant to the contrary, Wood v. Texas Ice and Cold Storage Co., Tex.Civ.App., 171 S.W. 497, and State v. Racine Sattley Co., 63 Tex.Civ.App. 663, 134 S.W. 400, 403, the first has been severely limited if not actually overruled by the foregoing Supreme Court decisions, and likewise outmoded is the theory advanced in the second, State v. Racine Sattley that “ ‘The law did not intend to regulate restrictions in trade, but to prohibit them entirely, without regard to their immediate effect on trade.’ ”
Furthermore appellant cannot invoke the terms of 7428, subd. 1, because of insufficiency of pleading. That subdivision in material part defines conspiracy in restraint of trade as “where any two or more * * * corporations * * * who are engaged in buying or selling * * * any commodity, enter into an agreement * * * to refuse to buy from or sell to any other person * * * any * * * commodity.” (Emphasis mine.) Under any strict or even reasonable construction of the subsection, it contemplates an agreement by two concerns both of whom are engaged in buying or selling, who by agreement refuse to sell to some third party; and it has never been applied, so far as my research discloses, when one of the parties was the ultimate consumer (as was the contractor here in the purchase of Diesel engines). It is also to be observed that the parties must be so engaged at time of making the agreement, for the simple reason that if one of the parties is not so engaged at the time, there can be no restriction of trade involved in his agreement to purchase from a particular seller and no other. The point just made is illustrated in Crystal Ice Mfg. Co. v. San Antonio Brewing Ass’n, 8 Tex.Civ.App. 1, 27 S.W. 210, 211, holding in part: “If they made ice for their own use alone, and were not sellers of ice, and had no intention of becoming such, and there was evidence to admit of such finding, we fail to comprehend how the transaction can be adjudged in restraint of trade or preventive of competition. * * and in the following from Nickels v. Prewitt Auto Co., Tex.Civ.App.; 149 S.W. 1094, 1095; “The language ‘who are engaged in buying or selling,’ etc., was evidently placed in the statute for the purpose of limiting that provision to merchants and others engaged in some particular business; and therefore, in order to show a violation of that provision, it is necessary to allege and prove that the parties to the alleged illegal contract were engaged in the business of buying or selling such articles as the contract relates to.” There being no pleading to the effect that at time of making the agreement in question, Universal, the Alabama contractor, or any other defendant was engaged in the business of buying Diesel engines in Texas, the resulting insufficiency of fact allegations is such as to preclude any relief under the particular subdivision.
These conclusions clearly demonstrate to my mind that appellant’s case as pled, presents no set of facts to which these drastic antitrust penalties can be applied; and this, although the remaining defendants have been referred to only incidentally if at all.
The principal defendant is Fairbanks-Morse; appellant’s basic allegations being that the outlined scheme was concocted by such manufacturer to “promote the sale and installation of municipal light and power systems within the State of Texas.” Apparently none of the other defendants were expected to participate in the program of promotion or contribute thereto. As the only end described in the pleading on part of Fairbanks-Morse was the sales of its engines, which are found to be either interstate transactions or under an agreement so limited in scope as to be lawful, I submit that the' charge of conspiraey against the remaining defendants is left entirely without support and becomes groundless. Aside from this, the other major element in the means allegedly used by Fairbanks-Morse to promote the sale of engines was an agreement by Ballard-Hassett, an Iowa concern, to purchase from the sue-*658cessful bidder an amount of municipal warrants — manifestly a matter of interstate commerce.
The conclusions hereinabove stated amply justify the trial court’s ruling on exceptions and affirmance of cause. However, other considerations, establishing as baseless the State’s charge of antitrust violations, should be discussed. First, as to the engineers Gieb and Moore and their part in the socalled conspiracy (any mention of one herein having reference to both). It is charged that Gieb and Fairbanks-Morse agreed that the latter would promote certain cites on installation of their own electric light systems, recommending such appellee as an engineer for the proposed project; that, and when, so employed as engineer, he would draw the plans and specifications for the improvements so as to lessen or eliminate competition in favor of Fairbanks-Morse. There is no allegation that either Gieb or Moore did not honestly believe that the engines and units supplied by Fairbanks-Morse were not the best, considering the amount spent for construction; nor that the plans and specifications were not to the best interests of the city. It is merely charged in such connection that Fairbanks-Morse was Gieb’s undisclosed principal and that the respective cities knew nothing of the understanding alleged. We must assume for purposes of this appeal that engineer Gieb did everything charged to him, yet by the same token and pleading, it must be further assumed that he honestly believed an investment in Fairbanks-Morse equipment was to the best interests of the particular city, and that indeed it was; and if, in consequence, he drew plans and specifications eliminating other types of engines, such was the inevitable effect of any set of plans and specifications. But appellant alleges that Gieb’s agency could not exist because of this underlying and secret conspiracy; and if bad faith and fraud (See Footnote 1) are thus insinuated (which are indispensable to a destruction of agency), such is pled only by inference and innuendo. The general rule that “all reasonable intendments will be indulged to sustain pleading in ordinary civil case does not' apply to penalty suits, wherein plaintiffs’ pleadings are strictly construed and will not be aided by inferences.” Ford Motor Co. v. State, supra, 175 S.W.2d 230, Syl. 2. Since Gieb was an agent of the named municipality and acting within his jurisdiction on the occasions specified, his principals (the respective cities) must be considered as parties to the alleged unlawful conspiracy and combinations. A city cannot be guilty of a violation of the State Anti-Trust Laws. State v. Central Power & Light Co., 139 Tex. 51, 161 S.W.2d 766. And if the completed contract under examination in the cited case be outside the scope of such laws, then, a fortiori, the preliminary negotiations here described are likewise immune.
Lastly, we do not have here a combination of competitors; — any illegality *659in the statutory sense relating to a concert of action among those who would otherwise be in competitive businesses; the instant action merely portraying the noncompetitive agreements of a manufacturer, contractor, finance company, along with an engineer favorable to low speed Diesel engines, to the end of establishing a municipal light plant in a locality where none had before existed. Manifestly the thing denounced by Art. 7426, defining trusts, is a combination of competitors. “ * * * we are led to the conclusion that the union or association of ‘capital, skill or acts’ denounced is where the parties in the particular case designed the united co-operation of such agencies, which might have been otherwise independent and competing, for the accomplishment of one or more of such purposes.” (Emphasis mine.) Gates v. Hooper, 90 Tex. 563, 39 S.W. 1079, 1080. “Our Supreme Court from early times has ruled that a statutory combination cannot exist unless the two or more persons are independent and capable of acting in competition with one another; * * Pad-gitt v. Lone Star Gas Co., Tex.Civ.App., 213 S.W.2d 133, 136. “Any combination of noncompetitors is legal, it seems.” Ann. Cas.1912D, p. 768.
Reverting to appellant’s point 1 and summing up: The transactions of appellees being invariably carried on at a place where no light system existed or was being built, the question naturally arises as to what similar business was there to be interfered with? Even in State v. Racine Sattley Co., supra [63 Tex.Civ.App. 663, 134 S.W. 402] (cited in original opinion), the agreement under attack was with a customer in Waco, Texas, “where there was a market for such articles, and where many citizens were engaged in the sale and purchase of such articles.” (See Footnote 2.) And can this court rely on allegations that appellees have imposed restrictions on others in the free pursuit of the business of constructing municipal light systems, when the Attorney General' fails by inference or otherwise to allege the existence in the cities named or in this State of any persons, firms, or corporations engaged in such business, and has permitted a dismissal of suit on sustaining of exceptions for lack of such allegations? What we have here, in final analysis, is a lawful combination on part of appellees to do jointly what they might with less economy have done singly; and the Attorney General has truly characterized these activities as promotional. “ * * * it has been almost universally held that contracts and combinations which tend to promote business, and which only remotely, incidentally, and indirectly restrain competition, are not forbidden.” 36 Am.Jur. 606. “Agreements and arrangements between contractors which are the result of honest co-operation, or which are primarily intended to enable them to accomplish an object which neither could gain if acting in his individual capacity, are not within the rule, although they may incidentally prevent the rivalry of the parties, and thus lessen competition.” 36 Am.Jur. 561.
I dissent from the order of reversal because the various rulings of the trial court on exceptions were correct.
BOND, C. J., dissents.

. Counsel for appellees expressly charge that the instant litigation is fostered by power and light utilities whose contracts and interests present and future may be adversely affected by installation of these municipal improvements. If so, the courts should not be used as a means for furthering the business of another exclusive combine by penalizing the competitive efforts of Fairbanks-Morse and associates.