Court Opinion

ID: 8268900
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:18:58.13296+00
Date Added: 2024-06-11T16:43:27.424111
License: Public Domain

Swayze, J.
(dissenting).
In ordinary cases little good is done by an expression of the reasons for dissent, but when the principle involved is fundamental, it is a public duty to protest in the hope that the logical consequences may not lead us too far before we are aware of the direction in which we are traveling. This decision is novel. Combinations of insurance companies like the Newark Eire Insurance Exchange are not new. Many such cases are collected in Lewson’s Monopoly and Trade Restraint Cases, referred to in the opinion. It is significant that not one of these cases is cited. I shall review them at length hereafter. Our sister *394states, administering the same system of law that we administer, have been singularly blind, for they have for years been industriously legislating' on this subject, and if the present decision is right, such legislation has been unnecessary since we have accomplished by judicial decision what in every other state has been thought to require legislative action by the elected representatives of the people. I deprecate judicial legislation regardless of its merits. It confuses the functions of the separate branches of the government, and when it results, as in this case, in applying new law to the past conduct of individuals, it has all those evils of ex post facto legislation which led to- our constitutional prohibition. I deprecate also the ground upon which the decision is put, for it goes much farther and reaches much deeper than the opinion itself indicates. The court relies on Munn v. Illinois. Munn v. Illinois was decided under provisions of the Illinois statute which attempted to- regulate the charges o-f individuals o-wning grain elevators. The importance of the case was in its assertion of this right to regulate charges by private individuals, not corporations. By relying upon that case alone as authority, the court must mean that it is competent for the legislature to fix rates of insurance by private individual insurers, a very wide departure from established principles. It may be conceded that where a virtual, monopoly exists, as in the Munn Case, the state, by its legislature, has the right to regulate charges. Such is the view suggested by Professor Wyman in a thoughtful article on “The Law of Public Callings,” 17 Harv. L. Rev. 156 (at p. 217), and it has much to commend it. But the right to regulate charges when it rests upon the existence of a virtual monopoly must cease as soon as the court has destroyed the monopoly by its injunction. Under this view, to put an end to the monopoly is to cut off the branch on which the right of public regulation hangs, and this the court attempts to do- by its present decree. The opinion rests for its fundamental proposition not upon the basis of virtual monopoly, but upon the idea that when the public interest is served by the conduct of any business, and that business has become large and successful, the public may at once intervene. The quotation in the opinion, *395“First the blade, then the ear, after that the full corn in the ear,”- and the paraphrase of Shakespere, suggest that one rule applies to a small business and a different rule to a large^business. 1 have never before heard it suggested that the size or success or want of success of a business was a test of its public character. I think a ferryman operating a fiatboat with only one passenger a, day is engaged in a public calling as truly as the owners of the ferries over the North river with their thousands of passengers daily; that a public expressman just beginning business and carrying his first parcel is engaged in a public calling as truly as the great express companies, and that the railroads were engaged in a public calling in their feeble beginnings as well as in their present development. If size or success is, as the opinion holds, the test by which the existence or non-existence of a public calling is to be determined,, I do not know where to draw the line or when in the course of its growth a business that before was private becomes public. The test of size and success is a very different test from that of a virtual monopoly. The opinion holds that the business of insurance is affected with a public interest, not because of the combination, which is to be dissolved, but because it is an important business necessary in modern life. The reasoning ap- - plies as¡ well to a single company as to a combination of many companies. In fact the decision goes upon the ground that the court has the right to regulate the business of each separate company because it is affected with a public interest, and to prevent each separate company from making the contract in question. If this is correct, the Munn Case is authority for the extension of the same regulation to individual insurers. It is therefore important to determine whether the right to regulate insurance companies, which has long been exercised, rests upon the ground that they are affected with a public interest. The expression “affected with a public interest” is an unfortunate one. Judge Cooley, years ago, in discussing Munn v. Illinois, was careful to warn us against the danger of giving too broad a meaning to these words. Cooley Const. Lim. 736. He says:
*396“The mere fact that the public have an interest in the existence of the business, anti are accommodated by it, cannot be sufficient, for that would subject the stock of the merchant, and his charges, to public regulation. The public have an interest in every business in which an individual offers his wares, his merchandise, his services, or his accommodations to the public; but his offer does not place him at the mercy of the public in respect to charges and prices.”
He then proceeds to explain Munn v. Illinois as resting upon tbe virtual monopoly, the very condition which the present decree undertakes to destroy, and he classifies businesses which are affected with the public interest as follows :
“1. Where the business is one the following of which is not of right, but is permitted by the state as a privilege or franchise. Under this head would be comprised the business of setting up lotteries, of giving shows, &c., of keeping billiard tables for hire, and of selling intoxicating drinks when the sale by unlicensed parties is forbidden; also the cases of toll bridges, &c.
“2. Where the state, on public grounds, renders to the business special assistance by taxation or otherwise.
“3. Where, for the accommodation of the business, some special use is allowed to be made of public property or of a public easement.
“4. Where exclusive privileges are granted in consideration of some special return to be made to the public.”
The business of insurance against .fire is said to come within these classes because it is regulated by the state, and companies which cannot satisf.y a certain standard of solvency and comply with certain conditions are not allowed to do business in the state. It sounds rather strange to find that the burdens and requirements imposed by forty-six different states, from which insurance companies have inade vain' attempts to escape since the decision of Paul v. Virginia, are really in the nature of privileges and franchises because they exclude from competition all companies’ which cannot attain to the legislative standard or comply with the legislative conditions. These regulations might indeed amount to privileges and franchises if the state bound itself not to relax them or not to admit other companies on less onerous terms; but there can be no privilege or franchise where the state grants nothing; the restriction of competition by means of these salutary regulations does not amount to an agreement on the part of the state to continue them. The legislature *397may to-day adopt regulations which would require a company to have a capital of a million dollars, and after the companies that could do so, had complied, perhaps with great difficulty, with the legislative requirements, those requirements might be reduced and the companies with large capital would have no redress. Indeed, the legislature, far from making these regulations amount to the grant of a special privilege, has taken pains to provide for insurance on the mutual plan and for the formation of associations known as Lloyds (P. L. 1896 p. 156), under which any twenty men of sufficient substance may insure as individuals. The state has been careful not to grant special privileges to what are called the old line insurance companies, such as are concerned in the present case, but has only imposed regulations and restrictions necessary to insure solvency. It is true that the companies having a New Jersey charter have a privilege and franchise, and that the companies of other states that are admitted to do business in this state, may also properly be deemed to acquire a privilege by that permission, and I do not deny the state’s power of regulation arising from these facts; but that power rests upon the reserved power of the state to control its own corporations, and upon its absolute power to admit or refuse to admit foreign corporations to do business in the state. It does not rest upon the view that these particular corporations, Imown as insurance companies, are peculiarly constituted and peculiarly affected with a public interest. Under this power the legislature has the right to amend the charters of corporations, at least those which have received their charters since the enactment of the act of 1846, which now appears as section 4 of the Corporation act, a class which probably includes all of the defendants in this case (although their charters have not been put in evidence); and it has the right to impose additional conditions upon foreign insurance companies. But the right to regulate the business of corporations is very different from the right to regulate the business of individuals. Corporations come within the first of Judge Cooley’s classes, but individual insurers, who, under the form known as Lloyds, have become important in England, and may become important here, do not exercise their business as one of privilege, but as one of constitutional *398right, by which they may acquire property, and if they are to be regulated at all, are to be regulated by virtue of the police power just as the practice of medicine and law may be regulated since the decision of Dent v. West Virginia. The distinction is important; for the police power and the power to regulate corporations must be exercised by the legislature; and.our legislature has significantly failed to act.
The remedy for the evils supposed to be due to the compact how condemned by the court has been in the hands of the legislature ever since the Newark Fire Insurance Exchange was formed in 1902. It was simple and required no litigation to establish its efficacy, but the legislature has failed to prescribe any additional requirem'ents, and,- as far as the foreign companies are concerned, has allowed the superintendent of insurance to renew their licenses in each successive year. It is not for the court to add to the legislative requirements. Such has been the holding of this court with reference to the statutory signals required to be given by railroads; and I think our decision in that respect is applicable to the present situation. The reason the legislature has failed to act is probably the same reason which led the legislature of Missouri, in passing a statute against combinations of this character, to exempt from the operation of the act cities of more than one hundred thousand inhabitants. State v. Firemen’s Fund, 52 S. W. Rep. 595. It has a solid basis in the greater fire hazard in the larger and more compactly built cities, many of which are built of frame structures and consist of extraordinarily hazardous risks, where regulations such as those of the Newark Fire Insurance Exchange are peculiarly desirable for the public safety. The failure to exercise the legislative power to forbid the present arrangement is conclusive evidence that, in the view of the legislature, it was not inimical to the public interest. There is no reason why the legislature should not have exercised this summary and extreme power which is not applicable to the exercise of the same power by this court. For us to decide that this business has been continued illegally for all these j^ears is to suggest that the legislature has failed in its duty. I cannot believe that that accusation is just.
*399The distinction between the power of the legislature to control corporations and the control by the courts upon the ground that the business is affected with a public interest is an important one in its effects, aside from its application to individuals. One of the most important characteristics of a business affected with a public interest is that those engaged in its conduct must serve all who come, just as the innkeeper or a ferryman or a common carrier must, and it would be quite impossible to hold that this prominent and essential characteristic of a business affected with a public interest applies to an insurance company. The court, in its opinion, shrinks from so holding. An insurance company is certainly atTiberty to reject absolutely and without assigning a reason, risks which are too hazardous.to be insured at all, or in which experience has failed to establish* a basis for rates of premium, or in which the moral hazard is bad. In such cases the insurance company must decline to insure if it is to hold itself ready to pay natural losses to honest insurers. The fact that the insurance companies cannot, if the business is to be successfully conducted, insure all who offer, is itself enough to show the error into which the court has fallen in holding that the business is one affected with a public interest.
The definition given by the court to the expression “affected with a public interest,” loses sight entirely of the distinction upon which the cases rest. All of them go back to what Lord Hale says in the passage quoted in Munn v. Illinois. The right to regulate ferries was put upon the ground that they were really a part of a public highway. As to a wharf or crane, Lord Hale says, that a man may set up one and take what rates he and his customers can agree upon, “for he doth no more than is lawful for any man to do, viz., makes the most of his own;” but he adds, “when the wharf is one to which all must go, because it is the only wharf licensed by the queen, or because it is the only wharf at the port (as it may fall out where a port is newly erected), then arbitrary and exclusive charges cannot be taken.” This is the view that Professor Wyman advocates in the article referred to, and puts the right to regulation upon the more tenable ground of a virtual monopoly, not upon the size or success of the business. It is the necessity of public regulation in such ' *400cases that justifies what would otherwise be an unwarrantable interference with a private business. Whether there can be a virtual monopoly of mere contracts of pecuniary indemnity or not, it is reasoning in a circle to say that because a combination becomes affected with a public interest by reason of its being a virtual monopoly, we can destroy the monopoly and still retain the quality of being affected with a public interest. It is hard to see how the business of insurance can become a virtual monopoly, since, under the decision in Allgeyer v. Louisiana, it is open to all the world regardless of state regulations so long as the contracts are not made in the state, and even such monopoly as exists by virtue of the legislative restrictions upon the business is created by the legislature itself, which has found it wise to restrict the business to certain companies and individuals in the public interest.
Munn v. Illinois has been frequently reviewed, but the diligence of counsel and of this court and my own researches have failed to reveal any case before this in which it has been held that the fact that a business was successful and that it was a useful or necessary adjunct of modern society was sufficient to bring it within the purview of that case. Budd v. New York certainly explained the earlier case on the view I suggest, and I do not know what other test is to be adopted unless we include all useful employments in the class. It must not be overlooked that what Munn v. Illinois decided was, that the charges of individuals might be regulated where their business was affected with a public interest. I think the upright lawyer or even the skillful advocate are essential to the conduct of a civilized society, and no one would deny the absolute necessity for the proper care of human life by the skillful physician and surgeon. Logically the court must hold that as soon as the lawyer or advocate, the physician or surgeon, becomes so skillful that his services are of the utmost value,'then the practice of his profession becomes affected with a public interest, and his fees for a skill which may be quite unique become the matter of public regulation. ,1 cannot conceive the court carrying the reasoning of the opinion to the logical end, but where it is to stop I do not know.. I think, therefore, that the court fails in its first proposition that the *401business of insurance is affected with a public interest within the meaning of the cases. The cases in which a similar result has been reached have been under statutes of the different states. State v. Firemen’s Fund, 52 S. W. Rep. 595; Hartford Fire Insurance Co. v. State, 89 S. W. Rep. 42; State v. Phipps, 31 Pac. Rep. 1097. People v. Sheldon, 34 N. E. Rep. 785, was not an insurance case, but that also arose under a statute. In states which, like New Jersey, have no statute, a different result has been reached. Thus, in Aetna Insurance Co. v. Commonwealth, 51 S. W. Rep. 624, the Kentucky court held that contracts regulating insurance were not within a statute prohibiting combinations to regulate, control or fix the price of any merchandise, manufactured articles or property of any kind, and that a combination for the purpose of maintaining rates of insurance, although it might be a void contract, was not an indictable offence at common law. The indictment in that case was for conspiracy to stifle free competition among fire insurance companies and their agents. And in Queen Insurance Co. v. State, ex rel. Attorney-General, 24 S. W. Rep. 397, the Texas court held that the Texas statute did not apply to insurance, and that a combination of filre insurance companies to fix uniform rates and agents’ commissions, though possibly unenforceable as an unreasonable restraint of trade at common law, was not enjoinable by the public, nor a ground for forfeiting franchises, “since the business is not one in which the public has an interest as in that of a common carrier or other corporation having the power of eminent domain, or of a dealer in a staple which is a prime necessity of life; nor is it a professional service to which the public is entitled.”
In Continental Insurance Co. v. Board of Fire Underwriters, 67 Fed. Rep. 310, Mr. Justice McKenna held that a board of fire underwriters formed under an agreement providing for the regulation of premium rates, the prevention of rebates, the compensation of agents and non-intercourse with companies not members, was not an illegal conspiracy, and the accomplishment of its purpose by lawful means would not be enjoined at the instance of a company not a member of the association. In Liverpool, London and Globe Insurance Co. v. Clunie, 88 Fed. Rep. *402160, Circuit Judge Morrow held that the fact that a number of foreign insurance companies doing business in the state were members of an illegal combination to suppress competition, would not prevent them from maintaining a suit to enjoin the state insurance commissioner from illegally revoking their certificates to do business, and he quoted the Continental Insurance Company Case above cited as deciding that the association was lawful and its purpose legal. It will thus be seen that in the cases in which a similar question has arisen, where there was no statute, the courts have uniformly reached a result different from that now entertained by this court. No one would deny the high standing of Mr. Justice Harlan, the senior judge in service of the United States supreme court. In his concurring opinion in Carroll v. Greenwich Insurance Co., 199 U. S. 401 (at p. 414), he touched upon this subject, and his language shows that he was fully sensible of the very considerations now expressed in the opinion of this court, but instead of suggesting that the matter could be controlled upon common-law principles in the manner that we now adopt, his language shows that he evidently thought that the way to reach it was by legislation. He says: “The business of fire insurance is of such a peculiar character, so intimately connected with the prosperity of the whole community, and so vital to the security of property owners, that it is competent for the state to forbid combinations and agreements among fire insurance companies doing business within its limits in reference to rates, agents’ commissions and the manner of transacting their business. If, in the judgment of the state, the people who desire insurance upon their property are quit at a disadvantage when confronted by a combination or agreement among insurance companies, I do not perceive any sound reason why, preserving the individual right of contracting, it may not forbid such combinations and agreements, and thereby enable the insured and insurer to meet on terms of equality. Surely the state could enact such a regulation with reference to companies organized under its own laws. If that be so, it cannot bo that such regulation may not be made applicable to foreign insurance companies doing business in the'State only by its consent.” The control of corporations by state enactment, as *403Justice Harlan suggests, is a very different thing from action by the court where the state, through its authorized agents, has persistently for years failed to act.
There are cases where agreements in restraint of trade of this kind have been denounced, but in every ease the only remedy has been supposed to be for the court to refuse to enforce the agreement. The reason is not far to seek. If the parties to an agreement are all satisfied with it, and find it to their interest to conduct their business in harmony and without competition, no power can prevent them from doing so short of the absolute prohibition of the business. The courts cannot make men compete who are determined not to compete. If, however, they are not satisfied with the agreement, and do not desire to conduct their affairs in harmony, but prefer to compete, the agreement will not stand in their way as long as the courts refuse to enforce it. An injunction is either hrutum fulinen, or is unnecessary. A similar question arose in Meredith v. Zinc and Iron Co., 55 N. J. Eq. (10 Dick.) 211 (at p. 221), where Vice-Chancellor Pitney held that the buying up by one corporation of the property of another, and consolidating the whole into one business to the extent and in the manner provided for in the agreement there in question, was not contrary to .public policy, nor did it tend to create a monopoly; and he added:
“By the law of the land these owners have the right to exercise their own judgment as to when, if ever, and how they will spend their money in preparing their property for market and rendering it fit for use by mankind. Now, I am unable to find any foundation either in law or in morals for the notion that the public have the right to have these private owners of this sort of property continue to do business in competition with each other. No doubt the public has reasonable ground to entertain the hope and expectation that its individual members will generally, in their several struggles to acquire means of comfortable existence, compete with each other. But such expectation is based entirely upon the exercise of the free will and choice of the individual, and not upon any legal or moral duty to compete, and can never, from the nature of things, become a matter of right on the part of the public against the individual. In fact, the essential qual*404ity of that series of acts or course of conduct which we call competition is that it shall be the result of the free choice of the individual and not of any legal or moral obligation or duty.”
The control of the supply of zinc ore necessarily limited to the already existing natural deposits, is undoubtedly as important for the public as a partial control of the moneyed capital of the world, which is limited only by the wealth of the world and is constantly increasing- in amount. The Meredith Case was affirmed by this court on the opinion of Vice-Chancellor Pitney, 56 N. J. Eq. (11 Dick.) 454.
Twenty years ago we had occasion to consider a question similar to that which arose in Munn v. Illinois. The Delaware, Lackawanna and Western Railroad Company filed a bill to compel the Central Stockyard and Transit Company to receive cars containing livestock, and Vice-Chancellor Van Fleet recognized that the case was similar to Munn v. Illinois; in fact, the stockyard in that case was the only place in Jersey' City to which, the railroad could deliver livestock. Delaware, Lackawanna and Western Railroad Co. v. Central Stockyard and Transit Co., 45 N. J. Eq. (18 Stew.) 50 (at p. 61). Vice-Chancellor Van Fleet, said: “The part of the opinion of the majority of the court which is most pertinent to the question now under consideration is that in which it is said: Ut matters not in this case that these warehousemen had built their warehouses and established their business 'before the regulations complained of were adopted. What they did was, from the beginning, subject to the power-of the body politic to require them to conform to such regulations as might be established by the proper authority for the public good/ From this statement of the law, it would seem to be undeniable that until the proper public authority intervenes and establishes such regulations as it may deem necessary for the public good, the owners of property devoted to a public use of this character retain complete and absolute dominion over it, and may exclude any part of the public from its, use that they see fit. Until the body politic puts in exercise its power to control the use of such property, its owner may use it, as he pleases.”
*405He adds: “That the duty to receive the livestock did not- rest upon the stockyard by force of any general rule of law, and the court to sustain the complainant’s claim must be able to find evidence of an intention on the face of the statute so clear and strong that it may, without fear of usiwping legislative power, declare that such 'intention is part of the legislative will.”
This opinion was approved in this court, where the decree was affirmed without further reasoning. 46 N. J. Eq. (1 Dick.) 280. Justices Dixon and Magie dissented, but upon the ground that the charter of the stockyards required the business to be located upon public navigable waters near the terminus of great trunk lines of railroad, and gave them power to build railroads, to lay tracks across public streets, and invested the company with authority to make police regulations, the violations of which would subject the offender to arrest without warrant and to fine and imprisonment, and expressly declared that the business of the company should be that of a general stockyard ; they laid stress upon the use of the word “general.” The dissenting justices recognized that it followed as a' necessary consequence that the company was bound to deal with' all members of the community impartially and on reasonable terms. This is, indeed, a necessary consequence of a public employment, and the very fact that it is inapplicable .to insurance companies is conclusive that they are not a public employment within the definition. The reasoning of the present case goes contrary, thereforej to two express decisions of this court, and is unwarranted, as.far as I know, by any case in any other jurisdiction. No such case is cited. If, therefore, it is necessary, as the opinion says, in order to sustain the conclusion of the court, to hold that the business of insurance is a public employment, the basis upon which the result is reached fails.
The contract is said, however, to be ultra vires because it amounts to a delegation by the board of directors of the right and duty to manage the affairs of the corporation. I think it is unnecessary to discuss the general question as to the extent to which the board of directors may delegate to others the execution of acts for the corporation. Obviously, a-very large portion of the acts of' a corporation must necessarily be done by sub*406ordinate agents, and I understand that the rule is that the duty of the directors is only to exercise a general supervision and direction of the affairs of the corporation. Morawetz Corp. § 536. This case does not amount to a delegation of authority at all. It is merely an agreement by the constituent companies that they will not issue insurance in Newark at less than the rates established by the exchange. I know of no provision of law, nor is any pointed out in the opinion, which requires any one of these insurance companies to issue any insurance whatever in the city of Newark. As far as appears, all of them are at liberty to decline risks in the territory covered by the exchange. Certainly the foreign companies are under no legal obligation fo issue insurance in that locality. If they are free to refuse to issue insurance at all, they must a fortiori be free to refuse to issue except at certain rates. By the agreement the constituent companies do not bind themselves to issue insurance policies at the rates fixed by the exchange, but merely not to issue them at any lower rates. The power of the directors to'manage the affairs of the company, no doubt, includes the determination of the question whether or not the company will issue any particular policy or assume any particular risks, or will do business in any particular place, and it is no abdication of power to decline the. business except upon certain terms. It is rather an exercise of the power of general supervision and direction. It is no more an abdication or delegation of power to refuse to issue policies in Newark except at certain rates, than it would be to refuse to issue policies at all in San Francisco. Since the companies are free to decline all risks, I do not see any logical reason why they may not agree in advance upon the rates at which they will accept the risks. In substance, what the insurance companies say is this: “The exchange will establish rates; if we choose to do business in Newark at all, we will do business at those rates, but it is still open to the companies to accept or decline any particular policy.” But for the respect which I entertain for my brethren, I should think it absurd to say that an agreement not to do, except upon certain conditions, what they are at liberty not to do at all, amounts to a merger of the companies. In fact, as the insurance business is'conducted, the *407question of premium rates must necessarily be left to skilled underwriters familiar with the conditions in the particular locality. All of these companies probably do business in many different localities in many different states, under widely varying conditions of hazard. It is quite impossible for any board of directors actually to determine the rates in any particular place, and that is not their function, but the function' of professional underwriters. Again, the value of property has become so great that perhaps a majority in amount of the insurance issued is upon risks which cannot be assumed by one company alone, without exposing its assets to undue hazard and putting too many eggs in one basket; consequently, the practice has grown up' of insurance companies uniting and each writing a part of the amount on the same risk. It must be that companies have the right to agree upon the rate on such risks, and if they have the right to agree, they certainly have the right to agree to insure at a rate to be fixed by a skilled underwriter, for a whole city. This is no delegation of the actual function of the directors, which is to make contracts, and not to determine rates. The agreement does not give to any one company any control over the assets and management of another. It merely establishes a convenient way by which uniform rates may be determined, leaving each company free to accept or decline the risk as it chooses, and to manage its own affairs.
The case of Stockton v. Central Railroad Co. is an illustration of an ultra vires act restrained at the suit of the attorney-general. But Chancellor McGill expressly put the case upon the ground that the lease there in question was made, not only without legal sanction, but in defiance of an express prohibitory statute. 50 N. J. Eq. (5 Dick.) 78. This case would l)e analogous to that if the legislature had enacted a statute forbidding contracts like the present. The failure of the legislature to do so is, as I have already suggested, in effect, a legislative permission.
It is said that the contract is illegal because it is in restraint .of trade, and the argument is that the state must have power to restrain corporations from entering into any illegal contract. It has been decided in this state, after most mature consideration, *408that contracts in restraint of trade are not necessarily illegal. Trenton Potteries Co. v. Oliphant, 58 N. J. Eq. (13 Dick.) 507. We have recently reaffirmed this view in Fleckenstein Brothers’ Co. v. Fleckenstein, 71 Atl. Rep. 265. Even under the federal Anti-Trust act of 1890, Mr. Justice Brewer, who had concurred with the majority of the court in the early case of United States v. Freight Association, 166 U. S. 290, said, in his concurring opinion in Northern Securities Co. v. United States, 193 U. S. 360, that the ruling in that case, instead of holding that the Anti-Trust act included all contracts, reasonable or unreasonable, in restraint of interstate trade, should have been that the contracts there presented were an unreasonable restraint of interstate trade, and as such within the scope of the act. From the very earliest times contracts in restraint of trade, when limited to .a particular locality or to a particular time, have been treated as valid. Such is the contract in the present case. It is limited to the city of Newark and the immediately adjacent towns coming within the same filre risk, and it is limited in time, because any of the companies may withdraw from the agreement upon thirty days’ notice. I doubt if a case can be found where a contract thus limited in time and place has been held to be an illegal restraint of trade. If I am wrong in that, an examination of the contract itself indicates its real object. That object was twofold — first, to prevent rebating by agents of the insurance companies, and second, to adopt concerted measures to decrease the fire risk. It is probable that there would be little difficulty in the companies themselves agreeing upon rates of insurance. The difficulty is shown to have arisen from the fact that the agents of the companies were allowed a commission on the premiums and were enabled, by means of surrendering a portion of their commission by way of rebate to the assured, to compete not only with each other, but to compete even with the companies they represented, and to write insurance at lower rates than the company itself offered over its counter. We have been át pains in this state to pass an act making it criminal to allow rebates from the premium in the case of life insurance, and the federal government during the last few years has made strenuous efforts, by means of legislation and litigation, to prevent *409what lias been considered the evils of rebating in interstate commerce. The evil, of course, is that one man is enabled, by his greater skill or influence, to secure service at a lower rate than his neighbor. It seems to have been considered by our legislature in the case of life insurance, by the federal government in the case of contracts of carriers, that uniformity of rates was even more desirable than low rates. I cannot think that it is illegal for fire insurance companies to attempt to prevent, by common agreement, what the legislature in the case of life insurance companies has made criminal by statute. It even seems meritorious. It was practically conceded at the argument that this was the real complaint of the attorney-general, and that it was not that the rates fixed by the companies were extortionate, but that the agreement was so drawn as to prevent any discount from those rates to favored insurers. Another prime object of the agreement was to secure improvement in the fire hazard by allowing deductions from the premium in case various precautions were taken by the assured. The natural tendency of this effort by the concerted action of the companies to decrease the fire loss is not detrimental to the public, but, on the contrary, beneficial; and there is no reason to- doubt the evidence, which was uncontradicted, that the rates of insurance in the United States are less in states where compacts of this kind exist than in states where such compacts do not exist. It was proved that this laudable effort to decrease fire loss could not be accomplished except by the concerted action of the companies, and an agreement upon rates. It may be true that such an agreement also has a tendency to maintain rates, but every agreement by which two men unite and conduct their business together, instead of competing one with the other, has the same tendency, and while an agreement, the only'object of which was to stifle competition, might well be declared illegal, it is going much farther to hold that an agreement, the main object of which is for proper purposes beneficial to the public, becomes illegal because, as an incidental result, it may by possibility tend to prevent competition. The proof in the case shows that the rates in Newark are lower than in most places, and there is a total failure to show that the rates are more than enough to make good the losses insured against, pay the *410expenses oJE conducting the business, and a reasonable return upon the capital invested. The evidence shows that in some localities nearby, where rates are lower, the business lias been conducted at a loss. Indeed, the complaint at the original argument was not that the companies were making unreasonable profits on their whole business, but that they were using profits made in Newark to recoup losses in San Francisco. This argument overlooked the whole theory of insurance, which is to distribute the hazard. It is for the public benefit that the business should not be conducted at a loss, for insolvency sooner or later is the necessary, consequence, and it is to the public interest that men who invest their money in the business of insurance against loss by fire should be compensated by a proper return, for otherwise there would be no inducement to engage in this highly useful employment, which serves the admirable purpose of distributing through society at large the shock of the loss by fire which might prove ruinous to any single man or association. It is said that there is no provision in the contract which requires the company to’ set aside any portion of the premium in order to increase the security of the assured, but the desire of the companies for the continued successful conduct of their business is sufficient motive to accomplish this end. We must assume that the companies are honestly managed with a view to a continuance in business (as is the ordinary case), and that they will be careful not only to comply with the law but to lay aside, as most of them do, except in cases of unexpectedly great conflagrations, a sufficient surplus to meet the unusual hazards of the business.
The question, however, seems to be entirely set at rest by the decision in this court, in the case of Raritan River Railroad Co. v. Traction Company, 70 N. J. Law (41 Vr.) 732, 743. There a railroad company agreed with a traction company, which paralleled its line, that during a limited period the railroad company would not reduce its present rates of fare unless required by law. It was held that this agreement was valid and not contrary to public policy as established in this state. I fail to see how an agreement between common carriers, everywhere conceded to be engaged in a public calling, which is intended purely for the purpose of preventing competition, is *411valid where th.e right of the company is limited to a maximum rate fixed by law, and an agreement which has merely a tendency to prevent competition as a mere incident of lawful purposes, becomes invalid when the company is not limited by any maximum, but is free to charge any rate that it pleases. The case seems stronger to me in favor of the validity of an agreement in the latter case, where tire company is unhampered by restrictions of statute. The legislative permission in the Railroad act is not to charge three cents per mile absolutely, but such-rate as the company shall think reasonable and proper, provided it is not more than three cents per mile. So, in this case, the companies are entitled to. charge such rates as are reasonable and proper without any limitation, except by.the court, which upon the theory of the opinion would be entitled to determine what are reasonable and proper rates. What difference in principle can there be between an agreement to prevent competition where there is a fixed statutory limit which cannot be exceeded, and a similar agreement where the limit is what the court determines to be reasonable and proper? The fact that the Railroad act authorizes the company to charge what it thinks reasonable and proper does not alter the case, for insurance companies also may charge such rates as they think are reasonable and proper. In the case cited, competition between two common carriers was absolutely stopped by the agreement which we said was valid. In neither case is the question of the reasonableness and the propriety of the charges within the control and discretion of the. company; that is, in case the insurance companies are subject to judicial regulation in this respect, as is the.necessary re-, suit of this decision. If the case is to be distinguished it can only-be upon proof that the rates charged in the present case wore unreasonable and improper, and there is an entire failure of such proof. The opinion of the court does not venture to suggest that the rates are higher than are required to pay losses, the expenses of conducting the business, and a reasonable profit; that is, higher than suffices to induce men to enter the business of insurance and to maintain solvency.
Even if the contract were invalid, I agree with the learned vice-chancellor that the only effect is that it is unenforceable. It is *412sufficient to justify that view to quote from the famous opinion of Judge Taft, upon which the learned vice-chancellor relied. United States v. Addyston Pipe and Steel Co., 85 Fed. Rep. 271. The court said that contracts that were in unreasonable restraint of trade at common law were not unlawful in the sense of being criminal or giving rights to a civil action for damages in favor of one prejudicially affected thereby, but were simply void and were not enforced by the courts, and that the effect of the act of 1890 (the act of congress to protect trade and commerce against unlawful restraints and monopolies) is to render such contracts unlawful in an affirmative or positive sense and punishable as a misdemeanor, and to create the right of civil action in damages in favor of those injured thereby, and a civil remedy by injunction in favor of both private persons and the public against the execution of such contracts and the maintenance of such trade restraints. Judge Taft, in this passage, distinctly calls attention to the fact that the civil remedy by injunction was introduced into the federal jurisprudence by the act of 3890, and that it did not exist at common law. If this decision is good law — andJ no one questions it — there is no remedy by injunction in this state, for the reason that we have no such statute. Courts of equity do not issue injunctions unless for the purpose of preventing irreparable injury. Such a result cannot be had by this injunction. If the companies choose to continue the present rates, the injunction cannot prevent them. If they do not choose to do so, the compact is no obstacle. The only probable effect of this decision is to make it difficult for the companies to prevent rebating by their agents. The question of the public policy of rebating is outside my province; it is for the legislature and not for the court. I am unwilling to assent to judicial legislation; I prefer to stand by the more stable landmarks of established law.
For affirmance — The Chief-Justice, Swayze, Reed, Bergen — 4.
For reversal — The Chancellor, Garrison, Trenchard, Bogert, Vredenburgi-i, Vroom, Dill — 7.