Opinion
Argued May 22, 1876
Decided May 30, 1876
Esek Cowen for the appellants.
Nathaniel C. Moak for the respondents.
The complaint was dismissed upon the ground that the contract set out therein was upon its face against public policy, and therefore void; the claim on the part of the defendants being that the necessary and direct effect of the contract was to prevent competition between the parties thereto in furnishing recruits.
The contract made the parties thereto partners in furnishing recruits for the towns of Washington county. They were to be jointly interested in the business and to share equally in the profits and losses thereof. As regulations of their business, they provided that the individual contracts of the members of the firm should inure to the benefit of the firm and that no contracts to furnish recruits should be made for a less sum than $500 for each recruit. It does not appear that the parties had control of any recruits, much less that they had a monopoly of them, or that the towns were in any way obliged to get their recruits from them, or that the price charged was an unreasonable or unusual price, or that the parties did or could, by their contract, put up the price of recruits or embarrass the towns in filling their quotas, or that the agreement was kept a secret. It is not a necessary inference from the terms of the contract that the purpose of the parties was an improper or unlawful one, or that its effect would be to thwart the policy of any law or to injure or jeopardize any public interest.
The business of furnishing recruits was a lawful one, and could be carried on by individuals or firms; when carried on by a firm its members could regulate the price at which they would buy and sell, as they could if they had been dealers in other articles having a price. Suppose they had formed a partnership to buy and sell wheat, how can it be doubted that they could lawfully agree in their articles of copartnership that neither member of the firm should come in competition with the firm, and that wheat should not be purchased for more than a certain price nor sold for less than a certain other price? Such an agreement would, certainly, not upon its face, be unlawful, and could only be condemned by proof that it was part of a conspiracy to control prices or create a monopoly, or that it was made for some other unlawful purpose.
Our attention has been called to no case in conflict with these views. In Gulick v. Ward (5 Halst., 87), Gardiner v. Morse ( 25 Maine, 140), Doolin v. Ward (6 Johns., 194), and other cases cited, there were agreements to prevent competition at auction sales made by public officers or in pursuance of law of property which was required to be sold to the highest bidders, and hence the agreements were held to be against public policy and void. At such sales firms may bid as well as individuals, and if the firms are formed for the honest purpose of carrying on a joint business, it matters not that the incidental effect may be to diminish the number of bidders. If, however, the primary object of the firm is to prevent competition then it might be considered as against public policy. In Atcheson v. Mallin ( 43 N.Y., 147) the general rule was laid down that when a contract for the performance of any public service or work is to be awarded to the bidder therefor offering terms most favorable to the public, any agreement between parties, designing to make bids, tending either directly or indirectly to restrain or lessen rivalry and competition between them, is void as against public policy; even although it may not appear that such agreement did really produce any result detrimental to the public interest. In that case, however, FOLGER, J., stated that: "A joint proposal, the result of honest co-operation, though it might prevent the rivalry of the parties and thus lessen competition, is not forbidden by public policy." In that case a board of town auditors were by statute authorized to receive sealed proposals for the collection of the taxes to be assessed on the town and to award the collection of the taxes to the person who should propose to collect the same on terms most favorable to the town; and it was held that an agreement between two persons, each sending in distinct sealed proposals that if the collection should be awarded to either both should share equally in the profits, if any, and contribute equally to the losses, was against public policy and void. It was held that the natural tendency and necessary operation of such an agreement was to prevent rivalry and competition. That case differs in some of its essential features from this. There was a case where the public officers were bound to let the contract to the lowest bidder, and they had not the option to seek contractors wherever they could find them; and in such cases agreements tending to prevent competition among bidders are scrutinized by the courts more closely than in other cases. Then, again, there could be no apparent purpose for such an agreement except to prevent competition between the parties thereto. The collection of the taxes was a business requiring no capital and no great labor or skill; it was a business usually, if not necessarily, conducted by one person. Both parties put in bids, each knowing the bid of the other; and thus, while there was apparent, there was no real competition, and the public officers and others could thus be deceived. That case is not, therefore, a controlling authority for defendants in this case.
In Hooker v. Van Dewater (4 Denio, 349) and Stanton v. Allen (5 id., 434), there were combinations between owners of canal boats, expressly and primarily, to regulate the price of freights on the canals, and the manifest purpose of the agreement made was to prevent competition between the public carriers upon the canals; and the agreements were properly held void, as against public policy.
The true rule is laid down in Phippen v. Stickney (3 Met., 384), where it was held that an agreement between A and B that A will permit B to become the purchaser of certain property about to be offered for sale at public auction, and that A shall participate with B in the benefits of the purchase, was not upon its face fraudulent, but would or would not be so, as the circumstances of the case showed innocence of intention or a fraudulent purpose in making such agreement. DEWEY, J., says: "When such an agreement is made for the purpose and with the view of preventing fair competition, and by reason of want of bidders to depress the price of the article offered for sale, below the fair market value, it will be illegal and may be avoided as between the parties, as a fraud upon the rights of the vendor. But, on the other hand, if the arrangement is entered into for no such fraudulent purpose but for the mutual convenience of the parties and for a reasonable and honest purpose, such agreement will be valid and binding." So here, if it could be shown that this agreement was made by the parties for the purpose of perpetrating frauds upon the towns of Washington county and compelling them, by preventing competition, to pay an enhanced price for recruits, and not for the honest purpose of carrying on a legitimate enterprise in an honest way, it would be brought within the cases cited by the learned counsel for the defendants and would be considered as against public policy.
Therefore, without considering the claim made on behalf of the plaintiff, that whether the contract was or was not void originally, they can recover because it has been executed, enough has been written to show that the judgment must be reversed.
Judgment reversed and new trial granted.
All concur; FOLGER, J., concurring in result; MILLER, J., not voting.
Judgment reversed.