54 So. 670 | Miss. | 1911
Lead Opinion
delivered the opinion of the court.
The proceeding in this caseds brought by the attorney-general under chapter 145>, section 5002, Code of 1906, as amended by Laws of 1908, page 124. This suit was instituted on the 28th day of September, 1909', against the Cumberland Telephone & Telegraph Company for an alleged violation of the anti-trust laws, and the purpose of the suit is to recover the penalties imposed by section 5004. The trial court rendered a judgment in favor of the state for the sum of one hundred sixteen thousand and four hundred dollars, holding that the contract which we shall set out in full a little later constituted a violation of the anti-trust laws, from which judgment this appeal is prosecuted.. The minimum penalty allowed to be imposed under the statute is two hundred dollars per day, and the minimum penalty was imposed by the trial judge, the time being fixed from the date of making the contract, which will hereafter be stated, to the date of filing of the bill as above specified and making five hundred and eighty-two days. The contract was made by the Cumberland Telephone & Telegraph Company on the 24th 'day of February, 1908, with the Oxford telephone system. The Cumberland Company is a corporation, but the Oxford system is unincorporated.
It is as follows, viz.:
“Whereas, the second party (the Oxford Telephone Company) is the successor to the rights and privileges created or established by reason of a certain contract entered into on the 23d day of April, 1901, by and be*106 tween the first party and W. H. Harvey, of Oxford, Mississippi, and under which contract the first party furnished to said Harvey certain telephone apparatus, which apparatus was turned over to the second party, and the first party has, since the transfer of said apparatus by Harvey to second party, furnished second party certain telephonic apparatus; and
“Whereas, the first and second parties desire to enter into a new contract to cover connection between the telephone exchange system of second party in Oxford, Mississippi, and the systems of the first party:
“Now, therefore, in consideration of one ($1.00') dollar each to the other in hand paid, the receipt of which is hereby acknowledg’ed, the parties hereto mutually covenant and agree as follows:
“(1) Except as to amounts due from one party to the other under the aforesaid contract of date November 23d, 1901, and except as to the responsibility of second party to first party for telephone, apparatus furnished it, the said contract of date November 23d, 1901, shall be.and the same is hereby superseded by this contract.
“(2) The second party agrees to ship to the first party at Nashville, Tennessee, freight prepaid, the switchboard furnished first party under the aforesaid contract of November 23d, 1901, within ninety days from the date hereof, and to pay for the use of said switchboard at the rate provided in said contract until the same shall laave been shipped to first party as aforesaid.
“ (3) The first party agrees to furnish at its Memphis, Tenn., office to' the second party the standard form of transmitter and the receiver used by it, at the rate of one dollar per annum, payable in advance for each set of instruments, consisting of one bi-polar receiver and one solid back transmitter, furnished; and second party agrees to pay for the use of such transmitters and receivers heretofore or hereafter furnished at said rate*107 p.er annum at the office of first party, in Nashville, Tenn., from date of this contract, and second party shall pay for the use of equipment furnished prior to the date of this contract at the rate provided in the aforesaid contract, dated November 23d, 1901. Each and every instrument embraced in the system of the second party shall be equipped with transmitters and receivers furnished by first party, and shall be used only on the telephone embraced in the system of second party in Oxford, Mississippi, and vicinity. Second party agrees not to extend its lines in such manner as to conflict with the business or interest of the first party or its subscribers, and not to make any connection, directly or indirectly, with any other telephone lines, nor to extend its lines outside of Lafayette county, Mississippi, without the written consent of the first party. In the event transmitters and receivers furnished hereupon become defective and are returned to the first party at Memphis, Tennessee, freight prepaid, first party will repay or replace same without additional charge.
“ (4) Oxford shall be in the future, as in the past, the connection point between the systems of the parties hereto, and the second party agrees to make such connection for direct communication between its subscribers and the system of the first party as it may be called upon to make, it being expressly agreed and understood that second party shall be responsible to the first party for all messages sent from stations embraced in its system to points on the long distance lines or connecting lines of the first party, and that the messages sent over the lines or connecting lines of first party shall be subject to the rules, rates, and regulations of the first party, and the second party shall receive a commission of fifteen per cent, on all moneys (except messenger fees) collected by it for messages sent from stations embraced in its system to points on the long-distance lines of the first party; but no commission will be allowed second*108 party on moneys collected by it for messages sent over the lines of any other company than first party.
“(5) In the event the second party shall decide to cancel this contract before its expiration, or to dispose of its property, or the control of stock of its company, the first party shall, in the event second party shall decide to cancel the contract before its expiration, have the right to purchase the property of second party by arbitration, one arbitrator to be selected by each party, the two so chosen to select the third and fix the price, and each party shall be bound by the finding of such arbitrators ; in the event the second party shall desire to sell the property or control of stock of the company, the first party shall have.the refusal of such property or stock at the same price second party may be offered for the same.
“(6) A diagram of the lines of the second party is hereto annexed and made a part hereof.
“(7) Settlement for tolls shall be made monthly for the month next preceding.
“ (8) In case of any failure of payment or other violation of any of the terms of’this agreement by the second party, continued for ten days after notice or demand by the first party, or in case the second party shall become bankrupt or insolvent, the first party may at its option immediately terminate this contract by written notice to the second party, or to those in charge of its principal offices.
“(9) This contract shall become effective and be in force for five years from date hereof, and thereafter until thirty days’ written notice of intention to terminate the same be given by either party to the other.”
The bill of complaint makes the contract on the 24th day of February, 1908, fully set out above, an exhibit to same, and asserts that its purpose and effect was to shut out competition, and to monopolize and control the prosecution and management of the telephone business. The bill
In short, the answer states that these contracts are. made with non-competing local telephone systems; the object of the contract being to give the local telephone systems with which they are made, and which are not in competition with the Cumberland system, all the advantage offered by the long-distance system of the Cumberland Company. In doing this and yielding its long-distance system to the patrons of the local phone system, the Cumberland claims the right to protect itself from abuse by requiring the local connecting system to use certain standard transmitters and receivers, and to patronize the Cumberland system alone in sending long-distance messages, and not to extend its lines so as to be detrimental to the interest of the Cumberland Company so long as the contract lasts, unless the local system obtains permission of the Cumberland. The facts further show, according to the answer, that there has not in fact been any monopoly or suppression of competition, because no competition ever existed or was in contemplation, nor does the hill allege that competition was desired or intended. It is alleged in the answer that the sole purpose of this contract is to protect the Cumberland Company in the use of its property, and that the restric
In deciding this case, the distinguished chancellor places in the record a written opinion. The reason assigned by him for holding this contract in violation of the antitrust statutes is put in the following language: “This case was submitted on bill, answer, and exhibits, without proof. Counsel for defendant urges that, the cause being thus submitted, the state is precluded from recovery on all allegations in the bill of complaint to which the answer is responsive. This is correct as to everything specifically denied, but the defendant in its answer admits entering into the contract, the illegality of which is the crux of this case. The real question then is: Was the contract violative of the anti-trust law?” We set out the above quotation for the purpose of showing that the court below shut out all explanations made by the answer, aand considered the case on the contract alone, holding that the contract on its face violated the anti-trust laws of the state, because it so far controlled the Oxford Company as to require it to send “all long-distance messages over the Cumberland’s line,” and because it “prohibited the Oxford Company from making any connection with other telephone companies, or extending its lines, so as to conflict with the business or interests of the Cumberland Company, "without the writ
As only one of the contracting parties was a corporation and the other was an individual, section 5005, Code of 1906, as amended by the Laws of 1910, page 222, which prohibits one competing corporation from buying out the stock of another competing corporation, has no application, and there was, therefore, no law of this state which prevented either system from in good faith buying out the other; yet no law could compel either to allow a connection by the other. Under the contract, the local system became fully equipped as a local and a long-distance system, while the long-distance system interfered in no way with the local business of the local system, but received a small rental for transmitters and receivers furnished under the contract, and additionally obtained its subscribers as possible patrons of its long-distance facilities. In considering this contract, it must be considered in the light of the facts set up in the answer as explanatory thereof, since the questions here involved are questions of both law and fact. But, if this were not true, and we should consider this case on the contract alone without the explanations made by the answer, this contract standing by itself would constitute no violation of the anti-trust laws of the state, as we think will appear in the reasoning of the court a little later on in this opinion. The anti-trust laws of the state and the United States have been so frequently before the state and federal tribunals, and every phase and feature so ably and exhaustively discussed, that any attempt to improve on these discussions would be vain. One of the ablest discussions to be found in the books on this subject is the case of Railway Co. v. Searles, 85 Miss. 520,
While contracts in restraint of trade, monopoly contracts, and monopolies were held to be illegal under the ■law as it stood before the anti-trust statutes, such contracts could be avoided and injury done thereby rectified only by the parties themselves. While this was the •case, the evil continued because those persons were frequently satisfied by the parties engaged in the prejudicial and unlawful enterprise, and the public at large left to suffer. In order to obviate these difficulties, anti-trust laws have been enacted enabling the state in its sovereign capacity to sue for and recover penalties in all such cases; in addition to this, giving any member of the public suffering injury or damage the right to sue also. In •other words, the law as to what it now takes to make a contract in restraint of trade to monopolize or attempt to monopolize any business remains the same, •but the parties who may sue and the penalties have been broadened. As to what does or does not constitute a monopoly within the meaning of the statute
*117 “Section 198, Constitution 1890, commands the legislature to ‘enact laws to prevent all trusts, combinations, ■contracts, and ag’reements inimical to the public welfare. ’ It must be observed at the outset that not all trusts, ■combinations, contracts, and agreements were to be prohibited because the great lawmakers who framed the fundamental law of this commonwealth as the same is embodied in our present Constitution well knew that such legislation would be palpably trenching upon, if not absolutely violative of, the inherent rights of the citizen, and would be restrictive to an unwarranted degree of the privilege of contract which every man is entitled to enjoy under our form of government. Tiedeman, Lim. Police Powers, section 244. No such legislation was authorized, because no such legislation was demanded. Only such trusts, combinations, contracts, and agreements were to be prevented as would be ‘inimical to the public welfare.’ ”
We have quoted largely from the opinion in the Searles case, because the rule laid down in that case is narrow enough to exclude from its scope unlawful contracts and agreements, combinations, and monopolies in their true sense, and yet broad enough to leave life in all legitimate undertakings and enterprises. If the anti-trust laws are given a scope sufficient to throttle and choke out lawful business transactions, its effect upon the public would b.e as detrimental as the evils which it is designed to break up. Under the law as it stood before the enactment of the anti-trust statutes, courts were astute enough to discover these unlawful enterprises and apply such correction as the law then gave power to apply. As the law now stands, differing only in the fact that some new causes of illegality have been added for the avoidance of these unlawful agreements and combinations, penalties made more severe, and the parties who may sue made more numerous, the courts may still be relied upon to discover and punish in all proper cases.
The contract on the part of the Oxford system to give its long-distance messages to the Cumberland exclusively ior the period of the contract was not in violation of the law. It was based upon a valuable consideration to both systems, and was not inimical to the public interest in any way. This character of contract is sustained by numerous authorities cited in brief of counsel for appellant. Central Trans. Co. v. Pullman, 139 U. S. 24, 11 Sup. Ct. 478, 35 L. Ed. 55; St. Louis Drayage Co. v. L. & N. R. R. Co. (C. C.), 65 Fed. 39; Oregon Short Line v. Nor. Pac. R. R. Co. (C. C.), 51 Fed. 465; U. S. v. Addison Pipe & Steel Co., 85 Fed. 271, 29 C. C. A. 141, 46 L. R. A. 134; L. & N. R. R. Co. v. West Coast Stores Co., 198 U. S. 497, 25 Sup. Ct. 745, 49 L. Ed. 1135.
Reversed and dismissed.
Dissenting Opinion
(dissenting).
I am of the opinion that this contract, and the acts of the parties under it, constitute an attempt on the part of appellant to monopolize the long-distance telephone business in .Oxford and its vicinity within the meaning of subsection “k,” chapter 119, Laws of 1908.
I doubt the validity of this contract at common law; but conceding that it was valid at common law and conceding, as the fact is, that there was no competition between the parties to this contract at the time it was entered into, the result, in my judgment, must be the same.