147 F. 51 | 2d Cir. | 1906
The plaintiff in error was the defendant in the court below, and by this writ of error seeks to review a judgment for the plaintiffs in an action tried by the court*without a jury. The action was brought to recover damages for the breach by the railroad company of a contract dated July 9, 1886, made with Robert E. Westcott, which was to remain in force for the term of 10 years, and the duration of which was extended September 30, 1892, for the further term of 5 years.
By the terms of the contract Westcott undertook to use his best endeavors “to build up, develop, increase, facilitate, and conduct the business of transportation of milk” over the lines of the defendant’s railroad; that he would be wholly responsible for the milk transported over said lines, and save the defendant harmless from all claims arising from or connected with the milk business, except those from acci
By its answer- the defendant admitted the execution of the contract and alleged as a justification for terminating it (1) that the contract was ultra vires, and contrary to public policy; (2) that it was made in violation of the acts of Congress known as the “Anti-Trust -Act” and the “Interstate Commerce Act”; and (3) that Westcott had violated the contract by entering into other contracts with competitive railroads inconsistent with his duty to the defendant and the obligations of his contract.
The plaintiffs by their reply to the answer set up as a bar to the defense alleged by the defendant the estoppel of a former adjudication in an action between the parties in the Supreme Court of the state of New York.
The trial judge did not make special findings of fact or of law, but made a general finding that the plaintiffs were entitled to recover $137,853, and interest and ordered judgment accordingly.
The evidence upon the trial was sufficient to establish the following facts: Before the contract was made the milk traffic of the defendant was of insignificant volume. Westcott immediately proceeded to create and develop it. His plan of operation was to establish creameries contiguous to the lines of the defendant, and procure proprietors who would purchase the milk of the farmers in the vicinity, prepare it for market, and ship it by the defendant’s lines to New York City to their own consignees. In carrying out these operations he caused creameries to be built, costing from $1,800 to $3,000 each, at all available places along the lines of the defendant, advancing his own
While developing this traffic Westcott entered into similar contracts with other railroad companies having lines connecting with the defendant’s lines, and built up a milk traffic on these lines which became a feeder of the defendant’s traffic. After this traffic had been developed, the defendant ran its milk cars over the lines of the other companies, collected the milk at the various stations on their lines, and transported it to its own line and thence by its own line to New'York, charging a through rate for all shipments, which was divided upon a mileage basis between the defendant and the other companies. The first of these contracts was between Westcott and the Delaware & Hudson Canal Co., of the date of February 19, 1891; the second was between Westcott and the Cooperstown & Charlotte Railroad Co., the road of which was a branch of the Delaware & Hudson Canal Co., of the date of June 1, 1893; the third was between Westcott and the Elmira, Cortland & Northern Railroad Co., the road of which was a branch of the Lehigh Valley Railroad Co., of the date of August 18, 1893.
During the first six years of the business the outlay and expenses of Westcott, in carrying out the contract were about $200,000, and his commissions were something less than $155,000; but by March, 1899, the contract had become very valuable to him. At that time Mr. Sloan, who had theretofore been president of the defendant, was succeeded by Mr. Truesdale'. Very shortly after Truesdale became president he notified Westcott that he was dissatisfied with the contract. Several interviews took place between Truesdale and Westcott, the last being in July, 1899. In the course of these interviews Truesdale insisted that the contract was too profitable to Westcott, and his percentage must be reduced; and met Westcott’s claim to the stipulated percentage by asserting in substance: “Contracts made before my coming do not stand.” Truesdale also insisted that the freight should be collected directly by the defendant, and although this change of method involved a considerable loss by way of interest upon his bank account to Westcott, the latter consented. Thenceforth, the freight was collected by the defendant. During these interviews Truesdale raised no objection to the so-called competitive contracts into which Westcott had entered with other railroad companies; although all of them were known to Truesdale, having been shown to him by Westcott.
.February 1, 1900, Truesdale, as president of the defendant, notified Westcott that the contract would be /treated as no longer in force, assigning as the only particularized reason that Westcott had violated his contract by entering into similar contracts with other railroad companies, competitors of the defendant, with the purpose and effect of diverting the milk traffic from its railroad to the other railroads. At the same time the defendant notified shippers that it had terminated all relations with Wcstcott, and excluded his messengers from his cars. Thenceforth, the defendant assumed exclusive control of the milk traffic over its lines.
When the contract was terminated the defendant had in its hands the freight moneys which it had collected since July 1, 1899. Upon its refusal to pay over to Westcott his proportion of these moneys Wcstcott assigned his demand to one Paul. In February, 1900, Paul, as assignee of Westcott, brought an action in the Supreme Court of the state of New-York to recover the amount, al
The present action was brought after the expiration of the contract term. At the time of the trial the amount owing from the defendant for the percentage arising to Westcott under the contract, less the amount which it would have cost Westcott to perform- his part of the contract, was that found by the trial judge.
Besides the facts which have been mentioned it was shown upon the trial that Westcott had made another so-called competitive contract, the existence of which does not appear to have been known to Truesdale when the latter terminated the contract. This contract was made with the Delaware & Hudson Canal Co., August 21, 1899. His earlier contract with that company, that of February 16, 1891, related to the development of the milk traffic upon and along one of the lines of the company known as" the “Albany & Susquehanna Division”; and among other things it provided that at the expiration of five years the railroad company should have the right to readjust any of the terms of the contract, excepting only those fixing the percentage of revenue payable to Westcott. While this contract contemplated that the traffic developed should be carried by the company to Binghampton, where its line connected with the defendant’s line, and thence by the defendant’s line to New York City, it provided that the company should have the right to transport “milk and other dairy products to Albany, and ship dairy products to New York via Albany.” In August, 1899, that company decided to develop a milk traffic upon other of its lines, and Mr. Young, its president, entered into negotiations with Westcott for that purpose. Westcott objected to making any new arrangement which would divert the milk traffic of the Air bany & Susquehanna division from the defendant’s lines at Binghampton, but Young insisted that under the existing contract his company was entitled, if it desired, to ship to New York via Albany. At the same time Young.-promised that until the termina
Upon the facts thus presented, the defendant upon the trial moved the court for a judgment in its favor upon the grounds that the defense alleged in its answer had been established, and that there was no evidence to support a judgment for the plaintiff. The assignments of error are based upon the exceptions taken by the defendant to the refusal of its motion.
When, upon a trial without a jury, the findings of fact and of law by the court are general, the exceptions to a ruling denying a motion for judgment for the defendant present for the consideration of an appellate court the question whether upon the whole evidence, with all the inferences which a jury could justifiably draw from it, tl:e plaintiff was entitled to recover._ The general finding is to be accepted as conclusive upon all matters of fact, and as equivalent to the verdict of a jury, and the Appellate Court cannot review the weight of the evidence. Lancaster v. Collins, 115 U. S. 225, 6 Sup. Ct. 33, 29 L. Ed. 373; Martinton v. Fairbanks, 112 U. S. 670, 5 Sup. Ct. 321, 28 L. Ed. 862; Lehnen v. Dickson, 148 U. S. 71, 13 Sup. Ct. 481, 37 L. Ed. 373.
In the present case a jury would have been justified in finding— and it is to be presumed in support of the general findings that the court found — that the defendant, at the instigation of its president, Truesdale, had arbitrarily and dishonorably repudiated a contract which both parties had performed for six years, which they had then extended for nine years more, which they had then performed for seven more years, and which the defendant had regarded as fair and reasonable, when Truesdale, having determined to end it because it was too profitable to Westcott, and having cast about for an excuse, assigned one which was unfounded. If Truesdale had really believed the so-called competitive contracts were really competitive, it is extremely improbable that he would not have said so in the interviews with Westcott after they had been brought to his attention, and when he was insisting that Westcott should abate his commission. However this may be, the justification assigned by Truesdale for terminating the contract was not valid if these contracts were not entered into by Westcott for the purpose of diverting the milk traffic of the defendant, and did not have any such effect. The contract between Westcott and the defendant did not obligate Westcott to give his whole time and personal services to the business of the defendant or to the business of developing its milk traffic, or not to engage in other business. If it is true, as it may be assumed the court below found, that when the two other contracts were made the milk traffic of the dc
If it had been proved that Westcott had violated the contract by any act which tended to diminish the milk traffic of the defendant, it would be quite immaterial that Truesdale or the.defendant assigned a wrong reason for terminating it, and there would have been a meritorious defense to the action. So, also, if the contract was ultra vires, or illegal, the defendant was at liberty to repudiate it so far as it remained executory, although its conduct was. despicable in adhering to the contract during the many years when it was profitable, and repudiating it only because it could make more money by doing so.
The judgment, in the former suit estops the defendant from again litigating the defense that Westcott had violated the contract; but it does not estop the defendant from the benefit of the other defenses which have been interposed, because there was no evidence in the court below that these defenses were litigated in that action. The 'cause of action for the money in the hands of the defendant, which it had collected as the percentage of Westcott under the contract, was for a different demand than that involved in the present action. When a judgment in an action is offered in evidence in a subsequent action between the same parties upon a different demand, it operates as an estoppel only upon the matter actually at issue and determined in the original action; and such matter, when not disclosed by the pleadings, must be shown by extrinsic evidence. The operation of a judgment upon the demand involved in the action in which the judgment was rendered, and its operation as an estoppel in another action between the parties upon a different demand, are essentially different. So far as the demand involved in the first action is concerned, the judgment closes all controversy; its validity is no longer open to contestation, whatever might have been alleged or proved against it at the trial. The judgment is not only conclusive as to what was actually determined respecting such demand, but as to every matter which might have been brought forward. and determined respecting it. But in a subsequent action between the same parties upon a different demand, it is an estoppel only upon the matter actually controverted and determined in the former action. The circumstance that both demands arise from the same contract is not controlling, and does not tend to establish their identity. Davis v. Brown, 94 U. S. 423, 24 L. Ed. 204; Cromwell v. County of Sac, 94 U. S. 351, 24 L. Ed. 195; Russell v. Place, 94 U. S. 606, 24 L. Ed. 214; Perry v. Dickerson, 85 N. Y. 345, 39 Am. Rep. 663; Sparhawk v. Wills, 72 Mass. 163; Andover Savings Bank v. Adams, 83 Mass. 28. Perry v. Dickerson is precisely in "point.. There 'the plaintiff had brought an action to recover damages for an alleged wrongful
“It is undoubtedly settled law that a judgment of a court of competent jurisdiction, upon a question directly involved in one suit, is conclusive as to that question in another suit between the same parties. But to this operation of Hie judgment it must appear, either upon the face of the record or be shown by extrinsic evidence, that the preciso question was raised and determined in the former suit. If there he any uncertainty on this head in Hie record, as for example if it appear that several distinct matters may have been litigated, upon one or more of which judgments may have passed, without indicating which of them was thus litigated, and upon which the judgment was rendered, the whole subject-matter of the action will bo at large, and open to a new contention, unless this uncertainty be removed by extrinsic evidence showing ilic principal point involved and determined.”
See De Sollar v. Hanscome, 158 U. S. 216, 15 Sup. Ct. 816, 39 L. Ed. 956.
In the present case, although the record docs not specifically denote the grounds of the decision in the former action, it docs disclose what issues were litigated and what must have been decided in order to result in a recovery for the plaintiff. There is included in the conclusive effect of a final adjudication every matter necessary to the disposition of the controversy as made by the pleadings ; and if the determination of a question is necessarily involved in the judgment, it is immaterial whether it was actually litigated or not. Freeman on Judgments, § 272 (4th Ed.). “The estoppel extends to every material allegation or statement which, having been made on one side and denied on the other, was at issue in the cause, and was determined therein.” See Aurora City v. West, 7 Wall. 103, 19 L. Ed. 42; New Orleans v. Citizens’ Bank, 167 U. S. 371, 398, 17 Sup. Ct. 905, 42 L. Ed. 202.
The defendant contested the right of the plaintiff to recover on the allega!ions that Westcott had violated his'covenant to use his best endeavors to build up and increase the milk traffic of the defendant, and had diverted that traffic to other and competitive railroads. Its answer did not allege the invalidity or illegality of the contract. The only issue presented by the pleadings was whether or not Westcott had been guilty of a breach of the contract. The adjudication against the defendant necessarily decided that he had not, as that was the only issue presented for the consideration of the court. If the validity, or the legality of the contract, was drawn in question in any manner upon the trial, the fact was not proved in the court below, and certainly cannot be inferred from the pleadings and the judgment.
If the contract was ultra vires, it was not so in the narrow sense of the term, but in the sense that its performance would involve. a wrongful perversion of the powers conferred upon the corporation. An implied condition attaches to all legislative grants of corporate powers that they are conferred not merely as the privilege of the recipient to be used at its discretion, but as a quasi trust to be exercised for the benefit of the public as well. -Consequently any contract of a corporation by which it disables itself from performing its duties to the public, or. subordinates to its private interests the rights and conveniences which it impliedly undertakes to secure to the community, is beyond the lawful power of the corporation. Such a contract is contrary to public policy, and is invalid on that ground also. The concrete inquiry in the present case is whether the necessary tendency of the contract was to disable the defendant from performing its obligations to the public by depriving shippers of milk of some of the rights or privileges to which they were entitled at the hands of a railway carrier. If it did not have that tendency, it could not operate to restrain trade; and if it did not contravene some statutory prohibition, it was in all respects a legitimate corporate act.
The contract doubtless contemplated.such a business relation and arrangement between the parties as followed its execution. Its purpose, so far as the defendant was concerned, was to enable the defendant to acquire a traffic which would have to be created, and which could not be satisfactorily built up and developed by the ordinary agencies of the defendant, and which the defendant conceived required the cooperation of Westcott. The peculiar conditions of the undertaking necessitated risks and responsibilities which the defendant was unwilling to assume, and the traffic could not be successfully developed and retained unless it was conducted with such a just regard to the interests of shippers as to be advantageous to them as well as to the defendant. In order to obtain this traffic without investing its own resources, and to carry it on with a minimum of inconvenience, expense, and risk to itself, the defendant saw fit to engage Westcott, and to put him in practically exclusive charge of the whole undertaking, upon terms and conditions which would be likely to be mutually advantageous to both parties. All this was in furtherance of its own business; and the remuneration-Westcott was to receive, and the duration of the arrangement, were matters which concerned none but the parties to the agreement and which they were at liberty to settle between themselves. It
“We have a right to assume that the contract was to the mutual advantage of both parties, that it was made in good faith, and that its performance for the whole term would not have been injurious to the interests of the stockholders, or in any way suspend or abridge the powers conferred on the corporation to discharge the duties owed to the public .as a common carrier for all on equal terms.” Railroad Co. v. Furnace Co., 37 Ohio St. 321, 41 Am. Rep. 509.
The contract treats Westcott, not only as the manager of the defendant in developing and conducting its milk traffic, but also as a representative of the shippers who was entitled to have every reasonable accommodation afforded to them and to himcslf in aid of the defendant’s covenants to facilitate the traffic. It has but two features which are open to criticism as tending to deprive shippers of some of their rights and privileges, or to favor Westcott at their expense. The provision that Westcott will charge for the transportation of milk rates not in excess of those charged by competitive railroads for similar service suggests that he is to be permitted to fix the rates subject to that restriction. If he could fix the rates solely as his own interests might dictate, it would be open to him to make rates prejudicial to the traffic or to particular shippers. But the limitation itself provides an ample protection against such an abuse of his authority, as no shipper would have just cause to complain unless his rates were in excess of the common standard for similar services. The contract does not in terms authorize Westcott to fix the rates, and may fairly be construed as intended to give him the usual authority of a manager to do so in first instance, and subject to revision by the .company. The construction placed upon it by the acts of the parties themselves negatives the inference that it was intended to delegate the ultimate power to Westcott, as from the inception of the arrangement the rates were always fixed by the defendant. Where the terms of a contract are equivocal the practical construction given to it by the parties themselves is very persuasive of its real meaning. The other provision open to criticism is that which gives to Westcott the exclusive privilege of transportation. But this provision also is carefully qualified so that it may not be construed as encroaching upon the legal duty of
“The defendant was under a duty, arising from the public nature of its employment, to furnish for the use of passengers on its lines such accommodations as were reasonably required by the existing conditions of the passenger traffic. Its duty, as a carrier of passengers, was "to make suitable provision for their comfort and safety. Instead of furnishing its own drawing room and sleeping cars, as it might have done, it employed the plaintiff, whose special business it was to provide cars of that character, to supply as many as were ' necessary to meet the requirements of travel. It thus used the instrumentality of another corporation in order that it might properly discharge its duty to the public. So long as the defendant’s lines were supplied with the requisite number of drawing room and sleeping cars, it was a matter of indifference to the public who owned them. * * * We are of opinion that public policy did not forbid the railroad company from employing the Pullman Southern Oar Company to supply drawing room and sleeping cars to be used by its passengers, and, as a means to induce the plaintiff to perform this public service and to incur the expense and hazard incident thereto, from giving it an exclusive right to furnish cars for that purpose. * * * The suggestion that the agreement is void, upon grounds of public policy, or because it is in general restraint of trade, cannot for the reasons stated, be sustained.”
The contention that the contract was void by the act of Congress (Act July 2,1890, c. 647, 26 Stat. 209 [U. S. Comp. St. 1901, p. 3200]) to “protect trade and commerce against unlawful restraints and monopolies,” may be briefly disposed of. The contract undoubtedly operated upon interstate commerce as well as upon interstate
The contention that the- contract, contravened the provisions of the interstate commerce act may likewise be briefly disposed of. The argument for the plaintiff in error is that the contract is obnoxious to section 3 of that act (Act Feb. 4, 1887, c. 104, 24 Stat. 380 [U. S. Comp. St. 1901, p. 3155]) because it gave an undue and unreasonable preference to Westcott in the business of transporting ’milk. That act deals with the effects or results of contracts, and has no operation directly upon the contracts themselves; but assuming that the contract is void if the contention that it gave an undue and unreasonable preference is sound, the case is not one where any such preference was given. The wrong prohibited by the section is a discrimination between shippers. It was designed to compel every carrier to give equal rights to all shippers over its own road, and to forbid it by any device to enforce higher charges against one than another. Wight v. United States, 167 U. S. 516, 17 Sup. Ct. 822, 42 L. Ed. 258. The mere circumstance that there is, in a given case, a preference or advantage, does not of itself show that such preference or advantage is undue or unreasonable within the meaning of the act. Texas & Pacific R. R. Co. v. Interstate Commerce Com., 162 U. S. 219, 220, 16 Sup. Ct. 666, 40 L. Ed. 940. To come within the inhibition of the act “the positions of the respective persons or classes between whom differences in charges are made, must be compared with each other, and there must be found to exist substantial identity of sitaation and service, accompanied by irregularity and partiality resulting, in undue advantage to one, or undue disadvantage to the other.” Interstate Commerce Com. v. B. & O. R. R., 145 U. S. 263, 282, 12 Sup. Ct. 844, 36 L. Ed. 699. Subject to the two leading prohibitions that their charges shall not be unjust and unreasonable, and that they shall not unjustly discriminate so as to give undue preference or disadvantage to persons or traffic similarly circumstanced, the interstate commerce act “leaves common carriers as they were at the common law, free to make special rates looking to the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce and their own situation and relation to it, and generally to manage their important interests upon the same principles which are regarded as sound and adopted in other trades and pursuits.” Interstate Commerce Com. v. Alabama Mid. R. R. Co., 74 Fed. 715, 21 C. C. A. 51, 41 U. S. App. 453; Id., 168 U. S. 144, 173, 18 Sup. Ct. 45, 42 L. Ed. 414.
The privileges accorded to AVestcott were only those which were incident to the anomalous relations existing between him and the defendant created by the contract. It is quite inconceivable that
'The assignments of error which have been considered are the only ones which have been argued at the bar or on the brief of counsel. The repudiation of the contract was without any justification, for even if the contracts with the New York Central Railroad Company were theoretically competitive, they had been consented to by the officers of the defendant. The repudiation, as has been said, was announced when the contract had nearly expired, and when the defendant would shortly have secured exclusively for itself all the profits of the valuable traffic built up by Westcott. It was repudiated for sordid motives, and with an arrogance born of the scorn of consequences. The appropriation of Westcott’s percentage of the money, which the defendant had actually collected for him, was morally no better than larceny. Although Truesdale was primarily responsible for this conduct,.and the directors of the defendant may not have been personally cognizant of it, they cannot escape their share of the moral responsibility which ensues from endeavoring to establish the defenses interposed in the earlier action and in this action. It is conduct like Truesdale’s, by those who manage the affairs of great corporations, that has aroused the spirit of resentment in the public mind which is so intense today, and which is not unlikely to result in legislation, and in municipal interference, which will bring serious loss upon stockholders.
We find no error in the rulings of the court below, and the judgment is accordingly affirmed.
LA COMBE, Circuit Judge. I am individually of the opinion that the contract of 1898 with the N. Y. Central Railroad was a breach of the plaintiff’s contract with the defendant, because it was calculated to- expose the Delaware, Lackawanna & Western R. R. to a competition which would operate to reduce the amount of its milk traffic. But that question is no longer open' here. I concur in the finding that the evidence clearly shows that the defendant’s officers knew of this contract and did not disapprove it, and. in the conclusion that the prior judgment has conclusively established the proposition that neither such contract nor its carrying out is a breach available in defense. As to the second Delaware & Hudson contract, which I am fully convinced was a competing contract, the circumstance that both parties to it agreed that it should not go into effect until after the termination of the contract in suit, which agreement'was strictly adhered to, in my opinion, eliminates it from consideration as a breach.
As to the other defenses I concur in Judge Wallace’s opinion, and therefore concur in voting to affirm.
