94 Ark. 461 | Ark. | 1910
(after stating the facts). Appellees urge affirmance upon certain grounds which we will consider in the order presented by counsel.
H. M. Byllesby was president of H. M. Byllesby & Company, a New Jersey corporation. Its business was that of engineering, promoting, developing and managing various industrial and mechanical enterprises in different sections of the country,. which had reference particularly to the supply of natural oil. and gas. Byllesby was vice president1 of appellant, Arthur S. Huey was president of appellant and also vice president of H. M. Byllesby & Company. The relation that H. M. Byllesby & Company sustained to appellant is explained by H. M. Byllesby & Company as follows: “We are employed by the Fort Smith Eight & Traction Company, as we are by some other ten other public service corporations, as their engineers and managers. In this capacity we take general charge of their engineering matters and of the management of their business, acting in that capacity by appointment of their board of directors, reporting to them at their meetings, receiving our authorization from them from time to time for our duties as above described as engineers and managers. The company has its regular local manager who carries out the detail management of the company’s affairs under our general directions, we in turn acting as above described under the direction of the board of directors of the company.
Witnesses on behalf of appellees testified that' the contract between appellant and appellees was dictated on the part of appellant by its vice-president, H. M. Byllesby. They say he carried on the negotiations on behalf of appellant pertaining to that contract, and such communications as were had between appellant and appellees concerning the cpntract that was made by appellant with the Arkansas Company. One of the witnesses said H. M. Byllesby “was the whole thing,” ■ so far as appellant was concerned in making the contracts as to the suppty of gas. The testimony shows conclusive^ that IT. M. Byllesby & Company were instrumental in organizing the Arkansas Company. Counsel for appellees contend that the general officers and managers of appellant, who are also general officers and managers of H. M. Byllesby & Company, brought into existence the Arkansas Company for the purpose of furnishing gas to appellant at a lower price than prevailed under the contract with appellees. If it be conceded that Byllesby, vice-president of appellant, dictated the present contract on appellant’s pant with appellees, still that does not warrant the conclusion that appellant organized the Arkansas Company to compete with the appellees; nor is such conclusion justified by reason of the fact that the general officers and managers of appellant were also general officers and managers of IT. M. Byllesby & Company. There is no evidence to sustain appellees’ contention. The undisputed evidence is that the organization of the Arkansas Company was never discussed with the directors of appellant; that neither its directors nor any of its agents or officers ever offered any inducements to the Arkansas Company to come into the gas field near Fort Smith for the purpose of avoiding the contract between appellant and appellees; that appellant’s directors, officers and agents “were in entire ignorance of the personnel of the Arkansas Company, and had no knowledge of what their intentions were until the Arkansas Company through its officers submitted” to appellant “a proposition for furnishing gas;” that appellant “never had any interest in the Arkansas Company other than its contract with it for the distribution of natural gas.” The evidence shows that these three corporations: appellant, Mansfield Gas Company, and H. M. Byllesby & Company, were entirely separate and independent corporations. Appellant had a total of one hundred and nine share holders, and of these only seventeen also had stock in the Arkansas Company. There were many stockholders in the Arkansas Company who were not stockholders in either appellant or IT. M. Byllesby & Company, and also in H. M. Byllesby & Company that had no stock in the other corporations. The fact that some of the stockholders in one company had also stock in each of the other companies, and the fact that the general managers and officers of one company were also general managers and officers of another company, did not make these companies the same corporation, nor the acts of one the acts of the other. Lange v. Burke, 69 Ark. 85. Our conclusion of fact, therefore, is that appellant did not organize the Arkansas Company.
.But, even if appellant did organize the Arkansas Company, and for the purpose of causing appellees to lower the price of gas, as a matter of law that would not have been a breach of that provision of the contract which .prescribes “that both parties will promote and protect the interests of each other over and above those of any other person or corporation.” This court said in Wood v. Kelsey, 90 Ark. 272: “Courts may acquaint themselves with the persons and circumstances that are the subject of the statements in the written agreement, and are entitled to place themselves in the same situation as the parties who made the contract, so as to view the circumstances as they viewed them,” in order to ascertain the intention of the parties from the language used. The contract must be construed as a whole, all its parts being considered in order to determine the meaning of any particular part as well as of the whole.”
Now, this provision of the contract had reference to the mutual protection of the parties in matters where their common interests conflicted with that of some third party. It did not mean that each party would not be allowed to promote and protect his own interest when such interest conflicted with that of the other party to' the contract. It could not have had reference to the lowering of the price of gas to appellant, for other provisions of the contract specifically provided for that, and it was appellant’s duty as a public service corporation to furnish gas to the inhabitants of the city whose franchise it held, as cheaply as it could be obtained by the legitimate prosecution of its business. Appellant and appellees must have known that they could not enter into a contract that would be contrary to the public interests. The supplying of gas under the ordinance was a matter of public concern, and in contracting with each other they had to consider what would be for the benefit of the public. New Orleans Gas Co. v. Louisiana Light Co., 115 U. S. 650.
Appellant could not furnish the cheapest gas to the public if its contract with appellees compelled it to pay the highest price. Although the contract provided that the price of gas to appellant should be lowered “if other parties or corporations should furnish it at a lower price,” yet Kelley’s own evidence shows that, he thought his company had the only gas field in the vicinity of Fort Smith. He says: “At that time the only other field was 160 miles away. In the fall of 1904 there was no reasonable certainty upon which men could have counted as a business proposition that the gas would be found which has since been brought to Fort Smith.” So it is plain-that Kelley did not have in mind that there would be any competition to bis gas supply from any source.
Appellees contend that, before appellant could avail itself of a contract with another person or corporation to furnish cheaper gas, such contract would have to cover the same period of time, and embrace only the territory mentioned in the contract with appellees. The parties might have “so nominated” in the contract, but they have not done so. The provision is: “That the party of the second part may contract for and purchase natural gas from other parties or corporations when such parties or corporations will furnish, supply and deliver the same to the party of the second part at lower figures than the said parties of the first part will do.” The provision is for the benefit of appellant. It was clearly for the benefit of appellant to obtain gas at the rates agreed upon in its contract with the Arkansas Company. True, .this would perhaps lead to disastrous consequences to appellees if the}'- failed “to meet such prices.” But that is not the concern -of courts. The parties have made their contract, and it must be given the meaning its plain language imports. Appellees would not have to abandon the field and suffer confiscation of their plant and income when an onslaught is made upon their prices, or else “take their gas elsewhere,” as suggested by counsel. A sovereign preventative of any such ruinous results to appellees is found in that provision of the contract which reads: “If said second party (appellant) shall have contracted with such other parties or corporations, the said parties of the first part (appellees) shall have the right, by making a lower price, to reinstate their natural gas under this contract.” So long as appellees had this remedy in their hands, it would be impossible for appellant and any rival natural gas supply company or person to displace or supplant them.
Kelley assigned his rights under the ordinance to appellant. “The city or town may agree that the grant may -be assigned, and a grant to the company or its assigns is sufficient to authorize an assignment without the further consent of the city.” Thornton on Oil and Gas, § 477; Los Angeles v. Los Angeles City Water Co., 177 U. S. 573; Chadwick v. Old Colony Rd., 171 Mass. 243; New Orleans, &c., R. Co. v. Delamore, 114 U. S. 501.
The contract provides that “the party of the second part (appellant) shall, during the life of the contract, exercise and enjoy all the rights and privileges conferred by ordinance No. 634 of the city of Fort Smith, Arkansas.” The life of the contract for the supply of gas was forty-nine years. • It provided that “the party of the second part (appellant) shall have the exclusive right to sell and dispose of said natural gas arid distribute the same within the limits aforesaid,” i. e., in the city of Fort Smith and suburbs. “All the rights and privileges” under ordinance No. 634 could not, under the terms of assignment provided by the contract, be enjoyed by both appellant and appellees at one and the same time. The franchise granted by the ordinance was not susceptible of numerous multiplications and divisions through the process of assignment by one to another, and leaving the assignor to enjoy equally with the assignee the rights and privileges of the franchise assigned. The right to create franchises is in the city, and not in the one to whom it gives the franchise. The grantee of a franchise, if same is assignable, may transfer what he has to another, but he cannot create a new franchise. State v. Morgan, 28 La. Ann. 483.
The grantee of the franchise, by assigning the same, transferred to his assignee all the rights he had under his grant. Such is the effect of an assignment of a franchise, and such was the effect of the contract by which the assignment was made'in this case. The language is clear and unmistakable. Appellant has the exclusive right to sell and dispose of the said natural gas, and distribute same, and is to “exercise and enjoy all the rights and privileges conferred by ordinance No. 634.” This language construes itself. Appellant could not enjoy thexclusive righfJ and have “all the rights and privileges,” if appellees also had enjoyed those rights and privileges. That would be a contradiction of the language of the contract, and would destroy its meaning.
The fatal mistake of appellees was in concluding that the contract with/appellant, granting it the exclusive right to supply natural gas under ordinance No. 634, terminated when appellees refused to meet the lower prices offered by the Arkansas Company. True, appellees were not compelled to meet these prices; but they could not, by refusing to meet them, recall the assignment and re-invest themselves, so to speak, with the rights and privileges granted to Kelley by the ordinance.
The effect of the contract assigning the franchise to appellant was to give to appellant the exclusive right to distribute gas in the city of Fort Smith and suburbs. It would be a breach of the contract for appellees during the life of the contract, to procure another ordinance from the city and to attempt to distribute gas under that. From such violation of the letter and spirit of the contract equity will perpetually enjoin appellees.
The contract is not one in restraint of trade. It does not restrain appellees from supplying natural gas to the city of Fort Smith under the ordinance No. 634, so long as they are willing to meet a “downward revision” of the prices of natural gas. The law prohibiting contracts in restraint of trade does not prevent one from making a contract by which he agrees to compete with others in the price of the commodity which he produces for-the use of the public. One purpose of the law in prohibiting contracts in restraint of trade is to encourage competition and thereby lower the prices of services and commodities to the public. Appellees contend that by this contract the price of natural gas is not reduced, so far as the consumer is concerned. But that is its inevitable tendency, and, indeed, was its effect in this case. The price of gas to the consumer has been greatly reduced since appellant entered into the contract with the Arkansas Company. Appellant could never lower the price of gas to the consumer unless by the terms of the contract it had the right to purchase gas at a lower rate than was fixed b3r appellees. That is precisely the right that appellant has by the terms of this contract, whenever appellees failed to meet the lower prices of some other person or corporation.
It was impossible for the consumer to be oppressed by a monopofy in the price of natural gas under the terms of this contract, for by its terms appellant’s pipes were open to every producer who applied for admission at a lower rate. The necessary result of this was to bring down the price of gas to the consumer to the lowest possible price at which it could be supplied to the inhabitants of Fort Smith on a remunerative basis to the appellant. It would be difficult to conceive and to write down a more excellent and beneficial plan than that by whidi the inhabitants of Fort Smith were furnished natural gas.
Since, under our construction of this contract, there was no restraint of trade and no monopoly created injurious to the rights of the public, the cases cited in the brief of counsel for appellees, where there were contracts in restraint of trade or creating monopolies, are not in point, and we need not review them here. No authority can be found, we believe, construing a contract similar to this one as against public policy and void. For, as we have shown, by this contract the interest of the public is subserved by the most effectual provision that the ingenuity of the parties and their draftsmen could have devised.
But, should we be mistaken in holding that the contract is not one in restraint of trade, then we are of the opinion that, at most, it could only be a contract in partial restraint of trade. Under all the authorities, and our own decisions, such contracts, when reasonable, are not against public policy, and therefore are not void. Keith v. Herschberg Optical Co., 48 Ark. 146; Webster v. Williams, 62 Ark. 101. See numerous authorities cited in appellant’s brief. If appellees, by not meeting the lower prices, were compelled to take their gas elsewhere, this they might have done for aught that appears to the contrary, and the burden was on them, from this viewpoint, to show that the contract was unreasonable.
The contract did not violate the anti-trust law of 1905. There was no combination between appellant and appellees to fix the price of natural gas to the consumer except for illumination. Appellees had the fixing of the price of gas before they entered into the contract wdth appellant, and they have it still, as long as they meet the lower prices, as to gas for all purposes except for illumination. The price of gas for illumination was fixed by the contract at a certain figure. But appellees under the contract had the right to fix the price, according to the schedule specified by them, only so long as there was no competitor in the field “beating down” the price. When natural gas was offered appellant at a reduced price, then appellees had to meet these reduced prices. If they had complied with these conditions, they still would have had the right to fix the price. The agreement on the part of Kelley was to sell to appellant his franchise and on the part of the gas company to sell its gas. The agreement on the part of appellant was to buy the franchise, the distributing system, and the natural gas, upon the terms expressed in the contract, and to pay for same out of the proceeds of sales made by appellant to consumers. The contract is unique in its provisions as to the sale. But it is nevertheless a contract of sale.
The anti-trust law of 1905 was to prevent a combination among producing competitors to fix the prices to the detriment of consumers. There was no competition here, as shown by appellee Kelley and the undisputed evidence, between appellant and appellees in the supply of natural gas. Appellant had no natural gas, and the contract was concerning natural gas. The artificial gas that was then being supplied by appellant could not, by reason of the difference in the cost of producing it, be brought into competition with natural gas.
We find no elements of an unlawful combination to fix the price of natural gas. While the price of natural gas for illumination was fixed at a certain sum named, the evidence hardly warrants the conclusion that this was done for the purpose of stifling competition between natural gas and electricity, as appellees contend. But if they are right in their contention, this clause does not render the whole contract void. It is easily severable, and may be eliminated, leaving the contract in other respects valid. In Oregon Steam Navigation Co. v. Winsor, 20 Wall. 64, 70, the court says: “It is laid down by Chitty as the result of the cases, and his authorities support the statement, ‘that agreements in restraint of trade, whether under seal or not, are divisible; and, accordingly, it has been held that when such an agreement contains a stipulation which i>s capable of ■being construed divisibly, and one part is void as being in restraint of trade, whilst the other is not, the court will give effect to the latter, and it will not hold the agreement to be void altogether.’ ”
The same rule applies here. See other cases cited in appellant’s brief on the divisibility of contracts.
The laying of pipes and mains in the streets of Fort Smith by appellees for the purpose of supplying natural gas to the inhabitants of the city is a breach of their contract with appellant granting the latter the exclusive right to supply natural gas, and, of course, by such breach appellant suffers injury, and is damaged in a manner that is peculiar to itself, and is not shared in by the inhabitants of the' city. The doctrine of the law of injunction as to nuisances, invoked by appellees, is not applicable here.
That courts of chancery will grant relief by injunction to prevent a breach of contract in partial restraint of trade is well settled. Webster v. Williams, 62 Ark. 101; High on Injunctions, § 1167, and numerous cases in note 1.
“The jurisdiction in cases of this nature is based upon the ground that the parties cannot be placed in statu quo, and that damages at law can afford no adequate compensation, the injury being a continuous one and irreparable by the ordinary process of courts of law.” High on Injunctions, § 1168.
If equity will enjoin a breach of contracts of this character that are in partial restraint of trade, a fortiori will it prevent a breach of such contracts that contain no restraint whatever.
The decree is therefore reversed, and the chancery court is directed to enter a decree in accordance with this opinion, granting the relief prayed for in appellant’s complaint and dismissing appellee Kelley’s cross complaint for want of equity.