| N.Y. Sup. Ct. | Jan 15, 1891
I cannot find, as is claimed by the plaintiffs, any stipulation on? the part of the defendant corporation to grant the license mentioned in Exhibit D within three weeks from November 10th. The licenses were to be granted when the sample harrows were all in. It was understood by the parties that the time would be short when these samples would be before the executive committee, and the question of license could be passed upon. I have no doubt that a specified time was there mentioned, but it was not, in my judgment, a part of the contract; and the committee, having met upon the same day that the last sample harrow was received, have acted within a reasonable time, which fulfills the requirement of the law. Upon December 16th, after the commencement of this action, the committee did meet, and assume to license the plaintiffs in accordance with the memorandum Exhibit D. The license delivered to them, strictly construed, is not, in my judgment, such a license as is required by the contract. But the plaintiffs had theretofore notified the defendant that they would not abide by the contract. The defendant corporation here asserts that it is willing and anxious to fulfill the terms of the contract, and grant such license as is therein required. A resolution to that effect was by the executive committee passed December 16th. The defendant should not, therefore, be foreclosed, by reason of the mistake of its attorney in preparing the form of the license, but the decree should provide, if these contracts are valid, that they be operative upon the making out of the proper license under the contract.
The plaintiffs’ claim that the contract was induced by duress is not within the pleadings. Nor can the court grant the plaintiffs relief upon the ground • that the corporation is not a legal corporation, because organized for a purpose not within the statute. It is a serious question whether a corporation can organize under the manufacturing act, for a purpose within that act, as incidental only to the main purpose of its organization. But, even if that question could be raised by the plaintiffs in such an action as this, it is a claim of which the defendant has had no notice by plaintiffs’ complaint, and is therefore not before the court for consideration.
Nor can the plaintiffs sustain this action because defendant corpora- ■ tian has acted beyond its powers, or has -made contracts with other corporations which were without power to enter into such contracts. These plaintiffs can have no better right than could a subscriber for the stock of a corporation in an action upon such subscription. In such an action it is settled law that the subscriber cannot defend on the ground of the misuse or abuse by the corporation of its corporate powers. Mor. Priv. Corp. (1st Ed.) §§ 312, 313, and cases cited in notes. The contract of plaintiffs was with the defendant corporation. These other corporations are not parties to the contract sought here to be annulled; nor are their contracts with defendant any part of the legal consideration of plaintiffs’ contract. It does not lie with plaintiffs, therefore, to say that, because the corporate authorities have made-void contracts with other corporations, plaintiffs can refuse to perform their contract. There is grave doubt if the plaintiffs’ contract with defendant could be in any way affected by the Michigan statutes. The decisions of the supreme court of the United States would seem to go far to hold that the plaintiffs might sell their harrows in the state of Michigan, unaffected by the Michigan statute. What effect the statute would have upon contracts between the defendant and Michigan corporations, I have held, was not a matter of concern to the plaintiffs in this action. These plaintiffs, therefore, have no cause of complaint, unless the contract made is an illegal contract, as
It appears from the evidence that for the purposes for which harrows are used the float spring tooth harrow has practically monopolized the market. By reason of its superiority it has driven from the field nearly all of its competitors. It appears, further, that the defendant corporation has made contracts, similar to the one set forth in Exhibits A, B, and C, with 19 other firms and corporations, which, with the plaintiffs, comprised all of the manufacturers of float spring tooth harrows in the year 1890 within the United States. By the contracts these manufacturers assumed to sell to the defendant corporation “their business, the good-will of the business, all patents now owned or which may hereafter be owned, all licenses and rights under patents relating to the manufacture and sale of float spring tooth harrows.” They took back from the defendant corporation the exclusive right to manufacture the style of harrow they were manufacturing at the time of entering into such contracts. The defendant’s rights, therefore, under such contracts, are only to manufacture under patents which have been by the manufacturers discarded. The firm of G. B. Olin & Co. have assigned its patents to the defendant for cash value, without taking back such a license as is provided for in the other contracts. I do not understand that under the purchase from Olin & Co. the defendant gets the right to manufacture any harrow under any valuable patent to wdiich it has not given the exclusive right to manufacture to other licensees. It was assumed and stated upon the trial that the incorporators and trustees of this national Harrow Company are all persons who are represented in the various manufacturing firms thus contracting with the defendant. It is apparent, therefore, that it is not one of its purposes itself to manufacture harrows for sale upon the market. It is claimed further that it has an ultimate object to manufacture materials for harrows for use by its licensees. But such an object is manifestly an incidental one only, if it exist at all, and is evidently a purpose entertained to avoid the objection that the purchase by corporate licensees of stock in the defendant corporation is void, as beyond, their corporate powers. The purposes of this incorporation are only important in this case as they bear upon the ends sought to be accomplished by these contracts.
All manufacturers, then, of float spring tooth harrows in the United States have agreed, by the papers executed, not to be directly or indirectly interested in the manufacture or sale of float spring tooth harrows, or allow them to be manufactured or sold in any building controlled by them, or either of them, in the United States, or any territory thereof, except Montana, for 50 years, and except as agents and licensees of the National Harrow Company. They have transferred to the defendant company all the patents owned by them, or which may hereafter be owned by them. They have agreed that for 50 years they will not manufacture or sell any harrow except such as they are now manufacturing. By this contract, for 50 years they are not permitted to avail themselves of any devices under patents other than those under which they now manufacture, even after the expiration of such patents. This limitation which they have assumed is not for tile protection of the defendant company, to which they have sold their patents. The defendant has covenanted for 50 years not to manufacture under all that is valuable of the present patents, to-wit,.those patents under which their licensees are now manufacturing. Nor are these manufacturers permitted to utilize any new in
It is claimed that the courts have modified the rule as to contracts in restraint of trade. I find that that is true where an individual sells his business and contracts not to engage therein within a territory as large even as •the United States. The courts now enforce such contracts. Our own court of appeals has gone far, in the Diamond Match Co. Case, 106 N.Y. 473" court="NY" date_filed="1887-10-04" href="https://app.midpage.ai/document/diamond-match-co-v--roeber-3611629?utm_source=webapp" opinion_id="3611629">106 N. Y. 473, 13 N. E. Rep. 419, in relaxing the severity of the ancient rule in condemnation of such contracts as in restraint of trade; but I am cited to no case where the courts have relaxed the rule where there was a general combination to engross the market, control prices, and prevent competition. This was a conspiracy indictable at common law. It is made criminal by our own statutes. The contract is not made to protect any purchase made by the parties thereto. Unless the policy of the common law has so far changed as to authorize any monopoly for the restraint of trade, this combination must clearly come within its condemnation. The defendant further contends that the purpose of the ■contract made is to prevent disastrous litigation. Such purpose is lawful. But the combination effected has gone much further than such a purpose re