Wright v. Ryder

36 Cal. 342 | Cal. | 1868

By the Court, Crockett, J. :

There are but two points presented on this appeal for our decision, to wit: First—Whether or not the covenants of the Oregon Steam Navigation Company to the California Steam Navigation Company, and the conditions in the bill of sale from the Oregon Steam Navigation Company to Winsor, and the bond of Winsor and others to said last named company, are void, as being in restraint of trade and against public policy; and Second—If they be conceded to be valid, whether or not they can he enforced as against the defendant or against the steamer Hew World in his hands.

The general principles which govern contracts in restraint of trade are well settled, both in England and the United States. They proceed on the theory that the public welfare demands that private citizens should not be allowed, even by their own voluntary contracts, to restrain themselves unreasonably from the prosecution of trades, callings, or professions, or from embarking in business enterprises in the promotion and encouragement of which" the public has an interest. At an early period in English jurisprudence, when trade and the mechanic arts were in their infancy, it was deemed a matter of the greatest public importance to encourage their growth and to prohibit contracts which tended to abridge them. Hence the rule first established was, that all contracts were void which in any degree tended to the restraint of trade, even in a particular, circumscribed locality, either for a definite or unlimited period. But as population and trade increased, and there was consequently a greater competition in all useful pursuits, the necessity for the stringent rule which before prevailed had in a greater measure ceased, and the rule itself was greatly relaxed and modified. Instead of denouncing as void all contracts in restraint of trade, the rule, as relaxed, tolerated such as were restricted in their operations within reasonable limits. Hence it has been repeatedly decided, both in England and America, that whilst a contract by an artisan not to follow his calling at any time or place was an unreasonable restraint upon trade, contrary to public policy, and therefore void, nevertheless if he contracted for a valuable consideration not to pursue his occupation within certain reasonable, restricted limits, the contract was valid and would be enforced. Thus, in Alger v. Thacker, 19 Pick. 51, the defendant had entered into a bond by which he bound himself not to carry on the business of an irqn founder at any time or place, and the Court held the contract to be void, as an unreasonable restraint upon trade. This is a leading case on that point. So, in Keeler v. Taylor, 53 Penn. 468, 469, the Court says: “ But if the restraint be general, that is, not limited to a reasonable time and district, it is void at law, and of course will not be enforced in equity.” In Story on Contracts, Sec. 550, the rule is thus stated: “An agreement in general or total restraint of trade is void, although it be founded on a legal and valuable consideration. * * * The same rule has been uniformly adhered to even to the present day; an agreement, therefore, not to carry on a certain business anywhere is invalid, whether it be by parol or specialty, or whether it be for a limited or for an unlimited time; ” and he quotes in support of the rule Mitchell v. Reynolds, 1 P. Will. 190; Homer v. Ashford, 3 Bing. 323; Pierce v. Fuller, 8 Mass. 223; Nobles v. Bates, 7 Cow. 307; Morris v. Coleman, 18 Ves. 436; Hinde v. Gray, 1 Man. & Grang. 195; Alger v. Thacker, 19 Pick. 51; to which may be added many other authorities from the Courts of England and America. “But,” he adds, (Sec. 551,) “ an agreement in partial restraint of trade, restricting it within certain reasonable limits or times, or confining it to particular persons, would, if founded upon a good and valuable consideration, be valid. * *, * Such an agreement not only does not obstruct trade, but is oftentimes requisite and necessary, as well for the advantage of the public as of the individual.” This proposition is maintained in Rannie v. Irvine, 7 Mann. & Grang. 976; Chappel v. Brockway, 21 Wend. 157; Hartley v. Cummings, 5 C. B. 247; Bunn v. Guy, 4 East. 190; Pierce v. Woodward, 6 Pick. 206; Perkins v. Lyman, 9 Mass. 522; Hayward v. Young, 2 Chit. 407; Mallan v. May, 11 Mees. & Wels. 653; Wickins v. Evans, 3 Young & Jerv. 318.)

In such cases, the difficulty lies in determining what are reasonable and what unreasonable restrictions, in respect to the area within which the restriction is to be confined. If it be unlimited in space, and is to operate everywhere, nearly all the authorities agree that the contract is void; and a rule established by the English Courts is, that if the restriction operates throughout the kingdom, the contract is void.

In this case, the covenant of the Oregon Steam Navigation Company to the California Steam Navigation Company is, “that they will not run or employ, or suffer to he run or employed, the said steamboat New World upon any of the routes of travel on the rivers, bays, or waters of the State of California, for the period of ten years from the 1st day of May, 1864.” There is a similar covenant that the machinery of the boat shall not be run or employed to run any vessel or craft on any of the routes of travel, or on the rivers, bays, or waters of this State, for the same period. The covenant of Winsor and others to the Oregon Company is even broader, and includes the waters of the Columbia River and its tributaries. These covenants, if valid, and enforced by the Courts, would exclude the boat from all the navigable waters of California and the principal navigable waters of Oregon for the period of ten years. There is no force in the argument that the covenant to the California Steam Navigation Company applied only to the existing routes of travel, and not to new routes afterwards to be opened. As we construe it, the covenant applied to all routes of travel on the rivers, bays, or waters of the State then existing or which should be established within the period limited. If the validity of these covenants was to be tested solely by the question whether the limitation of the area within which they are to operate was reasonable or otherwise, we should have no hesitation in pronouncing them unreasonable and within the rule which holds such contracts to be void as against public policy. The covenants include the entire area of the State, and are therefore in this respect without limitation, within the meaning of the rule we have stated.

“ Contracts which go to the total restraint of trade, as that a man will not pursue his occupation or carry on his business anywhere in the State, are void, upon whatsoever consideration they may be made.” (Chappel v. Brockway, 21 Wend. 159; Dunlop v. Gregory, 10 N. Y. 244; Homer v. Ashford, 3 Bing. 328.)

In nearly all the adjudged cases cited by counsel, the questions decided arose under contracts made by tradesmen or others following particular occupations, whereby they bound themselves not to pursue their occupations either generally or within certain specified limits. But in this case, the question comes up in another aspect. The California Steam navigation Company was largely engaged in navigating the waters of this State, and being the owner of the steamer Hew World, sold her to the Oregon Steam navigation Company, upon an agreement that she was not, for the period of ten years, to be employed in navigating the waters of this State. The object of this provision, obviously, was to prevent the Hew World from being employed as an opposition boat in competition with the boats of the California Steam navigation Company, and counsel insist that such a transaction does not come within the rule which prohibits contracts in restraint of trade. The argument is that being the owner of the boat, the California Steam navigation Company had the lawful right to withdraw her from commerce entirely; and if they elected to do so, might have permitted her to rot at the dock, or have otherwise destroyed her, in which event the public could not have complained even though a great public inconvenience may have resulted from such conduct on the part of the company.

From the fact that the company, as owner, had this absolute power of disposition, the inference is drawn that it might impose whatever limitations it pleased on the future use of the boat; that it might have imposed it as a condition of the sale that the boat should be taken to pieces and its machinery destroyed, and consequently that it was competent for it to require that the boat should not thereafter run in a particular trade. But precisely the same argument would apply to a tradesman who stipulates not to follow his trade at any time or place. He may elect to abandon his calling altogether, however urgently the public may demand his services, or he may voluntarily disable himself from pursuing his avocation, and thus deprive the public of his services entirely. But, as we have seen, it does not thence follow that he is bound by a contract, in which he stipulates that he will not pursue his avocation at any time or place. The reason of the rule is that though for the present he may intend and desire to abandon his trade or calling, as he has the right to do so, the law, on grounds of public policy, will not allow him to bind himself not to resume his avocation if he shall afterwards elect to do so. So, while the owner of a steamboat has the right to keep her idle, or to destroy her if he choose, however great may be the inconvenience to the public, it does not follow that he would be bound by a contract in which he stipulates never to employ her in the waters of this State. He might afterward change his mind and desire to engage in commerce with her in our waters, and on grounds of public policy he would not be bound by his contract. But we have grave doubts whether, in this age of abundant capital and active competition in all the avenues of commerce, the withdrawal of a single boat from our navigable waters could be deemed an appreciable restraint upon trade, or result in the slightest inconvenience to the public. The difficulty lies in fixing the line between that which is or is not an appreciable restraint of trade. If the California Steam navigation Company, which now occupies our bays, rivers, and inlets with its fleet of steamboats, should suddenly convey them all to a purchaser on condition that they were not to be employed in navigating any of the waters of this State for a period of ten years, no one could doubt that this would operate as a great present calamity to the public, and the condition would be void as a restraint upon trade. On the other hand, if a sloop or schooner of fifty tons burden should be sold on a similar condition, the injury to the public would be scarcely appreciable. In like manner, if all the carpenters and masons in a large city should bind themselves not to prosecute their business in this State for a period of ten years, it might produce great public inconvenience; whereas, if only one carpenter or mason should enter into a similar contract, the loss of his services might not be felt by the public. And yet, in the latter case, we would be bound by a long line of adjudications in England and America to hold the contract void, as in restraint of trade. The reasoning on which these-decisions rest applies to the sale of a single boat as fully as to the case of a single tradesman; and we feel constrained, in deference to these decisions, to hold the contract in this case to be void. This view of the case renders it unnecessary to consider the second point raised on the appeal.

The judgment is therefore affirmed.