Nashua River Paper Co. v. Hammermill Paper Co.

• Decision Date: 14 February 1916
• Parties: NASHUA RIVER PAPER CO. v. HAMMERMILL PAPER CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

223 Mass. 8

111 N.E. 678

NASHUA RIVER PAPER CO.

v.HAMMERMILL PAPER CO.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 14, 1916.

Report from Superior Court, Suffolk County; Marcus Morton, Judge.

Action by the Nashua River Paper Company against the Hammermill Paper Company. Demurrers to defendant's answer in abatement and answer in bar overruled, and case reported. Demurrers sustained, and case to stand on answer to the merits.

CONTRACTS k127-JURISDICTION-CONTRACT STIPULATION-VALIDITY.

A stipulation, in a commercial contract between a corporation domiciled in Massachusetts and a corporation incorporated in Pennsylvania, that no action should be maintained against the latter corporation in any state or federal court other than the courts of common pleas of Pennsylvania, was unenforceable, and did not preclude the maintenance of such an action in the courts of Massachusetts.

[Ed. Note.-For other cases, see Contracts, Cent. Dig. ss 608-615; Dec. Dig. k127.]

Harold S. Davis, of Boston, for plaintiff.

Brandeis, Dunbar & Nutter, of Boston (J. Butler Studley, of Boston, of counsel), for defendant.

RUGG, C. J.

The question is whether, in a contract between a manufacturer and its sales agent, a provision is valid to the effect that:

‘No action at law, equity or chancery shall be instituted or maintained by the corporation in any court of any state of the United States or in any Circuit or District Court of the courts of the United States against the company other than in the courts of the common pleas of the state of Pennsylvania.’

This stipulation occurs in an ordinary commercial contract between a corporation domiciled in this commonwealth and another corporation incorporated under the laws of Pennsylvania.

It becomes necessary to review some of the cases. Nute v. Hamilton Mut. Ins. Co., 6 Gray, 174, was an action upon a policy of insurance, one stipulation of which, incorporated in the contract by reference to the by-laws of the company, was in substance that any ‘action shall be brought at a proper court in the county of Essex.’ It was held that this stipulation was not binding, and that an action could be brought in any county where the venue properly might be laid. The general principle on which this decision was made to rest was that it was not within the province of parties to enter into an agreement concerning the remedy for a breach of contract, which is created and regulated by law. Considerations of public policy were adverted to as supporting the conclusion, but not given decisive weight. Chief Justice Shaw, in concluding the discussion, said:

‘The greatest inconvenience would be in requiring courts and juries to apply different rules of law to different cases, in the conduct of suits, in matters relating merely to the remedy, according to the stipulations of parties in framing and diversifying their contracts in regard to remedies.’

In Hall v. Peole's Mut. Fire Ins. Co., 6 Gray, 185, the provision of the contract of insurance was explicit to the effect that no action should be brought upon the policy except in the county of Worcester. Chief Justice Shaw, in giving the opinion of the court, after adverting to Nute v. Hamilton Mut. Ins. Co. as substantially deciding the question, said:

‘The court were of opinion that a stipulation in an original contract, that in case of breach the suit shall be brought in a particular county, or, in other words, that a suit shall not be brought in a county in which it is directed by law to be brought, is not a proper matter of contract. After a contract has been made and broken, the remedy is regulated by law, and of course must be governed by the law of the forum where the remedy is sought. * * * It is a well settled maxim that parties cannot, by their consent, give jurisdiction to courts, where the law has not given it; and it seems to follow, from the same course of reasoning, that parties cannot take away jurisdiction, where the law has given it.’

The same point was decided in Amesbury v. Bowditch Mut. Fire Ins. Co., 6 Gray, 596, 603. In Roberts v. Knights, 7 Allen, 449, it was held that a British subject, who had shipped in England as seaman for an entire voyage under a statutory law which provided that under such contract no seaman should sue for wages in any court abroad except in case of discharge or danger to life, nevertheless might bring an action against the master of the vessel although both parties were residents of Great Britain. It commonly has been thought that ‘such law enters into the terms of the contract and becomes a part of its obligation.’ Hanscom v. Malden & Melrose Gaslight Co., 220 Mass. 1, 7, 107 N. E. 426. Therefore the refusal of the court to give any heed to the British statute is significant, although there was no discussion of the point here raised. These cases generally have been understood as supporting the proposition that parties could not contract that their disputes arising under the contract should be litigated in a single court or in the courts of a particular jurisdiction.

It was held in Home Ins. Co. v. Morse, 20 Wall. 445, 22 L. Ed. 365, that a statute making it a condition precedent to the granting of the privilege to a foreign corporation to do business within a state, that it would not remove suits from state to federal courts, was unconstitutional and a contract to that effect was invalid. It there was said, at page 451 of 20 Wall.,22 L. Ed. 365:

‘A man may not barter away his life or his freedom, or his substantial rights. * * * In a civil case he may submit his particular suit by his own consent to an arbitration, or to the decision of a single judge. So he may omit to exercise his right to remove his suit to a federal tribunal, as often as he thinks fit, in each recurring case. In these aspects any citizen may no doubt waive the rights to which he may be entitled. He cannot, however, bind himself in advance by an agreement, which may be specifically enforced, thus to forfeit his rights at all times and on all occasions, whenever the case may be presented.’

This point was reaffirmed expressly in Doyle v. Continental Ins. Co., 94 U. S. 535, 24 L. Ed. 148. This principle has been followed in numerous decisions of Circuit and District federal courts. Prince Steam Shipping Co. v. Lehman (D. C.) 39 Fed. 704, 5 L. R. A. 464;Slocum v. Western Assur. Co. (D. C.) 42 Fed. 235; The Etona (D. C.) 64 Fed. 880;Gough v. Hamburg-Amerikanische Packet fahrt Aktiengesellschaft (D. C.) 158 Fed. 174;U. S. Asphalt Refining Co. v. Trinidad Lake Petroleum Co., Ltd. (D. C.) 222 Fed. 1006.

It was held in Benson v. Eastern Building & Loan Ass'n, 174 N. Y. 83, 86,66 N. E. 627, in substance that parties cannot in the ordinary case by contract deprive courts of competent jurisdiction of their power to adjudicate causes on the ground that that jurisdiction is prescribed by law and it connot be increased or diminished by agreement of parties. In Mut. Reserve Fund Life Ass'n v. Cleveland Woolen Mills, 82 Fed. 508, at page 510, 27 C. C. A. 212, at 214, it was said by Lurton, J.:

‘The policy [of insurance] * * * contained a stipulation that no suit in law or equity should be brought upon it except in the Circuit Court of the United States. This provision intended to oust the jurisdiction of all state courts is clearly invalid. Any stipulation between contracting parties distinguishing between the different courts of the country is contrary to public policy and should not be enforced.’

To the same effect, see Savage v. People's Building, Loan & Savings Assn., 45 W. Va. 275, 282, 31 S. E. 991; Bartlett v. Union Mut. Fire Ins. Co., 46 Me. 500; Reichard v. Manhattan Life Ins. Co., 31 Mo. 518; Indiana Mut. Fire Ins. Co. v. Routledge, 7 Ind. 25;Baltimore & Ohio R. R. v. Stankard, 56 Ohio St. 224, 46 N. E. 577,49 L. R. A. 381, 60 Am. St. Rep. 745;Owsley v. Yerkes, 187 Fed. 560, 109 C. C. A. 250;First Nat. Bank of Kansas City v. White, 220 Mo. 717, 737, 120 S. W. 36,132 Am. St. Rep. 612,16 Ann. Cas. 889;Healy v. Eastern Building & Loan Ass'n, 17 Pa. Super. Ct. 385, 392, 393;Matt v. Iowa Mut. Aid Ass'n, 81 Iowa, 135, 46 N. W. 857,25 Am. St. Rep. 483;Shuttleworth v. Marx, 159 Ala. 418, 428, 49 South. 83. In many of these cases the opinion of this court by Chief Justice Shaw in Nute v. Hamilton Mut. Ins. Co., 6 Gray, 174, has been cited and relied on as an authority. Attempts to place limitations by contract of the parties upon the powers of courts as to actions growing out of the particular contract, or to oust appropriate courts of their jurisdiction, have been regarded with disfavor and commonly have been held invalid. Guaranty Trust & Safe Deposit Co. v. Green Cove Springs & Melrose R. R. Co., 139 U. S. 127, 140, 11 Sup. Ct. 512, 35 L. Ed. 116;Meacham v. Jamestown, Franklin & Clearfield R. R., 211 N. Y. 346, 352, 353,105 N. E. 653, Ann. Cas. 1915C, 851. It might be argued with force that the law as to the enforcement of rights arising out of personal injuries was imported into the terms of a contract for hire. Yet it has been decided that statutory limitations to the effect, that a right of action for personal injuries shall be confined to the state where it occurred, are invalid. Atchison, Topeka & Santa Fé Ry. v. Sowers, 213 U. S. 55, 70, 29 Sup. Ct. 397, 53 L. Ed. 695;Tennessee Coal, Iron & R. Co. v. George, 233 U. S. 354, 34 Sup. Ct. 587, 58 L. Ed. 997.

So far as we are aware, the current of authority (with the exceptions presently to be noted) is unbroken in support of the principle laid down in Nute v. Hamilton Mut. Ins. Co., 6 Gray, 174, although that principle is followed by compulsion of authority and under protest by Judge Hought in United States Asphalt Refining Co. v. Trinidad Lake Petroleum Co., Ltd. (D. C.) 222 Fed. 1006. There are two of our own cases where the principle was...