Bailey v. Association of Master Plumbers of City of Memphis

• Decision Date: 15 August 1899
• Parties: BAILEY et al. v. ASSOCIATION OF MASTER PLUMBERS OF CITY OF MEMPHIS.
• Court: Tennessee Supreme Court

52 S.W. 853

103 Tenn. 99

BAILEY et al. v. ASSOCIATION OF MASTER PLUMBERS OF CITY OF MEMPHIS.

Supreme Court of Tennessee.

August 15, 1899

Error to circuit court, Shelby county; J. S. Galloway, Judge. Reversed.

Smith & Trezevant, for plaintiffs in error.

Henry Craft, for defendant in error.

CALDWELL J.

The Association of Master Plumbers of the City of Memphis sued J A. Bailey & Co. before a justice of the peace to collect an alleged debt of $444. On appeal to the circuit court the presiding judge tried the case without a jury, and pronounced judgment in favor of the plaintiff for the amount claimed. The defendants have appealed in error to this court, and, as they insisted below, here insist that the demand is illegal and that they owe the plaintiff nothing. The plaintiff is a corporation chartered as a nonprofit association, under section 2, c. 142, Acts 1875 (Shannon's Code, § 2514 et seq.), and organized by a majority of the plumbers in the city of Memphis, Tenn. Numerous by-laws were adopted for the government of the association, and some of them were amended from time to time to meet the changing views of the members. One of the amended by-laws, as recited in the president's testimony, was as follows: "Each member of the association was required thereafter to report in open meeting each week what work he had done during the week, and, if it developed that such work was done in competition with any other member (such fact to be made known by the statement of such other member at the meeting at which the work was called out), the member having done the work was to pay into the treasury of the association a fixed sum, according to a schedule agreed upon and made a part of the by-law, namely for each bath tub put in, $7.50 was to be paid to the association; for each water-closet, a fixed sum," etc. In accordance with the plain terms of this by-law, the defendants, who were members of the association from the beginning, made weekly reports for some time, and were by the secretary charged on the books of the association with the sums fixed in the schedule for such parts of the work reported as were shown to have been done in competition with other members. The charges so made (being $7.50 on each bath tub, $5 on each wash-stand, $5 on each water-closet, $5 on each sewer connection, $3 on each boiler, $3 on each sink, $2 on each water connection, and $2 on each hydrant) aggregated $444, and constituted the sole basis of this action and of the judgment below.

Since the plaintiff's demand rests upon the by-law set out above, and nothing else, the first logical step to be taken in the consideration of the case is to determine the legal effect of that by-law. Is it valid or invalid? Its controlling feature, as is readily observed, is the unconditional and inexorable requirement that all members of the association who engage in plumbing work in competition with other members shall pay into the treasury of the association, upon that consideration alone, fixed sums of money for particular kinds of work, which sums in each instance must amount to a large per centum of the price charged. In other words, and more briefly stated, all members doing such competitive work are imperatively required to pay a large tax or tariff thereon to the association. That requirement, however phrased, tends unmistakably and inevitably to one or both of two unlawful results: (1) The destruction of free and natural competition among members (2) the arbitrary and unreasonable increase of prices to customers. The tax or tariff so imposed by the association is in the nature of a penalty visited upon members who shall successfully bid against other members on work appertaining to the plumbing business; and, in the nature of things, the member, who is always conscious of the fact that he must bear that burden and pay that tribute if he gets the job, may be expected to refrain from bidding altogether, or to indemnify himself by adding a corresponding sum to the price he would otherwise charge the customer for the same work. Though the by-law does not in terms require the member doing competitive work to increase the price he would otherwise exact of the customer, such increase is its natural tendency and effect, as would readily be supposed from its scope, and as is conclusively demonstrated by this record. The president of the association testified that "usually he had added this amount [that fixed by the schedule of the by-law in question] to the price of such work as he thought he was bidding on in competition with others, but that, so far as the rule of the association was concerned, he was at liberty to fix his own price, and to do the work at a loss, if he saw fit. He did not know whether, as a general thing, the members of the association added the charges to the price fixed for their work or not, but he supposed that it was usually done whenever the member thought the work was to be done upon competitive bids." Other members gave testimony on the same subject. One of them said: "The practice of the members was this: When a customer would come in to buy an article (a tub, for instance), it would be assumed that he would get prices from other members. This would therefore be understood as a competitive job, which the member would have to report. He would figure the cost, add his legitimate profit, the whole amounting, say, to $30, and to that he would add the tariff of $7.50 on tubs, and charge the customer $37.50." Another one said: "The members would add the tariff to their regular charges, and pay it to the association." And still another one said that "he usually added the amount to be paid the association to the price of work on which he bid in competition, but that there was no rule requiring it done. If he ever failed to do it, it was because he forgot it." No witness testified to a different course of business, or mentioned a single instance in which the customer was not required to bear the burden of this tax or tariff by paying a price enhanced to that extent. Though influential in both particulars, this by-law is not shown to have reduced competition among the members of the association so much as it enhanced prices. In the latter respect it exerted a very large and most hurtful influence upon the public. The arbitrary and unreasonable enhancement in prices was rendered easy, and consequently the more widely harmful and oppressive, by the fact that most of the plumbers in the city of Memphis were members of the association, and that an imperative ordinance of the municipality, as well as the dictates of health and comfort, required all inhabitants to procure and use many of the things for whose sale and construction the association exacted the tax or tariff from its members. The provision is obviously an unreasonable restraint upon trade, and, being so, it is contrary to public policy and void under the common law. It injuriously affects matters of prime importance and legal necessity to the community at large, by the impairment of competition on the one hand, and the enhancement of prices on the other hand, and consequently no supposed obligation resting upon it is capable of enforcement in a court of justice.

The courts are practically unanimous in holding that contracts agreements, arrangements, or combinations, in whatever form or name, are contrary to public policy and void when they tend to impair competition in trade and to enhance prices, to the injury of the public. The cases in which the principle has been applied are numerous. Reference to a few of them will illustrate its scope and application. It was made the controlling rule of decision in Hooker v. Vandewater, 4 Denio, 349, and Stanton v. Allen, 5 Denio, 434, where the plaintiffs were unsuccessful in suits to enforce alleged monetary obligations which arose under a mutual agreement between several transportation companies to equalize business, and establish and maintain uniform rates among themselves as carriers of freight on the Erie and Oswego Canals; in Craft v. McConoughy, 79 Ill. 346, where one of several grain dealers who had entered into a secret agreement to suppress competition and control the grain trade of Rochelle, Ill., was denied a recovery from the others of his proportionate part of the alleged profits of the combination; in the Sugar Trust Case (People v. North River Sugar Ref. Co. [Cir. Ct.] 3 N.Y. Supp. 401, and Id. [Sup.] 7 N.Y.S. 406), where the charter of the defendant was adjudged subject to forfeiture because it and nearly all of the other sugar-refining companies in the United States had entered into an agreement whose tendency was to prevent competition and to control prices; in More v. Bennett, 140 Ill. 69, 29 N.E. 888, where it was held that an association of stenographers was illegal, and its rules nonenforceable, because one of its objects was to restrain competition among its members in bidding for stenographic work; in Oil Co. v. Adove, 83 Tex. 650, 19 S.W. 274, where alleged profits arising under an agreement of certain cotton-oil companies were denied the plaintiffs because the natural and necessary consequences of the agreement were to prevent competition among the parties thereto, and to control prices, to the injury of the public; in U.S. v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 17 S.Ct. 540, and U.S. v. Joint Traffic Ass'n, 171 U.S. 505, 19 S.Ct. 25, where agreements of numerous railroad companies, entered into for their mutual protection, by establishing and maintaining reasonable rates, rules, and regulations on all freight traffic in their combined territory, were adjudged to be illegal, as in restraint of trade, destructive of competition, and tending to monopoly; in Nester v. Brewing Co., 161 Pa. St. 473, 29 A. 102, where the...