Fox Film Corp. v. Tri-State Theatres

• Decision Date: 18 December 1931
• Docket Number: 5742
• Citation: 51 Idaho 439,6 P.2d 135
• Parties: FOX FILM CORPORATION, a Corporation, Appellant, v. TRI-STATE THEATRES, a Corporation, Respondent
• Court: Idaho Supreme Court

6 P.2d 135

51 Idaho 439

FOX FILM CORPORATION, a Corporation, Appellant, v. TRI-STATE THEATRES, a Corporation, Respondent

No. 5742

Supreme Court of Idaho

December 18, 1931

MONOPOLIES-CONTRACTS-RESTRAINT OF TRADE-RIGHTS OF PARTIES.

1. Agreement between motion picture distributors to contract for exhibition of films only on standard form providing for compulsory arbitration and joint action held unenforceable in action for damages (Sherman Anti-Trust Act, sec. 1; 15 U.S. C. A., sec. 1).

2. Execution of contract within prohibition of Sherman Anti-Trust Act, in whole or in part, is unlawful (Sherman Anti-Trust Act, sec. 1; 15 U.S. C. A., sec. 1).

APPEAL from the District Court of the Tenth Judicial District, for Nez Perce County. Hon. Miles S. Johnson, Judge.

Action for breach of contract. Judgment for defendant. Affirmed.

Judgment affirmed, with costs to respondent.

Hawley & Worthwine, Walter G. Bell and Leo McCarty, for Appellant.

The fact that the arbitration clause is invalid as offending the Sherman Anti-Trust Act is no defense to this action, for the following reasons:

The arbitration clause is not an element of dispute, nor concerned directly herein. (United States v. Paramount Famous Lasky Corp., 34 F.2d 984; affirmed, Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 75 L.Ed. 145; Columbia Pictures Corp. v Bi-Metallic Inv. Co., (D. C.) 42 F.2d 873.)

The arbitration clause is separable from the other parts of the contract, and its illegality neither affects the remainder of the contract nor relieves the defendant from his obligation to perform the legal covenants to receive and pay for motion picture prints. (United States v. Paramount Famous Lasky Corp., supra; Paramount Famous Lasky Corp. v. National Theatre Corp., 49 F.2d 64; Fox Film Corp. v Buchanan, 17 La. App. 285, 136 So. 197; Western Union Tel. Co. v. Pennsylvania Co., 129 F. 849, 64 C. C. A. 285, 68 L. R. A. 968; Aktieselskabet Korn-Og Foderstof Kompagniet v. Rederiaktiebolaget Atlanten, 232 F. 403.)

A violation of the Sherman Anti-Trust Act is only a defense where the defendant alleges and proves injury because of its violation, and such requirements do not appear in this case. (Keogh v. Chicago & Northwestern R. Co., 260 U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183; Sullivan v. Associated Billposters & Distributors of U.S. (D. C.) 272 F. 323.)

Cox, Martin & Ware, for Respondent.

The contracts on which appellant's complaint is founded are in restraint of trade and illegal under the federal laws. (U. S. Code, title 15, sec. 1; United States v. Paramount Famous Lasky Corp., (D. C.) 34 F.2d 984; Paramount Famous Lasky Corp. v. United States, 282 U.S. 30, 51 S.Ct. 42, 44, 75 L.Ed. 145; Majestic Theatre Co. v. United Artists' Corp., (D. C.) 43 F.2d 991; United States v. First Nat. Pictures, 282 U.S. 44, 51 S.Ct. 45, 75 L.Ed. 151.)

In Idaho a contract which is illegal because in contravention of a statute making it a criminal offense will never be enforced by the courts. (Libby v. Pelham, 30 Idaho 614, 166 P. 575; Sanborn v. Pentland, 35 Idaho 639, 208 P. 401; McFall v. Arkoosh, 37 Idaho 243, 215 P. 978; McShane v. Quillin, 47 Idaho 542, 277 P. 554.)

The courts will not aid either party in the enforcement of his alleged rights under an illegal contract, but will leave the parties where it finds them. (Hall v. Coppell, 7 Wall. (U. S.) 542, 19 L.Ed. 244; McMullen v. Hoffman, 74 U.S. 639, 19 S.Ct. 839, 43 L.Ed. 1117; E. Bement & Sons v. National Harrow Co., 186 U.S. 70, 22 S.Ct. 747, 46 L.Ed. 1058; Continental Wall Paper Co. v. Louis Voight & Sons Co., 212 U.S. 227, 29 S.Ct. 280, 53 L.Ed. 486; Brent v. Gay, 149 Ky. 615, 149 S.W. 915, 41 L. R. A., N. S., 1034; Patterson v. Imperial Window Glass Co., 91 Kan. 201, 137 P. 955; Barton v. Mulvane, 59 Kan. 313, 52 P. 883.)

Where a contract is executory and one party retains the right to determine in the future the nature and extent of his performance, the contract is lacking in consideration and mutuality and is void. (Houser v. Hobart, 22 Idaho 735, 127 P. 997, 43 L. R. A., N. S., 410; Olin Co. v. Lambach, 35 Idaho 767, at 769, 44 A. L. R. 354, 209 P. 277; Clement v. Producers' Ref. Co., (Tex. Civ. App.) 270 S.W. 206, 277 S.W. 634.)

MCNAUGHTON, J. Lee, C. J., and Budge, Givens and Varian, JJ., concur.

OPINION

MCNAUGHTON, J.

This is an action by the Fox Film Corporation against Tri-State Theatres in damages for breach of contract. The contract involved evidences a form of agreement and combination pursuant to which the motion picture business has since May 1, 1928, been carried on throughout the United States. A copy of the contract is attached to the complaint and is relied upon except it is alleged that the arbitration clause (section 19 of the contract) has been eliminated. It is claimed that clause has been declared in restraint of trade and illegal, in an action against a like general contract brought by the Attorney General of the United States against the Paramount Famous Lasky Corporation, but it is alleged that the balance of the contract was held to be and is legal and binding. The action by the Attorney General of the United States involving a like general contract will be referred to in this opinion as the original contract. The rights of the parties in the action are dependent upon whether or not in legal effect the whole contract involved in the original action was avoided or only the nineteenth section thereof. The legal effect of the original action is brought into this case by plaintiff's complaint and its declaration or conclusion as to its effect on the contract. These allegations are in the nature of legal conclusions but we treat them as legal declarations to be taken for what they are worth and not as admitted by demurrer.

Section 19 of the contract is as follows:

"Nineteenth The parties hereto agree that before either of them shall resort to any court to determine, enforce or protect the legal rights of either hereunder, each shall submit to the Board of Arbitration (established or constituted pursuant to the Rules of Arbitration filed with the American Arbitration Association, 342 Madison Avenue, New York City, bearing date of May 1st, 1928, and identified by the signatures of the Contract Committee appointed at the 1927 Motion Picture Trade Practice Conference a copy of which will be furnished to the exhibitor upon request) in the city wherein is situated the exchange of the Distributor from which the Exhibitor is served or if there be no such Board of Arbitration in such city then to the Board of Arbitration in the city nearest thereto (unless the parties hereto agree in writing that such submission shall be made to a Board of Arbitration located in another specified city) all claims and controversies arising hereunder for determination pursuant to the said Rules of Arbitration and the rules of procedure and practice adopted by such Board of Arbitration.

"The parties hereto further agree to abide by and forthwith comply with any decision and award of such Board of Arbitration in any such arbitration proceeding, and agree and consent that any such decision or award shall be enforceable in or by any court of competent jurisdiction pursuant to the laws of such jurisdiction now or hereafter in force; and each party hereto hereby waives the right of trial by jury upon any issue arising under this contract, and agrees to accept as conclusive the findings of fact made by any such Board of Arbitration, and consents to the introduction of such findings in evidence in any judicial proceeding.

"In the event that the Exhibitor shall fail or refuse to consent to submit to arbitration any claim or controversy arising under this or any other Standard Exhibition Contract which the Exhibitor may have with the Distributor or any other distributor or to abide by and forthwith comply with any decision or award of such Board of Arbitration upon any such claim or controversy so submitted, the Distributor may, at its option, demand, for its protection and as security for the performance by the Exhibitor of this and all other existing contracts between the parties hereto, payment by the Exhibitor of an additional sum not exceeding $ 500 under each existing contract, such sum to be retained by the Distributor until the complete performance of all such contracts and then applied, at the option of the Distributor, against any sums finally due or against any damages determined by said Board of Arbitration to be due to the Distributor, the balance, if any to be returned to the Exhibitor; and in the event of the Exhibitor's failure to pay such additional sum within seven (7) days after demand, the Distributor may by written notice to the Exhibitor suspend service hereunder until said sum shall be paid and/or terminate this contract.

"In the event the Distributor shall fail or refuse to consent to the submission of any claim or controversy arising under this or any other Standard Exhibit Contract providing for arbitration which the Distributor may have with the Exhibitor, or to abide by and forthwith comply with any decision or award of such Board of Arbitration upon any such claim or controversy so submitted, within the number of days specified in Article Twenty-First opposite the name of the city in which such Board of Arbitration is located, the Exhibitor may at his option terminate this and any other existing contract between the Exhibitor and the Distributor by mailing notice by registered mail within two (2) weeks after such failure or refusal, and in addition the Distributor shall not be entitled to redress from such Board of Arbitration upon any claim or claims against any Exhibitor until the Distributor shall have complied with such decision and in the meanwhile the...