Gay v. Brent

• Decision Date: 23 November 1915
• Parties: GAY ET AL. v. BRENT.
• Court: Kentucky Court of Appeals

179 S.W. 1051

166 Ky. 833

GAY ET AL. v. BRENT.

Court of Appeals of Kentucky.

November 23, 1915

Appeal from Circuit Court, Clark County.

Action by David S. Gay and others against N. Ford Brent. From a judgment dismissing the petition, plaintiffs appeal. Affirmed.

Shelby Northcutt & Shelby, of Lexington, Talbott & Whitley, of Paris, E. S. Jouett, of Louisville, and B. R. Jouett and J M. Stevenson, both of Winchester, for appellants.

Pendleton Bush & Bush, of Winchester, and Harmon Stitt and Reuben Hutchcraft, both of Paris, for appellee.

CARROLL J.

Briefly, the facts of this case are these: Previous to 1906 David S. Gay, J. S. Wilson, E. F. Spears & Son, and N. Ford Brent were dealers in Kentucky blue grass seed, each of them doing business in competition with and independent of the others. About 90 per cent. of the blue grass seed of the world is produced in Kentucky, and in the years previous to 1906 clean blue grass seed had been selling at from 80 cents to $1.35 a bushel, the usual price being $1.25 a bushel. In June, 1906, Gay, Wilson, and Spears & Son conceived the purpose of securing control of the blue grass seed market, and in execution of this plan they entered into a private, written contract, which is set out in full in the opinion written in this case when it was here before and that may be found in 149 Ky. 615, 149 S.W. 915, 41 L.R.A. (N. S.) 1034.

After this agreement was entered into, and pursuant to its terms, and to accomplish the intended object, the parties to the agreement at once commenced to buy all of the blue grass seed available, their purchases including the seed owned by farmers as well as dealers. Among the purchases of seed so made was a large quantity bought from Brent at $1.30 per bushel. When the time arrived for the delivery of this seed by Brent he refused to perform the contract, and thereupon Gay, Wilson, and Spears & Son, who are doing business under the name of the Kentucky Blue Grass Seed Company, brought suit against Brent to recover damages for a breach of the contract, alleging in the petition that between the time the contract was entered into and the time specified for the delivery of the seed, it had advanced 38 cents per bushel, and had he performed his contract they would have realized a profit of this sum.

In the answer to this petition, which is set out at length in the former opinion, Brent charged that the purpose of the agreement between Gay, Wilson, and Spears & Son, of which agreement he was ignorant when he contracted to deliver the seed, was to control the blue grass seed market and create a monopoly in unreasonable and unlawful restraint of trade, and to thereby increase the cost of blue grass seed to the public. He further averred that in entering into this agreement Gay, Wilson, and Spears & Son intended to and did form and create a trust, combine and pool in violation of the statute law of the state for the purpose of enhancing the price of blue grass seed above its real value, and that immediately after one object of the pool had been accomplished in practically securing control of the blue grass market, they did arbitrarily raise the price of blue grass seed above its real value. To this answer a general demurrer was sustained, and from the judgment of the lower court holding that his answer did not present a defense, Brent prosecuted an appeal to this court.

In the course of the opinion of this court holding that the answer presented a good defense on which Brent was entitled to go to trial, it was said:

"Nor do we find it necessary in disposing of the case to consider at all the anti-trust statutes of the state. Leaving out of view entirely the applicability of the anti-trust statutes, we think the controlling and decisive question in the case is: Did the averments of the answer, which must be treated as true, state the defense of an unlawful and unreasonable restraint of trade upon which Brent was entitled to introduce evidence and have a decision on the merits? * * * It will also be noticed that the answer in substance charged that the partnership or agreement entered into between Gay and his associates had for its purpose the creation of a trust and monopoly to control the blue grass seed market of the country, and to fix and regulate the price at which the seed should be sold; and that in pursuance of this purpose and to carry it into effect the purchase of the carload of seed from Brent was one of many purchases undertaken in execution of the plan to control and monopolize the market and fix and regulate the price of the seed."

In answer to the argument that the purchase of the seed from Brent involved only a small part of the blue grass seed then on the market, and therefore it should not be treated as an illegal arrangement, or as an unreasonable or unlawful agreement in restraint of trade, the court said, quoting with approval from the opinion in Merchants' Ice & Cold Storage Co. v. Rohrman, 138 Ky. 530, 128 S.W. 599, 30 L.R.A. (N. S.) 973, 137 Am.St.Rep. 390; and applying it to the facts of the Brent Case:

"But the validity of this particular contract cannot be determined by looking at it alone. It must be considered in connection with the others of which it was and is a part, and when so considered in connection with the circumstances under which it was entered into and the conditions that gave rise to its execution, we find that it was only one of a number of like contracts secured about the same time by the Merchants' Refrigerating Company in furtherance of the purpose to obtain control of the ice market and effectually destroy substantial competition. In short, we think it is plain that the purpose in the minds of the parties to this transaction was to purchase the National Ice & Cold Storage Company and Rohrman's interest therein, as a link in the chain that would finally bind all the consumers of ice in Louisville to the wheels of a single concern, thereby creating a condition that would enable the purchaser to control the market and stifle, if not suppress, competition. * * * If a contract is made that suppresses competition, and controls the market, and that contract is entered into between those who have theretofore engaged in competition in the market sought to be controlled, it is a contract in restraint of trade. It may be more. It may amount to a trust or conspiracy or a monopoly, but it is nevertheless a contract in restraint of trade. To restrain trade is the essential feature of the contract--the reason why it was made. If trade that is in competition could not be restrained, the promoters would not go into the scheme; and when such a contract is made, whatever form it may assume, or by whatever name it may be called, and although it may be reached under the law of monopolies, trusts, and conspiracies, it will be declared void as being in unreasonable restraint of trade."

It was further said in the opinion:

"Nor do we think that in ruling that the scheme of Gay and Company was an agreement in restraint of trade, we have unduly extended the scope of the principle upon which the doctrine rests. It is true that by the common-law contracts treated as being in restraint of trade were limited to contracts having for their purpose the purchase of some trade or business, as a part of which the seller agreed not to engage in the trade or business he had disposed of. But, in dealing with conditions brought about by modern business methods, it has been found necessary for the public good to extend the common-law prohibition against contracts in restraint of trade to states of case involving more than the mere purchasing and selling of a trade or business, so as to give the courts for the good of the public authority to prevent as much as possible combinations and arrangements having for their purpose the creation of a monopoly, the control of prices, and the suppression of competition. Addyston Pipe & Steel Co. v. United States, 175 U.S. 211 , 44 L.Ed. 136.

The restraint of trade may be accomplished in more ways than one. Every business scheme that has for its purpose the control of the market and the fixing of prices, necessarily tends to restrain trade and suppress competition in the article sought to be controlled. But when the doctrine was first recognized conditions were such that the public good only required that it be applied to contracts of sale and between the parties to the contract. It is, however, manifest that if this wholesome principle of the common law should be confined to the narrow limits that were sufficient in its origin, it would be wholly inadequate to correct the evils that modern trade conditions have produced. And so, taking for a foundation the principle that illegal and unreasonable restraint of trade is obnoxious to the spirit of the law, the range of this principle will be extended to meet the requirements of to-day and to embrace every condition in which an unlawful attempt is made to restrain trade and control the market and suppress competition by whatever means these ends are sought to be accomplished."

On the trial of the case, after it was remanded, the law and facts, by agreement, were submitted to the trial court, and in a judgment and an opinion holding that Gay, Wilson, and Spears & Son could not maintain the action, the trial court said, in his findings of law, that:

"The Kentucky statutes against pools, trusts, and conspiracies do not apply to contracts in restraint of trade. Contracts in restraint of trade are controlled by the common law, and when they are unreasonable, they are declared to be void. A contract entered into between those who have theretofore engaged in competition with reference to any particular product or commodity, which suppresses competition and

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