Missouri Portland Cement Co. v. Denny Concrete Co., Inc.

• Decision Date: 10 September 1973
• Docket Number: No. 2,No. 56903,56903,2
• Citation: 499 S.W.2d 432
• Parties: 1973-2 Trade Cases P 74,689 MISSOURI PORTLAND CEMENT COMPANY, Appellant, v. DENNY CONCRETE COMPANY, INC., et al., Respondents
• Court: Missouri Supreme Court

Page 432

499 S.W.2d 432

1973-2 Trade Cases P 74,689

MISSOURI PORTLAND CEMENT COMPANY, Appellant, v. DENNY CONCRETE COMPANY, INC., et al., Respondents.

No. 56903.

Supreme Court of Missouri, Division No. 2.

Sept. 10, 1973.

Motion to Transfer to Court en Banc and Rehearing Denied Oct. 8, 1973.

J. Wallace Adair, Ray S. Bolze, Robert M. Heier, Howrey, Simon, Baker & Murchison, Washington, D.C., Thomas E. Allen, Hale, Kincaid, Waters & Allen, Liberty, for appellant.

William P. Higgins, Higgins & Brimer, Wichita, Leon B. Seck, Harrisonville, Kenneth P. Seck, Kansas City, for respondents.

HOUSER, Commissioner.

This appeal involves the propriety of an order ruling motions for summary judgment filed by plaintiff Missouri Portland Cement Company (a manufacturer and supplier of cement in this and other states in the midwest) and by defendants Denny Concrete Company, Inc. (a manufacturer and supplier of ready-mix concrete to general contractors and the construction trades in Kansas City and vicinity) and individual defendants J. Gilbert Denny and E. William Geiger, officers of the corporate defendant. The order sustained all four paragraphs of defendants' motion for summary judgment, and overruled all four paragraphs of Missouri Portland's like motion. Missouri Portland appealed. This Court has jurisdiction because the amount in controversy exceeds the jurisdictional amount in effect, and the appeal was taken, prior to January 1, 1972, the effective date of Mo.Const. new Article V, § 3, V.A.M.S.

Missouri Portland's petition is in four counts. Counts I and II are based upon promissory notes in the sum of $25,000 each, executed by the corporate and individual defendants in 1966 and 1967, respectively. Count III is a claim for $67,583.68 for cement sold and delivered by Missouri Portland to Denny Concrete. Count IV is based upon the failure of Denny Concrete to redeem 500 shares of preferred stock of Denny Concrete at $100 per share pursuant to a written contract dated September 18, 1964 entered into by and between Missouri Portland and Denny Concrete, the individual defendants and their wives. That contract is challenged in this suit as violative of the antitrust laws of this State, Chapter 416, RSMo 1969, V.A.M.S. It required Missouri Portland to invest $50,000 in Denny Concrete preferred stock of a par value of $100 per share, in consideration of which investment Denny Concrete agreed to continue its normal operations during the 5-year term of the agreement (from October 1, 1964 through September 30, 1969), and to purchase from Missouri Portland 'all of its requirements of cement of any type during the five year period.' Missouri Portland agreed to supply Denny Concrete all such requirements of cement, meeting standard specifications, and that 'the sale price shall be no higher than the lowest established delivered price at destination in effect at the time of delivery.' Denny Concrete further agreed that if it disposed of its assets during the period Missouri Portland would be given the first opportunity to purchase or lease the properties at the same price offered in good faith by a prospective purchaser or lessor, and the stockholders of Denny Concrete agreed to give Missouri Portland the first opportunity to purchase their stock. The agreement was subject to renewal for a like 5-year term and if not renewed Missouri Portland had the option to present the $50,000 preferred stock for redemption at a price of $100 per share and upon presentment Denny Concrete was obligated to pay the redemption price. The contract was executed on behalf of the two corporations by their presidents. In addition the individual defendants, who were directors and stockholders, and their wives, signed the contract in their individual capacities.

The parties stipulated that the two $25,000 notes referred to in Counts I and II were executed; that defendants have made no payment thereon; that Missouri Portland sold and delivered to Denny Concrete cement at the total invoice price as alleged, and that no part of the invoice price has been paid.

Defendants' answers alleged that the cement sales and promissory notes were all part of the same transaction; that they arose out of the contract of September, 1964, which constituted an illegal restraint of trade and conspiracy within the meaning of Chapter 416, RSMo 1969, V.A.M.S., and that by reason of § 416.100, ¹ RSMo 1969, V.A.M.S., Denny Concrete is not liable for any amount on the notes, or the account, and that Denny Concrete is under no obligation to redeem the preferred stock.

Following the filing of numerous depositions, interrogatories, answers to interrogatories, and exhibits, both sides filed motions for summary judgment.

In sustaining defendants' motion the court found, conclusively and as a matter of law, that the language of the contract of September, 1964 violates the antitrust laws of Missouri, Chapter 416, RSMo 1969, V.A.M.S.; that the contract must be construed as a capturing by agreement of all of Denny Concrete's business to the total exclusion of other competing manufacturers and sellers of cement operating in the market of this state, and therefore is an agreement in restraint of trade under §§ 416.010, ² 416.040 ³ and 416.110, ⁴ RSMo 1969, V.A.M.S.; that under § 416.100, ¹ RSMo 1969, V.A.M.S., Missouri Portland cannot collect for the cement sold under this contract. As another and further reason the Court gave for its ruling that as a matter of law the contract is void as in restraint of trade was that it fixed the price at which Missouri Portland sold its cement to Denny Concrete.

The court further ruled that Missouri Portland cannot collect from Denny Concrete on the two $25,000 promissory notes because they grew out of and were directly connected with and part of the conspiracy in restraint of trade, and therefore are equally void. The court arrived at this conclusion on the basis of 'evidence submitted by defendants' on its motion for summary judgment, which the court considered establishes that Missouri Portland 'calculatingly set about to secure and hold business by the practice of lending money to cement purchasers (or purchasing stock in their companies) in return for agreements binding them to limit their purchases exclusively to plaintiff'; that whether by way of the 'outright loan of money or the purchase of stock in cement purchasers' companies, the pattern of conduct matches the arrangement with defendant Denny Concrete and this procedure is not permissible in this state under our antitrust laws,' that the lending of money followed 'in the wake of the contract and as a furtherance of the illegal conspiracy.' The court exonerated from liability and rendered judgment in favor of the individual defendants who lent their names to the two promissory notes on the ground that the notes are component parts of an original contract which is illegal and void, and therefore the notes are void as against public policy.

Taking the position that the 1964 contract on its face is nothing more or less than a simple requirements contract made in the ordinary course of business, Missouri Portland makes the point that the court erred in ruling that the contract on its face violates Missouri's antitrust laws; urges that in assessing the validity of the requirements provision the court incorrectly invoked § 416.010; argues that the requirements provision does not violate § 416.040, and maintains that summary judgment was incorrectly granted. Contrariwise defendants contend that Denny Concrete's motivation in approaching Missouri Portland was not to assure itself of a continuing supply of cement but that Denny Concrete was short of working capital and was seeking financial relief; that instead of this transaction constituting a simple loan it was part and parcel of an overall plan or conspiracy on Missouri Portland's part to capture and hold Denny Concrete's business and to obtain control over numerous other ready-mix concrete producers through loans, acquisitions of stock or outright purchase of their businesses, in order to enhance its market for cement. Defendants argue that instead of being a simple requirements contract this was a 'tying' arrangement in which the advancement of capital by Missouri Portland was expressly conditioned upon Denny Concrete's agreement to purchase all of its cement from Missouri Portland for a period of five years, thus requiring Denny Concrete to surrender its free choice between competing products and curbing and suppressing competition by other manufacturers of cement, in violation of the antitrust statutes. Defendants assert that the court did not err in ruling that the 5-year contract violates Missouri's antitrust laws, and that the court properly entered summary judgment for them on this issue.

The circuit court ruled as a matter of law that the 1964 contract violates the antitrust statutes. Its findings make it clear that this determination was made solely upon the basis of an examination of the provisions of the contract. In entering summary judgment for defendants the circuit court fell into error.

In State ex inf. Hadley, Atty. Gen. v. Standard Oil Co., 218 Mo. 1, 116 S.W. 902 (banc 1909), aff. 224 U.S. 270, 32 S.Ct. 406, 56 L.Ed. 760 (1912), this Court announced the common-law rule 'that two or more parties may enter into any lawful contract regarding any matter, and, if that otherwise legal contract only incidentally limits trade or fixes prices, then that legal contract will not be held void on the ground that it incidentally operated in restraint of trade. * * * But if the primary purpose of the contract was to limit and restrain trade, then the contract would be void at common law, and would not be protected by the constitutional provision mentioned, however slight that interference or restraint might have been.' 116 S.W. l.c. 1018(f). The Court further observed that the same may be said of the antitrust statutes; that '(...