Nester v. Continental Brewing Co.

• Decision Date: 14 May 1894
• Docket Number: 30
• Citation: 161 Pa. 473,29 A. 102
• Parties: Nester et al., Appellants, v. Continental Brewing Co. et al
• Court: Pennsylvania Supreme Court

29 A. 102

161 Pa. 473

Nester et al., Appellants, v. Continental Brewing Co. et al

No. 30

Supreme Court of Pennsylvania

May 14, 1894

Argued January 25, 1894

Appeal, No. 30, Jan. T., 1894, by plaintiffs, Samuel K Nester et al., from decree of C.P. No. 1, Phila. Co., June T., 1891, No. 947, sustaining demurrer to bill in equity. Affirmed.

Bill in equity for account.

The bill set forth: That during June, 1886, defendants all, with one exception, being brewers, in Philadelphia, formed an unincorporated association, called "The Brewers' Association of Philadelphia," under articles of agreement in writing. That on July 22, 1886, the Enterprise Brewing Company, Limited, became a member of said association; that by statements of account rendered monthly to the company, it appeared that from July, 1886, to and including December, 1886, the sum of $14,435.77 was due from the association to the company. That the company, for a valuable consideration, executed and delivered to Samuel K Nester an assignment, in writing, of the amount which might be due the company from the association on the expiration of the year limited by the agreement, which assignment was delivered to and remains with the association. That on April 4, 1887, "The Enterprise Brewing Company" succeeded to the property, rights and credits of the limited company, including its membership in the association, and was recognized by the association as a member. That by further statements of account, rendered monthly to the company and the corporation, it appeared that from January, 1887, to and including May, 1887, the further sum of $3,387.13 was due from the association. That in March, 1887, the company notified the association in writing of its intention to withdraw from the association on June 30, 1887. That on September 21, 1887, the corporation made an assignment for the benefit of creditors in writing, duly recorded, to Benjamin F. Fisher, Esq., one of the plaintiffs. That by virtue of the aforesaid two assignments, Samuel K. Nester and Benjamin F. Fisher have succeeded to all rights of the said company and corporation. That there was due from the association, as above set forth, a total of $17,822.90, with interest on the respective monthly installments, but the association is entitled to deduct $4,620, and also the share of expenses which should be borne by the company and corporation, the amount of which share is unknown to the plaintiffs; that the whole of the aforesaid sums, with interest, notwithstanding repeated demands for an account and payment, still remain due and owing to plaintiffs. The prayers were: (1) For an account and payment of the amount which shall be ascertained to be due to plaintiffs; (2) other and further relief.

Demurrers were filed by twenty defendants to the whole of the bill. The case was heard on bill and demurrer. 2 Dist. Repts. 177.

The following opinion was filed by BIDDLE, J.:

"The bill of complaint in this case sets out that the defendants became members of 'The Brewers' Association of Philadelphia,' which is an unincorporated association, familiarly known as 'the brewers' pool' and also as 'the pool;' that, under the articles of agreement, the defendants became indebted to them in a large amount of money and that they have made repeated demands upon them for an account and for payment of the amount due them under the provisions of the agreement, but the said account and payment have been refused. They therefore pray that an account may be taken, by and under the decree and direction of the court, of all the dealings and transactions of the said The Brewers' Association of Philadelphia, under the aforesaid agreement, for the said term, beginning on July 1, 1886, and ending on June 30, 1887, and that the amounts found due shall be paid over.

"To this demurrers have been filed by several of the defendants, alleging '1st, that the plaintiffs have not in and by their said bill shown such facts as would entitle them to the relief prayed for; and, 2d, that the said agreement set out in the said bill and alleged to have been entered into by the said Enterprise Brewing Co., Limited, and the defendants, and which the said plaintiffs seek to enforce, is not such an agreement as a court of equity will enforce, because the same is an agreement against public policy and in restraint of trade.

"The agreement, by the fifth section, provides, that 'the undersigned hereby stipulate and bind themselves one to the other, and do hereby agree, one with the other, not to sell and deliver any beer in the city and county of Philadelphia, and Camden and Camden county, N.J., or which is to be used in the city and county of Philadelphia, Camden and Camden county, N.J., after July 1, 1886, to any new trade or any other brewers' customer or customers that belong to this association, during the continuance of this agreement, at less than eight dollars a barrel.' For the violation of this agreement the severest penalties are then provided. By the 16th article: 'The board of trustees may call the association together from time to time, and at any such meeting the price at which beer may be sold may be changed by a vote of not less than two thirds of all the members belonging to said association at the time of voting thereon.' These are the only sections to which the demurrer would apply, and which it is necessary to consider at this time.

"[It cannot be gainsaid that the object of this combination is to enable the forty-five brewers of the county of Philadelphia, individuals, firms and corporations, who have entered into it, to regulate and control the sales and prices of beer within the city of Philadelphia and the county of Camden, N.J.] [It certainly is a combination in restraint of trade, tending to destroy competition and to create a monopoly in an article of daily consumption.] Is this, therefore, a matter in which a court of equity will interfere?

"It has been strenuously urged and innumerable authorities have been cited to prove that contracts in partial restraint of trade, limited by time and space, have been sustained, and that, inasmuch as this only applies to 1,250,000 of people and the space which they occupy, the agreement is perfectly lawful. While we admit the principle we fail to see that it has any application to this case.

"Where a barber contracts not to open a shop within one square of another for the space of six months, equity would no doubt interfere to prevent its violation. But, suppose it had been a gambling house or a house of ill fame instead of a barber shop, equity would then refuse to interfere, because these establishments are held to be illegal, and their recognition against public policy. The question would be there, as here, not a question of time and space, but a question whether equity would take cognizance of such a subject.

"The restriction would rather, in a case of this sort, make the plan more objectionable. The fact that the city was to be placed in a worse position than all the rest of the state could not certainly be in accordance with any enlightened system of public policy.

"Professor Patterson, in his recent work on 'The Law of Contracts in Restraint of Trade,' after an able and exhaustive examination of all the authorities, says, p. 51: 'The rule that is deducible from the cases seems to be that restraints on competition and production are valid, provided they be for the necessary protection of the parties' interests; but combinations between producers to limit production and to enhance prices are opposed to public policy, and are not merely void contracts, but are offences, and punishable as such.' This doctrine is clearly that of our own state: See Morris Run Coal Co. v. Barclay Coal Co., 68 Pa. 173.

"[That this agreement is a necessary protection of the parties' interests is not averred, and we do not understand is contended.]

"Where a price is fixed arbitrarily for which a manufactured article may be sold, it necessarily limits the production of that article to the amount that can be sold for that price. An increased price put upon an article restricts its sale, and the restricted sale necessarily reduces the production. It is no answer to say we do not restrict your production; you may produce any amount you like, we only restrain your sale of it. Is this not practically a limit to production?

"Where a pool or combination reserves the right to regulate prices they can, by the manipulation of prices, drive their competitors out of business, create a monopoly, and enhance at their pleasure the prices to consumers.

"It is also contended here by the complainants that the consideration is executed, and therefore, in accordance with a line of cases, the illegal nature of the original transaction will not be inquired into. The test, however, as to whether a demand connected with an illegal transaction is capable of being enforced at law, is whether the plaintiff requires the aid of the illegal transaction to establish his case; if the plaintiff cannot open his case without showing that he has broken the law, a court will not assist him: Swan v. Scott, 11 S. & R. 164; Coal Co. v. Coal Co., supra.

"Now, in this case, the bill itself sets out the agreement, prays that it may be taken as part of the bill, asks for an account, and calls upon a court of equity to enforce it. [It is the very transaction itself complained of as illegal that we are asked to enforce.]

"[Believing this agreement to be against public policy,] we sustain the demurrers and dismiss the bill.

Errors assigned were (1) sustaining demurrer; (2) dismissing bill; (3-7) holding as in brackets; quoting them.

Decree affirmed and appeal dismissed with costs to be paid by appellants.

John O Bowman, Theodore P....