Patrizi v. McAninch

• Decision Date: 16 June 1954
• Docket Number: No. A-4305,A-4305
• Citation: 153 Tex. 389,102 U.S.P.Q. 44,269 S.W.2d 343
• Parties: , 102 U.S.P.Q. 44 PATRIZI v. McANINCH.
• Court: Texas Supreme Court

Page 343

269 S.W.2d 343

153 Tex. 389, 102 U.S.P.Q. 44

PATRIZI v.McANINCH.

No. A-4305.

Supreme Court of Texas.

June 16, 1954.

Rehearing Denied July 21, 1954.

Vinson, Elkins, Weems & Searls and Ben H. Rice, III, Houston, Graves, Dougherty & Greenhill and Joe R. Greenhill, Austin, for petitioner.

Hart, Brown & Sparks Powell, Wirtz, Rauhut & McGinnis and William A. Brown, Austin, for respondent.

CALVERT, Justice.

Respondent filed suit in a district court of Travis County against petitioner to recover certain royalty payments due under a written contract theretofore entered into whereby the respondent sold to petitioner a certain patented machine for making frozen custard.Petitioner answered, and defended upon the ground, among others, that the contract between the parties was illegal and void because it was in violation of the antitrust statutes of Texas.Art. 7426 et seq., Vernon's Annotated Civil Statutes of Texas.Trial was to the court without a jury, and at the conclusion of the trial, judgment was entered by the court in favor of respondent and against the petitioner.On appeal the Court of Civil Appeals entered judgment affirming the trial court's judgment.258 S.W.2d 949.

Petitioner assigns error to the holding of the Court of Civil Appeals that petitioner must pay the royalties sued for, on the ground that a substantial portion of the contract is in violation of the antitrust laws; and that the contract is not divisible so as to permit separation of the legal from the illegal provisions.The contract is set out in its entirety, less the signature paragraph, in the opinion of the Court of Civil Appeals.McAninch is designated therein as First Party and Patrizi as Second Party.

The paragraphs pertinent to a decision of this cause are copied below.The contract is on a printed form with blank spaces underlined by dotted lines.These blank spaces are filled in by typewriting and the typewritten words and figures appear over the dotted lines exactly as copied.

'1.That First Party hereby sells and assigns to Second Party Zest-O-Mat machine bearing serial number ..... 1003 .....

'2.That First Party agrees for a period of (8) years from date, not to sell or lease to any person, firm or corporation other than Second Party, or cause to be used in any other manner whatsoever, any like Zest-O-Mat machine in the above described territory.

'3.That First Party agrees that during the term of this agreement, Second Party shall use the name 'Zesto' in the advertising and sale of products manufactured in the above mentioned machine, and that Second Party will use only uniformly high quality ingredients, according to the formula approved by the Taylor Freezer Corporation.Second Party further agrees to use the name 'Zesto' in the advertising and sale of such products during the term of this agreement.

'4.That in consideration of such sale, Second Party agrees to pay to First Party the sum of ..... $3,000.00 .....Said sum to be paid as follows: .....cash with order.....with order, and ..... upon delivery; in addition thereto, Second Party agrees to pay to First Party a royalty of $20c per gallon of mix used in said Zest-O-Mat machine during the 8 year period from .....1st July, 1948..... to .....1st July, 1956.....* * * Second Party further agrees that in no event shall the royalty paid be less than $500.00 per year, per machine, for each year following its purchase, for the ten year period and agrees that if the monthly royalty payments for any such year do not total $500.00 or more on each machine, Second Party will, on or before the tenth day of the month immediately following any such year, pay to First Party whatever sum might be necessary to constitute the $500.00 annual minimum royalty for each machine.

'5.That Second Party agrees for a period of (8) years from date not to sell, lend, lease or assign said Zest-O-Mat machine bearing serial number ..... 1003 ..... to anyone without the written permission or consent of the Taylor Freezer Corporation.Second Party further agrees for a period of (8) years from date not to use, operate or cause to be operated in any manner whatsoever said Zest-O-Mat machine bearing serial number ..... 1003 ..... at any location other than .....870-South 11th Street in the city of Beaumont, Texas ..... without the written consent of the Taylor Freezer Corporation.

'12.Both parties hereby expressly agree and contract that it is the intention of neither party to violate public policy, statutory or common laws of the State of Texas, including the Texas Anti-Trust Statute.That if any sentence, paragraph, clause or combination of the same is in violation of the Anti-Trust law or any other Texas, or Federal law, such paragraphs, clauses or sentences, or combination of the same shall be inoperative and the remainder of this contract shall remain binding upon the parties hereto; that in any event, these paragraphs concerning the cash consideration and royalty shall be binding upon the parties, and Second Party shall not be relieved of the obligation to pay for the machine and subsequent royalties as herein provided.It is the intention of all parties hereto to make this contract binding only to the extent that it may be lawfully done under the existing laws of the State of Texas and the United States.

'14.This agreement shall be binding upon and inure to the benefit of the successors and assigns of the First Parry and the heirs, administrators, executors and assigns of the Second Party.'

The territory in which First Party agreed not to sell or lease any like Zest-O-Mat machine to any other person, firm or corporation, and outside of which Second Party agreed not to use or operate the machine, was described in the preamble of the contract as 'That area within the present City Limits of Beaumont, Texas that is within a one-mile radius of the location known as 870-South 11th, St.'The Zest-O-Mat is a patented machine the use of which the patentee could control by lease and for the use of which he could exact royalties, but the parties are agreed that the contract here was a contract of sale and not of lease and that by the sale the patentee's monopoly was exhausted and he no longer had a right to restrict the resale thereof in violation of our antitrust laws.

We hold the machine to be an article of merchandise and that the restrictive provisions of paragraphs 2 and 5 are violative of our antitrust laws which prohibit agreements which 'may tend to create, or carry out restrictions in trade or commerce' and 'preclude a free and unrestricted competition among themselves or others in the sale or transportation of any such article or commodity'.Article 7426, Vernon's Annotated Civil Statutes;National Automatic Machine Co. v. Smith, Tex.Civ.App., 32 S.W.2d 678, no writ history;Burpee Can Sealer Co. v. Henry McDonnell Co., Tex.Civ.App., 75 S.W.2d 458, writ refused;Rogers v. Westinghouse Electric Supply Co., Tex.Civ.App., 116 S.W.2d 886, writ refused;Fuqua v. Pabst Brewing Co., 90 Tex. 298, 38 S.W. 29, 750, 35 L.R.A. 241;6 Tex.Law Rev. 210.We do not interpret Coca-Cola Co. v. State, Tex.Civ.App., 225 S.W. 791, as holding to the contrary.

Respondent relies upon the provisions of paragraph 12 of the contract, quoted above, to authorize recovery of the royalties in spite of the illegal provisions.The substance of paragraph 12 is that even if illegal provisions are found in the contract and are stricken therefrom, the royalties provided for in the contract shall yet be payable just as though the illegal provisions had never been in it.In support of their position that the illegal provisions of the contract may be stricken and the remaining provisions thereof preserved, respondent cites Nevels v. Harris, 129 Tex. 190, 102 S.W.2d 1046, 109 A.L.R. 1464, andFord Motor Co. v. State, 142 Tex. 5, 175 S.W.2d 230.

In Nevels v. Harris, suit on a note and to foreclose a deed of trust given to secure payment thereof was defended on the ground that the note provided for usurious interest.Under one contingency the note, considered alone, could have been construed as usurious, but the court said (129 Tex. 190, 102 S.W.2d 1048) that it 'must treat the application (for the loan), principal note, interest notes, and deed of trust as constituting one contract', and finding in the deed of trust the stipulation "That the intention of the parties being to conform strictly to the Usury Laws now in force, any of said contracts for interest shall be held to be subject to reduction to the amount allowed under said Usury Laws as now or hereafter construed by the courts having jurisdiction", held that the contract of the parties, considered as a whole, was not usurious.The court then proceeded in language we regard as particularly applicable to the facts of this case, and said: 'Of course we do not mean to hold that a person may exact from a borrower a contract that is usurious under its terms, and then relieve himself of the pains and penalties visited by law upon such an act by merely writing into the contract a disclaimer of any intention to do that which under his contract he has plainly done.'

Ford Motor Co. v. State was a suit by the State of Texas to recover statutory penalties and to enjoin violations of the state's antitrust laws.The question before this court was whether the state's petition stated a cause of action.The court held that while none of the provisions of Ford's contract with its dealers violated the antitrust laws, the petition did charge a course of conduct sufficient to raise a jury question of a violation of such laws.One of the provisions of the contract was an agreement by the dealer not to sell Ford's products at less than the retail prices established by Ford "in so far as it is lawful for the dealer to so agree * * *".(142 Tex. 5, 175 S.W.2d 233.)It was held that this did not constitute an agreement to sell at fixed prices in violation of the antitrust laws.

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