Phillips v. Iola Portland Cement Co.

• Decision Date: 12 November 1903
• Docket Number: 1,888.
• Citation: 125 F. 593
• Parties: PHILLIPS v. IOLA PORTLAND CEMENT CO.
• Court: U.S. Court of Appeals — Eighth Circuit

125 F. 593

PHILLIPS v. IOLA PORTLAND CEMENT CO.

No. 1,888.

United States Court of Appeals, Eighth Circuit.

November 12, 1903

John Charles Harris (Edward F. Harris, on the brief), for plaintiff in error.

James C. Williams, for defendant in error.

Before SANBORN, THAYER, and VAN DEVANTER, Circuit Judges.

SANBORN Circuit Judge.

This is a writ of error to review a judgment for the plaintiff below the Iola Portland Cement Company, a corporation, against Thomas H. Phillips, in an action for damages for the breach of a contract of sale of cement. The company was a manufacturer of cement in the state of Kansas. The defendant below, Phillips, was a member of the copartnership of William Parr & Co., who were merchants engaged in business at Galveston, in the state of Texas. On January 24, 1901, Parr &amp Co. made a contract with the cement company whereby they agreed to purchase of it, during the year 1901, 50,000 barrels of Iola portland cement to be delivered free on board the cars at Iola, in the state of Kansas, and to pay therefor $1.20 per barrel. They further agreed 'not to sell said cement, ship same, or allow same to be shipped,' outside of the state of Texas. Under this contract they accepted and paid for 24,580 barrels of the cement, and refused to accept 25,420 barrels thereof. The cement company brought an action against them to recover the damages which it sustained by the failure of the purchasers to accept and pay for these 25,420 barrels, and Phillips, the only defendant served with process, answered that the contract was illegal and void under Act Cong. July 2, 1890, c. 647, 26 Stat. 209 (U.S Comp. St. 1901, p. 3200), because it provided that Parr & Co. should not sell the cement, ship it, or allow it to be shipped, without the state of Texas.

It is now settled by repeated decisions of the Supreme Court that the test of the validity of a contract, combination, or conspiracy challenged under the anti-trust law in the direct effect of such a contract or combination upon competition in commerce among the states. If its necessary effect is to stifle competition, or to directly and substantially restrict it, it is void. But if it promotes, or only incidentally or indirectly restricts, competition in commerce among the states, while its main purpose and chief effect are to foster the trade and enhance the business of those who make it, it does not constitute a restraint of interstate commerce within the meaning of that law, and is not obnoxious to its provisions. This act of Congress must have a reasonable construction. It was not its purpose to prohibit or to render illegal the ordinary contracts or combinations of manufacturers, merchants, and traders, or the usual devices to which they resort to promote the success of their business, to enhance their trade, and to make their occupations gainful, so long as those combinations and devices do not necessarily have a direct and substantial effect to restrict competition in commerce among the states. Hopkins v. U.S., 171 U.S. 578, 592, 19 Sup.Ct. 40 43 L.Ed. 290; Anderson v.

U.S. 171 U.S. 604, 616, 19 Sup.Ct. 50, 43 L.Ed. 300; U.S. v. Joint Traffic Ass'n, 171 U.S. 505, 568, 19 Sup.Ct. 25, 43 L.ed. 259; Addyston Pipe & Steel Co. v. U.S., 175 U.S. 211, 245, 20 Sup.Ct. 96, 44 L.Ed. 136; U.S. v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 339, 340, 342, 17 Sup.Ct. 540, 41 L.Ed. 1007; U.S. v. Northern Securities Co. (C.C.) 120 F. 721, 725. The application of this rule to the facts of the case in hand leaves no doubt that there was nothing in the contract before us obnoxious to the provisions of the anti-trust law of 1890. The Iola Cement Company had no monopoly of the manufacture or sale of cement in the United States. It was surrounded by competing manufacturers, and the contract which it made with Parr & Co., of Galveston, had no direct or substantial effect upon competition in trade among the states. It left the...