Pulpwood Co. v. Green Bay Paper & Fiber Co.

• Decision Date: 07 January 1919
• Citation: 168 Wis. 400,170 N.W. 230
• Court: Wisconsin Supreme Court
• Parties: PULPWOOD CO. v. GREEN BAY PAPER & FIBER CO.

168 Wis. 400

170 N.W. 230

PULPWOOD CO.

v.GREEN BAY PAPER & FIBER CO.

Supreme Court of Wisconsin.

Jan. 7, 1919.

Appeal from Circuit Court, Brown County; Henry Graass, Judge.

Action by the Pulpwood Company against the Green Bay Paper & Fiber Company. Judgment of dismissal, and plaintiff appeals. Affirmed.

This is the second appeal in this action, the first being from an order sustaining a demurrer to the complaint. 157 Wis. 604, 147 N. W. 1058. The case has been tried by the court, and judgment rendered for the defendant, dismissing the complaint on the ground that the contract (for breach of which this action is brought) is void because contrary to both the federal and state anti-trust statutes.

The contract sued on will be found printed in full in the report of the former appeal, and need not be printed here. It will be sufficient now to say that by its terms the plaintiff, a corporation engaged in the business of purchasing pulpwood for others, contracted with the defendant, a paper manufacturing corporation at Green Bay, to use diligence to procure and furnish to the defendant 5,000 cords of spruce, 17,500 cords of hemlock, and 2,000 cords of balsam pulpwood during the year 1905, and the defendant agreed that it would accept and pay for the pulpwood delivered to it under the contract. It appears further by the recitations of the contract that the plaintiff had also contracted to purchase and deliver during the same year, to various other paper-making concerns located in the Fox River valley or its immediate vicinity, specified amounts of pulpwood aggregating 116,950 cords, making a total, including that contracted for by the defendant, of 141,450 cords; and the agreement provides that the defendant will accept and pay for its pro rata share of all the pulpwood which the plaintiff company shall of necessity deliver in order to operate economically during the season, even though in excess of said 141,500 cords, and will also accept in discharge of the contract its pro rata share of the pulpwood which the plaintiff is able to deliver during the season, even if the same is less than 141,500 cords. The agreement also provides that the defendant shall ultimately pay for the pulpwood delivered its pro rata share of the cost thereof, including all “expense of operating” and 7 per cent. interest on the capital employed in the business, payments of a certain base or invoice price per cord being provided for as deliveries are made and a settlement to be had at the end of the season when the excess or deficiency in the amount already paid as the invoice price is to be determined and made right by return of the overpayment, if any, to the defendant, or the further payment by the defendant of any amount necessary to make up its pro rata share of the total expense of operation and interest on the capital employed. The contract further provides that the defendantshall not purchase pulpwood of any other person during the year. The complaint showed that this contract was one of a series of annual contracts of similar content covering the years from 1904 to 1909, inclusive.

It was stipulated on the trial that the defendant had made the base or invoice payments stipulated for during the time covered by all of the contracts, and that the aggregate of such payments was all that the total pulpwood actually delivered was reasonably worth on the market.

The action is brought to recover: (1) The defendant's pro rata share of a large loss resulting from the failure of one Perry to carry out a contract made with the plaintiff in 1903, so cut and deliver spruce pulpwood, it being claimed that such loss was a legitimate part of the cost of producing the pulpwood; and (2) certain claims for damages on account of the refusal of defendant to accept delivery of pulpwood on the contracts, also claims for interest charges upon delayed payments for pulpwood and a claim to recover the difference between the base or invoice price of the wood delivered under the contract of April 14, 1908, and the defendant's pro rata share of the cost of getting out and delivering the season's wood.

The action was referred to W. L. Evans to hear, try, and determine, and he made findings to the effect that the contracts in question were void because they constituted a part of a scheme or combination to destroy competition and acquire a monopoly in the purchase and sale of pulpwood in Northern Michigan and Wisconsin, and also to control prices and unreasonably restrain trade in pulpwood to the material injury of the public. He concluded that the contracts were void, and offended against the federal and state anti-trust laws as well as against the common law. The findings of the referee were confirmed by the circuit court, and judgment rendered for the defendant, from which judgment this appeal is taken.

Hooper & Hooper, of Oshkosh, for appellant.

Martin, Martin & Martin, of Green Bay, for respondent.

WINSLOW, C. J. (after stating the facts as above).

[1] The federal anti-trust act, known as the Sherman Act (26 U. S. Stats. at Large, 209, c. 647 [U. S. Comp. St. § 8820 et seq.]), and the Wisconsin statutes bearing on the subject (Wis. Stats. §§ 1791j, 1747e) are quoted at length in the opinion on the former appeal in the present case, and it is not deemed necessary to repeat them here; both condemn contracts or combinations in restraint of interstate trade or commerce as well as monopolization or attempts at monopolization of any part of such trade or commerce. These sections were quite fully discussed and construed by this court upon the former appeal, and the principles of law then laid down unquestionably constitute the law of the case so far as they go upon the present appeal. Ellis v. Northern Pacific R. R., 80 Wis. 459, 50 N. W. 397, 27 Am. St. Rep. 44;Legault v. Malacker, 166 Wis. 58, 163 N. W. 476.

[6][7] These principles may be briefly stated as follows: First. The contract in question involved interstate commerce, and hence the federal statute is the statute to be applied to the case, although little, if any, difference is to be observed in the result in the present case whether the state or the federal statutes, or both, apply. Second. The words “restraint of trade” in the federal statute have the same meaning which they had at common law, namely, acts, contracts, agreements or combinations which operate to the prejudice of the public interests by unduly restricting competition or by unduly obstructing the due course of trade. Third. The contract here involved shows some restriction of competition, or some obstruction of trade, but does not show whether the same is undue or unreasonable; hence resort must be had to evidence outside of the contract to ascertain whether it offends the statute. Fourth. There is nothing intrinsically unlawful in two or more persons appointing a common agent to purchase a commodity which they require, or in giving such agent the exclusive right to do their buying; such an arrangement becomes unlawful only when it injures the public by unduly restricting competition or restraining trade. Fifth. The pulpwood producer is entitled to protection against combinations which unreasonably depress the price of his commodity, even though the general public may to some extent benefit by the depression.

To these propositions may be added another which seems to follow necessarily, namely, if, under the provisions of the first section of the federal act (U. S. Comp. St. § 8820), the pulpwood producer is entitled to protection against combinations which unreasonably depress the price of his product, he must also, under the second section of the act (section 8821), be entitled to protection against combinations which destroy, or attempt to destroy, the competitive market for his product and compel him to sell his product, if he sells it at all, to a single concern at a price fixed by that concern, for this is monopoly.

Starting with these fundamental propositions as a basis, it will be well to state here the additional facts which have been added to the case by the proofs.

The complaint showed that the plaintiff had been made the exclusive purchasing agent of pulpwood for 12 paper mills in the Fox River valley; that the agreement was that each mill should take its proportionate share of the pulpwood which the plaintiff was able to purchase economically during the season, and pay to plaintiff the cost of producing the same, with 7 per cent. interest on the capital invested. The only substantial restriction on trade was the agreement by the mills that they would not purchase pulpwood of any other person during the existence of the contract.

The additional facts shown by the evidence will now be stated:

First. The plaintiff corporation was one of three pulpwood supply agencies operating on the same plan (the names of the other two being the Wisconsin Pulpwood Company and the Northern Paper Company), each acting as purchasing agent for a number of mills (aggregating 25 mills in all), and these three agencies during the years in question operated together in the pulpwood territory in Northern Michigan and Wisconsin, amicably dividing the territory between themselves and by agreement fixing prices.

Second. These three corporations, or purchasing agencies, were each formed by stockholders in some or all of the paper companies which became their respective patrons, and the directorates were, to a large extent, interlocking, and worked in harmony; their contracts with their patrons were all substantially alike and of the same character, so far as the aspects of this case are concerned, as the plaintiff's contracts with the defendant and its other patrons.

Third. The plaintiff's patrons were 12 mills in the Fox River valley consuming by far the greater part of the pulpwood consumed in that valley, which is one of the principal pulp manufacturing centers in the country; the Wisconsin Pulpwood Company bought for 10 mills, all, or...