St Louis Electric Light & Power Co. v. Edison General Electric Co., 3,651.

• Decision Date: 17 December 1894
• Docket Number: 3,651.
• Court: U.S. District Court — Eastern District of Missouri
• Parties: ST. LOUIS ELECTRIC LIGHT & POWER CO. v. EDISON GENERAL ELECTRIC CO.

64 F. 997

ST. LOUIS ELECTRIC LIGHT & POWER CO. v. EDISON GENERAL ELECTRIC CO.

No. 3,651.

United States Circuit Court, E.D. Missouri, Eastern Division.

December 17, 1894

This controversy grows out of a contract made on the 12th day of April, 1887, between the Sprague Electric Railway & Motor Company (hereinafter called the 'Sprague Company'), a New York corporation, and one D. W. Guernsey, constituting said Guernsey agent for said company for the sale of electric equipments for railways and stationary motors, etc. The action is to recover commissions alleged to be due and owing to said Guernsey by the defendant company as the successor of said Sprague Company, under an alleged contract of novation. The case was referred by the court to Edward T. Farish, as referee, to make report thereon. On the coming in of his report both parties filed exceptions thereto, and defendant more especially. These exceptions were heard by the court, both on oral arguments and printed briefs.

Boyle Adams & McKeighan and Geo. W. Taussig, for plaintiff.

Seddon & Blair, for defendant.

PHILIPS District Judge.

A vital question lies at the threshold of this controversy, raised by the pleadings and evidence, which disposes conclusively of the plaintiff's action, if the defendant's contention in this particular obtains. By the provisions of the contract of agency between said Sprague Company and said Guernsey it is stipulated in the third paragraph that the Sprague Company should not, during said agency term, sell, furnish, rent lease or license, in the state of Missouri, any of its motor machinery apparatus, or permit any other person to make such sale, etc., or permit any other person to take the same into said territory. By the eighth paragraph it is provided that:

'Said party of the second part further agrees faithfully and diligently, at its own cost and expense, to prosecute said business of selling motors, machinery, and apparatus for said party of the first part in said territory, devoting such time thereto as he reasonably can, considering the other business in which he is now engaged (furniture business); and further agrees that, during the continuance of this contract, he will not engage in any other business, without the written consent of the party of the first part.'

By the tenth and eleventh articles it further provided:

'(10) Said party of the second part further agrees that he will not be engaged or interested directly or indirectly in the introduction or sale of any other electrical motor, or system of electrical transmission of power. (11) It is further mutually agreed, by and between the said parties, that, in case of any breach of this contract by either party hereto, the aggrieved party may terminate the same sixty (60) days' notice in writing given to the party committing the breach.'

This contract was entered into April 12, 1887. Afterwards, on June 1, 1888, Guernsey entered into a contract with the plaintiff company which recited, inter alia, that whereas, said Guernsey is the authorized agent of said Sprague Company, under a certain contract, 'and whereas, the said party of the second part is desirous of securing to itself the benefits, profits, and advantages now enjoyed by the said party of the first part (Guernsey) under said contract and power of attorney, and also of securing the active services of the said party of the first part (Guernsey) in the management and prosecution of its business,'-- said party of the first part (Guernsey) agrees and hereby assigns, transfers, and sets over, unto said party of the second part (the plaintiff company), all the profits, benefits, and commissions coming and accruing to him under and by virtue of his said contract with said Sprague Company to said party of the second part for and during the term of five years from the date hereof. Said party of the first part also agrees that he will not himself sell, let, or dispose of motors commonly known as the 'Sprague Motor,' or become interested in any person, partnership, or corporation whose object is the sale or renting of such motors, for use to persons or corporations within the following described district of the city of St. Louis. ' (Then follows a description by metes and bounds of certain streets and avenues in the city of St. Louis.) 'And that he will give such active personal management to the conduct of the business of said St. Louis Electric Company as is necessary to the successful prosecution thereof. Said party of the second part agrees to pay to the said party of the first part the sum of $1,800 per annum, in equal monthly installments of $150 each, on the first day of each month hereafter and during the continuance of this contract, to wit, until June 1, 1893, and that it will defray traveling expenses of said party of the first part when engaged in the prosecution of the business of said party of the second part.'

It does not admit of debate that, without more, this contract on the part of Guernsey was wholly incompatible with and antagonistic to his prior engagement with the Sprague Company. For the express contract of the first engagement was that, with the single specified exception of his private business as a furniture merchant, he was faithfully and diligently to give him time and services to the prosecution of the business interests of the Sprague Company, and that during the continuance of the contract he would not engage in any other business without the written consent of the Sprague Company; whereas, by his contract with the plaintiff company, he not only assigned and transferred to the plaintiff company all the profits, benefits, and commissions from the Sprague Company, but it boldly recites that the St. Louis Company, as his new liege lord, desired to secure, not only the benefit of his agency, but the active services of Guernsey in the management and prosecution of its business. Nor was this all, but he obligated himself to abandon to the St. Louis Company that part of the territory in the city of St. Louis which of right, under his contract with the Sprague Company, belonged to the latter company for the sale and placing of motors; and, as evidence conclusive that both he and the St. Louis Company understood and believed that the services to be rendered by Guernsey to the latter company were most valuable, he was to receive a salary of $1,800 in monthly installments, and his traveling expenses when engaged in the prosecution of the business of the St. Louis Company; 'and that he will give such active personal management to the conduct of the business of said St. Louis Electric Power Company as is necessary to the successful prosecution thereof. ' Aside from the express terms of the contract between Guernsey and the Sprague Company, his relation of agency for the latter company absolutely forbade him, upon grounds of sound policy, from entering into another agency contract with another company engaged in a similar business, binding him to activity in the prosecution of his new master's business, and consenting to abandon a part of the filed which he had engaged to occupy for the first master. The plaintiff recognizes this inflexible rule of public policy and justice by relying upon certain matters by way of avoidance. It is claimed, first, that it was not intended by either the parties to the latter contract to preclude Guernsey in selling the Sprague motors, etc., within the prescribed district, and claiming that the same was not in force, but that Guernsey continued to sell the same therein; and, second, that by reason of the plaintiff's engaging in said business it served to create a larger demand for said Sprague motors in the city of St. Louis, and that property was billed and charged to said Guernsey, and that the plaintiff company was the only one in St. Louis that could run the Sprague motors in supplying power to commercial customers, and that Guernsey, during the life of said contract, sold in said district a large number of such motors; and, third, that the Sprague Company and defendant knew of said contract and services Guernsey was rendering the plaintiff without objecting thereto.

The reply is somewhat sui generis. It is rather an argument that a statement of facts constituting a good defense. The argument is that, notwithstanding the contract obligated Guernsey, without the written consent of the Sprague Company to wholly abandon to the use of the St. Louis Company certain territory in an important business portion of the city of St. Louis, yet there was no actual breach of the contract of agency between Guernsey and the Sprague Company, because the St. Louis Company did not in fact carry into effect that part of the agreement. It does not plead, nor is it claimed, that this provision of the contract between Guernsey and the plaintiff was abrogated, but simply because there was a nonuser it constituted no infraction of Guernsey's contract of agency with the Sprague Company. I do not so understand the law. The law will not tolerate contracts and transactions which place one under obligations to do wrong, or which subjects him to wrong influences. On grounds of public policy, the law denounces such conduct, because of its direct tendency to induce fraud upon the rights of others. 'One employed by another to transact business for him has no right to enter into a contract with a third person which would place it in his power to wrong his principal in the transaction of the business of the latter, and which would tempt a bad man to act in bad faith towards his employer. The interests of the defendant's employers and those of the plaintiff's, as buyers and sellers, were antagonistic, and defendant could not serve two masters in a matter in which there was such a conflict of...