Trenton Potteries Co. v. Olyphant

• Decision Date: 07 July 1899
• Citation: 58 N.J.E. 507,43 A. 723
• Parties: TRENTON POTTERIES CO. v. OLYPHANT et al.
• Court: New Jersey Supreme Court

43 A. 723

58 N.J.E. 507

TRENTON POTTERIES CO.

v. OLYPHANT et al.

Court of Errors and Appeals of New Jersey.

July 7, 1899.

(Syllabus by the Court.)

Appeal from court of chancery.

Suit by the Trenton Potteries Company against Richard C. Olyphant and others. Decree for defendants (39 Atl. 923), and complainant appeals. Modified.

William M. Lanning and Lewis Cass Ledyard, for appellant.

Samuel D. Olyphant, Jr., Richard V. Lindabury, and Joseph H. Choate, for respondents.

MAGIE, C. J. The appeal in this cause is from a decree of the court of chancery, made upon the advice of Vice Chancellor Grey, dismissing appellant's bill of complaint, and denying the relief sought thereby. The pleadings in the cause, the issues presented, and the facts established by the proofs, are set out with such completeness in the opinion of the learned vice chancellor, and the statement preceding it, reported in 56 N. J. Eq. 680, 39 Atl. 923, that it is unnecessary to repeat them here.

The bill was filed by appellant against the seven defendants and respondents to restrain the breach of contracts alleged to have been made by them with it. It was dismissed as to all the respondents upon the ground that the contracts in question were in illegal restraint of trade, and against the public policy of the state. As to three of respondents, the dismissal was also put on other grounds. As to James V. Olyphant, one of respondents, one additional ground was that he had not become bound to appellant by any such contract. As to him, and also as to Richard C. and Henry D. Olyphant, also respondents, the additional ground for dismissal was that the proofs disclosed no breach of the contracts on their parts. The appeal is from the whole decree, but counsel for appellant conceded in the argument that, although Richard C. and Henry D. Olyphant were proved to have been bound to appellant by the contracts which the bill sought to enforce, yet that no sufficient evidence of any breach of those contracts by them appeared. It results that so much of the decree as dismisses the bill as to them must be affirmed.

But appellant contends that the dismissal of the bill as to James V. Olyphant cannot be supported upon the additional grounds assigned therefor. This contention requires a review of the proofs touching the relation of James V. Olyphant to the contracts in question, which were contracts to abstain from the manufacture of pottery ware. The first contract claimed was contained in a letter addressed to one Tapscott, dated January 23, 1891, and signed, "Olyphant & Co.," which is set out in the prefatory statement of the vice chancellor. The other contract relied on was contained in a sealed instrument dated July 6, 1892, purporting to be made between the seven respondents and Tapscott, also to be found in that statement. This writing was executed by all the respondents except James V. Olyphant. The proofs show that, at the date of the letter in question, James V. Olyphant was not a member of the firm of Olyphant & Co. He became a member about January 1, 1892. The letter gave Tapscott an option to purchase at a stated price the pottery business carried on by Olyphant & Co., including the real estate, plant, and good will, which option was to be exercised within a limited period. That period had expired when James V. Olyphant became a member of the firm. On February 1, 1892, all the members of the firm, including James V. Olyphant signed a writing, addressed to Tapscott, extending the option originally given for a period of 90 days. The option was accepted by him on May 20, 1892. On May 21, 1892, an agreement of sale was signed by all the members of the firm except James V. Olyphant. But on May 23, 1892, he executed under seal a memorandum of agreement to the terms and conditions mentioned in the agreement of the other owners of the property which was the subject of the sale. The sale was consummated on June 6, 1892. Tapscott was acting in the transaction for those who formed the corporation which is the appellant, and for that corporation after its formation on May 27, 1892. Appellant acquired all Tapscott's rights in the contracts with respondents. The vice chancellor reached the conclusion that the bill should be dismissed as to James V. Olyphant, because, not having executed the sealed instrument of July 6, 1892, he had not become bound by its covenants, and because the contract of the letter of January 23, 1891, adopted and ratified by him by his joining in the extension of the option by the writing of February 1, 1892, was a joint, and not a several, contract, and merely bound the firm of Olyphant & Co. not to engage in a competitive business. The omission of James V. Olyphant to execute the instrument of July 6, 1892, unquestionably deprives appellant of any right to enforce its provision against him in this cause.

If necessary to construe the contract contained in the letter of January 23, 1891, I think it would be difficult, if not impossible, to hold it to be a mere partnership undertaking. No doubt, an obligation entered into by more than one person is presumed to be joint, and a several responsibility will not arise, except by words of severance. Alpaugh v. Wood, 53 N. J. Law, 638, 23 Atl. 261. But the purpose of this letter was to give an option to purchase a business carried on by individuals who were partners. It recites that "we, the undersigned," do business under a firm name, and own and control the Delaware Pottery, which was the subject of the offer to sell. It contains an agreement that in case of sale "we will not, directly or indirectly," engage in a competitive business. In my judgment, it would not be an unnatural or strained construction to attribute to these words a several force, and to find that the firm signature thereto bound the members of the firm, not merely jointly, but also severally. Upon any other construction, it is obvious that the protection of the business and good will proposed to be sold would only be partially secured. But we are not required to construe the terms of the letter by themselves. By the extension of the option by the writing executed by all the firm members, including James V. Olyphant, on February 1, 1892, a several quality in the contract contained in that letter either was recognized as originally in it, or was imparted to it. "By that instrument each partner agreed to an option of purchase for a fixed period, and that such agreement should be part of the original option given by that letter. When they all executed that instrument, and declared that it was to be attached to, and become part of, the original option, the then owners made a new contract in the terms of the former contract, which bound those signing as if they had signed the original option with the extended term. The contracts thus amalgamated stipulated that in the event of sale "we will not directly or indirectly" engage in a competitive business. These words, over individual signatures respecting a business previously averred to be a partnership business, indicate several as well as joint undertakings. It is as if they undertook that they would not directly by their joint act as a firm, or indirectly by any several act of any member, engage in a competitive business. This construction is greatly aided by the exception from the undertaking, whereby the proposing vendors are permitted to engage in the business of manufacturing pottery ware as agents or employes of the proposing purchaser. These words indicate a relation which might be formed between vendors and purchaser in case of sale effected. While the firm could become the purchaser's agent, it could not in any other sense become his employe. Individual members of the firm might become either agents or employes. The exception therefore indicates that the contract it limited was one affecting individual members of the firm. As James V. Olyphant, upon this construction, became bound by the contract, and as the proofs show that he had broken it, the decree dismissing the bill as to him cannot be supported on this ground.

It is next to be considered whether the decree can rest upon the ground that the contracts sought to be enforced are in illegal restraint of trade. The contract contained in the letter of January 23, 1891, and the covenant of June 6, 1892, are the obligations which the bill was filed to enforce. They are identical in terms, and purport to bind respondents to absolutely refrain from engaging in the business of manufacturing pottery ware "within any state in the United States of America, or within the District of Columbia, except in the state of Nevada and the territory of Arizona for the period of fifty years." They are contracts in restraint of trade. This court, speaking by Chief Justice Beasley, more than 30 years ago, declared that contracts in general restraint of trade are illegal. Brewer v. Marshall, 19 N. J. Eq. 537. The learned chief justice found that to have been the undisputed rule of the English and of our own courts since the decision, in 1711, of Mitchell v. Reynolds, 1 P. Wms. 181. In that celebrated case Lord Macclesfield placed the illegality of such contracts upon the sole ground of their being inimical to the public interest or public policy. To the same origin the rule denying validity to such contracts was attributed by the chief justice in our leading case above cited. Our court of chancery has announced and applied the rule, and upon the same ground. Mandeville v. Harman, 42 N. J. Eq. 185, 7 Atl. 37; Sternberg v. O'Brien, 48 N. J. Eq. 370, 22 Atl. 348; Altben v. Vreeland, 36 Atl. 479. In determining what is the public policy in this regard, we have, however, to take into account certain contracts which restrain trade. It is of public interest that every one may freely acquire and sell and transfer property and property rights. A tradesman, for example, who has engaged in a manufacturing business, and has purchased land,...