DOLPH
v.
TROY LAUNDRY MACHINERY CO.
553
sued consistently with established principles. There are two consid· erations touching the abstract merits which incline me to adopt this view in a doubtful case: First, the one already alluded to, that we thus avoid imposing a double liability upon a party whose good faith is not questioned; and, second, the property has gone to pay a just debt of the plaintiff, and she has received the benefit of it. These circumstances could not turn a clear case. It is said to have been held by BLODGETT, D. J., that the liability of an insurance company to garnishment does not arise in Illinois until after adjustment. 1'he contrary appears to have been held in the state court in this case. If this was error, it was error merely, and, if the court had jurisdiction, could only be corrected there. On so close a question I shall deny the motion, without costs, and without prejudice to a new motion, if the plaintiffs shall elect to make it when the circuit justice of· the supreme court, ot the circuit judge, shall preside here. NOTE. . Between courts of concurrent jurisdiction, the court first acquiring jurisdiction will retain it, and another will not mterfere with it. Attleborough Nat. Bank v. Northwestern Manuf'g & Car Co., 28 Fed. Rep. U3; Owens v. Ohio Cent. R. Co., 20 Fed. Rep, 10; Bruce v. Manchester & K. R. R., 19 Fed. Rep. 342; In re James, 18 Fed. Rep. 85R; Claflin v. Lisso, 16 Fed. Rep. 897; Martin v. Baldwin, 19 Fed. Rep. 340; Davis v. Life Ass'n of America, 11 Fed. Rep. 781, and note, 789; Harris v. Hess, 10 Fed. Rep. 263; Parkes v. Aldridge, 8 Fed. Rep. 220; Union Mut. Life Ius. Co. v. University of Chicago. 6 Fed. Rep. 443; Hamilton v. Chouteau, Id. 339; Levi v. Colnmbia Life Ins. Co., 1 Fed. Rep. 206; Barnum Wire-works v. Wayne Circuit Judge, (Mich.) 26 N. W. Rep. 802, 805. Federal courts will not interfere with the possession. control, or disposition of property in the hands of a state court of co-ordinate jurisdiction. Bruce v. Manchester & K. R. R., 19 Fed. Rep. 342; Domestic&F. M. Soc. v. Hillman, 13 Fed. Rep.16l j Walker v. Flint, 7 Fed. Rep. 435; Hutchinson v. Green, 6 Fed. Rep. 833; Adler v. Roth, 5 Fed. Rep. 895.
(Oircuit Court, :N. D. New York.
1886.)
1.
CONTRACT-VALIDITY-RESTRAINT OF TRADE-COMBINATION OF MANUFACTURERS.
A contract, under which two rival manufacturers agreed upon a scale of selling prices for their goods, one of them discontin uing his business, and becoming a partner with the other for a specified term, is not void, as in restraint of trade: provided, the goods manufactured were not articles of necessity, and the transaction did not amount to a conspiracy between the parties to control prices by creating a monopoly.l The true rule of damages for the breach of an agreement to sell and deli ver personal property at a future day is the difference between the contract price and the market value of the property at the time of delivery called for by contract. It is immaterial whether the article to be deliVered is or is not it. existence at the time of the contract, or whether it is one to be manufactured from time to time, as required. note at end of case.
2.
DAMAGES-MEASURE OF-FuTURE DELIVERY OF PERSONAL PROPERTY-CON TRACT PRICE AND :MARKET PRICE.
1 See
554 3.
FEDERAL REPORTER. Indemnity for the breach of such a contract includes the plaintiff's actuhl and also his prospective loss; but this is not necessarily measured by the difference between the contract price and the cost of the articles to himself if he had manufactured them. When, from the nature of the article, there is no market for it, and no way of ascertaining market value, the plaintiff should recover, as his prospective loss, the difference between the contract price and the reasonable cost of producing the article.
SA){E-CONTRACT PRICE AND COST PRICE-MARKET
V
4.
SAME-THING TO BE SUPPI,IED NOT MANUFACTURED EXCLUSIVELY BY PLAINTIFF.
Where a contract provided that plaintiff was to have the privilege of supplying the defendant with certain machines at the lowest price bid by other manufacturers for supplying defendant with the same, the plaintiff is not en· titled to damages for breach by defendant. unless it is shown that there is some usual or average percentage of profit customarily realized by manufacturers of analogous articles, or some established manufacturers' price.
Motion for New Trial. The opinion states the facts. Geo. L. fiteadman, for plaintiff. E. Cowen, Jr., for defendant.
J. The motion by the defendant for a new trial raises W the questions whether the contract in suit was void as one in restraint of trade, and whether the correct rule of damages was given by the judge in his instructions to the jury. The facts, so far as they are necessary to the consideration of these questions, may be briefly stated. The parties were compet,itors in the business of manufacturing and selling washing-machines throughont thEl United States, the plaintiff's pla.ce of business being at Cincinnati and the defendant's at Troy; They were the principal, but not the only, manufacturers in this couritry. In January, 1882, in order to obviate the cODseqUElnces of competition with each other, and secure better prices and better profits, they entered into an agreement to divide the profits on all sales made by each, upon the basis of a fixed manufacturers' price and selling price upon machines, during the term of five years. Among other things, hythe terms of the contract, (1) the plaintiff promisecl to deliver to the defendant such "Dolph Standard" machines as the latter should order, from time to time, at the price of $110 each, ll,nd the defendant promised to take at least 50 of such machines in each year; and (2) the plaintiff was to have the option of manufacturing all machines sold by both parties, at the price of $110 each for the "Dolph Standard" machine, and at slloh prices for other machines as might be bid for them in open competition by any other responsible manufacturer for equal quality of goods. After the parties had proceededunder the contract for one year, the defendant terminated it bynotice to the plaintiff. During the remaining foul' years of the oontrac,t both parties sold many of the "Dolph Standard" machines at pHces· ranging from $110 to $175 each. During these years the ready.a,nd willingt900mply wit1;l theprovisioIlSof the contract. The evidence was that during. these four years the plaintiff could have manufactured the machines at a cost to himself of from
DOLPH 'V. TROY LAUNDRY MACHINERY CO.
555
$45 to $92.50 each; and the price paid by defendant to other manufacturers, and the cost of manufacturing them when made by the defendant, was about $105 each. The judge denied an instruction, requested for the defendant, that the contract was void, as being one in restraint of trade. Upon the question of damages, he instructed the jury that the plaintiff was entitled to recover what. he would have realized had the contract been performed, taking into consideration what he would have made in the future if he had been permitted to carry it out, as well gains prevented as losses sustained, provided they were certain, and such as naturally followed from the breach of the contract. Referring to the 50 Dolph Standard washers which the defendant had agreed to take for each of the four remaining years of the contract, he instructed the jury that the plaintiff was at all times ready and willing to furnish these machines, and could have done so at a cost to himself varying from $45 to $92.50 each, and by doing so would have made aproJt consisting of the difference between the cost and $110, the contract price. Respecting the other machines, he instructed the jury that the plaintiff was entitled to recover the difference between the price the defendant paid other manufacturers for such machines, or the. cost of the machines to the doefendant when manufactured by itself, and the sum for which tIle plaintiff could have manufactured them. He refused to instruct the jury, as requested by the defendant, that the rule of damages was the difference between the contract price and the market value of the machines at the times at which they were to have been delivered. Exceptions were taken by the defendant to the instructions given, and to the refusal to instruct as reqnested. Assuming that, in entering into the contract, the parties contemplated that the defendant should cease manufacturing machines, and buy all its machines from the plaintiff, and that the only purpose in view was to promote the interests of the parties, and them to obtain from customers higher prices for the machines, it is not obvious how such a contract contravenes allY principle of public policy. Washing-machines, although articles of convenience, are not articles of necessity. The scheme of the parties did not contemplate suppressing the manufacture or sale of machines by others. Those who might be unwilling to pay the prices asked by the parties could find p'enty of mechanics to make such mll.chines, and the Jaw of demand and supply would effectually counteract any serious mischief likely to arise from the attempt of the parties to get exorbitant prices for their machines. It is quite legitimate for any trader to obtain the highest price he can for any commodity in which he deals. It is equally legitimate for two rival manufacturers or traders to agree upon a scale of selling prices for their goods, and a division of their profitB. It is not obnoxious to good morals, or to the rights of the public, that two rival traders agree to consolidate their concerns, and that one shall discontinue business, and become a partner with the.
556
FEDERAL REPORTER.
other, for a specified term. It may happen, as the result of SUCll an arrangement, that the public have to pay more for the commodities in which the parties deal; but the public are not obliged to buy of them. Certainly, the public have no right to complain, so long as th.a transaction falls short of a conspiracy between the parties to control prices by creating a monopoly. It is hardly necessary to cite authority in support of these propositions, but, if any is needed, enough will be found in the opinions in the cases of Jones v. Lees, 1 Hurl. & N. 189; Ainsworth v. Bentley, 14 Wkly. Rep. 630; Marsh v. Bussell, 66 N. Y. 292; and Perkins v. Lymcm, 9 Mass. 522. As is stated by Mr. Pollock, (Prin. Cont. :) "Public policy requires on the one hand that a man shall not, by contract, deprive himself or the state of his labor, skill. or talent; and on the other hand that he shall be able to preclude himself from competing with particular persons, so far as necessary to obtain the best price for his business or knowledge when he chooses to sell it."
Upon the question of damages, the effect of the instructions given, and those refused, was to direct the jury that the measure of damages for the breach of the contract was the difference between the contract price and the price which it would have cost the plaintiff to make and deliver the machines, irrespecthe of the market value of the machines during the period of the contract. The general instruction with which the judge prefaced his directions to the jury, that the plaintiff was entitled to recover as damages what he would have realized had the contract been performed, including as well gains prevented as losses sustained, was undoubtedly a correct statement of the law. One of the most recent cases in which it was reiterated is U. S. v. Behan, 110 U. S. 338; S. C. 4 Sup. Ct. Rep. 81. It was there held that where one party enters upon the performance of a contract, and incurs expense therein, and, being willing to perform, without fault of his own, prevented by the other party from performing, his loss will consist of two distinct items of damages: First, his outlay and expenses, less the value of materials on hand; and, secondly,the profits he might have realized by performance. In applying this rule to the facts of the particular case, the courts have sometimes used language which is liable to misconception, if understood to be the rule which ordinarily applies in the case of a contract for the future delivery of articles which have a market value. Thus, in the leading case of Masterton v. The Mayor, 7 Hill, 69, the language of the syllabus is: "The measure of damages in respect to so much of the contract as remains wholly unperformed is the difference between what the performance would bave cost the plaintiff and the price which the defenJant agreed to pay."
See, also, the language of CURTIS, J., in Philadelphia, W. c1; B. R. 00. v. Howard, 13 How. 344. The error of the instructions in the present case consists in adopting these expressions literally, and applying them to a case where the
557
difference between the cost price and the contract price would exceed the plaintiff's actual prospective loss, and allow him more than complete indemnity for the breach of the contract by the defendant. In the cases where damages have been sanctioned upon the basis of the difference between the contract price and the actual cost to the plaintiff of performance of the contract, there was no other criterion for ascertaining the extent of the plaintiff's prospective loss. Thus, in Masterton v. The jWayor the contract was for furnishing marble, cut, fitted, and prepared for a particular building, and in Story v. New York cf: H. R. R. Co., 6 N. Y. 85, the contmct was for building the roadway of a railroad; and it is to be observed that in both of these cases the cost of performing the contract which was allowed as the basis of damages was not the cost to the plaintiff personally, but the reasonable cost of doing what was done by him, and he was not allowed to recover the difference between the contract price and subcontracts v. made by him with others for doing the same work. In Armstrong, L. R. 9 Q. B. 473, the court say: "When, from the nature of the artiole, there is no market in whioh it can be obtained, this rule [the difference between the contract and market value] is not applicable. " The well-settled rule of damages for the breach of an agreement tb sell and deliver personal property at a future' day is the differencfl between the contract price and the market value of the property at the time of the delivery called for by the contract. It is quite im· material whether the article to be delivered is or is not in existence at the time of the contract, or whether it is one to be manufactured, from time to time, as required. This is specifically pointed out in .i'U"asterton v. The Mayor, where BEARDSLEY, J., says: "In reason and justice, there can be no difference bbtweeu' damages which should be recovered for the breach of an ordinary agreement to buy or sell goods and one to procure materials, fit them for use, and deliver them in a finished state, at a stipulated price."
In Rhodes v. Cleveland Rolling-mill Co., 17 Fed. Rep. 426, the con. tract was for thetlelivery of pig-metal, to be mamlfactured, and, the defendant having refused to proceed with the contmct, it was held that the plaintiff's damages, ordinarily, would be the difference between the market price and the contract price at the time defendant refused to go on with the contract; but that plaintiff having tendered .the iron after notice that the defendant would not accept, and the price having advanced between the time of notice and the time of the tender, the plaintiff could only recover the difference between the contract price and the price at the time of the tender. See, also, MeNaughter v. Cassally, 4 McLean, 531. The plaintiff certainly was not entitled to a larger recovery than he would have been entitled to if he had built all the machines which might have been required to carry out the contract. He might then JJave stored or retained them for the' defendant, and sued for the con-
5Sg
tract price; but if he did not choose to do this, and elected to sue for breach of contract to accept them, and, having the machines on hand, could have Bold them, and realized· a larger price than the actual cost of manufacture to himself, it would have been his duty to do so, and his relJovery would have heen the difference between what he could have realized upon sales and the contract price. The party who is exposed to loss by the violation of the contract by another party must exert himself to make the damages as light as possible; the law imposes this active duty upon him. Costigan v. Mohawk &: H. R. Co., 2 Denio, 609; Hamilton v. McPherson, 28 N. Y. 72; Dillon v. Anderson, 43 N. Y. 231; Warren v. Stoddart, '105 U. S. 229. Good faith and good logic require' that he be confined to are· covery of those damages only which arise from the fault of the other party. What has been said has reference to the instructions respecting the damages. recoverable by the plaintiff for the breach of that part of the contract relating to the "Dolph Standard" machines. It is apparent that, under the instructions given, the jury may have awarded the plaintiff damages in excess of the difference between the market price or value of the machines at the time when their acceptance was called for under the contract and the contract price. The evidence that both the plaintiff and defendant were selling the machines in open market during the whole term of the contract, and the prices at which the machines were sold, authorized the jury to fix the market value. As to the damages recoverable for the breach of that provision of the contract by which the plaintiff was to have the privilege of supplying the de· fendant with other at the lowest price bid by other manufacturers for supplying defendant with the same, it is not clear that the plaintiff conld establish ll,ny loss of profits, unless it could be shown that there is some usual or average percentage of profit customarily realized by manufacturers of a.nalogous articles, or some established manufacturers' price. The plaintiff might have been unwilling to act upon the option at prices which other mauufacturers would have offered, and the extent of his prospective loss, if any, is largely a matter of speculation. The defendant may have been so situated that it could better afford to employ its own men and facili· ties, even although by doing so its machines would cost it more than to buy them of others, and in this view the difference between the actual coat of the machines to the defendant, and the sum it would have cost the plaintiff to make and furnish them, might not be the correct rule of damages. In any view, the jury were unduly restricted by the direction that the plaintiff was entitled to recover as his loss nnder this provision of the contract the difference between what it cost the defendant to build them and what the plaintiff could have built them for. At most, the cost to the defendant was only evidence to be considered with the other evidence of the ordinary manufacturers' price for such machines.