Hyperlawhypertext legal database Drake v. Siebold 30 N.Y.S. 697

← Cases

Drake v. Siebold

30 N.Y.S. 697 Court N.Y. Gen. Term Decision date 1894-10-17 English

Delivered by BRADLEY, J.

Contents

Majority

p. 697
(81 Hun, 178.)
DRAKE et al. v. SIEBOLD.
(Supreme Court, General Term, Fifth Department.
October 17, 1894.)

Headnote

1. Contracts—VALiDiiw—Fixing Price of Necessaries.
An agreement for purchase and sale of coal at prices to be fixed by an association organized for the unlawful purpose of controlling the price of coal is void so far as it is not executed, but not so far as to deny to the seller all remedy for nonpayment of coal delivered under the contract.
2. Pleading—Amendment—New Defense.
An objection that a contract valid on its face is against public policy is not available unless specially pleaded, and therefore, in an action on a contract, an answer which does not deny its validity cannot be amended on the trial, so as to allege that the contract was against public policy,, as such amendment sets up a new defense.
Appeal from judgment on report of referee.
Action by Harvey F. Drake, Henry H. Craig, and Eli M. Upton against Severin Siebold for breach of a contract. The complaint was dismissed, and plaintiffs appeal. Reversed.
The action was brought to recover damages for alleged breach of a contract made between the parties in April, 1888, whereby the plaintiffs agreed to sell and deliver to the defendant, who agreed to receive, at the plaintiffs' coal yard, in the city of Rochester, from 2,000 to 3,000 net tons of anthracite coal, on or before May 1, 1889, upon these terms: “For all coal delivered during the months of May, June, July, and August, 1888, the price shall be as follows: For grate and egg, $3.65 per ton; for stove and nut, 83.88 per ton; for pea, ,$2.88 per ton. For all coal delivered during each of the succeeding^ months after August 31, 1888, and prior to May 1, 1889, the prices shall be the prices as quoted above, with the regular retail circular advances as may be made from time to time after May 1, 1888, in the Rochester market, added thereto; that is, if the Rochester retail price should advance 25c. per ton to June 1 over the present price, then such advance of 23c. per ton shall be added to the prices named in this contract for all coal delivered after August 31, 1888. Likewise, each succeeding advance in the Rochester retail price shall be added to price named herein on all coal delivered after August 31, 1888.” The defendant agreed to receive the coal upon those terms, and to pay on the 15th day of each month for all coal received the preceding month, and to pay on or before August 1, 1888, 81,500 or 82,000, to be applied to his credit for coal to be delivered to him after August 31, 1888. The contract also provided that it was subject to the usual conditions on the back of coal circular thereto attached, among which was the condition: “(2) The price of coal will be the rates as fixed by circulars from time to time, and will be charged at circular prices at time of shipment, regardless of dates oE orders.” The plaintiffs allege that they delivered to the defendant, and he received, 19% tons of coal, and that the defendant refused, to further perform the contract on his part. The defendant also alleges, by way of counterclaim, breach of the contract by the plaintiffs.
Argued before DWIGHT, P. J., and LEWIS, HAIGHT, and BRADLEY, JJ.
Albert H. Harris, for appellants.
H. G. Pierce, for respondent.

The referee found the facts in support of the plaintiffs’ alleged claim, for breach of the contract by the defendant, but determined that the contract was illegal, by reason of the fact, as found by him, that during the year commencing May 1, 1888, there existed a combination of all the coal dealers in

p. 698
Rochester, except a few small dealers, who sold by the bushel, including the parties to the action; that the combination was known as the Rochester Coal Exchange; that at meetings held monthly the retail price of coal was fixed; that it was. agreed among the members of the association that coal should not be sold in the city of Rochester by them for prices less than those fixed by it; that a disregard of the action of the association in that respect subjected the member violating it to some fine or penalty; and that the object of the association was to fix a uniform price for •coal in the city, and to prevent competition among the members of the coal exchange who dealt in coal, which was during that time an article of prime necessity to the public.- And the referee further found that the retail price of coal, as determined by the association, entered into and formed a part of the consideration for the contract mentioned in the complaint. The evidence warrants the conclusion that such an association existed in Rochester for the purposes so found, and that substantially all the dealers in coal there, including the parties to this action, were members. And, as the object of it was to destroy and prevent competition in the sale of an article of prime necessity, the combination between the dealers, followed by overt acts, was a conspiracy, within- the meaning of the statute, which provides that when two or more persons conspire “to commit any act injurious * * * to trade or commerce,” they are guilty of a misdemeanor. Pen. Code, § 168, subd. 6; People v. Sheldon, 139 N. Y. 251 , 34 N. E. 785 .

It is urged on the part of the plaintiffs that the contract in question was not tainted by any relation to the association, that it was independent of it, and that reference to the circular was incidentally made to designate, as between the parties, the standard prices during the time their contract was to run. It is true that persons, in their dealings, may ordinarily adopt such method as they please to regulate the measure of compensation or prices in the future, through the period of the operation of their contracts. This they cannot effectually do to accomplish any unlawful purpose. The only object of the association known as the Rochester Coal Exchange was to govern the price of coal within the city, and make the retail price of that article there uniform. The primary purpose was to prevent competition in the trade. The parties to this action, being members of it, sought by their contract to accomplish, so far as related to their dealing as represented by it, the purpose for which the coal exchange was organized and existed. One of the considerations of the sale and purchase seems to have been the prices fixed from time to time by the association for the purposes before mentioned. It therefore cannot be said, in view of the facts which the referee was permitted to and did find, that the contract was made independently of any relation to the association, or that it was free from any consideration in support of its purpose. In Armstrong v. Toler, 11 Wheat. 258 , cited uy the plaintiffs’ counsel, Mr. Chief Justice Marshall discussed the subject of the validity of contracts having relation to illegal acts, and tainted by them. And it was there held that

p. 699
if a promise be unconnected with the illegal act, and is founded upon a new consideration, it is not tainted by the act, although it was known to the person to whom the promise was made, and he the contriver and conductor of the illegal act. If, therefore, a person knowing all the circumstances had lent to the defendant in the present case the money to pay for the coal pursuant to the contract in question, or had paid the plaintiffs for the coal, for the defendant, upon the promise of the latter to repay him, the promise would, within the doctrine of that case, be effectual to support an action, because, as there held, lending the money or making the payment would have constituted a new consideration, and the foundation of a new contract, which could not be vitiated by acknowledgment of the purpose for which the money was so loaned or paid. By taking the relation which the parties had to the association, as its members, it would seem that they intended to observe, in their dealing in coal, the prices fixed by it, and to adopt them in making their contracts. They did so by the contract in question, and to that extent they effectuated the purposes of the illegal combination by the means contemplated by it. And so far as related to the price the contract must be infected by the unlawful object of the association, and be subject to the consequences of it. In Roller Co. v. Cushman, 143 Mass. 353 , 9 N. E. 629 , one of the features distinguishing the principle of that case from that of the present one is that the agreement in question there did not refer to an ar'icle of prime necessity, nor to a staple of commerce, or to merchandise to be bought and sold by the parties in the market, but to certain fixtures manufactured by them. The other cases cited by the learned counsel for the plaintiffs do not seem to have any necessary application in support of his contention on the subject. As the business of selling and buying coal is in itself legitimate, the fact that the price adopted is in furtherance of the scheme of the association would not deny to the seller all remedy for nonpayment of the coal delivered upon such contract. The view taken of the contract in question is that so far as the prices are founded or dependent upon the circular before mentioned, of the Rochester Coal Exchange, it is ineffectual and void.

There is a further question of pleading presented. The defendant, by his answer, admitted the partnership of the plaintiffs, and that he signed the instrument set forth in the complaint, and denied each and every other allegation of the complaint. He did not allege that such instrument, which is the contract in question, was invalid for any cause. At the close of the evidence the defendant moved to amend his answer by inserting an allegation to the effect that the contract was based in part upon a criminal conspiracy to injure trade and commerce, and is against public policy and void. The amendment was allowed by the referee, against the objection and exception of the plaintiffs. The question arising upon the exception is here for consideration. Quimby v. Claflin, 77 N. Y. 270 . The allegations of the amendment constituted a new defense, and if it was essential to the sup

p. 700
port of the conclusion of the referee, dismissing the complaint, the exception was well and effectually taken, for the reason that it was not within the power of the referee to allow the answer to be so amended. Code Civ. Proc. §§ 723,1018; Shaw v. Bryant, 65 Hun, 57 , 19 N. Y. Supp. 618 . It has been held that when it appears that a contract which is the subject of an action is void, as against, public policy, the court will decline to enforce it by judgment, although such infirmity is not pleaded. Oscanyan v. Arms Co., 103 U. S. 261 ; Russell v. Burton, 66 Barb. 539 . But in those cases-the invalidity of the contracts there in question appeared by the presentation of them by the plaintiff at the trials. In that respect they were distinguished from Milbank v. Jones, 127 N. Y. 370 , 28 N. E. 31 , where it was held that when the contract, as alleged and proved by the plaintiff, is valid on its face, the defense that it is in fact against public policy and illegal is not available unless specially pleaded. The rule seems to be that a plaintiff must, to support his action, allege and prove a contract valid on its face. If he fails to do so, his complaint may be dismissed, although the invalidity of the contract is not pleaded as a defense. But otherwise, to enable the defendant to raise the Question upon his evidence, it must be alleged in the answer. The-contract, as set forth in the complaint, was not invalid on its face.. The evidence on the part of the plaintiffs does not appear in the-record, but the referee finds upon it facts which entitled the-plaintiffs to recover. The evidence on the part of the defendant, upon which arises the charge of illegality of the contract, was not objectionable, as it related to the source of the circular of retail prices, into which the defendant had the right to inquire, and for that reason the plaintiffs are not prejudiced upon this question by not taking objection to the evidence. Honegger v. Wettstein, 94 N. Y. 252 . These views lead to the conclusion that the referee erred in allowing the amendment, which substantially changed the defense alleged in the answer; and for that reason the judgment should be reversed and a new trial granted, costs to abide-the event. All concur.

Cases cited