Kellogg v. Sowerby

The evidence very conclusively establishes that the conditions under which the plaintiffs were compelled to operate their elevator, the Kellogg, during the year 1900, were less favorable for the successful conduct of such business than those which pertained to the other rail elevators, so called, at the port of Buffalo, although for all practical purposes the Kellogg was as conveniently located and equipped as any of the others; that thereby the plaintiffs were unable to earn as much as they would have done, had such conditions been uniform. If such result was occasioned by the unlawful acts of the defendants, done pursuant to-an illegal combination on their part, or because of an unlawful discrimination enforced against the plaintiffs, they are entitled to recover any damages thus occasioned, no matter under what form of agreement the defendants may have acted, or what method of procedure they adopted. What the plaintiffs or defendants may have done or omitted to do in previous years is unimportant, except as such acts or omissions may throw light upon the situation of the parties as it existed during the year 1900, or tend to explain the intent and purpose of the acts of the parties in the premises. This action relates solely to what occtirred in the year 1900; the claim being that during that year the defendants unlawfully combined, and, acting in concert and with a common purpose, pursued such course of conduct towards the plaintiffs as to prevent them from successfully operating their elevator or doing business thereat under as favorable conditions as the same was done at the other rail elevators located at the port of Buffalo-, which are in competition with the plaintiffs’ elevator, and that as a result the plaintiffs sustained substantial damages. Upon an appeal from an interlocutory judgment in this case overruling a demurrer to the complaint, the judgment was affirmed, and this court unanimously decided that the complaint stated a cause of action. 61 App. Div. 35 , 70 N. Y. Supp. 237 . Therefore upon this appeal it is only necessary to determine whether or not the plaintiffs introduced any evidence which fairly tended to establish the allegations of the complaint.

For the purposes of this appeal, we may assume that the proposed arrangement by the elevator owners, and the formation of the association to give effect to the same, was not illegal. It was, in effect, that all the owners of, rail elevators at the port of Buffalo should devote their respective properties to the purposes of the association; that it should agree to properly elevate all grain consigned to any of such elevators, at a price less than they were authorized by law to charge, to wit, one-half cent per bushel; and that the net profits of such elevating should be distributed among such elevator owners in accordance with a rate of percentages also agreed upon. If we assume it was entirely competent for the owners of elevators in the city of Buffalo—any or all of them—to enter into such an agreement, it certainly was also within the rights of the plaintiffs to- refuse to join such proposed association, or to accede to its suggested plan of operation in the premises. The plaintiffs had an absolute right to say, “The Kellogg Elevator, which is owned by us, we propose to run and operate as an independent concern, and will invoke the protection of all law to enable us to successfully operate it in competition with the other rail elevators at the port of Buffalo, whether members of any association or otherwise.” Under these conditions the defendant association was formed, and, as we have seen, included all the persons and corporations owning or interested in rail elevators at the port of Buffalo, with the exception of the plaintiffs. The agreement forming the defendant association, among other things, provided:

“In case of the failure to come into the Association of any elevator or elevators named in said schedule, then and in that case the percentage of net earnings allotted to such elevator or elevators shall be divided pro rata according to per cent, shown, between the other elevators in the Association.”

Simultaneously with the organization of such association, a contract was entered into- between it and each of the defendant railroad companies, which provided, in substance, that such railroad company would pay to the defendant association one-half cent per bushel for all grain transported by it which came into the port of Buffalo directed to any rail elevator, and independent of whether such grain was handled by the association elevators, or by those not belonging to or controlled by it. In other words, by such agreements the defendant companies agreed to pay elevator charges of one-half cent per bushel to the defendant association for all grain elevated in the rail elevators of the city of Buffalo and carried by such railroad companies, whether such grain was elevated by the association elevators, by the plaintiffs, or the elevators of other parties in no manner connected with such association.

We may assume that the plaintiffs are not entitled to complain because of the organization of the defendant association, or on account of the contracts entered into between it and the defendant companies, provided the acts of the defendants, done under or in pursuance thereof, 'were not such as to unjustly prejudice the plaintiffs’ legal rights in the premises, among which was the right to operate their elevator upon -equal terms with their competitors—its location, equipment, management, and all other conditions being as favorable for the transaction of its business—and the right to have grain which was elevated by it carried to its destination by any of the defendant companies upon the same terms as grain handled by the competing elevators was carried. When the defendants commenced operations under the contracts referred to, precisely what was to be expected happened. The natural and logical result followed, to wit, the defendant companies sought to reimburse themselves for the one-half cent a bushel which they agreed to pay to the defendant association on grain carried by them, even if elevated by the Kellogg Elevator, and which such association had in no manner earned. That was accomplished by compelling the plaintiffs, in effect, '.to pay to such companies one-half' cent a bushel as elevator. charges for all grain delivered to them for transportation by the Kellogg Elevator, instead of paying such charges to the plaintiffs, the result of which was to make all grain which passed through the Kellogg Elevator pay a charge of one cent a bushel, in case the owners of the Kellogg Elevator received one-half a cent a bushel for elevator charges, the amount received by all the other rail elevators at the port of Buffalo-. The precise method adopted to accomplish such result was very simple, and at the same time most effective. Elevator charges of one-half cent a bushel were added to the freight charges upon all grain carried "by the defendant companies, and which was delivered to them through the rail elevators, including the Kellogg. Such elevator charges were -collected by the railroad companies from the consignees of such grain .and paid over to the defendant association, to be afterwards distributed among ,its members, no part of which, however, would go to the plaintiffs, notwithstanding the fact that a considerable portion of such grain had been elevated by them. In case the plaintiffs insisted that they ■should receive one-half cent a bushel for elevating such grain, the .■same as the owners of the other rail elevators received, then such grain was made to pay one cent a bushel for elevator charges. The evidence ■clearly establishes that, under the agreements entered into between the defendants, and the method adopted for carrying out such agreements, the result was that, if the plaintiffs received one-half cent a bushel for grain elevated by them in the Kellogg Elevator, such grain, if carried ly the defendant companies, was obliged to pay one cent a bushel as

It is not seriously contended in the exhaustive briefs presented by the able counsel for the respective defendants that the conditions which prevailed in respect to the Kellogg Elevator in the spring of 1900 were not such as to prevent it from successfully competing with the other rail elevators similarly situated at the port of Buffalo. The situation as it existed was injurious to the plaintiffs—tended to destroy their business and render their property unproductive. The evidence tends to show that such result was brought about by a combination, by the concerted action of all the defendants, and that such was their intent and purpose in entering into the agreements, and in doing the acts referred to. The negotiations leading up to the organization of the defendant association, the agreements executed by ea.ch of the defendant companies, and their acts thereunder, all tend to prove that it was the intent and purpose of the defendants to compel the plaintiffs to cease operating the Kellogg Elevator in competition with the others, or to run it at a loss. An examination of the whole evidence leads us to the conclusion that it tends to prove that the defendant railroad companies combined and conspired with the defendant association, a competitor of the Kellogg Elevator, to injure the plaintiffs’ business, and to prevent competition in elevating grain at the port of Buffalo during the season of 1900, and that, for the purpose of carrying out-such conspiracy, the association was organized and the contracts referred to were made; that in pursuance thereof the defendant companies refused to carry grain from the Kellogg Elevator upon as favorable terms as from its competitors; and that, in consequence of such agreements, and the acts done thereunder, the plaintiffs sustained substantial damage. If we have correctly interpreted the evidence, it cannot be doubted that the plaintiffs are entitled to recover the damages thus occasioned. It is unimportant that the organization of the defendant association, and the agreement between its members as elevator owners, was not illegal; that the full performance of all its provisions would not have afforded the plaintiffs legal ground for complaint, even if they sustained damage thereby. Unquestionably, any number of elevator owners have the right to adopt a plan of co-operation, to protect their common interests, and to prevent a hostile and unprofitable competition for business between themselves, and, to that end, may agree to place their earnings in a common pool, and to divide them pro rata upon the basis of agreed percentages. Michael v. Prussian National Ins. Co., 171 N. Y. 25 -37, 63 N.

Was the defendants’ purpose respecting the business of the Kéllogg Elevator, and the means employed to carry the same into effect, unlawful? The evidence tends to show that the purpose was to destroy the business, and that the means employed was to compel grain transported from it to pay one cent á bushel elevator charges, in case the plaintiffs received the same compensation for elevating as did the owners of all other rail elevators at the port of Buffalo similarly situated. Result, purpose carried out, and plaintiffs’ business substantially destroyed. What the defendants did, or might have done, simply as elevator owners, may be eliminated from consideration. Was what the defendant companies did as common carriers, acting under and in pursuance of the contracts made by them separately with the defendant association, unlawful? That it effected a substantial discrimination against the plaintiffs, and in favor of the defendant association, its competitor, is plain. We think it was unlawful for the defendant companies to refuse to carry grain from the plaintiffs’ elevator upon the same terms as it carried grain from the elevators of the defendant association.

Vincent et al. v. C. & A. R. R. Co., 49 Ill. 33 , was an action brought to recover damages against the defendant for refusing to deliver cars to their elevator upon the same terms as it delivered cars to other

“* * * It need only be said that a railway company, although permitted to establish its rates of transportation, must do so without injurious discrimination as to individuals. It must deal fairly by the public, and this it would not be doing if allowed so to discriminate as to build up the business of one person to the injury of another in the same trade.”

Chicago & North Western Railway Co. v. People ex rel. Hempstead, 56 Ill. 365 , 8 Am. Rep. 690 .

In the case of Coe v. Louisville & Nashville R. R. Co. (C. C.) 3 Fed. 775 , the whole question is discussed by Chief Judge Baxter in a very exhaustive opinion, and the conclusion is reached that it is not permissible for a common carrier to discriminate in the handling of freight of the same character offered by two individuals, and similarly situated. The Vincent Case, supra, is cited with approval, and in the course of the opinion it is said:

“Impartiality in serving their patrons is an imperative obligation of all railroad companies. Equality of accommodations in the use of all railroads is the legal right of everybody. The principle is formed in justice and necessity, and has been uniformly recognized and enforced by the courts. A contrary idea would concede to railroad companies a ’dangerous discretion, and inevitably lead to intolerable abuses. * * * By an unjust exercise Of such a power they could destroy the business of one man and build up that of another— punish an enemy and reward a friend. * * *”

We conclude that the acts of the defendant companies in refusing to handle grain from the Kellogg Elevator upon the same terms that they handled grain from the other elevators was unlawful, and such refusal being the natural result, and that contemplated by the defendant association when it entered into the contracts referred to with said companies, it became a party to such unlawful acts, and equally liable with the other defendants therefor.

It is not important that the plaintiffs may have had a right of action against the defendant association for any moneys paid to it by the railroad companies, and received by them, for the elevation of grain by the plaintiffs at the Kellogg Elevator. Under the plan adopted by the defendants, the elevator charges were collected by the railroad companies, and such charges belonged and should be paid to the owners of the elevators through which the grain passed, unless such owners otherwise agreed; and therefore payment to any one else was improper, and can be recovered from those making it. Neither is it important that the plaintiffs’ elevator was located upon the Buffalo Creek Railroad, and that the grain was delivered to the defendant companies by means of that road. As we have seen, it was simply a branch road or a switch, accessible to all the railroads, and existed solely for the purpose of delivering freight to them from shippers located upon its line; the charge for such service being uniform. The defendants, under the circumstances, were not at liberty to discriminate against the defendants because of those conditions. Undoubtedly they might have refused to send their cars over said road for the convenience of any shipper, but, having adopted the plan of doing so, they had no right to make an exception as against the plaintiffs. Wight v. United States, 167 U. S. 512 , 17 Sup. Ct. 822 , 43 L. Ed. 358 .

Plaintiffs’ exceptions sustained, and motion for a new trial granted, with costs to the plaintiffs to abide event. All concur.