Osaka Shosen Kaisha v. Pac. Exp. Lumber Co., 260 U.S. 490 (1923)
Case details
Bluebook Citation
Osaka Shosen Kaisha v. Pac. Exp. Lumber Co., 260 U.S. 490 (1923)
Full caption
OSAKA SHOSEN KAISHA ET AL. v. PACIFIC EXPORT LUMBER COMPANY.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
Jan. 2, 1923
Majority
Brandeis (Justice)
OSAKA SHOSEN KAISHA ET AL. v. PACIFIC EXPORT LUMBER COMPANY.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE NINTH CIRCUIT.
No. 129. Submitted November 23, 1922.—Decided January 2, 1923. 1. Whether the ship is subject to a lien to secure damages resulting from breach of a maritime affreightment contract, is a question of maritime law not controllable by a state statute. P. 495. 2. Acceptance ^f part of the designated cargo under a contract of affreightment creates no lien upon the ship for damages resulting from refusal to take all. P. 495. 3. The maritime lien or privilege adhering to a vessel is a secret one which may operate to the prejudice of general creditors and purchasers without notice, and is therefore stricti juris, not to be extended by construction, analogy, or inference. P. 499. 4. The lien$ cheated by law, presupposes mutuality and reciprocity as between ship and cargo. P. 499. 272 Fed. 799, reversed.
Certiorari to a decree of the Circuit Court of Appeals, affirming a decree of the District Court for the libelant (the present respondent) in a proceeding in rem to enforce a claim of maritime lien.
Mr. William H. Hayden for petitioners. Mr. Frank Adams Huffer and Mr. Gerald H. Bucey were also on the briefs.
Mr. Erskine Wood for respondent.
The moment a ship enters upon the performance of her charter by taking even a small part of the cargo on board, she binds herself to the performance of her contract just as if she were a living being. Her taking on part of the cargo is her signature to the contract, so that whereas prior to that act, only her owner was liable in personam, after that act she herself becomes liable in rem; in other words, a maritime lien in favor of the charterer has arisen against her.
Our opponents, building up their case on the maxim that the ship is bound to the cargo and the cargo to the ship, say that it is impossible there should be a lien on the Saigon for leaving part of the lumber behind, because the ship had no lien on this left-behind cargo, and that unless there is such reciprocity of liens there can be no lien at all.
The point is an interesting one that has never been passed upon by this Court, though we think the current of authority as it may be followed through the history of maritime law is in our favor. Consulato de la Mer, c. 209; Benedict, 4th ed., § 131; Marine Ordinances, Louis XIV, “ Maritime Contracts,” § XI, Tit. I.
We concede that the old continental maritime law that a ship was liable for breach of an executory contract of affreightment, has been modified in this country to the extent that she is no longer liable in rem when the contract remains wholly executory. But, we contend, that is the extent of the modification; and where a ship partly
Argument for Respondent. 260 U. S.
executes the contract, as by taking on part of her cargo, she herself is liable for all breaches of the contract. The argument on this point may be summarized thus:
1. Under the old continental codes ships were liable in rem for breaches of contracts made by the managing owner on their behalf, including executory contracts of affreightment.
2. Even if this were not true, such was certainly the law of this country as announced in the earlier decisions of our admiralty courts, up to the time of The Freeman, 18 How. 182, and The Yankee Blade, 19 How. 82.
3. The Yankee Blade and The Freeman did not really settle the point, but they did contain dicta that a vessel was not liable for breach of a contract of affreightment which was purely executory.
4. In deference to these dicta the lower courts have decided that purely executory contracts do not bind the vessel.
5. But this is the limit of the extent to which the old law has been modified, and the lower courts, as if jealous to preserve that old law, in so far as the dicta will allow, have many times held that where the vessel partly executes the contract, as by taking on part of the cargo, she herself becomes liable in rem for all breaches of the contract.
6. The statement by counsel that the liens must be reciprocal, that the ship is bound to the cargo and the cargo to the ship, relates to the case where the cargo has been delivered to the ship, and is true so far as it goes. But it in no way contradicts the theory that the lien on the ship may go further. It is in no way inconsistent with the theory that she is liable for breaches of her partly executed contracts, even where die has no corresponding lien in return. There are many cases of liens on ships with no reciprocal lien in their favor. As witness breach of her contract to carry a passenger. The Rebecca, 1 p. 493Ware, 188; The Paragon, Fed. Cas. No. 10,708; The Tribune, 3 Sumner, 144; The Flash, 1 Abb. Adm. 67; The Pacific, 1 Blatchf. 569; Oakes v. Richardson, 2 Lowell, 173; The Williams, 1 Brown Adm. Rep. 208; The Hermitage, 4 Blatchf. 474; The Ira Chaffee, 2 Fed. 401; The Monte A, 12 Fed. 331; The J. F. Warner, 22 Fed. 342; The Director, 26 Fed. 708; The Missouri, 30 Fed. 384; The Guilio, 34 Fed. 909; The Starlight, 42 Fed. 167; The Oscoda, 66 Fed. 347; The Eugene, 83 Fed. 222; 87 Fed. 1001; The Helios, 108 Fed. 279; The Oceano, 148 Fed. 131; The Margaretha, 167 Fed. 794; Wilson v-. Peninsula Bark & Lumber Co., 188 Fed. 52; The Thomas P. Sheldon, 118 Fed. 945; The S. L. Watson, 118 Fed. 952; Stone v. The Relanpago, Fed. Cas. No. 13,486.
It is to be noted, in considering this reciprocal relation of liens, that the lien of a vessel on her cargo is of an entirely different nature and origin from the lien of the cargo on the vessel. The lien of the cargo on the vessel is of a higher order. It is a jus in re and follows the ship into whosoever hands the ship goes. The lien on the cargo, upon the other hand, is not a jus in re but a mere possessory lien and is lost the moment the cargo leaves her possession. The lien on the cargo is nothing more than the right to hold the goods until the freight is paid.
It is hardly necessary to point out that where a vessel enters upon the performance of her contract of affreightment by actually taking on a portion of her cargo, she has signified by as definite and conspicuous an act as it is possible for her to perform that she is undertaking a contract and is herself bound for its performance. You could hardly have a more definite rule or test than that. And the lien arising would be no more “ secret ” than a lien for seamen’s wages, salvage, general average, collision, materials, supplies, repairs, necessaries, bottomry loans, pilotage, wharfage, or any other of the liens which a ship’s activities may give rise to.
It would surely be a great miscarriage of justice to allow this Saigon Maru, after deliberately refusing to receive part of the cargo, to then say that we had no lien on her because she had no lien on that part of the cargo which she herself had wrongfully refused. This would be to permit her to profit by her own wrong. We can see no more reason for denying the lien under the state statute in this case, on the ground of lack of uniformity, than for denying it in those quite numerous death cases where the state statutes have been invoked to give a lien where the maritime law gave none.
[Argument was made on the construction as well as the applicability of the statute; the amount of deckload; the seaworthiness of the vessel; and the measure of damages.]
Mr . Just ice Mc Reynol ds delivered the opinion of the Court.
March 19, 1917, through its agent at Tacoma, Wash., Osaka Shosen Kaisha, incorporated under the laws of Japan and owner of the Japanese steamer “ Saigon Maru/’ then at Singapore, chartered the whole of that vessel, including her deck, to respondent Lumber Company to carry a full cargo of lumber from the Columbia or Willamette River to Bombay. In May, 1917, the vessel began to load at Portland, Ore. Having taken on a full under-deck cargo and 241,559 feet upon the deck, the captain refused to accept more. After insisting that the vessel was not loaded to capacity and ineffectively demanding that she receive an additional 508,441 feet, respondent libeled her, setting up the charter party and the captain’s refusal, and claimed substantial damages. The owner gave bond; the vessel departed and safely delivered her cargo.
The Lumber Company maintains that it suffered material loss by the ship’s refusal to accept a full load; that p. 495she is liable therefor under the general admiralty law and also under the Oregon statute (Olson’s Laws of Oregon, § 10,281), which declares every vessel navigating the waters of the State shall be subject to a lien for the damages resulting from non-performance of affreightment contracts.
Petitioner excepted to the libel upon the ground that the facts alleged showed no lien or right to proceed in rem. The trial court ruled otherwise and awarded damages upon the evidence. 267 Fed. 881. The Circuit Court of Appeals approved this action. 272 Fed. 799.
Little need be written of the claim under the state statute. The rights and liabilities of the parties depend upon general rules of maritifne law not subject to material alterations by state enactments. The Roanoke, 189 U. S. 185; Southern Pacific Co. v. Jensen, 244 U. S. 205; Union Fish Co. v. Erickson, 248 U. S. 308.
Both courts below acted upon the view that while the ship is not liable in rem for breaches of an affreightment contract so long as it remains wholly executory, she becomes liable therefor whenever she partly executes it, as by taking on board some part of the cargo. In support of this view, it is said: Early decisions of our circuit and district courts held that under maritime law the ship is liable in rem for any breach of a contract of affreightment with owner or master. That The Freeman (1856), 18 How. 182, 188, and The Yankee Blade (1857), 19 How. 82, 89, 90, 91, modified this doctrine by denying such liability where the contract remains purely executory, but left it in full force where the vessel has partly performed the agreement, as by accepting part of the indicated cargo. The Hermitage, 12 Fed. Cas. No. 6410; The Williams, 29 Fed. Cas. No. 17,710; The Ira Chaffee, 2 Fed. 401; The Director, 26 Fed. 708; The Starlight, 42 Fed. 167; The Oscoda, 66 Fed. 347; The Helios, 108 Fed. 279; The Oceano, 148 Fed. 131; Wilson v. Peninsula Bark & Lumber Co., 188 Fed. 52, were cited.
We think the argument is unsound.
Prior to The Freeman and The Yankee Blade, this Court had expressed no opinion on the subject; but, so far as the reports show, the lower courts had generally asserted liability of the ship for breaches of affreightment contracts. “ It is grounded upon the authority of the master to contract for the employment of the vessel, and upon the general doctrine of the maritime law, that the vessel is bodily answerable for such contracts of the master made for her benefit.” The Flash, 1 Abb. Adm. 67, 70; The Rebecca, 1 Ware, 188; The Ira Chaffee, supra. Since 1857, some of the lower courts have said that the ship becomes liable for breaches of affreightment contracts with her owner or master whenever partly executed by her; but it is forcibly maintained that in none of the cases was the point directly involved. The Hermitage, The Williams, The Ira Chaffee, The Director, The Starlight, The Oscoda, The Helios, The Oceano, Wilson v. Peninsula Bark & Lumber Co., supra.
The Freeman and The Yankee Blade distinctly rejected the theory of the earlier opinions. They are inconsistent with the doctrine that partial performance may create a privilege or lien upon the vessel. And in so far as the lower courts express approval of this doctrine in their more recent opinions, they fail properly to interpret what has been said here.
While, perhaps, not essential to the decision, this Court, through Mr. Justice Curtis, said in The Freeman: “ Under the maritime law of the United States the vessel is bound to the cargo, and the cargo to the vessel, for the performance of a contract of affreightment; but the law creates no lien on a vessel as a security for the performance of a contract to transport cargo, until some lawful contract of affreightment is made, and a cargo shipped under it.”
In The Yankee Blade, Mr. Justice Grier, speaking for the Court, declared:
“ The maritime ‘ privilege ’ or lien is adopted from the civil law, and imports a tacit hypothecation of the subject of it. It is a ‘ jus in re,’ without actual possession or any right of possession. It accompanies the property into the hands of a bona fide purchaser. It can be executed and divested only by a proceeding in rem. This sort of proceeding against personal property is unknown to the common law, and is peculiar to the process of courts of admiralty. The foreign and other attachments of property in the State courts, though by analogy loosely termed proceedings in rem, are evidently not within the category. But this privilege or lien, though adhering to the vessel, is a secret one; it may operate to the prejudice of general creditors and purchasers without notice; it is therefore * stricti juris,’ and cannot be extended by construction, analogy, or inference. ‘Analogy,’ says Pardessus, (Droit Civ., vol. 3, 597,) ‘ cannot afford a decisive argument, because privileges are of strict right. They are an exception to the rule by which all creditors have equal rights in the property of their debtor, and an exception should be declared and described in express words; we cannot arrive at it by reasoning from one case to another.’
“ Now, it is a doctrine not to be found in any treatise on maritime law, that every contract by the owner or master of a vessel, for the future employment of it, hypothecates the vessel for its performance. This lien or privilege is founded on the rule of maritime law as stated by Cleirac, (597:) ‘ Le batel est obligee a la marchandise et la marchandise au batel.’ The obligation is mutual and reciprocal. The merchandise is bound or hypothecated to the vessel for freight and charges, (unless released by the covenants of the charter-party,) and the vessel to the cargo. The bill of lading usually sets forth the terms of the contract, and shows the duty assumed by the vessel. Where there is a charter-party, its
45646°—23——32
covenants will define the duties imposed on the ship. Hence it is said, (1 Valin, Ordon. de Mar., b. 3, tit. 1> art. 11,) that ‘the ship, with her tackle, the freight, and the cargo, are respectively bound (affectee) by the covenants of the charter-party.’ But this duty of the vessel, to the performance of which the law binds her by hypothecation, is to deliver the cargo at the time and place stipulated in the bill of lading or charter-party, without injury or deterioration. If the cargo be not placed on board, it is not bound to the vessel, and the vessel cannot be in default for the non-delivery, in good order, of goods never received on board. Consequently, if the master or owner refuses to perform his contract, or for any other reason the ship does not receive cargo and depart on her voyage according to contract, the charterer has no privilege or maritime lien on the ship for such breach of the contract by the owners, but must resort to his personal action for damages, as in other cases. . . .
“And this court has decided, in the case of The Schooner Freeman v. Buckingham, 18 Howard, 188, 1 that the law creates no lien on a vessel as a security for the performance of a contract to transport cargo, until some lawful contract of affreightment is made, and a cargo shipped under it.’ ”
In Bulkley, Claimant of the Barque Edwin, v. Naumkeag Steam Cotton Co., 24 How. 386, 393, the barque was libeled to recover damages for not delivering part of the cotton—707 bales—which the master had agreed to carry from Mobile to Boston. With most of the cargo on board the vessel was towed below the bar, there to receive the remainder from lighters. A lighter carrying 100 bales sank, and the cotton was lost or damaged. The barque delivered 607 bales at Boston in good condition. The owner of the vessel claimed exemption for her upon the ground that she never received the 100 bales. This Court said: “ In the present case the cargo was delivered p. 499in pursuance of the contract, the goods in the custody of the master, and subject to his lien for freight, as effectually as if they had been upon the deck of the ship, the contract confessedly binding both the owner and the shipper; and, unless it be held that the latter is entitled to his lien upon the vessel also, he is deprived of one of the privileges of the contract, when, at the same time, the owner is in the full enjoyment of all those belonging to his side of it.”
Later opinions approve the same general rule.
“ The doctrine that the obligation between ship and cargo is mutual and reciprocal, and does not attach until the cargo is on board, or in the custody of the master, has been so often discussed and so long settled, that it would be useless labor to restate it, or the principles which lie at its foundation. The case of the Schooner Freeman v. Buckingham, decided by this court, is decisive of this case.” The Lady Franklin, 8 Wall. 325, 329.
“ It is a principle of maritime law that the owner of the cargo has a lien on the vessel for any injury he may sustain by the fault of the vessel or the master; but the law creates no lien on a vessel as a security for the performance of a contract to transport a cargo until some lawful contract of affreightment is made, and the cargo to which it relates has been delivered to the custody of the master or some one authorized to receive it.” The Keokuk, 9 Wall. 517, 519.
The maritime privilege or lien, though adhering to the vessel, is a secret one which may operate to the prejudice of general creditors and purchasers without notice and is therefore stricti juris and cannot be extended by construction, analogy or inference. The Yankee Blade, supra. The contract of affreightment itself creates no lien, and this Court has consistently declared that the obligation between ship and cargo is mutual and reciprocal and does not attach until the cargo is on board or in
Opinion of the Court. 260 V. S.
the master’s custody. We think the lien created by the law must be mutual and reciprocal; the lien of the cargo owner upon the ship is limited by the corresponding and reciprocal rights of the ship owner upon the cargo. See The Thomas P. Sheldon, 113 Fed. 779, 782, 783.
The theory that partial acceptance of the designated cargo under a contract of affreightment creates a privilege or lien upon the ship for damages resulting from failure to take all, is inconsistent with the opinions of this Court and, we think, without support of adequate authority. In The S. L. Watson, 118 Fed. 945, 952, the court well said:
“ The rule of admiralty, as always stated, is that the cargo is bound to the ship and the ship to the cargo. Whatever cases may have been decided otherwise disregarded the universal fact that no lien arises in admiralty except in connection with some visible occurrence relating to the vessel or cargo or to a person injured. This is necessary in order that innocent parties dealing with vessels may not be the losers by secret liens, the existence of which they have no possibility of detecting by any relation to any visible fact. It is in harmony with this rule that no lien lies in behalf of a vessel against her cargo for dead freight, or against a vessel for supplies contracted for, but not actually put aboard. The Kiersage, 2 Curt. 421, Fed. Cas. No. 7,762; Pars. Ship. & Adm. (1869), 142, 143. It follows out the same principle that Mr. Justice Curtis states in The Kiersage, 2 Curt. 424, Fed. Cas. No. 7,762, that admiralty liens are stricti juris, and that they cannot be extended argumentatively, or by analogy or inference. He says, ‘They must be given by the law itself, and the case must be found described in the law.’ ”
Reversed.
Argument for Plaintiffs in Error.
CHARLES A. RAMSAY COMPANY v. ASSOCIATED BILL POSTERS OF THE UNITED STATES AND CANADA ET AL.
WM. H. RANKIN COMPANY v. ASSOCIATED BILL POSTERS OF THE UNITED STATES AND CANADA ET AL.
ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.
Nos. 100, 101. Submitted November 15, 1922.—Decided January 2, 1923.
1. A combination of many billposters, throughout the United States and Canada, to destroy competition in the business of posting bills and secure a monopoly, by limiting and restricting commerce in posters to channels dictated by them, to exclude others from the trade, and to enrich themselves by demanding noncompetitive prices, held violative of the Anti-Trust Act. P. 511.
2. Solicitors of advertising, for customers in many States, who prepared, designed, purchased and sold posters and caused them to be displayed by local billposters in many places throughout the Union and Canada, and whose business suffered from the above-mentioned combination, were entitled to sue the alleged conspirators for triple damages under the Anti-Trust Act. P. 511.
271 Fed. 140, reversed.
Error to judgments of the Circuit Court of Appeals affirming judgments of the District Court which sustained demurrers and dismissed the complaints in two actions for triple damages under the Sherman Act.
Mr. John A. Hartpence and Mr. Thomas G. Haight for plaintiffs in error. Mr. John B. Johnston was also on the brief.1
1
On motion of counsel for plaintiff in error, the writ of error, in each case, as to the defendants Kings County Trust Company, Annie Link and Kirwin H. Fulton, executors of the estate of Barney Link, deceased, was, on November 15, 1922, dismissed without costs to either party.
Argument for Plaintiffs in Error. 260 U. S.
It is difficult to conceive of a plan better calculated to bring about a complete monopoly in the billposting business than that devised and put into effect by the defendants. There was to be only one billposter in each city or town in the United States and Canada and no member was to compete with another; members were furnished with funds of the association to buy out competing concerns in their respective localities; advertisers could not have their billposting done by members of the association if they did business with a non-member; no lithographer could furnish stock posters to independent billposters or advertisers (unless the latter were to have the posters placed by members of the association) except under penalty of having the members of the association refuse to deal with them; and finally business could be taken by members only through twelve licensed solicitors throughout the whole of the United States and Canada. The inevitable effect was to monopolize the billposting business throughout the United States and Canada. United States v. Associated Bill Posters, 235 Fed. 540, 541.
A further result of the monopoly thus created was that it enabled the members of the association to fix what rates they saw fit, and to drive out of business all but the favored twelve of those who had theretofore been engaged in the legitimate business of advertising agents or who might thereafter desire to engage in that business.
The immediate and direct effect was also to restrain interstate commerce. This follows from either of two aspects of the cases.
(A) When the defendants and other members of the association combined and took the steps which they did to prevent lithographers from selling stock or sample posters to independent billposters, and to make it impossible for advertisers to purchase such posters if they desired and purposed to have them posted by non-mem- p. 503501 Argument for Plaintiffs in Error.
bers, they directly restrained commerce; and, as the lithographers were in most cases located in different States than the purchasers of the posters, they directly restrained interstate commerce.
In this aspect, the cases cannot be distinguished from Montague & Co. n . Lowry, 193 U. S. 38; Eastern States Retail Lumber Dealers’ Association v. United States, 234 U. S. 600, and Belfi v. United States, 259 Fed. 822. Moreover, they fall clearly within the principle of the decisions of this Court in Loewe n . Lawlor, 208 U. S. 274, and Swift & Co. v. United States, 196 U. S. 375.
In Hopkins v. United States, 171 U. S. 578, as well as in Anderson v. United States, 171 U. S. 604, it was pointed out that there was no evidence of any act on the part of the defendants preventing purchases and sales of cattle by anyone other than that such sales were prevented by the mere refusal on the part of the defendants to do business with non-members (commission merchants) in a manner violative of the rules of the respective exchanges. See Swift & Co. v. United States, 196 U. S. 375,397. Blumenstock Brothers Advertising Agency v. Curtis Publishing Co., 252 U. S. 436, is not applicable to this case. See Stafford v. Wallace, 258 U. S. 495.
(B) In another aspect of the case also, the defendants have directly restrained interstate commerce. The purchase of posters by advertisers or agents, such as the plaintiffs, and the shipment of the same to other States to be posted on billboards surely constitute interstate commerce within the decisions of this Court. The purchase, shipment and posting must be considered in the light of one complete commercial transaction. When the defendants, therefore, conspired to refuse to accept for posting upon their billboards the advertising matter of any advertiser who gave any of his business to a nonmember, and by the other means before mentioned made it impossible for him to deal with non-members, they re-
Argument for Plaintiffs in Error. 260 U. S.
strained interstate commerce—they restricted the number of persons with whom advertisers could deal and prevented the natural flow of commerce; they made impossible the complete commercial transaction. It will not do to overlook the great part which poster advertising plays in the commercial intercourse of the nation. In determining whether there has been an unlawful restraint, all of the elements which make up the completed scheme or plan to monopolize the billposting business must be considered, and although the parts may be lawful, the plan as a whole may make them unlawful. Swift & Co. v. United States, 196 U. S. 375, 396. Therefore, although it may have been, standing alone, lawful for the defendants to refuse to post the bills of certain advertisers, yet if the whole plan or scheme of which that was merely a part was unlawful, the refusal became unlawful.
The business of plaintiffs bore a direct relation to the interstate commerce unlawfully restrained, and was injured in such a way as to entitle them to maintain an action under § 7 of the Sherman Act. United Copper Securities Co. v. Amalgamated Copper Co., 232 Fed. 574; Chattanooga Foundry & Pipe Works v. Atlanta, 203 U. S. 390.
The plaintiffs purchased and sold the advertising posters and shipped them from State to State. Their contracts with their customers or clients necessarily involved, therefore, the movement of goods in interstate commerce; as, for the same reason, did also their dealings with the billposters. There was nothing of that kind in the Blumenstock Case. Moreover, in that case the complaint was that the defendant was attempting to monopolize certain advertising business. 252 U. S. 441. Consequently, the business there attempted to be monopolized had to be interstate commerce to come within the Sherman Act, and the defendants, therefore, engaged therein. In the cases at bar, the charge is that the de- p. 505501 .Argument for Defendants in Error.
fendants conspired to restrain interstate commerce; hence, they need not have been engaged themselves in interstate commerce. Loewe n . Lawlor, 208 U. S. 274.
If it be decided that the only unlawful restraint is that imposed upon the sale of the posters, it is impossible to say that the injuries, which the plaintiffs’ businesses sustained, were not due to some considerable extent to that restraint.
It is inconceivable that there is no direct relation between an unlawful restraint and an injury, when the plan as a whole, containing one or more unlawful restraints, is so devised as to drive the plaintiffs out of business. United Copper Securities Co. v. Amalgamated Copper Co., 232 Fed. 577.
The plaintiffs are not barred from recovery because they were formerly licensed to solicit work and place it with members of the association. Distinguishing, Bluefields S. S. Co. v. United Fruit Co., 243 Fed. 1.
Mr. Richard T. Greene for defendants in error. Mr. Daniel S. Murphy and Mr. H. C. Lutkin were also on the brief.
Neither the posting of posters nor the soliciting of such business affects interstate commerce, except incidentally. Therefore, if, as claimed, the plan has brought about a complete monopoly of the billposting business, it is not condemned by the Sherman Act. Federal Baseball Club v. National League, 269 Fed. 681; affirmed, 259 U. S. 200; Blumenstock Brothers Advertising Agency v. Curtis Publishing Co., 252 U. S. 436; Hopkins v. United States, 171 U. S. 578; Anderson v. United States, 171 U. S. 604.
There is no allegation in the complaints that defendants attempted in any way to restrict freedom of production, sale, transportation or use of special posters, which constitute the great volume of the business, or that .the rules and regulations adopted by the defendant associa-
Argument for Defendants in Error. 260 U. S.
tion affected interstate commerce in special posters, except remotely and incidentally.
The plaintiffs are engaged in soliciting national business only, in which special posters are used exclusively. Such restraint as existed affecting stock posters was segregated from and did not in any way affect the business of national outdoor advertising.
No claim is made that rates fixed for billposting service were unreasonable or excessive. The Hopkins Case is authority for the proposition that the mere power to fix rates for intrastate transactions, does not necessarily imply a restraint of interstate trade and commerce.
The limitation of the number of licensed solicitors of billposting contracts is a legitimate and proper regulation of the billposting business under the decision in the Hopkins Case.
In the Blumenstock Case the advertisements were published in magazines which were intended to be and were thereafter objects of interstate commerce; but this Court held that the refusal to accept advertisements was too remote in its relation to the interstate commerce of circulating magazines to render the defendant liable under the Sherman Act. The refusal to accept advertisements for the billboards is even more remote in its relation to interstate commerce in posters, which precedes the publication of the advertisements by posting the posters on the billboards. The posters are consumed upon the billboards.
There is no allegation in the complaints that the defendants ever purchased posters; and the allegation that the members of the association threatened to refuse “ to deal ” with lithographers is meaningless, because the members of the association never had any dealings with lithographers and their business was such that they had no occasion to deal with lithographers. They dealt with advertisers and solicitors exclusively. There is, therefore, no allegation that the defendants have exercised any direct restraint upon interstate commerce.
501 Argument for Defendants in Error.
The plan of organization of the defendant association, as alleged, was not designed, and was not in any way used, to effect any restraint upon commerce in posters. In so far as there was any direct restraint upon interstate commerce in stock posters, it was effected solely by threats that the members of the association would refuse to buy stock posters. The purchase of stock posters was not a part of the billposters’ business. There is no allegation in the complaints that any of the measures adopted by the association took cognizance of the source of any poster offered to members for posting. Whether or not the posters offered to defendants for posting were manufactured by lithographers engaged in selling stock posters to independent billposters or to advertisers intending to use them on independent boards, they would be accepted and posted by the defendants if they came through one of the licensed solicitors from an advertiser who gave all his billposting business to members of the association. It thus appears that, in the alleged attempt to prevent the sale of stock posters to independent billposters and to advertisers intending to place them upon independent boards, the defendants did not make any use of the measures adopted by the association relating to the billposting business, but relied solely upon threats of refusal of members to buy stock posters. The alleged combination to monopolize the billposting business was separate and distinct from, and had no relation to, the alleged restraint upon interstate commerce in stock posters. But even if it could be said, as claimed by plaintiffs, that these separate and distinct things were parts of an entire scheme or plan, it would nevertheless be true, as held by Judge Hand, that the plaintiffs have not been injured in their business or property “ by reason of anything forbidden or declared to be unlawful ” by the Sherman Act.
Any restraint upon interstate commerce in special posters which may have resulted from the control which
Argument for Defendants in Error. 260 U. S.
the defendants exercised over the business of posting posters upon billboards was too remote, being merely incidental to the object of the defendants, which was to regulate and control the billposting business. On the other hand, the restraint upon interstate commerce in stock posters which it is claimed is alleged in the complaints, if it existed at all, was the direct result of the threats of refusal by members of the association to buy stock posters. Plaintiffs were not affected by such restraint upon interstate commerce in stock posters.
Even if, as claimed, the business of the plaintiffs had a direct relation to interstate commerce in special posters, the decision in the Blumenstock Case is an authority against the claim of plaintiffs that they are entitled to recover for the injury to their business occasioned by the incidental restraint upon interstate commerce in special posters. Under the Blumenstock Case the alleged attempt to monopolize the billposting business is too remote in its relation to interstate commerce in special posters to come within the Sherman Act.
But the plaintiffs’ business was not that of buying and selling posters. Incidentally and as agent for or in aid of their advertising customers, they supervised the production of the special posters and settled the lithographer’s bills and included them in their own charges. Their business was purely that of solicitors of advertising contracts. They were not merchants or traders in goods.
Plaintiffs cannot maintain an action against their former associates in the alleged unlawful combination based upon defendants’ refusal to renew plaintiffs’ licenses to continue in such combination and to reap their share of the profits of the alleged unlawful combination. Bluefields S. S. Co. v. United Fruit Co., 243 Fed. 1; appeal dismissed, 248 U. S. 595; Eastman Kodak Co. v. Blackmore, 277 Fed. 694; Lee Line Steamers v. Memphis Co., 277 Fed. 5; McMullen v. Hoffman, 174 U. S. 639; p. 509Continental Wall Paper Co. v. Voight & Sons Co., 212 U. S. 227.
Mr . Just ice Mc Reynolds delivered the opinion of the Court.
These are separate actions for treble damages under the Sherman Act. The plaintiffs are distinct corporations and demand different sums; otherwise their complaints are identical. Holding no cause of action was stated the trial court dismissed both complaints, upon demurrer, and the Circuit Court of Appeals affirmed this action. 271 Fed. 140. It will suffice to state the substance of the pertinent allegations.
Plaintiffs were solicitors of advertising for customers in many States. They prepared, designed, purchased and sold posters and caused them to be displayed by local operators in many cities and towns throughout the United States and Canada. They contracted with their customers and received pay for the entire service of preparing, designing, purchasing and posting the advertisements and were engaged in interstate commerce.
Defendants are a New York corporation and its officers and directors, together with certain favored solicitors.
Advertising by posters has become common, and in most of the larger cities and towns throughout this country and Canada one or more local concerns follow the business of displaying them. Usually advertisers contract with a lithographer directly or through agents (solicitors) such as plaintiffs for the manufacture or purchase of posters, and with the local billposter for displaying them. Often the lithographer does business in a different State from the advertiser and both operate in different States from those where most of the billboards are located. Some posters are prepared for the exclusive use of an advertiser and some (“ stock ” or “ sample ” ones) for general use. Nearly all are put out by six or eight lithographers.
In 1891 many billposters throughout the United States and Canada, theretofore in competition, entered into a combination and conspiracy to monopolize the business in their respective localities and to dominate and control all trade and commerce in posters within such limits. To that end they organized a voluntary association—afterwards incorporated—whose membership is now very large.
The following were among the means adopted for carrying out the purposes of the combination and conspiracy, (a) Membership has been restricted to one employing billposter in each town or city and members have been prohibited from competing with each other, (b) Funds have been furnished to members for buying out competitors. (c) Rules prevent members accepting certain work from an advertiser who has given business to a nonmember. (d) A schedule of prices has been fixed and members have been prohibited from accepting certain kinds of work from any one except solicitors (twelve in all) arbitrarily selected and licensed, who are forbidden to patronize a nonmember in any place where any member does business, (e) By threats of withdrawal of patronage, manufacturers have been prevented from furnishing posters to independent billposters or to advertisers desiring to do business with independents except upon prohibitive terms.
The Association’s membership has become large, its powers and influence great, while the number of independent billposters has greatly declined, and it is now practically impossible for an advertiser to utilize posters except by employing members of the Association and upon terms arbitrarily fixed. Advertisers are not permitted to purchase “ stock ” posters unless willing to have them displayed upon boards of members, and independent billposters cannot purchase such matter at all.
Plaintiffs had developed a lucrative and profitable business when in July, 1911, the Association canceled their p. 511licenses and refused to renew the same. Now, as a result of the defendants’ unlawful acts, they are disabled from competing in the markets and their business is restricted and unprofitable.
The court below held: “The business of the solicitors is to send their customers’ advertisements to be posted on billboards in various towns and cities throughout the country. Assuming that this business is, as between them and their customers, interstate commerce, we are clear that, after the posters have arrived at destination, the posting of them by the bill poster is a purely local service, not directly affecting, but merely incidental to, interstate commerce. We think this follows from the decision of the Supreme Court in Hopkins v. United States, 171 U. S. 578.”
We cannot accept this view. The alleged combination is nation-wide; members of the Association are bound by agreement to pursue a certain course of business, designed and probably adequate materially to interfere with the free flow of commerce among the States and with Canada. As a direct result of the defendants’ joint acts plaintiffs’ interstate and foreign business has been greatly limited or destroyed. Hopkins n . United States is not applicable. There the holding was that the rules, regulations and practices of the association directly affected local business only. The purpose of the combination here challenged is to destroy competition and secure a monopoly by limiting and restricting commerce in posters to channels dictated by the confederates, to exclude from such trade the undesired, including the plaintiffs, and to enrich the members by demanding noncompetitive prices. The allegations clearly show the result has been as designed, that the statute has been violated and plaintiffs’ business has suffered.
This Court has heretofore laid down and adequately discussed the applicable principles. Montague Co. v. Lowry, 193 U. S. 38, 45, 46; Swift & Co. v. United States, p. 512196 U. S. 375, 396; Loewe v. Lawlor, 208 U. S. 274, 293, et seq.; Gompers v. Bucks Stove & Range Co., 221 U. S. 418, 438; Eastern States Retail Lumber Dealers’ Association v. United States, 234 U. S. 600, 609. See also United States v. Associated Bill Posters, 235 Fed. 540. The fundamental purpose of the Sherman Act was to secure equality of opportunity and to protect the public against evils commonly incident to destruction of competition through monopolies and combinations in restraint of trade. The alleged actions of defendants are directly opposed to this beneficent purpose and are denounced by the statute.
We find no adequate support for the claim that plaintiffs were parties to the combination of which they now complain.
Reversed.
GREENPORT BASIN & CONSTRUCTION COMPANY v. UNITED STATES.
ERROR TO AND APPEAL FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF NEW YORK. No. 31. Argued November 17, 1922.—Decided January 2, 1923. 1. A judgment of the District Court in an action against the United States under Jud. Code, § 24, par. 20, to recover taxes paid under protest, is reviewable here by writ of error. P. 514.
2
In computing the excess profits tax imposed by the Act of October 3, 1917, c. 63, 40 Stat. 300, the exaction prescribed by § 201 is to be imposed, in its successive stages, upon the entire net income, except that, from the part of the net income prescribed for the first stage, the allowances made by § 203 are to be deducted. So held, where the allowances were less than 15 per cent, of the invested capital. P. 514. 269 Fed. 58, affirmed. Error to and appeal from a judgment of the District Court sustaining a demurrer and dismissing the complaint in an action against the United States to recover taxes.
Mr. M. Hampton Todd, with whom Mr. Percy L. Housel was on the briefs, for plaintiff in error and appellant.
Mr. Assistant Attorney General Ottinger, with whom Mn Solicitor General Beck and Mr. Charles H. Weston, Special Assistant to the Attorney General, were on the brief, for the United States.
Mr . Justice Brandeis delivered the opinion of the Court.
The Greenport Company had, in 1917, an invested capital of $215,615.55. Its net income was $76,361.20 in the taxable year ending October 31, 1917. Its prewar annual net income, calculated on a 7 per cent, basis, was $15,093.08; and the fixed statutory deduction $3,000. The company was thus subject (for five-sixth of the year) to the excess profits tax imposed by the Revenue Act of October 3, 1917, c. 63, §§ 201, 203, 40 Stat. 300, 303, 304.1 The Government, following Treasury Regulation No. 41, Articles 16, 17, and form 1103, assessed the tax at $16r-837.76. The company insisted that the correct amount was $12,417.36; paid the tax as assessed, under protest; and brought this suit for the difference, $4,420.40, in the
1
Section 201: “ That in addition to the taxes under existing law and under this act there shall be levied, assessed, collected, and paid for each taxable year upon the income of every corporation, partnership, or individual, a tax . . . equal to the following percentages of the net income: “ Twenty per centum of the amount of the net income in excess of the deduction (determined as hereinafter provided) and not in excess of fifteen per centum of the invested capital for the taxable year; “ Twenty-five per centum of the amount of the net income in excess of fifteen per centum and not in excess of twenty per centum of such capital; “ Thirty-five per centum of the amount of the net income in excess of twenty per centum and not in excess of twenty-five per centum of such capital; 45646°—23------33
Opinion of the Court. 260 U.S.
federal court for the Eastern District of New York, under the Tucker Act. (Judicial Code, § 24, par. 20.) That court sustained a demurrer to the petition and entered judgment for defendant. 269 Fed. 58. The case is brought here by both writ of error and appeal. It is properly here on writ of error, Chase v. United States, 155 U. S. 489; J. Homer Fritch, Inc. v. United States, 248 U. S. 458. The sole question presented for decision is whether the method of calculating the taxes adopted by the Treasury is in harmony with the provisions of the Revenue Act.
The rate of exaction .imposed by the excess profits fax grows, in stages, with the increase in the percentage earned on the capital. In the first stage—net income up to 15 per-cent, on capital—the rate of exaction is four-twentieth. In the second-stage—net income from 15 to 20 per cent.—the rate is five-twentieth. In the third staged—net income from 20 to 25 per cent.—the rate is seven-twentieth. In the fourth stage—net income from 25 to 33 per cent.—the rate is nine-twentieth. In the last stage—net income over 33 per cent.—the rate is twelve-twentieth. What the net income is to which the respective rates of exaction apply is the question for decision. The company contends, in effect, that net in-
“ Forty-five per centum of the amount of the net income in excess of twenty-five per centum and not in excess of thirty-three per centum of such capital; and
“ Sixty per centum of the amount of the net income in excess of thirty-three per centum of such capital.”
Section 203: “ That for the purposes of this title the deduction shall be as follows, except as otherwise in this title provided—
“(a) In the case of a domestic corporation, the sum of (1) an amount equal to the same percentage of the invested capital for the taxable year which the average amount of the annual net income of the trade or business during the prewar period was of the invested capital for the prewar period (but not less than seven or more than nine per centum of the invested capital for the taxable year), and (2) $3,000” p. 515come as used concerning each stage, means not the whole net income—but the balance remaining after deducting from the net income the allowance for prewar profits and the fixed deduction. Under this contention the base to which the exactions should be applied would be, not $76,361.20, but that sum less $18,093.08, or $58,268.12. The Government insists that the exaction should be applied to the whole net income, except that from the net income prescribed for the first stage the allowances specifically provided for are to be deducted.2 The differences in detail resulting from the two methods of calculation are shown in the margin.3
2
Treasury Regulation No. 41, Article 17, provided that if the deduction exceeded 15% of the invested capital the amount in excess should be applied to the next succeeding tax bracket and so on until the deduction should be absorbed. Compare § 301(d) Act of February 24, 1919, c. 18, 40 Stat. 1057, 1089. ’Methods of Computation. I. Gov ernm ent ’s Method . II. Plaintiff ’s Metho d . First, apportion the net income into the tax First, apply the deduction: brackets: $76,361.20 minus $18,093.08 leaves $58,268.12 Percentages of as taxable income. invested capital Amount (1) Oto 15%................................ $32,342.33 (2) 15% to 20%...... ..................... 10,780.77 (3) 20% to 25%........................... 10,780.77 (4) 25% to 33%........................... 17,249.24 (5) Above 33%........................... 5,208.09 Total net income......... . $76,361.20 Second, apportion the taxable income, into Second, apply the deduction to the first tax the tax brackets: bracket: Percentages of * (1) $32,342.33 minus $18,093.08 leaves invested capital Amount $14,249.25. (1) Oto 15%................................. $32,342.33 (2) 15% to 20%......................... 10,780.77 (3) 20% to 25%......................... 10,780.77 (4) 25% to 33%......................... 4,364.25 (5) Above 33%........................... none Total taxable income......... $58,268.12 Third, compute the tax: Third, compute the tax: (1) $14,249.25 at 20%................. $2,849.85 (1) $32,342.33 at 20%................. $6,468.47 (2) $10,780.77 at 25%................. 2,695.19 (2) $10,780.77 at 25%.................. 2,695.19 (3) $10,780.77 at 35%................. 3,773.27 (3) $10,780.77 at 35%................. 3,773.27 (4) $17,249.24 at 45%................. 7,762.15 (4) $4,364.25 at 45%................. 1,963.91 (5) $5,208.09 at 60%................. 3,124.85 (5) none at 60%................... none $58,268.12 Total tax.........$20,205.31 $58,268.12 Total tax...... $14,900.84 Pro rate (5/6) .................$16,837.76 Pro rate (5/6)....................... $12,417.36 the jurisdiction of the State where such purchases and visits are made; and service of summons on its president while temporarily in that State on such business is, therefore, void. P. 517.
The method of calculation adopted by the Treasury follows the clear language of the act; and its correctness is confirmed by the statement, and the illustrative tables, presented by the chairman of the Ways and Means Committee in submitting the Conference Report on the bill. 55 Cong. Rec., 65th Cong., 1st sess., Part 7, pp. 7580-7593. As the language of the act is clear, there is no room for the argument of plaintiff drawn from other revenue measures. Nor is there anything in La Belle Iron Works v. United States, 256 U. S. 377, 383-388, which lends support to plaintiff’s contention.
Affirmed.
3
The fact that the cause of action arose in the State of suit will not confer jurisdiction of a foreign corporation not found there. P. 518. 285 Fed. 879, affirmed. Error to a judgment of the District Court quashing the summons, for want of jurisdiction, in an action against a foreign corporation.