US SUPREME COURT DECISIONS

Questions about contracts in restraint of trade must be judged according to the circumstances on which they arise and in subservience to the general rule that there must be no injury to the public by its being deprived of the restricted party's industry and that the party himself must not be precluded from pursuing his occupation and thus prevented from supporting himself and his family. Accordingly, where A., engaged in navigating waters of California alone, sold in 1864 a steamer to B., engaged in navigating a particular river (the Columbia River) of Oregon and Washington Territories (regions to the north of California), subject to a stipulation that he, B., would not employ it or suffer it to be employed for ten years from the date of the sale in any waters of California, and B., three years afterwards, i.e., in 1867, sold the same steamer to C., engaged in navigating Puget's Sound (water in the extreme northwest corner of Washington Territory and remote from all the other waters described), subject to a stipulation that she should not be run or employed upon any of the routes of travel, or the rivers, bays, or waters of the State of California or the Columbia River and its tributaries, for the period of ten years from May 1, 1867, held that the contract was not void as in restraint of trade.

Held further -- the contract in the second case having been for ten years from the date of it, and therefore far three years after the first contract chanrobles.com-red

Page 87 U. S. 65

had expired -- that it was so divisible in regard to the California portion that it could stand for the seven years for which B. was bound to protect it, though it was void as to the remaining three, and accordingly that B. could sue for a breach of it occurring within the first seven years of it -- that is to say, occurring within the time that he was to protect A.

The Oregon Steam Navigation Company sued Winsor in one of the courts of the Territory of Washington to recover $75,000 as stipulated damages for the breach of a certain agreement between the parties. The complaint set forth the following facts:

That in 1864, the California Steam Navigation Company being engaged in steam and other transportation on the several routes of travel on the rivers, bays, and waters of the state of California, sold to the plaintiff, the said Oregon Steam Navigation Company (being a company engaged in the like business on the Columbia River and its branches, in Oregon and Washington [Footnote 1]), the steamer New World for $75,000, subject to a stipulation, amongst other things, that the latter company should not run or employ, or suffer to be run or employed, the said steamer upon any of the routes of travel, rivers, bays, or waters of the State of California, for the period of ten years from the 1st day of May, 1864; that on the 18th day of February, 1867, the Oregon company sold the same steamer to Winsor and others for the sum of $75,000, subject to a stipulation and covenant that she should not be run or employed upon any of the routes of travel, or the rivers, bays, or waters of the State of California, or the Columbia River and its tributaries, for the period of ten years from the 1st day of May, 1867, and that for a breach of said covenant the vendees should pay $75,000 as actual liquidated damages. The complaint further averred that at the time of the second sale of the steamer and up to the commencement of the suit, the California Steam Navigation Company were engaged with numerous steam and other vessels in navigating the waters of the State of California, and that the Oregon chanrobles.com-red

Page 87 U. S. 66

company, the plaintiffs, were likewise engaged in the navigation of the Columbia River and its branches, and that at the time of said sale to the defendants, the latter were engaged in navigating the waters of Puget Sound, [Footnote 2] and were in nowise engaged in the navigation of the waters of Oregon or California or of any of the waters described in the stipulation. The breach complained of was that the steamer had been engaged from the 1st of November, 1868, to the commencement of the suit, in the transportation of passengers and freight from the City of San Francisco to Vallejo, in the State of California, being a route of travel on the waters of the State of California embraced in the stipulation and covenant.

The complaint was demurred to, and the demurrer was sustained and the action dismissed. The plaintiff brought a writ of error to the supreme court of the territory, which affirmed the judgment, and that judgment was now here on the present writ of error.

The sufficiency of the complaint was, of course, the matter brought up, and the case turned mainly upon the question whether the covenant entered into by the defendants whereby they agreed

"not to run or employ, or suffer to be run or employed, the said steamboat New World upon any of the routes of travel, or the rivers, bays, or waters of the State of California or the Columbia River and its tributaries for the period of ten years from the first day of May, 1867,"

&c., was valid. The objection urged against it was that it was a contract in restraint of trade, and as such contrary to public policy.