The People of the State of New York, Respondent, v. Carson J. Sheldon et al., Appellants

The People of the State of New York, Respondent, v. Carson J. Sheldon et al., Appellants. While the Penal Code (§ 171) provides that no agreement simply, with certain exceptions, shall consti ,ute a criminal conspiracy, and requires, aside from the agreement, some act done in pursuance thereof, it is not essential in order to establish the crime to prove the doing of an act unlawful in itself, or which might injuriously affect the public. Where an unlawful agreement is shown and some act is proved showing that the parties have proceeded to act upon the agreement, the offense is established. A combination between independent dealers to prevent competition between themselves in the sale of an article of prime necessity is, in the contemplation of law, an act inimical to trade or commerce, without regard to what may be done under and in pursuance of it, and although the object of such a combination was merely the due protection of the parties against ruinous rivalry, and no attempt was made to charge undue or excessive prices; where it appears that the parties acted under the agreement an indictment for conspiracy is sustainable. Upon trial of an indictment for conspiracy to raise the price of coal at retail and to destroy free competition, the court charged the jury, that if the defendants entered into an organization agreement for the purpose of controlling the price and managing the business of the sale of coal, so as to prevent competition in price between the members of the organization, the agreement was illegal, and if the jury found this was their intent and that the price was raised in pursuance of the agreement, the crime of conspiracy was established. Reid, no error. The court was requested, but refused, to charge that the overt act required to be proved to sustain a conviction for conspiracy must be one which might injuriously affect the public, and that the act of defendants in raising the price of coal, was not, of itself, such an overt act. Reid, no error. (Argued June 23, 1893; decided October 3, 1893.) Appeal from judgment of the General Term of the Supreme Court in the fifth judicial department, entered upon an order made February 1, 1893, which affirmed a judgment of the Court of Sessions of Niagara county entered upon a verdict convicting defendants of the crime of conspiracy. The indictment set forth an agreement between the defendants and others, comprising all the retail coal dealers in the city of Lockport, except one, entered into in March, 1892, to organize the “ Lockport Coal Exchange,” which agreement was as follows: “CONSTITUTION AND BY-LAWS. “ SAME. “ The name of this exchange shall be the Lockport Coal Exchange. “ OBJECTS. “ The objects of this exchange shall be: To foster trade and eonvmerce in coal, wood and all the products appertaining to the same; to protect and secure freedom from, unjust and v/nlaioful exactions ; to diffuse accurate and reliable information as to the retail coal trade, and of the responsibility and standing of customers, and other matters among its members for their mutual protection and benefit; to settle differences between its members; to produce uniformity and certainty ■in the customs asid usages of such trade ■ to promote a more enlargéd and friendly intercourse between merchants and dealers in coal and wood, and to provide, establish and maintain such rules and regulations as may be proper and' necessomy for the mutual co-operation, interest and protection of the retail dealers in coal and wood in the city of Lockport, and in furthering the coal trade interests generally. “ It shall be the duty of all members to strictly obey all the provisions of the constitution, by-laws and resolutions of the exchange, and permit to the secretary the free exercise of the duties imposed upon him in enforcing them. “ OFFICEBS. “ The officers of the exchange shall be a president, and a vice-president, who shall be elected by the exchange, and who shall be members of the exchange ; and also a secretary and treasurer, elected by the exchange. “ The officers shall hold office for the term of one year, and until their successors are elected and' shall have duly qualified, and any officer may be removed from office by the five-sixths vote of all the members of the exchange at any regular or special meeting thereof. “ COMMITTEES. “ There shall be such committees as the president or the board of trustees may from time to time designate. “ PRESIDENT AND VICE-PRESIDENT. “ The president shall preside at all meetings of the exchange, or in his absence the vice-president. In the absence of the. president and vice-president, a presiding officer shall be chosen from the members of the exchange. The president shall be ex-officio a member of all committees. “ SECRETARY. “ The secretary shall not be a member of the exchange nor in any manner personally interested in the coal trade. He shall be elected by at least a five-sixths vote of all the members of the exchange at a regular or special meeting, due notice of said intended election having been sent by mail to each member at his regular business address at least five days previous to the meeting. “ The secretary shall keep a record of the meetings of the exchange, a register of its members, officers and committees, and conduct all correspondence of the exchange, and perform such other duties in connection with his office as may be imposed upon him by the exchange. He shall instantly investigate all charges preferred against the members of the exchange on all well-founded suspicions without fear or favor, and conduct the investigation both to obtain proof and when presented before the exchange, and shall render his decision in each case to the exchange within ten days from the date on which charges are made, unless further time is given him by the exchange. “ He shall be permitted to see any portion of the books of any member when in pursuit of evidence of wrongdoing, and may demand an affidavit, when he thinks necessary, to refute or sustain a specific charge. “ He shall also collect material for, and compile a list of persons who are poor pay, for the mutual protection and benefit of the members of the exchange. He shall also be the keeper of the seal of the exchange, and receive such salary as may be determined upon by the exchange. “ Before the secretary shall enter upon the duties of his office, he shall make oath that he will honestly and fearlessly perform the duties prescribed by the constitution and by-laws, and that he will keep in honor and secrecy any and all information by him acquired regarding the business of the various members as he from time to time may investigate them, except any. facts connected with any violation of the laws of the exchange, which the exchange or any member is entitled to know. If practicable, the secretary shall be a notary public. The secretary shall not disclose to any member of the exchange any information regarding any investigation while he is making the same. “ TREASURER. “ The treasurer, who shall also be the secretary, shall have charge of the funds of the exchange, disburse the same, on the order of the board of trustees, countersigned by the president, and shall report at all regular meetings; and his accounts shall be open for proper inspection at all proper times.- He shall give bonds for the proper protection of the exchange. “ MEMBERSHIP. “ The exchange shall be composed of active and associate members. “ Active members shall comprise any retail coal dealer, film or company, who has a yard or dock, and the usual appliance for doing a coal business in the city of Lockport. “Associate members shall comprise any individual, company or firm that sells coal in the villages around Lockport, and who approves the objects of, and agrees to co-operate with the exchange. Associate members shall pay an annual fee of five dollars, and shall have all the privileges of active members, except the right of voting. “ DISCIPLINE. “ If a member charged with violating any provision of these by-laws, or any rule or resolution of the exchange, or of being guilty of conduct unbecoming a member, or prejudicial to its interests, or of giving short weight or over weight, he shall be summoned before the secretary to answer the charge. “ If, upon the charge and defense being heard by the secretary and he shall decide to sustain the charge, the member shall be declared ‘ in default,’ and the member shall be considered to be ‘ in default ’ until five-sixths of all the members, at a regular or special meeting, shall vote to reinstate him as a member of the exchange in good standing. “A member who shall be declared ‘in default ’ shall absolutely and irrevocably forfeit all rights to all money, property or other value held by the exchange, as its own or in trust, and shall also forfeit all rights of membership in the exchange, unless he be reinstated in good standing, and no member shall be so reinstated except by a five-sixths vote of all members of the exchange at a regular or special meeting assembled after proper notice, and only after depositing with the treasurer $100 as fee for renewal of membership. 1‘ When a member shall be accused by the secretary, in any open meeting of the exchange, of having violated any provision of this constitution and by-laws, or of any resolution, and evidence is lacking to absolutely refute or sustain the charge, it shall be obligatory u/pon- such member to malee proper affidavit that he has in no m,stance sold or delivered coal for which he has not recei/ved the full price at which the ■viayorii/y of the other members were selling coal of the same size at the same time, and that he has not directly or indirectly given any rebate, convmission or other concession equivalent to cash, thereby actually reducing the established market price made by the Lookport Coal Exchange, and that not less than two thousand and not more than two thousand pounds have, in his knowledge, been sold by himself, his partner, or his employees, or delivered as a ton. . “ Resignations shall be- made in writing to the president or secretary, and be referred to the board of trustees for their action ; but no resignation will be accepted until all dues, fines, charges and penalties against such member shall have been paid and settled. “ When the exchange, or secretary thereof, shall declare a member 1 in default ’ the secretary shall notify every member of the exchange by mail, and such notice shall be authoritative. “ When a member defies the exchange by persistent wrongdoing, and is declared 6 in default ’ and persistent the secretary shall notify the shippers of coal to the Lockport market that the said member is “ in default ” and persistent, and for this reason is not entitled to the privileges of membership in the Lockport exchange. “ ELECTION OF MEMBEES. “ A candidate for membership shall be proposed in writing by a member at a regular meeting of the exchange, and be recommended by two members in good standing, and at the next succeeding regular meeting be voted upon. “ A two-thirds vote of the' members of the exchange shall be requisite to elect. “PBICE OF ANTHBAOITE COAL. “ The price of coal at retail, shall, as far as practicable, be kept uniform, and it shall require a five-sixths vote of all members of the exchange at any meeting to advance or reduce the retail price of coal, and no 'price shall be made at any tíme which amounts to more than affair and reasonable advance-over wholesale rates, or that is higher than the current prices of the exchanges at Rochester or Buffalo, when figured upon corresponding freight tariff, but at no túrne shall the price of coal at retail exceed one dollcm■ above the costs of the same at wholesale, except by the unanimous vote of all the members of the exchange. “All votes upon the price of coal shall be viva voce. “ The sale of coal shall be through the nominal channels of the trade. Soliciting shall be discouraged and no club orders of associated buyers to reduce prices shall be considered or accepted. “ Ho member shall employ any person temporarily to solicit orders, either on salary or on commission, and no signs indicating i Orders taken-for coal’ shall be displayed at groceries or other ‘ outside places,’ and no habitual orders for second parties shall be received or tilled when sent in by such agencies, whether on commission or other form of reciprocity, or only as a matter of friendship. “ Except that each member may have one place for taking orders in addition to his regular yard office. “ MEETINGS. “ The annual meeting of the exchange shall be held on the first Monday of April of each year. The regular meeting shall he held on the first Monday of each month. Special meetings may he called by the president or upon the written request of three members, which request shall be sent to the secretary, stating the object of such meeting; and the notices of any special meeting shall state the object of the same, and no other business shall he transacted at such meeting. “At all meetings of the exchange seven members shall constitute a quorum, but this shall not authorize them to transact any business which under the constitution and by-laws requires the vote of a greater number of the members. Any member may he represented at a meeting by an authorized person connected with his business, and such persons shall be entitled to the privileges of such member. “Any vacancies in any of the official positions of the exchange shall be filled by the board of trustees when ordered by the president (or in his absence by the vice-president) within two weeks after such vacancy occurs, or as soon thereafter as practicable. “ MEMBEESHIP FEE. “ There shall he a membership fee of one hundred dollars to be paid to the secretary by each member at the time of signing the constitution and by-laws, and during the first week of each month the further sum of five dollars for current expenses. “ At the end of the year, upon vote of the exchange, there shall be returned to such member the full amount of such monthly payment so paid in by the members, less the proper proportion due for each member for the current expenses of the exchange, which amount shall be deducted from each by the secretary. Any member of the exchange, retiring from the coal business in Lockport in good standing with the exchange, shall be entitled to receive from the treasurer, the original amount paid in by said member for membership, that is, one hundred dollars, less any assessment for expenses or dues that may properly belong to such member to pay, upon filing an affidavit with the secretary that the said member has absolutely withdrawn from all direct or indirect interest in coal business in Lockport, and that during his term of membership he has not violated any of the provisions of the constitution and by-laws or resolutions of the Lockport Coal Exchange. “order of business. “At all meetings of the exchange the order of business shall be, “ Calling of roll, “ Beading of minutes, “ Proposal of membership, “ Beports of committees, “ Communications, bills or notices, “ Unfinished business, “ Miscellaneous business. “ This order of business may be suspended at any meeting of the exchange by a vote of two-thirds of the members present. “ RECORDS AND MINUTES. “ The minutes and records of the exchange shall be open at all times to the inspection of members. “ AMENDMENTS. “ This constitution and by-laws may be amended by an affirmative vote of five-sixths of the members of the exchange at a regular meeting, provided that notice of such proposed amendment shall have been presented in writing at a previous regular meeting. “ We, the undersigned, agree to abide by the above constitution and by-laws of the Lockport Coal Exchange. “ JAMES LENNON & SON, “ ANGEVINE & HOOVER, “P. H. TUOHEY, “ CHARLES WHITMORE & CO., “J. MARC. FOWLER, “SHELDON N. COOK, “ EPSON & STEVENS, “ E. S. BROWN, “M. W. CARR, “ PERRIN BROS. CO., Inc., “M. McMANES, “EDWARD B. JELLY.” The indictment, among other things, alleged that the agreement constituted an unlawful conspiracy to raise, increase and augment the rates and prices of coal, at retail, in the city of Lockport, and to destroy free competition among the signers of the agreement and others, in the sale of coal in said city, and to compel the consumers of coal to pay therefor the prices fixed by the coal exchange. It alleged that, in pursuance of said conspiracy, the defendants and others, members of said exchange, organized the same, elected officers, and by resolution did “ fix, determine and establish the rate and price of anthracite coal at retail, in said city, at four dollars and seventy-five cents per ton for egg, chestnut, stove and grate coal, and three dollars and seventy-five cents per ton for pea coal, and other higher rates for small quantities of the same, said rates and prices so fixed, determined and established, being over seventy-five cents per ton higher and in advance of the then market price of such coal at retail in said city.” The indictment alleged an unlawful intent, and concluded by an averment that the “ conspiracy as aforesaid, so carried into execution as aforesaid, is of grievous injury to trade and coni- merce, prejudical to the public good and welfare, against the form of the statute,” etc. The proof established the execution of the agreement as alleged; the organization of the exchange by the election of officers; the fixing of the price of coal at an advance beyond the then market price, which price was thereafter charged therefor; the notification of the wholesale dealers, by the secretary, of the organization of the exchange, with the names of the members. Other facts are set forth in the opinion. E. M. Ashley for appellants. The agreement between the members of the Lockport Coal Exchange did not constitute a conspiracy. (Penal Code, § 168; M. S. Assn. v. Watch, 2 Daly, 1.) Where the provisions of a non-competitive agreement, although extending to all branches of the business, do not tend beyond measures of self-protection, -or threaten the public interest in a distinctly appreciable manner, the statute is not infringed. (Leslie v. Lorillard, 110 N. Y. 519-533.) Whether the defendants or any of the members of the exchange did raise the price of coal so as to injuriously affect the public interests was a question of fact for the jury. (People v. Flack, 125 N.Y. 324.) The agreement was not oppressive and was not against public policy. (People v. N, R. S. R. Co., 54 Hun, 369.) P. F. King for respondent. The accusation of the crime of conspiracy, without stating the object thereof, would have been legally sufficient. (People v. Kostka, 4 N. Y. Cr. Rep. 429; People v. Bradley, 33 N. Y. S. R. 526; Code Crim. Pro. §§278, 285; People v. Dumar, 106 N. Y. 502; Dawson v. People, 25 id. 399.) These defendants confessedly combined to overthrow and destroy competition among themselves, in the retail coal business in the city of Lockport, and are each,, therefore, properly convicted of conspiracy. (Penal Code, §168, subd. 6; People v. Fisher, 14 Wend. 19; Hooker v. Vandewater, 4 Den. 349; Arnold. P. & E. C. Co., 68 N. Y, 558; Clancy v. O. F. S. M. Co., 62 Barb. 395 ; Watson v. H. & N. Y. N. Co., 52 How. Pr. 384; Murray v. Vanderbilt, 39 Barb. 141; People v. N. R. S. R. Co., 121 N. Y. 582; Keene v. Kent, 4 N. Y, S. R. 431; Wright & Carson on Conspiracy, 180; D. W. C. Co. v. N. J. W. C. Co., 14 N. Y. 277; Marsh v. Russell, 66 id. 292; Leonard v. Poole, 114 id. 372.) The courts of our sister states recognize the value and importance of free competition in articles of trade, and emphatically condemn any combination formed for the purpose of overcoming and destroying it. (S. Co. v. Guthrie, 35 Ohio St. 666; City of St. Louis v. Gas Co., 70 Mo. 69; Santa Clara v. Hayes, 76 Cal. 387; M. R. C. Co. v. B. C. Co., 68 Penn. St. 173; Penal Code, § 168; U. S. v. Goldberg, 7 Biss. 175; D. M. Co. v. Roebar, 106 N. Y. 473.) The unlawful combination is the gist of the crime of conspiracy, and proof of any act towards carrying the conspiracy into effect is an overt act. (Commonwealth v. Hunt, 4 Metc. 111; U. S. v. Goldberg, 7 Biss. 175.) The question of intent was fairly left to the jury as a question of fact, and their decision thereon is entirely supported by the evidence. (People v. Powell, 63 N. Y. 88; People v. Flack, 125 id. 324.) [MAJORITY — Andrews, Ch. J.] Andrews, Ch. J. Section 168 of the Penal Code makes it a misdemeanor for two or more persons to conspire (sub. 6) “ to commit any act injurious to the public health, to public morals, or to trade or commerce, or for the perversion or obstruction of public justice, or of the due administration of the law.” The Revised Statutes contained a similar provision (2 Rev. St. 692, § 8, sub. 6). The fact that the defendants subscribed the constitution and by-laws of the “ Lockport Coal Exchange,” and participated in its management, was not controverted on the trial. Mor is it denied that the object of the organization .was to prevent competition in the price of coal among the retail dealers, acting as the “ Lockport Coal Exchange,” by constituting the exchange the sole authority to fix the price which should be charged by the members for coal sold by them, and there is no dispute that in pursuance of the plan the exchange did proceed to fix the price of coal, and that the-parties to the agreement were thereafter governed thereby in making sales to their customers. It is not questioned that the price first established was seventy-five cents in advance of the then market price, and that there was afterwards a still further advance. The defendants gave evidence tending to show (and of this there was no contradiction), that before and at the time of the organization of the exchange the excessive competition between the dealers in coal in Lockport had reduced the price below the actual cost of the coal and the expense of handling, and that the business was earned on at a loss. It was not shown that the prices of coal, fixed from time to time by the exchange, were excessive or oppressive, or were more' than sufficient to afford a fair remuneration to the dealers. The trial judge submitted the case to the jury upon the-proposition that if the defendants entered into the organization agreement for the purpose of controlling the price of coal and managing the business of the sale of coal, so as to prevent-competition in price between the members of the exchange, the agreement was illegal, and that if the jury found that this-was their intent, and that the price of coal was raised in pursuance of the agreement to effect its object, the crime of conspiracy was established. The correctness of this proposition is the main question in the case. If a combination between independent dealers, to prevent competition between themselves in the sale of an article of prime necessity, is, in the contemplation of the law, an act inimical to trade or commerce, whatever may be done under and in pursuance of it, and although the object of the combination is merely the due protection of the parties to it against ruinous rivalry, and no attempt is made to charge undue or excessive prices, then the indictment was sustained by proof. On the other hand, if the validity of an agreement, having for its object the prevention of competition between dealers in the same commodity, depends upon what may be done under the agreement, and it is to be adjudged valid or invalid according to the fact whether it is made the means-for raising the price of a commodity beyond its normal and reasonable value, then it would be difficult to sustain this conviction, for it affirmatively appears that the price fixed for coal by the exchange did not exceed what would afford a reasonable profit to the dealers. The obtaining by dealers of a fair and reasonable price for what they sell does not seem to contravene public policy, or to work an injury to individuals. On the contrary, the general interests are promoted by activity in trade, which cannot permanently exist without reasonable encouragement to those engaged in it. Producers, consumers and laborers are alike benefited by healthful conditions of business. But the question here does not, we think, turn on the point whether the agreement between the retail dealers in coal did, as matter of fact, result in injury to the public or to the community in lockport. The question is, was the agreement, in view of what might have been done under it and the fact that it was an agreement the effect of which was to prevent competition among the coal dealers, one upon which the law affixes the brand of condemnation. It has hitherto been an accepted maxim in political economy that “ competition is the life' of trade.” The courts have acted upon and adopted this maxim in passing upon the validity of agreements, the design of which was to prevent competition in trade, and have held such agreements to be invalid. It is to be noticed that the organization of the “ exchange ” was of the most formal character. The articles bound all who became members to conform to the regulations. The observance of such regulations by the members was enforced by penalties and forfeitures. A member accused by the secretary of having violated any provision of the constitution or by-laws was required to purge himself by affidavit, although evidence to sustain the charge should be lacking. The shippers of coal were to be notified in case of persistent default by the member, that “ he is not entitled to the privileges of membership in the exchange.” Ho member was permitted to sell coal at less than the price fixed by the exchange. The organization was a carefully-devised scheme to prevent competition in the price of coal among the retail dealers, and the moral and material power of the combination afforded a reasonable guaranty that others would not engage in the business in Lockport except in conformity with the rules of the exchange. The cases of Hooker v. Vandewater (4 Den. 349), and Stanton v. Allen (5 id. 434), are, we think, decisive authorities in support of the judgment in this case. They were cases of combinations between transportation lines on the canals, to maintain rates for the carriage of goods and passengers, and the court, in those cases, held that the agreements were void, on the ground that they were agreements to prevent competition, and the doctrine was affirmed that agreements p having that purpose, made between independent lines of transportation, were, in law, agreements injurious, to trade. In those cases it was not shown that the rates fixed were excessive. In the case in 5th Denio, the judge delivering the opinion referred to the effect of the agreement upon the public revenue from the canals. This was an added circumstance, tending to show the injury which might result from agreements to raise prices or prevent competition. (See, also, People v. Fisher, 14 Wend. 10; Arnot v. P. & E. Coal Co., 68 N. Y. 558.) The gravamen of the offense of conspiracy is the combination. Agreements to prevent competition in trade are in contemplation of law injurious to trade, because they are liable to-be injuriously used. The present case may be used as an illustration. The price of coal now fixed by the exchange may be reasonable in view of the interests both of dealers and consumers, but the organization may not always be guided by the principle of absolute justice. There are some limitations in the constitution of the exchange, but these may be changed and the price of coal may be unreasonably advanced. It is manifest that the exchange is acting in sympathy with the producers and shippers of coal. Some of the shippers were present when the plan of organization was considered, and it was indicated on the trial that the producers had a similar organization between themselves. If agreements and combinations to prevent competition in prices are or may be hurtful to trade, the only sure remedy is to prohibit all agreements of that character. If the validity of such an agreement was made to depend upon actual proof of public prejudice or injury, it would be very difficult in any case to establish the invalidity, although the moral evidence might be very convincing. We are of opinion that the principle upon which the case was submitted to the jury, is sanctioned by the decisions in this state, and that the jury were properly instructed that if the purpose of the agreement was to prevent competition in the price of coal between the retail dealers, it was illegal and justified the conviction of the defendants. There is a single remaining question. The trial judge was requested by the defendants’ counsel, in substance, to charge that the overt act required to be proved to sustain a conviction for conspiracy, must be one which might injuriously affect the public, and that the act of the defendants in raising the price of coal was of itself not such an overt act as was required. The request was, we think, properly refused. The offense of conspiracy was complete at common law on proof of the unlawful agreement. It was not necessary to allege or prove any overt act in pursuance of the agreement. (3 Ch. Cur. Laws, 142; Reg. v. O'Connell, 11 Clk. & Fin. 155.) In this state this rule of the common law was changed by the Revised Statutes, and with certain exceptions, it was provided that no agreement should be deemed a conspiracy “ unless some act beside such agreement be done to effect the object thereof by one or more of the parties to such agreement.” (2 Rev. St'. 692, § 10.) And this principle was re-enacted in the Penal Code (§ 171). The object of the statute was to require something more than a mere agreement to constitute a criminal conspiracy. There must be some act in pursuance thereof and done to effect its object, before the crime is consummated. A mere agreement, followed by no act, is insufficient. The overt act charged in the indictment and ^proved, was the raising of the price of coal. The raising of the price of coal by a dealer unconnected with any conspiracy is not unlawful, but if there is a conspiracy to regulate the price, and that conspiracy is unlawful, then raising the price is an act done to effect its object, whether the price fixed is reasonable or excessive. The object of the statute is accomplished when it is shown that the parties have proceeded to act upon the agreement. We think there is no error in the record and the conviction should, therefore, be affirmed. All concur. Judgment affirmed.