Davis v. Jointless Fire Brick Co.

HUNT, Circuit Judge (after stating the facts as above). It is clear that after the letter of October 15th Davis was recognized by the plaintiff as its agent, and that he continued to act as agent until after December 26, 1923. This relationship was of a fiduciary character, but he deliberately failed' to notify the plaintiff company that he was in fact acting as agent for a company selling a competing product, and *3 was selling and delivering such competing product as Plibrico, and was leading purchasers of the competing product to believe that they were dealing with him as agent for the plaintiff. By his conduct, and by ignoring the October 15th notice of cancellation, he is not now in a position to ask a court to uphold his contention that after October 15th he was free to hold onto' the benefits accruing under his contract of agency, yet could repudiate its valid provisions The court will treat him as having elected to keep the contractual relationship alive for the benefit of the plaintiff company, as well as himself, subject to such obligations and liabilities as were lawfully assumed under the old contract. New Brunswick & Canada R. Co. v. Wheeler (C. C.) 1- 2 Fed. 383 ; 13 C. J. § 764; Farrelly v United States, 159 Fed. 675 , 86 C. C. A. 539 . We may assume that the contract, tested by general principles, is valid. Oregon Steam Co. v. Winsor, 20 Wall. (87 U. S.) 64, 22 L. Ed. 315 . But the vital question is: Does the statute of California interdict the contract, in so far as it restrains Davis from selling a competing product? Section 1673 of the Civil Code of California provides: “Every contract by wbieb any one is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent, void.” To this provision there are certain exceptions: (a) Where one sells the good will of a business; and (b) in the case of partners who, upon or in anticipation of a dissolution of the partnership, agree that none will carry on a similar business within the same city or town where the partnership business has been transacted. We pass the exceptions as not pertinent. The adjudications of the highest state court, interpreting the statute, defining the public policy of the state, compel a decision against the validity of the clause whereby Davis agreed not to engage in the business of selling a fire brick that competes with Plibrico. Meister v. Moore, 96 U. S. 76 , 24 L. Ed. 826 . In the recent case of Chamberlain v. Augustine et al., 172 Cal. 285 , 156 Pac. 479 , the court considered section 1673, supra, and distinctly held that the statute “makes no exception in favor of contracts in partial restraint of trade.” See, also, Merchants’ Ad Sign Co. v. Sterling, 124 Cal. 429 , 57 Pac. 468 , 46 L. R. A. 142, 71 Am. St. Rep. 94 ; Vulcan Powder Co. v. Hercules Powder Co.. 96 Cal. 510 , 31 Pac. 581 , 31 Am. St. Rep. 242 . The agreement that the covenant shall be construed according to the law of Illinois is ineffectual to avoid the statute of California, the place of performance, where Davis resides, and where the regulation provided for would be invalid by the law therein prevailing. Scudder v. United States Nat’l Bank, 91 U. S. 406 , 23 L. Ed. 245 ; Andrews v Pond, 13 Pet. 65 , 10 L. Ed. 61 . In Flagg v. Baldwin, 38 N. J. Eq. 219, 48 Am. Rep. 308 , it was held that a contract void under the law of New Jersey, but made in New York, where the contract was lawful and enforqeable, could not be enforced in New Jersey against a resident of New Jersey, because enforcement would violate the polity of the state of New Jersey as evinced by its statute. The doctrine is that under such circumstances such a contract is excepted from the rule *4 of comity, which requires the enforcement by the law of one state of contracts of another state, if valid by the law of the place of contract. In Hill v. Spear, 50 N. H. 253, 9 Am. Rep. 205 , the court, after saying that the validity of a contract is to be decided by the law of the place where it was made, unless it was agreed expressly or by tacit implication that it should be performed in some special place, recognized as an important exception to the rule this: That no state is bound to recognize or enforce contracts which the government of such state may deem injurious to its own interests, or to the welfare of its own people, or which are in violation of its own laws. Such contracts are considered as nullities in every country affected by such considerations, although they may be valid by the laws of the place where the contract is made. In Pope v. Hanke, 155 Ill. 617 , 40 N. E. 839 , 28 L. R. A. 568, the court said that it was true that one state would recognize and execute the laws of another through comity, yet that the principle of comity does not require the enforcement of a law of one state which is prejudicial to the interests of the state where it is sought to be enforced. Comity between states does not require a law of one state to be executed in another when it would be against the public policy of the latter state. In Rhodes et al. v. Missouri Savings & Loan Society, 173 Ill. 621 , 50 N. E. 998 , 42 L. R. A. 93, the court held that the rules of comity do not require that foreign corporations should be allowed to enforce contracts in Illinois, where such enforcement would be in conflict with the laws of Illinois, and, thus in conflict, would work against the citizens of Illinois, and give to citizens of another state an advantage which the residents did not have. Gist v. Western Union Tel. Co., 45 S. C. 344, 23 S. E. 143 , 55 Am. St. Rep. 763 ; 6 R. C. L. 91. The rule of the cases cited is approved by the Supreme Court and other federal courts. In Bank of Augusta v. Earle, 13 Pet. 519, 591 , 10 L. Ed. 274 , the court held that, when the policy of a state by a special law has been made manifest, the courts of the United States will be bound to notice the statute of policy as a part of its code of laws, and to declare all contracts in the state repugnant to it to be illegal and void. In Equitable Life Society v. Clements, 140 U. S. 226 , 11 Sup. Ct. 822, 35 L. Ed. 497 , it was held that .the insertion in a policy of insurance of a provision for a different rule of commutation from that prescribed by the statute of Missouri, and the insertion of a clause by which the beneficiary of the policy purported to waive and relinquish all right to any other surrender value, whether required by statute or not, was an ineffectual attempt to avoid and nullify the clear words of the statute. In Grosman v. Union Trust Co., 228 Fed. 610 , 143 C. C. A. 132 , Ann. Cas. 1917B, 613, the court held that a contract, though valid under the law of the place where it was made, will not be enforced in a jurisdiction where to enforce it would involve a disregard of the established public policy of that jurisdiction. Erom these decisions we conclude that the injunction by which Davis, his representatives, agents, or employés, or others acting under his direction, are restrained from engaging directly or indirectly in the sale of any one-piece fire brick lining or high heat resistive bond or cement or commodity that will compete with the plaintiff company’s *5 business in California for a period of two years from December 15, 1923, is, to that extent, void. But in so far as the injunction restrains him from disclosing, or offering to disclose or make use of, lists of former customers of plaintiff, or using stationery upon which the word “Plibrico” appears, or conducting a business of a competitor, where his acts may deceive the public into believing that he is still the agent of the plaintiff, or that the goods offered by him are in fact the product of plaintiff, or from interfering with existing contracts with the agents of plaintiff, or inducing them to violate their contracts, or taking orders addressed to or intended for plaintiff, the order was right and proper. The order appealed from is reversed, and the cause is remanded, with directions to modify the injunction in accordance with the views herein expressed. Costs in this court to be equally divided.