In Equity. Suit by the Continental Candy Corporation against the California & Hawaiian Sugar Refining Company and others. On hearing on motion for injunction after temporary restraining order was issued.

On May 14, 1920, plaintiff Candy Company entered into a contract with defendant Sugar Company for the purchase of 750 long tons of white Java sugar. The contract contained the following provisions:

“1. The California & Hawaiian Sugar Refining Company, of San Francisco have to-day sold, and the Continental Candy Corporation of Chicago, Ill., have to-day bought, the following sugars:

“750 tons, each, 2,240 lbs. 10% more or less, white Java sugar at $19.85, net cash, duty paid, landed weights, f. o. b. cars San Francisco, California; 25. Dutch Standard — 99 Polarization.

“250 tons 10% more or less, shipment from Java September, 1920.

“500 tons, 10% more or less, shipment from Java October, 1920.

“2. Payment. Buyer agrees to immediately establish an irrevocable letter of credit through San Francisco bank sufficient to cover the amount of this purchase, same payable on presentation at said bank of invoice and shipping documents by the seller, the California & Hawaiian Sugar Refining Company. In the event of shipping documents being delayed at time of arrival of steamer, the payments are to be made against seller’s delivery order.

■ “3. It is agreed that should strikes, wars, revolutions, accidents, dangers of the seas of other unforeseen events beyond control, prevent shipment or delay delivery of this sugar, then the California & Hawaiian Sugar Refining Company shall have the privilege of canceling this contract.

“4. Any change of import duty understood to be for account of buyer.

“5. In the event of any dispute arising under this contract, same to be settled by San Francisco arbitration, decision of sticli arbitration to be final on both seller and buyer. Expense of arbitration to be paid by losing party.

“(S. Buyer agrees to use these sugars only for his own manufacturing needs and under no circumstances to resell same.

“7. Sales of this sugar to manufacturers constittrtes their quota of .sugar from the California & Hawaiian Refining Company from delivery date of these .lava whites until the end of the year.”

Four days later a similar contract between the same parties for the purchase and sale of 500 additional tons of sugar was entered into.

At the time of these purchases the price of sugar in the market had been rising for some time, and was then in the neighborhood of 22 cents per pound. It continued to rise until about the middle of July, when a steady decline ensued. By the latter part of October It had reached 11 cents per pound and on the day the bill of complaint was filed herein, December 1, 1920, it had fallen to 8 cents per pound. By December 17, the day answer was filed, it had fallen to 7% cents per pound.

Pursuant to the provisions of paragraph 2 of the contracts, irrevocable [{'iters of credit, expiring December 31, 1920, were established by the Candy Company, $300,000 with defendant First National Bank, and §255,800 with defendant Canton Bank.

On December 1 plaintiff filed Its bill of complaint alleging the making of the contracts referred to and the establishment of irrevocable letters of credit, and that plaintiff would in due course be bound to repay any sums advanced in payment of sugar delivered pursuant to the terms of the irrevocable letters of credit. Plaintiff further alleged that both of the entire1 agreements between plaintiff and defendant were illegal, null, and void, because the clauses forbidding the resale of the sugar and establishing plaintiff’s quota were in unlawful and unreasonable restraint of trade and in violation of the anti-trust laws (Comp. St. §§ 8820-8823, 8827-88801.

It was further alleged that plaintiff, for the reasons given, had rescinded the contracts and duly notified the Sugar Company thereof. Alleging the arrival and probable immediate delivery of said sugar, with consequent demand on, and payment by, defendant banks of the sums represented by the irrevocable letters of credit, to plaintiff’s irreparable damage in the premises, the prayer was for a restraining order enjoining the tender or delivery of the sugar, the negotiation or payment, of either of the irrevocable letters of credit, and for a decree declaring the contracts “illegal, null and void, canceled, and rescinded,” and for a permanent injunction, etc.

A temporary restraining order was issued, and by agreement the matter came on for final hearing on the merits on December 27. The substantial issues tendered by defendants were to the effect that the clauses in the contracts numbered 6 and 7, specifically objected to by plaintiff, did not suffice in any respect to operate in unreasonable or unlawful restraint of trade or to violate the anti-trust laws or to Invalidate the said contracts, and that said clauses were inserted in said contracts because of the general requirement to that end made by the Attorney General of the United States acting through the Department of Justice and the Fair Trade Commission, and were imposed solely in the interest of the public and for the purpose of securing and effecting an equitable distribution of sugar and preventing speculation and profiteering therein. The contention was also made that the clauses were severable if found invalid. '

Defendant Sugar Company also alleged that it had no notice of plaintiff’s claim that the contracts were void, as being in restraint of trade, etc., until December 1, the day on which notice of rescission was served and the bill of complaint was filed, and that, If plaintiff had notified it of the asserted invalidity of the contracts within a reasonable time subsequent to their execution, and it had acquiesced in such invalidity, a resale of the sugar, at a small loss to defendant, might have resulted, but that plaintiff had delayed advising defendant of its attitude and claims until the price of sugar had fallen so low that a cancellation or rescission of the contracts, as prayed for by plaintiff, would result in a loss to defendant of a sum in excess of §300,000.

The principal argument in the case centered around the asserted invalidity of paragraph 6, forbidding a resale of the sugar purchased.