FOWL1!: V. PARK.
789 et 01.
FOWLE
et al.
tI. PARK
(Circuit Court, S. D. Ohio, W. D. January 22,.1892.,
1.
BREAOH OF CONTRAOT-SALE OF PATENT MEDIOINE-DAMAGES.
Where one advertises and sells a proprietary article in a speciil.ed territory in violation of contract the other party cannot recover as damages any moneys spent by him in advertisinl'( for the purpose of counteracting the effect thereof, since he might, in the first instance, have resorted to the courts for the protection of his rights. In a suit for injunction and an accounting for violation of a contract not to sell a proprietary article in a specified territory, belonging to complainant, equity cannot decree an accounting for losses suffered by complainant b;V reason of reducing the price to meet defendant's competition. The IS limited to profits. .' " '
2.
SAME-AocOUNTING.
&
SAME-'-REMOTE DAMAGES.
Even if such damages were allowable generally, losses incurred by continued sales at the reduced prices after defendant had withdrawn from the territory would be too remote to merit consideration. SAME-CALCULATION OF PROFITS.
4.
formUla, the profits for which an accounting can be allowed must bflcomputed
Each party having manufactured the article for himself according to the same
upon the basis of the actual. cost to defendant, and not to plaintiff, of making and selling the article; since the selling of nostrums of this character depends less upon intrinsic merits than the expedients used to recommend them to the public, which fact renders the cost of selling by one party no criterion of the cost to an· other.
5.
SAME-INTEREST,
In an accounting forprofits.made by selling a proprietary medicine in a specified territory contrary to a contract, interest should be allowed, for though the liability is ex deUctu, it arises upon a contract.
06.
LAOHES-ExcUSE.
One who knows that another is selling a proprietary article in a certain territory in , violation of a contract between them, cannot justify a prolonged sleeping upon his rights on the ground that he has not sufficient knowledge of the details to bring suit, since he could bring suit by stating the facts generololly according to hisknowledge, and by means of interrogatories have a discovery of the details from the other party. The delay in bringing suit should only operate to reduce the time for which an accountiIlg.could be had to the time fixed by the state statute of limitations for actions on written contracts.
1. 8.
SAME-STAtUTE OF LunTATJONs.
JUDIOIAL NOTICE-SELLING NOSTRUMS.
The fact that the selling of proprietary medicines and nostrums depends less upon the merits olthe medicines themselves than upon the expedients used to recom· mend them to the public is so notorious that the court will take jUdicial notice thereof. A discharge in bankruptcy releases the bankrupt from,liabUty for' breach ofa contract with l\ creditor who assented to the composition, although the creditor had no knowledge of the breach at the time of giving his asseIlt.· , A debtor who fails to plead his discharge in bankl')lptcy waives the benefit thereof.
'9.
BANKRU1'TCy-EFFECT OF DISOHARGE.
10.
SAME-PLEADING DISOHARGE.
In Equity. Bill by Seth A. Fowle and Horace S.Fowle against John D. Park,Ambro R. Park, and Godfrey F. Park for an injunction and accounting. The defendants filed an answer and a cross-bill for an injunction.Both the bill and were originally dismissed by .the .circuit court. On appeal by complainant the decree was reversed. 9 Sup. Ct. Rep. 658.Subseqnently a perpetual injunctionw.as allowed :against· defendants; and the' cause waS· relimed to a master for an ;ao- .
790"
FEDERAL ,:Q$,PORTER, . vol.
48. Report
counting. The hearing is now on exceptions to his report. modified. . McGuffey « Morrill, for complainants. O'Hara« Br1Jan and Paxton Warrington, for defendants.
SA;<lE, J. This cause is before the court upon exceptions to the report of the special master. The suit was to restrain the defendants from the violatiop. of their not to sell Wistar's Balsam.9f Wild Cherry within certain territory belonging to complainants, including that portion ! of the {,Jnited States west of theRocky Mountains. .. A decree was entered JUDe 10, 1889, perpetually enjoining the defendant$ from selling said ; balsam or causing the same to be sold or manufactured within said ter:ritory, or within other territory embraced in the 'contract made by deIfend ants with the complainants' assignors, and referring the case to a ,special to ascertain, takl:l, stale, and report to the court(1) An account of the sale of said balsam made, directly or indirectly, by in violation of said contract or of the rights of the com· plainsnts.in. the premises. I (2) The'gains, profits,and advantages which the defendants have received, orwbich have arisen. or accrued to them; from the violation of the exclusive right of the complainants to sell said balsam in the territory prohibited to them. (3) 'fo assess the damages the complainants have suffered from such violation. The complainants claimed before the master as the measure of their 'damages under paragraph a,as stated above: .' (1) The profits they could have made if they had enjoyed the monopoly of traclewithin tho prohibited territory, guarantied them in said contract by defendants. (2) The ,reduction of price necessitated by said· violation of contract· . (3) Tbeactual cOlliof extra advertising renllered,necessary to counter· act the injury to their trade by said violation of contract. (4) Interest on flacb of the above items. The deltmdnnts' claim before the master waathat the true measure of damages was the amount anhair profit on the 'balsam sold within the prohibited territory. They also presented a trllnscript of the record in ,by which it appears that they filed their petition in bankruptcy,' i,n tne United court for this district, January 2, 1878, and that a composition was made with their creditors, which operated as a discharge from said date, and that complainants appeared among the and assented to said settlemE'nt. InrespeQtofdischarge in>nankruptcy the complainants said that at the time composition they had no knowledge .of the violation of the contract,.which is the basis of this actio11, and they were creditors of defendants, and gave their assent tothe composition upon another and entirely differentaecount. , . ,. . The master finds tl1at the net profits of defendants on sales made or authorized by them; or made with their .knowledge,. within theprohib-
FOWLE V. PARK.
791
ited territory, prior to January 2, 1878, (the date of the of the petition in bankruptcy,) were $1,154.84; and subsequent to January 2, 1878, $1,023.32; total, $2,178.16. The cost to complainants of the manufacture and sale of balsam was from $1.32 to $1.75 per dozen. The cost to the defendants was $2.63 per dozen. .'The sales by defendants before January 2, 1878, were 23 gross 5 7-12 dozen; after January 2, 1878, 20 gross 6t doz.; which amounts, deducted from the gross proceeds of defendant."!' sales, as stated in the report, show that, the complainants' profit, on the defendants' sales, at the defendants' prices, would have heen, prior to January 2, 1878, 81,439.58; subsequent to January 2,1878. $1,243.36; being inaB, $2,682.83. The complainants further claimed before the maSter: (1) Damages resulting from a reduction of price of the balsam in the prohibited territory made by them, ahd deemed necessary to counteract the injurious effects ofthe violation of the contract by thE' defendants. The master finds that said redi.lction of price upon sales actually' made in the prohibited territory by the complainants from ,September 4, 1878, to October 23, 1889, amounts to' $6,668, with interest amounting to $2,908.19. (2) Extra advertising, considered necessary to protecttheir interest from the injurious effects of the violation of the contraCt, amounting to $1.024;47, with interest amounting to $238. ' (3) Interest on the profits complainants would have made but·for the violation of the cont1'Jl,Ct,arnounting Which is nponsales pdor to .January 2, 1878, and $645·.6:1 on sales ·afwr that uate. . The master sums up his findings as follows: Complainants' profits -82,682 88 Interest1.799 00 --,-"8 4.481 88 6;668 00 Reduction of price 2.908 19, lnterellt -
,-
..
9.576 19
814,05802
Both parties except to the master's report. . The compla,inants'exception is to the refusal of the master to allow the actual cost of advertising by them, rendered necessary. it is claimed, to counteract the injury to their trade by defendants' violation of the contract. The master refused to make this allowance, for the reason that the advertisements were under the caption "Caution," and were warnings to the public that there were counterfeits, and advising to buy the genuine, which might be known by the signature "I: Butts" on the wrapper. The master reported that that advertisement had reference to a spurious balsatn, and -called attention to the fact that it was nowherechal'ged that ,the balsam 'put upon the market by the defendll.nts· W8S spurious or counterfeit, and to the further fact that one of the complainanta testified that he knew of no -counterfeit£'! in the market.. The master found furthermore the
792
FEDERAL REPORTER,
vol. 48.
testimony, and the whole theory of complainants' case, assumed that the balsam of hoth complainants and defendants was compounded from the same formula, so that the logical effect of the" caution" would be to the warn the public, not against the balsam prepared by the curative property of which was identical with that of the balsam prepared by the complainants, but-against some other balsam, different in its composition, and therefore presumably different in its effects, but which, in fact,. had no existence.. So that, although it may have been the purpose of complainants to warn the public against defenciants'balsam, the "caution" advertisement did not do so in terms, and the defendants should not be charged with the miscarriage of complainants' purpose. But, apart from this statement of reasons by the master, which is, logically, sound, the claim for the cost of advertising is inadmissible. If the complainants saw fit to resort to advertisements to counteract the defendants' wrong; they undoubtedly had the right to do so. That was a remedy of their own selection. 'l'hey might instead have applied to a court of equity for an injunction to restrain the defendants from violating. the negative covenants contained in their agreement with the complainants. In the unreported case of Britting v. Deckm' Bros., (decided by the district court of Hamilton county, Ohio, January 5, 1881,) Judge AVERY,'in speaking of the' claim made for advt:rtising, which was allowed by the master on the ground that it was necessary to counteract the defendant1s'advertisements, said: ..It is by counsel that Decker Brothers were not to sit idly by and suffer their reputation to be lost without' an effort to regain it. This may be true, but courts were open for actions fOl' damages, or, if multiplicity of suits .would be involved, for injunction. If .tlwy resorted tQcOunter-advertisements, they might do so. But it is a different. questiQll whether, in a court of law, rules of'diuriages would allow them tQ recover the expenses. If a man's property is invaded by a trespasser he may recover for the loss, but not for the expenses of building a wall to keep out the trespasser. The plaintiffs could have recovered for injury to their business, but not for counteradvertising, in' which they saw fit tQ as a means of protecting themselves. "!tis said where injury has been done it is for the party injured to take reasonable care to prevent mQre seriQlIs consequences. That is a principle of law which is merely the application of the doctrine of ordinary care. Dam'ages must be the proximate loss from the injury, and not aggravated by the omission of reasonalJle care of the party injured. But reasonable care does not reqUire the, owner of a trade-mark, injured by an advertisement in the newspapers, to resort to the newspapers to lessen his loss. There can, therefore, be no recovery fQr the cost of advertisements." This is a correct statement of the law, and the claim for the expense of advertising WIlS properly rejected. The defendants' first exception is that the complainants are not en,titled to an,accounting, by reason of their long-continued acquiescence in the alleged violation of the contract in question, and their unreasonabl& delay in seeking relief. The testimony shows that the complainants, in a letter written to defendants under date August 20, 1878, stated that they had then indisputable evidence that the defendants' manufacture
793
of Wistar's Balsam was being sold on the Pacific coast market with defendants' knowledge and sanction, and an explanation was demanded. The complainants, in answer, say that they were not then in possession of details sufficient to enable them to bring a suit, and that it was only shortly before the bill was filed that they obt-ained such details. I do not think that the answer is sufficient. It was not necessary. that they should have the details before bringing suit. If they WElTe advised of the fact that the defendants were selling, they could have filed their bill, stating the facts generally, and according to the knowledge they had, and have attached to the bill interrogatories which would have. compelled the defendants to make full and complete discovery; and upon the decree for injunction and reference to a master the details would have been brought out. But, while ignorance of details was noexcuse for not bringing the suit, the delay did not give to the complainants any right to continue their violation of a then subsisting and bindipg negative covenant. . My conclusion is that the delay operates only to limit the time embraced in.theaccounting, and that that should be fixed by the rule un.. der of limitations of Ohio, which, the liability arising by reason of the breach of a written contract, is 15 years. The bill was filed on the 28th day of March, 1884, which would carry the accounting back to the corresponding date of 1869. But this conclusion is subject to the next objection made by the defendants, to-wit, that on January 2, 1878, they filed their petition in bankruptcy in the United States district court for this district, and a composition.. was made with their creditors, which operated as a discharge from that date; and that complainants appeared among the creditors and assented to the composition; The complainants urge that the discharge is no bar, because-they did not then know of the claim upon which this suit is based; I do not think that objection sound. 1£ the debt was provable, it bas been held that the action is barred, although it was not actually proved. Hardy v. Carter,S Humph. 153; Rogers v.lmurance Co., 1 La.Ann.16l. But the defendants have not pleaded their discharge in bankruptcy, and that omission is fatal-to the objection. The defendl1nts1 exceptions to the master's assessment ofdamages present the following objections: (1) To the finding that the complainants suffered damage resulting from their own reduction, in the invaded territory, of the price of the balsam, which reduction wM' forced upon them by the defendants' competition and cutting of prices, in the sum of $6,668, on which he allows $2,908.19 interest, making a total of $9;576.19. Complainants cite, as authority for this finding, Yale Lock Co. v. Sargent, 117 U.S. 552, 6 Sup. Ct. Rep. 93'4, where the supreme court sustained an award of damages for the enforced reduction of price of the locks which the complainant sold, caused by the infringement of the complainants' patel\t by the defendants. But counsel do not take into account that in a patent case, upon a decree for infringement, the complainant is entitled totheb'enefit' of:the statutory rule contained in sectioIil 4921, Rev. St.
794
FEDERAL REPORTlCB,
S.,thathe may recover, in addition to the to be accounted for by the defendant, the damages he has sustained thereby. This cause is bnsed upon a contract, and, the jurisdiction having attached to enjoin the breach of the defendants' negative covenant, the court may hold the case for the purpose of giving compensation or damages if the breach isin,cidental to the main relief. This is the s.ettled rule, both in this cai.mtryand in England. 1 Story. Eq. § 71; Bisp. Eq. § 487. The role of compensation must. be according to the settled principles of equity. It is welhtated in Adams' Equity,. *218, as follows: "The grant of an injunction necessarily presupposes that the plaintiff has sustained a losaby the defendant's act, and that the defendant has probably derived a profit. which mayor may not, IACcording to the circumstances. be co-extensive "ith the plaintiff's loss. The strict right9f the plaintiff. so far lUI the past wrong is to recompense in damages fol' his own loss, irrespectively of defendant's profit. . "A cl'alm, however, for such damages would involve the necessity of proceeding in two courts at once,-in eqUity for an injunction, and at law for damages; and therefore the court of chancery, baving jurisdiction for the purpose of the injl1lictioll. will prevent that circuity and expense; and, although it cannot decree damages for the plaintiff's loss. it will substitute an account of the defendant's profits. " arosley v. Gas Co., 3 Mylne.& C. 428; Oolbum v. Simms, 2 Hare, 543-560. There is another objection to this finding by the master. He allows for the reduction of price <lomplained of from September 4, 1878, to October 23, 1889. The bill was filed March 28, 1884, and the testimony shows that the defendants made no sales in the prohibited territory after the filing of the bill. The master finds, however, that the reduction subsequent to the filing of the bill was due solely to the defendants' prior unauthorized competition. The finding was not warranted by the testimony. It is true that· witnesses statll thltt such was the fact, but these stateIllents do .not warrant tile conclusion reached by the masand allowed upon that basis are altogether ter. The damages too remote anduncertaio. I know nQ rule which. would authorize the court to allow the subsequent reduction, even if damages could be awarded in this suit. The exception to this portion of the master's report will be sustained. . :(2) The defendants object to the computation of the profits by the master, arrived at by substituting the cpst to the complainants of making ahd selling the balsam for the cost to the defendants of the same items. This objection is well taken. The computation must be of the profits actually made by the defendants, and not of the profits which .they might have made. It cannot be concluded with the certainty required by the law that the compJ.a.inants could have made and sold the balsam at the figures The cost of manufacturing could be stated accurately, but not the cost of selling, because that must depend largely upon the skill and efficiency of salesmen, and upon advertising. It is a fact so general and notorious that the court may properly take notice of it that the business·of selling nostrums of the class to which C
u.
X'dAMPBELL fl. BROWN.
795
the medicine in this case belongs' depends more 'upon the expedients employed to recommend them to the public than upon the merits of the medicine. The cost to one of manufacturing and selling is therefore no criterion by which to determine the cost to another. (3) The defendants object to the allowance of interest.' This objection will be overruled. The liability, although tl:l: dellido, arises upon <contract, and interest should be included.· The record shows a dalibera.teand inexcusable violation by the defendants of their contract, and the oourt is not disposed to release them from any part of the liability which they have incurred. The decree will be in accordance with the mll$ter's report, as modified by this opinion. If counsel cannot agree. upon the modifications, there will be a recommittal to the llULIlter 1.0 reo ltate the
MCCAMPBELL
fl. BROWN ".
or.
(Ctrcuit court, B. D. Ohio, W. D. January 26, 1892.) L EQUITY J'tmJSDJOTION-'rRuST8.
A bill brought by the assignee of a partnership alleged that the partnersblp beUl a mortgage upon the lands of a cattle companYI and that, for the purpose of discharg. ing the same, the oompany negotiated a sale tnereof through one B.· who agroed to take as his commission a mortgage upon the company's oattle; that by the terms of the sale the deed was placed in escrow. the depositary also receiving a part of the price, under an agreement to apply the same to the discharge of the liens on tJ;1e land, Including eomplaiJiants' mortgage; that, while in the midst of the transaction. B., fraudulently, and for the purpose of coercing the payment 01 hia commlasion in cash commenced a suit against the cattle company, and garnished the purchaser; and that thereupon complainants agreed with the depositary. as of the purchaser, that the depositaJ1' should retain a sum suftl.cient to cov,el' &'s claim, until an order could be obtained from a competent court for the payment of the same to complainants. The bill asked thatB. should be decreed to have no claim npon the tund, and that the purchaser be decreed to pay the balance ot the price to complainants. HeW. that, as the bill showed that the IIlOney was held in trust, it stated a case cognizable ill eqUity, although Do wu no party to the trust agreement. The fact that the money so held was subll8quentIT retranaferred 1»7 the depoat. tary to the purchaser did not dlaoharge the trust..
9. BAllE.
a.1UM_REMBDY AT LAw.
In cases involving trusts the jUrllldletlOD of equit71s Dot dependent Upon the absence of a remedy ali law.
I. EQUITY-PARTIBS.
The bill having alleged that the partnership was In fact solvent, but had been oompelled to make an because ot the cattle compan,'s tallure to pay Ita it was not a misjoinder of parties to make the individuals ot the partnership parties plaintUf with their aB8ignee, since these allegations showed that there might be a surplus for distribution to the partners after the discharge of tho partnership lIabilities.
In Equity. Suit by Edwin A. McCampbell, as assignee of Dodd. ridge & Co., and others, against J. R. P. Brown and David Sinton. Heard on demurrer to the bill. Overruled. S'l'ATEMENT BY SAGE, J.
The bill sets forth that the complainant is the assignee of the estate u,d effects of the of Doddridge & Co., of CorpusChrisU"