New York Bank-Note Co. v. Hamilton Bank-Note Engraving & Printing Co.

Majority

p. 38

New York Bank-Note Company, Resp’t and App’lt, v. Hamilton Bank-Note Engraving and Printing Company, App’lt and Resp’t.

(Supreme Court, General Term, First Department,

Filed January 18, 1895.)

Headnote

1. Contracts—Validity.

Contract prohibiting personal property from being used in a particular way, is valid.

2. Same.

In respect to all persons buying with knowledge of such restriction, the party, for whose benefit it was made, will have a right to enforce the same, without tendering its value.

8. Same.

In an action to enjoin the purchaser from using the property contrary to such restriction, the seller is a necessary party plaintiff.

Appeal from so much of an interlocutory judgment as sustains a demurrer to the complaint for insufficiency of facts ; defendant appeals from so much of such judgment as overrules a further objection, assigned in the demurrer, of a defect of parties defendant.

Edward P. Lyon, for pl’ff; W. L. Turner, for def’t.

This action was brought to restrain the defendants from using the press bought by them from the Kidder Press Manufacturing Company so as to compete with the plaintiff in strip-ticket printing. The complaint alleged the organization of the defendant, and that the Hew York Bank-Note Company, a corporation organized under and pursuant to the laws of Hew Jersey, on the 12th of October, 1891, entered into a contract with the Kidder Press Manufacturing Company, whereby the Kidder Press Manufacturing Company, for considerations in said contract expressed, agreed ngt to sell any presses on which strip tickets might be printed. This restriction, however, was not to deprive the Kidder Press Company from selling their presses to be used for other purposes; and the Kidder Press Company further agreed not to make alterations or additions to any existing presses, that would enable such presses to print strip tickets, without requiring the parties owning such presses to make the same terms and agreements regarding the same as though they were new machines. The complaint further alleged that prior to the time of said contract, and at the time and subsequent to the making of the same, one C. E. Gray was the secretary of said Hew York Bank Note Company, and sustained towards it the most close and confidential relations; that he was familiar with the first press made by the Kidder Company for said Hew York Bank Note Company, and with such attachments, etc., and also with the provisions of the contract above referred to; that, soon after the making of the contract, Gray -severed his connection with the Hew York Bank Note Company, and became associated with the defendant corporation, and its vice president and general manager; that the defendant, by its officers, conceiving the idea of duplicating said presses, and of using said Gray, and the knowledge he had

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acquired in liis confidential relationship with the New York Bank Note Company respecting the said presses, their said attachments, and the said strip-ticket printing business, and contracts therefor, and well knowing the terms of the said contract between said Kidder Press Manufacturing Company and said New York Bank Note Company, and well knowing that said Kidder Press Manufacturing Company had no legal right to sell or furnish to the defendant, orto any person, a Kidder Perfecting Press, except in such manner as should prevent said press from ever being used, with or without alterations, for strip-ticket printing, procured said Kidder Press Manufacturing Company, in violation of the terms of its said contract with the said New York Bank Note Company, to sell, furnish, and deliver to it (the defendant) a Kidder Perfecting Press, of substantially the same pattern as the ones to which said Kidder Press Manufacturing Company had made said attachments for the New York Bank Note Company, and that the defendant procured attachments to be added to the press, in such way as to enable the defendant to print strip tickets on, equally favorable terms with, and in substantially the same manner as was done by, the said New York Bank Note Company, and thereafter, and in the year 3.893, with full knowledge of the rights of the plaintiff under said .contract, procured another press, etc. The complaint further alleged that on or about the 1st day of January, 1893, the plaintiff was organized under the laws of West Virginia, and succeeded to all the rights of the New York Bank Note Company, bv assignment, etc., and prayed an injunction restraining the defendant from using any of the presses which it acquired from the Kidder -Company for the purpose of strip-ticket printing, etc. The defendant demurred to this complaint on the ground that it did not state facts sufficient to constitute a cause of action, and that there was a defect of parties, in that the Kidder Press .Manufacturing •Company had not been joined as a defendant in this action. The -court, upon hearing the demurrer, sustained the same, upon the ground that it did nos state facts sufficient to constitute a cause of action, in that the plaintiff had not paid, or offered to pay, the value of the press furnished to the defendant, or, at any rate, had failed to tender a compliance with the terms of the contract upon its part, and overruled the demurrer as to the defect of parties.

We do not see upon what theory the plaintiff was bound to tender anything. If the defendant purchased from the Kidder Company the press in question, having knowledge of the contract between that company and the plaintiff’s predecessors, whereby the Kidder Company agreed not' to sell any presses, except under restriction, it is difficult to see why the plaintiff is not entitled to enforce its contract. The result of the contract detween the Kidder ■Company and the plaintiff’s predecessor enabled the Kidder Company to give only a qualified title in the presses which it might produce. That company,had, by its contract, agreed that its productions should be used only in a certain way , and, when parties took those productions with knowledge of the restriction which accompanied the Kidder Company’s title, the purchaser’s title must necessarily i>e affected the same as the seller’s. Independent of the acts in rela

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tian to the filing of chattel mortgages, if a party purchases personal erty, knowing that the same is mortgaged, can it be claimed that he would acquire a title relieved from the mortgage ? It seems-hardly necessary to discuss such a proposition. So, in the case at bar, the defendants in this action, knowing that the Kidder Company had no right or authority to sell their presses, except with a restriction, which restriction the plaintiff had purchased, can it be said that in purchasing from the Kidder Company they acquired an absolute title, relieved from such restrictions ? Clearly not. The party purchasing under such circumstances takes the property burdened with the contracts made by its owner in reference thereto, and which he had the power to make. Contracts prohibiting the manufacture of goods in certain localities are held to be valid. Contracts restraining the carrying on of a trade or business within certain limits are held to be valid. Why not contracts-prohibiting personal property from being used in a particular way ? Is place different in this respect from method ? It would not be argued for a moment that, if the contract between the Kidder Company and the plaintiff had been that no Kidder presses-should be used within the city of New York, such contract could not be enforced against the persons purphasing such presses with knowledge of this contract. What difference in principle is there: because it is not an absolute prohibition from using, but only from a particular use ? It seems to be clear that the Kidder Company could place this restriction upon the use of its manufacture, and,, certainly, in respect to all persons buying with knowledge of this restriction, the plaintiff, for whose benefit it was made, would have a right to enforce the same.

The next question is in regard to the knowledge of the defendant of this restriction. It is alleged in this complaint as distinctly and as positively as any allegation therein contained. The allegation is that the defendant, by its officers, well knowing the terms-of said contract between the Kidder Company and the New York Bank-Note Company, and well knowing that said Kidder Company had no legal right to sell or furnish to the defendant, or to-any person, a Kidder Perfecting Press, except in such manner as should prevent said press from ever being used for strip-ticket printing, procured said Kidder Company, in violation, etc. What, more distinct allegation of knowledge, could be made by the plaintiff than is therein contained ? It is true, the allegation is accom-, ponied by allegations with regard to Gray’s instrumentality. But these are not qualifying words by any means. If true, they would show, not only knowledge upon the part of the officers of the defendant, but a fraudulent design to evade the restrictions, of which they had knowledge. We think, therefore, that, the complaint stated facts sufficient to constitute a cause of action ; and we-know of no reason why the plaintiff should be required to pay anything to anybody because of the breach of its contract by the Kidder Company by the sale of these presses to the defendant, the defendant being fully aware of the existence of the contract.

The objection, however, in regard to the defect of parties, seem» to have a better foundation. The question involved, among

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Others, is as to the right of the Kidder Company to confer a title upon the defendant, of its presses, with an absolute right to use the same for any purpose for which they were adapted. When this right is assailed, as it is by the plaintiff’s action in this proceeding for an injunction against a vendee of the Kidder Company, it seems to us that that company is entitled to be heard, and that the question of its right to deal with its property as it sees fit cannot be adjudicated upon without its presence, where the objection is taken in time, as it is in the case at bar. For these reasons, we think that the demurrer should have been sustained upon the ground of defect of parties. The judgment, therefore, should be reversed, so far as it holds the complaint defective as to facts, and also so far as it holds the complaint sufficient as to parties, without costs of this appeal to either party; the plaintiff to be allowed to amend by bringing in the Kidder Press Company as a party, upon payment of the costs of the court below, and serving an amended complaint. All concur.