81 F. 64 | U.S. Circuit Court for the District of Rhode Island | 1897
This is a bill in equity, brought by Henry L. Greene, survivor of the firm of S. H. Greene & Sons, to rescind for alleged fraud a written contract made March 12, 1888, between said firm and the defendant (for brevity called the “St. Denis Company”), a corporation incorporated under the laws of the republic of France, and to enjoin the prosecution of a suit at law begun by the St. Denis Company in this court to recover damages for the breach of said contract By the terms of the contract, the firm
“I understand that you are one of the largest consumers of alizarifte in this country, and presume it must he of great moment to you to be able to always secure this dyestuff as freely and as cheaply as possible. You now suffer from the monopoly on this article controlled by one house, and I don’t think you will be able to help that until the end of 1886. But you must be, aware also Hint n combination, has been made among the German manfrs. in order t.o ‘monopolize this article, for along lime ahead, thus substituting one monopoly for another. One of the, features of this combination is the making up of a special fund for the prevention of any new 'manufactories. All consumers of alizarine have therefore a great Interest in breaking this combination, and promoting the creation of other' houses making alizarine. Our company is willing to serve such a. policy if we can get an efficient support from consumers, but we are not willing to start in competition with the German combination unless we have some kind of guaranty. We will be satisfied if consumers will bind themselves to take from ns, say, a fourth of their wants during three years from the date of expiration of the patent. * * * You will remark that a contract for a fourth of your wants oti three years is a small risk for you to take, in comparison with the compensation you will have in our putting a check on the combination. Our price would be Frs. 6.50 p. kilo in Paris for 20%, which is a medium price between the lowest quotation before the combination and the present price of the combination. Should our competition bring the combination down to lower prices, the difference on one-fourth of your wants would be a small thing compared with the difference obtained by you through our action on the other three-fourths. I trust you will take this into consideration, and should like after that to be granted a personal interview with you.”
“Tlie subject-matter Is one of importance, and should be carefully weighed. A personal interview seems essential. Our opinion now is that should you succeed in obtaining the signatures, of, say, % of the largest consumers of alizarine in the country to such a compact, we would become one of the combination. We shall be glad to see you at any time.”
On November 4, 1882, Greene & Sons received the following reply from the defendant, which is said also to contain fraudulent statements:
“We are in receipt of your favor of the 2d inst. No doubt, the matter is one requiring much consideration, and we agree with you that a personal interview is desirable. Mr. Naville will probably be in Boston within a few days, and, if so, will take the opportunity of calling upon you on his way. Meanwhile we would say that the suggestion of Mr. Naville that you should contract now for one-fourth or one-third of your consumption during three years from 1886 is the only way, it seems to us, by which the consumers of alizarine in this country can save themselves from the effect of the combination of German maicera which is now entered into, to continue the monopoly in the article after the present patent expires. By contracting for a small portion of your consumption, you thereby force down the price of the balance of your wants, by enabling us to manufacture, and so break the German combination. We are quite will-' ing to do this, but, in order to do it successfully, we must have the support of consumers. In other words, if we are assured that we have a market for a certain quantity, we are willing to make it, but without this assurance we would not care to undertake the risk.”
The complainant asserts also that the defendant’s agent, Mr. Na-ville, in a personal interview at the office of S. H. Greene & Sons, in River Point, R. I., on November 27, 1882, represented -that the German combination would continue in the United States the then-existing high price after the expiration of the United States letters patent; that a special fund had been raised by the combination to prevent competition; and also made the additional statement, not referred’to in the letter of the St. Denis Company, that other American consumers of alizarine, namely, Garner & Oo., the Merrimack Company, and the Pacific Mills, had made contracts with the St. Denis Company similar to that prepared by Mr. Naville, and finally accepted by S. H. Greene & Sons.
The complainant alleges that, relying upon the foregoing written and oral statements, and believing them to be true, the firm signed a letter written by Mr. Naville, and addressed to the St. Denis Company, the material parts of which are as follows:
“In reply to your letter of 26tb of October by Mr. E. A. Naville. and referring to personal interview witli him, we have decided to accept your offer, and agree to the following: We send you two selected samples of each kind of alizarine we are using, and give you now an order, subject to you being able to match these samples, for fifteen hundred kilogrammes of 20 per cent, alizarine per month, to be delivered during three years from the date of expiration of the United States patent, at the price of francs 6.55 (six francs fifty-five centimes! per kilogramme, delivered f. o. b. Havre. We leave this order in force until the first day of April, 1883, by which time you must let us know whether you can accept the contract and match the samples.”
On March 12,1883, defendant wrote Greene & Sons that they could match the samples, and on April 17, 1883, Greene & Sons wrote the company:
*67 “Wo note that you have been able to match both samples of alizarine which we sent you some time since. We are ready to carry out our contract as arranged with you when here, viz. fifteen hundred, kilogrammes of 20 per cent, alizarine per month, to be delivered during three years from the date of expiration of the United States patent, at the price of six francs fifty-five centimes per kilogramme, delivered f. o. b. Havre.”
About the ,14th da,y of April, 1884, a decision was rendered by 'the United Stab's supreme court in the case of Cochrane v. Soda Fabrik, 111 U. S. 293, 4 Sup. Ct. 455, to the effect that a certain process of manufacture of alizarine was not infringement of the United States letters patent, and immediately thereafter the price of alizarine fell from above $1 per pound to about 35 cents. Subsequently, the company, in letters to Greene & Sons, in July, 1884, notified them that the company would hold them to the contract. Greene & Sons, on October 11, 1884, wrote the company:
“Would say in reply that the circumstances under which the letter was written have been so radically changed by the recent decision of the United States supreme court on the alizarine patent, and upon which patent our letter was predicated, that the contract, if such it can be called, was canceled by that decisión.”
Afterwards, on September 23, 1886, the company notified Greene & Sons of its readiness to carry out the contract on and after October 5, 1886, the date of the expiration of the United States patent, and asked for shipping instructions. On September 27, 1886, Greene & Sons wrote, saying they did not recognize that there was any contract existing. Thereafter, and on or about May 16, 1889, the St. Denis Company brought an action at law in assumpsit against Greene & Sons in the United States circuit court, district of Rhode Island, to recover damages to the amount of $50,000 for the breach of said contract.
Before examining in detail the charges of false representation, an important fact should be noted. The contract which is the basis of the suit which this bill seeks to enjoin was definitely and distinctly repudiated by the complainant company, upon grounds having no relation to those set up in the present bill. About April 14, 1884, a decision rendered by the supreme court of the United States (Cochrane v. Soda Fabrik, 111 U. S. 293, 4 Sup. Ct. 455) practically destroyed the monopoly; and on October 11, 1884, Greene & Sons repudiated the contract, upon grounds indefensible in law, namely, as before stated, on account of the radical change of circumstances caused by the decision of the supreme court. Not until the St. Denis Company, on May 16, 1889, after the expiration of the contract period, brought: suit for breach of contract, was the claim made by S. H. Greene & Sons that the contract had been procured by false and fraudulent statements. This position was first taken, so far as appears of record, by jfieas filed in the action at law, and' dated November 28, 1891. The bill therefore asks that the contract be annulled for reasons first advanced more than eight years after its making and more than seven years after its repudiation. The complainant excuse's this delay by testifying that the falsity of the statements was first discovered in 1891. This excuse is hardly satisfactory in view of his testimony (afterwards corrected) that knowl
The foregoing considerations render it proper, before considering the meaning and accuracy of the statements made in writing, to dispose of the question which rests, not upon documentary evidence,, but upon testimony as to an oral interview. We inquire, therefore: Did the defendant’s agent, Naville, in an oral interview on November 27, 1882, falsely and fraudulently represent and state to Greene & Sons that the firm of Garner & Co., the Merrimack Company, and the Pacific Mills, or any of them, had made contracts with the defendant similar to that proposed to and finally made with Greene & Sons? It should be observed that the contract finally entered into was a simple contract for the sale, delivery, and acceptance of a certain quantity of alizarine at a certain price. It contains no reference to the making of other contracts, and upon its face the contract is independent of the condition that other like contracts had been or should be made. The testimony of Henry L. Greene, given 11 years after the interview, professes to give only its general purport. It appears from this testimony, that Naville expressed the desire and intention of the company to come into the market provided that it
It is urged that complainant’s letter of November 2, 1882; supports the. view that the obtaining of the other contracts was a material inducement. The language is: “Our opinion now is that should you succeed in obtaining the signatures of, say, f of the largest consumers of alizarine in the country to such a compact, we would foe one of the combination.” It is probably true that, at the time of writing, there was in contemplation of S. H. Greene & Sons a compact or combination. But the idea of making such a combination was abandoned at the time of making the contract. The entire responsibility for carrying on the work was assumed by the St. Denis Company, and, in the face of the contract, (he evidence is not satisfactory that the making of other contracts was relied upon as an inducement. There appears no reason for holding it more probable that S. H. Greene & Sons desired a combination for their own purposes than that they were satisfied to make an individual contract, as they in fact did. Even were the statement made, it is
Eliminating this branch of the case, we proceed to the representations made in writing:
“But you must he aware also that a combination has been made .among the German manfrs. in order to monopolize this article for a long time ahead, thus substituting one monopoly for another. One of the features of this combination is the making up of a special fund for the prevention of any new manufactories. * * * The combination of Gorman makers which is now entered into, to continue the monopoly in the article after the present patent expires.”
These representations must be considered in view-of the fact well known to Greene & Sons that a powerful German combination existed. Counsel for the complainant contend that the representations were made for the purpose of creating in the minds of S. H. Greene & Sons the belief that a then-existing agreement provided in express terms for the continuance of the monopoly after the expiration of the United States patent. It is then claimed that the untruthfulness of the statements appears from the deposition of the controlling officer of the German syndicate, as well as from the written agreement of the syndicate, showing that no express provision relating to the maintenance of prices in America after the expiration of the United States patent was contained in the written agreement, and that the syndicate agreement therefore did not provide for the substitution of one monopoly for another; and also that the written agreement contained no express provision for a special fund for the prevention of any new manufactories, and that in fact no such special fund had been raised. This contention is not supported by a reasonable or fair interpretation of the language of the written statements alleged to be fraudulent. I am of the opinion, upon all the evidence, that the parties were contracting, not upon the basis of a supposed knowledge of the terms of the syndicate agreement, nor even of its perfected plans, but merely in anticipation of the probable sequence of a present business condition, and that the contract was entered into upon the basis of facts known to both parties, and practically undisputed;
By reference to the syndicate agreement dated September 27, 1881, the general purpose of the syndicate is found to> be thus expressed: “The contracting parties agree and engage themselves to fix the quantity of alizarine (alizarine red) to be sold,” etc. The quantity is fixed, subject to increase or decrease by further agreement, with the exception of the United States of America, and the .provision appears: “The consumption in the United States is supplied without control by the Badische Anilin Soda Fabrik.” The main and substantial fact was the existence of a powerful combination. The purpose of the contract between the St. Denis Company and S. H. Greene & Sons was to provide against the control of that combination over prices in the United States after the expiration of ihe letters patent, viz. October 5, 188(5. In making such provision, did the firm of S. H. Greene & Sons proceed upon the belief that the written terms of a completed contract of the German syndicate pro-
It is apparent, not only from the character of the combination, but from the terms of the syndicate agreement, that its purpose was to monopolize the article for a long time ahead, and that the statement was substantially true. It is only by the unwarranted assumption that the language referred, not to the broad purpose of the combination. but to a special written or perfected agreement, (bat. the complainant is aide to argue the existence of any discrepancy between the existing facts and the statement of the St. Denis Company. I am of the opinion that, as urged by defendant’s counsel, the statements were of matters of opinion and forecast; that they related to the p'urpose and intention of the German manufacturers, which could not have been stated by Naville as anything else than a matter of inference;, because he could not assert as a matter of fact what could he only positively known by entering the minds of the persons composing (he association. It is by no moans fair to assume that the parties understood that the syndicate agreement embraced the full scope of the purposes and intention of the members, or that it was a fixed and controlling agreement, and not subject to whatever enlargement or modification the business situation might well call for during the years before the expiration of the letters patent; and it was fair and natural to assume the continuance of the combination so long as it should be profitable. Practically, all that Naville said was that tbe expiration of the American patent would not break up the trust, and that the trust would control the market: in America. It is familiar law that statements of forecast, opinion, or expectation, that are in substance merely matters of inference, cannot he made the subject of a false representation. Gordon v. Butler, 105 U. S. 553; Sawyer v. Prickett, 19 Wall. 146; Reeves v. Corning, 53 Fed. 774
“The amount of the working fund for the control office will be fixed by the president. The contracting parties share in this according to their participation, as fixed in section 1, and have to pay the share in casli to the control within ten days after they get notice to do so.”
Employing the language of the brief of the learned counsel for the St. Denis Company, and agreeing with its statement of fact:
“The combination did have such a fund. It was maintained by regular assessments. They did expend.it, whenever necessary, in attempts to suppress competition; and to assert that there is any material variation between the general statement that there was a special fund, small or groat, available for the purpose named, and the fund actually available aud ready and intended to be used for that purpose, is too manifestly unreasonable for serious discussion.”
Upon the findings, therefore, that the statements that other contracts had been made is not proved to have been made by Mr. Naville, and that there was no misrepresentation in the written statements or in the oral statements of Mr. Naville relating to these matters, and no material discrepancy between the statements and the facts, I am of the opinion that there is no .ground for attributing to the defendant corporation or its agent either bad faith or inaccuracy or recklessness of statement, and that, on the contrary, their good faith and substantial accuracy of statement in the dealings resulting in the contract are satisfactorily established. The injunction is therefore denied, and the bill will be dismissed, with costs.
