Marshall Engine Co. v. New Marshall Engine Co.

203 Mass. 410 | Mass. | 1909

Loring, J.

The parties to this suit are the same as those to the suit reported in 199 Mass. 546. This suit was begun about a year after the bill in the other suit was filed. Both suits are founded on the agreement of September 15,1902, between the defendant F. J. Marshall and the plaintiff corporation, by which Marshall assigned to the plaintiff corporation (1) a certain-patent “and all improvements thereon,” and (2) “the good will of the business carried on by the vendor under the firm name of 6 F. J. Marshall,’ the head office being located at 309 Broadway, New York City, together with the exclusive use of any and all words, indicating that the business is carried on in succession or continuation thereof and trademarks and trade names connected therewith.” The other suit was brought to obtain an assignment of a patent for an improvement. This suit is brought to secure the rights to which the plaintiff was entitled as the assignee of the good will of the business assigned to it by Marshall in that agreement.

The suit now before us was-referred to a master. Exceptions to his report were taken by both parties. Two of the exceptions taken by the plaintiff were sustained. The others taken by it and all those taken by the defendants were overruled. The report so modified was confirmed, and on May 15, 1909, a final decree was entered in favor of the plaintiff. The case is before us on an appeal by the defendants from the decree confirming the master’s report with the modifications above stated, and from the final decree.

On July, 17, 1909, some two months after the entry of the final decree, the plaintiff'moved to have that decree vacated and a decree entered which added a clause to the fourth paragraph of it. This was denied, and an appeal was taken by the plaintiff from the order and decree denying this motion. After the entry of a final decree in a suit in equity the court which made the decree has no power to vacate it. The jurisdiction of the court is at an end. Lakin v. Lawrence, 195 Mass. 27, and cases cited. For this reason the plaintiff’s appeal was not well taken.

It appears from the master’s report, as amended by the Superior Court, that in 1886 a patent was granted to F. J. Marshall for reducing wood pulp to paper. Shortly after the granting of these letters patent Marshall formed a partnership which caused engines to be manufactured for it by others under this patent, and called them the “ Marshall Perfecting Engines.” This business of the partnership was done at Turner’s Falls, Massachusetts. In 1888 and 1896, sales were made by the several partners which resulted in F. J. Marshall’s becoming in 1897 the sole owner of the business. The master finds that “ a considerable number ” of these engines were placed upon the market and put in use by the partnership up to 1897. In 1897 a Massachusetts corporation was formed, with a capital of $60,000, of which the master found that Marshall acquired “ the principal part.” The name of this corporation was “ The Marshall Engine Company.” The office of the corporation was at Turner’s Falls. It manufactured the “ Marshall Perfecting Engine ” until “some time in the summer of 1902.” The words “Marshall Perfecting Engine ” were cast upon all engines so manufactured. There was also placed upon these engines the words “ Patented June 1st, 1886, by Frank J. Marshall, built by Marshall Engine Company, Turner’s Falls, Massachusetts.” The master finds that during this period also “a considerable number of these engines were placed upon the market and put to use in different mills.”

Later, at a time not stated by the master, “ until the incorporation of the plaintiff in September, 1902,” the business was carried on by F. J. Marshall alone, under the name of the Marshall Engine Company.

“ During all this time, from 1886 to Sep. 15, 1902, the said Frank J. Marshall was active in the management of the business, travelling to a greater or less extent in its interests, carrying on the correspondence, making and arranging contracts of different kinds for advertising and selling engines and in promoting the business, and he was practically the business man and principal factor in carrying on the business, and it did not appear that any other person was actively engaged during any substantial portion of time in developing and promoting the business of building and selling these engines. In the early part of 1902, and for several months prior to the incorporation of the plaintiff, the said Frank J. Marshall carried on business himself at 309 Broadway, New York City, in an office in connection with the Marshall Paper Company.”

On September 13, 1902, the plaintiff corporation, called the Marshall Engine Company, was incorporated in New Jersey. Its capital stock was 150,000, $5,000 being preferred and $45,000 common. All the common stock was issued to F. J. Marshall for the assignment of the patent and all improvements thereon, and the good will of the business under the agreement of September 15, 1902, which is the foundation of this and the other suit. The office of the plaintiff corporation, from the time of the incorporation until October 12, 1904, was at 309 Broadway, New York City. The plaintiff manufactured and sold nine or ten Marshall Perfecting Engines, and did “ considerable repairing.” Some agents were sent out by it to solicit business. On October 12, 1904, the office of that company was closed. From the time of the closing of the office of the plaintiff at 309 Broadway on October 12, 1904, until June 13, 1905, when the receiver was appointed as hereinafter stated, Marshall, on his own account and with his own funds, did “ certain business in connection with the Marshall Perfecting Engine ” at Turner’s Falls, Massachusetts, consisting of repairs and furnishing of fillings for engines then in use. By a decree of the Court of Chancery of New Jersey, dated June 15, 1905, the plaintiff corporation was decreed to be insolvent and a receiver was appointed to take over its affairs. Later the same person was appointed a receiver in Massachusetts.

Eight days afterward, to wit, on J une 21, 1905, F. J. Marshall caused the “ New Marshall Engine Company ” to be incorporated in Massachusetts, with a capital of $50,000, $45,000 being common stock. Marshall “ received the entire common capital stock of the corporation, consisting of four hundred and fifty shares, except one share.” It appears from the master’s report as amended by the Superior Court that this was done with intent to injure and defraud the plaintiff. It does not appear that any of the preferred stock has been issued. It is found by the master that “ Marshall received the money of the company and paid the bills and kept the accounts upon a slate, which he afterwards erased.”

It further appears from the master’s report that from 1886 to the incorporation of the Marshall Engine Company of Massachusetts in 1897, the Marshall Perfecting Engine always had been advertised in trade journals and in papers published in connection with the paper trade, and that, after the incorporation of the Marshall Engine Company of Massachusetts in 1897, “ the advertising of these ‘ Marshall Perfecting Engines’ continued in many trade journals and papers for considerable lengths of time, and more or less extensively. Cuts of this machine were published, and the advertising appeared upon the stationery and bill heads, and one of these engines was placed on exhibition at the World’s Fair in Chicago in 1893.”

“The letter heads and bill heads used under date of 1902, and before the incorporation of the plaintiff, were headed:

‘ Factory at Marshall Engine Co.

Turner’s Falls, Mass. Manufacturers of

F. J. Marshall, Treas. F. J. Marshall’s Perfecting Engine,

708 Mutual Reserve Building, No. 309 Broadway, New York.’ ”

“ In reference to trade names it appeared that . . . these engines had always been advertised, in trade journals and in papers published in connection with the paper trade, by letter headings, bill headings and otherwise, as 6 Marshall Engines,’ ‘ Marshall Perfecting Engines,’ ‘ New Marshall Perfecting Engine,’ and were well known to the public and to the trade as such.”

The master ruled as matter of law on the facts and evidence set forth in his report “ that the words, ‘ Marshall Perfecting Engine,’ and 6 Marshall’s Perfecting Engine,’ as used in connection with said business carried on under said patent of June 1, 1886, became trade names or trade marks, and became the property of the plaintiff under said assignment; that the trade names and trade marks and the good will attached thereto and to the business, embraced in said assignment, were not limited in operation to the life of the patent of June 1, 1886, and were not, as to the defendants, surrendered up to the general benefit of the public upon the expiration of said patent, and that the business carried on by the said defendants Frank J. Marshall and the New Marshall Engine Company at Turner’s Falls, after the incorporation of said New Marshall Engine Company, June 21, 1905, was in derogation of the grant to the plaintiff by said assignment, without right, and in violation of the legal rights of the plaintiff, and that the plaintiff is entitled to an injunction restraining the same,” and this is the foundation of the final decree in this suit.

We are of opinion that this ruling is not correct. Not only that, but we find as a fact, on the facts stated in the master’s report, that the words “ Marshall Perfecting Engine ” and “Marshall’s Perfecting Engine” are words designating the engine manufactured under the patent granted to Marshall in 1886; and that on the expiration of that patent in 1903 the right to the exclusive use of these words ceased. The case comes within the rule laid down and fully stated in Dover Stamping Co. v. Fellows, 163 Mass. 191; Flagg Manuf. Co. v. Holway, 178 Mass. 83; Singer Manuf. Co. v. June Manuf. Co. 163 U. S. 169. The decree below cannot stand on the ground that these words are in fact trade names assigned to it by Marshall.

If the decree below is to stand it must stand on the ground that the business set up by Marshall under the name of the New Marshall Engine Company does in fact derogate from the grant made by him in the sale to the plaintiff of the good will of the business sold by him to it.

On the facts disclosed in the record, the New Marshall Engine Company is F. J. Marshall in another form. The defendant Marshall began the new business when the office of the plaintiff corporation was closed in October, 1904, and no real change was made by the incorporation of the New Marshall Engine Company on June 21, 1905. The case stands as if F. J. Marshall were the sole defendant.

It was laid down by this court in Old Gorner Book Store v. Upham, 194 Mass. 101, 105, that: “In each case where the good will of a business is sold and the vendor sets up a competing business it is a question of fact whether, having regard to the character of the business sold and that set up, the new business does or does not derogate from the grant made by that sale. In Bassett v. Percival, 5 Allen, 345, and in Hoxie v. Chaney, 143 Mass. 592, it was held that the new business did not derogate from the grant, while the contrary conclusion was come to in the cases before the court in Angier v. Webber, 14 Allen, 211, Dwight v. Hamilton, 113 Mass. 175, Munsey v. Butterfield, 133 Mass. 492.” For subsequent cases see Foss v. Roby, 195 Mass. 292; Gordon v. Knott, 199 Mass. 173.

In considering the previous decisions of this court in order to determine whether in a particular case the competing business does or does not derogate from a grant of the good will, it may be of importance to bear in mind when they were decided and the state of the law at the time.

Bassett v. Percival, 5 Allen, 345, was decided in 1862. It was there stated that the sale of the good will then in question “ was nothing more than a sale of the custom or trade which appertained to the place where the vendor was then carrying on his business. This was the real subject matter of the contract between the parties, and it cannot be construed as imposing any personal restraint on the vendor, or as restricting his right to transact a similar business in another place at a subsequent time. Whenever such is the intent of the parties, it is carried into effect by an express, stipulation, which, if not in undue restraint of trade, may be valid and binding. But we know of no case where any such agreement has been raised by mere implication, arising from the sale of the good will of a person’s trade, in connection with a particular place of business where it has been carried on.”

This however was modified in Angier v. Webber, Dwight v. Hamilton and Munsey v. Butterfield, ubi supra. In those cases it was held that the several sales of good will there under consideration did raise by implication agreements not to carry on a competing business which would interfere with the grant of the good will sold. These cases were reviewed in Hoxie v. Chaney, 143 Mass. 592. But in Hoxie v. Chaney there was not a sale of the good will, eo nomine. It was there held that a sale by one partner to another of “ the following goods and chattels, namely: All my right, title and interest in and to all and singular the partnership property . . . meaning hereby to sell and convey ... all my interest in the entire assets of said firm, wherever the same may be situated,” included a sale of the good will; and it was assumed that a case where there was such an implied sale of good will stood on the same footing as an express sale and grant of it so far as the question now under discussion is concerned. It is also to be remarked of Hoxie v. Chaney that it was there assumed that the law of England and the law of this Commonwealth were the same as to the rights and burdens consequent on the sale of the good will of a business. It was not until the decision of this court in Hutchinson v. Nay, 187 Mass. 262, that the difference was pointed out between the law which had then been established in England and that established here on the point. It is there pointed out that in England a competing business always can be set up by one who has sold his good will; and that a purchaser of a good will in England gets nothing more than the right to have the vendor refrain from soliciting business from the customers of the old firm. The law in England is well stated in Lindley, Law of Partnership, (7th Eng. ed.) 477. While in Massachusetts no competing business can be set up if it derogates from the grant of the good will of the old business.

Under what is now the settled law of this Commonwealth, cases may be put where the sale of the good will would not prevent the vendor from setting up a similar business. For example, one who sells the good will of a small grocery store in the south end of Boston without doubt might set up a small grocery store in the north end of the same city. Customers of small grocery stores are those living in the immediate neighborhood, and a similar store in another locality would not affect the rights acquired by the purchaser of the good will of the first store.

On the other hand had there been no covenant in the sale by Nordenfelt of his good will as a manufacturer of guns and ammunition, which was before the House of Lords in Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Co. [1894] A. C. 535, under the Massachusetts rule he could not have set up a similar business anywhere. Where the governments of the world are the customers, the place of business is of no consequence.

We are thus brought to the question whether the business set up by Marshall in October, 1904, and continued under the name of the New Marshall Engine Company since June 21,1905, interferes with the rights of the plaintiff as the purchaser of the good will sold to it by Marshall in 1902.

In the first place, what was the business carried on by the defendant Marshall in September, 1902, when he sold the good will of his business to the plaintiff corporation ? That is best understood by rehearsing the history of it. It began in 1886. It waü then carried on by a partnership until 1896, then by Marshall until 1897, then by a Massachusetts corporation (which was Marshall in another form), then by Marshall in his own name, and later by Marshall alone under the name of the Marshall Engine Company. While it was being thus carried on by him the good will of it was sold to the plaintiff corporation. The business consisted in manufacturing or having manufactured for it, or him, Marshall Perfecting Engines, buying and selling those engines, and repairing, and furnishing “ fillings ” for such engines.

The business done by the defendant Marshall under his own name from October, 1904, until the incorporation of the defendant corporation and after that time in the name of the corporation, was the same. The defendant corporation “ advertised ‘The New Marshall Perfecting Engine,’ with a cut of the engine, in the Paper Mill and Wood Pulp News, a journal published in connection with the paper trade, and that this advertisement had been inserted weekly during a large part of the time to the present. This engine was advertised as having ‘ all of the valuable features of the original Marshall Perfecting Engine, and many new and valuable features.’ These ‘ new and valuable features ’ were not patented, under any patent, and the advertisement was in fact of the Marshall Perfecting Engine, the patent of which expired in 1903, with certain additions and changes, which were not patented.” It built and sold two large “Marshall’s Perfecting Engines,” constructed along the lines of the original “ Marshall Perfecting Engines,” made repairs, furnished “ fillings,” and bought and sold and had on hand parts of Marshall second hand engines.

The good will of the business of selling engines to reduce pulp to paper is manifestly one not dependent on the place where it is carried on. A paper manufacturer is not concerned where he buys his machinery. What he wants is the best made machine at the cheapest price. This would seem to be so from the nature of the thing dealt in, and is apparent from the fact that the business of the plaintiff and its predecessors and that of the defendants has been brought to the attention of the public by advertisements in trade journals. The repairs and worn out parts naturally are bought of the manufacturer or setter up of the machine. We cannot doubt that the business set up by the defendant is a competing business which injures the rights bought by the plaintiff when it bought the good will of Marshall’s business.

It was found as a fact in the Superior Court that what Marshall did in connection with the incorporation of the New Marshall Engine Company was done with intent to injure and defraud the plaintiff. This suit is brought in effect by creditors of the plaintiff corporation (through the receiver of it) to enforce the rights secured by the corporation from Marshall in the purchase from him of the good will of the business then carried on by him.

The defendants have argued that if Marshall had entered into a covenant never to engage in the business of manufacturing Marshall Perfecting Engines it would have been void as a covenant in restraint of trade. But it is now settled that a covenant, even if it be unlimited both in time and space (United Shoe Machinery Co. v. Kimball, 193 Mass. 351, 358), not to engage in a particular business is valid if it is coupled with the sale of a business and is necessary to give to the purchaser what he has bought. Anchor Electric Co. v. Hawkes, 171 Mass. 101. United Shoe Machinery Co. v. Kimball, 193 Mass. 351. The ground on which it is held that a covenant not to engage in a business similar to that sold is valid when expressed, is the very ground on which a covenant not to engage in a similar business is sometimes implied from a sale of the good will of a business, namely, that it is necessary to give to the purchaser what is sold to him.

In our opinion the decree, so far as. the first, third, fifth and sixth paragraphs are concerned, was right.

From the facts found by the master there is no reason to apprehend that the defendant Marshall will take from the post office letters addressed to the Marshall Engine Company relating to the business sold by him to the plaintiff after he is enjoined from doing business. The defendant Marshall cannot do that without violating that injunction. The fourth paragraph therefore should be stricken from the decree. The plaintiff’s rights are fully secured by the rest of the decree.

The seventh paragraph evidently was taken from the decree directed to be entered in Old Corner Book Store v. Upham, 194 Mass. 101, where the new corporation was not the defendant Upham in another form. Where the new defendant corporation is enjoined, this provision is not necessary.

The master states in his report that he excluded evidence tending to show that Marshall was not the owner either of the patent named or of the good will set forth in the agreement of September 15,1902. The defendants have argued that in this the master was wrong. No exception was taken to this and therefore the question is not before us. As the point has been argued it may be added that the defendant Marshall is estopped to show that he did not own what he assigned.

The decree of the Superior Court must be modified by striking out the second, fourth and seventh paragraphs, and so modified it must be affirmed.

So ordered.

Case Details

Case Name: Marshall Engine Co. v. New Marshall Engine Co.

Court Name: Massachusetts Supreme Judicial Court

Date Published: Oct 21, 1909

Citation: 203 Mass. 410

Court Abbreviation: Mass.