Fowle v. Park

131 U.S. 88 (1889)

FOWLE
v.
PARK

No. 263.

Supreme Court of United States.

Argued April 17, 1889. Decided May 13, 1889. APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF OHIO.

Mr. Henry A. Morrill for appellants. Mr. Alexander H. McGuffey was with him on the brief.

No appearance for appellees.

MR. CHIEF JUSTICE FULLER delivered the opinion of the court.

No question arises in respect to the sale and transfer by Williams to Butts, and by Butts to Seth W. Fowle, and the acquisition by complainants of all the right, title and interest of the latter, nor as to the sale by Williams to Sanford and Park, and the passage of the title, interest, and rights of Sanford and Park to Park, and through him to his codefendants; and the agreement between Park and Fowle & Son, as to the territory west of the Rocky Mountains, is produced, and sustains the averments of the bill in that regard.

By the contract between Williams and Sanford and Park, Williams, in consideration of the payment of $2500 by Sanford and Park, and the covenants entered into on their part, sold and transferred to Sanford and Park, a true copy of the recipe used in preparing said Balsam of Wild Cherry, together with the sole right to manufacture and sell said medicine in Ohio, Indiana, Illinois, Kentucky, Tennessee, Missouri, Michigan, Arkansas, Mississippi, Alabama, Louisiana, and all the territory lying west of those States, together with certain counties in the State of Virginia and certain counties in the State of Pennsylvania, and Sanford and Park covenanted and agreed to pay $2500 and $4764 for medicine consigned to them for sale, and also "that they will not sell or cause to be sold, or establish agencies for the sale of said balsam in any part of the United States except in the States and Territories herein granted to them, and also that they, the said Sanford and Park, will not sell, or cause any of said medicine to be sold, at less price than seven dollars for each and every dozen, except to such persons as shall become their agents for a whole State or Territory, and in all cases where such agencies are granted they also promise and agree to take from such agents an agreement, with a sufficient guaranty or penalty, that no sales of said medicine shall be made at a less price than that above named;" and Williams covenanted and agreed that he would not "manufacture, sell, or cause to be sold, any of said medicines within the territory herein granted to the said Sanford and Park, or any medicines under a different name, prepared from the same recipe used in preparing said balsam, or in any other form purporting to be an improvement on the said medicine," it being provided "that the said Sanford and Park shall not make known to any person the ingredients employed or manner of preparing said medicines." By a similar agreement Williams sold and transferred to Butts the recipe and the sole right to manufacture and sell said medicine in the six New England States; also in the States of New York, New Jersey, Delaware, Maryland, North and South Carolina, District of Columbia, and British America, and certain counties in the States of Pennsylvania and Virginia, for four thousand dollars, and eight thousand six hundred and sixty-one dollars for medicine consigned to him, the parties covenanting as in the agreement with Sanford and Park.

The contract between Butts and Fowle was similar in terms, the money consideration being twenty-nine thousand five hundred dollars, and some accounts, a stock of drugs, and some apparatus and stereotype plates being included in the purchase.

By the agreement between John D. Park and Seth A. Fowle and Lucy Ann S. Fowle, Park, in consideration of $5000, sold, assigned, transferred and conveyed to said Seth A. and Lucy Ann S. Fowle all his "right, title, interest and claim in and to the property or proprietary right or franchise of the medicine or medicinal preparation called and known as ``Wistar's Balsam of Wild Cherry,' for and so far as regards all the territory or part of North America lying westerly of the ridge of the Rocky Mountains, embracing the whole of the following States and Territories of the United States, viz., the States of California, Oregon and Nevada, and the Territories of Washington, Idaho, Utah, Arizona and Alaska, and so much and such parts of the Territories of Montana, Wyoming, Colorado and New Mexico as are westerly of the ridge of said Rocky Mountains meaning and intending all territory lying westerly of said Rocky Mountains (including the westerly slope thereof) and between said mountains and the Pacific Ocean, and also all my right, claim and interest in and to the good will of the business of making, putting up and selling said Wistar's Balsam of Wild Cherry within said limits, and in and to the trade-marks, so far as used within said limits, on the labels, bottles, wrappers, or packages containing said medicine, or otherwise used in carrying on said business within the limits or territory aforesaid;" also in all of British Columbia and Mexico; "intending hereby to transfer and relinquish to said Fowles the whole market for the said medicine of all said territory westerly of the Rocky Mountains, and also, (so far as I have the power so to do,) of all said British Columbia and Mexico, so that they and their legal representatives and assigns may have and enjoy the sole and exclusive right of selling said medicines within said limits, so far as I can assure such right to them, and free from any competition or interference by me or any one claiming under me or acting by or with my authority, permission, or aid, either directly or indirectly;" and he further covenanted that he "will not, and my heirs, executors, administrators, and assigns shall not, either within said territory westerly of the ridge of the Rocky Mountains, or within said British Columbia or Mexico, hereafter make, put up, sell, or offer or expose for sale, any of said Wistar's Balsam of Wild Cherry, or any other medicine whatever bearing the name of ``Wild Cherry,' in whole or in part, nor the said medicine under a different name prepared substantially from the same recipe or formula, or use the same, or trade-marks, or any of them, or be concerned, directly or indirectly, in the business of selling or in promoting the sale of said medicine within said limits in competition with said Fowles, their representatives and assigns, or in any way or by any means whatsoever do or knowingly aid or abet any other person to do anything to prejudice or interfere with the business of selling said medicine within the limits aforesaid solely by said Fowles, their representatives and assigns;" and then follows a covenant of further assurance.

If the defendants violated the provisions of these contracts by selling this article within the territory which it was covenanted complainants should occupy exclusively, or by selling to others for sale there, or by promoting such sales, we are aware of no reason for the refusal of relief unless it may be, as is contended, that the contracts were not enforceable on the ground of public policy.

We have not been favored with any opinion of the learned judge who decided the case in the Circuit Court, nor with any brief in appellees' behalf; and while we may naturally assume that the finding was based upon the supposed want of proof of violation of the contracts or their supposed invalidity, or both, we are left to conjecture as to the precise views which were entertained.

As we remarked in Gibbs v. Consolidated Gas Company, 130 U.S. 396, 409: "The decision in Mitchel v. Reynolds, 1 P. Wms. 181; S.C. Smith's Leading Cases, Vol. 1, Pt. II., 508, is the foundation of the rule in relation to the invalidity of contracts in restraint of trade; but as it was made under a condition of things and a state of society different from those which now prevail, the rule laid down is not regarded as inflexible, and has been considerably modified. Public welfare is first considered, and if it be not involved, and the restraint upon one party is not greater than protection to the other requires, the contract may be sustained. The question is whether, under the particular circumstances of the case, and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Rousillon v. Rousillon, 14 Ch. D. 351; Leather Cloth Co. v. Lorsont, L.R. 9 Eq. 345; Oregon Steam Navigation Co. v. Winsor, 20 Wall. 64, 68."

Relating as these contracts did to a compound involving a secret in its preparation; based as they were upon a valuable consideration, and limited as to the space within which, though unlimited as to the time for which, the restraint was to operate, we are unable to perceive how they could be regarded as so unreasonable as to justify the court in declining to enforce them.

The vendors were entitled to sell to the best advantage, and in so doing to exercise the right to preclude themselves from entering into competition with those who purchased, and to prevent competition between purchasers; and the purchasers were entitled to such protection as was reasonably necessary for their benefit. Williams had and transferred property in the secret process of manufacturing the article he had discovered, and he and his grantees could claim relief as against breaches of trust in respect to it. The policy of the law is to encourage useful discoveries by securing their fruits to those who make them. If the public found the balsam efficacious, they were interested in not being deprived of its use, but by whom it was sold was unimportant.

The decree below was probably not rendered, and cannot be sustained, upon the theory that these contracts were in themselves invalid.

It remains to be considered whether there is evidence tending to show that the defendants sold the balsam within the prohibited territory, or to those by whom to their knowledge it was to be there sold, or in any way promoted such sale. We are of opinion that the record discloses violations of the contracts in these particulars, and that the cause should have gone to a master to state an account. One of the defendants was called by complainants as a witness, and though apparently an unwilling one, he admits four shipments of balsam to Atlanta, Ga., in 1879, 1880, 1883 and 1884; a shipment, in 1879, to New York; a shipment, in April, 1880, to Philadelphia; and identifies an entry on defendants' sales-book of a shipment to Coffin, Reddington & Co., San Francisco, Cal., in 1878, charged to Smith & Co., of Dayton, Ohio; although Georgia, New York, Philadelphia and California were all within complainants' territory. Evidence was also adduced of shipments by defendants to Henry, Curran & Co. at New York, in 1874, 1875 and 1876, not for sale in defendants' territory, but for the general purposes of the Eastern trade, and sold within the territory embraced in the original transfer to Butts, and of sales directly by Park & Sons to Crittenden and McKesson & Robbins, of New York, in 1878, 1880, 1881 and 1882. Coffin, of Coffin, Reddington & Co. of New York and San Francisco, testifies that for seven years he had purchased Park's Wistar's Balsam from S.N. Smith & Co., Dayton, Ohio, commencing in 1877, and the last purchase being in 1883, and that purchases were made under orders to ship direct to California, and that Smith & Co. furnished it for seven dollars a dozen, less freight. Smith testifies to the shipment of nine gross of this balsam to California, to the San Francisco branch of Coffin, Reddington & Co., during the years 1879 to 1883, inclusive, and one gross to John Helm & Co., of California; that he did not usually keep the article in stock, but ordered it from Park & Sons, and sometimes had the goods shipped directly by them; that while they rendered bills charging $84 and $87 per gross in some instances, or seven dollars or more per dozen, he, in fact, paid them only what he received, seven dollars per dozen less the freight, which, of course, indicates that defendants knew where the balsam was going, since they not only shipped some direct, but were paid by Smith on the basis of deducting freight equivalent to the charges to California, and, as well put by appellants' counsel, "if the sales were to Smith & Co., in fact, then they were for much less than seven dollars a dozen, and in violation of contract." Smith also testifies to two instances — one in 1877 and one in 1878 — of the shipment of ten gross and five gross to Coffin, Reddington & Co., California, for so much less than seven dollars per dozen as the amount of the freight to California, which balsam Smith & Co. procured from the defendants, paying them the net sum received. The witness Park did not deny that balsam had been shipped directly to California, upon the order of Smith & Co.; he testified that they kept the balsam in stock at one time with Smith & Co., to be sold on their account; he would not say that the entries on the sales-books in the name of Smith & Co. necessarily showed to whom the article was shipped, and said that he did not know whether, when charged to Smith & Co., the article was shipped to them or to other parties; he identified the entry of one shipment to Coffin, Reddington & Co.; he knew the average amount of freight per gross on balsam shipped to California, which, deducted from $84, the contract sales price per gross, left substantially the amount in all cases received by Smith & Co. on the California shipments, and by them paid to Park & Sons; and he admitted several charges on Park & Sons' books against Smith & Co., for merchandise, corresponding in dates and amounts with shipments to California. The inference is a reasonable one, that the defendants knew that the balsam claimed to have been sold to Smith & Co., and which was shipped to California, was going there, and in addition they had been informed, in 1878, by the complainants, of the report that Wistar's Balsam of defendants' make had made its appearance in the San Francisco market, and complainants had subsequently objected to sales within their territory, to which defendants paid no attention. We do not think the latter are in any position to say that they did not know what was going on. Neither of them was called for the defence nor any testimony taken on their behalf. We are satisfied complainants sufficiently made out their case to justify according to them the relief prayed.

The decree is reversed, and the cause remanded for further proceedings in conformity with this opinion.