California Packing Corporation v. Sun-Maid R. Growers

• Decision Date: 03 February 1936
• Docket Number: No. 7701.,7701.
• Citation: 81 F.2d 674
• Parties: CALIFORNIA PACKING CORPORATION v. SUN-MAID RAISIN GROWERS OF CALIFORNIA.
• Court: U.S. Court of Appeals — Ninth Circuit

81 F.2d 674 (1936)

CALIFORNIA PACKING CORPORATION v. SUN-MAID RAISIN GROWERS OF CALIFORNIA.^*

No. 7701.

Circuit Court of Appeals, Ninth Circuit.

February 3, 1936.

COPYRIGHT MATERIAL OMITTED

F. D. Madison, Marshall P. Madison, and Leland B. Groezinger, all of San Francisco, Cal. (Pillsbury, Madison & Sutro, of San Francisco, Cal., of counsel), for appellant.

Edward S. Rogers, of Chicago, Ill., and A. W. Boyken, of San Francisco, Cal. (Miller & Boyken, of San Francisco, Cal., of counsel), for appellee.

Before WILBUR, GARRECHT, and MATHEWS, Circuit Judges.

WILBUR, Circuit Judge.

The appellant brought this action to enjoin the appellee from using the trademark "Sun-Maid" otherwise than on packages containing raisins or food products or confections made wholly or in part from raisins. The controversy grows out of the claim by the complainant and its predecessors that the trade-mark "Sun-Maid" used by the defendant and its predecessors infringed the trade-mark "Sun-Kist," which is used by the appellant. The controversy was first brought to the attention of the courts on June 21, 1915, by an action begun by J. K. Armsby Company, appellant's predecessor, against the California Associated Raisin Company, appellee's predecessor, wherein J. K. Armsby sought to enjoin the use of the trade-mark "Sun-Maid" on raisins because of its prior use of the term "Sun-Kist" for the same purpose. The parties settled that litigation by contract dated March 10, 1917.

The appellant, having succeeded to the rights of J. K. Armsby Company to the use of the trade-mark "Sun-Kist," joined that company in the contract, and Griffin & Skelley Company, a raisin packing company, California Fruit Canners' Association, and the California Associated Raisin Company, joined therein. Under the terms of this contract it was agreed that the California Associated Raisin Company would refrain from the use of the trademark "Sun-Maid" on all products other than raisins and food products or confections containing raisins. The appellee, Sun-Maid Raisin Growers of California, was not a party to this contract, but it has acquired the rights of the California Associated Raisin Company, which was a party to the contract, to the use of the trade-mark "Sun-Maid."

The primary question in the case is whether or not the appellee Sun-Maid Raisin Growers of California is bound by the contract of March 10, 1917. The California Associated Raisin Company changed its name to "Sun-Maid Raisin Growers" on February 17, 1922. In the fall of 1923 it was found that the Sun-Maid Raisin Growers would have to terminate its business and dispose of its assets and the appellee was organized for the purpose of taking over the raisin packing business. Consequently, on August 1, 1923, a contract was entered into between the Sun-Maid Raisin Growers and the appellee by which, among other things, it agreed to transfer its raisin packing business and the good will thereof, together with its applicable trade-marks. On June 3, 1924, after the execution of this contract, the Sun-Maid Raisin Growers was adjudged bankrupt, and in the bankruptcy proceedings its assets, including the trade-mark "Sun-Maid," were transferred to the appellee by the trustee in pursuance of the agreement theretofore entered into between the Sun-Maid Raisin Growers and the appellee. The appellee claims that it had no knowledge of the agreement of March 10, 1917, and is not bound thereby and that the agreements contained in that contract to be performed on behalf of its predecessor are covenants which do not run with the personal property assigned and are binding only on the parties to the contract. This contention overlooks the character of the trade-mark and the right to its use. The California Associated Raisin Company, under its own name, the Sun-Maid Raisin Growers, could not convey any right to the use of a trade-mark which it did not own, and that right had been expressly limited by the agreement of March 10, 1917, wherein the parties had agreed to limit the use of that trade-mark to raisins and raisin products. Consequently, the trustee in bankruptcy sold that right and no other. By its agreement to refrain from using the trade-mark "Sun-Maid" on any other than raisin products, it acquired the unquestioned right, so far as the parties here involved were concerned, to the use of that trade-mark on raisin products. The contract of settlement of the divers claims of the parties to the use of the trade-marks "Sun-Maid" and "Sun-Kist" was based upon mutual concessions as to doubtful claims. The appellee has enjoyed the fruits of that contract ever since it was executed and has packed nearly $250,000,000 worth of raisin products under the trade-mark "Sun-Maid." The appellee having purchased the rights of one of the parties to the contract of March 10, 1917, cannot avoid the corresponding burden. We quote in support of this rule a statement from 15 C.J. 518, as follows: "The ordinary rules of construction apply to assignments and contracts affecting trade-mark rights. Successors or assignees are entitled to the same rights as the original proprietor, and the assignee of a trade-mark is subject to the same defenses that could be asserted against the assignor." This rule has been applied by the courts in analogous cases. In Waukesha Hygeia Mineral Springs Co. v. Hygeia Sparkling Distilled Water Co. (C.C. A.) 63 F. 438, 442, the plaintiff sought an injunction to restrain the defendant from using the word "Hygeia" as a trade-mark for drinking waters except as specified in a contract between plaintiff's and defendant's predecessor. The defendant claimed, as is claimed by appellee in this case, that it was a bona fide purchaser from the predecessor. The court stated: "The purchase was not of the character which protects the buyer from equities existing against the seller. * * * No larger claim can be maintained than was possessed by the source of title, and the right is subject to the same equities, abandonment, or estoppel which could be asserted against the vendor." It is true that in that case the court also held that because of the fact that the two different trade-marks were in constant use, there was notice by the defendant company of the conditions existing under the contract. Pratt v. Wilcox Manufacturing Co. (C.C.) 64 F. 589, 592, a suit for infringement of letters patent, involved the same question. The plaintiff's predecessors had contracted with the defendants that each party should not interfere in the manufacture of the inventions set forth in their respective patents. Subsequently plaintiff's predecessor entered into an agreement with one Pratt under which he was given the exclusive rights to certain patents owned by Pratt. These patents of Pratt were infringed by the defendant's patents, which plaintiff's predecessor had contracted to protect. The plaintiff's predecessor merged into the plaintiff company and then brought suit against the defendants for the infringement of the Pratt patents, thus in effect attacking the very patents that plaintiff's predecessor had contracted to respect and protect. The court in applying the rule as to benefits and burdens said: "In the hands of the firm E. C. Stearns & Co. that assignment and right under the Pratt patent was burdened with the obligation of their contract with the Wilcox Manufacturing Company, and the complainant corporation took whatever it acquired from the firm of E. C. Stearns & Co., cum onere. I am therefore of the opinion, without inquiring into the subject of the validity of the patent, or the novelty of the invention, or the question of infringement by the defendant, that the complainants cannot maintain their suit, and the bill will therefore be dismissed."

The cases cited by the appellee, the Armstrong Co. v. Shell Co. of Cal., 98 Cal.App. 769, 277 P. 887, and Bryant v. Smith, 57 Cal.App. 214, 206 P. 1025, also recognize that a party who enjoys the benefits of a contract must bear its burdens. Bradford Belting Co. v. Kisinger-Ison Co. (C.C.A.) 113 F. 811, holds that an assignee is not bound to perform an independent covenant of his assignor, a question not involved in the application of the rule we are discussing in the case at bar.

The lower court found that the appellee acquired the business, good will, and trade-mark "Sun-Maid" from the Sun-Maid Raisin Growers in good faith and for a valuable consideration and without notice or knowledge of the contract of March 10, 1917. Consequently, appellee contends that it is not bound by that contract, and relies on the Federal Trade-Mark Act, § 10 (15 U.S.C.A. § 90), which authorizes the recordation of trade-mark assignments and provides that an assignment "shall be void as against any subsequent purchaser for a valuable consideration, without notice, unless it is recorded in the Patent Office within three months from date thereof." The failure to record the contract of March 10, 1917, did not open the door to a bona fide purchaser to question the validity of the contract, for that transaction was not an assignment by the appellant to the California Associated Raisin Company of the "Sun-Maid" trade-mark, but a contract limiting the right of the parties in their use of it.

What we have said disposes also of the appellee's contention that under the California statutory law (Cal.Civ.Code, §§ 655-663) a trade-mark is personal property, and that covenants do not run with transfers of personal property. The purpose and effect of the contract of March 10, 1917, was to define the relative rights of each in its respective trade-marks. The appellee limited its right of ownership in the trade-mark "Sun-Maid" to the use of it in connection with raisins and raisin products. The contract so states. This view was adopted by the Court of Customs and Patent Appeals in litigation before that court between the parties hereto California Packing Corporation v. Sun-Maid Raisin Growers of California (Cust.&Pat.App.) ...