Davis v. Jointless Fire Brick Co.

• Decision Date: 30 June 1924
• Docket Number: 4228.
• Parties: DAVIS v. JOINTLESS FIRE BRICK CO.
• Court: U.S. Court of Appeals — Ninth Circuit

300 F. 1

DAVIS v. JOINTLESS FIRE BRICK CO.

No. 4228.

United States Court of Appeals, Ninth Circuit.

June 30, 1924

Rehearing Denied August 4, 1924.

This is an appeal by Davis, defendant below, from injunction pendente lite, restraining Davis from engaging in the sale of a certain commodity that competes with the business of plaintiff in California, for two years from December 15 1923. The Brick Company, plaintiff below, is an Illinois corporation doing a large business in plastic furnace lining with the registered trade-name 'Plibrico.' Davis was appointed exclusive sales agent for Plibrico for California by contract dated June 1, 1921, running for one year and thereafter until revoked. Material provisions were: Davis was to use his best endeavors in marketing the products within California to the exclusion of any merchandise that would serve the purpose or conflict with the product of his principal, though he was not prohibited from dealing in other commodities which did not conflict with his principal's interest. Orders were to be billed direct from the principal and bills were to be collected by it. Sections 12 and 13 of the contract are as follows: '(12) It is particularly stipulated and made a part of the consideration and the inducement on the part of the principal in entering into this contract, and the terms and prices herein contained, that said agent shall not engage in the sale of any one-piece fire brick lining or high heat resistive bond or cement, or commodity that will compete with the principal's business, for a period of two years immediately following the severing of connections with said principal.

'(13) This contract and all covenants and conditions therein contained shall be construed and interpreted according to the laws of the state of Illinois, and may be revoked at any time at the option of said principal upon giving 60 days' notice in writing.'

Affidavits by plaintiff company set forth that about October or November, 1923, Davis was billing material direct to customers and making collections on his own account, contrary to the provision in the contract; that on October 15, 1923 'for good and sufficient reason' (not stated in detail), acquiesced in by Davis, the contract of June 1st was terminated by letter to Davis; that about December 26, 1923, the company, learning that Davis was selling a competing product, asked for his resignation, but that, notwithstanding such request, Davis wrongfully assumed to act as agent for plaintiff, used letter heads of the plaintiff company, misled certain customers to whom he shipped a plastic fire brick made by a competing company, wrongfully diverted moneys, misused lists of customers, and did other acts showing deception and misrepresentation-- all of which greatly reduced plaintiff's business in California.

Davis by affidavit said that plaintiff, by the letter of October 15th, had broken the contract and left him free to ignore its provisions; that he was ignorant of his rights and of the law of unfair competition, and had no intention to defraud plaintiff; and that he is ready to account to plaintiff for any product sold in excess of a certain quantity, which was delivered to a customer who ordered Plibrico.

George K Ford and Fred C. Peterson, both of San Francisco, Cal., for appellant.

Charles E Townsend, of San Francisco, Cal. (Wm. S. Graham and Wm. S. Downing, both of San Francisco, Cal., of counsel), for appellee.

Before GILBERT, HUNT, and RUDKIN, Circuit Judges.

HUNT Circuit Judge (after stating the facts as above).

It is clear that after the letter of October 15th Davis was recognized by the plaintiff as its agent, and that he continued to act as agent until after December 26, 1923. This relationship was of a fiduciary character, but he deliberately failed to notify the plaintiff company that he was in fact acting as agent for a company selling a competing product, and was selling and delivering such competing product as Plibrico, and was leading purchasers of the competing product to believe that they were dealing with him as agent for the plaintiff. By his conduct, and by ignoring the October 15th notice of cancellation, he is not now in a position to ask a court to uphold his contention that after October 15th he was free to hold onto the benefits accruing under his contract of agency, yet could repudiate its valid provisions. The court will treat him as having elected to keep the contractual relationship alive for the benefit of the plaintiff company, as well as himself, subject to such obligations and liabilities as were lawfully assumed under the old contract. New Brunswick & Canada R. Co. v. Wheeler (C.C.) 12 F. 383; 13 C.J. Sec. 764; Farrelly v. United States, 159 F. 675, 86 C.C.A. 539.

We may assume that the contract, tested by general principles, is valid. Oregon Steam Co. v. Winsor, 20 Wall. (87 U.S.) 64, 22 L.Ed. 315. But the vital question is: Does the statute of California interdict the contract, in so far as it restrains Davis from selling a competing product? Section 1673 of the Civil Code of California provides:

'Every contract by which any one is restrained from exercising a lawful profession, trade, or business of any kind, otherwise than is provided by the next two sections, is to that extent, void.'

To this provision there are certain exceptions: (a) Where one sells the good will of a business; and (b) in the case of partners who, upon or in anticipation of a dissolution of the partnership, agree that none will carry on a similar business within the same city or town where the partnership business has been transacted. We pass the exceptions as not pertinent.

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