Hackenheimer v. Kurtzmann

• Decision Date: 27 February 1923
• Citation: 235 N.Y. 57,138 N.E. 735
• Parties: HACKENHEIMER et al. v. KURTZMANN et al.
• Court: New York Court of Appeals Court of Appeals

235 N.Y. 57

138 N.E. 735

HACKENHEIMER et al.

v.KURTZMANN et al.

Court of Appeals of New York.

Feb. 27, 1923.

Action by Jacob Hackenheimer and others against Louis S. Kurtzmann and others. Judgment for defendants was reversed by the Appellate Division, and judgment directed for plaintiffs (198 App. Div. 691,192 N. Y. Supp. 181), and defendants appeal.

Judgment of the Appellate Division affirmed.Appeal from Supreme Court, Appellate Division, Fourth department.

Simon Fleischmann and Martin Clark, both of Buffalo, for appellants.

Evan Hollister and L. L. Babcock, both of Buffalo, for respondents.

ANDREWS, J.

Some 73 years ago Christian Kurtzmann began the manufacture and sale of pianos in Buffalo. His business increased, and the name of Kurtzmann became well and favorably known. He died in 1886. The business was thereafter carried on by a firm known as C. Kurtzmann & Co. In 1901 this firm was incorporated under the same name. The plaintiffs, with one Irving E. Devereaux, and the defendant Louis Kurtzmann, the son of the original Christian, owned all the stock. The business continued to increase, and its good will, especially the name of Kurtzmann connected with it, had considerable value. The total capitalization of the corporation was $300,000, of which $65,000 was preferred stock. Of this Louis owned $41,000 of the preferred and $47,000 of the common stock. In 1911 for some reason he desired to sell this stock to the others. Thereupon a contract in writing was made between them. Evidently because of the value of the name Kurtzmann, which might be used to the disadvantage of the corporation, there were joined in this contract Anna S. Kurtzmann, the wife of Louis, and his son, Christian. The contract, therefore, was between Jacob Hackenheimer and the other stockholders, of the first part, and Louis Kurtzmann, his wife Anna S., and his son Christian, of the second part. It recited that the corporation was the successor of the partnership, and had been well known to the trade for many years in connection with pianos, and that pianos manufactured by it had been known as the Kurtzmann piano. Large sums had been spent in advertising, and the name Kurtzmann had become a valuable asset to the corporation. The parties of the first part are willing to purchase the stock ‘and to pay a price therefor which is based in large degree upon the good will of the business and its successful and continuous prosecution and to that end desire to protect the name of the instrument manufacturedby them so that it shall not be used to interfere in any wise with such business.’ Louis, his wife and son are anxious to have such sale effected. Therefore the parties of the first part agreed to purchase the stock of Louis for $130,000 payable under conditions which have subsequently been complied with by them. In consideration of this payment:

‘The parties of the second part other than Christian Kurtzmann severally and jointly agree with the parties of the first part and with such corporation that neither of them will during the period of ten years from the date hereof, and the said Christian Kurtzmann agrees that he will not within the period of five years from the date hereof, directly or indirectly interfere with the good will of the business of such corporation by the use of the name Kurtzmann in connection with the manufacture or sale of pianos and piano supplies; that they will not sell or give the right to any third person or corporation to use such name in connection with the manufacture or sale of pianos or piano supplies or musical instruments of any kind; that they will not do any other act or thing which shall tend to impair the good will of the business of such corporation or interfere with the conduct thereof, or with the mails of such corporation, or with the letters addressed to such corporation, or to Kurtzmann or the Kurtzmann Company, mail for such corporation being frequently so addressed, and that if any such mail matter come into the possession of either of them it shall be immediately delivered to the company.

‘They further agree that for the period aforesaid they will not, nor shall either of them, in any way disclose any information heretofore obtained by them touching the conduct of the business of such corporation, or seek to discredit its products, or any of them, or its methods of business or any of them, but will in good faith do what they may to preserve the good will and business of such corporation, and enable it to be successfully operated by its officers and directors without interference or hindrance upon their part or the part of either of them; and all statements furnished to them heretofore respecting the business of the corporation shall be returned to the corporation or to its counsel within five days from the execution of this agreement.’

Then to further protect the parties of the first part is this clause:

‘In case of breach of the agreements herein contained upon the part of the parties of the second part, or of either of such parties, then the parties of the first part shall be entitled to recover from the parties of the second part, all being held jointly and severally responsible therefor, the sum of fifty thousand dollars which is hereby stipulated as liquidated damages and not as a penalty; and they shall have the further right to enforce the terms of this agreement by due process of the law through a writ of injunction, or otherwise, as they may deem best.’

The 5-year term during which Christian Kurtzmann was bound by the agreement would expire on December 5, 1916. The 10-year period during which Louis and his wife Anna were bound would expire on the 5th day of December, 1921. The special Term found that neither Louis, Anna, or Christian violated any of the provisions of this agreement. The Appellate Division, however, reversed these findings and held that it was violated both by Louis and by Christian, and directed judgment for $50,000 in favor of the plaintiffs. Neither court held that it was violated by Anna S., and plainly it was not. Even if it were not violated by Christian, but was violated by Louis, under the language of the contract the same result would follow as that reached by the Appellate Division. We therefore confine ourselves to the acts of Louis.

[1] The Appellate Division finds that on the 29th day of May, 1916, the defendant Christian, with two dummies, organized a corporation called Christian Kurtzmann, Incorporated, for the purpose of the purchase, manufacture, and sale of pianos, organs, and musical instruments. The capital stock of this corporation was $1,000. All of this stock was owned by the defendant Christian Kurtzmann. This corporation never elected any officers, and held no corporate meetings after the first, at which Christian was elected president. Some time during the year 1917 Christian Kurtzmann entered the United States army, and was absent from Buffalo for about two years until the spring of 1919. During these two years Louis Kurtzmann did business under the name of the said corporation, representing himself to the banking institutions in which he kept his account as its treasurer, although he had never been elected to such office. He transacted all the business of the corporation. During the years 1917, 1918, and 1919 he sold and delivered to various dealers in planos in the United States at least 10 of those...