Larx Co. v. Nicol, 34235.

• Decision Date: 11 October 1946
• Docket Number: No. 34235.,34235.
• Citation: 28 N.W.2d 705,224 Minn. 1
• Parties: LARX CO., Inc. v. NICOL et al.
• Court: Minnesota Supreme Court

28 N.W.2d 705

224 Minn. 1

LARX CO., Inc. v. NICOL et al.

No. 34235.

Supreme Court of Minnesota.

October 11, 1946.

On Rehearing August 22, 1947.

Appeal from District Court, Ramsey County; Gustavus Loevinger, Judge.

Action by Larx Company, Inc., against Clinton C. Nicol and others for a declaratory judgment that a certain contract between plaintiff's assignor and Clinton C. Nicol, together with written assignments of a certain trade-mark and copyright pledged as security, are invalid and unenforceable. From a judgment holding that the contract and assignments were valid and enforceable, the plaintiff appeals.

Judgment affirmed.

Kingman, Cross, Morley, Cant & Taylor, of Minneapolis, for appellant.

Oppenheimer, Hodgson, Brown, Donnelly & Baer, of St. Paul, for respondents.

THOMAS GALLAGHER, Justice.

Action for a declaratory judgment to have a certain written contract dated December 10, 1935, between Clinton C. Nicol and Barnes-Noble Company, Inc., a corporation, together with written assignments of a certain trademark and copyright pledged as security for said contract, adjudged invalid and unenforceable.

Plaintiff is the assignee of all the right, title, and interest of the Barnes-Noble Company in and to said contract, trademark, and copyright and holds the same subject to Barnes-Noble Company's obligations therein.

On June 21, 1945, the trial court made findings, conclusions, and order for judgment in favor of defendants, in effect holding said contract and assignments valid and enforceable. A memorandum made by the court on June 12, 1945, was incorporated in the findings and conclusions and made a part thereof. On December 20, 1945, the court denied plaintiff's motion for amended findings and conclusions or for a new trial. From the judgment subsequently entered, this appeal is taken.

The material portions of the contract under attack provide:

"In consideration of the benefits and advantages to be derived by each from the faithful performance of the covenants and agreements hereinafter contained, and One Dollar ($1.00) consideration each to the other paid, the receipt whereof is hereby acknowledged, the transfer and assignment of all certificates of stock in the Barnes-Noble Company, Inc., now held by said second party [defendant Clinton C. Nicol] and a release by said second party of said first party [Barnes-Noble Company, Inc.] from all claim for all salary or bonuses that may be due or owing, and the mutual cancellation of any and all agreements heretofore made by and between the parties hereto, the cancellation of which is hereby acknowledged by both of the parties hereto, it is mutually agreed between the parties hereto, as follows:

"First party for itself, its successors and assigns, hereby agrees to pay second party, his heirs, executors, administrators and assigns Two Hundred Dollars ($200.00) on the delivery of these presents and Two Hundred Fifty Dollars ($250.00) monthly thereafter during the continuance of this contract; said monthly payments shall be divided into two equal installments, due respectively on the First and Fifteenth day of each month hereafter, the first of said semi-monthly payments shall be due January 1, 1936.

"Second party, for himself, his heirs, executors, administrators and assigns agrees that he will not enter into or engage in any business of manufacturing or selling, nor in any manner be associated with, a business of manufacturing or selling any abrasive scouring powder, or competitive product to `Brite-Ize Cleanser' so long as this agreement shall remain in full force and effect, and will not sell or assign said Copyright or Trade Mark.

"It is further agreed that first party has assigned Trade Mark No. 94053 and Copyright or Registration of Label No. 42256, to second party as collateral security for the performance by first party of its covenants and agreements herein contained.

"It is further mutually agreed that in the event first party, its successors or assigns fail to make the payments or perform the covenants on its part to be performed, for a period of forty-five (45) days, that its rights under this contract shall be forfeited at the option of said second party, and all its rights in and to said Copyright or Registration of Label, and Trade Mark, assigned as aforesaid, shall become the absolute property of second party; that notice of such forfeiture, signed by second party, addressed to first party at its last known place of business, postage prepaid and registered under the then existing postal regulations, shall constitute a good and sufficient notice of the exercise by second party of his option to declare this contract forfeited.

"It is further mutually agreed, that in the event said second party shall fail to perform each and every of his covenants herein contained, that all his rights, title and interest under this contract shall immediately become forfeited and terminated and his rights in and to said Trade Mark and Copyright or Registration of Label, so assigned to him, shall be and become forfeited and terminated."

Accompanying said contract were two written assignments, one for the trademark and one for the copyright referred to. They both provided in substance that in consideration of the sum of one dollar and other good and valuable considerations the Barnes-Noble Company sold, assigned, and transferred unto the said Clinton C. Nicol its entire right, title, and interest in and to said trademark and copyright and the registration numbers thereof, together with the good will of the business in connection with which they were used. Subsequent to the execution thereof, Nicol notified the Barnes-Noble Company by letter that his revenue from the December 10, 1935, contract was thereby assigned to his wife, the defendant Leila M. Nicol, and thereafter all checks under said agreement were delivered to her.

On January 14, 1945, by written agreement, Curtiss G. Noble, who with his wife then owned all but two shares of the stock of the Barnes-Noble Company, for $30,171.13 sold and assigned to plaintiff the aforesaid trademark and copyright; the good will of the business conducted by the Barnes-Noble Company; the right to use the name Barnes-Noble Company for a limited time; the factory improvements, furniture, and fixtures owned by said company; and also the contract between the Barnes-Noble Company and Clinton C. Nicol dated December 10, 1935. Said agreement further provided:

"Seller covenants and agrees that he will not hereafter disclose to anyone the formula pursuant to which Barnes-Noble Company has been manufacturing and selling the scouring compound known as `Brit-Ize.'

"Seller covenants and agrees that there is no default on the part of the Barnes-Noble Company or himself insofar as said Clinton C. Nicol contract is concerned, and seller makes no representation regarding the validity of such contract."

Shortly after the execution of the aforesaid sale and assignment to plaintiff, the latter instituted this action.

Plaintiff contends that the trial court erred in finding the contract and assignments of December 10, 1935, valid, and he asserts that all of the same are invalid or unenforceable for the following reasons: (1) That under the law of Illinois, where the contract was made, Nicol's agreement not to compete for an unlimited time in an unlimited space was in unlawful restraint of trade and rendered the contract invalid; (2) that said contract is unsupported by legal consideration and is vague, indefinite as to duration, and unconscionable; (3) that the trademark and copyright were illegally assigned because their assignment was unaccompanied by an actual transfer of the business and good will with which they were associated; (4) that the assignment of the monthly payments from Nicol to his wife constituted a transfer of the trademark and copyright in violation of the contract and accordingly terminated it.

During the year 1931, Clinton C. Nicol developed a formula for a cleansing or scouring compound and commenced the manufacture and sale thereof in Minneapolis in 1932 under the name "Nicol Cleanser." The ingredients of the compound and their proportions were unknown to anyone except him, although the formula, for obvious reasons, was not registered in the United States patent office. He acted as both manufacturer and salesman in his business and by 1933 was selling the compound in substantial quantities.

In 1933, the Barnes-Noble Company was incorporated in Minnesota and commenced selling a compound similar to Nicol's. It found, however, that Nicol's compound had greater sales possibilities, and during the year 1933 it entered into negotiations with him for the use of his formula. An oral agreement was reached under which Nicol turned over and disclosed to the corporation his formula and business, for which the corporation agreed that it would pay him $500; assign him one-fourth of its outstanding stock after an additional $10,000 had been invested in the corporation by one of its officers; and place him in charge of its manufacturing plant on a salary commencing at $150 per month, "to be increased as the company went along."

Thereafter the corporation commenced the manufacture and sale of the cleansing compound made pursuant to Nicol's formula. It purchased from some other concern the right to use a trademark known as "Brite-Ize" and a copyrighted label, and manufactured and sold the compound under such trademark and label. It maintained its plant and offices in Minneapolis until February 1935, at which time it moved to Ottawa, Illinois, where it continued in business. In 1933 its gross sales were $28,000. It continued in business until the sale to plaintiff made on January 14, 1945. By 1943 its sales had increased to $119,000, and its sales activities then extended into 15 states. Its subsequent sales were not disclosed.

Nicol continued with the corporation in Illinois until December 10, 1935, the date of the...