Larx Co. v. Nicol
| Decision Date | 11 October 1946 |
| Docket Number | 34235. |
| Citation | 28 N.W.2d 705,224 Minn. 1,71 U.S.P.Q. 115 |
| Parties | LARX CO., Inc. v. NICOL et al. |
| Court | Minnesota Supreme Court |
On Rehearing Aug. 22, 1947.
Syllabus by the Court
1. The law of the place of contracting determines the validity and effect of a promise with respect to fraud, illegality, or any other circumstances which may make the promise void or voidable.
2. The law of the place of performance of a contract applies only to questions relating to the manner, time, location, and sufficiency of performance; the parties by whom or to whom performance shall be rendered; and the excuse for nonperformance. Where a contract is to be performed in several states or countries, it is generally held, in the absence of evidence to the contrary, that the parties to the contract have intended that the law of the place of contracting should govern as to questions of validity and legal effect.
Contract executed and delivered in Illinois, where the parties resided and where all property covered by the contract was located, held governed by common law of Illinois as to validity and legal effect.
3. Under law of Illinois, employe's covenant not to engage in a competitive business with his former employer for an unlimited time in an unlimited space is invalid as contrary to public policy.
4. Covenant of the seller of a secret process or of an employe to whom it has been disclosed in connection with his employment not to disclose such secret or make use thereof either directly or indirectly, in competition with such owner or employer may be reasonable and valid where business of the owner or employer is, or tends to become, nationwide notwithstanding such covenant be unlimited as to time and space.
5. While the general public is free to analyze or discover the ingredients of a product made pursuant to a secret formula nevertheless the owner of such formula may protect himself in equity against discovery by breach of confidential relation or against disclosure of the contents of such formula by one lawfully bound under contract, express or implied, not to use or disclose the ingredients thereof.
6. Where the transfer of capital stock of a corporation forms the consideration of a contract not to compete; where said corporation's sales are increasing and its territory expanding from year to year; where stock for other reasons may have had value not reflected in its books; and where the party to whom said stock is transferred has full knowledge of and access to such books and records, in the absence of fraud or overreaching, this court will not inquire into the adequacy of such consideration or look to the books of said corporation to determine the book value, if any, of the stock transferred.
7. A tradename or a trademark may be assigned, licensed, or lent as long as it remains associated with the same product or business with which it has become associated in the public mind. Assignments of trademark and a copyrighted label, carrying with it the right to manufacture a product pursuant to a secret formula, and of the good will previously attached thereto held valid and binding, although assignee might subsequently be required to make it clear to the public, in the use of the mark, that the product thereafter sold thereunder by him is no longer made by the original user of the trademark.
8. Letter from assignee of trademark and copyrighted label to the assignor thereof directing the latter to make payments due thereafter under contract secured by such assignments to assignee's wife, which letter did not transfer or assign to her such trademark, copyrighted label, or the good will attached thereto, Held not to be an assignment of such trademark or copyright.
Appeal from District Court, Ramsey County; Gustavus Loevinger, Judge.
Kingman, Cross, Morley, Cant & Taylor, of Minneapolis, for appellant.
Oppenheimer, Hodgson, Brown, Donnelly & Baer, of St. Paul, for respondents.
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 into 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...
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