Mantell v. Int'l Plastic Harmonica Corp...

• Decision Date: 05 September 1946
• Docket Number: 148/677.
• Citation: 49 A.2d 290
• Parties: MANTELL et al. v. INTERNATIONAL PLASTIC HARMONICA CORPORATION.
• Court: New Jersey Court of Chancery

49 A.2d 290

MANTELL et al.

v.INTERNATIONAL PLASTIC HARMONICA CORPORATION.

148/677.

Court of Chancery of New Jersey.

Sept. 5, 1946.

Suit by S. Carl Mantell and Milton Adler, trading as Liberty National Distributors, against International Plastic Harmonica Corporation to enjoin defendant from selling patented plastic harmonicas to other purchasers until it fulfilled obligation to complainant and for other relief.

Injunction issued.

Syllabus by the Court.

1. Defendant entered into contract with complainant by which contract complainant was appointed as general distributor for plastic harmonicas manufactured by defendant in certain States of the Union and the District of Columbia, with the exception of certain types of sales, and agreed to sell, and complainant agreed to buy all of such harmonicas produced by defendant up to 30,000 per month initially, and 45,000 for each additional injecting moulding machine obtained by defendant not exceeding four machines. The contract was to run for two years and was renewable for the succeeding two years unless terminated by either party on three months notice prior to the end of any term.

2. Evidence held to show that defendant failed to comply with the contract to supply harmonicas to the maxima provided for and that defendant made sales in the restricted area embraced within the contract.

3. The plastic harmonicas in the instant case are of unusual design and patented, and therefore legally and factually unique, since they cannot properly be obtained from any other source. Under such circumstances, a judgment for money damages, however ascertained, will not enable complainant to purchase such harmonicas elsewhere and continue in business. Unless equitable relief is granted complainant will be deprived of valuable property rights.

4. The contract is affirmative both in form and substance, and carries with it not only an agreement to do what is specifically agreed, but by necessary implication an agreement not to do anything inconsistent therewith.

5. Where defendant contracted to sell all of its production to complainant up to certain maxima, and made complainant its general distributor in the contract area, an implied covenant arises by necessity that defendant will not sell to others before furnishing the maxima to complainant, and will not compete with complainant in the contract area by selling to others.

6. Injunction issued restraining defendant from directly or indirectly selling the patented harmonicas to any one but complainant until it has first supplied complainant with the harmonicas which it produces up to the maxima provided for in the contract, and to desist and refrain from directly or indirectly engaging in competition with complainant in the area provided for in the contract, and from selling or disposing or attempting to sell or dispose of the patent and patent rights under which the harmonicas are manufactured.

7. Assessment of unliquidated damages while deemed the peculiar function of a jury, a court of equity nevertheless has power to assess damages where the cause is otherwise within its control and the interests of justice will be served by that course. The Court having jurisdiction for the purpose of specifically enforcing performance of the contract, has full jurisdiction, in addition to decreeing specific performance, to award such legal damages as have resulted from delay in the performance of the contract.

8. Defendant held to have waived its right to trial by jury under R.S. 2:29-9, N.J.S.A., since that right was not demanded in the pleadings. It is essential that a demand for a jury trial be made in the pleadings.

9. Where preliminary injunction issued in the cause and the defendant is found guilty of violation of the injunction to the damage of complainant, such damages may be awarded for such injury by way of a fine assessed in complainant's favor. Such damages may be ascertained by the Court itself or by a Master appointed for that purpose.

Arthur T. Vanderbilt, of Newark, for complainants.

John E. Toolan, of Perth Amboy, for defendant.

STEIN, Vice Chancellor.

The bill of complaint in this cause was filed on November 13, 1945, on behalf of S. Carl Mantell and Milton Adler, trading as Liberty National Distributors, complainants, against International Plastic Harmonica Corporation (hereinafter referred to as International), defendant, to enjoin the defendant from selling its patented plastic harmonicas to other purchasers, until it had first fulfilled its obligation to supply the complainants with such harmonicas under a contract dated July 3, 1945. Defendant filed an answer and answer in lieu of plea generally admitting the contract, but denying that it had failed to comply with its obligations thereunder, charging that complainants had violated the contract in various particulars, and that the contract was terminated on or about October 1, 1945 by the complainants because of said breaches of contract. The cause was brought on for final hearing April 3, 1946, and concluded on April 8, 1946.

The harmonica manufactured by International is a patented article made up of five major parts. International first began its efforts to produce the harmonica in January of 1945, but did not succeed in actually producing the completed harmonicas until the latter part of July, 1945.

The contract here in dispute, after brief recitals, contains the following covenants and agreements: (a) International appoints complainants as its general distributor for its plastic harmonicas, in New York, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and the District of Columbia, with the exception of certain types of sales; (b) International agrees to sell, and complainants agree to buy all of the harmonicas produced by International up to certain maxima, i. e. 30,000 per month initially, and 45,000 for each additional injecting moulding machine obtained by International not exceeding four machines; (c) complainants are to cover their assigned territory with proper representatives, traveling agents, correspondents and other sales methods to increase sales, and are to cooperate with International in formulating sales promotion plans and in supplying statistical information. The contract is to run for two years, and is renewable for the succeeding two years unless terminated by either party on three months notice prior to the end of any term, and is to bind and enure to the benefit of the parties, their heirs, successors and assigns.

Originally, according to Finn H. Magnus, Vice President of International, the defendant planned to have seven distributors throughout the country who would handle all sales, but the complainants were the only distributors appointed, and the plan was abandoned. The reason for its abandonment and apparent reluctance on the part of defendant to comply with the contract will appear later herein.

International was organized in December of 1944, and was still struggling to get into successful production of its product when the contract was entered into. Magnus and one Christian Christiansen each owned a half of International. Christiansen had paid $35,000 into the business. Christiansen was also the president of the Button Company of America. Magnus knew that complainants had made a loan of $5,000 to that company shortly before the execution of the contract. Prior to the formation of International, Magnus had been working on the harmonica mould at the Button Company, and had the use of the machine shop there for several months, and had completed his experiments there successfully. Magnus says that he did not knew whether the money paid into International on behalf of Mr. Christiansen, was paid by the Button Company or Mr. Christiansen personally.

At the time the contract was made the only injecting moulding machine International had was owned by the Button Company. International evidently in order to get into production entered into this contract with complainant which assured it a substantial market. According to Mr. Magnus it took from July 3, 1945 until July 27 of that year to get the first machine in operation to produce the reed plates, and the difficulties encountered in adjusting the mould to produce tuneful harmonicas was explained by him at length. On July 3, 1945, accordingly when the mould for reed plates was placed in the injecting moulding machine for tuning, there was a possibility, with poor luck, on the testimony of the inventor himself, that effective operation might not be possible for eight or nine months.

After successful production was begun late in July it evidently became apparent to International that their contract with complainants was not as favorable to International as might have been expected. Morris Levy a witness for the defendant, who had been in the wholesale musical merchandise business for some sixteen years, says that prior to the war all harmonicas used in this country were imported from Germany, Czechoslovakia, or other foreign countries. International having once achieved successful production suddenly discovered that there existed a general market which was far in excess of its productive capacity and beyond its expectations. So on June 29, 1945, International had three injecting moulding machines on order, but deliveries were uncertain and the machines were not actually received until the following year. About two months prior to the hearing the defendant had orders for 4,000,000 harmonicas, and had turned down orders for 10,000,000 or 12,000,000. By the end of September, International had produced a total of only 98,696 harmonicas, all of which it was obligated to deliver to complainants, but had not filled an order from complainants for 150,000 requested on August 2, 1945.

Thereafter it appears International attempted to cancel the contract, it having found that the major part of its production was being claimed by the complainants under the terms of the contract. And...