Oscar Barnett Foundry Co. v. Crowe
| Decision Date | 18 January 1915 |
| Docket Number | 1902. |
| Citation | 219 F. 450 |
| Parties | OSCAR BARNETT FOUNDRY CO. v. CROWE. |
| Court | U.S. Court of Appeals — Third Circuit |
Rehearing Denied March 2, 1915.
Russell M. Everett, of Newark, N.J., for appellant.
W. P Preble, of New York City, for appellee.
Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.
This is an appeal from the decree of the District Court entered upon an opinion reported in 213 F. 864, which states in detail the involved controversy of which this case is but a part. For the purposes of this appeal, therefore, nothing more than a relatively brief outline of the facts is necessary.
This action, and others presently to be noticed, had their origin in a contract bearing date January 29, 1908, between Paul L Crowe, the complainant, and the Oscar Barnett Foundry Company, the defendant, hereafter referred to, respectively, by the names of Crowe and the foundry company.
Crowe was the inventor and patentee of certain improvements in mechanical stokers, which, by the contract, he licensed the foundry company to make and sell in a prescribed territory at a fixed royalty, under a covenant on his part to protect the licensee against infringement, in consideration of undertakings on the part of the foundry company that it would manufacture and sell stokers covered by the patents, that quarterly it would make returns of all stokers sold, and pay the royalties agreed upon.
Differences between the parties arose immediately. In 1909 Crowe sold stokers of the type of his invention in competition with the foundry company in its licensed territory; and in an action instituted against him by the foundry company in the Court of Chancery of the state of New Jersey, Crowe was held to have violated his contract, and against him damages were assessed to the amount of his profits. Oscar Barnett Foundry Co v. Paul L. Crowe, 80 N.J.Eq. 112, 86 A. 915.
While that suit was pending, Crowe incorporated the Ironworks Company, through which he proceeded to do the same thing, where upon, in 1911, the foundry company, claiming that Crowe, indirectly through his corporation, was infringing his own patents and violating his covenant to protect the foundry company against infringement, instituted another action in the Court of Chancery of the state of New Jersey against Crowe and the Ironworks Company. Before the determination of that case the foundry company instituted the third action in the same court against the Ironworks Company and Battelle & Renwick; the latter defendant being under contract with the former to purchase from it the alleged infringing stokers. Evidence was heard before the Vice Chancellor in the latter two proceedings on September 30 and October 1, 1912, and a decree entered against the defendants, finding breaches of the contract by Crowe, and restraining the defendants from using, manufacturing, and selling stokers of the type therein contemplated. From the decrees in the several cases, appeals were taken to the Court of Errors and Appeals, and affirmed. 80 N.J.Eq. 258, 86 A. 915; [1] 81 N.J.Eq. 515, 516, 87 A. 160. The actions in the courts of New Jersey relieve us of a consideration of the misconduct of Crowe, which, by those proceedings, has been judicially established.
At the hearing before the Vice Chancellor in the actions last named, it developed that, through all the controversies between the parties, the foundry company manufactured stokers, made reports, and paid royalties, as provided by the contract, until January 10, 1912, after which day, without notice or explanation, the foundry company ceased rendering quarterly reports and making quarterly payments. It also developed at the same hearing, upon the testimony of Gerald Hanney, secretary and treasurer of the foundry company, that some time between January 10, 1912, and September 30, 1912, the foundry company stopped making and selling stokers under the contract of license.
Other testimony tends conclusively to prove the same thing.
While after January 10, 1912, Crowe knew perfectly well that the foundry company had failed to make quarterly reports of stokers sold and had refused to make quarterly payments of royalties earned, and therefore knew that the foundry company had made breaches of certain of its covenants, it was not until the hearing before the Vice Chancellor on September 30, 1912, it is claimed, that he had an intimation that the foundry company had ceased to make and sell stokers under the contract. Upon learning of the breach of its principal undertaking, Crowe promptly notified the foundry company that he considered the contract rescinded and himself discharged from its provisions. This act of Crowe occurred during the interval between the final hearing and the entry of the decree of the last two chancery proceedings. Hence the question of the rescission of the contract was neither raised before nor decided by the Court of Chancery in the cases referred to. That question, therefore, was left open for subsequent judicial determination.
Out of this irrepressible conflict the question of the rescission of the contract immediately arose and became the matter in dispute in an action instituted by Crowe against the foundry company in the United States District Court for the District of New Jersey, and now before this court on appeal. By the bill filed in that case, Crowe alleged that the defendant had not paid royalties under its contract nor made reports since January 10, 1912, and had announced that since that date it had stopped making stokers and had ceased to work under the contract, and prayed that an order rescinding and canceling the contract be made, together with a writ of injunction perpetually restraining the defendant from claiming any right under the contract to make or sell mechanical stokers, and also prayed for a discovery and accounting of profits. The foundry company challenged the right of Crowe to obtain redress in a court of equity, and denied that it had announced that it had ceased work under the contract, and said:
'It is not informed as to whether the stokers it has manufactured and sold since January 10, 1912, are within the scope of the contract of January 29, 1908, or not, and therefore leaves the plaintiff to make such proof thereof as he may.'
The District Court entered a decree 'that the contract of January 29 1908, between the parties, * * * be and the same is hereby rescinded and annulled as and of this 21st day of May, 1914 (the date of the decree); and it is further ordered, adjudged, and decreed that a perpetual injunction * * * be directed to the said defendant, Oscar Barnett Foundry Company, * * * enjoining and restraining them from operating or attempting to operate under said contract of January 29, 1908,' further decreeing that the costs and expenses be imposed upon the parties equally, and that neither party is entitled to an accounting or to recover damages as against the other.
Before the foundry company had time to take and complete an appeal from this decree, Crowe availed himself of its injunctive feature, charged the foundry company with disobedience, and moved the District Court to commit it for contempt. This motion was based upon the contention that the foundry company continued to make and sell stokers embodying the features of patents under which the foundry company theretofore was licensed by the contract, thereby raising, in a proceeding for contempt, a question whether the foundry company had violated the injunction by making stokers under rights lost by the rescission of the contract, or whether, by the stokers made, the foundry company had infringed the patents released by the rescission of the contract. Recognizing the difficulty, if not the impossibility, of determining these questions on a motion to commit for contempt, the District Court deferred action awaiting the decision by this court upon this appeal.
We are of opinion that the decree of the District Court, with certain modifications, should be affirmed. While in the main we agree with the...
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