Piggly Wiggly Corporation v. Saunders

• Citation: 1 F.2d 572
• Decision Date: 28 March 1924
• Docket Number: No. 847.,847.
• Parties: PIGGLY WIGGLY CORPORATION v. SAUNDERS.
• Court: United States District Courts. 6th Circuit. Western District of Tennessee

1 F.2d 572 (1924)

PIGGLY WIGGLY CORPORATION v. SAUNDERS.

No. 847.

District Court, W. D. Tennessee, W. D.

March 28, 1924.

FitzHugh, Dixon & Osoinach, of Memphis, Tenn., for plaintiff.

Miles, Waring & Walker, G. T. Fitzhugh, and J. W. Farley, all of Memphis, Tenn., for defendant.

ROSS, District Judge.

This is a proceeding instituted by plaintiff, a Delaware corporation, with its principal office in Memphis, Tenn., to enjoin the defendant, Clarence Saunders, a resident of Memphis, Tenn., from engaging in the grocery and merchandising business under certain conditions. On the 6th day of March, 1924, plaintiff filed its bill, alleging in substance:

That in 1918 defendant procured valuable patents from the United States and many foreign countries covering a system of merchandising known as the "Clarence Saunders Self-Serving Stores"; that he also obtained a copyright and trade-mark for the name "Piggly Wiggly," as the name by which said stores operating under said system were known; that such a system was put in operation over various parts of the United States; that prior to September 9, 1918, defendant had entered into license contracts with a large number of individuals and corporations in a great many cities and towns in the different states, by virtue of which grocery stores were operated using the self-serving system; that in August of 1918 defendant incorporated the business and sold stock over the United States, and that on the 9th day of September, 1918, defendant entered into a written contract with plaintiff, Piggly Wiggly Corporation, whereby he transferred to plaintiff property and rights designated as follows:

"My business, and the good will belonging thereto, established and built up by me under my own name and the name "Piggly Wiggly," comprising the establishing, operating, and the licensing of agents and subsidiary concerns to operate, Piggly Wiggly stores, and to use my trade-name, copyrights, and inventions appertaining to such stores in the operation of the business, together with the right to operate under my United States patent No. 1,242,872, dated October 19, 1917.

"My said United States letters patent No. 1,242,872.

"All licenses granted under said patent to date and all beneficial interests therein.

"All trade-mark contracts granted to agents to this date and all beneficial interest therein.

"Certain applications for other United States letters patents now pending in the United States Patent Office for me in connection with Saunders self-serving store as follows:

"No. 142,253, filed January 13, 1917, for refrigerators.

"No. 175,905, filed June 20, 1917, for design for store furniture.

"No. 175,942, filed June 20, 1917, for self-serving store.

"No. 198,134, filed October 23, 1917, for self-serving store.

"No. 202,466, filed November 17, 1917, for self-serving store.

"No. 203,503, filed December 10, 1917, for tape for adding machines.

"No. 215,508, filed February 5, 1918, for price-tagging means and method.

"Certain other applications for patents in the course of preparation and to be filed, all relating to inventions in instrumentalities for use in connection with the operation of said Piggly Wiggly stores and the business connected therewith.

"Any other inventions which I have made or may make hereafter in instrumentalities relating to and for the purpose of the business aforesaid in the United States, and will agree at the expense of the said corporation to file applications for United States patents for such inventions and to make proper agreements for the use thereof by the said corporation in connection with Saunders self-serving stores.

"Also all copyrights registered or to be registered by me for subject-matter relating to said business.

"Also all trade-mark rights, both under United States statutes and under the common law, relating to or connected with said business.

"Also all beneficial rights under any other existing contracts relating to said business which I now hold with any one.

"All of which property I will transfer and vest the title thereto in said Piggly Wiggly Corporation, to be held and enjoyed by it as fully and entirely as the same is now held and enjoyed by me.

"All of which I agree to do for and in the consideration of $550,000 and the issuance to me of 15,000 shares of no par value common stock of said corporation, which shall be received by me in full payment for said property so to be transferred, and when so issued shall become fully paid and nonassessable.

"I have heretofore entered into a certain agreement for the manufacture of fixtures for use under said trade-mark contracts and patent license agreement with the Saunders Manufacturing Company at Jackson, Tenn., and all my rights under said contracts are to be transferred to said Piggly Wiggly Corporation and my liabilities thereunder assumed by said corporation, except my liability upon my agreement to guarantee dividends or purchase stock as set out in said certificates."

That on the 25th day of August, 1919, plaintiff purchased from the defendant certain other rights by virtue of a contract made the subject of a resolution passed by the stockholders of plaintiff, in part as follows:

"Whereas, Mr. Clarence Saunders has heretofore obtained letters patent of the United States No. 1,242,872, granted October 9, 1917, for an invention in self-serving stores, also letters patent of the United States No. 1,297,405, granted March 18, 1919, for price-tagging means, also several applications now pending in the United States Patent Office for other letters patent of the United States for other inventions of the said Clarence Saunders, all of which letters patent have been transferred to and are owned by Piggly Wiggly Corporation, and there exists a contract between the said Clarence Saunders and Piggly Wiggly Corporation for the said Clarence Saunders to make application for other letters patent of the United States, and to execute and assign to said corporation all applications for letters patent of the United States for any other or future inventions he may make in means or methods for use in the operation of self-serving stores; and

"Whereas, the said Clarence Saunders had granted to the said Piggly Wiggly Corporation the exclusive right to the use of the name `Piggly Wiggly' and all trade-mark rights and the good will belonging thereto; and

"Whereas, said Clarence Saunders has already obtained letters patent for said invention in self-serving stores in Mexico, Spain, France, Great Britain, Australia, Canada, and Cuba, and has applications for patents pending for said invention in Argentina, Austria, Belgium, Brazil, Germany, Holland, Italy, Russia, and Sweden, and also has obtained letters patent for said invention in price-tagging means for Mexico, and has applications pending for said invention in Argentina, Australia, Belgium, Brazil, Cuba, France, Great Britain, Holland, Italy, Spain, and Sweden, and applications ready for filing in Austria, Germany, and Russia; and,

"Whereas, the said Clarence Saunders has offered and proposed to transfer the ownership of all of said foreign patents and applications for patents to the Piggly Wiggly Corporation, as well as any other or future inventions by the said Clarence Saunders in means or methods for the operation of self-serving stores and any and all patents therefor, including letters patent obtained in any other foreign countries for said inventions, or for other and future inventions in means or methods for operation of self-serving stores, and any and all patents therefor — the expense of making further applications to be borne by Piggly Wiggly Corporation upon the following terms, to wit: The payment to the said Clarence Saunders of the sum of two hundred and ten thousand dollars ($210,000) in cash, and the issuance to him of thirty-five thousand (35,000) shares of common stock of nominal or nonpar value."

That subsequent to the execution of the contract last above mentioned, and in the year 1919, the defendant obtained a charter for another corporation under the laws of the state of Virginia, known as the Piggly Wiggly Stores, Incorporated; that the stock of this corporation was sold throughout the United States, and that it operated Piggly Wiggly stores under license contracts from plaintiff, but in addition to the stores operated by this latter corporation plaintiff continued to license individuals and corporations as independent operators of such stores, the total number of the stores operated by plaintiff being 1,331, and of this number the latter corporation operates about 440; that this system covers approximately 42 states; that defendant was the president of each of the corporations from the date of their organization until on the 12th day of August, 1923, when he resigned as president of the Piggly Wiggly Stores, Incorporated, and on the 17th day of August, 1923, when he resigned as president of the Piggly Wiggly Corporation; that, just before resigning as president of plaintiff, defendant filed a bill in this court, seeking a receiver for plaintiff corporation, and that a few days thereafter plaintiff filed a bill in this court against defendant, seeking an accounting as to the expenditures of large sums of money charged to have been used in stock speculations. By subsequent pleading defendant sought an accounting from plaintiff, alleging in his amended bill that he had used over $400,000 of his own funds in the stock speculations for the account of plaintiff and that he had contracted debts in an amount exceeding $1,250,000 in his own name, for which he claimed plaintiff was responsible.

The bill sets out in detail various proceedings pursuant to the litigation mentioned and then charges that on the 23d day of February, 1924, defendant filed a voluntary petition in bankruptcy in this court, and that immediately upon so doing made public a statement as follows:

"I have perfected a new system of self-serving...