Ritz Cycle Car Co. v. Driggs-Seabury Ordnance Corp.

• Decision Date: 06 November 1916
• Citation: 237 F. 125
• Parties: RITZ CYCLE CAR CO. v. DRIGGS-SEABURY ORDNANCE COPR.
• Court: U.S. District Court — Southern District of New York

237 F. 125

RITZ CYCLE CAR CO. v. DRIGGS-SEABURY ORDNANCE COPR.

United States District Court, S.D. New York.

November 6, 1916

Rockwood & Haldane, of New York City (Edgar T. Brackett, of Saratoga Springs, N.Y., and Nash Rockwood and Charles A. Winter, both of New York City, of counsel), for complainant.

Cadwalader Wickersham & Taft, of New York City (Cornelius W. Wickersham and John F. Charlton, both of New York City, and Francis H McAdoo, of Washington, D.C., of counsel), for defendant.

HAZEL District Judge.

This action in equity was brought to enjoin the defendant corporation from infringing complainant's commonlaw trade mark or name 'Ritz,' an abbreviation of Ritzwaller the name of complainant's president, adopted in September, 1913, and applied to cycle cars or light automobiles. The circumstances are peculiar, in that the parties entered into a written agreement by which the defendant was to manufacture cars or automobiles of complainant's design, making deliveries in installments. Upon failure by complainant to comply with the conditions of the agreement, the defendant was to have the right to market and sell the cars manufactured by it, using the trade-mark 'Ritz' and applying the proceeds on any claims arising out of the breach or annulment of said contract, as the defendant might have against complainant; and complainant agreed in the event of a breach to assist defendant in marketing the cars with respect to any unfulfilled contracts of sale.

Defendant by its answer, among other things, denied the establishment of a valid trade-mark in the name 'Ritz' as applied to cycle cars or automobiles, and admitted the sale of 205 cars or automobiles bearing that name after the contract was broken, justifying its action on the ground of complainant's nonpayment of certain promissory notes, a part of the consideration for the making of the agreement. The answer put in a counterclaim for two promissory notes, of $2,500 each, and for the price of a car or automobile manufactured for demonstrating purposes. A reply to the answer denied that complainant had broken or annulled the agreement, and alleged that it was first broken or rescinded by defendant; that accordingly no right inured to defendant under the agreement to market or sell any cars or automobiles bearing said adopted trade mark or name. Damages for breach of the contract were also demanded.

The issues presented by the proofs may be summarized thus: Had complainant established a valid trade-mark in the name 'Ritz' at the time the contract was made? Was a property right created by its adoption and use? Was there such failure by complainant to perform the contract as gave defendant the right under paragraph 13b of the contract in question to sell or market cars and apply the proceeds to claims for labor or materials used in their construction? Are the counterclaims properly interposed as an offset to complainant's right of recovery?

The evidence shows that, although the trade-mark was not known to the public to any extent by user, it had nevertheless been exploited, catalogued, photographed, and advertised, in trade journals and otherwise, at much labor and expense, preparatory to the establishment of a business for manufacturing and selling cars or automobiles impressed with it. The said agreement refers to the cars as Ritz cars, or Ritz cycle cars, and, prior to its making, two demonstration cars, model A and model B, were completed, which were designated as Ritz cars; model B being shipped to defendant for inspection in March, 1914. The contract provided for the manufacture of a car to be known as model C, which, however, in general appearance and design was to be of the type of model B. Complainant had contracted to sell and deliver to the Ohio Motor Company 100 Ritz cars to be manufactured by defendant, and was quite actively engaged in negotiating sales with prospective buyers and in establishing agencies at the date of the contract and up to the time of its breach.

Although it is unnecessary to specify all the details of the agreement under which the cars were to be manufactured, it should be understood that 500 Ritz cycle cars were to be manufactured by defendant and delivered in lots of approximately 100 per month, the first lot to be delivered by the end of June, 1914; that the price of construction agreed upon was $425, less a discount of $120; that the complainant was to deposit, and did deposit, with the defendant $10,000, payable $5,000 in cash, and the balance in two promissory notes, of $2,500 each, one payable in three months, and the other in four months, from date, to cover the cost of manufacturing tools required in the construction of the cars; that the complainant was to furnish detail drawings and specifications and place an inspector in the factory to approve materials; and provision was made for changes in construction and design 'to efficiently complete said cycle cars.'

There was much dispute as to who first terminated the contract. The defendant claims that complainant was responsible for the breach, and in proof thereof points to a letter, dated July 17, 1914, stating in substance that, on account of defendant's prior rescission, complainant was compelled to terminate its part of the contract. Hence it is contended that paragraph 13b became operative, regardless of who first broke the contract, but that it was in fact broken when complainant failed to pay its note for $2,500 falling due July 8, 1914. In opposition to this contention it is insisted that the promissory note was not paid because the defendant had previously failed to make delivery in June of approximately 100 cars, or of any cars.

To this contention rejoinder is made by defendant that such delivery was delayed by complainant's failure to seasonably furnish detailed drawings and specifications, as provided by paragraph 9 of the contract, and that complainant had ordered changes, or acquiesced in changes, which materially delayed completion of the cars. Did complainant's conduct relieve defendant from performance or render performance by defendant impossible? Did defendant's conduct, resulting in the repudiation of the contract, deprive it of the right to sell cars under and by the name of Ritz?

Considering the question of a property right in the trade-mark 'Ritz': It is undeniable that the general rule is that there must have been a user of an adopted trade mark, name, or symbol in connection with the goods or article to which it is applied, as its mere adoption, even with an expenditure of money in preparation for its use, confers no property right. But in this case something more than a mere adoption and exploitation of the trade-mark is evidenced. Not only was the trade-mark affixed to two completed cars at the time the contract was entered into, but reference is made therein to Ritz cars, amounting to a recognition of complainant's property right to the name. A single instance of user, with accompanying circumstances showing an intention to continue the use of the trade name or mark, is sufficient to establish a right to its use. Hopkins on Unfair Trade, Sec. 18. Sebastian, in the Law of Trade-Marks, quoting from Romilly, M.R., says:

''The interference of a court of

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