Stuckes v. National Candy Co.

• Decision Date: 06 June 1911
• Citation: 138 S.W. 352,158 Mo. App. 342
• Parties: STUCKES et al. v. NATIONAL CANDY CO.
• Court: Missouri Court of Appeals

138 S.W. 352

158 Mo. App. 342

STUCKES et al. v. NATIONAL CANDY CO.

St. Louis Court of Appeals. Missouri.

June 6, 1911.

1. CONTRACTS (§ 201*)—TRADE SECRETS—PROCESS OF MANUFACTURING CANDY.

Defendant cannot deprive plaintiff of the benefit of a disclosure of a secret process of manufacturing stick candy, the disclosure being made under a contract for royalties, by adopting the same process under independent experiments, if such disclosure was used as a basis for the experiments, though changes were made.

2. CONTRACTS (§ 175*)—TRADE SECRETS—USE —EVIDENCE—SUFFICIENCY.

Evidence held to warrant a finding that a process of manufacturing stick candy adopted by defendant was based on a disclosure made by plaintiff on the faith of a royalty contract.

3. EVIDENCE (§ 368*)—DISCLOSURE OF TRADE SECRETS.

A party cannot invoke a claim that damage will result to him from his being compelled to produce in evidence a secret formula for a manufactured product, where to refuse to require such production will aid in the perpetration of a fraud on the adverse party.

4. CONTRACTS (§ 349*)—MANUFACTURES—ROYALTY CONTRACTS—EVIDENCE.

In an action for royalties on use of a secret process for manufacturing candy, it was error to exclude a showing as to the amount of candy manufactured by defendant when the contract was made.

5. EVIDENCE (§ 78*) — PRESUMPTIONS — SUPPRESSION OF EVIDENCE.

In an action for royalties on use of a secret process for manufacturing candy, defendant's failure to keep accounts separating the product from product in which the process was not used, presumptions aid plaintiff's claim, on the theory of suppression of evidence.

Appeal from St. Louis Circuit Court; Matt G. Reynolds, Judge.

Action by John Stuckes and others against the National Candy Company. Judgment of nonsuit, and plaintiffs appeal. Reversed and remanded.

Clifford B. Allen, for appellants. Frank F. Reid and Lehmann & Lehmann, for respondent.

REYNOLDS, P. J.

Action by plaintiffs, appellants here, against defendant, to recover $1,800 for royalties claimed to be owing plaintiffs under a contract entered into between the parties on April 19, 1904, the action begun April 23, 1906. The petition alleges that one of the plaintiffs, John Stuckes, had invented a new and useful improvement in the process of making a class of candy known as hard boiled goods, usually made in the form of sticks, whereby the cost of production was lessened and the prevention of the candy from becoming sticky effected, it being averred that the process which Stuckes had discovered was a secret one and that the other plaintiffs were parties to the contract, interested with Stuckes in the profits to be made out of the use of the process. Defendant is a corporation engaged in the manufacture of candy, having plants at different points in the United States, among other places, at St. Louis, Missouri, and Louisville, Kentucky. It is averred that on April 19, 1904, defendant, desiring to use this process of plaintiffs in the manufacture of candy, entered into a written contract with plaintiffs, whereby defendant agreed that if plaintiffs would fully inform defendant of the use of this formula, process or method, defendant would pay them, by way of royalty, one-fourth of the saving effected by its use as against the cost of candy made in the old method, on all candy manufactured by defendant in which the process was used, royalty payable on the 15th of each month following. Defendant also agreed to keep the formula, process and method a secret. It is averred that plaintiffs thereafter fully informed defendant of the secret process, and that defendant has, since the disclosure of it, used the process in several of its manufacturing plants in this state and elsewhere and has thereby made a great saving in the cost of manufacturing, but has not paid the royalty as agreed upon for the use. Wherefore it is averred that defendant became indebted to plaintiffs for royalties accruing from and including the month of April, 1904, to the 26th of September, 1905, in the sum of $1,800, for which, and costs, judgment is demanded.

The amended answer on which the case was tried, after a general denial, avers that on or about April 19, 1904, and for some time before then, defendant was more or less extensively engaged in the manufacture of hard boiled candy, the principal ingredients of which are cane sugar, commonly known as sugar, and corn sugar, commonly known as glucose; that on or about the date mentioned plaintiffs represented to defendant that they possessed and had originated a new and secret process whereby in making hard boiled candy the percentage of glucose could be very greatly increased without impairing its commercial character. Whereupon, it is averred, an agreement was entered into, that agreement being the one counted on by plaintiffs, but set out somewhat more fully than as pleaded by plaintiffs, the answer averring that in and by that it was agreed that defendant should have the exclusive right to use the formula, etc., within the limits of North America, except that the St. Louis Candy Manufacturing Company of St. Louis might use it, providing no less royalty than that to be paid by defendant should be paid by the St. Louis Candy Manufacturing Company; that it was further agreed that all parties to it would use their best endeavors at all times to keep the formula, etc., secret, unless mutually agreed by defendant and plaintiffs that it should be patented, and further that John Stuckes or whomsoever he should designate in writing should represent all the plaintiffs and his act or the act of whomsoever he might designate in writing should bind all the plaintiffs, the agreement to continue for the term of 17 years from its date or for the life of the patent rights, if the formula, etc., were patented, defendant to have the benefit of any changes that were made by the use of any other method which, during the term of the agreement, if adopted, would lessen the cost by corresponding reduction in the royalty. It is further averred in this amended answer that within the 30 days defendant offered plaintiffs ample opportunity for the disclosure and demonstration of the process, but that plaintiffs did not demonstrate and disclose satisfactorily to defendant that by the use of any process owned and originated by them the percentage of glucose in hard boiled candy could be increased without destroying the commercial character thereof, but did attempt a demonstration of their alleged process, which demonstration was a complete failure, in that defendant did not learn therefrom what the process was; that the candy resulting therefrom became sticky in time, as was usual for such candy when made with a high percentage of glucose; that plaintiffs were thereafter duly notified that defendant would have nothing more to do with them or their alleged original process and plaintiffs accepted the notice. It is further averred in this answer that never, either at the attempted demonstration, or at any other time, was there any new or secret process for the manufacture of hard boiled candy disclosed to defendant or any of its officers or agents by plaintiffs or any one in their behalf, and neither defendant nor any of its officers or servants at any time learned or discovered any new secret process from plaintiffs or any of them, either under the terms of the agreement or otherwise. It was further averred that on September 26, 1905, letters patent were issued to plaintiff Stuckes on the process for manufacturing hard boiled candy and that it was from the specifications accompanying the application for these patents that defendant for the first time learned the process plaintiffs claimed to own and to have originated, and that the process described in the specifications consist in making the hard boiled candy in two parts, a core and a jacket, the core consisting of a high percentage of glucose mixed with common fats, grease and stearine, the jacket being made in the same manner but being made without a mixture of fat and with a very high percentage of sugar. It its averred in the answer that the process, etc., of making hard boiled candy disclosed in these specifications was neither new nor original and was not originated or exclusively possessed by plaintiffs; that it was old and well known to the candy trade long prior to any negotiations between plaintiffs and defendant and that long prior to these negotiations and the execution of the agreement, defendant had experimented and used both the jacket method and the addition of fats, etc., in the manufacture of hard boiled candy, and that defendant's president so told plaintiff Hoke prior to the execution of the agreement. It is further averred in this answer that the process, etc., is not now, nor was at any time mentioned in the petition, the process used or employed by defendant, or that which defendant is now using in part in the manufacture of hard boiled candy, but that defendant has been, since October 1, 1905, using a process and formula discovered by its chemist through investigation and research, which process is extremely valuable to defendant and enables the use of a larger percentage of glucose and keeps the candy from becoming sticky and makes it a commercial article; that this process is a trade secret of great value and its disclosure would work great and irreparable injury to defendant, especially so if the disclosure were made to plaintiffs, who are largely interested in the candy business in competition with defendant.

A reply generally denying all this matter set up in the amended answer was filed and the case went to trial before the court and a jury.

At the close of the testimony introduced by plaintiffs the court gave an instruction that on the pleadings and evidence in the case plaintiffs could not recover, whereupon they took a nonsuit, with leave to move to set it aside. This motion was filed in due time and...