Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.
Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.
This is an appeal from a decree dismissing for want of equity appellant's bill charging appellees with unfair competition and seeking an injunction and damages.
For some years before 1922, four corporations, Detmer Woolen Company, Bruner Woolen Company, Mason & Hanson, Inc., and Salzer & Wolf, Inc., had carried on in the United States sale of woolens and trimmings to tailors by supplying to the trade samples, mounted on style cards, which in turn were put into boxes with order blanks, envelopes addressed to the vendor and explanatory literature. This matter at times made use of certain trademarks registered in the names of the four corporations. Appellee Kaiser was an officer and stockholder in the Detmer Woolen Company.
In 1922 the four corporations conveyed their property, including trade-marks, to a new corporation then organized under the name Detmer, Bruner & Mason, Inc., which we, in accord with counsel, shall refer to as the old corporation. This company did not manufacture but purchased woolens and trimmings in the market and sold them to retail merchants by the same means and in the same manner as the predecessor corporations had done. At no time did the old corporation make use of the registered trade-marks owned by the four merging companies but it registered and used certain other trade-marks. After the amalgamation, until the period pertinent in this cause, the Detmer Woolen Company was not the owner of any property or trademark and did not conduct any business.
In January, 1933, the old corporation determined to liquidate. Appellee Kaiser was vice president and active in the liquidation. The business of the old corporation had always been divided into two branches, designated as the New York and Chicago branches. The new Yrk branch included roughly speaking the states east of Ohio; the Chicago branch covered the remainder of the United States.
On January 12, 1933, appellant made a proposal to the old corporation which the latter accepted. Thereby, for the sum of $28,000, appellant acquired the merchandise located in Chicago, including the right, in connection with its own name or that of the Ferris Woolen Company, to use "Successor to Detmer, Bruner & Mason, Inc. Chicago," in "any territory that is now being served by the Chicago branch." It was provided that the old company should not thereafter sell any merchandise in this territory or authorize any one else to do so under its name. The purchase covered also all customers' records and stencils, history cards, "Rand File" records, sample lines, and trimming books then in the office or in the lands of the trade. The old company agreed that appellant, at its own expense, might send under the old company's name and on its letterhead, to be approved by it, an appropriate circular letter to the trade in the Chicago territory stating that the sample lines and trimming books in the hands of the trade thereafter belonged to appellant and that appellant had undertaken to fill all future orders.
In pursuance of this contract, on January 29, 1933, appellant sent out, under the name of the old company, a circular letter which had been approved by the latter, in which it was said: "We are discontinuing our Chicago Branch, but having in mind the best interest of our customers, arrangements have been made with the Ferris Woolen Company, 325 W. Jackson Blvd., Chicago, Illinois to continue supplying our customers in the territory served by this branch * * * In making this arrangement, we feel that we have chosen a firm experienced in the Sample Woolen and Trimming business, and one that will be able to continue the same satisfactory service which it has been our pleasure to render you for so many years. Ferris Woolen Company, who will now succeed us in the territory served by our Chicago branch, will write you in a day or two advising when their new spring and summer lines will be ready for distribution." Simultaneously, appellant forwarded to the customers of the old corporation in the Chicago Territory, under its own name, as successor to Detmer, Bruner & Mason, Inc., another letter similarly approved by the old corporation, in which it announced that it had succeeded the old corporation in the Chicago branch and that in pursuance with this arrangement all orders received from the old corporation's customers on or after January 16 would be filled by appellant.
BEtween January 12 and May 1, 1933, style cards with sample lines of woolens attached to them containing the words "Ferris Woolen Company, Successor to Detmer, Bruner & Mason, Inc., Chicago," in 3,415 sample boxes, containing approximately 275 to 300 style cards each, at a cost of approximately $27,000, were sent by appellant to the trade. At that time there were in the hands of the trade several thousand old style cards and trimming books. It is apparent that it was the intent that any business ordered from those style cards and order books should reach appellant.
On March 28, 1933, the Kaiser Corporation purchased from the old corporation the merchandise of the New York branch, the furniture and fixtures of the company wherever located, the accounts receivable, trade-marks and capital stock of the four corporations previously merged in the old corporation, and the list of customers of the New York branch. This contract recited that the old corporation assigned to the purchaser the good will of the business, subject, however, to the agreement between the old corporation and appellant, copy of which was made a part of the Kaiser purchase contract. It was agreed in the latter that the old corporation should cause its stockholders to change its name so that the purchaser might form a new corporation with the name of the old one or some similar one; but it was provided that nothing contained in the contract should authorize such corporation so organized to sell in any territory served by the Chicago branch of the old corporation.
On January 12, 1933, the old company changed its name to D-B-M Corporation and Kaiser caused to be incorporated under the laws of New York a new corporation with the name of Detmer, Bruner & Mason, Inc. This will be referred to as the new corporation.
Thereafter in April, 1933, Kaiser came to Chicago and began business, selling woolens and trimmings in the Chicago territory under the name of Detmer, Bruner & Mason, Inc. On May 5 he sent to the Chicago customers of the old corporation a letter under signature of Detmer, Bruner & Mason, Inc., saying, "You are one of our old and valued customers. * * * We think you once again for your past patronage. * * * The business of Detmer, Bruner & Mason, Inc., has been re-established in Chicago at our old location, 205 West Monroe Street. * * *" At that time the new corporation had no old or valued customers. It had no past patronage. It could not properly re-establish the business of the old corporation if the covenants of the contract of sale to appellant were valid. The plain purport of the letter was that the new corporation was in fact the old one and that it had re-established and was continuing its business.
At the same time Kaiser, under the name of Detmer, Bruner & Mason, Inc., distributed to the customers of the old corporation in the Chicago territory sample boxes, containing woolens, mounted on style cards, and order blanks and return envelopes bearing the name of Detmer, Bruner & Mason, Inc. These were closely similar to the sample boxes, style cards, order blanks, ...