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it gives an absolute right to sell; that it confers absolute seisin upon Nussbaum; and that the statute and repeated decisions of the supreme appellate court of the state leave it no longer open to dispute that under such a conveyance the title absolutely passes. In support of this proposition, among many others, the following cases are cited : Roland v. Coleman, 76 Ga. 652; Biggers v. Bird, 55 Ga. 650 ; Carswell v. Hartridge, 55 Ga. 412; Johnson v. Trust Co., 55 Ga. 691 ; Behn v. Phillips, 18 Ga. 466. In reply to the contention of the defendant's counsel, the plaintiffs make the broad assertion that, if the deed or other instrument to alienate or change the title is given to secure a debt, with the right existing, either by operation of law or by express reservation, to redeem the property pledged, it is neither an alienation, nor, in the absence of an express stipulation identifying the conveyance and forbidding it, such a change of the title as will avoid the insurance. In the maintenance of this proposition great reliance is placed upon the decision of the Supreme Court of Georgia in Insurance Co. v. Feagin, 62 Ga. 515. In that case the policy made the insurance void in case of “any sale, transfer, or change of title in the property without the company's consent indorsed on the policy.” It was pleaded there that the insured had no title at the time of the insurance. They had simply an interest under a bond for titles. The property had been previously transferred to one Ogden as trustee, to secure a debt due to a trust association, and the trustee had in the same conveyance bound himself to reconvey to the assured on the payment of the debt. In that case, also, there was the same language of conveyance as in the deed before the court. There, as here, possession was left in the grantor, the assured. There, as here, the grantee had the power upon default to take possession of the property and to bargain and sell at public or private sale, to execute titles, and to give possession to the purchaser to apply the proceeds—first, to the payment of the note; and, second, to account for any balance to the parties insured. There is this difference: In that case there was an indorsement on the policy that the loss, if any, is made payable to the trust association, viz., the debtor intended to be secured; and this was done with the consent of the insurance company. The jury found for the plaintiff, and a motion for new trial was made upon the following ground, among others: "Because the court charged that the deed to Ogden, trustee, was only a lien, and did not without more invalidate the policy; that it did not amount to a sale, there being no change of possession or step towards that end.” Nussbaum v. Northern Ins. Co. (C. C.) 37 Ted. 527, 1 L. R. A. 704. “This is an attempt on the part of the creditors of William Miller to administer his estate in bankruptcy. It appears that an important part of the estate is about to be sold by the Thomasville Loan & Improvement Company by virtue of a deed made by the debtor, in which, under the law of Georgia, he conveyed title to that company. This, nevertheless, in equitable contemplation, is security only for debt.” In re Miller (D. C.) 118 Fed. 360. And in the case of New England Mortgage Security Co. v. Gay, 145 U. S. 123, 12 Sup. Ct. 815, 36 L. Ed. 646, the highest court in the land seems to have characterized this peculiar instrument “a mortgage.” If a security deed declared by the state statute to be an absolute conveyance is held in the courts of the United States to be merely a mortgage, with how much stronger reason can it be argued that a conveyance not in accordance with such a statute, but on its face merely a security for the payment of a debt, and containing conflicting characterizations, a power of sale, and a provision for the passing of the fee-simple title out of the grantor, is merely a mortgage. It matters not what the parties themselves call the instrument, the court will determine from the context of the paper what in law it really is. Brantley v. Wood, 97 Ga. 755, 25 S. E. 499,
The transaction between the parties to the conveyance was the borrowing and lending of money, and the taking of the paper in question as security for the debt. The grantor remained in possession of the property, and a part of the personalty therein conveyed was sold by him in the usual course of trade, and other parts have passed out of the possession of the grantor and of his successors in estate. The transaction must therefore be held to constitute a mortgage.
In marshaling the assets of a bankrupt estate the court is confronted with numerous contests for the right of priority. In this case, as against this particular property, there are claims for taxes in favor of the state of Georgia and the county wherein the property is located, claims of laborers who have performed services and have rights against this property, and various and sundry other claimants seeking establishment of their right against the same. The property is manifestly fast deteriorating in value, and there is a vast amount of expense attending the keeping of the same. At best, the objector can only hope to be paid the balance due him on account of his loan-balance, I say, because $3,500 has already been realized from the sale of a part of the property claimed by this objector—and so it occurs to me that it would be far more expedient and for the benefit of all parties concerned that the property belonging to the estate in general, which is very small, and this property in particular, should be sold at public outcry at the earliest opportunity after due advertisement; the property of the general estate being sold separate and apart from the property claimed by the objector, and the proceeds held separately to await the determination of this contest, and that hereafter the rank and dignity of the objector's claim may be fixed and established against the proceeds of the sale as easily as against the property itself.
An order will therefore be entered granting the prayer of the trustee for the sale of the assets of the estate, in accordance with the foregoing opinion.
D. W. Krauss, for the trustee.
A. T. Woodward, C. L. Smith, and J. M. Wilkinson, for B. P. Jones.
SPEER, District Judge.
District Judge. In this case, after due consideration, the court adopts as its own the singularly clear, satisfactory, and attractive opinion of Max Isaac, Esq., referee in bankruptcy, and directs that order of affirmance be entered.
WELLS & RICHARDSON CO. V. ABRAHAM et al.
(Circuit Court, E. D. New York. April 20, 1906.)
1. INJUNCTION--CONTRACTS--INDUCING BREACH.
Complainant manufactured a proprietary medicine, which it sold under a trade-mark and only to wholesale dealers under contracts which bound them to sell, only at a certain price, and only to retail dealers who also had contracts with complainant fixing the price at which the medicine should be sold to consumers. Held, that such contracts were legal, and that complainant was entitled to an injunction restraining defendants, who, not having entered into any contract with complainant, were therefore not entitled to buy and sell the medicine, from inducing any purchaser who had made such a contract to violate the same by selling to defendants, or from knowingly purchasing from any such person in violation of his contract, and also from selling the medicine to consumers after the cartons and labels containing the directions for its use had been removed
from the bottles. 2. SAME—EVIDENCE OF INTENTION,
The fact that defendants, who were shown to be selling large quantities of the medicine to consumers at less than the prices fixed by complainant, before doing so removed from the bottles all cartons and labels containing numbers which would enable complainant to trace the original purchaser, in the absence of evidence showing to the contrary, was sufficient to authorize a finding that defendants knowingly participated in the breaches of the contracts between the sellers and complainant.
In Equity. On motion for preliminary injunction.
Steuart & Steuart (Frank F. Reed and Edward S. Rogers, of counsel), for complainant.
Paul Grout (Edmond E. Wise, of counsel), for defendants.
THOMAS, District Judge. The complainant owns a secret process for making a medicinal product known as “Paine's Celery Compound,” or “Celery Compound,” for many years, extensively sold under a registered trade-mark showing a head of celery. The article is placed in bottles bearing the word “Paine's” on one side, and the words “Celery Compound” on the opposite side, while on the cork is a label showing the trade-mark and carrying the words “Paine's Celery Compound.” On a third side of the bottle is a label showing a larger picture of the trade-mark, whereon is printed in large letters, “Celery Compound,” while below are the words "Paine's Celery Compound. A True Nerve Tonic, an Active Alterative, a Reliable Laxative, and Diuretic. It Restores Strength, Renews Vitality, Purifies the Blood, Regulates the Kidneys, Liver and Bowels. Price $1.00. Prepared by Wells, Richardson & Co., Sole Proprietors, Burlington, Vt.” On the fourth side appears, in English and German, the following:
"Directions for using Paine's Celery Compound. The dose should be graduated to suit the patient, enough being taken to act upon the bowels and keep them regular, but lessening the dose if it acts too strongly : for adults, from a teaspoonful to a tablespoonful in a little water four times a day, before eating and at bed time; lessen the dose for children according to age. In bad cases of Neuralgia and Rheumatism double the above dose for the first two days, and in severe and obstinate cases, or in any disease complicated with Scrofula, add one-eighth ounce of Iodide of Potassium to each bottle, then use the medicine faithfully. Prepared by Wells, Richardson & Co., Sole Proprietors, Burlington, Vt."
On each of the two labels last described are stamped numbers, whereby the persons to whom the complainant delivered the bottle may be traced. Around the bottle is wrapped a pamphlet, showing the picture, and noting the history, of “Prof. Edward E. Phelps, M. D., L. L. D., the Eminent Discoverer of Paine's Celery Compound," followed by a disquisition on the nervous system, the relation of the nerves to the stomach, liver, kidneys, and heart, a great number of pictures of, and communications from persons, who relate their experiences in the use of the medicine, and much other matter intended to illustrate the curative qualities of the medicine. The bottle and pamphlet are packed in a carton, one side of which shows, in a variety of colors, the matter appearing on the third above-described side of the bottle. Another side states that the compound is “A Reliable Medicine” for certain diseases enumerated, and gives the directions for its use as stated on the bottle. The same substantially is repeated in German on another side, while the fourth side announces for what the compound is a remedy. In each carton is an envelope containing samples of “Wills' English Pills,” and recommending their use in certain cases supplementary to the compound.
The defendants, under the name of Abraham & Straus, are among the great merchants in New York, and sell at a cut price the com
pound, in the original bottles, stripped of carton, pamphlet and all else, including labels, save the small circular label on the cork above described. The defendants do this in defiance of complainant's forbiddance that they sell the goods at all, unless they comply with the “direct contract system,” instituted by the complainant. Under such system the complainant sells its product only to wholesale or jobbing druggists who will agree with the complainant that they will only sell at stated prices, and discounts to such dealers as have executed contracts with complainant agreeing not to sell for consumption except at the prices fixed by the complainant, and that they will not sell at all to dealers who have not similar contracts with the complainant. This system opens the field to all dealers who will agree to observe the fixed prices, and limit sales for the purpose of reselling to those who have agreed to such terms. The defendants knew of this system. They rejected its opportunities. They, by themselves, their agents, or other persons, induced or co-operated with some vendee bound by such contract to sell them the product, and to save their vendor the penalties of a breach of the contract the defendants stripped the packages to the bare glass, save the miniature label on the cork, and in this naked form have and are marketing the compound. The defendants remove the cartons and labels because they carry stamped thereon serial numbers, whereby the bottle may be traced from the complainant to the retailer or wholesaler. This preserves the secrecy of their operations. The result is that the defendants have and sell the product made by complainant, because they surreptitiously obtain it from persons who have agreed not to sell it to them.
The defendants urge that the evidence does not show that they purchased it from a person interdicted by the contract from selling it. When a bottle of medicine is despoiled of its very prescription, the statement of the diseases for which it may be used, and this for the obvious purpose of shielding a contract breaker, the evidence of connivance and participation in the breach of the contract is sufficient. The doubt that Judge Lacombe entertained in Bobbs-Merrill Co. v. Straus, decided August 14, 1904, does not 'exist in the case at bar.1
But has the complainant a remedy in this suit? The contracts with the complainant's vendees are legal. Resort need not be had to the voluminous briefs submitted, for the defendants in their brief say:
"The validity of these contracts as between the parties is nowhere attacked. On the contrary, the whole argument proceeded on the theory that, though as between the parties thereto such contracts could probably be enforced, third parties who did not assent thereto, and who were under no contractual obligation to the complainant, could not in the absence of proof of fraud or conspiracy be compelled to observe such contracts, in the case of articles made under secret processes, any more than if such articles were not made under
1In the memorandum filed by Judge Lacombe in the case of Bobbs-Merrill Co. v. Straus, he says that where the record does not show whether defendants bought from a jobber, thus obtaining a reduced price or from a person who had already paid the full retail price, the court ought not to undertake on preliminary motion to render a decision which possibly could not be reviewed by the appellate court.-Editor.
secret processes, and that the patent cases which granted such remedy had no application to the case at bar."
The concession as to the legality of the contract accords with the decision in Park & Sons Co. v. National Wholesale Druggists' Association, 175 N. Y. 1, 67 N. E. 136, 62 L. R. A. 632, 96 Am. St. Rep. 578; Garst v. Harris, 177 Mass. 72, 58 N. E. 174; Garst v. Charles, 187 Mass. 144, 72 N. E. 839.
But the defendants contend that the defendants cannot be enjoined from purchasing the goods, or selling them after purchase. That proposition in connection with the facts appearing amounts to this: That che complainant's vendees are legally bounden by contract not to sell to the defendants, but that the defendants may, so long as they use neither force nor fraud, intentionally co-operate with them to do an illegal act—that is, break the contract—and be immune. The briefs . abound in decisions, but no precedent should be required. A. is intentionally doing B. a legal injury. C. intentionally induces A. to do the injury. He solicits that it be done. He pays money to the doer of it to tempt him to do the act; that is, A. and C. unite, connive, agree to procure A. to break his contract, so that C. may get complainant's goods, which the latter has committed to A. upon the trust that they shall not be delivered to C., and others similarly situated. In such an instance the law should have sufficient inherent integrity to enable it to lay fast hold of A. and C., and stop both such deliberate breach of obligations and the advantages that the persons implicated in it are gaining. The law permits the complainant to use the direct contract system to maintain the price of its medicine, so that it shall not be the subject of capricious sales at varying prices. The complainant is under no obligation to sell to the defendants. The defendants have no right, equitable or legal, to insist upon sales to them. The complainant sells to others only upon their solemn stipulation that they will not sell to persons situated as are the defendants. The defendants induce them to break such contract, and take part with them in breaking it, and get the goods, not by rightful purchase, because their vendors have no right to transfer the title to defendants, but by procuring these vendors to deliver to the defendants the goods, knowing that they have agreed with the complainant, upon its parting with title to its vendees, that the latter would not give title to these defendants. Remember that it is conceded that the contract is good and legal between the parties. If so, the defendants have attempted to take title from a person who has no right to transfer the legal title to any person of the class to which the defendants belong. Hence the defendants get goods by procuring the avoidance of another's obligation that he will not give it to them. Whatever may be said argumentatively, no sane conscience can justify one man inducing another to betray a legal obligation. The point of wrong should not be missed. It is not primarily in selling a product which the makers have limited to be sold by others, of which the defendant is not one. The very vital wrong is that the defendants have obtained and are obtaining the goods by inducing others, not entitled to sell to them, to make sale to them, whereby the defendants