Opinion
05-27-1896
YOUNG LOCK NUT CO. v. BROWNLEY MANUF'G CO.
Charles L. Carrick and John Linn, for complainant. Flavel McGee and John Van Dorn, for defendant.
Bill for specific performance of a contract, brought by the Young Lock Nut Company against the Brownley Manufacturing Company. Defendant filed a cross bill, asking for the cancellation of the contract. Bill and cross bill dismissed.
Charles L. Carrick and John Linn, for complainant.
Flavel McGee and John Van Dorn, for defendant.
REED, V. C. The Brownley Manufacturing Company, on March 24, 1894, made a written agreement with the Young Lock Nut Company, by which the Young Lock Nut Company agreed to put upon the market in the United States an injector, known as the "Brownley Injector." The said company was to have the full and exclusive right to sell the same within the United States during the term for which the patents for the said injector were granted, or should thereafter be granted. The Brownley Manufacturing Company covenanted that it would not, during such time, grant any right to any other person to sell within the United States; that it would carry in stock, or manufacture, enough of such injectors to supply all demands of the trade, and to ship the same as they should be ordered, Then there is a covenant by which the Young Lock Nut Company agreed to advertise and use its best energies to introduce into the trade the said injectors. Among the covenantscontained in this agreement, one figures conspicuously. It is a covenant by the Young Lock Nut Company to sell the said injectors at the list price and cartage, and to allow such discounts therefrom as they might see fit, which discount is not, in any case, to exceed 50 per cent. of the list price, unless it is otherwise mutually agreed between the parties to the contract. The Young Lock Nut Company was to have a commission of 20 per cent. on all sales, to be computed on the selling price. By another clause in the agreement, there was a stipulation in respect to its termination. The clause was in the following language: "Either party may give thirty days' notice to the other party of its desire to terminate the contract, and, at the expiration of said thirty days, the question of such termination, and upon what terms and compensation, or damages, if any, to be made or awarded to either party, shall be referred to three disinterested persons," etc. On January 16, 1893, the Brownley Manufacturing Company notified the complainant that it considered the contract broken, and it would get other agents to handle the injectors. The bill charges that the company appointed one Edward T. Keating sole agent for the sale of said injectors east of the Mississippi and Ohio rivers and the state of Ohio, and that said Keating had been for some time selling, and the Brownley Manufacturing Company had been filling such orders, and that the Brownley Manufacturing Company had been negotiating with other persons to take the agencies. The prayer of the bill is that the defendants be decreed to specifically perform the contract, that it be enjoined from selling or delivering such injectors, except through the complainant, and that an account of past transactions between the parties shall be ordered.
In my judgment, there should be no decree for specific performance: First, so far as the testimony exhibits the condition of the parties and the business, there is no inadequacy in the legal remedy open to the complainant, for the alleged breach of the contract, by an action at law. Secondly, the details involved in the execution of the contract are such that a court of equity will not usually undertake a supervision. As Sugden, L. C, remarked in Gervais v. Edwards, 2 Dru. & W. 80-85, the court acts when it can perform everything in the terms specifically agreed upon; and, when they come to the execution of a contract depending upon many particulars, but of uncertain events, the court must see whether it can be specifically executed. The court must execute the whole contract. Third. The conduct of the complainant has not been such as to make it equitable that this court should order the other side to specifically perform. Apart from the question whether the complainants have used, in the terms of the contract, their best energies in introducing the Injector, I think they have manifestly violated their covenant in their dealings with Newkirk. The alleged sales to Newkirk were only colorably such. He was really the agent of, and not the purchaser from, the complainant. The result of treating the injectors sold through Newkirk as injectors sold to Newkirk was to impose upon the defendant the expense of making these sales, which expense, under the contract, was to be borne by the complainant, and for which it was to receive 20 per cent. commission upon the price for which they were sold. For these reasons, there should be no decree for specific performance.
In respect to the prayer for injunction, the last-named reason applies. While courts of equity will sometimes enjoin the breach of a negative covenant contained in the contract, which contract it will not specifically enforce (Lumley v. Wagner, 1 De Gex, M. & G. 604), yet, where the conduct of the complainant in executing its side of the contract is violated, it will not exert the power. Such an injunction is indirectly a decree for specific performance. The objection to specific performance on the last ground mentioned applies, in all respects, to the prayer for injunction. A decree for specific performance would compel the defendant to perform its part of the contract, while the complainant has not performed, and does not propose to perform, its side of the agreement.
Nor do I see any ground for an account in equity. It seems to be asked as an incident of the other relief sought. Such relief having failed, this also must fail. Besides, the account can be fully examined in an action at law to recover any balance due. These remarks dispose of the alleged equity of the bill.
The defendant, however, in his cross bill, prays for independent relief. It asks for a decree directing this contract to be rescinded and canceled. Now, it does not follow that the court will rescind a contract on the prayer of one party, because it refuses to direct it to be specifically performed on the prayer of the other party. 1 Story, Eq. Jur. § 693. The head of equity jurisdiction, within which bills for rescissionare arranged, is the power to entertain bills filed quia timet. Such bills are exhibited for the rescission or cancellation of an instrument (for these bills are identical), on the ground that such instrument may be vexatiously or injuriously used against the complainant when the evidence to impeach it may be lost, and it may throw a suspicion or cloud over his title or interest. It is a matter of sound discretion in granting or refusing such relief. Id. So far as the exercise of the power to rescind or cancel rests upon fraud, so far as I have examined them, they display instances where the execution of the instrument was induced by the fraud of the defendant. Where he, by direct deceit or false representations, induced the complainant to execute the instrument, then, upon discovering the fraud, and promptly filing a bill for cancellation, the court will, if it can, put the parties in statuquo, and usually order the instrument to be delivered up for cancellation.
It is perceived that the present agreement does not stand among this class of fraudulently induced instruments. It was not executed by means of any kind of deceit. The sole ground for cancellation is that, in carrying out the terms of the contract, the Young Lock Nut Company did not execute its side according to its covenants, and attempted to gain more than it was entitled to, by pretending to sell to one, when, through its agent, it really sold to another. Now, I can conceive of a case of such fraudulent conduct by a party to a contract as would indicate a clear repudiation of any intention to carry out its terms, and I would, therefore, confer upon the other side the right to rescind; and it may be that a court of equity would decree, in such case, the cancellation of a contract. I have, however, met with no such case. But. if such be the power of the court, I do not deem this a case for its exercise. Among other reasons for such conclusion is the existence of a clause for arbitration. That clause seems to contract that not only the terms and conditions upon which the contract shall be terminated shall be referred to arbitrators, but that the right to terminate it shall also be referred in the same manner. It is true, of course, that the jurisdiction of a court, whether of law or equity, cannot be excluded by an agreement to arbitrate. But the party who invokes the aid of a court in violation of such contract remains liable to an action for the breach of his agreement to arbitrate. Now, a decree ordering this agreement to be delivered up for cancellation would nullify the clause providing for arbitration, and, ipso facto, destroy any right to bring an action for the violation of its provisions. For these and other reasons, the decree prayed for in the cross bill will be refused.
I will advise a decree dismissing the bill of complainant and the cross bill of defendant.