Hartsough v. Hirshheimer

283 F. 759, 1922 U.S. App. LEXIS 2281
CourtCourt of Appeals for the Seventh Circuit
DecidedFebruary 28, 1922
DocketNos. 2944-2946, 2948
StatusPublished

This text of 283 F. 759 (Hartsough v. Hirshheimer) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hartsough v. Hirshheimer, 283 F. 759, 1922 U.S. App. LEXIS 2281 (7th Cir. 1922).

Opinion

PAGE, Circuit Judge.

On August 24, 1915, a royalty contract, herein called contract, was made in writing, fixing the terms and conditions under which Hirshheimer and Hamey, herein, called licensees, were to manufacture tractors pursuant to the then unpatented design belonging to Hartsough and Langlois, herein called licensors. On November 16, 1916, an agreement in writing, herein called tire cancellation, was made between the same parties and the Happy Farmer Tracrtor Company, canceling the contract. On March 11, 1918, licensors and Patrick J. Lyons brought suit in the United States District Court for the Western District of Wisconsin, on the equity side, against licensees and La Crosse Tractor Company, a corporation, charging fraud in procuring the cancellation, and praying that it be set aside, that the contract be held to be in full force, and for an accounting, etc. A decree was entered, which set aside the cancellation and restored the contract, and gave judgment against Hamey for all royalties, in accordance with the prayer of the bill, and against Albert Hirshheimer for a small sum only. The bill was dismissed as to La Crosse Tractor Company.

All parties except Langlois and the La Crosse Tractor Company have appealed. The appeals have been heard and considered together. No. 2944 is the appeal of Plartsough, whose chief complaint is that the court erred in not rendering the same judgment against Hirshheimer as was rendered against Hamey, and in dismissing the bill as to the La Crosse Tractor Company; in No. 2945 John F. Robinson and Minnesota Loan & Trust Company, as administrators of Patrick J. Lyons, deceased, appeal, and their principal complaint is the same as that of Hartsough; in No. 2946 defendant Hirshheimer complains of the setting aside of the cancellation, and urges that no judgment should have been rendered against him; and in No. 2948 Harney’s objections are directed to the same matters as they operate against him.

The evidence in the case consisted of depositions and exhibits and of testimony of witnesses in open court. There was an interlocutory decree and an order for accounting made by Judge A. L. Sanborn, be-[761]*761fore whom, the hearing was had, and after his death the final decree was entered in the District Court by Judge Geiger, who followed substantially the interlocutory decree and in most respects the findings made by the master. In Judge Sanborn’s memorandum of decision filed it is said:

“The defendants Hirshheimer and Hamey and the Happy Fanner Company by their authorized agents fraudulently misrepresented the intention of such defendants and that company in respect to the'future manufacture of tractors by it or its successors. This representation was relied on by plaintiffs, and was material. * * * The release agreement should be rescinded as prayed, as to Hirshheimer and Hamey, but not as to the La Crosse Tractor ¡Company.”

The contract, after various recitals, sets out the terms in considerable detail. Dicensors’ undertakings were, in substance, as follows: First, licensees’ rights were to be confined to the United States; second, licensors were to use their best efforts to obtain patents, and were to communicate further improvements to licensees, who should have the power to make and use the same in connection with the manufacture and sale of tractors, without payment of any further royalty; third, licensors would not give any rights in connection therewith to any person in the United States, nor themselves become connected with the manufacture, sale, or disposal of any tractor except in connection with said agreement.

Dicensees, in addition to the agreement to pay 3 per cent, royalty, were to do the following things: First, render full statement on the 1st of each month; second, give licensors access to the books; third, name and number of,each tractor was to be affixed thereon; fourth, parties were to agree upon a trade-mark, and the tractor was thereafter to be advertised under such name, with the exclusive right in the licensees to use the name and trade-mark as long as the conditions of the contract were fulfilled; fifth, in the event of licensors becoming reinvested with the rights of licensees, then the trade-mark to belong to, and title and right to use the same to be in, the licensors; sixth, the licensees “shall not, either directly or indirectly, use or employ the said invention, tractor, or any improvement or device therewith connected or in any manner'aid or be interested in the making or selling of any other tractor embodying any of the distinguishing features of this tractor, without the written consent of the parties of the first part [licensors], and the payment of royalties thereon in the same amount, manner and time as herein provided”; seventh, if licensees “manufacture or sell, or cause to be manufactured or sold, directly or indirectly, in whole or in part, any other tractor which embodies any of the distinguishing features or parts of this tractor, or any tractor which may be developed or improved from the design herein contracted on, then it is understood and agreed that any and all such tractors shall come within this contract, and shall be manufactured and sold under this agreement, and royalties shall be paid thereon to the parties of the first part [licensors] ”; eighth, licensees agree not at any time to dispute the validity of any patent applied for or to be used by said licensors in respect to said tractor, or any parts thereof; ninth, licensees may form a corporation for the manufacture of tractors, and the contract may be assigned to it, but “such transfer shall not in any way relieve the second [762]*762parties herein [licensees] from their liability to the first party [licen-sors] under this contract.”

Among the first things done by licensees was the incorporation of the Happy Farmer Tractor Company, with Hamey as president and both licensees as directors. The contract was assigned to the corporation by licensees, who received in payment therefor $152,600 of its full-paid capital stock. The corporation assumed and agreed to perform all the conditions and stipulations as provided in the contract to be performed by the licensees. Such transfer did not in any way relieve licensees from their obligations under the contract. So far as appears, there was no written agreement between licensees fixing their relations to each other. Therefore the contract and the conduct of the parties must be looked to in determining their relations and the obligations arising therefrom, if any, to licensors.

In November, 1915, the Happy Farmer Company made a contract with the Gile Tractor & Engine Company, of Eudington, Mich., for motors, and also made two contracts for the tractors themselves, one with the Sta-Rite Engine Company, of Ea Crosse, of which A. Hirsh-heimer’s son, H. J. Hirshheimer, was secretary and treasurer, and the other with the Wilcox Motor, Company, of Minneapolis. The Ea Crosse Plow Company, of which A. Hirshheimer was president, was a selling agent. The manufacture and sale of tractors seems to have been a success from the start, and there does not seem to have been encountered more than the usual difficulties attending the making and marketing of a new machine. A large number of machines was sold. The first price was $495, but was advanced until in July, 1916, it was $585. Hartsough filed four applications for patents, one in 1913, two in 1915, and one in 1916, upon all of which patents were ultimately issued.

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Bluebook (online)
283 F. 759, 1922 U.S. App. LEXIS 2281, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hartsough-v-hirshheimer-ca7-1922.