Dr. S. A. Richmond Nervine Company v. Richmond

This was a bill in equity filed by the Dr. S. A. Richmond Nervine Company, a Missouri corporation, against Samuel A. Richmond, the founder of the corporation, and a citizen of Illinois, to enjoin the use of a certain trade-mark, and to recover damages and profits for the unlawful use of the same.

The facts of the case were substantially as follows: The defendant Richmond, prior to December, 1877, being engaged at St. Joseph, Mo., in the business of making and selling a preparation known as 'Samaritan Nervine,'-a medicine for the relief of epileptic fits and similar diseases,-adopted as a trade-mark the figure of a man, in an epilectic fit, falling backwards, with his arms extended, and his cane and hat dropping to the ground, with the word 'trade' printed in small capitals on the right side of the figure, and the word 'mark' printed in small capitals on the left side. This trade-mark was duly registered in the patent office, March 26, 1878, and was imprinted upon the wrappers which inclosed the bottles in which the medicine was sold, and was used from the day of its adoption, in 1873 or 1874, continuously, until a charge in the size and character of the bottle and trademark was made, in the spring of 1884. Dr. Richmond met with considerable success in the sale of his medicine, and was reasonably prosperous until just prior to 1882, when he became embarrassed and unable to pay his debts,-the result of engaging in an hotel venture in St. Joseph, which proved disastrous.

In May, 1882, there was organized by Richmond and two of his clerks, under the laws of Missouri, a corporation under the name of the 'Dr. S. A. Richmond Medical Company' (hereinafter called the 'Medical Company'), for the purpose of manufacturing and selling the Samaritan Nervine and nervine pills. The capital stock of the corporation was fixed at $5,000, divided into 50 shares, of which James H. Richmond, a brother of the defendant, was named as the owner of 48, and John Albus and Michael Draut, the other two incorporators, of 1 share each. The property of Dr. Richmond, viz. the receipt for making the nervine and pills, the right to manufacture them, the trade-mark of the man falling in a fit, the outfit or plant for manufacturing the medicine, with the good will of the business, were assigned by Dr. Richmond to the medical company, in consideration of $5,000,-the amount of the capital stock.

Long prior to this, however, and in December, 1871, defendant Richmond was married to Eva E. Shannon, who appears to have received from her father some money, together with the proceeds of some real estate, which she loaned to her husband to aid him in the prosecution of his business. To secure her for the money thus contributed, James A. Richmond, the doctor's brother, on May 5, 1882, assigned to her 47 shares of the stock he held in the medical company. These shares she held until the company made an assignment for the benefit of its creditors, and ceased to do business, as hereinafter stated.

Dr. Richmond became the general manager of the company; had charge of its business; superintended the preparation and putting up of the medicine; purchased bottles, wrappers, etc.; attended to the advertising and sales,-and was paid by the company, for his services, a salary of $200 per month, and, in addition, was allowed, free of cost, such medicines made by the company as were needed to supply the patients he was personally treating. He subsequently became president, and also acted as treasurer, of the company, which advertised the Samaritan Nervine very extensively, using the trademark, bottles, and wrappers assigned to it by Dr. Richmond. The company continued prosperous from its organization, in May, 1882, until May 13, 1884, when it made an assignment for the benefit of its creditors, under the laws of the state of Missouri.

Before this, however, and in November or December, 1883, Dr. Richmond, who was then president and manager of the company, recommended a change in the size of the bottles, and the adoption of a new trade-mark, to wit, an eight-ounce bottle, with his own portrait blown in the side, with the words 'Samaritan Nervine' and 'New Style,' and that the new trade-mark consist of a portrait of himself, surrounded by four globes or hemispheres, stamped or engraved on the outside wrapper of the bottle. This 'new style,' as it was called, was adopted by the company. Dr. Richmond gave orders to the Kellogg Engraving Company, of Chicago, for engraving the new trade-mark, and early in 1884 ordered a large quantity of eight-ounce bottles from a firm in Pittsburgh, to be made in accordance with the new style adopted by the company, together with cartoons with the trade-mark printed thereon. Upon the adoption of this new style of bottle and trade-mark, a circular was prepared by him, notifying customers of the company, and the trade generally, of the change made by the company in the size of the bottles, the wrapper, and the trade-mark. This circular described the new bottle and the trade-mark; announced that they would go into use on the 1st day of May, 1884, and that medicines put up in any other style would not be genuine. They were sent to the trade generally, in the United States and Canada. The old style of bottle, and the old trade-mark, of a man falling in a fit, were discarded, except as to stock on the market, which had been prepared prior to the change.

On May 13, 1884, a meeting of the directors was held, at which Dr. Richmond announced that, owing to certain claims being pressed, which the company could not pay, it was insolvent; and upon his recommendation a resolution was adopted, directing him to execute an assignment of the property, effects, assets, and business of the company for the benefit of its creditors. An assignment was executed to one John F. Tyler the same day, including all the property of the company, advertising materials, printed matter, circulars, electrotypes, medicine bottles, and materials on hand for the manufacture of medicine, and all and every article of property or right belonging to the company.

The assignment appeared to have been entirely unnecessary, and was probably a scheme of defendant's to get possession and control of the company's assets; but it seemed to have been regularly made, and the assets appraised upon an estimate placed upon them by defendant at the sum of $998. Immediately thereafter, to wit, May 16, 1884, the property and assets of the company were sold to one C. W. Wolverton, of Tuscola, Ill., who was the attorney of James A. Richmond, for the sum of $1,000,-$2 more than the appraised value. Wolverton promptly assigned whatever interest he took by the purchase to one Powell, to whom the assignee refused to deliver the assets, having discovered the fraud; and Powell sued out a writ of replevin, and thereby got possession of such corporeal property as the officer holding the writ could take and deliver.

It appeared that Dr. Richmond went to Chicago in July, 1884, and began there to manufacture the Samaritan Nervine; to use the bottles and trade-marks that had been adopted and procured by the medical company before the assignment, including both the old and new trade-mark; and also to use the good will of the company. He carried on this business under the name of the World's Medical Association for about three months, under a pretended lease from Powell, the second vendee from the assignee of the medical company.

As soon as the sale of the property and effects of the company for $1,000 became known to the creditors, they filed a petition in the circuit court of Buchanan county, Mo., to set aside the sale to Wolverton, upon the ground that it was fraudulent and void as against creditors; and the court, on hearing the evidence, on June 23, 1884, decided that the sale was fraudulent and void, and ordered that the property be resold for the benefit of creditors, which was done, and on August 28, 1884, James A. Richmond purchased it for $25,000, which sale was subsequently confirmed by the court. Richmond paid $2,500 on the purchase, and gave security for the balance ($22,500), which, however, was never paid by him. On December 11, 1884, the 'Dr. S. A. Richmond Nervine Company,' plaintiff (hereinafter called the 'Nervine Company'), was organized under the laws of the state of Missouri by James A. Richmond, Michael Draut, and John Christ, Richmond being elected president. A resolution was then adopted electing Dr. S. A. Richmond treasurer and general manager of the company, at a salary of $200 per month, with power, together with the president of the company, to execute all contracts for carrying on its business.

James A. Richmond transferred to the company his interest in the receipt for the manufacture of the medicine, the trade-mark, and all his personal property, and an assignment was also obtained from Powell of any right he claimed to have acquired by reason of the original sale by the assignee to Wolverton. The nervine company then became the sole and exclusive owner of all the property and effects of the original company, which had been assigned to Tyler for the benefit of its creditors, together with the right to manufacture and sell the medicines, and to use the trade-marks, bottles, wrappers, etc.

In January, 1886, after the company had been doing business about two years, Dr. Richmond, having become involved in certain legal proceedings, ceased his connection with the company, and was subsequently sent to an asylum, where he remained until November, 1887. During this time his wife, who received 17 shares in the nervine company, took charge of the business, and successfully conducted it until it was enjoined by the court below in this suit. After he left the asylum, Dr. Richmond did not return to his family, but went to Tuscola, Ill.; began the manufacture of the nervine, as he had done in Chicago, using the trade-marks, bottles, wrappers, and good will of the company, without its knowledge or consent,-claiming that everything was his own, in equity, at least. He subsequently had the trade-mark, consisting of his portrait surrounded by four globes or hemispheres, registered as his own.

Thereupon the doctor was notified by the company to cease manufacturing the medicine and using the trade-mark, and upon his refusal this bill was filed against him, praying for an injunction and an accounting.

To this bill Dr. Richmond filed an answer and a cross bill, denying that the plaintiff company owned, or had ever owned, the trade-mark in question, or any of the interests claimed by it, or had ever used, or had a right to use, the eight-ounce bottles, or any trade-marks in connection therewith, except by his permission, and subject to his right to terminate such use. He averred that the trade-marks and good will of the business were his own,-that he only leased them to the plaintiff company; denied that his wife ever had any interest in the stock of the old or new company, and that whatever stock she held was his, and held only by her as trustee for him.

Upon a hearing upon pleadings and proofs, a decree was entered dismissing the original bill, and decreeing, upon the cross bill, that the nervine company be enjoined from making or selling the medicines, or using the bottles, wrappers, or trade-mark of the portrait of Dr. Richmond surrounded by the four globes, known as the 'new trade-mark.' From this decree, plaintiff appealed to this court.

Benjamin Butterworth, for appellant.

''Wm. Henry Browne,'' for appellee.

Mr. Justice BROWN, after stating the facts in the foregoing language, delivered the opinion of the court.