Case ID: daly-ny_10/html/0107-01.html
Source: Caselaw Access Project
Author: {"author": "Van Hoesen, J. Beach, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of the Assignment of John A. Swezey et al. to John A. Bagley for the Benefit of Creditors.
    (Decided June 5th, 1882.)
    Under section 21 of the General Assignment Act, an order may properly be made for the examination of one of the members of a copartnership which has made an assignment for the benefit of creditors, to ascertain whether a particular trade-mark belongs to the assigned estate, where the facts upon which the ownership of such trade-mark depends are within the knowledge of the partner for whose examination the order is made.
    Motion to vacate an order for the examination of one of the assignors in a general assignment for the benefit- of creditors.
    The copartnership of Swezey & Dart, composed of John A. Swezey and Joseph Dart, being insolvent, a general assignment for the benefit of creditors, executed by Joseph Dart alone, assigning the copartnership property and his individual property not exempt from attachment, was filed, in which -the claim of Buckingham & Paulson, copartners, and creditors of Swezey & Dart, was preferred. Upon their petition, an order was granted requiring Dart to appear and be examined in order to determine the interest of Swezey & Dart, and of their assignee, in a certain trade-mark, which, the petition alleged, Dart claimed and was about to use. Dart applied to vacate the order for his examination, and, should his application be denied., for a stay of proceedings pending an appeal from the order denying his motion.
    
      Robert S. Green, for Joseph Dart, assignor.
    
      Chauncey B. Ripley, for Buckingham & Paulson, creditors.
   Van Hoesen, J.

The Burtnett Case (8 Daly, 363) was not like this. There the avowed object of the examination was not to aid the assignee in the administration of his trust save in the way of obtaining testimony to be used in such actions as he might afterwards bring. Chief Justice Daly said that such testimony ought to be taken after those actions had been begun, and that the Code of Civil Procedure made ample provision for the examination of parties in pending actions. Here it is not shown that the testimony is sought for use in any action hereafter to be brought. The examination is, as I understand it, to ascertain whether or not certain property, called a trade-mark, belongs to the assigned estate. That can only be determined by learning the facts which give the trade-mark its value. If, as Chief Justice Daly said in the Hegeman Case (8 Daly, 1), this trade-mark is made valuable simply because the public believe that Dart’s personal skill, experience, and peculiar knowledge impart to the fabric a perfection which it would not possess if made by any other person, it does not belong to the assigned estate. If, on the other hand, the trademark indicates a certain fineness or quality in the goods, and does not owe its value to the public belief in the peculiar skill of the manufacturer individually, it will be part of the assigned estate, and will go to those who buy the factory which has heretofore produced the fabric.

The sub-rule of rule 73, Moak’s Underhill’s Principles of 'Torts (p. 632), thus states the law : Although a trader may have a property in a trade-mark sufficient to give him a right to exclude all others from using it, if his goods derive their increased value from the personal skill of the adopter of the trade-mark, he will not be allowed to assign it, for that would be a fraud upon the public. But if the increased value of the goods is not dependent upon such personal merits, the trademark is assignable.”

In Kidd v. Johnson (9 Reporter, 729), the United States Supreme Court held, as has Chief Justice Daly in several cases, that trade-marks affixed to certain articles manufactured at a particular factory, will pass with the factory when it is transferred by contract or by operation of law.

A trade-mark may be, and often is, transferred m invitum by proceedings in bankruptcy.

Now the question here is whether or not the trade-mark in question owes its value to the personal skill of Mr. Dart as a manufacturer. If it does it does not pass by assignment, for the public must not be deceived into buying goods which, though bearing his trade-mark, are not the product of his peculiar skill. If, however, it is the machinery, the factory, which has produced superior goods, the trade-mark goes with the machinery. In other words, the trade-mark is inseparable from the particular thing which gives it its value.

It is said that the trade-mark did not pass because it is not subject to levy under an attachment. That is not the test, conceding, for the sake of the argument, that it is not leviable. The statute of exemptions does not expressly exempt a trademark, and therefore the clause in the assignment on which Mr. Dart’s counsel relies does not apply. The assignment does not except property which is not subject to levy, but property which the exemption act declares to be exempt.

I think the examination should proceed. I have indicated the scope of the examination. In settling the order I will explicitly state what shall be the subject and the extent of the examination. I shall not grant, nor give leave for an application to any judge for, a stay of proceedings. Both parties may submit forms of an order drawn in conformity with the views above expressed.

An order in accordance with the foregoing decision, dated December 14th, 1881, was duly entered ; and on December 17th, 1881, another order was entered directing the examination of Dart by the creditors Buckingham and Paulson to proceed before a referee, and providing as follows :

That said creditors be allowed, in such examination, to ascertain whether or not certain property, called a trade-mark, belongs to the assigned estate; to elicit any facts which give the trade-mark its value; to ascertain any facts showing how and wherein it has since the assignment had a value, or how it has a present value; by whom the goods have been and are manufactured on which this trade-mark has been or is at present used; to show what qualities, if any, are indicated by its use ; and how, if at all, the trade-mark is made valuable; i. e., whether by a belief on the part of the public that Dart’s personal skill, experience or peculiar knowledge impart that which the warps would not possess if made by any other person than himself; or, on the other hand, whether the said trade-mark indicates a certain fineness or quality in the goods, and does not owe its value to the public belief in the peculiar skill of the manufacturer individually. The examination may also show whether or not the increased value of the goods is dependent upon the personal merits, that is to say, the skill of the adopter of the trade-mark; or whether it is dependent upon the machinery, the factory which has produced superior goods. It may be shown how the trade-mark was used by the assignors, on what -goods, and how, if at all, made profitable by them or either of them ; what goods were, have been, and are sold under that ticket; to whom the profits were, have been, and are paid over; and by whom used or appropriated; if there be any present use of the trade-mark, or if there has been since the assignment, it may be shown what such use has been and is, and for whose benefit; and what the benefits and profits are. Books and papers, containing evidence of any facts allowed under this order, can be required during the progress of the examination.”

The assignor, Dart, appealed to the general term, both from the order denying his motion to vacate the order for his examination, and from the order of December 17th, 1881, directing the examination to proceed before a referee. Upon the appeal the following opinion was rendered, June 5th, 1882.

Beach, J.

The objections appearing in the first order appealed from, relate to its being returnable only before the learned justice who granted it, and for want" of jurisdiction. The answer to the first objection is that it would appear from the record, that the witness appeared on November 18th, and ' presumably before the same judge. But were it not so, any act or proceeding commenced or returnable before or instituted or ordered by one judge, may be heard, continued, or completed before any other. (General Assignment Act, § 24.) I can imagine no reason for the objection to jurisdiction.

The examination of witnesses under this statute rests entirely within the discretion of the court, and applications therefor should be granted only in those cases where benefit will probably result to the assigned estate or those interested therein.

Whether or not this so called trade-mark passed by the assignment is a question not here involved. The facts which may control such a proposition are within the knowledge of the assignor, whose examination was directed. Information upon that subject it is proper for the creditors to have, because the inquiry is in aid of the assignment, and may be useful to them, in promoting action by the assignee, or as a basis for a proceeding against him for a violation of his duty, in not preventing illegal use of the name. The examination of witnesses denied In matter of Burtnett (8 Daly, 363), was one destined to involve matters within the issues of an action to be brought, and not for pertinent information preliminary to the suit. The application was made by the assignee, who appeared to have all the knowledge necessary for the assertion of his rights.

The order of December 17th, directing the examination to proceed before a referee therein named, is in my opinion too broad in its terms. The portion thereof between the sentence “ to ascertain whether or not certain property called a trade-mark belongs to the assigned estate,” and the last clause relative to books and papers, should be stricken out.

The order denying the motion to vacate the original order should be affirmed, and also the succeeding order as hereby modified, without costs of this appeal to either party.

Van Brunt and J. F. Daly, JJ., concurred.

Order accordingly.