NATIONAL STARCH CO. v. KOSTER.

(Circuit Court, S. D. New York. June 6, 1906.)

1. TRADE-MARKS AND TRADE-NAMES-UNFAIR

DRESS.

COMPETITION-SIMILARITY OF

Where articles of merchandise of the same kind are made by different manufacturers in the same city, the name of which appears on the packages, one having a long established reputation, a later manufacturer is required to exercise care to differentiate his packages, so that purchasers will not confuse the two products.

[Ed. Note. For cases in point, see vol. 46, Cent. Dig. Trial, §§ 73, 74, 86.

Unfair competition, see notes to Scheuer v. Muller, 20 C. C. A. 165; Lare v. Harper & Bros., 30 C. C. A. 376].

2. SAME-RIGHT TO INJUNCTION-FRAUDULENT USE OF PACKAGES BY COMPLAINANT.

A motion for preliminary injunction to restrain unfair competition by the imitation of complainant's packages will not be granted although such imitation is shown where there is evidence which, though disputed, tends to show that complainant has used its packages for an article different from that for which they were designed, of inferior quality, and not made at the place thereon stated.

[Ed. Note. For cases in point, see vol. 46, Cent. Dig. Trade-Marks and Trade-Names, §§ 94, 108.]

In Equity. On motion for preliminary injunction.

Louis C. Raegener, for the motion.

Archibald Cox, opposed.

LACOMBE, Circuit Judge. In the case of the small yellow packages of edible cornstarch and the large wooden six-pound boxes of gloss starch, I think there has manifestly been an attempt to imitate complainant's style of package. There are so many resemblances that defendant's packages might readily be mistaken for complainant's when none of the others would. That these resemblances are unnecessary is seen from an inspection of the packages of other manufacturers, who seem to have had no difficulty in differentiating them. Using, as it does, the name Oswego, the defendant, or, rather, the manufacturer from whom he bought, was required to be careful not to mislead the public in any way, so as to confuse the identity of the two products, both made in Oswego-the one for more than 25 years, the other quite recently. Injunction would issue against these particular styles of packages were it not for the dispute as to the character and quality of the starch which complainant made temporarily in Indianapolis, and sold in the old style of package without any announcement that it was not made at Oswego. There is a conflict of evidence on this point, and it should be reserved for final hearing.

Motion denied.

MURRAY v. JOSEPH et al.

(District Court, S. D. New York. February 21, 1906.)

1 EVIDENCE-PRESUMPTIONS-INFERENCES FROM FAILURE TO PRODUCE EVIDENCE. If a party to a cause fails to produce evidence which in the opinion of the jury he could produce in support of his position if his testimony, which is contradicted, is true, the jury is justified in drawing the inference from such omission, either that there is no such evidence that can be produced, or that if it was produced it would not be favorable to such party.

[Ed. Note.-For cases in point, see vol. 20, Cent. Dig. Evidence, § 97.] 2. JUDGMENT-MATTERS CONCLUDED-ORDER OF BANKRUPTCY COURT.

An order made by a court of bankruptcy in summary proceedings therefor, refusing to direct a third person to turn over to the trustee money and property of the bankrupt, claimed to be in the possession or under the control of such third person, is not a bar to a subsequent action by the trustee against such person to recover the value of such money and property, on the ground that it was transferred to defendant by the bankrupt with intent to hinder, delay, and defraud his creditors.

3. BANKRUPTCY-ACTION BY TRUSTEE-FRAUDULENT TRANSFER OF PROPERTY. Evidence reviewed in a charge to the jury in an action by a trustee in bankruptcy against the bankrupt and another to recover the value of money and property alleged to have been fraudulently transferred by the bankrupt to his codefendant and to others through a conspiracy between defendants.

The complaint was based upon section 67e of the United States bankruptcy act (Act July 1, 1898, c. 541, 30 Stat. 564, 565 [U. S. Comp. St. 1901, p. 3450]). The specific charges were: That the two defendants entered into a conspiracy to defraud the creditors of Gilroy & Bloomfield; that in pursuance of this conspiracy Joseph, an attorney, aided Gilroy in transferring assets beyond the reach of creditors; that on March 19, 1904, and within four months of the filing of the petition in bankruptcy, in pursuance of the scheme, Gilroy transferred to Joseph certain firm property, consisting of 64 pieces of woolens, of the value of $4,500, and firm money; the latter amounting to $1,250. Defendant Gilroy, in his answer, admitted the transfers to Joseph, but denied the allegation of fraud and conspiracy. He alleged the transfers were made upon the advice of his attorney, Joseph, and that said Joseph assured him that the proceeds would be used solely for the purpose of effecting a settlement with creditors. Defendant Joseph denied the conspiracy, and denied the receipt of the woolens and money. As a plea in bar of further proceeding, Joseph set up an order entered by the district judge on the report of a referee, which order dismissed the proceedings as to Joseph, and required D. L. Feinman, Rosie Korn, and Tobias Korn, the other respondents therein, to pay over certain sums to the receiver.

Bird & Tarbox (Abram I. Elkus, of counsel), for plaintiff.

Arthur Furber (Arthur Palmer, of counsel), for defendant Joseph. Paul M. Herzog, for defendant Gilroy.

HOLT, J. (charging jury). This action is brought by the trustee in bankruptcy of the firm of Gilroy & Bloomfield against Abraham A. Joseph and Louis K. Gilroy; Gilroy having been a member of the firm of Gilroy & Bloomfield, and Joseph being a lawyer who acted in some professional capacity in the matters to which the suit relates. The charge in the complaint is, in substance, that Gilroy and Joseph entered into a conspiracy to transfer property belonging to the firm of Gilroy

& Bloomfield, for the purpose of hindering, delaying, and defrauding the creditors of the firm. In another part of the complaint it is alleged that Joseph aided and abetted Gilroy in making a transfer of property, and that the property was transferred by Gilroy to Joseph for the purpose of hindering, delaying, and defrauding the creditors of the firm. The property alleged to have been transferred is a certain amount of cloth, which is alleged in the complaint to have been of the value of $4,500, and certain payments in cash amounting to $1,250, so that the complaint demands judgment for $5,750, with interest on it from March 19, 1904, which is the date on which it is alleged that the conspiracy took place to transfer this property. A conspiracy is defined in the law as an agreement between two or more people to do an illegal or criminal act, or to accomplish a legal act by criminal or illegal means. The charge here is a conspiracy to transfer property in fraud of creditors. A transfer of property with intent to hinder, delay, or defraud creditors is an illegal act under the state law. If it takes place before any bankruptcy occurs, it is an illegal act. If it takes place after bankruptcy occurs, and it is done knowingly and intentionally, it is a criminal act under the bankruptcy law, as well as an illegal act. In either case a trustee in bankruptcy has authority under the bankrupt act to bring a civil action to recover for the transfer of property, whether it is done in fraud of creditors before the bankruptcy occurs, or whether it takes place after the bankruptcy occurs. The plaintiff's claim generally in this case is that Gilroy transferred this cloth and cash to Joseph with intent to hide it and conceal it from the creditors. Gilroy's claim, as I understand it from his testimony, is that this was done to enable Joseph, as his attorney, to effect a settlement with his creditors. I suppose he would claim that the property was intended to be applied in that way, to settle with his creditors, and if the settlement was not accomplished, and if the estate had to be settled in bankruptcy, the property was to be turned back to the trustee. Joseph's claim, as I understand it, is, in substance, that this property was intended to be turned over to Mrs. Korn in payment of a debt, or upon account of a debt, and that the only part which he took in the transaction was as attorney for Mrs. Korn. It appears in evidence in this case that Mrs. Korn was a creditor of this firm. If a debtor owes a just debt to a creditor, he can pay that debt at any time before bankruptcy occurs, and making such payment is not a crime nor an illegal act. It may be a preference, and if bankruptcy occurs subsequently, and the payment has taken place within four months, with knowledge of the insolvency, and with reasonable ground on the part of the person who gets the payment to suppose it was intended as a preference, the trustee in bankruptcy can require it to be paid back; but there is nothing done which is illegal or criminal when a debtor pays a creditor, although he knows that by paying a particular creditor that creditor will get payment in full, and that the rest of his creditors will not. So that in this case, if you should come to the conclusion that all that Mr. Joseph was doing in this case was to endeavor to get Mrs. Korn's debt paid, and that all he did in that respect took place before the bankruptcy occurred. then you should find a

verdict in his favor in this case. But after the bankruptcy occurred, after the petition was filed, and the order appointing the receiver was made, then neither the person against whom the petition was filed nor Joseph nor anybody else would have any right to take the property of the bankrupt, and apply it to the payment of a particular creditor. The bankrupt's property under those circumstances belonged to the receiver, and was to be held by the receiver pending the adjudication in bankruptcy, and if the adjudication in bankruptcy took place, it was then to be applied ratably and equally to all the creditors, and not to some particular creditor to the prejudice of the others.

Now, in order to understand the bearings of the question which is presented to you, it is necessary to comprehend somewhat the general facts of this case, and if in stating those facts I state them in a way different from your own recollection of them, you must be guided by your own recollection; you are the judges of the facts.

It seems that this firm of Gilroy & Bloomfield were in business, and that along in January, I think in January or February, 1904, an arrangement was made by which Mrs. Korn put between $8,000 and $9,000 into the business. There was a man named Feinman who was a salesman in the employ of Gilroy & Bloomfield, who knew Mr. and Mrs. Korn, and he introduced them to the members of the firm of Gilroy & Bloomfield, and negotiations were entered into which resulted in Mrs. Korn putting into the firm this sum of between $8,000 and $9,000, and Mr. Korn being employed there. He was to be paid a salary, and Mr. Gilroy says he was to be paid also a percentage of the profits of the business, and at the time that this transaction took place, or subsequently, an assignment of certain accounts was made by the firm of Gilroy & Bloomfield to Mrs. Korn to secure this loan. Mr. Gilroy says that originally there was no agreement to give this assignment of accounts. He says she was to loan money in consideration apparently of the employment of her husband, and that the giving of the assignment was a subsequent suggestion.

The evidence of the other side is to the effect that it was all a part of the original arrangement, and that she was to have the assignment of these accounts as security for the repayment of this loan. At all events, it was subsequently executed, and a short time thereafter dissatisfaction seems to have arisen between the Korns in regard to this loan. They consulted Mr. Joseph on the subject, as they had originally consulted him in regard to getting the assignment, and they were in consultation with him thereafter. They claimed that they had been defrauded or deceived, asserting that some of these accounts had been pledged to banks. Mr. Gilroy says that it was only intended. to give them an equity in these accounts as security, and that that fact was explained to them. At all events, without going further into detail in that matter, dissatisfaction arose. Joseph was consulted, and he advised them to say nothing; to let the business go on, and to draw out, on account of their claim, from the profits of the business as far as they could without making any attack. Then subsequently some altercation arose between Feinman and Bloomfield, Feinman

claiming that Bloomfield had been taking goods out of the business, and in that way affecting the interest of the Korns, which resulted in an altercation; so that generally, down, apparently, to about the middle of March, there was a condition of dissatisfaction and controversy there in this concern. Joseph says that he knew they were insolvent and that they were going to fail, and that things were getting worse and worse. At all events, the Korns went to Joseph's house along about Wednesday or Thursday before this Saturday, the 19th, as I understand it, and consulted him on the subject of securing their claim. This consultation resulted in Joseph's drawing a bill of sale, which has been produced here, signed Gilroy & Bloomfield, by Gilroy. Gilroy says when he signed it it only contained a transfer of three articles, silks, satins, and romaines. It now contains, in addition to these silks, satins, and romaines, a list of other property, and it practically includes all the assets in the store. Joseph says that after that was signed by Gilroy he took it up to Bloomfield's house. Bloomfield was ill. He wanted to have Bloomfield sign it, and Bloomfield declined to sign it, and thereupon he came back. Now, generally, of course, one partner could transfer firm property, but here was apparently a transfer of the entire assets of the concern, and it appears to have been understood by Jospeh that it would be desirable, at all events, to have both partners acquiesce in it, and it is admitted that Bloomfield did not. It is therefore for you to say what weight is to be given to this bill of sale; whether it was considered by the parties as an actual legal transfer of the property of this concern, or whether it was not; whether Bloomfield's refusal to sign it led the parties to not undertake to act under that bill of sale. At all events, on Saturday morning, the 19th of March, Mr. Joseph was sent for to come up to Gilroy & Bloomfield. I think he went first to the St. Clair House, and then went around to the store of the firm of Gilroy & Bloomfield. When he got there, he found that papers had been served on Gilroy in a suit brought in the state Supreme Court by Bloomfield for a dissolution of the partnership, and with it a notice of a motion was served for the appointment of a receiver. Mr. Gilroy called up Joseph, and consulted him about it, and gave him the papers, and the evidence would appear to be such as to justify you in finding that from that time on Joseph was acting as attorney for Gilroy or for the firm, as well as that he had previously been acting for Mrs. Korn. That is one of the questions in the case. If you think he was not acting as counsel for Gilroy, but was acting throughout as counsel for Mrs. Korn, simply representing a creditor here who was trying to get payment of a debt, then you will draw your conclusions accordingly. What occurred was that Joseph, after ascertaining that this suit was brought and an application for a receiver made in the Supreme Court, which naturally would lead any attorney to expect that there would be trouble, and that bankruptcy proceedings might take place, especially in view of the fact that Mr. Joseph admits here he knew the firm was insolvent, and was expecting that they would get into difficulty-Joseph started out by telephoning to the clerk of this court to ascertain whether any bankruptcy petition had been filed, and was told that none had been. He sent a clerk down here to the clerk's