
    New York Bank Note Company, Appellant, v. The Hamilton Bank Note Engraving and Printing Company and Kidder Press Manufacturing Company, Respondents.
    
      Referee’s report—verbal error in, not corrected on appeal—profits from, the unlawful me of a printing press, the subject of a monopoly — burden of proof as to the profits—the damages being unliquidated interest is not allowable.
    
    The question whether a referee, who, in his report, stated, “I further find and report in making such statement that no proof of the profits so charged the defendants could have been made or received by them but for the use by them of the machines in question,” intended to say “part ” instead of proof cannot be considered on an appeal from an order .refusing to confirm the report, • The remedy is in the court ¡below.
    In an action brought to restrain the use by the defendant of two presses known as the Kidder perfecting presses, -and for an accounting of the profits made by the (defendant in printingutrip tickets upoinsaid presses, 'an ¡interlocutory j udgment was entered granting the injunction and "appointing, a referee to assess the ¿plaintiff’s damages. Such damages were ad judged to be.the ‘ ‘profits made by the defendant the Hamilton Bank Note Engraving and Printing Company " upon all strip tickets printed by it upon the two aforesaid presses purchased from the Kidder Press Manufacturing Company, known" as the Kidder Per- • fecting Press, on proof before, the referee that "the Kidder Perfecting_Pr.ess was the subject of a monopoly .for strip ticket printing by virtue .of outstanding patents, or was the only available machinery for printing strip tickets, or on proof that the Hamilton. Bank Note Engraving and Printing Company could not "have dbtained the contracts‘to print said tickets except ’by means' of "the Kidder Perfecting Press, and" in-the absence o'f such proof that the damages shall be the saving in profit on said tickets byAtm use of the Kidder Perfecting Presses over the profits it would have made by printing the .same on the presses in its possession, or known to and purchasable by it prior to December 29, 1892.”
    
      ■Held, that the provision of the judgment directing that, in certáin Contingencies, the plaintifBs damages.should.be ascertained on the basis- of .the difference.in the . profits realized from .printing .-strip tickets on the Kidder perfecting presses and those realized from printing the . strip tickets on .other presses 'available to the defendant had been made for the defendant’s benefit, and that the burden of showing the extent of the profits which would have been realized by printing the strip tickets upon other machines available to the defendant rested ' upon it; /
    That, as-it .appeared" that the "damages wur.e unliquidated, ¡and .that there was no method by which .the defendant could have computed the amount thereof, they being dependent on extrinsic facts, over the proof of which the defendant had no control, the plaintiff was not entitled to interest on such damages. Ingbaham, J., dissented. -
    Appeal by the plaintiff, the New York Bank Note Company, from .an order .of the Supreme Court, made at the New York Special Term and entered .in .the office of the .clerk .of the county of New York on the 8th day of December, 1903, sustaining the defendants’ exceptions to the report of a referee theretofore appointed .herein and denying the plaintiff’s motion to confirm said report., x
    
      Edward F. By on, for the appellant.
    
      Ojiarles F. Brown, for the. respondents,
   Van Brunt, P. J.:

This action was brought to restrain the use by the (lefendant The. Hamilton Bank Note Engraving and Printing Company of two presses known as the Kidder perfecting presses, and for an accounting of the profits made by the defendant bank note company in .printing strip tickets upon said presses.

After the trial of the action an interlocutory judgment was ■entered restraining the use of the presses as prayed for in the complaint. and awarding damages, and a reference was ordered to compute the same. Proceedings were subsequently had which resulted in the modification of the interlocutory judgment, whereby it was ■adjudged, among other things, as follows:

Ordered, adjudged and decreed that the plaintiff recover from the defendants the damages which it has sustained by the breaches •of the contract , made between the New York Bank Note Company, plaintiff’s assignor, and-the Kidder Press Manufacturing Company, ■■and dated the 12th day of October, 1891,'set forth in the complaint, which damages shall be the profits made by the defendant the Hamilton Bank Note Engraving and Printing Company upon all strip tickets printed by it upon the two aforesaid presses purchased from the Kidder Press Manufacturing Company, known as the Kidder Perfecting Press, on proof before the referee that the Kidder Perfecting Press was the subject of a monopoly for strip ticket printing by virtue of outstanding patents, or was the only available machinery for printing strip tickets, or on prbof that' the Hamilton Bank Note Engraving and Printing Company could not have obtained the contracts to print said tickets except by means of the Kidder Perfecting Press, and in the absence of such proof that the damages shall be the saving in profit on said tickets by the use of the Kidder Perfecting Presses over the profits it would have made by printing the same ■on the presses in its possession, or known to and purchasable by it prior to December 29,1892,” and a referee,was appointed to com- ■ pute the damages upon the basis laid down in this interlocutory judgment as amended.

The subsequent proceedings resulted in a report by a referee "that the damages which the plaintiff was entitled to recover were the sum of $73,058.86, with interest amounting to $32,189.52, making in all at the date of the report $105,248.38.

The defendants filed exceptions to this report, and upon a motion to overrule these exceptions and for final judgment upon the report, the exceptions were sustained and the motion for final judgment was denied. From the order thereupon entered this appeal is taken.

It is claimed by the appellant, that it is apparent from the nature of the referee’s report that a clerical error was made in that part of the report, where he says, “L further find and report in making such statement that no proof , of the profits so charged the defendants could have been made or received by them but for the use by them of the machines in question,” the claim being that the referee intended to say part ” instead of proof. ...... ....

I do not see how we "can consider any such question upon; this appeal. If there was any mistake in. the referee’s report of the kind mentioned, it should have been corrected in the court below.The appeal here must be determined upon the record as we find it.-

The respondents claim that the referee evidently intended by: the • language used that there was no proof before him that the profits which he determined were made could have been made by the Hamilton Company -by the use of any other machine except the, Kidder perfecting press.'

They then say, But this was not only not correct, but it was not the question which was referred to the learned referee for his determination. He was not directed to determine whether the profits made by the Hamilton Company could have been- made by the Use of any other machine.”

In this view of the referee’s duties I think that the counsel, for the respondents have entirely misapprehended the questions which were referred to the.referee. One of the questions which, he was necessarily called to pass upon, Under certain contingencies, was what profits could have, been made by the Hamilton Company, by printing these tickets upon any machine other than the Kidder. If the plaintiff did not establish that the Kidder perfecting, press was the subject of a monopoly for strip-ticket printing by virtue of outstanding patents, or was the only.available machinery for printing strip tickets, or that the Hamilton Bank Note Engraving and Print-. ing Company could not have obtained the contracts to print said tickets, except by. means of the Kidder perfecting press, then, it became the duty of the referee to determine wdmt were the profits of the printing upon the Kidder perfecting press, and what would have been the profits had the tickets been printed upon presses in the defendant Hamilton Company’s possession, or known to and purchasable by it prior to December 29, 1892, and the difference was to be the damages which the plaintiff would have the right to récover.

It is claimed by the respondents that the Kidder perfecting press was not the subject of a monopoly by virtue of outstanding patents; that it was not the only available machinery for printing strip tickets; that the defendant the Hamilton Company did obtain contracts without said Kidder perfecting press, and they requested the referee so to find. It is true that the referee refused so to do, but he proceeded to assess the damages as if those facts had been established and in the manner in which he was directed to do by the decree.

It is of no consequence as to what the referee discussed in his opinion; the question is what did he report the profits .to be of the printing of the tickets upon the Kidder machine, and what would have been the profits if the work had been done upon the presses of the defendant, the Hamilton Company, or presses available to it, the difference being the damage due the plaintiff.

He has reported distinctly upon these two points, as follows: The profits realized for the printing of the tickets upon the Kidder press he reported to be $13,958.86, and that there was no proof before him of the profits which would have been made by-the Hamilton Company by the use of any other machine except the Kidder perfecting press.

Thus, really but two questions are presented to be determined upon this appeal. One is whether the referee was correct in respect to the items with which he surcharged the Hamilton Company’s account, and the other is whether there was any proof that profits could have been made had the Hamilton Company done the work upon its own machines, or upon machines aváilable to it, and if there were, what was the amount of such profits.

There is* also a subordinate question as to the allowance of interest which will be discussed later.

We will consider the second question first. The burden of proof in respect to this matter lay with the defendants. They were permitted by the decree to mitigate the damages by the amount that they could show that they would have made had they done the work upon their own presses. I say upon their own presses,, because there is no evidence that there were any better machines procurable to do the work'than the ones that the defendant company had in their possession, unless it was- the Kidder perfecting press.

There was no attempt made by the defendants to show with any degree of particularity as to what the profits were in printing .these tickets- npon the presses other than the Kidder perfecting press. It certainly was within theirpower to give accurate evidence upon this subject. Prior to the acquirement of the Kidder perfecting press-the defendant company had been printing these strip.tickets upon their own presses, and .afterwards when the injunction in this action was granted they again printed their strip tickets upon their old presses. Under these circumstances it would seem that it. would, be possible to- have given some precise data upon this subject.

This they utterly failed to do. They contented themselves with-the testimony of the parties who had been guilty of the fraud for which the defendants were to account in. this action, which was of the most general character, and to the effect that the Kidder machine was worse than useless, as it did not do as good work as the presses that had been in use before they acquired the Kidder perfecting press, and indeed, as Mr. Seebach says,. “ the Kidder ” will not do “ good- work.” Yet all the work of strip-ticket printing under the Manhattan contract after its acquisition was done on the Kidder prior to the injunction in this action at a confessedly large profit.

Furthermore, Mr. Seebach was contradicted upon so many material points by the evidence of other witnesses that, but little weight could be given to any opinions that he might express, and upon this question of profit it seems to rest entirely upon the opinion of Mr.. Seebach, because he gives- no facts. One of the reasons that he gives for the undesirableness of the Kidder press is- that it is a very complicated piece of machinery and was frequently getting out of repair, and that they were put to great expense in rejDairing it and also that they thereby lost a great deal of time. When asked to produce- the bills for repairs he can only produce one, I think, and that for some insignificant piece of work.

When he attempts to say that the waste in one was- as great as. in the other, he puts the waste from his old machines at twelve and one-half pounds of paper a day. He says that he had it weighed for a time. The man whom he (Seebach) says weighed the waste says that it was twenty-five or thirty pounds a day, and another witness says that it was more.

Mr. Seebach wholly fails to deny the testimony of Mr. Kendall that he (Seebach) told him that the cost to them of printing strip tickets upon the machines the defendant company had was fourteen cents a thousand. Nor does he deny Mr. Kendall’s testimony that Seebach and himself examined the books of the defendant company and found from the books that that was the cost. All that Seebach will say about this is that he does not remember.

It being within the power of the defendants to have given accurate and certain evidence as to the cost of printing these strip tickets upon their old presses, from their- failure to do so but one inference can be drawn, and that is that they could not. This provision in the decree as to the profits which could be made upon the old machines was for the defendants’ benefit, and if they failed to produce reasonably convincing proof, which it was very easy for them to do had it existed, it does not lie- in their mouth, they having been the wrongdoers, to complain if the conclusion is arrived at that they have not produced the proof because it did not exist.

Upon considering the whole of this evidence, it seems to me that the conclusion of the referee that there was no proof that profits could have been made upon the old machines of the defendants, was well founded. Our attention has been called to the findings of the previous referees upon this subject. From the view of the burden of proof that was taken by at least one of those referees his finding in this respect can be easily explained. If the burden of showing what was the difference of the profits had been upon the plaintiff, as the referee held, a different result might have have been arrived at, but in the case as it now stands the burden is upon the defendants to reduce the damages by showing what profits would have been made by printing these tickets upon their old machines, and I repeat that in this case there was no reason for surmise, guess or inference; the defendant company had printed these very tickets upon their old machines, must have known exactly what they cost,, and never produced their books and showed from them what it was. ■ , .. . ... ,, ,

We will, now,,consider, the. ptlmr. principaL^gugstion,. and that is, was the referee justified in making thg, surcharges ,which he did upon the account of profits furnished by ,t^e defendant ..company. In the examination pf 'this , question vy.e, are ( embari;assed t>by the paucity of the evidence, by the light of which, we, .could .apportion the general expenses of the business between .^the: yaijous kinds of business done by the defendant company with its .plant; ( t-.

We must,, therefore,, get .at, the expensp of the business asweh as we can, and if proper allowances..arg. npt made, to the .defendant company,.it arises from the fact that, thpy ^Irave^.npt gi-^ep us the evidence, from which, we pan Reduce, .accurate ^results,, . We, think, however, that the.refergg in some, instances has npt ^ made , sufficient allowance in respect to. some of the it,ems..pf .expense.,in this, business. I do. not think.he.has allpwgd sufficient in.the matter of rent. He has not ,evgn allowed, rent for ^hq, ^pa.ce. agt.ii^lly. pceppiod, for the strip-ticket business,, and in addition. tp_ the.space.actually, occupied some percentage of the vacant, spa.cg consisting of,passageways, .etc., shpuld,,certainly, fie, $dl^e<|. ,,i.This.,pypiild ,add (at least 300 feet ,to the. estimate, .of,the referee and make the surcharge ab.out,$,3,630insteadpf,^6,156, , ... ,. ,t| .. ,

So, m regard.tp,.managerial .expenses, it .vppuid .seem,proper to allow the same percentage,., as tiiesepre.ge.neral.gxpens.es which .relate to the-management of , the whole, bpsiness,. in the same manner as rent> I think that there,should bavg.bpen allowed under this head about $6,500 instead of $3,OOP, yhich .wsf allowed. ..... ,

For the same reasons a proper proportion, of- the general expenses should have been, allowed. . They .are incurrg.d, ,in the .general conduct of the whole ,business. and a. propgr amount ywas _properly chargeable to the account pf the strip-ticlce.t printing,,,.,There should have been allowed , upon this account .the, gum of. $.6,782,31, instead of nothing. As . interest upon capita!. there should ha.vec been Allowed the sum , of $4,320. instead, of $3,226.50, the difference arising in the reduction in, machine cost. . , , , .. .. .

The loss on Kings County strip tickets seems to have been properly surcharged as that foss arose from their own business methods. The account would then stand thus:

Admitted profits........... $34,626 65

Rent overcharged.. ............................. 5,630 00

Managers’ salaries overcharged.,.................... 6,500 00

General expenses overcharged..................... 6,782 31

Interest on capital overcharged.................... 5,830 00

Loss on Kings County tickets overcharged.......... 1,888 09

Making................................... $60,546 95

the amount with which, the defendants are chargeable, as- the profits made by them by the printing of the strip tickets upon the' Kidder perfecting press ; and as the defendant company has not furnished any reliable evidence that any part of this profit could have been made upon the other presses which they had and upon which they printed these strip tickets both- before and; after they had acquired the Kidder perfecting press, the plaintiff was entitled'1 to judgment for this amount.

The' only question' remaining is the. one of interest. I do not think that interest was properly allowed. The damages- were clearly unliquidated. There was no method by which the defendant could have computed the amount. The rulé of damages depended upon extrinsic facts, over the' proof of which they liad no control I do not see but that the< rule in- respect, to interest on profits in the case of an infringement of a patent should not be applied in this case.

I think, therefore, that the order appealed from.should be reversed and judgment entered upon the referee’s report in favor of the plaintiff for $60,546.95, with interest from the date of his report, without costs of this appeal and with costs in the court below.

Patterson, Hatch and Laughlin, JJ., concurred; Ingraham,, J., dissented.

Order reversed and judgment directed as stated in opinion, without costs of appeal, and with costs in the court below.  