
    Austin Baldwin et al., Resp’ts, v. Albert Von Micheroux et al., App’lts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed December 14, 1894.)
    
    1. Injunction—Fbaud.
    Where employes of a firm are co-operating with one of the partners to perpetrate a fraud upon his co-partners, with full knowledge on their part that such was their intent, and that it was all done in order that they, as well as the said partner, should profit at the expense of the firm, the court has power to restrain them from either proceeding further with, or consummating, such illegal scheme.
    3. Evidence—Lettebs.
    Letters written by such partner to said employes, tending to show knowledge on the part of the latter of the fraudulent practices, in which the former was engaged for their mutual benefit, are properly admissible against them.
    Appeal from an interlocutory judgment in favor of plaintiffs.
    
      Henry Schmitt, for app’lts; Willam D Guthrie, for resp’ts.
   Parker, J.

This controversy relates to the ownership of and right to use a secret or unpatented process for manufacturing tobacco flavors, and to certain trade-marks and brands, used in the business of the linn of Baldwin Bros. & Co. from the time of the commencement of this suit up to January 1,1893. Baldwin Bros. & Co. were continuously in business in the city of New York for a period of over 30 years prior to the commencement of this suit. One of the members of the partnership was George B. Seymour, one of these defendants, who had been a member of the firm for nearly 10 years, and had been one of their clerks for some fifteen years prior thereto. Yon Micheroux, from December 1883, until October, 1892, was in the employ of the firm as a traveling salesman, and the defendant Boulger had been in the employ of the firm as a-compounder or rectifier .of liquors for nearly ten years prior to the. commencement of this suit. . Boulger and Seymour had full knowledge of the secret process by which the tobacco flavorings were manufactured. Indeed, while its manufacture was suggested by Mr. Baldwin, the experiments were conducted almost entirely by Boulger and Seymour. The theory of plaintiff’s suit is that these defendants conspired together, while Seymour was-yet a partner and the other defendants in the employ of the firm,, to form a partnership for the manufacture and sale of the tobacco-flavorings, the secret process for the manufacture of which was the property of the firm of Baldwin Bros. & Go.; that their plan went beyond the manufacture and sale of the product under their own firm name, and involved a scheme to wrongfully divert the business of Baldwin Bros. & Co. to themselves. To accomplish this they caused circulars to be prepared before any of them had terminated their relation with Baldwin Bros. & Co., in which they described themselves as being the sole owners of this secret process, and made use of trade marks belonging to the partnership. These circulars they sent to those dealers who had been accustomed to do business with Baldwin Bros. & Go. That the ruin of the business of Baldwin Bros. & Co. might be more certainly accomplished for their benefit, the fact that Seymour was a member of the new firm was kept secret. He notified his partners that he should go out of the firm at their convenience, and January 1, 1893, was selected as the date of the dissolution of the firm. In the meantime he made the most of his opportunities to divert customers of Baldwin Bros. & Co. to the new firm in which his membership was kept secret. The trial court decided that the secret process belonged to the firm of Baldwin Bros. & Co. prior to its dissolution, which took place December 31, 1892 ; that the manufacture and sale of the extracts by the defendants prior to such dissolution were a fraud upon plaintiffs, and that defendants should account therefor; that an injunction should issue, restraining defehdants from representing, by the issuing of circulars or otherwise, that they are the exclusive owners of the secret process, or of the trademarks and devices used in connection with the goods manufactured by such process. The conclusions of fact upon which the judgment is based are entirely sufficient for its support, and the reasons presented by the trial court for its decision are so satisfactory as to make i-t wholly unnecessary for this court to attempt to add anything to them.

The appellants insist that there were errors in the rulings of the-trial court. Some of' the findings of fact, they urge, are unsupported by evidence. We cannot agree with them, but think there was evidence upon which to base every inference of fact. The-appellants press upon the attention of this court exceptions taken to the admission in evidence of certain letters written by Seymour to Yon Micheroux and Boulger during the time which elapsed between the agreement to form the new firm and the commencement of this suit, and from which it appears that Seymour was employed in taking away from his long-time partners all the trade he could reach. These letters disclose some of the fraudulent practices of which Seymour was guilty. They tend to «show the nature of the conspiracy to wrong Baldwin Bros. & Go., and make it clear that Yon Micheroux and Boulger were fully aware of the secret and fraudulent work in which Seymour was engaged against his old firm for the benefit of the new one. A reference to some of their letters will cause it to appear that the trial court was not in ■error in receiving them. November 14th, Seymour, then the plaintiff’s partner, wrote to his partners in the new firm, expressing his annoyance that the plaintiffs had received an order from one ■of their regular customers, and makes an inquiry which indicates a wonder on his part whether their fraudulent scheme had proved ineffective in that one case, or whether Yon Micheroux had neglected to perform his part of the work. It contains other suggestions of duplicity. But let the letter speaks for itself:

“I have just come from 58 Broadway, and I am very much annoyed to report we rec’d to-day 90 gal. order from Stern Bros., Chicago. What ails these d—— Jews? Did you not sent them 0 a circular? I have also other news to report. The inclosed is a copy of a letter from B. Bros. & Co., lawyers, to H, B. P., upon the propriety of suing out an injunction upon us. I am going there to-morrow, probably, but I am of the opinion, when I am through, there will be no injunction, I am quite sure.”

The day following, November 15th, Seymour advised what plaintiff’s traveling salesman was doing. The next day he informed Yon Micheroux that there might be danger that Marburg, •one of plaintiff’s oldest customers, would send an order to Baldwin Bros. & Co. instead of defendants. In the letter of November • 19th to Yon Micheroux, Seymour says, among other things :

“We have got them tight, I think, beyond all doubt. They don’t dare to attempt such a thing. Baird [the plaintiffs’ traveler], as I wrote you, went out over the N. Y. Central road', but so far has sqld nothing. Only one letter from him since Monday, and no «report of work beyond Albany. * * * They will have to discharge him, and try it again, which will probably take the wind out of their sails, and all the fight out of them as well. From what I hear, the latter is pretty well squeezed out of them now. On Monday I am to see Guthrie, and you bet I will feel pretty independent. I know where I stand better than they dó. * * * They are dying fast, much faster even than Roberts, and I hardly think six months will see them in the biz.’ If we hold Finzer and old trade, won’t last even that after I leave.”

From the letter of November 22d we take the following :

“ But we doubt it. Of course, they may be foolish enough to do so. No one can tell what fools may do. * * * Please, in all first orders, don’t fail to give prices, terms, etc., as soon it will be impossible for writer to have access to B. B. Oo.’s to get these particulars. * * * No orders at 53.”

These letters fairly indicate the general character of those received by the court, which defendants insist were immaterial. That Yon Micheroux was as blameworthy as the other two defendants appears from his letters generally, and particularly in one of November 15, 1892, immediately after the order from Chicago, of which Seymour complains in his letter of November 14th. He writes:

“ 1 think we better send at once our trade-mark to Washington, and have it registered. I think you better communicate with Mr. Seymour at once, and that he shall attend to it at once without ■delay. Am sorry to see the order from Chicago in our enemy’s hands, but of course it cannot be helped for the present. By New Year’s all the agony will be at an end. All the trade has received our circulars. Nothing more to state. I am, dear sirs.”

Of course, it is not pretended by the appellants that these letters did not show unlawful conduct on the part of Seymour, but they insist that they could in no way affect the defendants Bouiger and Von Micheroux, because they were not, like Seymour, a partner in the firm of Baldwin Bros. & Co., but merely employes, and so could leave the business at any time, and engage in business on their own account. That Seymour’s conduct was of such a character as would cause a court of equity to restrain him from committing further frauds of the character described in the letters written by him, and charge him with the damages resulting from the fraudulent. acts already committed, is so well established as not to require citation of authority. The reason for it is well stated in Holmes v. Gilman, 138 N. Y. 369; 52 St. Rep. 873. At page 377, 138 N. Y., the court said :

“That a partner occupies a fiduciary position with regard to his copartners and the funds of the firm, and will not be permitted to make a personal profit out of the use of such funds, is, I think, clearly established. * * * Although partners do not, in the strict sense of the term, occupy the position of trustees towards each other and towards the firm funds, yet the position is one of a fiduciary nature, calling for the maintenance and exercise of the greatest good faith between them. Such a relationship authorizes the same remedy on behalf of the wronged partner as would exist against a 1 trustee,’ strictly so called, on behalf of & cestui que trust."

Now, while Von Micheroux and Boulger were not partners of Baldwin Bros. & Co., and did not stand in a fiduciary relation to plaintiffs, still they were co-operating with Seymour in his efforts to perpetrate a fraud upon his partners, with full knowledge on their part that such was his intent, and that it was all to be done in order that they, as well as Seymour should profit at the expense of Baldwin Bros. & Co. ° The court had the power to restrain them, as well as Seymour, from either further proceeding with or consummating such illegal scheme. For the damages sustained by plaintiffs because of Seymour’s conduct, the other defendants were participants, and likewise chargeable. This proposition is-supported by Emery v. Parrott, 107 Mass. 95. We quote, as especially applicable to the facts of this case, from the opinion, as follows:

“ The case of the defendant Head stands somewhat differently, but is governed by the same general principles. He did not stand in any fiduciary relation to the plaintiffs. But he knew the position of Parrott, and became the partner of Parrott, uniting with him to effect a sale of the property to Parrott and the plaintiffs, for the sake of dividing with Parrott the secret commission which the owner of the property had agreed to pay for effecting the sale. He was thus fully cognizant of the illegal conduct of Parrott, and co-operated with him in inducing the plaintiffs to make the pur.chase. He participated in the profits of the transaction; and the court are of opinion that he, as well as Parrott, must disgorge the secret gain which they thus jointly obtained and divided with each other.”

If this position be well taken, it follows that evidence tending to show knowledge on the part of Von Micheroux and Boulger of the fraudulent practices in which Seymour was engaged for their mutual benefit was properly admissible against them. Such was the purport of these letters. We have not, of course, referred to all of them, but to enough at least to point out that from day today Seymour was putting them in possession of accurate information touching the steps being taken by him to mislead and defraud his partners. The letters were all of the same general character, and they had the effect to inform the defendants Boulger and Von Micheroux of substantially everything that was being done by Seymour which was in violation of the relation existing between . him and the other members of the firm of Baldwin Bros. & Go., and therefore the evidence was immaterial. There were a number of exceptions taken to the admission of evidence, but we do not, think they call for a reversal of the judgment.

The judgment should-be affirmed, with costs.

All concur.  