Virgin Islands Corp. v. W. A. Taylor & Co. , 202 F.2d 61 ( 1953 )

FRANK, Circuit Judge.

1. A motion to dismiss a complaint, without the aid of anything except the complaint itself, is usually a most undesirable way for a defendant to seek a victory. For, on such a motion, the court must construe the complaint’s language in a manner most favorable to the plaintiff; and, if that language is at all ambiguous, seldom will it, when thus generously construed, fail to show a cause of action. So here, interpreting the complaint as we must, we conclude that the district judge erred.

2. The defendant telies on this sentence in clause 11 of the five-year 1940 contract: “The brand and trademarks shall be the property of the Importer and may be registered by it in its name.” This, says defendant, compels a decision in its favor. But, as this sentence does not dwell alone, it must be reconciled with other provisions.

3. The succeeding sentences of clause 11 are illuminating. They provide that if, during the five-year period — from March 30, 1940 to March 30, 1945 — the defendant either liquidates its business or discontinues the importation or sale of alcoholic liquor, then VICO shall have “the option to purchase the trademark” at a price to be determined by appraisers. We find it difficult to believe (absent evidence) that the parties meant that, if the defendant ceased operations on, say, February 1, 1945, VICO had the option to buy the name, but that if the operations continued some sixty days longer — until March 30, 1945, when the five-year contract period expired — then VICO lost all rights to the name. For purposes of a motion to dismiss, we think clause 11 must be interpreted to mean that, if the operations continued for the full five-year period, the entire right to the name should be in VICO at the end of that period, and without any payment to defendant.

4. This interpretation finds . support in the complaint which, interpreted generously in plaintiff’s favor, tells the following: (1) When the first contract was made in October 1936, the parties contemplated that a name would be devised under which VICO rum would be marketed. (2) The name “Government House” and the label were subsequently devised in December 1936. (3) The parties at that, time agreed that defendant should have an exclusive right to use the name and label but only until the contract period ended, at which time the entire right thereto’ would vest in VIGO. , (4) On March 24, 1937, defendant registered them but solely as agent for VICO. (5) Beginning in October 1937,. the defendant began advertising VICO rpm, emphasizing that its sale was part of a Government project to rehabilitate and .further the economic recovery of the inhabitants of the Virgin Islands. The first shipment was advertised as the culmination of the “Virgin Islands three-year recovery plan”; the rum was called “a humanitarian project as well as a beverage.” (6) The name and label thus became associated in the minds of consumers with a rum produced in the Virgin Islands, a rum with the sale of which the government of the Virgin Islands had a connection. (7) When the March 30, 1940 contract was made, the parties knew of this consumer attitude. (8) The use of the name and label in the sale of other rum would deceive and mislead consumers, as defendant’s use is doing.

The foregoing facts we must take as if they were proved. If, then, defendant’s interpretation of clause 11 of the 1940 contract were correct, it would be plain that the parties, when they executed it, intended that, after its expiration on March 30, 1945, defendant should be able, if it so desired, to deceive consumers (as it now does). Such an interpretation should be avoided where possible. For “when, there is a choice, a court will prefer that construction which is lawful”⁵ and not one which imputes to the parties a purpose to make possible the public’s deception.

5. Congress, in the Act of June 30, 1949, incorporating plaintiff, provided that “the Corporation shall not engage in the manufacture of rum or other alcoholic beverages.”⁶ We do not read this provision as prohibiting plaintiff from engaging in the sale of rum.⁷

6. The word “property” in the first sentence of clause 11, especially in the light of the succeeding sentences, is at best ambiguous. What the parties meant by the word may therefore be shown by evidence as to their understanding in that respect, even if that understanding preceded, or was contemporaneous with, the making of the contracts. This, we think, is sound doctrine in all jurisdictions, despite the parol evidence rule.⁸ Accordingly, it is unnecessary for us to determine what “law” governs, when, as here, the record does not give us any information as to where the contract was executed.

Reversed.

5 . See, e.g., Eddy v. Prudence Bonds Corp., 2 Cir., 165 F.2d 157, 161; American Machine & Metals v. De Bothezat Impeller Co., 2 Cir., 180 F.2d 342, 347.

6 . 48 U.S.C.A. § 1407b (h).

7 . After the amendment constituting this provision was agreed to on the House floor, the following amendment was offered and defeated: “Provided further that all investments and property which relate directly to the making of rum shall be sold or discontinued on or before July 1, 1951.” (95 Cong. Rec. 5716.) Thus, although Congress barred plaintiff from itself manufacturing rum, it did not require appellant to divest itself of the rum distilling facilities, whose most advantageous use from the point of view of return to the Islands is, of course, in the production ’ of rum. Congress and the Congressional committees, when considering the legislation which became the Act of June 30, 1949, were fully informed of VICO’s methods of operation of the properties in the Virgin Islands — particularly the distributorship contracts which had been entered into first with defendant and subsequently with another disti-ibutor, Shaw. They were also aware that the use of these Government-owned properties for the production and sale of rum was the best, indeed the only, means of economically exploiting them. Hearings before Subcommittee of Committee on Appropriations, “Government Corp. Appropriation Bill 1949.” (H.R. 80 Cong. 2d Sess.) pp. 332 et seq. When Congress, with such knowledge, refused to order the sale of properties by VICO, it necessarily approved their retention as well as their use and operation, the only prohibition being against government manufacture for its own account. The only alternative would have been for appellant to shut down the properties and to keep them shut down, which would have meant deterioration, obsolescence and the ultimate loss of the government’s investment. This alternative, we think, rejected by Congress in refusing to adopt the proposal that “all investments and property which relate directly to the making of rum shall be sold or discontinued * *

8 . We can arrive at the same conclusion on this ground: Clause 11 shows that the writing did not contain the full understanding of the parties as to the disposition of the name after the term of the contract expired.