Phoenix Pad Co. v. Am. Coat Co. , 111 Md. 549 ( 1909 )

On May the 8th, 1901, the Phoenix Pad Company of Baltimore City filed a bill of complaint against the American Coat Pad Company and Louis Bouchat in the Circuit Court of the United States for the District of Maryland for an injunction to restrain them from infringing certain letters patent for a new and useful invention entitled a shoulder pad, issued by the United States and owned by the complainant. The Court ordered a preliminary injunction to issue as prayed upon the filing by the complainants of a bond with surety in the penalty of three thousand dollars. The complainant executed and filed a bond in the prescribed penalty on the 12th day of June, 1901, with the United States Fidelity and Guaranty Company as surety. This bond was approved by the Court and the injunction was issued, wherein it was adjudged that the defendants had infringed the rights secured to the complainants by the patent mentioned in the bill, and restrained them, their servants and employees, etc., from making, using or furnishing for use or selling any shoulder pads whatever containing or embodying the invention and improvements, or any material or substantial part thereof set forth and claimed in and by the letters patent named in the bill of complaint. Upon the appeal of the defendants, the United States Circuit Court of Appeals reversed this order. Nothing further was done by the complainants in the cause, and the District Court on the 16th of December, 1907, dismissed the bill of complaint with costs to the defendants.

The defendants then brought an action for damages on the injunction bond in the Superior Court of Baltimore City, and from the judgment in their favor entered in that Court the defendants in that suit have brought this appeal.

The record contains only one bill of exception, which presents for review the propriety of the Court's ruling upon the prayers of the respective parties offered at the close of the whole evidence. The plaintiffs offered four prayers, and the defendants six for instructions to the jury. The Court granted the plaintiff's prayers, and also granted the fourth, fifth and sixth prayers of the defendants; but modified, and granted as modified, their second prayer, and refused their first and third prayers, and to these rulings the defendants excepted. These prayers will be set out in the report of the case preceding this opinion.

It was conceded by the defendants that the plaintiffs were entitled to recover nominal damages, but they contend that under the facts appearing in the record it was the duty of the Court to have limited the recovery to such damages. They further contend that, even if they be wrong in this position, the Court committed an error in refusing their third prayer which asserted that actual damages could only "be determined from records of expense kept at the time the expenditures were made." Inasmuch as there was no record of such expense, the granting of this prayer would have precluded the recovery of actual damages.

Assuming that the plaintiffs, under the facts of the case, were entitled to recover actual damages, and that there was evidence offered from which the amount of such damages might have been legitimately found by the jury, we are of opinion that the case was fairly submitted to them under the prayers granted.

The general rule is that in an action upon an injunction bond the recovery must be confined to such actual damages as the plaintiff may be able to show were suffered by him. This damage must be the natural and proximate consequence of the issuing of the injunction. This rule, or measure of damages, is so well settled that no authorities need be cited to support it. It was the rule applied by the Court in all its instructions upon the subject, and, unless there be reversible error in refusing the defendant's first and third prayers and in modifying their second prayer, the judgment must be affirmed.

To determine the propriety of the Court's action in these respects, a brief outline of the facts is necessary. After the service of the injunction upon the plaintiffs, by advice of their counsel, they changed the character or structure of the pad. Prior to the injunction they were making an elastic pad, made of cotton with a layer of elastic fibre. The insertion of this fibre in the mass of cotton prevented the pad from matting, and held it in its original shape. This was the pad which the Phoenix Pad Company claimed to be an infringement of its patent. The change made in the structure was the insertion of an additional layer of four pieces of wadding. The shape and structure of these layers and the manner in which they were introduced into the original pad are fully explained in the testimony of the witnesses.

To retain their customers it was necessary to sell this changed pad at the same price as the original pad. The evidence on the part of the plaintiffs tended to show that the pad made and sold by them after the injunction cost more to manufacture than did the elastic pad which they were putting out before the injunction was issued. This increased cost in the manufacture of the pad pending the injunction, together with certain costs incurred by them in the injunction case, is the damage which the plaintiffs sought to recover in this action.

The plaintiffs proved the number of pads made and sold during the continuance of the injunction. They produced their books, and introduced in evidence, without objection, a statement taken from the books, which showed the additional cost incurred in the manufacture of the new pad. Miss Rodgers, the book-keeper of the plaintiff company, who produced this statement and who proved it was taken from those books, testified that she did not know what the extra cost for manufacturing the pads was; but that that cost, as shown upon the statement, was figured by Mr. Bouchat, and that, to quote her language, it "was understood by me to put that additional cost on them." She further testified that there was a careful calculation made of the cost of manufacturing the pads made upon estimate sheets, which were preserved for a while; but that these estimates were not entered on the books, and that she had then none of those sheets; that Mr. Bouchat attended to the calculation of the cost, and that the estimate sheets, which were preserved for about six months, showed the cost of the pad — the material that went in it and the labor.

Mr. Bouchat, who had large experience in the manufacture of pads and who was familiar with every detail of the business, testified that the extra cost of the substituted pad was two dollars and fifty cents per thousand pairs, and fully explained how and why this extra cost was made necessary. He had the books of the company before him, which showed the number of pads made. These books and the statement above mentioned were afterward offered in evidence during the examination of Miss Rodgers. He stated that this additional cost was made up of additional material and labor required to make the pad manufactured by them after the injunction — two dollars for additional material and fifty cents for labor, etc., in putting them together.

Mr. Schleunes, the secretary-treasurer of the company, who was familiar with the manufacturing department, fixed the increased cost at two dollars and forty-five cents per thousand pair, and explained in detail how this estimate of cost was arrived at. There was some discrepancy between this witness and Mr. Bouchat as to the cost of the pad made by the plaintiffs before the injunction was issued, but that was a matter for the jury to deal with. The plaintiffs offered evidence tending to show that after the service of the injunction they had either to discontinue business, or manufacture at an additional cost, and that they were advised that they might make the substituted pad without violating the injunction. These are all the facts that need be stated in order to dispose of the legal questions raised on the record.

The real question in the case arises under the defendant's first prayer, which asserted that there was no legally sufficient evidence that any, save nominal loss or damage, was sustained by the plaintiffs by reason of the injunction. It was argued in support of this prayer that nominal damages only could be recovered, first, because the plaintiffs had violated the injunction; secondly, that the evidence of actual loss is too vague, indefinite and conjectural to be considered by the jury in computing that loss. We have been referred to no case which supports the defendant's first proposition, and we see no good reason why such should be the law. There is no such condition to be found in the injunction bond. The condition of that obligation is that the complainant in the injunction suit shall prosecute the writ with effect, and satisfy and save harmless the defendant if the same shall not have been prosecuted with effect; and insuch case shall pay all costs and damages that may be occasionedby the issuing of the injunction. The right to recover such damages as may be occasioned by a breach of the obligation of the bond is not conditioned upon the defendant's obedience to the writ, and when suit is brought upon the bond no such condition can be read into it as a defence.

When the defendant in the injunction suit has obeyed the writ, as is his duty to do, and has suffered loss in consequence thereof, he may recover that loss. Where he has violated the injunction and no actual loss has resulted of course no such damages can be recovered. This was the case of Steel v.Gordon, 14 Wash. 523, cited by the appellant. But where the plaintiff has violated the injunction and has suffered loss, this conduct would only operate to prevent damages occurring which would have resulted if the writ had been obeyed.

It is stated in 16 Amer. Eng. Ency. of Law, 458, that, "it may be laid down as a general rule that while by disobedience to a writ of injunction the party enjoined becomes amenable to the action of the Court as for contempt, such disobedience does not deprive him of his right of action for a breach of the conditions of the injunction bond, and is no defense to such an action."

It was decided in Van Hoover v. Van Hoover, 18 Mo. Appeals, 25, that: "Obedience to the writ is not a condition to a recovery on the bond. If the writ has not been respected and obeyed, it is for the Court upon a proceeding in contempt and not a defense on the bond. High on Injunction, sec. 1654; Colcord v.Sylvester, 66 Ill. 540. Doing things which the writ commands not to be done may prevent damages accruing which would have resulted if the writ had been obeyed, and a party enjoined of course would be unable to show damages in that respect, as a consequence of the injunction."

In Colcord v. Sylsvester, supra, the contention was broadly made that no action could be maintained in case the writ of injunction had been disregarded by the party on whom it was served. But the Court said: "We fail to perceive the soundness of this proposition. The condition of the bond is one thing, the service of the writ another and entirely different thing. By the service of the writ the party against whom it is directed is under the mandate of the Court, which he must regard at his peril. We have not found a case where his disobedience has deprived him of his right of action on the bond."

Nor can we agree to the second proposition asserted by the appellants, viz, that the evidence offered to show actual damage was so indefinite and speculative as to have justified the Court in withdrawing the consideration of such loss from the jury.

The evidence upon this subject went in without objection, and, assuming it to be true, as we must do in passing upon this prayer, we think it was such that the jury might, with reasonable certainty, have determined the amount of loss. The evidence upon this point, some of which we have adverted to, cannot, we think, be fairly characterized as speculations, guesses and unwarranted estimates; but contains facts as to increased cost of manufacturing, etc., sufficient to have enabled the jury to estimate the loss. We have carefully examined the evidence, and think it was sufficient, if believed by the jury, to have warranted a recovery of actual loss under the principles announced in Central Coal and Coke Company v. Hartman, 111 Fed. Rep. 96; San Jose Fruit Packing Co. v. Cutting, 133 Cal. 237, and others relied on by the appellants.

The appellants have no good reason to complain of the modification of their second prayer. The only real change made in the prayer as offered was the elimination therefrom of the words "clear and definite" and the insertion of the word "reasonable." The word "data," which is somewhat uncertain and equivocal, appears in both prayers. Instead of this word it would have been better to have used the words "evidence" or "facts"; but we do not consider that the defendants were in any manner injured by the modification made.

The defendant's third prayer was properly refused. The law does not require, as a condition of recovery of actual loss, that such loss should be "determined from records of expense kept at the time the expenditures were made," as the prayer asserted. Such records may have greater probative force, but they are not necessary to a recovery, which may be had upon proof of facts from which the damage suffered may be logically deduced.

It follows that the judgment must be affirmed.

Judgment affirmed with costs.