Hackenheimer v. Kurtzmann

Clark, J.: This action is brought to recover the sum of $50,000, the amount agreed upon in a contract between the parties as stipulated and liquidated damages. When plaintiffs bought the stock in the corporation of Christian Kurtzmann & Co. frtim defendant Louis S. Kurtzmann they paid a large price for it, and principally because of the value to the business of the name “ Kurtzmann.” All parties to the contract agreed that that name should be protected for the business which had been established by Christian Kurtzmann many years ago. The defendants vendors agreed with the plaintiffs that all excepting Christian Kurtzmann would not directly or indirectly interfere with the good will of the corporation by the use of the name “ Kurtzmann ” in connection with the manufacture and sale of pianos or piano supplies within ten years from the date of contract, and defendant Christian Kurtzmann agreed to like conditions for five years. The name “ Kurtzmann ” was valuable to the business that plaintiffs bought when they purchased Louis S. Kurtzmann’s stock in the old company, and it was the duty of defendants, and each of them, under their contract to refrain from using that name in the piano business during the time specified in the contract, and this they failed to do. On May 29,1916, and several months before the time limit expired as to him, Christian Kurtzmann caused a corporation to be formed under the name of Christian Kurtzmann, Inc. It was organized for the purpose, among other things, of dealing in pianos. He was the sole owner of this new corporation and I am satisfied it was organized by him so he could use the name “ Kurtzmann ” in connection with the sale of pianos in violation of the terms of the contract. The circulars sent out by that company, and photographs used, are convincing evidence that defendants intended to use the name “ Kurtzmann ” in their piano business which they knew they had no right to do. [693] I think Christian Kurtzmann violated the terms of the contract by incorporating a new company to deal in pianos, giving it the Kurtzmann name, six months before the five-year limit placed on him had expired, when he knew perfectly well that the founder of the business, whose name plaintiffs desired to preserve in connection with the business, and for which privilege they had paid a huge price, bore the same name as the younger man who incorporated this new company, using the same name as that of the founder of the business. His father then went on dealing in pianos, and his company took up the business of distributing musical instruments, thus violating the terms of the contract before the time limit had expired. By the terms of the contract it was provided that if these defendants violated its terms, the party so violating would pay to the other party $50,000, not as a penalty, but as liquidated damages. This contract ought to be interpreted as of the time it was made, not when subsequent events have shown that" defendants were not successful in the business which violated its terms. It should be upheld, for in view of the price paid by plaintiffs for the good will of the business, which included the name “ Kurtzmann,” the amount of damages agreed upon by the parties is not unconscionable. (Dunn v. Morgenthau, 73 App. Div. 147; Tode v. Gross, 127 N. Y. 480; Seidlitz v. Auerbach, 186 App. Div. 7.) The parties clearly meant this $50,000 to be liquidated damages, and not a penalty, for they said so in their contract in so many words. The amount does not shock the moral sense, in view of the fact that plaintiffs paid $130,000 largely because of the good will of the business, which consisted largely in the right to the unmolested use of the word “ Kurtzmann ” in connection with their business. Plaintiffs are entitled to be protected from the questionable methods of defendants in their endeavor to appropriate and use the name they had agreed not to use for at least five years. The parties must be presumed to have understood the terms of the contract which they signed. They deliberately, and as it appears to me intentionally, violated the terms of their agreement, and endeavored to undermine plaintiffs’ [694] business by the unlawful use of the name “ Kurtzmann,” and holding out to the world that' they were the original people of that name, and solely entitled to use it in connection with their business. The fact that they did not succeed in their unworthy scheme is no valid reason why they should escape the consequences of their unlawful acts. The judgment should be reversed, findings are disapproved and judgment directed for plaintiffs for $50,000, with costs. All concur, Kruse, P. J., in a separate memorandum, except Lambert and Davis, JJ., who dissent.