security for the payment of the debt, it will not be enforced farther than is necessary for such security; if the debt is abundantly secured by the property which remains liable to the mortgage, a court of chancery would properly decline to enforce it. The present case, however, is not embarrassed by any questions of this sort. The appellants have proceeded to sell the immovable property mortgaged, which did not more than satisfy the first mortgage; and the amount of insurance money remaining after satisfying the claim of Johnson & Goodrich is less than the insurance stipulated for in the mortgages. The equitable doctrine upon which the appellants' claim is founded undoubtedly obtains in Louisiana. It is derived from the principles of the civil law, which is the basis of the Civil Code of that state; and it is supported by the authorities cited from the Louisiana Reports. See Civ. Code, La. art. 1965; Williams v. Winchester, 7 Mart. (N. S.) 22; Citizens' Bank v. Dugue and Louisiana State Bank, 5 La. Ann. 12; Braden v. Louisiana Insurance Co., 1 La. 220 [20 Am. Dec. 277].” While it is true, as claimed by counsel for appellants in the case at bar, that the facts of that case are different from the facts in this, we are unable to see why, in principle, the cases are not alike. If an equitable lien would exist and be enforced in the case cited, we are wholly unable to see why it should not exist and be enforced in the case now before the court. In the case of Burdon Sugar Refining Co. v. Payne, 167 U. S. 127, 17 Sup. Ct. 754, 42 L. Ed. 105, in the opinion by the chief justice. (page 147, 167 U. S., page 758, 17 Sup. Ĉt., 42 L. Ed. 105) on the precise question now before the court, this was said: "If it was within the power of the contracting parties to create an equitable lien upon the bounty collected, the terms of the contract effectuated that purpose. Walker v. Brown, 165 U. S. 654, 17 Sup. Ct. 453, 41 L. Ed. 865, and cases cited. The right of the parties, however, by the contract, to create an equitable lien, and the power of a court of equity to enforce such lien, is denied upon the ground that as, by the provisions of the law of Louisiana, equality of distribution is the rule among creditors, and preferences can only result from privileges and mortgages, and as the subject-matter from which the lien here arose was not one of the cases to which the law of Louisiana gives a privilege, therefore an equitable lien could not be created by contract or enforced in violation of the terms of the statutes of Louisiana. But, without passing on the correctness of this proposition, we think it has no relation to the matter under consideration. * The right to collect the bounty having arisen from a law of the United States, and the provisions of that law creating a necessary relation between the grower and the manufacturer, making them, in effect, joint producers of the sugar, the right to the equitable lien stipulated by the contract was not controlled by the provisions of the local law of Louisiana, even although as a general rule-and in regard to this we express no opinion-the effect of that law would be to deprive contracting parties, except when expressly allowed, of the right to contract for an equitable lien, and to deny to courts of equity the power to enforce the same." The most that can be said for this case is that the question now under consideration is left by the Supreme Court an open one. Counsel for appellants has cited us in his brief, and alluded in oral argument, to quite a number of cases decided by the Supreme Court of Louisiana, which it is urged support his contention that an equitable lien, as claimed in this case and as has been herein discussed, is unknown to the law of Louisiana. We have examined the cases cited, and are unable to see that they support his contention. Indeed, some of the cases, we think, may be regarded as sustaining a contrary view. 121 F.-3 It is contended for the appellants that the pleadings in the case, namely, the intervening petition of Delgado & Co., as above set forth, did not set up the right of the interveners to an equitable lien, or pray for the allowance of the same in such terms as would justify the master in granting it. We have had some difficulty on this question, but we think, inasmuch as the petition set out all the necessary facts, and contained substantially a prayer for priority of payment, that it is sufficient, particularly as it would certainly have been amendable, and the only effect of sending the case back upon that ground, having expressed the views we have on the merits, would be that the petition would then be amended, and the same result follow. It results from the foregoing that there was no error in the action of the Circuit Court in overruling the exceptions to the master's report, which report granted to Delgado & Co., under the facts and circumstances of this case, an equitable lien, to be paid out of the procees of the cane manufactured in the Caffery Refinery by preference over ordinary creditors. The judgment of the Circuit Court is therefore affirmed. S. JARVIS ADAMS CO. v. KNAPP. (Circuit Court of Appeals, Sixth Circuit. March 3, 1903.) No. 1,133. 1. CONTRACT IN RESTRAINT OF TRADE-CONSIDERATION. Where an employé of a corporation, on leaving its service, was entitled under his contract of employment to rights in certain stock of the company, held for his benefit, but the extent of his interest in the stock depended upon whether or not he left the company for the purpose of engaging in a competing business, the payment to him by the company of a sum in excess of that to which he would have been entitled if he left for such purpose is a sufficient consideration for an agreement by him not to enter into a competing business or to disclose its secret processes. 2. SAME-VALIDITY-AGREEMENT AS INCIDENTAL TO SALE OF PROPERTY. An employé of a corporation on leaving its service had the right, under his contract of employment, to purchase a certain amount of stock which was held for his benefit, and upon the price of which dividends had been credited to him. Held, that a contract by which, in consideration of the payment to him of a sum of money, he surrendered his interest in the. stock and his right to purchase the same, and agreed that for 10 years he would not engage in a competing business, nor disclose, use, or sell the secret processes used by the corporation in its business, was valid, the agreement in restraint of competition being for the protection of the value of the stock the equitable title to which he sold to the corporation. 8. EQUITY PLEADING-SUFFICIENCY OF BILL-ALLEGATION OF BUSINESS SECRETS. A bill to enjoin the use by defendant, in violation of a contract, of processes and methods used by complainant in its manufacturing business, sufficiently alleges their character as business secrets, as against a general demurrer for want of equity, where it alleges that they were not generally known or understood by other manufacturers or by the public, and that defendant acquired his knowledge of them while an employé of complainant and its predecessor, and where it also sets out the contract, by which defendant agreed not to disclose such processes and methods to others. Appeal from the Circuit Court of the United States for the Southern District of Ohio. The appellant, who was complainant in the court below, filed this bill for the purpose of obtaining an injunction restraining the defendant from manufacturing and selling, within the United States and east of Denver, Colo., certain special metallic castings described therein, and from using the processes used by the complainant in the manufacture of such castings, and for an accounting of previous manufacture and sales. The defendant demurred to the bill. The demurrer was sustained, and the bill dismissed. The bill alleges, in substance, the following facts: In September, 1899, and for some time previously, a firm, styled S. Jarvis Adams & Co., were engaged in the manufacture and sale of certain articles made of iron or steel, by methods and processes not generally known to the public, at Pittsburg, Pa., where it had established a business and acquired a reputation. Certain parties, McKnight, Fownes, Speer, and Speer, contemplating the formation of a corporation and the purchase of the plant, business, and good will of the firm, and wishing to secure for the corporation the services of some of the employés of the firm, the defendant Knapp among them, who were familiar with the business and the methods and processes used therein, entered into the following written agreement with them: "This agreement, made and entered into this twenty-eighth day of September, A. D. 1899, between Charles McKnight, H. C. Fownes, J. McK. Speer and J. Ramsey Speer, all of the city of Pittsburg, Pennsylvania, who have or are about to associate themselves together under the firm name of the S. Jarvis Adams Company, parties of the first part, and T. K. Miller, J. M. Bossert and S. A. Knapp, of the same place, parties of the second part, witnesseth: "Whereas, the parties of the first part are about to purchase the plant of S. Jarvis Adams & Company, including both the real estate and their foundry business operated by said company; and "Whereas, they are desirous of continuing in their employ the parties of the second part in the positions now held by them with the said S. Jarvis Adams & Company, or in some similar capacity or position of employment with the parties of the first part: "Now this agreement witnesseth: That the parties of the first part agree to hold for the use and benefit of each of the said parties of the second part the sum of twenty-five thousand dollars ($25,000.00) respectively, of the capital stock of a corporation to be formed by the said parties of the first part, under the name of The S. Jarvis Adams Company, the capital stock of which is to be not more than six hundred thousand ($600,000.00) dollars, and until said corporation is formed, to hold for them such proportionate share of the business as the said allotment of capital stock bears to the entire capitalization mentioned. The stock thus to be held for the benefit of the said second parties is to remain unsubscribed in the treasury of the corporation, and an account is to be opened with each of the said second parties and all profits or dividends applicable to said stock is to be credited thereon and thus the stock is to be carried until fully paid out of the dividends or as hereinafter provided and upon its full payment in the manner mentioned certificates of stock are to be made out and delivered to each of the said parties for such number of shares as shall make up the sum of twenty-five thousand dollars ($25,000.00). The said second parties are also each to be employed about the business either in their present capacities or in such capacity or work as the said first parties shall designate or direct for the term of one (1) year from the first day of October, A. D. 1899, at the annual salary of twenty-five hundred ($2500.00) dollars, payable monthly. "If, however, the said second parties, or any one or more of them, should prove unsatisfactory to the said first parties in the manner of the discharge of their duties which may be assigned to them, or in any other way or manner whatsoever, then the party so becoming unsatisfactory may be discharged and relieved of any further duties, but the party so discharged shall be entitled to receive the balance of his salary due to him for the full year's employ ment above designated at the rate named. In event of said discharge of any one or more of said second parties, the party so discharged shall also receive, in addition to his salary, the earnings upon his stock or interest, as shown by the books of the company, so as aforesaid set apart and held by the said first parties for him, to be estimated for such portion of the year as he may have actually served the said first parties. After the expiration of the first year as above mentioned, from October 1, A. D. 1899, the further employment of the said second parties shall be at the pleasure and discretion of the first parties, but, in the event of such discharge at any time after the expiration of the first year, the party so discharged shall receive his salary only for the portion of the year for which he may have actually rendered services down to the time of his discharge and he shall also, at the same time, transfer and set over by proper paper, his interest in the stock so as aforesaid held for him in the treasury of the company and shall receive therefor such amount as the said stock may be shown by the books to be then worth over and above the charges against it for the unpaid amount still due on the account opened between him and the parties of the first part. It being the purpose and intent of this agreement to give to each of said second parties in event of his discharge the book value of the stock held for him after subtracting from it the amount still due from him to the company, and the arrangement so specified is further to go into effect in event of death of any of the second parties or in case of their resignation; except, however, in case said resignation shall be for the purpose of entering a competing business, in which event the party so resigning shall receive back only the amount which has actually been credited to his stock account. When and in event of the stock becoming fully paid out of the earnings or dividends of the company, as above provided for, then certificates therefor shall duly be made out and issued to the said second parties, as and when the stock becomes fully paid and the stock shall then be held by said second parties free from this contract and in the same manner as other stock of the said company is held. The said second parties, or any of them, after the expiration of the first year, as aforesaid, may further make any payments which they may desire in addition to the earnings of the stock upon their respective stock accounts and receive proper credit therefor. "And the said second parties do further covenant and agree each for himself that they will give their full time, energy and attention to the business and prosecution of the work which may be committed to them by the said first parties, to the best of their respective abilities. "In witness whereof the said parties have hereunto set their hands and seals the day and year first above written. A corporation was formed under the title of the S. Jarvis Adams Co., and the purchase was made. Knapp and the other parties named in the contract entered the service of the corporation, and the business went on until a month or two after the expiration of the first year, when the defendant gave notice of his intention to resign and withdraw from the company, and taking such share of the profits as had accrued to him. A controversy arose between him and the company in respect to the terms upon which such withdrawal should take place; the officers of the company believing that he was intending to withdraw for the purpose of going into a competing business, in which case he would not be entitled to take profits, but only pay for his services and the amount which he had been credited on his stock. But he denied that he had such purpose, and if so he was entitled to pay for his services and the value of his stock, less the amount unpaid upon it. Το settle this controversy, the parties entered into the following agreement: "This agreement, entered into this twelfth day of November, 1900, between Sanford A. Knapp, party of the first part, and The S. Jarvis Adams Co., its successors and assigns, party of the second part, witnesseth: "That Sanford A. Knapp, having resigned from the employ of The S. Jarvis Adams Co., now covenants and agrees, in consideration of the sum of six thousand, four hundred and eighty and ninety-five hundredth ($6,480.95) dollars, to him in hand paid, that he will not directly or indirectly, as an individual or partner or as a stockholder, director or officer of any corporation, limited partnership or other concern, or as an employé of any corporation, limited partnership, or other concern, or any person or persons whatsoever, enter into the manufacture and sale, or either, or disclose or sell or use any of the processes or methods used by the said second party, in the manufacture of any of the specialties, viz.: Pipe Balls, Bell Dies, Tong Dies or Axle Boxes, now manufactured by said second party, for a period of ten (10) years from the date hereof, in that part of the United States east of a line drawn north and south through the city of Denver, Colorado. "Should the first party engage in the foundry business, as an individual or in partnership with James M. Bossert, he reserves the right to use the aforementioned processes and methods in the manufacture of any castings except the specialties enumerated above. "But should the said first party engage in the foundry business with any other partner or partners than the said James M. Bossert, or as an employé, stockholder, director or officer of any corporation, limited partnership, or other concern, then the prohibition as to the disposal, sale or use of the processes and methods, as outlined above, is to continue in force. "The said Sanford A. Knapp, doth hereby assign and release to The S. Jarvis Adams Co., all right, title, interest in or claim upon any of the stock of The S. Jarvis Adams Co., and doth authorize the return of the said stock to the treasurer of the corporation. "In witness whereof, we have hereunto set our hands and seals this twelfth day of November, 1900. Sanford A. Knapp. [Seal.] "The S. Jarvis Adams Company, "Henry C. Fownes, Pres. "Wm. C. Fownes, Jr., Sec." Subsequently, and about July 1, 1901, Knapp, with Bossert and others, formed a partnership, and at Coshocton, Ohio, went into the business of manufacturing and selling the same specialties, using the methods and processes of the complainant which he had learned and acquired while in the service of the corporation and its predecessors. On September 27, 1901, the defendant and his associates formed a corporation under the name of the Coshocton Iron Company, Knapp becoming one of its directors, and continued the same business at Coshocton, using the same methods and processes, taking over the plant and business of their former firm. The complainant has built up a large business in said specialties, particularly in axle boxes, and sells them within the portion of the United States east of Denver. The defendant's business is a competing business within the same territory, and the defendant, as an officer of his corporation, promotes the competition. The demurrer to the bill was a general demurrer for want of equity. Watson, Burr & Livesay, for appellant. Bargar & Bargar and Pomerene & Pomerene, for appellee. SEVERENS, Circuit Judge, having made the foregoing statement of the case, delivered the opinion of the court. The ground upon which this demurrer was sustained was that the contract of November 12, 1900, upon which the bill ultimately rests, had for its sole purpose the restraint of competition, and that it was therefore void because it was opposed to public policy. Still other |