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Littlefield v. Perry/Opinion of the Court

[Syllabus from pages 205-207 intentionally omitted]

APPEAL from the Circuit Court for the Northern District of New York; the case being thus:

On the 5th of April, 1853, Dennis Littlefield, of New York, being at the time the patentee under a patent issued April 15th, 1851, for 'a coal-burner so constructed as to produce combustion of the inflammable gases of anthracite coals,' and having then on file in the Patent Office an application, dated December 30th, 1852, for a patent securing to him a stove arranged and operating 'for the purpose of economizing and burning the gases generated during the combustion of anthracite and other coals'-and the applicant stating that it was his purpose to apply it 'to furnaces for heating buildings, to cooking-stoves or ranges, to the furnaces of locomotives, or in any other situation where it is an object to economize waste gases or to consume smoke'-entered, as a party of the first part, into an agreement-evidenced by two separate documents, the first styled in some of the pleadings in the case, 'a grant,' and the second 'a supplementary agreement'-with the firm of Treadwell & Perry (to whom he then owed the sum of $1500) as a party of the second part, concerning the subjects, &c., embraced in the patent. The 'grant' was thus:

'Whereas letters-patent have been granted to and are now held by the said party of the first part, for a coal-burner so constructed as to produce combustion of the inflammable gases of anthracite coal, which letters bear date the 15th of April, 1851. And whereas, the said party of the first part has made application to the Patent Office for letters-patent, securing to him a certain improvement in the invention so as aforesaid patented by him, and said application is now pending; therefore, the said party of the first part, in consideration of one dollar to him in hand paid by said parties of the second part, and of the agreements herein contained on the part of said parties of the second part, and of the agreements contained in a certain agreement this day executed between the parties hereto, and bearing even date herewith, hath and by these presents doth assign and transfer to the said parties of the second part, their executors, administrators, and assigns, all the right, title, and interest which the said party of the first part now has, or can or may hereafter have in or to the aforesaid inventions, improvement, and patent, or the patent or patents that may be granted for said inventions, or any improvements therein, and on any extension or extensions thereof within and throughout the territory embraced within the States of New York and Connecticut, for and during the term for which the aforesaid letters-patent were granted, and the terms for which any patent for the aforesaid improvement, and any other improvement or improvements thereof, or extensions for or of either thereof, may be granted. And the said party of the first part doth hereby, for himself, his heirs, executors, and administrators, guaranty to the said parties of the second part the full and uninterrupted enjoyment of the use and right to use, to make, construct, and to vend to others to use, the inventions, improvements, and patents aforesaid, during the terms aforesaid, as against all other persons whomsoever within the territory aforesaid.

'And the said parties of the second part hereby agree to pay unto the said party of the first part, for the right and interest hereby assigned and conveyed, provided, and as long as said party of the first part shall well and faithfully keep and perform all the agreements herein, and in the aforesaid agreement this day executed, between the parties hereto, the sum of fifty cents on each and every stove or coal-burner embracing said inventions and improvements hereby assigned, which shall be sold by said parties of the second part, after they shall have sold fifteen hundred of said stoves or coal-burners; such payments to be made at the times and in the manner particularly specified in the aforesaid agreement this day executed between the parties hereto.

'It is expressly understood and agreed between the said parties, that in case said party of the first part shall well and faithfully keep and perform all the agreements herein and in the aforesaid agreement, bearing even date herewith, contained, on his part, and the said parties of the second part, their executors, administrators, and assigns, shall without just cause refuse, or shall neglect to make and sell said coal-burners to such extent as the demand therefor shall reasonably warrant and require, after reasonable notice shall be given to them by said party of the first part, requiring them so to make and sell the same, that this assignment and transfer shall thereafter be void and of no effect, and all the rights and interests herein and hereby conveyed shall thereupon revert to the said party of the first part, his executors, administrators, and assigns.'

The 'supplementary agreement,' dated like the other, on the 5th of April, 1853, and like the other, with Little-field, the patentee, for a party of the first part, and Treadwell & Perry, the assignees, party of the second part, was thus:

'Whereas, the said party of the first part hath agreed to sell, assign and transfer unto said parties of the second part, all the right, title, and interest which said party of the first part now has, or can or may hereafter have, in or to certain letters-patent of the United States, granted to him on the 15th of April, 1851, and the invention thereby patented, and to a certain improvement thereon, an application for a patent for which is now pending, and to any and all extensions thereof, within the States of New York and Connecticut, upon certain conditions and stipulations. And whereas said party of the first part is now indebted to the said parties of the second part in about the sum of $1500, and it is understood and agreed between the parties hereto that the premium of fifty cents upon each stove embracing said invention and improvements of said party of the first part which shall be sold by said parties of the second part, shall be retained by them until they have sold fifteen hundred of said stoves, and applied upon the aforesaid indebtedness of said party of the first part to them. Now, in consideration of the premises, the said parties to this agreement hereby mutually agree to and with each other as follows, to wit:

'The said party of the first part hereby agrees—

'1. That in case any suit or proceeding shall be commenced against the said parties of the second part, or any persons holding under them, affecting the validity of said letters-patent, or either of them, or for violating any previous patent by the use and enjoyment of the rights, interests, and privileges conveyed to said parties of the second part, by an assignment this day made to them by said party of the first part, or any alleged infringement of any other patent, he will. . . assume and conduct at his own cost the defence against all such suits and proceedings, and keep and save entirely harmless and indemnified the said parties of the second part, their executors, administrators, and assigns, of and from all damages, costs, and expenses on account of the same; and further, that he will, whenever required by said parties of the second part or their assigns, sue any and all persons who shall infringe or violate, within the States of New York or Connecticut the said patent, or any patent or patents which may hereafter be obtained in respect to the subject-matter thereof, or of either of the same, in his own name or otherwise, but at his own cost or charge, and shall conduct the same for the use and benefit of said parties of the second part, their executors, administrators, and assigns; and he further agrees that in case the said letters-patent already granted, or any patents which may hereafter be obtained by him as aforesaid for the subject-matter thereof, shall be adjudged invalid, so as to deprive the said parties of the second part of the use and enjoyment of the rights and interests conveyed by the aforesaid assignment, that the agreements therein and herein contained on the part of said parties of the second part shall thereupon become void and of no further effect as against them or their assigns.

'2. That he will furnish to the said parties of the second part, before the first day of August next, at the cost price thereof, at the furnace of said parties of the second part, undressed castiron patterns for four several sizes of the coal-burner, patented in and by the aforesaid letters-patent, and embracing all the improvements therein for which letters-patent shall then have been secured, suitable to mould and cast from, and that he also will furnish at the place and price aforesaid, within a reasonable time after letters-patent have been secured by him therefor, undressed cast-iron patterns of the several sizes of all improvements upon said coal-burners which shall be made or invented by him.

'3. That he will pay the balance of the said indebtedness to said parties of the second part, over and above the said sum of $750, in monthly instalments, from this date, of not less than $100.

'The said parties of the second part hereby agree—

'1. That so long as the said party of the first part shall well and faithfully keep and perform all the agreements herein, and in said assignment bearing even date herewith, contained on his part, the premium of fifty cents upon each stove or coal-burner embracing the aforesaid inventions and improvements, which shall be sold by them, shall be retained and applied by them toward the payment of the said indebtedness of said party of the first part to them, to the extent and amount of $750, and that after such amount shall have been thus paid they will pay to said party of the first part, his executors, administrators, or assigns, the premium or sum of fifty cents on each and every of said stoves or coal-burners which shall thereafter be sold by them; that they will keep a true account of all sales of said stoves or burners, which shall be open to the examination of the said party of the first part, and that a settlement of and for the premiums on said sales shall be made by them with said party of the first part, on the first day of April in each and every year hereafter.

'2. That they will also pay, in the manner and at the times aforesaid, the sum or premium of fifty cents upon every stove or burner, furnace, range, oven, or heater, of whatever kind or description that they may originate or construct upon the principle of the coal-burner, so patented as aforesaid, by said party of the first part, after patterns of their own design or contrivance, it being, however, hereby expressly understood and agreed by said parties of the second part, that nothing herein or in said assignment contained shall give to them the right to use or apply the principle of said coal-burner to furnaces that are used or erected in the cellars or basements of houses, for the purpose of heating several rooms or larger part of a dwelling-house, the same being intended to be reserved by said party of the first part.

'3. That they will, in case the said party of the first part shall well and truly keep and perform all the agreements on his part herein and in said assignment contained, manufacture and use all reasonable efforts to sell so many of said stoves or burners as the demand therefor will reasonably warrant and require; and that in case they or their assigns shall, without just cause, refuse, or after reasonable notice from said party of the first part, shall neglect to manufacture or sell said stoves or burners to such extent as aforesaid, then that the aforesaid assignment shall become inoperative and void, and this agreement shall cease and be of no further effect. But in that event, it is expressly understood and agreed that in case the said indebtedness of said party of the first part shall not then have been fully paid or satisfied to said parties of the second part, the same shall thereupon be at once due and payable, and that the payment thereof may be required by them from said party of the first part; provided, however, that such refusal or neglect shall occur for the reason that said stoves or burners cannot be sold by said parties of the second part on account of some practical defect in the principle thereof.'

The first of these two agreements, the grant, was duly recorded in the Patent Office, April 11th, 1853. The second, or supplementary agreement, was never recorded.

The application of Littlefield, dated December 30th, 1852, for an improvement in his first invention, and mentioned in the two documents, was rejected by the Patent Office, and on the 23d July, 1853, withdrawn by him.

On the same day that he thus withdrew it he filed a second application, it being for 'a new and useful improvement in stoves,' so devised as 'to burn the gaseous or more inflammable elements of the coal in contact with its more refractory portions, and thus secure a complete combustion of them both.'

The specification of this application, like that of the application rejected and withdrawn, stated that the patentee did not purpose to limit it to stoves for heating purposes alone, but to employ it wherever it could be advantageously applied, particularly to house furnaces, cooking-ranges, steamboat boilers, and stoves.

Upon this application a patent was issued, January 20th, 1854. On the 27th June, 1861, a patent for an improvement on this patent of 1854 was granted; and on the 9th November, of the same year, a reissue. Numerous other patents outstanding, and the subject of this controversy, were admitted to be reissues of this patent of 1854 or of patents for improvements upon it.

In this state of things, Treadwell & Perry, on the 25th of March, 1862, assigned all their interest to a certain George W. Sterling. He becoming dissatisfied with his purchase, the sale, by agreement, was cancelled, and he executed, June 2d, 1862, a reassignment to Treadwell & Perry. Intermediately, however, that is to say, on the 7th April, 1862, Treadwell & Perry had executed an assignment without any warranty of ownership to one Dickey. Both the reassignment from Sterling and the assignment to Dickey were left at the Patent Office for record on the 26th of June, 1862, and on the 2d July Dickey assigned all his interest to Mrs. Mary J. Perry, wife of John S. Perry; the Perry of the firm of Treadwell & Perry.

Littlefield having entered into partnership with one Jagger, and they two being engaged in making, within the States of New York and Connecticut, stoves under the patents of 15th April, 1851, 20th January, 1854, and June 27th, 1861, and under the patents for improvements on the inventions therein patented, and under the reissues of these several patents, Mrs. Perry, on the 27th of August, 1862,-alleging that the invention secured by the patent of April 15th, 1851, was regarded by Littlefield 'only as a germ from which a more valuable construction was to arise,' and that with a view of enhancing its value and utility he had proceeded soon afterwards with various experiments for improving the inventions secured by that patent, and that the subsequent patents and reissues were but for improvements on the original one, which subsequent improvements, with the original one, had passed to Treadwell & Perry by the 'grant,'-filed a bill in the court below against Littlefield & Jagger for injunction and account. Other improvements were patented, and reissues made pending the suit. Mrs. Perry having died during the suit, her husband, who was trustee under her will, was substituted as complainant. All the parties-complainant and defendants alike-were citizens of the State of New York. A supplemental bill filed after the date of reissues claimed the profits under them.

The assignment above mentioned of April 7th, 1862, to Dickey, was executed by Perry. Treadwell, in testimony, swore, more than once, that he assented to it.

For the benefit of the reader who may not recall the exact words of the Patent Acts, and the exact construction given to them, it may be well here to state—

1st. That one of the Patent Acts enacts as follows:

'Every patent shall be assignable in law either as to the whole interest or any undivided part thereof, by any instrument in writing; which assignment, and also every grant and conveyance of the exclusive right under any patent to make and use and to grant to others to make and use, the thing patented within and throughout any specified part or portion of the United States, shall be recorded in the Patent Office within three months from the execution thereof.

'All actions, suits, controversies, and cases arising under any law of the United States, granting or confirming to inventors the exclusive right to their inventions or discoveries, shall be originally cognizable, as well in equity as at law, by the Circuit Courts of the United States, or any District Court having the powers and jurisdiction of a Circuit Court.'

2d. That under the first of the above-cited sections, it has been judicially held that the patent is assignable only

(a) As to the whole interest, or an undivided part of such whole interest in every portion of the United States, OR

(b) As to an exclusive right within and throughout some specified part of the United States.

And that under the second of the above-cited sections, an assignee, either of the entire interest or of the exclusive right within a specified portion of the United States, may sue, in his own name, infringers in the Federal courts.

And that it has been further decided that a mere licensee cannot so sue, and that whenever a contract is made in reference to patent rights, which is not provided for or regulated by the preceding or other statute of the United States, the parties, if a dispute arise, stand as regards their right to sue in the Federal courts and otherwise, upon the same ground as other litigants.

The defendant accordingly set up either in answer or argument various defences-as,

I. That the grant and the supplemental agreement were one agreement; the latter being referred to in and making part of the former. That in consequence of the limitation and reservation made in the supplemental agreement (supra, p. 212), the right to use or apply the invention patented or applied for, given in the grant, was never given as to part of the invention, the part, namely, which applied 'to furnaces that are used or erected in the cellars or basements of houses for the purpose of heating several rooms or larger part of a dwelling-house; the same, continued the supplementary agreement, being intended to be reserved.' That neither the whole invention nor any undivided part of it being thus transferred, Treadwell & Perry were, under the above-quoted statute, which 'renders the monopoly capable of subdivision in the category of its locality, but in no other way,' not invested with such a title, as under the acts of Congress would give them a right to sue in the Federal courts; that the assignee must have the entire right within the territory specified; that they were mere licensees and unable under the Patent Acts to maintain a suit in their own name, or to give another this right; that accordingly no jurisdiction under the statute existed in the Circuit Courts to hear the case, both complainant and defendants being citizens of the same State.

II. That the fact that the contract between the parties did not vest in Treadwell & Perry any exclusive right in, or legal title to, or equitable right to perfect a title to any patent or invention, nor confer any right beyond that of licensees, appeared further, under decisions of the Federal courts, for the following reasons:

Because it was stipulated that the patentee should sue all infringers 'in his own name,' or otherwise; showing the intent of the patentee to retain the control of the patents.

Because he reserved a premium or royalty on each stove to be manufactured by Treadwell & Perry.

Because Treadwell & Perry were required to account to him in a particular manner for all stoves made and sold by them.

Because there was a provision by which the contract might become 'inoperative and void,' and by which 'all the rights and interests. . . conveyed' were to 'revert' to the patentee, in the event that Treadwell & Perry neglected and refused to make and sell the stoves mentioned.

III. That the title was in Treadwell & Perry, inasmuch as Sterling, previously invested by them with a title, reassigned to them after they had assigned to Dickey, the argument here being that there was no actual warranty in the transfer to Dickey and none to be implied; that the transfer was in fact but a quit-claim, and that it was settled law that,

'If a possessor, without title, convey by quit-claim deed, and afterwards acquire good title, it does not inure to the benefit of the grantee.'

IV. That the inventions which Littlefield & Jagger were using, were inventions under the patent of 1854, or reissues of it, or for improvements on inventions thus secured; and that the patent of 1854 was not for any 'improvement' upon the invention of the patent of 1851, or on the invention described in the application of 1852, or improvement of it, or reissues for either; the things alone transferred by the 'grant.'

[On this question of fact the defendants went into a great body of proof, exhibiting in court models of all the things at any time applied for, patented, or secured by reissues, with a great amount of parol evidence to show that the inventions which they were using were not 'improvements' on anything which had passed by the grant or supplementary agreement of 1852, but were essentially different inventions.]

V. That no rights now existed in the complainant, inasmuch as Treadwell & Perry had forfeited whatever rights the grant gave them, by not making and selling stoves as they had stipulated by the agreement to do.

[On this point some proofs were given, but it was not shown that Littlefield had given to them the notice required by the supplementary agreement, supra, p. 212.]

VI. That the supplemental bill, claiming the profits under the last reissues, extinguished and cancelled all claims for infringement of the original and prior reissues, since suits pending for the infringement of an original patent fall with its surrender for a reissue, because the foundation upon which they rest no longer exists. And that this cannot be helped by a supplemental bill.

The court having heard the case, directed an account of 'all the profits, gains, and advantages which the said defendants, or either of them, have received, or which have arisen or accrued to them, or either of them, from the manufacture, use, or sale of stoves within the States of New York and Connecticut, embracing the improvements described in and covered by the said letters-patent, and the reissues thereof, or any of them.'

The master, stating an account on these principles, found due to the complainants as of December 6th, 1869, the sum of $52,747, the defendant giving little assistance in enabling him to arrive at the truth of things; and the court, overruling numerous exceptions to the report, some of form and some to the principles on which the account was stated, and approving it, added interest to the date of final decree; entering then, March 19th, 1872, a decree for $61,486.

From that decree, John S. Perry, who, by substitution in the course of the proceeding, had, as already said, become complainant as trustee and executor of his wife, Mary, the original complainant, appealed.

Messrs. E. R. Hoar and H. E. Sickles, for the appellants; Messrs. E. W. Stoughton and J. H. Reynolds, contra.

The CHIEF JUSTICE delivered the opinion of the court.

We are met at the outset of this case with a question of jurisdiction. All the parties, plaintiff as well as defendant, are citizens of the State of New York. The power of the Circuit Court, therefore, to entertain the cause, if it exists at all, must be found in the jurisdiction conferred by the patent laws.

The suit is in equity against a patentee by one who claims to be his assignee, to restrain him from infringing upon rights under his patent, which are alleged to have been assigned. The Circuit Court has jurisdiction of all suits arising under the patent laws, and has power, upon a bill in equity filed by a party aggrieved, to grant injunctions, according to the course and principles of courts of equity, to prevent the violation of any right secured by patent. Every patent, or any interest therein, is by statute made assignable by an instrument in writing, and the patentee or his assignee may, in like manner, grant and convey an exclusive right under his patent throughout any specified part of the United States. All such assignments must be recorded in the Patent Office within three mouths from the time of their execution. This power of assignment has been so construed by the courts as to confine it to the transfer of an entire patent, an undivided part thereof, or the entire interest of the patentee or undivided part thereof within and throughout a certain specified portion of the United States. One holding such an assignment is an assignee within the meaning of the statute, and may prosecute in the Circuit Court any action that may be necessary for the protection of his rights under the patent.

The title of the complainant in this case grows out of what is termed in the answers 'a grant and supplementary agreement,' executed in 'two parts,' between Littlefield, the patentee, and Treadwell & Perry. The 'grant' is one of the parts, and the 'supplementary agreement' the other. The grant, taken by itself, contains, in most unmistakable language, an absolute conveyance by the patentee of his patent and inventions described, and all improvements thereon, within and throughout the States of New York and Connecticut, and an agreement by the assignees to pay a royalty on all patented articles sold, with a clause of forfeiture in case of non-payment or neglect, after due notice, to make and sell the patented articles to the extent of a reasonable demand therefor. This grant was duly recorded in the Patent Office six days after its execution.

The supplementary agreement was never recorded. It contained, among other things, a stipulation to the effect that nothing in the assignment should give to Treadwell & Perry the right to use or apply the principle of the patent to furnaces erected in cellars or basements of houses for the purpose of heating several rooms, it being the intention of the patentee to reserve that to himself. It also contained certain other stipulations between the parties intended for the protection of their respective rights and the regulation of their conduct under the assignment. The defendants now contend that by reason of this reservation, and these several stipulations, the title of Treadwell & Perry, under the grant, has been reduced from that of assignees to mere licensees.

Undoubtedly, for the purpose of ascertaining the intention of the parties in making their contract, the two instruments, executed as they were at the same time, and each referring to the other, are to be construed together. If, when so construed, they shall be found to convey to the assignees the title to the patent and inventions and grant a license back from the assignees to the patentee of the right to use the patent and its principle in the manufacture of the designated furnaces, the Circuit Court had jurisdiction of the cause.

When the 'grant' was placed on record, Treadwell & Perry became the apparent owners of the entire patent and inventions throughout the specified territory. Neither the agreement to account and pay the royalty nor the clause of forfeiture for non-performance contained in that instrument reduced them to the position of licensees. The agreement to account and pay formed part of the consideration of the assignment, and was in effect an agreement to pay at a future time a sum to be determined by the number of articles made and sold. For the non-payment or other non-performance a forfeiture might be enforced as for condition broken, but until it was enforced the title granted remained in the assignees.

The supplementary agreement contained a provision that Littlefield should sue infringers 'in his own name or otherwise,' and also defend all suits against Treadwell & Perry for alleged infringements of other patents by the use of his, and this it is alleged is evidence of the intention of the parties to make the grant effective only as a license. It needs only a slight examination of that clause in the contract, however, to become satisfied that it was intended only as a provision for placing on Littlefield the costs and expenses of all such litigation, as well as all damages for infringements growing out of the use of the inventions by the assignees. The suits were to be prosecuted in his name, or otherwise, as circumstances should require, and he was to be at all the costs and expense of maintaining his patents. That is the extent of the provision.

Upon the argument, the reservation of the right to use the principle of the patent and inventions in the manufacture of furnaces seemed to be relied upon with more confidence as establishing this claim on the part of the defendants. All agree that the intention of the parties, when ascertained by an examination of both the instruments, must govern in this action where only the parties themselves are interested. There are no intervening innocent third persons. Jagger, the partner of Littlefield, who is codefendant with him, is charged with full notice of the rights of Treadwell & Perry, and others claiming under them.

It is a significant fact that the agreement was executed in two parts. Ordinarily the whole of such a contract is embodied in a single instrument. Another important fact is, that only one of the parts is recorded, and that the one which, taken by itself, places the title in Treadwell & Perry. The record is intended for the benefit of the public. Bon a fide purchasers look to it for their protection. The record of the grant alone, therefore, furnishes the strongest evidence of the intention of the parties to give effect to the two instruments as an assignment. It is true that in the recorded part reference is made to the other, but the manner of the reference is not such as to indicate that the unrecorded part contained anything to defeat the title granted by that which was recorded. The language is, 'in consideration of one dollar, and of the agreements herein contained on the part of the parties of the second part, and of the agreements contained in a certain agreement this day executed between the parties hereto, and bearing even date herewith, hath, and by these presents doth, assign,' &c. And again: 'It is expressly understood and agreed between the said parties that in case said party of the first part shall well and faithfully keep and perform all the agreements herein, and in the aforesaid agreement bearing even date herewith contained, and said parties of the second part shall, &c., neglect, &c., that this assignment and transfer shall thereafter be void and of no effect,' &c. This is undoubtedly sufficient to charge purchasers with notice of the execution of the supplementary agreement, and possibly of its provisions, but it falls far short of indicating an intention of the parties, by anything contained in the unrecorded instrument, to limit or defeat the assignment made in consideration of it. The most that can be inferred from such language is, that the parties had stipulated between themselves, not as to the legal effect of the recorded instrument, but as to their obligations or equitable rights under it. We think, therefore, that Treadwell & Perry were the assignees of Littlefield within the meaning of the patent laws, and that they and those claiming under them may sue in the Circuit Courts to prevent an infringement upon their rights.

But even if they are not technically assignees, we think this action is, nevertheless, maintainable. They certainly had the exclusive right to the use of the patent for certain purposes within their territory. They thus held a right under the patent. The claim is that this right has been infringed. To determine the suit, therefore, it is necessary to inquire whether there has been an infringement, and that involves a construction of the patents. The act of Congress provides 'that all actions, suits, controversies, and cases arising under any law of the United States granting or confirming to inventors the exclusive right to their inventions or discoveries shall be originally cognizable, as well in equity as at law, in the Circuit Courts,' &c. An action which raises a question of infringement is an action arising 'under the law,' and one who has the right to sue for the infringement may sue in the Circuit Court. Such a suit may involve the construction of a contract as well as the patent, but that will not oust the court of its jurisdiction. If the patent is involved it carries with it the whole case.

A mere licensee cannot sue strangers who infringe. In such case redress is obtained through or in the name of the patentee or his assignee. Here, however, the patentee is the infringer, and as he cannot sue himself, the licensee is powerless, so far as the courts of the United States are concerned, unless he can sue in his own name. A court of equity looks to substance rather than form. When it has jurisdiction of parties it grants the appropriate relief without regard to whether they come as plaintiff or defendant. In this case the person who should have protected the plaintiff against all infringements has become himself the infringer. He held the legal title to his patent in trust for his licensees. He has been faithless to his trust, and courts of equity are always open for the redress of such a wrong. This wrong is an infringement. Its redress involves a suit, therefore, arising under the patent laws, and of that suit the Circuit Court has jurisdiction.

It is next asserted that the complainant has not by his proof shown himself to be the assignee of Treadwell & Perry. They, on the 25th of March, 1862, assigned all their interest to George W. Sterling. He became dissatisfied with his purchase, and, by agreement of parties, the sale was cancelled, he giving effect to the cancellation by executing a reassignment to Treadwell & Perry, bearing date June 2d, 1862. Under date of April 7th, 1862, Treadwell & Perry executed another assignment to one Dickey. Both the reassignment from Sterling and the assignment to Dickey were left at the Patent Office for record on the 26th June, 1862, and on the 2d July Dickey assigned to Mary J. Perry, in whose name the suit was commenced.

It is now claimed that this proof shows title in Treadwell & Perry, inasmuch as Sterling reassigned to them after they had assigned to Dickey. Mrs. Perry was the wife of John S. Perry, one of the firm, and he is now a party to the suit, having upon her death succeeded to all her rights, as trustee under her will. Treadwell, the other member of the firm, has been several times in the progress of the cause examined as a witness, and has testified that Dickey became the owner of the patents under a transfer to which he consented. It is clear, therefore, that Mrs. Perry at the commencement of the action was in equity, if not in law, the owner of whatever had been assigned by Littlefield, and that if Treadwell & Perry had the legal title, they held it in trust for her, and will be estopped by a decree in her favor from setting up as against Littlefield any beneficial interest under it. At an earlier stage of the proceedings it might have been proper to make Treadwell a party, but upon the case as it now stands no possible harm can result to the defendants from a decree against them in his absence.

This brings us to a consideration of the merits of the case.

On the 15th April, 1851, a patent was issued to Littlefield for a certain improvement in cooking-stoves, and on the 30th December, 1852, he filed in the Patent Office his application for another improvement in stoves, devised 'for the purpose of economizing and burning the gases generated by the combustion of anthracite coals.' On the 5th April, 1853, he executed the grant and supplementary agreement already referred to. In the grant, after reciting that he held a patent bearing date April 15th, 1851, 'for a coal-burner so constructed as to produce combustion of the inflammable gases of anthracite coals,' and that he had 'made application to the Patent Office at Washington for letters-patent securing to him a certain improvement in the invention so as aforesaid patented to him,' and that such application was then pending, he proceeded to assign all the right, title, and interest which he then had, or might thereafter have, 'in or to the aforesaid inventions, improvement, and patent, or the patent or patents that may be granted for said inventions or any improvement therein, and on any extension or extensions thereof within and throughout the district, &c., for and during the term for which the aforesaid letters-patent were granted, and the terms for which any patent for the aforesaid improvement or any improvement or improvements thereof may be granted,' &c. The application of December 30th, 1852, was rejected at the Patent Office, and finally withdrawn by Littlefield on the 22d day of July, 1853, he at the same time filing another application for 'a new and useful improvement in stoves,' so devised as 'to burn the gaseous or more inflammable elements of the coal in contract with its more refractory portions, and thus secure a complete combustion of them both.' Upon this application a patent was issued January 20th, 1854. All the patents outstanding, and the subject of this controversy, are admitted to be reissues of this or improvements upon it. Littlefield and his codefendant do not deny that they have used the patents issued after January, 1854, and if the title to them passed under the assignment of April, 1853, it is admitted that such use is an infringement and that the complainant is entitled to a decree. The simple question, then, presented for our consideration is as to the effect to be given to this assignment.

It is well settled that a recorded assignment of a perfected invention, made before a patent has issued, carries with it the patent when issued, and that reissues are not patents for new inventions, but amendments of old patents. If a reissue is obtained with the consent of an assignee, it inures at once to his benefit; if without, he has his election to accept or reject it.

The parties have themselves agreed that the invention of 1852 is an improvement upon the patent of 1851. In the grant the patent is described as being 'for a coal-burner, so constructed as to produce combustion of the inflammable gases of anthracite coal,' and the application as being for an improvement upon the patent. It is true that the application is not referred to by its date, but there can be no doubt as to its identity, because the language adopted to describe the patent is not that of the claim in the patent itself, but of the application of 1852. Besides, the application is said to be then pending, and it is not pretended that Littlefield had any other on file in the Patent Office at that date. This relieves us from an examination of the specifications in the patent and application, for the purpose of ascertaining whether in point of fact the one was an improvement upon the other. Littlefield having agreed that it was, and having induced Treadwell & Perry to purchase by reason of this agreement, cannot now deny it.

It is clear, also, that the idea which Littlefield had in mind, and which he was endeavoring by his devices to make practically useful, was greater economy in the use of the inflammable gases of coal to produce combustion. It is not important in this suit that the patent, which had then been obtained, was not in fact suited for that purpose. It is sufficient that it was intended to be so. The subsequent devices, better adapted to the end to be accomplished, may therefore properly be regarded as improvements upon the original invention. They produce a stove doing the same thing which the first was intended to do, but doing it better. This is the proper office of an improvement.

The assignment in this case, by its express terms, covers all improvements in the original patent or the invention described in the application of 1852. It carried with it the legal title to the existing patent. If one had been issued upon the application, that, too, would have inured to the benefit of the assignee, because in that case it would have been the assignment of a perfected invention. Without considering whether the invention upon which the patent of 1854 issued was not, in fact, the same to all intents and purposes as that of 1852, it is sufficient for the purposes of this case that it was an improvement upon it, or perhaps more properly, that invention perfected. An assignment of an imperfect invention, with all improvements upon it that the inventor may make, is equivalent in equity to an assignment of the perfected results. The assignment in this case being such a one, the assignees became in equity the owners of the patent granted upon the perfected invention; that is to say, of the patent of 1854. Littlefield took the legal title in trust for them, and should convey. Courts of equity in proper cases consider that as done which should be. If there exists an obligation to convey at once, such courts will oftentimes proceed as if it had actually been made.

There is here no attempt to obtain the specific performance of a contract, but to restrain this patentee from infringing upon rights which, in a court of equity, he is deemed to have assigned. In other words, this complainant is in equity an assignee, and entitled to protection as such. If the assignment in precisely its present form had been executed after the last reissue was granted, we think it would hardly be claimed that the legal title to all the present outstanding patents did not pass with it. What such an assignment could do in respect to legal titles this has done in respect to such as are equitable. The contest is now between an assignor in equity and his assignee. A court of equity will in such a case give the same effect to an equitable title that it would to one that was legal.

It is next contended that the assignment in this case was forfeited before the commencement of this action, because of the failure of Treadwell & Perry to perform its conditions. There is no proof that the royalty on the stoves made and sold before the action was commenced was sufficient to discharge that part of the debt due from Littlefield to Treadwell & Perry, which was first to be paid out of it before anything was payable to him, and there could be no forfeiture for a neglect to make and sell, until after reasonable notice of the default. No such notice is proven or even claimed.

It is next insisted that if the plaintiff claims the benefit of the last reissues, he puts it out of his power to have damages for infringements previous to their date. The original bill in this cause was filed August 27th, 1862. Everything since that time has been done pendente lite. The first reissue was granted November 19th, 1861, and the first patent for an improvement on the patent of 1854 was issued on the 27th June previous. All in the way of reissues or improvements except these has been done pending the suit. The litigation gathers to its harvest the fruits of the labors of Littlefield and his associates during its pendency. His infringement and that of his codefendant Jagger, claiming under him, commenced in 1862, only a short time before the action was commenced. The question presented by this objection is, therefore, comparatively unimportant; but if it were not, the result would be the same. For as Littlefield held his patents all the time in trust for these assignees to the extent of the territory they owned, he must account to them for the profits he has made by the unlawful use of the trust property.

We are, therefore, clearly of the opinion that the complainant is in equity the assignee of Littlefield, and that he is entitled to recover of the defendants the profits they have made out of these infringements upon his rights. So far there is no error in the court below.

We now came to the decree itself. The plaintiff is entitled, as has been seen, to recover of the defendants the profits they have made from the use of the several inventions within the assigned territory; but the decree directed an account of 'all the profits, gains, and advantages which the said defendants, or either of them, have received, or which have arisen or accrued to them, or either of them, from the manufacture, use, or sale of stoves within the States of New York and Connecticut, embracing the improvements described in and covered by the said letters-patent, and the reissues thereof, or any of them.' An account stated upon these principles has been approved by the court in the decree appealed from.

The decree is, as we think, too broad. After the interlocutory decree below settling the principle of the accounting, the case of Mowry v. Whitney was decided in this court. It was there held that the question to be determined in such a case as this was, 'what advantage did the defendant derive from using the complainant's invention over what he had in using other processes then open to the public, and adequate to enable him to obtain an equally beneficial result? The fruits of that advantage are his profits.' For such profits he is compelled to account as damages.

Here the order is to account for all profits received from the manufacture, & c., of stoves, embracing the improvements covered by any of the patents. This would cover all the profits made upon a stove having in it any one of the improvements patented. The true inquiry is as to the profits which the defendants have realized as the consequence of the improper use of these improvements. Such profits belong to the plaintiff, and should be accounted for to him. The account of the master may not charge the defendants with more than the complainant is entitled to recover. The conduct of the defendants in withholding statements which it would seem they ought to be able to make, and their evident unwillingness to account, would induce us to sustain the report had the order of reference been less broad. As it is, we think the decree, so far as it settles the principles of the accounting for profits, must be reversed, and that the inquiry before the master must be confined to an account of the profits received by the defendants as the direct result of the use within the assigned territory of the several inventions involved in the case.

This reverses the decree.

Many exceptions were taken to the master's report. Some were as to the matters of form, and others were directed to the principles of the accounting as settled by the decree. It is unnecessary to consider these further. Another account may dispose of them all.

The Circuit Court, however, in rendering its final decree, added interest to the amount found by the master to be due upon the account for profits. In Mowry v. Whitney it was held that interest is not allowable in such cases, except under peculiar circumstances. The testimony thus far presented in this case does not, in our opinion, justify such an allowance. It will be for the court to determine, upon the coming in of the new report, accompanied by other evidence, whether the conduct of the defendants has been such as to subject them to liability in this particular. Profits actually realized are usually, in a case like this, the measure of unliquidated damages. Circumstances may, however, arise which would justify the addition of interest in order to give complete indemnity for losses sustained by wilful infringements.

DECREE REVERSED to the extent hereinbefore indicated, and the cause REMANDED, with instructions to take a new account of profits and proceed

IN ACCORDANCE WITH THIS OPINION.


text: Talk:Littlefield v. Perry/Opinion of the Court

license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


text:
The Mohler

APPEAL in admiralty from a decree of the Circuit Court for the Eastern District of Wisconsin.

The Home Insurance Company of New York was the insurer of a cargo of wheat shipped on a barge appurtenant to the steamer Mohler, on the 12th of May, 1866, at Mankato, on the Minnesota River, in the State of Minnesota-the river then being high-and destined to St. Paul, on the Mississippi. The bill of lading contained the usual exception of 'the dangers of navigation.' The barge was wrecked by collision with one of the piers of a bridge just above the city of St. Paul, at about eight o'clock, on the evening of the day on which the voyage began, and was totally lost. The insurance company paid the loss, and filed its libel in the District Court to recover the amount under its right of subrogation.

The answer set up that the accident occurred through a sudden and unexpected gust of wind which overtook the boat as she was about passing through the piers, and that she was, therefore, not answerable for the consequences of the collision.

The case was heard on the testimony introduced by the respondents, the libellant having called no witnesses.

The weather, in the morning of the day when the boat set off, was calm; but during the afternoon became rough and windy, so much so that the boat laid up at Mendota, near the mouth of the Minnesota River, and about four miles above the piers, on account of the wind. After sundown-that is to say, a few minutes after seven o'clock-she proceeded on her voyage, the wind having 'abated,' as the master said, or, according to the testimony of the mate, having 'calmed down some.' At eight the barge struck the pier, killing a man on board and sinking the barge. The night was starlight, and the piers had signal lights upon them.

On the trial there was great discrepancy between the testimony of the master and that of the mate, as to the condition of the wind after the boat left Mendota. The master swore that there was no wind to affect the boat until the Julia, an ascending boat, got near the Mohler; while the mate said that the wind rose after the Mohler left Mendota, and blew hard by spells all the way down. They also disagreed as to the point where the Julia was met, the master saying that it was not more than a quarter of a mile above the piers, while the mate fixed the distance at one and a half miles.

From Mendota down to within a short distance of these piers, high bluffs, it should be stated, line the sides of the river, and prevent boats feeling or being affected by the wind, but that just before reaching the piers the bluffs recede from the river and open so as not to operate as a protection from the wind; and that on reaching this point wind will be felt, and sometimes very strongly, though before arriving at this point it would not be. On coming near to these parts there was no doubt that the wind had not gone down, and that it was from a dangerous quarter, the south; the river here running east and south wind tending to drive a boat on a pier.

'When we came within about half a mile of the piers,' said the pilot, 'gusts came at times hard enough to split the posts of fences; but they lulled. Then a heavy gale struck us four or five lengths above the piers. We could not have then changed our course or made a landing. Everything possible to prevent a collision was done; but the collision was inevitable.'

An expert witness-of the respondent's, of course-on cross-examination testified that within a quarter of a mile, or even less, the steamer and her tow could have rounded to and landed, even in a hard wind from the south; and that not to do so in such a case would be bad seamanship.

Other witnesses testified that these piers increase the danger of the navigation; that vessels were very liable to be driven against such obstructions; that extraordinary precaution was necessary in going through them, and then, that 'a man is liable to be beat at it.'

Both the District and the Circuit Court held that the officers of the steamer were guilty of a wrongful act in attempting to pass between the piers of the bridge in the state of the weather at the time; and condemned the steamer. From this condemnation her owners appealed.

Mr. J. W. Cary, for the appellants, argued that it was plain from the fact that the vessels had put into Mendota for the exact purpose of not running while there was high wind, that all evidences of high wind must have disappeared before the vessels came out; that no wind did, in fact, disturb them until they got to where the bluffs recede; that there, from the physical configuration of the land, occasional gusts of wind might come unexpectedly through the gaps, as through a funnel, though no high wind were stirring; that such was the case here; and that where a sudden gust did come through such a place, it was a true peril of navigation.

Mr. N. J. Emmons, contra.

Mr. Justice DAVIS delivered the opinion of the court.

title: The Mohler


text: Talk:The Mohler

title: Talk:The Mohler


text:
The Mohler/Opinion of the Court

It is insisted that the loss occurred through a peril of navigation, which was one of the exceptions contained in the bill of lading, and that, therefore, the carrier was excused from a delivery of the wheat. The burden of proof lies on the carrier, and nothing short of clear proof, leaving no reasonable doubt for controversy, should be permitted to discharge him from duties which the law has annexed to his employment. This burden has been assumed by the carrier, and the case was heard on the testimony introduced by the respondents, the libellant having called no witnesses.

It may be true, as the answer implies, that the boat would have safely made the passage if the wind had not driven her against the pier, but this does not solve the difficulty. The inquiry is whether the passage should have been undertaken at all in the general bent of the weather on that day. If the carrier had sufficient warning to put him on his guard, and chose to neglect it and take the chances of a venture when common prudence told him there was danger in it, he cannot escape on the ground that the particular peril which finally overcame him was a sudden gust of wind. The general doctrine that a carrier is not answerable for goods lost by tempest has no application to such a case.

It is undeniable that the weather was boisterous during the afterpart of the day on which the loss occurred, and that the boat laid up at Mendota, on account of the wind. It had at best only 'abated' or 'calmed down' when she left Mendota and proceeded on her voyage. There is a singular discrepancy in the testimony of the master and the mate as to the condition of the wind after the departure from Mendota, and as to where it was that the wind began to blow hard; the master swearing that there was no great wind until the boat met the Julia, and that this was but a quarter of a mile above the piers; the mate giving a very different account as to both facts. Both these officers had equal opportunities of judging, and there is nothing in the record affecting the credibility of either. In such a case the defence fails, for the respondents have no right to ask the court to prefer the testimony of one witness over the other when there is nothing in the record to show that one is more reliable than the other.

Apart from this there is enough in the evidence to establish satisfactorily that the weather had not cleared, nor the direction of the wind changed, and that the boat should either not have left her moorings at Mendota, or have landed at some proper point before the piers were reached. It won't do to say that the wind had moderated, and that the officers of the boat thought they could get through without trouble. They had no right to think so, for on such a day squalls were likely to arise at any moment, and it was bad seamanship, being forewarned, to attempt to go through such a dangerous place in the river. It is difficult at all times to make the passage of these piers, and especially so in sudden gusts of wind blowing from the south, which was the case on that day. And this difficulty is enhanced in the night-time, and when the current, by reason of high water, is increased.

Any prudent officer would have stopped until the weather became calm. At any rate it was the duty of the master of the boat in question to have done so, and, failing in this duty, he is chargeable with the consequences of his negligence, which, in this case, were lamentable, for not only was the property in his charge destroyed, but a human life lost. The officers of steamers plying the Western waters must be held to the full measure of responsibility in navigating streams where bridges are built across them. These bridges, supported by piers, of necessity increase the dangers of navigation, and river-men, instead of recognizing them as lawful structures built in the interests of commerce, seem to regard them as obstructions to it, and apparently act on the belief that frequent accidents will cause their removal. There is no foundation for this belief. Instead of the present bridges being abandoned, more will be constructed. The changed condition of the country, produced by the building of railroads, has caused the great inland waters to be spanned by bridges. These bridges are, to a certain extent, impediments in the way of navigation, but railways are highways of commerce as well as rivers, and would fail of accomplishing one of the main objects for which they were created-the rapid transit of persons and property-if rivers could not be bridged. It is the interest as well as the duty of all persons engaged in business on the water routes of transportation to conform to this necessity of commerce. If they do this and recognize railroad bridges as an accomplished fact in the history of the country, there will be less loss of life and property, and fewer complaints of the difficulties of navigation at the places where these bridges are built. If they pursue a different and contrary course, it rests with the courts of the country, in every proper case, to remind them of their legal responsibility.

DECREE AFFIRMED.

title: The Mohler/Opinion of the Court


text: Talk:The Mohler/Opinion of the Court

title: Talk:The Mohler/Opinion of the Court


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Ex parte Sawyer

ON petition for mandamus to the circuit judge for the New York Circuit. The case was thus:

Sawyer and others libelled Oakman in admiralty in the District Court of Massachusetts and got a decree against him. Oakman appealed to the Circuit Court for that district, but the presiding justice of it, having been counsel in the cause, or otherwise disqualified, it was transferred, under the act of Congress providing for such cases, to the Circuit Court for New York circuit.

After this transfer, an order was made in the Circuit Court of New York that the decree of the District Court be carried into effect, unless the appellant gave stipulation by security of himself and two sureties for the payment of all damages and costs on the appeal to the said Circuit Court, and in this court, in the sum of $10,000.

Hereupon Oakman, without its being seen or approved by the court, filed ex parte a certificate, intended as 'stipulations,' signed by the commissioner of the Massachusetts circuit, and certifying that Oakman, as principal, and James Lee, Jr., and Wade Davis, as sureties, were bound in $10,000 that Oakman should pay all damages and costs which might be awarded against him in the suit. The paper was not signed by either the principal or the sureties, and herein was not in conformity to the rules about stipulations of the New York circuit.

On subsequently hearing the appeal, the Circuit Court for New York affirmed the decree of the District Court, and adjudged that the appellees recover of the appellant the sum of $7970. The decree then proceeded as follows:

'And it is further ordered, adjudged, and decreed that unless an appeal be taken from this decree within the time prescribed by law, a summary judgment therefor be entered in favor of the said libellants, appellees, and against James Lee, Jr., and Wade Davis (sureties on appeal from the District Court in the sum of $10,000, the amount of their stipulations by them given on said appeal), and that the said appellees have execution therefor, to satisfy said decree.'

Within the time prescribed by law an appeal was taken to this court, where the decree of the Circuit Court was affirmed and the cause remanded with instructions to the effect 'that such execution and proceedings be had in said cause as according to right and justice and the laws of the United States ought to be had, the said appeal notwithstanding.' Upon the filing of this mandate the libellants moved the Circuit Court for a decree charging the sureties upon the stipulation and ordering execution against them. This motion the circuit judge refused to grant, and instead ordered that the sureties show cause, if any they had, why such execution should not issue. Afterwards, upon cause shown, the court, for the first time, observed the peculiar form of the paper purporting to be the stipulations, and that it was not executed according to its rules. It accordingly held that the sureties were not liable upon the alleged stipulation, and refused to decree or award execution against them.

The libellants now moved this court for a mandamus requiring the Circuit Court to cause such decree and order to be entered.

Mr. John Lathrop, in support of the motion.

1. The judgment against the sureties rendered by the Circuit Court was a final judgment against them, and not a conditional one. If it was not final against the sureties, it was not against the principal. Both, so far as the judgment is concerned, stand on the same footing. If it was not a final judgment, the Supreme Court had no jurisdiction. The insertion of the words 'unless an appeal be taken from this decree within the time prescribed by law' makes no difference in the effect of the decree. If these words were out, execution could not issue in case of an appeal; and the judgment would be suspended. The effect of the decree is to order judgment against the principals and sureties; and they thereupon had the right of appeal. The sureties did not appeal, and they are precluded. The principal did appeal, though not from this decree; and the judgment was affirmed. All that remained for the Circuit Court to do, after receiving the mandate, was to issue execution in accordance with the judgment; nothing was left to its judgment or discretion.

[The learned counsel then went into an argument to show that in the admiralty stipulations need not be signed, citing precedents from Mariott's Formularies; and that the act of the commissioner of the Federal court for Massachusetts was to be respected in all other Federal courts, and, whether or not, that Lee and Davis, having filed the paper in the New York court, were estopped to set up its irregularity.]

Mr. E. F. Hodges, contra.

The CHIEF JUSTICE delivered the opinion of the court.

title: Ex parte Sawyer


text: Talk:Ex parte Sawyer

title: Talk:Ex parte Sawyer


text:
Ex parte Sawyer/Opinion of the Court

By the mandate already issued in the case, we have required the Circuit Court to proceed with the execution of its decree in such manner as right and justice shall require. If the court refuses to proceed under that order we may, by mandamus, compel it to do so, but we have no power to control its discretion while proceeding. A superior court may by mandamus set the machinery of an inferior court in motion, but when that has been done its power under that form of proceeding is at an end. The inferior court is supreme within its own jurisdiction so long as it is acting.

The question then is as to the power of the Circuit Court under the mandate from this court to determine whether execution should or should not issue against the sureties in the stipulation.

It is not denied that the liability of the principal respondents was fixed by the decree of the Circuit Court. The appeal took away from that court all power over that part of the decree. Upon the affirmance in this court that liability was conclusively settled, and the mandate left nothing for the Circuit Court but to proceed in the appropriate manner for the collection of the money found due.

But the sureties occupy a different position. No decree was entered against them before the appeal. The order was that a judgment be entered if an appeal was not taken. The appeal was taken, and, therefore, this order never became operative. The case then stood in the Circuit Court upon the return of the mandate without a decree against the sureties, and until such decree was entered there could be no execution as to them. It is true that if the appeal had not been taken the requisite decree might have been obtained, but it is equally true that until a decree is actually entered the court retains the power to withhold it.

At the time of the appeal, therefore, the Circuit Court might have refused to order the execution against the sureties. The decree of this court simply affirmed what had been done by the Circuit Court; it gave no instructions as to what remained to be done, except that it should be as right and justice and the laws of the United States should require. The Circuit Court was left free to determine for itself what was thus required. If, in its opinion, the order in respect to the judgment and execution against the sureties should be carried into effect, it might so adjudge, but if, upon further consideration, right and justice should seem to require a revocation of that order, there was nothing in the mandate to prevent it from so deciding.

Some action by the court was certainly necessary before the execution could issue against the sureties. Such seems to have been the understanding of the libellants, for upon the filing of the mandate they moved for the entry of a decree against these parties and the award of an execution thereon. There could have been no necessity for a motion if the court was not to hear and decide upon the propriety of the action moved for. The power to act upon a motion and determine whether it should be granted necessarily implies the power to refuse to grant it. The Circuit Court, under this power, has acted and has decided that execution ought not to issue against these parties. This decision cannot be reviewed by us upon an application for mandamus. Error or appeal furnishes the only remedy in such a case.

There is still another view of the case which shows the correctness of this conclusion. The sureties upon the stipulation are entitled to an appeal from any decree that may be rendered against them. A decree against the principal respondents does not necessarily include them. Additional proof is required before they can be charged. Here the decree was absolute against the principal respondents alone. The order against the sureties was provisional only. They could not appeal from that because it was not final. It is clear, therefore, that the power of the court over that part of the case was not at an end when the appeal was taken, and that if the sureties were to be charged at all it must be by a decree to be entered after the cause was sent back from here. From that decree another appeal must be allowed, or the sureties will be bound by a proceeding to which they were not and could not be parties.

This renders it unnecessary to consider any of the other questions presented in the argument. As it was within the power of the Circuit Court under the mandate from this court to decide whether execution should issue against the sureties, we cannot revise its decision in this form of proceeding.

PETITION DISMISSED.

title: Ex parte Sawyer/Opinion of the Court


text: Talk:Ex parte Sawyer/Opinion of the Court


text:
Tilden v. Blair

ERROR to the Circuit Court for the Southern District of New York; the case as found by the court having been thus:

On the 4th of August, 1869, W. T. Pelton, a resident of Chicago, Illinois, and doing business there, drew a draft on Tilden & Co., residents of New Lebanon in the State of New York, payable to his own order, for $5000 at sixty days, dating it at Chicago. This draft Pelton sent to Tilden & Co., to the members of which firm he was nearly related, and they accepted it, 'payable at the Bank of North America, New York,' for his accommodation and in order to aid him in raising funds for carrying on his business, and without any consideration or security therefor, and without any funds in their hands to protect it; the understanding being that the draft was to be discounted at a certain bank in Chicago, and that Pelton should take it up at maturity. Having accepted the draft, Tilden & Co. sent it back to Pelton, for the purpose of being negotiated in Illinois, and in order that the proceeds might be used in his business in that State and in Michigan. Pelton having indorsed the draft delivered it to one A. C. Coventry for the purpose of having him negotiate it for the benefit of him, Pelton; and Conventry, having indorsed it also, sold it through a note-broker to one Blair at Chicago for $4825, and no more, Blair, at the time when he discounted the draft, having no knowledge whatever of the understanding between Tilden & Co. and Pelton, or that the draft was accommodation paper and accepted without any funds in the hands of Tilden & Co.

The draft when it went into Blair's hands appeared, of course, in this form:

$5000.

CHICAGO, August 4th, 1869.

Sixty days after date pay to the order of myself five thousand dollars, value received, with exchange, and charge to account of

W. T. PELTON.

TO MESSRS. TILDEN & CO.,

New Lebanon, New York.

Accepted, payable at the Bank of North America, New York.

TILDEN & CO.

Indorsed: W. T. PELTON, A. C. COVENTRY.

By statute of New York, the exacting of greater interest than seven per cent. renders a contract illegal and void.

By the statutes of Illinois ten per cent. interest is lawful. Any agreement for a higher rate forfeits all the interest. But the contract is not void and the principal may be recovered.

And an act of Illinois (that of February 12th, 1857), enacts as follows:

'Where any contract or loan shall be made in this State, or between citizens of this State and any other State or country, bearing interest at any rate which was or shall be lawful according to any law of the State of Illinois, it shall and may be lawful to make the amount of principal and interest of such contract or loan payable in any other State or Territory of the United States, or in the city of London in England; and in all such cases such contract or loan shall be deemed and considered as governed by the laws of the State of Illinois, and shall not be affected by the laws of the State or country where the same shall be made payable.'

The draft matured, of course, on the 6th of October, 1869; and the acceptors refusing to pay it, Blair sued them in assumpsit in the court below. Plea, usury.

The issue was tried by the court, which found the facts as already given, and found conclusions of law as follows:

1st. That by accepting the draft and returning it to the possession of the drawer, the defendants empowered him to negotiate it and put it in circulation by any valid transfer.

2d. That the negotiation and transfer having been made in Illinois was valid, except as to the interest reserved.

3d. That interest having exceeded the rate of ten per cent. per annum interest was forfeited, and could not be collected either from the drawers or acceptors. That as to the principal, it was valid as to both.

4th. That the plaintiff was entitled to judgment for the sum of $4825, being the principal less the interest illegally reserved, with costs.

The defendants excepted to the first, second, and fourth of these conclusions of law, and to so much of the third as found that the contract, except as to interest reserved, was valid, and was binding on the defendants as to the principal.

The plaintiff excepted to the fourth conclusion so far as it limited his right of recovery to the $4825, and to the refusal of the court to allow interest.

Judgment being given for $4825, the defendants, Tilden & Co., brought the case here on error; Blair, the plaintiff, not taking any writ or assigning any error.

Mr. J. M. Van Cott, for the plaintiffs in error:

Parties to negotiable paper are liable according to the law of the place where their respective contracts are made, or where their contracts are to be performed when made, and to be performed at different places. And where any fact exists to take the case out of the general law it must be pleaded.

That the draft was accepted, and was payable in New York, appeared on its face and was notice to all the world; and the liability of the acceptors on their contract could not be varied by the place where the drawer or holder transferred the obligation.

By the law of New York, the negotiation of the draft was unlawful, and the contract connected with it wholly void. The judgment giving Blair anything was, therefore, erroneous.

Mr. J. E. Burrill (a brief of Mr. J. B. Niles being filed), contra:

1. The acceptance having been made without consideration, for the accommodation of Pelton, and having had no validity until it was negotiated, and having been first negotiated in Illinois, it had its legal inception there, and the only contract made by the defendants, or created by the transfer of the acceptance, was made there.

2. The draft is dated at Chicago, and that was the place of residence, and place of business, of the drawer; and the acceptance having been made and delivered for the purpose of being negotiated in Illinois, and used in the business carried on by the drawer in that State, it is clear that the acceptance was made with intentional and direct reference to the laws of Illinois.

3. Although the signature of the defendants was affixed to the draft in New York, it was not delivered there, but was sent to Pelton, the drawer, at Chicago, by letter, and it was there received and there negotiated by Pelton in accordance with the intention of the defendants. In such circumstances the acceptance is to be treated as made in Illinois.

As the contract is to be governed by the laws of Illinois, the question whether the purchase by Blair was a violation of the usury laws of that State, is a matter to be decided by its own courts. Those courts have held that the usury laws do not affect the right to purchase negotiable commercial paper at any price which may be agreed upon between the parties; that a man who purchases negotiable commercial paper does not make a loan of money.

This being the true law of the case, and there having in truth been no question of usury in the case, it is Blair, the plaintiff below, not Tilden & Co., who has cause to complain of the judgment. Blair, it is plain, has recovered less than he was entitled to. While the acceptance was $5000, he recovered but $4825, thus losing $175. In addition he lost the interest from 6th October, 1869, when the note matured, to 2d March, 1873, when the judgment was rendered. The question now is, whether, inasmuch as the record is brought here by the other side and not by us, we can obtain the relief which we are clearly entitled to? What good reason is there why this court should not correct the error in the judgment of which we complain? The sole object of a writ of error is to bring into the appellate court the record from the court below, in order that it may be reviewed. The whole case with all the facts found and the conclusions of law as stated, is already before the court on the present writ. By no possibility can the court ever be better informed as to the facts or the alleged error of which we complain. Should Blair be required to sue out a separate writ of error in his own behalf, he would necessarily bring here this same record without the variation of a word. Is such a duplication of this suit required?

The second section of the act of June 1st, 1872, provides that this court may affirm, modify, or reverse the judgment, decree, or order, brought before it for review, or may direct such judgment, decree, or order, to be rendered, or such further proceeding to be had, by the inferior court, as the justice of the case may require.

This provision is similar to that contained in section 330 of the Code of Procedure, by which appeals in the State of New York are governed; and according to the decisions of the courts of that State, where the facts are found by a court without the intervention of a jury, it is competent and proper for the appellate tribunal to render such judgment as upon the facts conceded or established either party was entitled to.

Mr. Justice STRONG delivered the opinion of the court.

title: Tilden v. Blair


text: Talk:Tilden v. Blair

title: Talk:Tilden v. Blair


text:
Tilden v. Blair/Opinion of the Court

That the contract upon which the suit was brought was made in Illinois must be considered as established by the findings of the Circuit Court. It is true the defendants formally accepted the draft in New York, and promised to pay at a bank in New York, but there was no operative acceptance until the draft was negotiated. They sent it back to Illinois, where it had been drawn, for the purpose of having it negotiated there. Pelton, the drawer, for whose accommodation the acceptance was given, was thus constituted the agent of the acceptors to give effect to their action. While the draft remained in his hands it was no binding contract. He had no rights as against the defendants, but he was empowered to negotiate the draft, and thereby to initiate a liability not only of himself, but also of the defendants. It was only when the instrument was negotiated that it became an accepted draft. It has long been settled that the liability of an acceptor does not arise from merely writing his name on the bill, but that it commences with the subsequent delivery to a bon a fide holder, or with notice of acceptance given to such holder. That this is so has often been asserted in judicial decisions, and often in New York. The doctrine is most reasonable. It is, therefore, quite immaterial, under the facts of this case, that the defendants resided in New York, and that they there wrote their acceptance upon the draft. In legal effect they accepted the draft in Chicago, when by their authority the drawer negotiated it, and thus caused effect to be given to their undertaking. Nor is the law of the contract changed by the fact that the acceptance was made payable in New York. The place of payment was doubtless designated for the convenience of the acceptors, or to facilitate the negotiation of the draft. But it is a controlling fact that before the acceptance had any operation-before the instrument became a bill, the defendants sent it to Illinois for the purpose of having it negotiated in that State-negotiated, it must be presumed, at such a rate of discount as by the law of that State was allowable. What more cogent evidence could there be that it was intended to create an Illinois bill? The case is exactly the same as it would be if the defendants had been residents of Chicago when the draft was drawn, and had accepted it at Chicago for the accommodation of the drawer, designating New York as the place of payment. It is plain, therefore, that the contract is an Illinois contract, and that the rights and liabilities of the parties must be determined according to the law of that State. By its statutes persons may contract to receive ten per cent. interest upon any debt due them, whether it be verbal or written. If they stipulate for a higher rate they forfeit the interest, but the statute expressly allows the recovery of the principal. The contract is not declared to be void. Only so much of it is void as exacts the excessive interest. And by a legislative act passed February 12th, A.D. 1857, it is enacted as follows, viz.: 'When any contract or loan shall be made in this State, or between citizens of this State and any other State or country, bearing interest at any rate which was or shall be lawful according to any law of the State of Illinois, it shall and may be lawful to make the amount of principal and interest of such contract or loan payable in any other State or Territory of the United States, or in the city of London, in England, and in all such cases such contract or loan shall be deemed and considered as governed by the laws of the State of Illinois, and shall not be affected by the laws of the State or country where the same shall be made payable.' Provisions very similar to these are also made by the statute of February 12th, 1857.

If, then, the contract is, as we think it must be regarded, an Illinois contract, and if, therefore, the rights of the plaintiff are to be determined by the laws of that State, there can be no doubt he was entitled to judgment, and to judgment for the full face of the draft, with interest from the time it fell due. Even if the contract had been usurious, he would have been entitled to a judgment for all that the Circuit Court allowed him, for, as we have seen, the contract would not have been void, the statute expressly declaring that when usury is taken the principal debt may be recovered, while the interest reserved may not be. The case would be quite different if the law of the State made void an instrument usuriously negotiated. There was, however, no usury. And where a note or a bill is not made void by statute, mere illegality in its consideration will not affect the rights of a bon a fide holder for value. The plaintiff in this case was a bon a fide purchaser of the draft. At the time of his purchase he had no notice of any equities in the drawer, or in the acceptors. There was nothing on the face of the instrument to awaken suspicion that it was accommodation paper, or that it had not been regularly and lawfully negotiated. He bought it from bill brokers, after it had been indorsed by the drawer and payee, and also by Carpenter, an apparent indorsee of the payee. That his purchase was not corrupt; that it was perfectly lawful under the law of Illinois can admit of no question. And this is the rule everywhere unless the note or bill is declared by statute to be void in its inception.

The plaintiffs in error, therefore, have no cause of complaint. The Circuit Court gave judgment against them for the sum which the plaintiff had paid for the draft, without interest. The judgment was only too favorable to them. It should have been for the full amount of the acceptance, with interest from the time it fell due, and had the case been brought here by the plaintiffs below we should direct such a judgment. But the present writ presents to us only the assignments of error made by the defendants, and as they are unsustained, we can do no more than

AFFIRM THE JUDGMENT GIVEN.

title: Tilden v. Blair/Opinion of the Court


text: Talk:Tilden v. Blair/Opinion of the Court


text:
Ochiltree v. Railroad Company

ERROR to the Supreme Court of Missouri; the case being thus:

A constitution of Missouri adopted in 1865, under a provision relating to the debts due by corporations having stockholders, thus enacted:

'In all cases each stockholder shall be individually liable over and above the stock by him or her owned, and any amount unpaid thereon in a further sum at least equal in amount to such stock.'

This clause of the constitution of 1865, commonly called 'the double liability clause,' being in force (with a statute also prescribing a method of giving effect to it), the Alexandria and Nebraska City Railroad Company-a Missouri company, with a paid-up capital of $2,000,000-in May, 1869, became indebted to one Ochiltree. That company soon afterwards incorporated itself, as railroad companies are allowed in Missouri to do, with another railroad company-the Iowa Southern-this last having a paid-up capital of $1,500,000; the two companies forming a third one under a new name, and this new one being, by the terms of consolidation, bound to pay the debts of the old ones. The capital of the new company was to consist of $13,000,000; of which the conjoint $3,500,000 of the two old companies made the part paid in; and there remained, of course, $9,500,000 of stock in the new company to be yet subscribed for.

In this condition of things, the State of Missouri, A.D. 1870, amended its constitution. By the amended constitution 'the double liability clause was abrogated,' and the following exactly opposite provision substituted:

'Dues from private corporations shall be secured by such means as may be prescribed by law; but in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him or her.'

This new provision being in force, a railroad company wholly independent of the others, to wit, the Iowa Railroad Contracting Company, subscribed and paid for eight thousand nine hundred and sixty shares, of the value of $100; in other words, subscribed and paid for stock to the amount of $896,000.

In this state of things, Ochiltree's debt not being paid, on execution issued, by any one of the companies, he sued the Iowa Railroad Contracting Company, in one of the State courts of Missouri, as a stockholder in the new company, his suit being founded on the double liability clause of the constitution of 1865, and his assumption being that though the Iowa Railroad Contracting Company had subscribed for its stock after the adoption of the constitution of 1870, yet as his debt accrued before its adoption and while the constitution of 1865 was in force, he could proceed personally against all stockholders, and that 'the single liability' provision in the constitution of 1870 was null and void as to his rights in the case, because, in depriving him of his remedy against stockholders under the law in force when his debts were contracted and the consolidated company became liable therefor, the said provision impaired the obligation of the company's contract with him within the meaning of the Constitution of the United States.

The court in which he brought his suit was not of this opinion and gave judgment against him, and this judgment being affirmed by the Supreme Court of Missouri he brought the case here.

Mr. G. W. McCrary, for the plaintiff in error, cited numerous cases in this court, but relied specially on Hawthorne v. Calef. He cited also the cases of McLaren v. Franciscus and Miller v. Republic Insurance Company.

Mr. T. T. Gantt, contra.

Mr. Justice DAVIS delivered the opinion of the court.

title: Ochiltree v. Railroad Company


text: Talk:Ochiltree v. Railroad Company

title: Talk:Ochiltree v. Railroad Company


text:
Ochiltree v. Railroad Company/Opinion of the Court

It is quite apparent that considerations of public policy induced the adoption of the double liability clause in the constitution of 1865, and equally apparent that, in the minds of the framers of the amendment of 1870, this provision had operated injuriously to the interests of the State, and that sound policy dictated its repeal. It is not difficult to see, with this provision in force, that great public improvements, in some of the States of the Union at least, could not be successfully carried on. Instead of inviting capital it would repel it. There are few persons who would consent to take stock in such enterprises, if subject to the double liability provision. Although willing to risk the loss of their stock, they would be unwilling to involve their estates beyond it. Especially would this be so if they were invited to take part in the completion of works greatly in debt, and which had languished for years. It is, therefore, important to determine, not only for this case, but all others similarly situated, whether the change of policy on this subject, as manifested by the change in the organic law, is effectual to accomplish the desired object.

The Supreme Court of the State having construed the amendment of 1870 so as to relieve stockholders in corporations, subscribing after it went into operation, from the effects of the former constitution, as to debts contracted prior to the amendment, the only question at issue here is, whether the amendment, thus interpreted, has the effect of impairing the obligation of the plaintiff's contract within the meaning of the Constitution of the United States.

It would serve no useful purpose to restate the views of this court on this general subject; nor to review the cases, which are neither few nor unimportant. It is enough to say that the law of the contract forms its obligation, and that legislation, which materially impairs the remedy, is void.

The law of the contract in this case undoubtedly gave the plaintiff the right to subject existing stockholders in the corporation, with whom the debt was contracted, to the double liability provision. This provision could be invoked so soon as the assets of the corporation were exhausted. The plaintiff trusted this corporation and the members composing it at the time the contract was made. It cannot be said that he gave credit beyond this, for what right had he to assume that other stock would be taken? It may be that he expected this would be done, and that thereby his security would be increased; but the obligation of a contract within the meaning of the Constitution is a valid subsisting obligation, not a contingent or speculative one. It was no part of the obligation of the contract that future stock should be taken. The value of it would be enhanced if this were done, but the obligation of it would be the same whether the stock were taken or not. If taken, it subjected the holder to the personal liability imposed by the law at the time of the subscription, and to the extent of this additional responsibility the plaintiff is benefited. But suppose no additional stock were taken, the plaintiff has all that he trusted, and has no right to complain that his contract is not as valuable as he thought it would be. If, then, the credit was given to the corporation, and the personal liability of the members composing it at the date of the contract, how does the repeal of the double liability clause impair the plaintiff's contract? It is true, while unrepealed, he had the opportunity to accumulate securities for the payment of his debt, but is this opportunity to be continued after experience has proved that the policy on which it rested was injudicious and should be abandoned? Such a doctrine would tie up legislation, in order that the speculative expectancies of creditors may be protected. It was the object of the national Constitution to protect rights, and not mere incidental advantages which may affect the contract indirectly. The incident of individual liability attached to and formed a part of the contract as long as it lasted, but its repeal did not deprive the plaintiff of any of the rights secured to him when the contract was made. They still exist, and the remedy to enforce them remains the same. If the corporation itself cannot pay, the members who composed it at the time of the repeal are unaffected by it, and there is nothing in the way of subjecting them to the double liability provision. Instead of the plaintiff being injured by the repeal, he is benefited by it, for it cannot be supposed that the defendant would have taken stock with the burden imposed by the old law, and the subscription made by it increased by capacity of the company to pay its debts very largely, as it is agreed that it owns eight thousand nine hundred and sixty shares of stock, each share being for $100. This stock was paid for and risked in the general enterprise, and, like other assets, liable for the debts of the company; but the plaintiff seeks to place upon the defendant a liability beyond this, which it cannot be believed it meant to assume, as the law did not impose the liability upon it when the stock was taken.

The plaintiff contracted with the Alexandria and Nebraska company, authorized to issue two millions of stock. In the absence of any evidence on the point, it is fair to presume the stock was absorbed when the contract was made. This corporation he trusted, and the persons who held its stock were undoubtedly liable to him in case he could not get his debt out of the company. He not only holds this security, but in addition to it the assets of the Iowa Southern Company, and the liability of the holders of one and a half millions of stock in it. Beside this he has the obligation of the consolidated company to pay his debt. It is difficult to see how these things have tended to impair his contract or lessen its value. But he seeks to increase his security by embracing the stockholders of the consolidated company, who were not parties to the contract to pay his debt, but who subscribed after the amended liability law went into operation. This he cannot do. His remedy under the law as it existed at the date of his contract is not impaired because the consolidated company increased its stock, as it was authorized to do, and was enabled to sell it by reason of the withdrawal of the burden of personal liability.

It is claimed by the plaintiff that the law under which his debt was contracted made all who were stockholders on the issue of the execution liable to contribute personally to the payment of his debt, and two cases in Missouri are cited to support this proposition. These cases arose before the repeal of the law, and were controversies between the holders of stock when the debt was contracted and the actual holders of it at the date of the execution. It was conceded that one class or the other were liable, and the court decided that the liability attached to the stock, and followed it in the hands of the assignee, and that, therefore, those stockholders only were liable who were such at the date of the execution. This is the full force of the decisions referred to, and they give to the plaintiff the right to seek his remedy against any one who held stock subject to the incident of individual liability, at the date of the execution against the corporation.

But as the incident of individual liability has been repealed, and neither the law nor his contract makes the defendant liable for the debts of the company beyond the amount of its stock, it follows that the decisions of the Supreme Court of Missouri on the point invoked are not applicable.

And so, doubtless, thought that court in its decision of this case, as the point is not noticed in the opinion.

JUDGMENT AFFIRMED.


text: Talk:Ochiltree v. Railroad Company/Opinion of the Court