New Era Gas Fuel Appliance Co. v. Shannon

Shepaed, J. The appellant is an Illinois corporation engaged in manufacturing and selling laundry driers. The appellee Shannon was the inventor of an improvement in said devices or machines, and transferred his patent therefor to the appellant, and became an original stockholder and director in said corporation, and was employed as its general manager at a stated annual salary. By the terms of his contract of employment, Shannon agreed to give his whole time and attention to the business of appellant in the manufacture, sale and construction of laundry driers, and in the course of such employment became intimately acquainted with the business affairs of appellant, the cost of construction, and the customers and persons with whom negotiations were being carried on for said machines. Continuing such relationship with the appellant for about a year and a half, Shannon, on July 18, 1891, suddenly quit the employment of appellant, and immediately engaged in the business of making and selling laundry driers of a similar kind to those made by appellant, on his own account. Shortly afterward appellant filed its bill in equity for an accounting, discovery and injunction against Shannon and his co-appellees, and to that bill, as amended, demurrers were sustained and the bill dismissed for want of equity. The bill was filed upon the theory that Shannon, taking advantage of his position as agent of the appellant, diverted from the appellant, customers with whom he had become acquainted, and with whom negotiations had either been begun or were substantially completed while he was in the employ of appellant, for the construction of a large number of laundry driers, from which large profits would have ensued to appellant, and took to himself the benefit of such negotiations and the profits of such sales, contrary to his duty as such agent, and that he and all such persons with whom he so dealt should be required to discover and account to appellant for all such transactions. Undoubtedly a bill in equity framed upon such a theory and containing proper and essential allegations of facts, would be maintainable. The law will not tolerate the taking of advantage by one who holds a position of agency and trust to another, and thereby secures to himself the fruits of transactions begun and carried on in the scope of his agency, and neither will it permit a third person, who, in knowledge of the agency, negotiates and contracts with such agent to deny responsibility and accountability to a disclosed principal; and where it appears that an unexecuted contract has been made under such circumstances, without special reliance upon the skill of the agent, a court of equity might well, as was asked in this case, require the substitution of the principal in place of the agent for the performance of the undertaken obligation, and give to the principal the compensation contracted to be paid to the agent. Such, substantially, was the relief asked in this case against the appellees McDonald and Cooling, who, it is alleged, began negotiations with appellant through Shannon while the latter was in its employment as manager, and either before he quit such employment, or very soon thereafter, entered into a contract with Shannon in his own name for thirty-five laundry driers, similar in kind and construction to those made by appellant, at a price which, on information and belief, appellant states would have yielded a large profit to appellant if the contract had been made with it for its machines. And as to Shannon, the bill seeks for a discovery of and accounting for that and all other contracts and sales made to unknown persons in pursuance of negotiations begun by Shannon while in appellant’s employment. The theory upon which such a bill may be maintained is not, however, sustained by the allegations of the appellant. The bill alleges that Shannon, by reason of having invented parts of the machines, and because of his experience acquired while in the employ of appellant, was particularly fitted to sell and construct said driers. Tinder the rule that all intendments are to be taken most strongly against the pleader, and nothing appearing to negative the inference, it will be presumed that McDonald and Cooling contracted with reference to the personal skill and experience of Shannon. The only allegation of the bill tending in anywise to negative this presumption is, that McDonald and Cooling “ may have supposed ” they were in fact contracting with appellant, or “ may have supposed ” that Shannon, himself, was the proper party in whose name they should contract with appellant, and a disclosure as to that supposed fact is prayed for. That was not enough. Appellant should have alleged that the supposed fact would, upon a discovery, be disclosed to be the truth. Such might be the inference, but a positive allegation was necessary. Primmer v. Patten, 32 Ill. 528. Belief can not be granted for matters not charged, for the court pronounces its decree seeuridum allegata et probata. Helm v. Cantrell, 59 Ill. 524. A further allegation, concerning the contract between Shannon and his co-appellees is, that by its terms “ McDonald and Cooling agreed to purchase of the said Shannon personally, and not of your orator, and the said Oscar M. Shannon agreed to sell in his own name and for his own benefit ” the said thirty-five laundry driers in place of a like number which appellant had been negotiating to construct for them. The only definiteness in that allegation is, that the contract was with and for the individual benefit of Shannon. The appellant does not allege that it would have sold any number whatsoever of the driers to the appellees McDonald and Cooling, if Shannon had not quit its employment, and its conclusion that it lost large profits is mere argument without an allegation of facts to support it; nor is it alleged that the contract made by Shannon for himself for another kind of machine was a profitable one to Shannon, or would be so to appellant if it were permitted to execute it. Certainty in pleading is as essential in chancery as at common law. Primmer v. Patton, supra. If McDonald and Cooling contracted with Shannon with reference to his peculiar personal skill and fitness to perform the work bargained for, and without knowledge of his agency for appellant, they could not be required to accept the service and construction of appellant for that of Shannon. But as to an accounting where the work has been done and nothing but payment remains to be made, the reason of the rule ceases, and it can not matter to McDonald and Cooling to whom they make payment. Mecham on Agency, Sec. FTO, and cases cited. The mere fact that there was a written contract between McDonald and Cooling and Shannon, the terms of which are unknown to appellant, and a disclosure thereof prayed, is not enough. It should have been positively alleged that the evidence of what the terms of the contract were, rested exclusively with the appellees and were known to no other persons, and such further facts should have been stated as to show affirmatively that appellant would be entitled to the benefit of the contract. Story’s Eq. Juris., Sec. 74: Vennum v. Davis, 35 Ill. 568. On the question of the liability of Shannon to account for other work for other persons, contracted for and done by him as a result of negotiations begun while in the employment of appellants, there is not much to be said. It is not alleged except by way of inference, that he ever did any such other work. It is not doubted but that as a general rule, an agent will be held to account to his principal for all matters done by him within the scope of his agency. But where the agency has terminated, his duty to account for transactions subsequently engaged in, can not be required, and where the fruits of subsequent employment are sought to be taken, it must be made to appear affirmatively and positively that they are the direct result of the agency. Every agent has a lawful right to carry with him into a new employment all the skill and knowledge acquired in his previous engagements, and nothing short of an express contract on his part not to do so, will debar him, and then only under the strict rules of law especially established to protect trade secrets. So far as appears in this case, Shannon was in no manner bound to give his services to appellant for any specified time, and it is not made affirmatively to appear that he has violated the scope of his agency for the appellant while it lasted. We think the bill was properly dismissed. Decree affirmed.