Prest-O-Lite Co. v. Avery Portable Lighting Co.

QUARLES, District Judge (after stating the facts as above). The first ground of objection is predicated upon section 629, Rev. St. (U. S. Comp. St. 1901, p. 503), which denies to the Circuit Court jurisdiction in a case “to recover the contents of any promissory note or other chose in action in favor of any assignee, or of any subsequent holder, if such instrument be payable to bearer, or be not made by any corporation, unless such suit might have been prosecuted in such court to recover the contents if no assignment or transfer had been made.” If the main purpose of the bill of complaint were to secure the specific performance of the agreement of September 3d, the contention that it would fall within the purview of section 629, Rev. St., would be entitled to serious consideration. The language of this enactment has received a broad construction by the courts; but we do not feel called upon to prosecute this inquiry, because we do not agree with defendant’s construction of the complaint. The agreement of September 3d is an important link in the chain of circumstances recited in the bill; but the ground of recovery and the equities of the complainant do not spring from such contract, but rest upon the alleged fraud of the defendants. Fairly construed, this bill is an appeal to a court of equity to impose upon the defendant Avery a trusteeship, by means of which the court by its own processes may work out a righteous result. There are two grounds presented in the complaint, either of which would warrant the court in treating Avery as a trustee ex maleficio, independent of the written contract of September 3d. Avery transferred an equitable two-thirds interest in his invention to Allison and Fisher. Avery, Allison, and Fisher sold the entire equitable title to the invention to the complainant for $10,000 of its capital stock before the letters patent were issued. They accepted such stock as a full and complete equivalent, and thereby the invention and the right to letters patent thereon became corporate assets. Such an oral agreement is not within section 4898, Rev. St. (U. S. Comp. St. 1901. p. 3387), and not within the statute of frauds, and may be specifically enforced in equity upon sufficient proofs. Dalzell v. Dueber Mfg. Co., 149 U. S. 315, 320, 13 Sup. Ct. 886, 37 L. Ed. 749. The law is that, having made such an oral transfer, the complainant acquired an equitable interest, and Avery, holding the legal title, became a trustee. Somerby v. Buntin, 118 Mass. 279, 19 Am. Rep. 459; Blakeney v. Goode, 30 Ohio St. 350, 360. In Littlefield v. Perry, 21 Wall. 205, 227, 22 L. Ed. 577, the court say: “The contest is now between an assignor in equity and his assignee. A court of equity will in such a case give the same legal effect to an equitable title that it would to one that was legal.” Second. Avery became a director and officer, as well as a salaried employé, of the complainant corporation. Upon the plainest prin [64] ciples he is chargeable as a trustee by virtue of such relationship. Consolidated Vinegar Co. v. Brew, 112 Wis. 610, 612, 88 N. W. 603. Instead of protecting the interests of the complainant and his associates, as he was bound to do, it is averred that on the 2d day of May, 1906, he assigned and transferred the letters patent to his attorney Wilkinson. On May 19, 1906, he sold his stock in complainant corporation to Allison and Fisher for $33,000, and then proceeded to appropriate the only asset that the corporation had, and to manufacture and sell the patented device in competition with complainant. If the averments of the bill, which are admitted by the demurrers, be true in fact, Avery has greatly abused his trust, in such a way that an accounting is absolutely necessary to protect the rights and equities of the complainant. This is the peculiar province of a court of equity; and, on the face of the bill, diverse citizenship appearing, the court has jurisdiction to entertain the case, which rests, not upon a written contract, but upon the fraud of the defendant. Victor Co. v. The Fair, 123 Fed. 424, 61 C. C. A. 58. Under the averments of this bill there can be no doubt that a court of equity should intervene to compel a transfer of the letters patent to .the complainant, although there was no written agreement on the part of the defendants. Pontiac Knit Boot Co. v. Merino Shoe Co. (C. C.) 31 Fed. 286; Stark v. Starr, 73 U. S. 402, 419, 18 L. Ed. 925; Consolidated Vinegar Co. v. Brew, 112 Wis. 610, 612, 88 N. W. 603. I am also of opinion that the jurisdiction may be sustained upon another ground. The bill charges an infringement by the inventor and prays for an injunction. It seems that such use- by the inventor amounts in law to an infringement. If so, jurisdiction is conferred by the patent law of the United States. Littlefield v. Perry, supra; Wooster v. Crane, 147 Fed. 515, 77 C. C. A. 211; Leslie v. Wm. Mann Co. (C. C.) 157 Fed. 236. The bill is not multifarious. The argument of counsel is that the two causes of action, the one for specific performance and the other for infringement, are incongruous, as the one is dependent upon the other, and the complainant is not entitled to damages for infringement until it establishes its right to be invested with the title. But in Littlefield v. Perry, 21 Wall. 206, 226, 22 L. Ed. 577, the court say: “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.” In the maze of conflicting decisions as to what is the test of multifariousness, we find one proposition concerning which the courts seem to be agreed — that a bill is not multifarious because it includes several causes of action, if they grow out of the same transaction. If all the defendants are interested in the same right, and the relief against each is of the same general character, the bill may be sustained. Barcus v. Gates, 89 Fed. 783, 791, 32 C. C. A. 337 (decided by the Court of Appeals of the Fourth Circuit); Story’s Eq. Jur. § 796; Swihart v. Harless, 93 Wis. 211, 215, 67 N. W. 413. For these reasons, both demurrers will be overruled, with leave to defendants to answer by the November rule day, if they shall be so advised; otherwise, judgment to pass upon the demurrer.