Sanche v. Electrolibration Co. , 4 App. D.C. 453 ( 1894 )

Mr. Justice Morris

delivered the opinion of the Court:

It is urged as a preliminary question by the appellee, that the appellant, having answered the original bill, cannot be allowed to demur to the amended bill. It is claimed that the amended bill is substantially the same as the original bill; and that, after answering, the defendant has not the right, under the rules of pleading in equity, to demur. And in this connection, Daniell’s Chancery Pleading and Practice, Vol. 1, page 468, is cited, as follows:

“An amendment of the bill, however, does not necessarily enable a defendant to demur to a bill which he had previously answered, upon any cause of demurrer to which the original bill was open, unless the nature of the case made by the bill has been changed by the amendment.” -And also, the same author, Vol. 1, page 583 : “A defendant in general, after he has answered the original bill, cannot put in a general demurrer to the amended bill, because the answer to the original bill, being still in the record, will in fact overrule the demurrer.”

But in this case, it may well he held that “ the nature of the case made by the original bill has been changed by the amendments.” Without attempting to go into any comparison of the two bills, it is quite apparent that in his answer to the original bill the defendant denied the legal existence of the complainant as a corporation under the laws of the State of Alabama; and that between the date of the filing of that answer and the time of the filing of the amended bill such proceedings were had in Alabama as to induce the defendant to abandon that charge, and now to admit, as he is assumed to do by his demurrer, the valid and legal existence of the corporation. This is such a radical change of conditions as substantially to make the amended bill a different one from the original, and entitling the defendant to interpose a new defense.

1. The first ground of objection to the bill is that it shows upon its face that there are not proper parties to the suit; and that Webb, Moroney and Doremus, with whom the contract of July 14, 1887, was made, are necessary parties to this proceeding.

The position of these three persons in the transaction was, first, that of promoters of the enterprise; and, secondly, that of trustees or stakeholders to receive the property and rights which the appellant sought to exploit, and to transfer them to the proposed company as soon as it should be formed. When the company was organized, and when they had executed to that company a conveyance in due form, of the rights that had been vested in them for that sole purpose, their duty was fully performed, and their functions were absolutely at an end. There was nothing thereafter to be done by them; nothing which they could rightfully be required to do either by the parties or by a court of equity. Now, it is a well established rule of equity procedure that only such persons are necessary parties to a suit whose rights would necessarily be affected by the decree. Kerr v. Watts, 6 Wheat. 550 ; McArthur v. Scott, 113 U. S. 340 ; Story’s Eq. Pl., Sec. 231, and cases cited in the notes; Daniell's Ch. Pl. and Prac., page 342.

If, by the proof in the case, or by further developments, it should appear that the trustees had never really conveyed the interest that was vested in them, or that the conveyance by them to the company was in any manner tainted with fraud, and that, therefore, there was yet some interest, legal or equitable, remaining in them, in respect of which they should be made parties to the suit, that is a risk which the complainant takes, and which does not seem to affect the defendant in any way. For, in that, event, the complainant could have no relief until the proper parties were made. But when the bill states that these three trustees have fully performed the trust reposed in them, and therefore have no longer any right, title, or interest, legal or equitable, that could be affected by the decree — and for the present hearing, of course, these statements of the bill must be taken as true — it is not apparent to us that there is any necessity, or even propriety, in bringing them into the suit as parties.

2. More, reliance is evidently placed by the appellant upon the second ground of demurrer than upon the first, and it is more worthy of earnest consideration. The argument is that the bill is one for specific performance of the contract of July 14, 1887 ; and that this contract is incapable of specific performance, inasmuch as it is too vague and uncertain to be enforced, wanting in mutuality, and is a contract mainly for personal services such as a court of equity cannot and will not enforce.

We think that it is a misapprehension on the part of counsel to assume that the bill in this case is one for the specific performance of the contract of July 14, 1887 ; or, at least, that it is exclusively such. That contract, of course, is the basis of all the proceedings; but it is not all that there is in the case; and specific performance of it is not all that is sought by the bill of complaint.

The paper writing of July 14, 1887, signed by Dr. Hercules Sanche, the defendant in this case, is a remarkable document, evidently the production of a person whose knowledge of legal forms was only sufficient to induce the more easy commission by him of legal blunders; and we have no disposition to find fault with the censures passed upon its ungrammatical clumsiness and its literary demerits by the counsel for the appellant, inasmuch as the clumsiness and the demerits must be charged mainly, if not exclusively, to the account of the appellant himself. If the contract sought to be set forth in that paper writing had remained wholly executory, it is difficult to see how specific performance of it could be enforced by a court of equity at the suit of any person or for any purpose whatever. It would probably be impossible for a court of equity to determine where or how a joint stock company should be organized with “ a capital stock sufficient to secure and operate all desirable patents in this and other countries.” It would certainly be difficult for a court of equity, from a perusal of the reports from Munn & Co., contained in this record, to bring itself to the conclusion that the condition precedent for the organization of a company, a favorable report from that firm upon the patentability of “ the new means,” had actually supervened. And most assuredly a court of equity would not assume to enforce the undertaktaking of Dr. Sanche “ to devote his time and attention to the investigation and improvement of said discovery.”

But that contract is no longer wholly executory. It has been freed by the action of the parties themselves from some, if not all, of its infirmities of indefiniteness. The parties have settled for themselves the question of a favorable report from Munn & Co., as well as the question of the patentability of the invention or discovery, so far as that can be settled by their action. They have organized the company; they have fixed the amount of its capital stock; and the capital stock, so far as deemed necessary, seems to have been subscribed for. The 25 per centum of that stock, stipulated to be assigned to the appellant, has been assigned to him, subject it is true, to some subsequent arrangement by which one-half of it was to be left in the treasury of the company for further disposition — an arrangement in which the appellant acquiesced, according to the statements of the bill. The company entered upon the work which it was created to perform ; it spent its money and expended its efforts in the promotion of the schemes of the appellant; and the appellant participated in its organization, subscribed to its stock, took employment under it and received compensation from it in pursuance of his contract. In pursuance of that contract, also, the trustees therein named, immediately upon' the organization of the company, conveyed to it, apparently with the full knowledge and concurrence of the appellant, all the right, title and interest which the latter had transferred to them by that contract. The contract, therefore, has been in great part executed ; and all those parts of it, except the undertaking for the personal services of the appellant, have been actually performed, and there is no longer any question of them.

But about the month of August, 1889, upwards of two years after the execution of this contract, when the company had been in operation nearly two years, dissensions arose, and Sanche refused thereafter to co-operate with the company or to act in its interest. On the contrary, he sought to repudiate its obligations, to manufacture and sell the appliances of the new discovery for his own exclusive use and benefit without regard to the company, to use for that purpose the trademark “ Electropoise ” which the company had adopted and caused to be registered, and to refuse to assign to the company the applications for patents then pending in the Patent Office. This action or conduct of his it is, and not merely the contract of July 14,1887, which the amended bill of complaint in this case seeks to reach by injunction to restrain his proceedings as an infringement of their rights, by an accounting for the profits made by him through such infringement, and by specific performance of the contract of July 14, 1887, only in so far as that contract provided for the assignment to the company of all patents relating to the 'discovery that might be applied for subsequently to that date. It may possibly be that, under a proper construction of the contract, the company may not be found to be entitled to the benefit of any subsequent applications for patents, notwithstanding that its terms seem to be amply broad enough and sufficient to cover such applications. But, under the showing made by the bill of complaint, the company is certainly entitled to the benefit of the application made previously to that date, and to. any and all patents and patent rights based thereon; and if that showing is sustained by adequate proof, the complainant .will he entitled to the injunction and accounting which it prays, regardless of its claim of right to the benefit of any other applications. And if the bill can be maintained on that ground and for that purpose, it necessarily follows that a demurrer to the whole bill for want of equity cannot be sustained, and was properly overruled. We may add that we see nothing from which to dissent in the opinion pronounced upon the subject by the learned justice who held the court below.

3. It is further argued on behalf of the appellant, that the only application for patent pending on July 14, 1887, was one relating to the appliance for contact of the body with the earth; that the bill seeks relief only with reference to the class of inventions relating to the connection of the body with hot or cold objects; and that therefore the complainant has no standing in court. This conclusion would not follow, except in the event that it would appear that no right was conveyed to the company to any application made after the date of the contract — a question upon which we have not found it necessary here to express any opinion. But the conclusion fails absolutely by the erroneous assumption-in the statement that the bill seeks relief only as to the class of inventions relating to the connection of the body .with hot or cold objects.

The second prayer of the bill in general terms, and the third prayer in express terms, seeks relief as to both classes of inventions; and the statements in the body comprehend both.

The interests involved in this suit are evidently valuable, in the opinion of the parties. Upon the faith of a contract supposed to be valid and binding, and which we may justly presume was drawn by the appellant himself, the appellee was-brought into existence, was made the recipient of rights supposed to be valuable, and was induced by the action and conduct of the appellant to expend money upon the furtherance of those rights and for the benefit of the appellant as well as of the others in interest. It is not equitable now to permit the appellant to repudiate the whole transaction. We think he should be estopped from so doing; and we think all doubts and difficulties, at this stage of the proceedings, should be solved against him. As we have intimated, further developments in the cause may show that the complainant has no just rights in the premises for the protection of which it is entitled to appeal to a court of equity. But this we cannot anticipate, if such should be the result. The bill, in our opinion, makes out a prima facie case for the intervention of a court of equity; and this is all that we can now determine.

We are of opinion that the court below was right in its decision; and we, therefore, affirm, with costs, the order of that cou/rt overruling the defendant’s demurrer, and we remand the cause to that court for further proceedings according to law.