Davis Improved Wrought-Iron Wagon-Wheel Co. v. Davis Wrought-Iron Wagon Co.

• Citation: 20 F. 699
• Parties: DAVIS IMPROVED WROUGHT IRON WAGON WHEEL CO. v. DAVIS WROUGHT IRON WAGON CO.
• Decision Date: 21 June 1884
• Court: U.S. District Court — Northern District of New York

20 F. 699

DAVIS IMPROVED WROUGHT IRON WAGON WHEEL CO. v. DAVIS WROUGHT IRON WAGON CO.

United States Circuit Court, N.D. New York.

June 21, 1884

R. H Duell, C. H. Duell, and G. W. Hey, for complainant.

John A Reynolds, for defendant.

WALLACE J.

The defendant relies upon its equitable title to the patents in suit to defeat the complainant's bill. The complainant has the legal title to the patents, having taken not only an assignment of the inventions from the Messrs. Davis, who were the inventors, but also the statutory title, the letters patent being issued to the complainant. The defendant claims to have succeeded to the rights of the Davis Iron Wheel Company, under an agreement made by that company with the Davises, by the terms of which the Davises covenanted to apply in the name of that corporation, its assigns or successors, for all patents for any improvements they might invent in iron wagons or any wheeled vehicle, or any parts thereof, and to transfer any such patents which they might procure to the company, its successors or assigns. The patents in suit are for inventions made by the Davises after this agreement was executed.

As the complainant has acquired the legal title to the patents, its title must prevail over the equitable title of the defendant unless the complainant's rights were acquired with notice of the equities of the defendant.

Actual notice of these equities is not shown, but the defendant contends that the complainant is chargeable with constructive notice. The defendant was incorporated after the execution of the agreement between the Davises and the Davis Iron Wheel Company, and the Davises were two of the five incorporators. They were also two of its five directors when they assigned to it the inventions patented, and when the letters patent were issued to it. The circumstance that the Davises were promoters or associates with others in forming the corporation is not material. A corporation can have no agents until it is brought into existence, and after that it acts and becomes obligated only through the instrumentality of its authorized representatives. Stockholders cannot bind it except by their action at corporate meetings, and it is undoubted law that notice to individual stockholders it not notice to the corporation, and their knowledge of facts is not notice of them to the corporation. In re Carews Act, 31 Beav. 39; Union Canal Co. v. Loyd, 4 Watts &amp S. 393; Fairfield Turnpike Co. v. Thorp, 13 Conn. 182; The Admiral, 8 Law Rep. (N.S.)Mass. 91. Instances may occur where associates combine together to create a paper corporation, as a form or shield to cover a partnership or joint venture, and where the stockholders are partners in intention. The liberal facilities offered by the statutes of many of our states for organizing such corporations are undoubtedly often utilized by those whose only object is to escape liability as partners by calling themselves stockholders or directors. Where such a concern is formed, a court of equity might treat the associates as partners in fact, disregard the fiction of a corporate relation between them, and subject the title of the property transferred to it by the promoters to any equities which might have existed as against them. If it had been shown here that the Davises formed the corporation for the purpose of transferring to it the inventions and patents which they were in equity obligated to transfer to another corporation, and that they contributed the capital and were the only...