Conway v. White
| Decision Date | 16 July 1923 |
| Docket Number | 271. |
| Citation | 292 F. 837 |
| Parties | CONWAY et al. v. WHITE. |
| Court | U.S. Court of Appeals — Second Circuit |
Louis W. Southgate, of New York City (Robert C. Cooley, of Springfield, Mass., and O. Ellery Edwards, of New York City of counsel), for appellants.
Mitchell Brothers, of New York City (George H. Mitchell and G. H Brevillier, both of New York City, of counsel), for appellee.
The plaintiff, Earle E. Conway, is a citizen of the state of Massachusetts, Carl C. Conway is a citizen of the state of New York, and Theodore P. Brown is a citizen of the state of Massachusetts. They are trustees under a declaration of trust dated April 30, 1913. The defendant is a citizen of the state of Connecticut. This is a suit brought by the plaintiffs to compel the defendant to transfer to them certain patent rights now in the possession of the defendant, and for a discovery, accounting, and injunction with regard thereto.
It is alleged that on March 25, 1920, the defendant and the Wilcox & White Company, a Connecticut corporation, entered into an agreement whereby the defendant was to be employed by the company as mechanical engineer for a period of five years beginning on April 1, 1920. The salary to be paid him was to be $8,000 for the first year, and was to increase $1,000 a year for each year of subsequent employment. The parties to the agreement entered upon the performance of it, and this performance continued until about July 15, 1921, when the Wilcox & White Company became bankrupt; but prior to the bankruptcy, and while so employed by the company under the agreement, the defendant, it is alleged, made valuable inventions and discoveries which in one way or another affected articles manufactured by the said company and which therefore pursuant to the aforesaid agreement, belonged absolutely and entirely to the company.
It is alleged that on or before April 1, 1921, the company, at the time not being in default under its contract, requested the defendant to execute assignments in writing proper and necessary to vest in the company the entire right, title, and interest in the discoveries and inventions before mentioned, and which were embodied in certain patent applications which had been filed thereon particularly serial Nos. 455,346 and 440,296, but that defendant refused to make the assignments, and thereby breached and defaulted on the contract while it was in full force and effect. It is alleged that the defendant still retains the title to the unassigned applications and that, unless the title to those applications and inventions are assigned to the plaintiffs, the latter will be irreparably damaged in the business that they are starting and commencing to carry on under the rights acquired by them from the sale in bankruptcy of the Wilcox & White Company's business.
As heretofore said, the Wilcox & White Company became bankrupt on July 15, 1921, and on May 13, 1922, the bankrupt's estate was sold to one Norman November who thereafter assigned to the plaintiffs his interest in the contract which the bankrupts had entered into with the defendant, and in all inventions, applications, and patent rights, together with the good will of the business.
The defendant in his answer set up the defense that the plaintiffs and their predecessors in interest, the Wilcox & White Company by its bankruptcy, had breached the contract with the defendant, and that this affected the whole consideration, so far as the defendant was concerned, and terminated each and every covenant thereof as effectively as if they had never been made. The defendant in his answer also alleged that the bill failed to allege any matter of equity entitling the plaintiffs to the relief prayed for therein, and that it did not contain facts sufficient to constitute a valid cause of action in equity, for the reason, among others, that it appears on the face of the bill that defendant has no mutual remedy to compel specific performance of the contract by the plaintiffs or by the Wilcox & White Company.
When the case came on to be heard, the plaintiffs moved to amend the bill of complaint and the motion was granted, and the bill amended. The foregoing statement as to what the bill contained is based on the bill as amended. The defendants then moved to dismiss the bill, both in its original and amended form, for the reasons already set forth in the answer; and the bill was thereupon dismissed for want of equity, a decree to that effect being entered, and an appeal to this court being taken.
Before ROGERS, MANTON, and MAYER, Circuit Judges.
ROGERS Circuit Judge (after stating the facts as above).
On the day set for the trial of this case in the court below the defendant moved to dismiss the bill. This motion was based on equity rule 29 (198 F. xxvi, 115 C.C.A. xxvi), which abolished demurrers and pleas and provided that every defense in point of law arising upon the face of the bill which might heretofore have been made by demurrer or plea counsel, however, availed themselves of the equity rule quoted. The District Judge granted the motion to dismiss.
Before proceeding to the consideration of the question involved we may point out that a motion to dismiss for want of equity must be heard and decided upon the allegations of the bill as upon demurrer. The defendant is not at liberty by filing his answer to move to dismiss upon denials of the allegations of the bill, or by new matter set up in his answer. A motion to dismiss the bill, because it does not state facts sufficient to constitute a cause of action, must be overruled, and the case allowed to go to hearing, unless it clearly appears upon the face of the bill that, taking the allegations to be true, they are insufficient to entitle the plaintiffs to the relief asked. Krouse v. Brevard, 249 F. 538, 548, 161 C.C.A. 464; Ralston Steel Car Co. v. National Dump Car Co. (D.C.) 222 F. 590. It is our opinion that this bill alleges facts which are sufficient, if true, to entitle the plaintiffs to the relief sought.
The bill declares that 'this is a suit brought by the plaintiffs for specific performance of a contract' between the defendant and the plaintiff's predecessor in interest. As a general rule specific performance is not decreed, where the subject-matter of the contract is personal property, inasmuch as the compensation which is recoverable in an action at law is ordinarily an adequate remedy for the breach of the contract. But it is well established that an agreement to assign a patent right will be specifically enforced. The reason for making such an exception to the general rule being that a patent is in its nature a unique thing which money compensation does not enable the plaintiff to duplicate.
But this case is brought not merely to enforce a contract to assign a patent right. The facts alleged show that defendant is a trustee and holds the legal title to property the beneficial ownership of which is vested in another. The purpose of the bill is to compel the performance of a trust agreement in accordance with its terms. It seeks the transfer of the legal title in certain applications for patents which the defendant has held in trust from the time they were filed. The beneficial ownership was at the beginning in the Wilcox & White Company to whose rights therein the plaintiffs have succeeded. Where a trust has been created a court of equity does not permit the trustee to violate it by his wrongful acts, but compels him faithfully to perform according to his undertaking.
This brings us more particularly to inquire as to the allegations of the bill. It alleges that defendant has certain property in his possession which he holds in a fiduciary capacity and solely for the benefit of the plaintiffs, which property he had agreed to transfer when required to do so. That he was required by the beneficial owner to make the transfer and has declined to execute the same. Whenever a person has a right to the beneficial enjoyment of property of which the legal title is in another a trust exists, which can be enforced in equity. The one entitled to the beneficial interest always has the right to compel in a court of equity a performance of the trust, which he has undertaken, according to its terms and intent. It is a maxim of equity, which has been adhered to from ancient times, that a trustee can derive no advantage from his trust. But the trustee in this case is in court, claiming that his trust is at an end, and that he is entitled to hold the property for himself alone.
The bill sets forth the agreement which the defendant entered into with the plaintiffs' predecessors in interest, the Wilcox & White Company, on March 25, 1920. That agreement contained among other provisions the following:
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Conway v. White
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