Howe v. Howe & Owen Ball Bearing Co.

• Citation: 154 F. 820
• Decision Date: 07 May 1907
• Docket Number: 2,501.
• Parties: HOWE v. HOWE & OWEN BALL BEARING CO. et al.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

154 F. 820

HOWE v. HOWE & OWEN BALL BEARING CO. et al.

No. 2,501.

United States Court of Appeals, Eighth Circuit.

May 7, 1907

(Syllabus by the Court.)

The jurisdiction of a national court may not be renounced or denied where the facts requisite to confer it appear directly or by just inference from any part of the record.

A suit cannot be properly dismissed by a Circuit Court as not substantially involving a controversy within its jurisdiction, unless the facts when made to appear on the record create a legal certainty of that conclusion.

The matter in dispute was the undivided half of a patent for an invention. There was evidence that 21/155 was sold for $5,000 17 months before the suit was commenced; that the defendant was a citizen and resident of Missouri; that one of the complainants was a corporation of Maine, and the other a stockholder, director, and president thereof; and that the articles of incorporation recited his residence Evansville, Ind.

Held there was sufficient evidence to sustain the conclusion of the lower court that the value of the property involved in the controversy was more than $2,000, and that the citizenship of the parties was diverse.

A breach of a covenant, which does not go to the whole consideration of a contract, but is subordinate and incidental to its main purpose, does not constitute a breach of the entire agreement, does not authorize the injured party to rescind the contract, but he is still bound to perform his part of it, and his only remedy is a recovery of damages for the breach.

The owner of one-half of a patent conveyed his half to a third person in trust to form a corporation, to convey his interest in the patent to this corporation for one-half of its stock and to so distribute his stock that the trustee should receive 21 2/3/250 of his share and should hold 215 5/6/250 thereof in trust for his wife and child. The owner of the other half of the patent at the same time, in consideration of this deed, agreed with him in writing to convey his half of the patent to the corporation for one-half its stock and to convey to the trustee as his own personal property 21 2/3/250 of his share in consideration of services rendered and to be rendered by the latter in the organization and promotion of the corporation.

Held: (1) This was not a unilateral contract or an agreement for an option, but an executed agreement on the part of the first party and an executory one on the part of the second party.

(2) The consideration of the executory agreement was the executed agreement, and it was no defense to a suit for the performance of the former that the trustee had failed to render services to promote the company, because his contract in that regard was subordinate and incidental to the main purpose of the agreement, and did not go to its whole consideration.

A prior agreement of a defendant to convey a part of the property in controversy to a third person, who is not a party to the suit, is no defense to a suit for specific performance of a subsequent agreement to convey the same property, because the decree cannot bind or injuriously affect the rights or interests of the absent first contractor.

Some betrayal of confidence or breach of duty is indispensable to the avoidance of titles or rights acquired of his correlate by one in a fiduciary relation.

This is an appeal from a decree for the execution of a trust created by a conveyance, and for the specific performance of a contract to vest the title to a patent for an invention in a corporation and to distribute its stock among those entitled thereto in accordance with their agreed interests. The contract was in these words:

'For and in consideration of one dollar and other good and valuable considerations, receipt whereof is hereby acknowledged, I hereby transfer, assign and set over to James G. Owen my undivided half interest in and to a certain patent and invention, No. 678,619, on a ball journal bearing for railroad and street cars, etc., issued to A. F. Howe and E. C. Owen, July 16th, 1901.

'In trust for the following purposes:

1st. Said James G. Owen shall organize a corporation and transfer to said corporation my undivided interest in and to said patent and invention, on the transfer by said A. F. Howe to said corporation of his undivided one-half interest in and to said patent and invention, in consideration for the entire capital stock, that is for said entire patent interest of said Howe and said Owen.

2nd. To transfer to T. F. Leyden, 10/250 of said capital stocks.

'Said Howe to transfer from his capital stock a like proportion, both in consideration of the advance by said Leyden of $5,000.00, as demanded.

3rd. From the stock in said trustees hands 5/500 to be transferred to W. W. Wilcox. Said Howe to transfer a like amount in consideration of services rendered.

'From the balance of said capital stock in said trustees' hands, he shall retain as his own personal property 21 2/3/250 out of said capital stock and said Howe shall transfer a like amount to said James G. Owen in consideration of services rendered and to be rendered in the organization and promotion of said Company. The balance shall be held by him in trust for Mrs. Hattie Owen and child James G. Owen, Jr., as their interest may appear, during the full term of patent, reissues, etc.

'Dated Chicago, Illinois, April 29th, 1902.

'Elmo C. Owen.

'Attest:

'F. M. Williams,

'A. F. Howe.

'I hereby consent and agree to the above conditions this 29th day of April, 1902.

A. F. Howe.'

James G. Owen organized the corporation with a capital stock of 10,000 shares of $100 each, but Howe refused to convey his undivided half of the patent to this corporation, and the corporation and Owen exhibited their bill to induce him to perform his contract. There was a decree that Howe and Owen as trustee should convey their respective half interests in the patent to the corporation; that one-half of its capital stock should be issued to Howe and the other half to Owen; that each of them should convey to Thomas F. Leyden 10/250 of his stock and to Webster W. Wilcox 5/500 thereof and that Howe should transfer to Owen 21 2/3/250 of the stock received from the corporation by him as provided in the agreement.

Luke E. Hart (Richard C. Hart, on the brief), for appellant.

Chester H. Krum (Chappell B. Crawley, on the brief), for appellees.

Before SANBORN and HOOK, Circit Judges.

SANBORN Circuit Judge, after stating the case as above, .

The jurisdiction of the court below is challenged in the brief and argument, but the ruling of that court upon the question of jurisdiction is not assigned as error, and the questions regarding it now urged were probably never called to its attention. They are: Was there sufficient evidence that the value of the property in dispute was $2,000 exclusive of interest and costs? And was there sufficient evidence that the complainant Owen was a citizen and resident of a state other than Missouri, the state of the citizenship and residence of the defendant Howe? The jurisdiction of a federal court may not be renounced or denied where the facts requisite to confer it appear either directly or by just inference from any part of the record. Briges v. Sperry, 95 U.S. 401, 403, 24 L.Ed. 390; Gordon v. Third National Bank, 144 U.S. 97, 103, 12 Sup.Ct. 657, 36 L.Ed. 360; Myers v. Hettinger, 37 C.C.A. 369, 370, 94 F. 370, 371; Ward v. Manufacturing Co., 5 C.C.A. 538, 540, 56 F. 437, 439; Railway Co. v. Ramsey, 22 Wall. 322, 328, 22 L.Ed. 823; Express Co. v. Kountze, 8 Wall. 342, 19 L.Ed. 457; Jones v. Andrews, 10 Wall. 327, 331, 19 L.Ed. 935; Steamship Co. v. Tugman, 106 U.S. 118, 1 Sup.Ct. 58, 27 L.Ed. 87; Bondurant v. Watson, 103 U.S. 281, 26 L.Ed. 447.

There is evidence in this record that within a few months prior to the execution of the contract in suit Leyden paid $5,000 for an agreement that he should receive 20/55 of the issued stock of a corporation whose only property was to be this patent. There was no evidence that the patent became less valuable, and this suit involved one-half of it. 'A suit cannot be properly dismissed by a Circuit Court as not substantially involving a controversy within its jurisdiction unless the facts, when made to appear on the record, create a legal certainty of that conclusion. ' Wetmore v. Rymer, 169 U.S. 115, 128, 18 Sup.Ct. 293, 42 L.Ed. 682. The facts which appear in this record establish no legal certainty that the value of the property in dispute in this suit was less than the jurisdictional amount, but they persuasively indicate that it was more.

The articles of incorporation of the Howe & Owen Ball Bearing Company, which are in the record, prove that it is a corporation organized in November, 1902, under the laws of the state of Maine, that James G. Owen was its president and one of its stockholders, and they recite that his residence was Evansville in the state of Indiana. From these facts the legal presumption arises that Owen was a resident and citizen either of the state of Maine, because he was a stockholder of a corporation of that state, and the presumption is that all who compose a corporation are citizens and residents of the state from which it derived its powers (St. Louis & San Francisco Ry. Co. v. James, 161 U.S. 545, 554, 16 Sup.Ct. 621, 40 L.Ed. 802, and cases there cited), or of the state of Indiana, because he was a resident of that state, and the presumption is that a person is a citizen of the state of his residence, and in either event the citizenship of the parties to this suit was diverse. Facts sufficient to sustain the jurisdiction of the Circuit Court thus appear in the record.

The defendant Howe complains of the decree that it is not sustained by...