Metalock Repair Service, Inc. v. Harman

• Decision Date: 28 July 1958
• Docket Number: No. 13313.,13313.
• Citation: 258 F.2d 809
• Parties: METALOCK REPAIR SERVICE, Inc., and Lois R. Morrison, Appellants, v. Hal W. HARMAN, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

258 F.2d 809 (1958)

METALOCK REPAIR SERVICE, Inc., and Lois R. Morrison, Appellants, v. Hal W. HARMAN, Appellee.

No. 13313.

United States Court of Appeals Sixth Circuit.

July 28, 1958.

COPYRIGHT MATERIAL OMITTED

John J. Mahoney, Columbus, Ohio, Corbett, Mahoney, Miller & Rambo, Columbus, Ohio, on the brief, for appellants.

Warren H. F. Schmieding, Columbus, Ohio, Schmieding & Fultz, Columbus, Ohio, on the brief, for appellee.

Before SIMONS, Chief Judge, and ALLEN and McALLISTER, Circuit Judges.

ALLEN, Circuit Judge.

This is an appeal from an order of the District Court of the Southern District of Ohio overruling a motion to dissolve a preliminary injunction theretofore issued against defendants.¹ The principal question is whether the District Court has jurisdiction of the matter.

In 1944 plaintiff sued Lawrence B. Scott for patent infringement in the Southern District of Ohio. The District Court entered an interlocutory order holding the patent valid and infringed and ordering an accounting. A permanent injunction was issued against Scott and his agents (Harman v. Scott, D.C., 90 F.Supp. 486) forbidding further infringement. This court affirmed the judgment of the District Court (195 F.2d 916), certiorari denied 343 U.S. 965, 72 S.Ct. 1059, 96 L.Ed. 1362.

The background of the case is as follows: In 1939 defendant Scott established the Metalock Casting Repair Service in Columbus, Ohio. Defendant Lois Morrison, who had been employed by Scott in Texas, and is now married to Scott, was employed in the Columbus business and now is an officer of a New York concern, Metalock Repair Service, Inc., (hereinafter called Metalock), successor to the Columbus concern.

On December 8, 1952, in accordance with the order of the District Court, a Master ordered Scott to appear and give evidence for an accounting. On February 13, 1953, the Master certified that Scott had not complied with the terms of the order of December 8, 1952, "in any respect" and adjudged Scott in contempt for not appearing or presenting books of account or statements as ordered. No further proceedings have been taken in the accounting.

The order of the District Court in the patent case enjoined the defendant Scott, his agents, servants, employees and attorneys and those acting in concert or cooperation with them, from continuing the infringement found by the District Court to exist. On January 26, 1955, plaintiff filed a motion for preliminary injunction against Scott, Metalock and Morrison, and on February 3, 1955, filed a motion for substituted service of process on defendants Metalock and Morrison. The two latter defendants opposed these motions. June 10, 1955, the motion for substituted service of process was sustained, and the preliminary injunction was granted as prayed for, enjoining defendants Scott, Metalock and Morrison from "selling, assigning, mortgaging or otherwise encumbering, or otherwise transferring, or from sequestering any of his, her, theirs or its assets in whatever form * * *."

A supplemental complaint was filed in the patent case on June 17, 1955, by leave of court joining Scott, Metalock, and Morrison as parties defendant. The supplemental complaint alleged that after the patent suit was instituted, but prior to the trial thereof, Scott, without notice to the court, moved the business from Columbus, Ohio, to Long Island City, N. Y., transferring all of his holdings in the Columbus business to the Long Island concern, which in 1946 was incorporated in New York State under the name of Metalock Repair Service, Inc. The complaint also averred that the infringement enjoined by the District Court was being continued by defendants in Columbus, Ohio, in violation of the injunction. The District Court overruled a motion to dismiss the supplemental complaint. An appeal was filed to the overruling of this motion, which in turn was dismissed by the Court of Appeals 6 Cir., 216 F.2d 611 on the ground that the order was not final and not appealable. The merits of the case were not considered.

A motion praying for dissolution of the preliminary injunction was overruled June 3, 1957, and from this order the instant appeal is prosecuted by Metalock and Morrison.

Defendants Metalock and Morrison in their various motions appeared "specially and not generally". They contend that the District Court has no jurisdiction to issue the preliminary injunction. Their principal contention as to jurisdiction of the person is that defendants have not been served with process. It is undisputed that both defendants Morrison and Metalock are residents of New York State. They contend that they have committed no act of infringement in Ohio and that they have no regular business within the State of Ohio. It is undisputed that neither of these defendants has qualified to do business in Ohio and no person is authorized to act as agent for receiving process in Ohio. The District Court appointed John J. Mahoney of Columbus, Ohio, attorney for Scott and the other defendants, as agent to receive service for defendants and it is asserted that Mahoney is not authorized to accept process in their behalf.

Defendants urge that under Rule 4(f) of the Federal Rules of Civil Procedure, 28 U.S.C.A. the issuance of an order for substituted service was plainly not authorized beyond the territorial limits of the State. They urge that substituted service is authorized only when a statute of the United States provides that service may be made beyond the limits of the State, citing, among other authorities, Barron & Holtzoff, Federal Practice and Procedure, Vol. 1, page 335. In patent cases they point out no such special statute exists.

Plaintiff maintains that as to jurisdiction of the person, Metalock paid expenses in the patent case, thus making a general appearance, see Ocean Accident & Guarantee Corporation, Limited, v. Felgemaker, 6 Cir., 143 F.2d 950, and waiving all question of personal jurisdiction. Due to Morrison's ownership of "most of the stock" of Metalock, plaintiff claims that general appearance by Metalock, in light of the circumstances set forth in the record, constitutes general appearance by Morrison.

As to jurisdiction of the subject matter, defendants Metalock and Morrison urge that the supplemental complaint brings in new parties and new matter charged as basis of relief and that the action therein set up must be brought in the district in which defendants have committed acts of infringement, if any, and have a regular and established place of business.

Plaintiff answers by asserting that the supplemental complaint is ancillary only, that the parties in legal contemplation are identical with Scott, that the complaint seeks no new relief, endeavors only to maintain the status quo, and to enforce the interlocutory injunction already granted by the District Court. It urges that the uncontradicted facts establish fraud and collusion between Scott, Metalock and Morrison. Scott testified that he and Morrison were partners in the Columbus business. Scott was president of Metalock from its inception until February, 1953, and Morrison was at its inception, and still is, secretary-treasurer of Metalock. In 1948 Morrison acquired from Metalock a house and "most of the stock". Plaintiff alleges that Morrison fraudulently acquired this property.

The sale of the assets of the Columbus business was made by Scott to Metalock in 1947, during the pendency of the patent suit, the trial of which was held in 1948, and interlocutory judgment rendered in 1950. Plaintiff asserts that Metalock and Morrison conspired with Scott to defraud plaintiff of an enforceable judgment and that Morrison is to be considered in equity as the corporation itself. In effect it claims that Metalock and Morrison are so identified in interest and in privity with Scott that they may not nullify the interlocutory judgment of the District Court as to validity and infringement by Scott of the Harman patent by performing the acts prohibited by the District Court.

In the instant proceedings the District Court ruled on all motions in favor of plaintiff and granted the preliminary injunction. Plaintiff says that this action was taken because the District Court agreed with plaintiff's view of the facts and of the law. It states in its brief that the court found that "the relationship between Morrison and Scott was a proprietorship wherein at least Morrison derived profits, and apparently all of the profits." Plaintiff also states in the brief that "As found by the District Court, the instant case falls squarely within the doctrine * * * in Felgemaker v. Ocean Accident & Guarantee Corporation, Ltd., D.C., 47 F.Supp. 660, 662," which part of the decision was affirmed in Ocean Accident & Guarantee Corporation, Limited v. Felgemaker, supra, 6 Cir., 143 F.2d 950.

The trouble with this contention is that the court in granting the preliminary injunction made no findings of fact and conclusions of law as required under Rule 52(a) of the Federal Rules of Civil Procedure.

The lack of these findings makes it difficult, if not impossible, for the court to rule upon the law as well as upon the facts. As to the claimed general appearance of Metalock in the case, plaintiff contends that Metalock paid the expenses of the trial on the merits and of the proceedings in this court, and certiorari proceedings in the Supreme Court. Scott expressly admitted that Metalock paid all expenses on appeal, but did not state that Metalock paid the expenses of the trial on the merits. However, Scott's income tax return for 1947 showed that he deducted $1,422.04 for legal expenses. He testified that in 1948, 1949, 1950 and 1951 he personally had no legal expenses. The patent case was tried in the middle of 1948 for a number of days. It would appear that heavy legal expenses must have been incurred in 1948 as a lawyer...