Milgram v. Jiffy Equipment Co.

• Decision Date: 10 March 1952
• Docket Number: No. 1,No. 42581,42581,1
• Citation: 362 Mo. 1194,30 A.L.R.2d 925,247 S.W.2d 668
• Parties: , 30 A.L.R.2d 925, 92 U.S.P.Q. 436 MILGRAM v. JIFFY EQUIPMENT CO. et al
• Court: Missouri Supreme Court

Page 668

247 S.W.2d 668

362 Mo. 1194, 30 A.L.R.2d 925, 92

U.S.P.Q. 436

MILGRAM v. JIFFY EQUIPMENT CO. et al.

No. 42581.

Supreme Court of Missouri, Division No. 1.

March 10, 1952.

Motions for Rehearing or to Modify Opinion or to Transfer to

Court en Banc Denied April 14, 1952.

Supplemental Opinion April 14, 1952.

E. R. Morrison, John A. Morrison, and Clark Kuppinger, all of Kansas City, Morrison, Hecker, Buck, Cozad & Rogers, Kansas City, of counsel, for appellants.

Lawrence R. Brown, Jess W. Van Ert, and Paul R. Stinson, all of Kansas City, Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, of counsel, for respondent.

CONKLING, Presiding Judge.

Jiffy Equipment Company, a corporation (hereinafter called Jiffy,) and Frances G. Jackson (hereinafter called appellant), individually and in her above capacity as administratrix, have appealed from the circuit court's decree and Order of Distribution entered in an equity action wherein Leonard Milgram (hereinafter called plaintiff) sought the dissolution of Jiffy under Section 351.485 (all section references are to RSMo 1949, V.A.M.S., unless otherwise indicated) on the ground that plaintiff and appellant as equal shareholders and directors of Jiffy were deadlocked and that Jiffy was suffering irreparable damage. Plaintiff's petition prayed the court to appoint a receiver pendente lite to preserve the assets, to order the dissolution and liquidation of Jiffy, the distribution of its assets in accordance with the rights of stockholders and the appointment of a liquidating receiver to execute the court's orders effecting dissolution. Jiffy was solvent. A receiver pendente lite was appointed. It affirmatively appears that the amount here in dispute, exclusive of costs, exceeds the sum of $7,500.

After the evidence was heard, and when the cause came before the circuit court for entry of final decree the parties agreed to dissolution, agreed that Jiffy's dissolution expenses and liabilities be paid, and agreed that Jiffy's cash and inventory should be equally divided between them. It was there further agreed by the parties that the sole remaining question before the trial court was the manner in which United States patent No. 2266206 (the only other asset owned by Jiffy) should be distributed to appellant and plaintiff as the only two Jiffy shareholders, the parties having agreed that all of Jiffy's assets be distributed in kind. That is the sole question upon this appeal.

Upon the above stated question, it appears that each, the plaintiff and appellant, submitted suggestions to the lower court in the form of a proposed decree. The proposed form of decree submitted by appellant, among other things, decreed that the remaining assets of Jiffy be divided in kind and distributed equally to plaintiff and appellant and that the patent owned by Jiffy 'be transferred and assigned' (in accordance with Section 351.490), to plaintiff and appellant 'as co-owners'. Plaintiff requested the decree which the court later entered. As to the question in issue on this appeal, in the final decree as entered by the court it was ordered that, (1) the patent in question be transferred and assigned to an individual trustee to be named by the court upon agreement of the parties, or, if they failed to agree, to be chosen by the court, (2) such trustee hold legal title to the patent on active trust for the equal use and benefit of plaintiff and appellant, on condition that all royalties and emoluments of every kind resulting from the ownership, use, license, or sale be held and distributed by the trustee equally to and for the benefit of plaintiff and appellant, and (3) such trustee be vested with full power and discretion to (a) continue or discontinue certain existing licensing agreements, (b) execute new licensing agreements for the use of the patent, (c) sell the patent, and (d) manage the operation and ownership of the patent, in such way as to the trustee be deemed for the best interests of plaintiff and appellant. Contending that the portion of the decree ordering the patent transferred to a trustee as above was void, Jiffy and Frances G. Jackson appealed from the decree and judgment entered in the trial court. This is an equity case in which we review the record de novo and give such judgment as the trial court should have given. Section 512.160, Handlan v. Handlan, 360 Mo. 1150, 232 S.W.2d 944.

The essential facts are as follows: The patent in question here covers the design of a certain type of standard and bracket for shelf supports. Hartley Jackson was president of Jackson Manufacturing Company, in Kansas City, which there manufactured show cases and store fixtures. Plaintiff had conceived the idea of developing a grocery shelf standard and bracket designed upon the cantilever principle. He interested Mr. Jackson in its development. Mr. Jackson was responsible for designing a certain pin which made the standard and bracket patentable. He thereafter also developed modifications of the original design, which modifications developed the article and made it more saleable. When the article was patented in 1941, the patent was issued to plaintiff and Mr. Jackson, as co-owners thereof. They thereupon formed a partnership and transferred the patent to their partnership. They had Butler Manufacturing Company make the articles. In 1946 plaintiff and Mr. Jackson organized the Jiffy Equipment Company and transferred to that corporation the patent in question and the other assets of their partnership. Plaintiff and Mr. Jackson were each issued a fifty per cent stock interest in Jiffy, and were the only two members of Jiffy's Board of Directors.

From and after the issuance of the patent, under oral agreement between plaintiff and Mr. Jackson, the Jackson Manufacturing Company was the exclusive sales and distribution agency for the patented articles, and the Jackson Company, at its plant, stored (but kept physically separate) all inventory owned by Jiffy. The Jackson Company created, published and paid for all promotional and advertising material and catalogues for Jiffy and sold the Jiffy standard and bracket to the trade. Jiffy had no employees. The Jackson Company paid its salesman (who sold Jiffy articles exclusively) and its laborers who handled Jiffy articles, and made no charge to Jiffy for rent or utilities. One of the Jackson Company employees 'is in exclusive charge of that Jiffy inventory', and he 'surrenders Jiffy inventory only on written order.' Jackson Company keeps a 'running inventory of Jiffy inventory at all times.' The Jackson Company's employees kept Jiffy's separate books for which it charged Jiffy $20 per month. That method of operation continued over the years and was approved by Jiffy's Board of Directors in April, 1948. Those minutes were signed by plaintiff and by Hartley Jackson.

Under that method of operation the Jackson Company purchased the patented articles from the Butler Manufacturing Company. The Jackson Company then sold them to Jiffy on open account. As the Jackson Company used these articles in its own manufacturing, or sold them to the trade, it bought the articles from Jiffy at what they cost Jiffy, plus 10%. The Jackson Company purchased the articles back from Jiffy only as the Jackson Company used them in its own manufactured show cases or store fixtures, or sold the Jiffy standard and bracket to the trade. Under that plan of operation the only things Jiffy owned were the patent, its inventory, its cash on hand and its accounts receivable from the Jackson Company. Jiffy's only liabilities were accounts payable to the Jackson Company, and taxes. Thus, the Jackson Company from the beginning, under oral agreement, was sole licensee of the patented devices on a royalty basis. This method of operation has been profitable to both the Jackson Company and to Jiffy. At trial time Jiffy had a $25,000 inventory. Hartley Jackson died in October, 1948 and Frances Jackson, his widow and administratrix, at trial time owned the Jackson Manufacturing Company and 50% of Jiffy's stock. After the death of Hartley Jackson, appellant Frances G. Jackson became a member of Jiffy's Board of Directors, in the place of her former husband. Business policy disputes then developed between plaintiff and appellant, as the two directors of Jiffy. The minutes of Jiffy's Board meetings in April, 1949, show they were in fact deadlocked. This action was filed in May, 1949.

The court in its final order of distribution and decree also discharged the receiver pendente lite and appointed him as liquidating receiver, ordered him to take charge of Jiffy's assets, divide Jiffy's inventory in kind between plaintiff and appellant, take receipts, pay taxes, establish certain reserves in Jiffy's bank account, transfer and assign the patent to the trustee, distribute equal portions of Jiffy's cash assets to plaintiff and appellant, and to do certain other things under the order of the court. The decree as entered ordered that after the things therein required to be done 'have been performed and done' the liquidating receiver 'shall apply for his final discharge' and that Jiffy 'shall thereupon stand and be dissolved as a corporation.' The court reserved jurisdiction to make further orders to carry out the decree.

In its decree, the court found: '4 the court further finds that if it should order a distribution in kind of an undivided onehalf interest each to the plaintiff Milgram and the defendant Frances G. Jackson, as administratrix, of the said patent, an inequitable and an unjust result would follow, for the reason that the royalties and emoluments heretofore and now enjoyed equally by said Milgram and said administratrix as stockholders of the company would thereafter inure to the sole use and benefit of said administratrix of the estate of said Henry Hartley Jackson, and plaintiff's share and interest in said royalties would terminate and end because of the peculiar nature of...