Nelson v. Swing-A-Way Manufacturing Company

• Decision Date: 25 June 1959
• Docket Number: No. 16044.,16044.
• Citation: 266 F.2d 184
• Parties: Helen Smith NELSON, Executrix of Arthur E. Nelson, Deceased, Appellant, v. SWING-A-WAY MANUFACTURING COMPANY, a Corporation, and Idus L. Rhodes, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

266 F.2d 184 (1959)

Helen Smith NELSON, Executrix of Arthur E. Nelson, Deceased, Appellant, v. SWING-A-WAY MANUFACTURING COMPANY, a Corporation, and Idus L. Rhodes, Appellee.

No. 16044.

United States Court of Appeals Eighth Circuit.

May 5, 1959.

Rehearing Denied June 25, 1959.

Harry M. James and Joseph Nessenfeld, St. Louis, Mo. (John H. Cassidy, Jr., and Wilbur C. Schwartz, St. Louis, Mo., were with them on the brief), for appellant.

Estill E. Ezell, St. Louis, Mo. (Lawrence C. Kingsland, Edmund C. Rogers, and Kingsland, Rogers & Ezell, St. Louis, Mo., were with him on the brief), for appellee.

Before SANBORN, JOHNSEN, and VAN OOSTERHOUT, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

Plaintiff appeals from judgment dismissing her patent infringement suit against defendant. The court granted a separate trial on the issue of the ownership of the patents and, after hearing on the merits upon such issue, found that defendant was the owner of the patents and dismissed the infringement suit.

Plaintiff is the executrix of the estate of her deceased husband, Arthur E. Nelson, and in such capacity has succeeded to all of Mr. Nelson's interest in the patents in controversy. Defendant Rhodes during the period here material had operated his manufacturing business as an individual, as a partnership jointly with his wife, as the Steel Products Manufacturing Co., and finally as Swing-A-Way Manufacturing Company, a Missouri corporation, hereinafter referred to as Swing-A-Way or defendant. Any rights acquired in the patents in controversy by Swing-A-Way and its predecessors are now owned by Swing-A-Way.

Nelson was continuously employed by defendant and its predecessors on a full time basis from 1940 to the time of the termination of his employment on February 16, 1950. Nelson was a mechanical engineer with the capacity to invent devices useful to his employer. By 1946 he had become president and general manager. During the period of Nelson's employment by defendant he invented a number of devices, secured patents upon some of them, and had applications pending upon other devices upon which patents were subsequently issued. This infringement action is based upon the alleged improper use of the Nelson patents by Swing-A-Way subsequent to the February 16, 1950, Agreement and Release.

Defendant's claims to the patents are based upon an agreement between Nelson and defendant dated May 1, 1946, and a later agreement dated June 30, 1949, which by its terms supersedes the 1946 agreement. Both of said agreements are in writing and are rather comprehensive. They provide for long-term employment for Nelson, grant him a percentage of the profits, and provide for payment for a period of years to Nelson or his successor in interest in case of disability or death. Nelson binds himself to devote his full time to the defendant, agrees that all patents previously issued to him shall be the property of the defendant and that all patents that he subsequently obtains shall belong to the defendant. The agreement provides in part that Nelson "does hereby assign, convey and transfer all of his right, title and interest in any present or future patents issued to him, or any one for him, to Corporation and agrees to execute any further written instruments necessary to effectuate such transfer."

Plaintiff concedes that if the 1946-1949 agreements had remained in force title to all patents issued to Nelson would be in the defendant. Plaintiff claims that defendant lost its rights in the patents and patent applications by virtue of an Agreement and Release entered into between Nelson and the defendant, dated February 16, 1950, which reads in part:

"Whereas, it is the mutual desire of both parties hereto that all duties, responsibilities, rights, and obligations of each of the parties hereto under said contract be cancelled and the said contract annulled and completely set at naught,

"Now, Therefore, the parties hereto hereby mutually agree as follows:

"1. Nelson releases Swing-A-Way of all past and future obligations to him.

"2. Swing-A-Way hereby agrees to release and discharge Nelson from any and all claims or demands which it has, may have, or ever will have against Nelson in connection with any matter or thing arising out of said employment contract, or arising out of the performance by Nelson of any duties thereunder, or in connection with any matter or thing, done, or performed by Nelson either as Director, President, Manager, Agent, or Employee of Swing-A-Way.

"3. And By These Presents, the parties hereto hereby mutually release each other of and from any claims and demands of any nature whatsoever, which either of the parties hereto now have, ever had, or ever will have against the other party hereto from the beginning of the world down to the date of these presents."

Plaintiff further urges that the defendant is estopped to deny the plaintiff's title to the patent rights by reason of a final judgment entered in the Circuit Court of the City of St. Louis, Missouri, in Case No. 36,142, entitled Helen Smith Nelson, Executrix of Arthur E. Nelson, deceased v. Swing-A-Way Manufacturing Company, which action plaintiff contends adjudicated that Swing-A-Way was not the owner of the inventions patented by Nelson.

Upon this appeal plaintiff urges that the trial court erred in failing to hold that defendant was estopped by the state court judgment from asserting title to the Nelson patents, and makes the further contention that the court erred in failing to hold that the defendant was divested of all interest in the Nelson patents by the 1950 Agreement and Release, heretofore set out. We shall first consider the collateral estoppel issue.

The trial court in its conclusions of law states in part:

"7. The parties having confronted each other in the State Court suit, it is necessary to determine the effect of the adjudication. Since that suit was upon an action to set aside a release and to determine the rights of the parties with respect to such release, whereas the present case is an action for infringement of patents, the two suits are upon different causes of action.

"8. Where two successive suits are upon different causes of action, the effect of the judgment in the former suit upon the later one is through the operation of the doctrine of collateral estoppel. Although the parties may not relitigate issues that were adjudicated in the former suit, the estoppel by the former judgment goes only to such matters as were surely adjudicated in the former suit as necessary to the judgment therein. Matters not decided as essential to the former judgment are not foreclosed from adjudication in the later suit."

We are in complete agreement with the statements contained in item 7 of the trial court's conclusions, and agree with the statement of the trial court in item 8 that a collateral estoppel situation is here presented.

The trial court's conclusion as to the scope of collateral estoppel is in accord with established law. In Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597-598, 68 S.Ct. 715, 719, 92 L.Ed. 898, the Supreme Court states:

"But where the second action between the same parties is upon a different cause or demand, the principle of res judicata is applied much more narrowly. In this situation, the judgment in the prior action operates as an estoppel, not as to matters which might have been litigated and determined, but `only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered.\' Cromwell v. County of Sac, supra, 94 U.S. 351, 353, 24 L.Ed. 195. * * *"

In United States v. Munsingwear, Inc., 340 U.S. 36, 38, 71 S.Ct. 104, 95 L.Ed. 36, the Court reaffirms and quotes the rule of res judicata stated in Southern Pacific R. Co. v. United States, 168 U.S. 1, 48-49, 18 S.Ct. 18, 27, 42 L.Ed. 355, as follows:

"The general principle announced in numerous cases is that a right, question, or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and, even if the second suit is for a different cause of action, the right, question, or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified."

The legal principles heretofore stated are followed by the Missouri courts. Bushman v. Barlow, 321 Mo. 1052, 15 S.W.2d 329, 332; Dalton v. Dabbas, Mo., 276 S.W.2d 150, 152; Norwood v. Norwood, 353 Mo. 548, 183 S.W.2d 118, 122. See also 30 Am.Jur. Judgments, § 178, quoted and approved in the Norwood case, supra.

In determining the effect of a former judgment pleaded as an estoppel, when the former judgment was not entered upon the same cause of action, the question is whether an issue litigated in the earlier suit is determinative of some matter in controversy in the later suit. To answer this question, "we must look to the pleadings making the issues, and examine the record to determine the questions essential to the decision of the former controversy." United Shoe Machinery Corporation v. United States, 258 U.S. 451, 459, 42 S.Ct. 363, 366, 66 L.Ed. 708. The doctrine of collateral estoppel applies to matters necessarily decided in the former judgment even if there is no specific finding or...