Schurtz v. Cushing

• Decision Date: 04 January 1941
• Docket Number: 36845
• Citation: 146 S.W.2d 591,347 Mo. 113
• Parties: Ralph E. Schurtz, Appellant, v. C. C. Cushing, Jr
• Court: Missouri Supreme Court

146 S.W.2d 591

347 Mo. 113

Ralph E. Schurtz, Appellant, v. C. C. Cushing, Jr

No. 36845

Supreme Court of Missouri

January 4, 1941

Appeal from Jackson Circuit Court; Hon. W. F. Woodruff Judge.

Affirmed.

W Rea Heath and Glenn R. Donaldson for appellant.

(1) Defendant's answer did not plead facts showing a right to, nor pray any affirmative relief; so the judgment decreeing a mortgage in favor of defendant was unfounded and a nullity, and should be set aside and quashed. Sec. 768, R S. 1929; Mo. Pleading & Practice, Houts, chap. 5, sec. 103, p. 175; Smith v. Mullins, 198 Mo.App. 504; Mantel Co. v. Thaler, 133 Mo.App. 689. (2) The patent laws do not provide any method by which the patent office records may be purged of spurious transfers of interest in patents. So an action in equity for the cancellation of a purloined assignment is plaintiff's only recourse. Paine v. Trask, 56 F. 233. (3) An action in a court of equity, acting in personam, is plaintiff's only remedy. Such court will carry on until complete justice is done, and adjudge property rights wherever situate. Fulton v. Fisher, 239 Mo. 133. (4) The assignment recorded by Cushing was executed to be placed in escrow; there was no delivery or intention to convey any interest other than in escrow; the purloining of such assignment by Cushing, and his recording same in the patent office, was unlawful, and made the same a spurious record. Standard El. Co. v. Crane El. Co., 76 F. 767, 22 C. C. A. 549, certiorari refused 19 S.Ct. 549. (5) Such spurious record casts a cloud on plaintiff's title and plaintiff is entitled to a cancellation of the recorded spurious assignment, obtained through fraud and deceit. 21 C. J., sec. 34, p. 889; Balfour v. Hopkins, 93 F. 564. (6) There was no intention by Schurtz to deliver either copy of the escrow assignment to Cushing as a transfer of title. In absence of such intention, wrongful possession and filing in patent office could confer no rights in Cushing and such spurious recorded assignment should be canceled. Dickinson v. Maddox, 330 Mo. 51; Cravens v. Rossiter, 116 Mo. 338; Commerce Trust Co. v. White, 172 Mo.App. 537; Morris v. Davis, 334 Mo. 411. (7) The recording in the patent office by Schurtz of one exhibit containing photostat copies of the contract of July 7, 1931, the escrow agreement and the "alph" counterpart of the assignment did not estop plaintiff from relief herein. LaJoye v. Primm, 3 Mo. 529; 21 C. J., sec. 34, p. 889; Balfour v. Hopkins, 93 F. 564; Saffran v. Ins. Co., 141 S.W.2d 100. (8) Upon breach of condition subsequent, title to an assigned interest in a patent reverts, by operation of law, to the grantor. Pierpont v. Penn, 75 F. 289.

Watson, Ess, Groner, Barnett & Whittaker for respondent.

(1) Preliminary discussion; analysis of the contract, of plaintiff's breach, and of plaintiff's claim of fraud. Brown v. Irving, 269 S.W. 687; Davis v. Culmer, 295 S.W. 805; Dick v. Puritan Pharmaceutical Co., 46 S.W.2d 946; Doyle v. Turpin, 57 Mo.App. 87; Facendini v. Hillman, 298 S.W. 1074; Kreitz v. Egelhoff, 231 Mo. 703; Laswell v. Natl. Handle Co., 147 Mo.App. 529; Merrill v. Central Trust Co., 46 Mo.App. 244; Natl. Car Brake Shoe Co. v. Terre Haute Car & Mfg. Co., 19 F. 520. (2) Plaintiff admits receipt of $ 10,000 from defendant. It was to be repaid with interest within one year, and is secured by the assignment. Though it has not been repaid and there is no forfeiture provision in the contract, plaintiff seeks to rescind and cancel the contract, note and assignment without tendering or offering to repay what he admits he received thereunder, which the law will not permit. Allen v. Meredith, 32 S.W.2d 106; Brown v. Presidential Fire & Marine Ins. Co., 24 S.W.2d 207; Ebel v. Roller, 21 S.W.2d 216; Estes v. Reynolds, 75 Mo. 565; Hartmann v. C., B. & Q. Ry. Co., 192 Mo.App. 278; Jarrett v. Morton, 44 Mo. 278; Nevius v. Moore, 221 Mo. 361; Panas v. Bopp, 16 S.W.2d 655; Robinson v. Siple, 129 Mo. 220; Roeder v. Robertson, 202 Mo. 534; Sellner v. Meyer, 240 S.W. 248; Stout v. Mo. Fidelity & Cas. Co., 179 S.W. 994; Tetley v. McElmurry, 201 Mo. 394; Widdicombe v. Penn. Mut. Life Ins. Co., 241 S.W. 438. (3) The two thousand dollar note sued on in the second count was to be paid only upon the condition that defendant, when tendered with cash in payment of his advances to plaintiff, elect to take the cash and not corporate stock. The cash has never been tendered and defendant has never had an opportunity to elect, and hence plaintiff is not entitled to judgment on the note. (4) Answering plaintiff's brief. Belcher v. Haddix, 44 S.W.2d 178; Castorina v. Herrmann, 340 Mo. 1026, 104 S.W.2d 300; Norris v. Lechworth, 167 Mo.App. 553, 152 S.W. 421; Pierpoint Boiler Co. v. Penn Iron & Coal Co., 75 F. 290.

Bradley, C. Hyde and Dalton, CC., concur.

OPINION

BRADLEY

This is an action, in two counts, to cancel a $ 10,000 note and an assignment of a half interest in patents, and (second count) to recover on a $ 2,000 note. The cause was tried (September 12, 1938) before Judge Darius A. Brown, Kansas City, and at the close of plaintiff's case, defendant interposed what may be termed a demurrer to the evidence. The court stated that the demurrer was overruled, but upon ascertaining that defendant would not offer any additional evidence (on cross-examination defendant offered some exhibits), the court stated that he would let the demurrer ride till briefs were in.

While the cause was so pending, Judge Brown died. Thereafter the cause was submitted to Judge W. F. Woodruff on a transcript of the proceedings before Judge Brown. Judge Woodruff found for defendant and against plaintiff on both counts.

Plaintiff, who lived in Kansas City, was the owner of three patents pertaining to a refrigerating device. July 7, 1931, he and defendant, who lived in St. Louis, entered into a contract in which it was recited that the device was ready for production and marketing and that plaintiff was arranging the formation of a corporation "for operating under rights of said patents" and that defendant was "desirous of becoming interested" in the corporation to be formed, and it was agreed as follows:

(1) Defendant was to pay to plaintiff $ 20,000 -- $ 10,000 down, $ 2,000 in 30 days, and $ 8,000 on or before September 20, 1931.

(2) A domestic corporation was to be formed with capital stock of not over 100,000 shares "with a sales value starting at $ 25 per share," and "for each dollar" of the $ 20,000 paid to plaintiff by defendant, defendant was to receive "eighty cents worth of stock at the present sales price."

(3) Until the corporation was completed plaintiff was to place in escrow with the First National Bank, Kansas City, an assignment to defendant of a one-half interest in the patents "as security for the delivery of said stock," 80 cents worth to the dollar as stated in (2).

(4) The stock of the corporation was to be placed on the market, and plaintiff was to set aside 25% "of the net receipts" from the sale of stock to be paid to defendant until he "shall have received within one year from this date a sum equal to the total amount paid by him to first party (plaintiff) under the terms of this agreement."

(5) Defendant had the option, "at the time of payment of said receipts from sale of stock tendered him, of accepting the cash or of accepting an equal value in stock in said corporation at the present sale price in lieu of cash."

(6) Plaintiff had the option "of declining to accept the money ($ 8,000 to be paid on or before September 20th) and of carrying out of this agreement."

(7) As security for the payment to defendant of 25% of net receipts from the sale of stock, plaintiff was to place in the escrow 50% of his "51% control stock."

(8) Plaintiff was to pay defendant 6% "on the amount which represents the difference between the sum paid by second party (defendant), according to the terms of this agreement, and the amount received by second party from the receipts of said stock."

The escrow receipt, approved by signature of plaintiff and defendant, recited: "Assignment of patents is to be held by escrow agent until delivery is made of 50% of first party's control stock of corporation to be formed. Assignment is then to be returned to first party. The stock is to be deposited accompanied by a letter signed by both parties stating that the deposit consists of 50% of first party's 51% control stock of the corporation. Upon repayment to second party of funds advanced to first party, the stock is to be returned to first party" (Italics ours).

In addition to the contract, the assignment and the escrow, there was executed, on July 7, 1931, the $ 10,000 note sought to be cancelled, signed by plaintiff, payable to defendant, and due one year, and the $ 2,000 note, upon which recovery is sought, signed by defendant, payable to plaintiff, and due one year. And on that date, defendant delivered $ 10,000 to plaintiff, and plaintiff returned $ 2,000 to defendant. The notes and all the documents and transactions mentioned grew out of and pertained to the patents and the contemplated corporation.

The preliminary draft of the contract of July 7th was made in the office of the plant in Kansas City where machines containing plaintiff's patented device were being manufactured, and this draft was made principally by plaintiff's associate, Mr. Tutt, who "had considerable experience in drawing certain contracts." Plaintiff said that he thought he "ran the typewriter for" Mr. Tutt, and that after "we laid out a preliminary draft," defendant "came and went over it, changed it. There were some differences he wanted and he arranged to make the final draft."

So far as appears, neither party consulted counsel about the contract, but shortly after...