Underhill v. Schenck

• Decision Date: 01 April 1924
• Parties: UNDERHILL v. SCHENCK et al.
• Court: New York Court of Appeals Court of Appeals

238 N.Y. 7

143 N.E. 773

UNDERHILL

v.SCHENCK et al.

Court of Appeals of New York.

April 1, 1924.

Action by John G. Underhill against Joseph M. Schenck, Richard G. Herndon, and others. From a final judgment of the Special Term of the Supreme Court (201 App. Div. 46,193 N. Y. Supp. 745), the second named defendant appeals with notice of intention to bring up for review a judgment of the Appellate Division modifying and as modified affirming by a divided court an interlocutory judgment of the Special Term in favor of plaintiff.

Final judgment reversed, and interlocutory judgment modified and affirmed.

See, also, 205 App. Div. 162, 182,199 N. Y. Supp. 606, 611.

Appeal from Supreme Court, Appellate Division, Second Department.

David Vorhaus and Elijah N. Zoline, both of New York City, for appellant.

John W. Hogan, of Syracuse, and Paul Bonynge, of New York City, for respondent.

CARDOZO, J.

Plaintiff bought from Jacinto Benavente, a Spanish playwright, in return for a promise of royalties, the right to translate the play La Malquerida, and to produce it or cause it to be produced upon the English-speaking stage. The play when rendered into English was given a new name, the Passion Flower, which is not a translation of its title in the original. A contract followed between plaintiff, described as the proprietor, and the defendant Herndon, described as the manager. By this contract dated January 4, 1920, the proprietor conferred upon the manager the right to produce the translated play in the United States and Canada under the title of the Passion Flower, with an option to acquire a like right in the kingdom of Great Britain and Ireland. The manager agreed to pay to the proprietor percentages of the gross receipts varying from a minimum of 5 per cent. to a maximum of 10. There is an express provision ‘that no rights to the production of the play in motion pictures are conveyed by this agreement.’

The play came out upon the stage, and was at once a great success. Translator and manager were anxious to extend the field of triumph and of profit. They turned in thought to motion pictures, but the difficulty was to know to whom the motion picture rights belonged. Motion pictures, if produced, would be in competition with the spoken play, and competition with the spocken, play, though the translator were to allow it, might be unfair to the author, Benavente. The situation was complicated by the fact that as early as 1913 Benavente had copyrighted in the United States the Spanish version of his drama. In this predicament translator and manager made a provisional contract, conditioned upon Benavente's approval. They agreed, subject to that approval, to hold the motion picture rights for joint account, the profits of the enterprise to be subject to a prescribed division. This agreement proved abortive, for Benavente's consent was not forthcoming. He had deprived himself of the ability to give any consent that would be effective, by conveying his own interest in the world motion picture rights to one gonzalez. Plaintiff on learning this gave notice to Herndon that for failure of the condition precedent attached to its delivery the contract would be canceled. Even before this notice Herndon had already sought out Gonzalez, and was treating with the new owner for an assignment to himself. He received such an assignment on June 5, 1920, simultaneously almost with notice of the failure of the contract; and without a word to the plaintiff proceeded to deal with the assignment as his own. He found a purchaser of the rights in the defendant Schenck. The contract between them (dated October 13, 1920) is in writing, and its provisions are important. Herndon, described as the owner, ‘does give, grant, bargain, sell, assign, transfer, and set over to the purchaser, the full, free, and unincumbered right, title and interest in and to the motion picture rights in the play of which Jacinto Benavente is the author, entitled La Malquerida, as well as in and to the English translation thereof made by John G. Underhill, entitled the Passion Flower, the titles and the theme thereof.’ The purchaser agrees to pay to the owner $25,000, the receipt of $15,000 being acknowledged, and the balance, $10,000, to be paid within thirty days. ‘The owner represents that he is the sole owner of the motion picture rights in and to the said play throughout the entire world, and has full right and authority to grant the right herein contained,’ and also undertakes to indemnify the purchaser against the consequences of the violation or alleged violation of any copyright as the result of the use of the play in a motion picture version. Within 60 days he is to deliver to the purchaser the written consent of Underhill (the plaintiff) to the use of the title, the Passion Flower, and also declarations confirmatory of his ownership, to be signed by Benavente and Gonzalez. If these are not delivered, the purchaser is to have the privilege of terminating the contract and receiving back from the owner the payments made thereon.

Underhill would not consent. Schenck would not desist. He was spurred on by Herndon, who was bound by warranty of title whether Underhill approved or not. The pictures were produced upon the screen in April, 1921. At that time this action had already been begun against Herndon, Schenck, and Benavente. There followed in June, 1921, an interlocutory judgment. The name or title the Passion Flower was adjudgedto belong to the plaintiff to the exclusion of every one else; the right to translate into the English language the play La Malquerida and to produce it on the stage was adjudged to be his, and the reproduction of the play in motion pictures with lines, titles, or captions in the English language was adjudged to be unlawful, unless with his consent; all the defendants were restrained from advertising or exhibiting a motion picture reproduction in violation of the plaintiff's rights as thus established and declared; the defendants Herndon and Schenck were adjudged to be liable, not only for all damages, but also for all profits made by them or either of them; and a referee was appointed ‘to take and state an account of said profits and of the plaintiff's damages in the premises.’ This interlocutory judgment was modified at the Appellate Division by narrowing to some extent the scope of the injunction, and as so modified affirmed by a divided court. The accounting has now ended in a final judgment against Herndon and Schenck for the profits of the enterprise. Herndon has been held for $22,500 with interest from January 24, 1921, the full amount ($25,000) paid to him by Schenck, less broker's commissions of $2,500. Schenck has been held for $1,362.41 with interest from September 12, 1922, the net profits of the pictures after charging the $25,000 paid to Herndon as one of the expenses of production. The present appeal which comes to us under Civil Practice Act, § 590, thus confining our review to the interlocutory judgment, is by Herndon alone.

[1][2] A challenge to the jurisdiction of the state courts confronts us at the threshold. The right protected by the injunction is secured to the plaintiff, we are told, by the Copyright Act of Congress (U. S. Comp. St. §§ 9517-9524, 9530-9584), if, indeed, it belongs to him at all, and it must be vindicated, if at all, by the judgment of the federal courts (Judicial Code, § 256 [U. S. Comp. St. § 1233]). The Appellate Division avoided this objection, or attempted to avoid it, by directing the injunction to the reproduction in the form of motion pictures, not simply of the copyrighted play, but of the copyrighted play with the uncopyrighted title. So subtle a distinction is an uncertian guide to judgment. We prefer, in upholding jurisdiction, to build upon a broader basis. The plaintiff does not rest his claim upon the infringement of any right of property secured to him by copyright in accordance with the act of Congress. One will read his complaint from the beginning to the end without finding an allegation that a copyright is his. The translation, for all that the complaint discloses, may remain unpublished in his desk. The fact of copyright and publication does, indeed, creep out in the course of the trial, but only incidentally and casually. What the plaintiff complains of in his controversy with Herndon is the breach of a duty attaching by implication of law to a fiduciary relation which has its origin in contract. Herndon is his licensee under covenant to produce the play upon the stage, the receipts to be divided in designated proportions. This fiduciary relation charged the fiduciary with a duty to refrain from forms of competition involving unfair diversion of royalties or profits. The position of such a one is analogous in this respect to the position of a partner. What he gains from a competing business, if the competition is so close as to transcend the bounds of fairness, he is not to keep for himself, but is to surrender to the joint adventure. Trimble v. Goldberg, [1906] A. C. 494, 500; Aas v. Benham, [1891] 2 Ch. D. 244, 255; Latta v. Kilbourn, 150 U. S. 524, 549, 14 Sup. Ct. 201, 37 L. Ed. 1169;Beatty v. Guggenheim Exploration Co., 225 N. Y. 380, 386,122 N. E. 378. Cf. Cescinsky v. Routledge & Sons, Limited, [1916] 2 K. B. 325. This duty is quite apart from the duty of reparation that rests upon the infringer of a copyright. It would exist though no copyright law had ever been enacted. It has its origin, not in a right of property, but in a contract or relation. The author who suffers infringement of his copyright at the hands of a licensee may count upon the infringement as a tort, and seek redress under the statute by action in the federal courts. But that is not in all circumstances the only remedy available. If the same act is not merely an invasion of the statutory right of property, but is also the breach of a contract or the abuse of a relation, he may count upon...