Vulcan Detinning Co. v. Am. Can Co.

• Decision Date: 02 July 1907
• Citation: 72 N.J.E. 387,67 A. 339
• Parties: VULCAN DETINNING CO. v. AMERICAN CAN CO. et al.
• Court: New Jersey Supreme Court

67 A. 339

72 N.J.E. 387

VULCAN DETINNING CO.

v. AMERICAN CAN CO. et al.

Court of Errors and Appeals of New Jersey.

July 2, 1907.

(Syllabus by the Court.)

Appeal from Court of Chancery.

Bill by the Vulcan Detinning Company against the American Can Company and others. Decree for defendants, and complainant appeals. Reversed.

See 62 Atl. 881.

Robert H. McCarter, Henry Wollman, and Edward S. Seidman, for appellant. Richard V. Lindabury, for respondents.

GARRISON, J. The bill of complaint in this case was dismissed by the Court of Chancery upon the sole ground that the complainant did not come into court with clean hands. The facts upon which this determination rests, as stated in the conclusions of the learned Vice Chancellor, are briefly these: The process which it was the object of the complainant's bill to enjoin the defendants from using or making public was the discovery of the Goldschmidt Bros, of Germany, and was as early as the year 1891 in successful operation at their factory in Essen, Germany, where it was guarded by its discoverers as a secret process. A large part of the tin scrap used by the Goldschmidts at this factory was shipped to them from New York by the firm of A. Kern & Co., of which Adolph Kern was the head. As early as 1892 the advantages of the erection of a detinning plant in this country were seen by Mr. Kern, and led him to enter into an extended correspondence upon the subject with the Goldsehmidts, which culminated in the submission to them of a proposition looking to the establishment of their process in this country under a corporate enterprise in which they should take stock. After considerable correspondence this proposition was definitely declined by the Goldsehmidts by a letter of May 7, 1897, the concluding paragraph of which is as follows:

"When one considers further that detinning is much dearer in America than here, as wages are higher and chemicals more expensive, it is clear that an establishment in America cannot compete with those in this country. I consider under these entirely changed conditions the establishment of a factory over there is a mistake and not able to exist, and consequently I will not take any part whatever in such an enterprise. Very respectfully, Th. Goldschmidt."

In the course of this correspondence Dr. Goldschmidt had in a letter of May 16, 1896, stated that his process was being used at Vlissingen, Holland, by a concern called the "Tinfabriek," which had been organized for this purpose by one Laernoes, who had clandestinely obtained the secret of the process. It does not appear that Kern ever communicated this piece of information to any one, except to Laernoes himself some two years later. From this time both of these detinning plants, namely, the Goldsehmidts at Essen and the Tinfabriek at Vlissingen, drew upon this country for their shipments of tin scrap, and as a great part of this refuse material was obtained by Kern from the tin can factories near New York the attention of the proprietors of these factories was also directed to the desirability of having a detinning plant of their own, if the process of its successful operation could be obtained. This community of interest brought together Kern and these manufacturers, and resulted in a tentative agreement for the promotion and financiering of such a project, provided the process used by their foreign customers could be obtained by negotiation. This matter was intrusted to Kern, who, knowing from his correspondence with the Goldschmidts that they regarded the enterprise as entirely unfeasible, went directly to Vlissiugen (of which the English name is Flushing), and there met Uaernoes, and ascertained from him the terms upon which the co-operation of the Tinfabriek could be had. This was in 1898. An option embodying these terms was secured by Kern, who, after visiting other factories at Kempen and Uerdingen, where less productive processes were used, went to Essen in a final endeavor to enlist, if possible, the Goldschmidts in the American venture, but without success. The net result, therefore, of Kern's visit to Europe, was his option with the Tinfabriek, which upon his return to New York he accepted in the name of A. Kern & Co., with whom it had been made, and later transferred to the Vulcan Metal Refining Company, a corporation of this state, and one of the underlying companies of the present complainant.

Under the terms of this executed option the Tinfabriek installed the process in question at two factories of the complainant in this country, receiving therefor in cash and capital stock a sum approximating $200,000.

To restrain the defendant Assmann (who was one of the original corporators who made this purchase) and the defendant corporation of which he is president from using or making public this process in violation of an alleged trust between Assmann and the complainant is the main object of the present bill.

From these circumstances and others detailed by the learned Vice Chancellor he reached the conclusion that the process used by the Tinfabriek was a fraud upon the Goldschmidts, of which Kern, by reason of his correspondence with Dr. Goldschmidt in 1896, had knowledge, and that when Kern in 1898 became the agent of the corporators of the complainant, through whom the Tinfabriek process was acquired, the prior knowledge Kern had thus casually obtained must be imputed to the complainant, under the decision of this court in the case of Willard v. Denise, 50 N. J. Eq. 482, 26 Atl. 29, 35 Am. St. Rep. 788. Having reached this conclusion as to the imputation of Kern's knowledge to the complainant, the Vice Chancellor further concluded that the effect of such imputation was to render the hands of the complainant unclean, within that maxim of equity by which a deaf ear is turned to a suitor in a court of conscience regarding a matter in respect to which his own conduct has been unconscionable.

In reaching this last conclusion the learned Vice Chancellor fell, we think, into the error of ascribing an unconscionable status to the complainant by force of a presumption of remedial law that in its most extreme application affects only the legal rights of parties and not at all their moral standing. That the knowledge possessed by an agent, but not acquired by him while acting for his principal, will under certain conditions be imputed to the latter, is in the nature of a presumption indulged in by courts in working out the rights of litigating parties. It is never a rule of evidence by which the actual possession of knowledge by the principal can in point of fact be established. On the contrary, an essential part of the presumption in question is that the principal is ignorant of the knowledge that has been casually acquired by his agent; hence, by the hypothesis, the principal is not only ignorant of the knowledge thus acquired, but, if such knowledge involves a fraud, the principal is innocent of such fraud. True, he may be bound by it in the sense that his legal rights may be determined with reference to the knowledge with which he is thus chargeable; but his conscience is void of offense, and hence it cannot with any propriety be said that his hands are unclean, for "unclean hands," within the meaning of the maxim of equity, is a figurative description of a class of suitors to whom a court of equity as a court of conscience will not even listen, because the conduct of such suitors is itself unconscionable—i. e., morally reprehensible as to known facts. The entire ineptitude of the presumption respecting imputed knowledge to relegate the complainant in the present case to this reprobated class must, we think, be apparent. As was said by the Kentucky Court of Appeals, speaking through Mr. Justice Burnam (afterward Chief Justice): "The maxim, 'One who comes into equity must come with clean hands,' is based upon conscience and good faith." American Association v. Innis, 109 Ky. 595, 60 S. W. 388.

Upon the ground stated we think that the learned Vice Chancellor committed error, without regard to the pertinence of the maxim of clean hands to the knowledge that he imputed to the complainant or to the propriety of such imputation.

Our conclusion as to this branch of the case leads to the reversal of the decree below, unless the respondents are entitled to hold the decree upon the merits of the case, which the court below, because of its ruling as to the complainant's status, did not find it necessary to pass upon, but which on this appeal counsel on either side have had the prevision to argue with great fullness.

The testimony taken in the case, although very considerable in extent, does not present any especial difficulty as regards the material facts. Stated succinctly and in unargumentative form, the facts as we find them to be from the testimony are these: Prior to 1898 the detinning of tin scrap had not been successfully carried on in this country, for the reason that the process by which such waste material could be so treated that both the iron and the tin of which it is composed could be separated and made commercially profitable was unknown here. Such a process was, however, in successful operation in Vlissingen, in Holland, by a concern called the "Tinfabriek." a fact that was known to shippers and dealers in tin scrap in this country, among whom were Adolph Kern, a shipper, and Franz A. Assmann, a manufacturer, and to others in the same line of business. These dealers also knew that detinning was carried on at Essen, in Germany; but Kern alone knew, from the private sources already referred to, that the Goldschmidts claimed that they were the originators of the process and that the Vlissingen concern had pirated their secret. The legitimate profits of detinning at a home plant the tin scrap that was thus being exported to Europe induced these American dealers in that material in the year 1898 to agree amongst themselves to subscribe the necessary capital to...