Court Opinion

ID: 8854833
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:26:16.152544+00
Date Added: 2024-06-11T17:05:37.343182
License: Public Domain

TAFT, Circuit Judge
(after stating the facts). We concur with the circuit court in the view that, by the recitals in the assignment of Jonathan Mills to the complainant, the Jonathan Mills Manufacturing Company, the latter was put upon inquiry as to the interest of the Smith Middlings Purifier Company and must be charged with notice of every fact with reference to the company’s interest in the patent which diligent and honest inquiry would have developed. It is well settled that, when a purchaser cannot make out Ms title but through a conveyance which leads to a fact, he will he affected with notice of that fact. When a defect in title is brought to his knowledge, no inconvenience will excuse him from the utmost scrutiny. He is a voluntary purchaser, and, having notice of a fact which casts doubt upon the validity of his title, the rights of innocent persons are not to be prejudiced through his negligence. Brush v. Ware, 15 Pet. 93, 112, 114; Oliver v. Piatt, 3 How. 333, 410; Cordova v. Hood, 17 Wall. 1. As said by Mr. Justice Strong, speaking for the supreme court in the last-named case (page 8):
“Wherever inquiry is a duty, the party hound to make it is affected with knowledge of all which he would have discovered had he performed the duty. Means of knowledge, with tlie duty of using them, are, in equity, equivalent to knowledge itself.”
The chain of title disclosed by the patent office records, from Jonathan Mills, the original patentee, to George T. Smith, indicated an outstanding equity of some kind in Mills, and an assignment *502from Mills to the complainant was necessary to clear any title which it might acquire from Smith. The Mills assignment was, therefore, in the chain by which complainant must assert ownership, and it was charged with notice of the statement therein that the patent was supposed to be owned by the Smith Purifying Company. Indeed, his assignment was made directly to complainant, and authorized it to procure the patent from the company or its assigns. The company, therefore, necessarily, had actual as well as constructive notice of its contents. Now, it is true that the company referred to by Smith was the Smith Purifying Company, while the company which really owned the patent was the George T. Smith Middlings Purifier Company. We cannot suppose, however, that, in the trade, any mistake could have arisen from this difference. Complainant has not called its officers to testify as to what knowledge they had of the existence or nonexistence of a company by either name, or what efforts they made to identify the Smith Purifying Company with an existing company. Even Wardlow, complainant’s agent in the purchase, has not been called to state what his knowledge or inquiry was in respect to the matter, although he is the person upon whom complainant relies as the innocent purchaser.
It is common knowledge that, in a manufacturing business of this character, the number of all the corporations engaged throughout the country is- limited, and it is a matter of no great difficulty to ascertain the name of every one of them. Certainly, had complainant and Wardlow made inquiry, if they did not already know it, they would have learned that there was such a company as the George T. Smith Middlings Purifier Company in Michigan, and the slightest diligence would have led to inquiry of those who represented it (it was then in the hands of receivers) to learn whether it claimed any interest in the patent. Instead of this, Wardlow and complainant contented themselves with the execution by George T. Smith of the so-called “warranty affidavit.” The affidavit, instead of aiding complainants’ case, casts suspicion on it, especially when Wardlow is not called to give evidence of his purpose in taking it, or his good faith in the transaction. Kirby v. Tallmadge, 16 Sup. Ct. 349. Inquiry of Smith, from whom the purchase was to be made, certainly did not fill the measure of proper diligence; - for he was necessarily interested to establish a clear title in himself. If the Smith Company had any interest in the patent, as Mills suggested, then it was apparent that George T. Smith, who held the legal title, was trustee for the company. It is well established that one who has reason to believe that another is offering property for sale, which he holds either as trustee or agent for a third person, cannot become a bona fide purchaser of the property for value by reliance on the statements of th,e suspected trustee or agent, either as to his authority, or as to his beneficial ownership of the thing sold. In such a case, inquiry must-be made of some one other than the agent or trustee, — of some one who will have a motive to tell the truth, in the interest of the cestui que trust or principal. Trust Co. v. Boynton (decided by this court *503at the present term) 71 Fed. 797. If, then, the purifier company was the equitable owner of the patent in controversy, we are fully justified in x>resuuiing, from the circumstances, that Wardlow and the complainant might easily have found it out from the receivers of the company, who were then in charge of its affairs and assets.
It remains to inquire whether the company was the real owner of the patent, as between itself and George T. Smith. The only evidence on this subject which defendant introduced was the decree of the circuit court of Wayne county, Mich., and Smith’s assignment in obedience to it. Certainly, it cannot be denied that Wardlow and the complainant are privies to Smith, and are bound conclusively by any decree rendered against him, in reference to this patent, and in favor of the purifier company or its assigns, upon proceedings begun before they acquired title from Smith. This need not rest alone on the naked doctrine of lis pendens, but it grows out of the fact that Wardlow and complainant were charged with notice of the litigation, because diligent inquiry in respect to the title suggested by' Mills’ assignment would have made them actually' aware of it. But it is said that the bill upon which the decree was founded did not embrace the Mills patent, and that, though the court had personal jurisdiction of the parties, it had no power to make a, finding or order concerning something not submitted to its judicial cognizance by the pleadings; and this fact is also said to free complainant from the burden of notice that the patent here in suit was in controversy there, because it and its grantor acquired title after the pleadings were made up, and before hearing or decree. The general principle contended for by complainant, that a decree must he responsive to the issues made by the pleadings, need not be disputed. Its application and its limitations are clearly set forth by Mr. Justice; Brewer in delivering the opinion of the court in Reynolds v. Stockton, 140 U. S. 208, 265, 11 Sup. Ct. 778. But the record of the Michigan suit presents no such difficulty.
In general- terms, the bill was filed by the receivers of the purifier company to compel Smith to assign to the company' all the patents and patent ini ('rests which he had agreed to assign to it by a contract made at the time of its organization, and also to compel a reconveyance to it of all its patents and patent interests which through (he fraud of Smith, as its president, and his wife, Eliza B. Smith, and one ITummer, had been conveyed, without consideration, first to Eliza B. Smith, and then by her to Plummer. The contract between Smith and the company required him to convey to it all the patents for flour milling which he should thereafter “obtain” or “procure.” If, as the decree finds, Smith held title to the Mills patent in trust for the company, he must have procured it after the date of the contract, in 1878, because the patent w'as not applied for until 1882; and therefore the jurisdiction of the court was invoked to compel the assignment of this patent by Smith, in accordance with his contract. Smith was required by the bill to set forth, in connection with that contract, all patents in which he had an interest. But it is objected that the word “obtain” refers *504only to such patents as Smith should obtain as inventor, and not to those he might obtain by assignment. Some , of the language used in the decree might justify this limitation, but the word is used in another part of the bill to include, not only those obtained by him as inventor, but also as joint inventor with another, and also one obtained by him as assignee. In support of the decree, and the court’s jurisdiction, an ambiguous description of the subject-matter should, it would seem, receive that construction which will sustain them both.
But the other aspect of the bill — that relating to the fraudulent assignments to Eliza B. Smith and to Plummer — very clearly embraces, by general language, the patent here in suit. The fraudulent assignment embraced, not only many patents by name and number, but also all other letters patent relating to the manufacture of middlings purifiers, centrifugal reels, interelevator reels, or roller mills and any inventions made by said George T. Smith, which said company then owned or controlled, or in which it had any joint or other interest. The.last two relative clauses modify, not only Smith’s inventions, but also the words “all other letters patent,” etc., and therefore, by this assignment, passed to Eliza B. Smith any patent relating to centrifugal reels owned or controlled by the purifier company; or in which it had a joint or other interest. The patent in suit related to a centrifugal reel or bolt, and, as complainant had reason to believe from Mills’ assignment, this company had the equitable title to it. The bill was filed to vest title in the receivers of the company of all the patents passing by the assignment to Eliza B. Smith and to Plummer. Hence, it was within the jurisdiction of the court, as limited by the four corners of the bill, to make a finding as to what passed by the fraudulent assignment and to order an assignment of the same to the receivers. The decree found that the Mills patent was one of these, because it found it to belong to the company, though in George T. Smith’s name. Smith and his wife were required by the bill to discover and specifically set forth all the patents claimed by them to be included in the assignment made to Eliza B. Smith and by her to Plummer. The record does not show Smith’s answer, and, if necessary, we should presume, in support of the validity of the decree, that the Mills patent was one of those discovered by George and Eliza B. Smith in their answer. But, whether it was so or not, the prayer for discovery in the bill gave the court jurisdiction to act with respect to any patent within the description of the prayer- for discovery which the evidence disclosed, and to find that it belonged to the company, and to order its assignment to the receivers. We do not doubt that the decree with reference to the Mills patent is responsive to the issues made by the bill, and that it was coram jud-ice.
Objection is made to the mode in which the Michigan decree was proven, because it was not certified in accordance with the act of congress, but only by certificate of the register of the court. It suffices to say that, however formidable this objection might have *505been if seasonably made in the circuit court, it cannot prevail here when made for the first time. Not only did complainant not make any such objection in the court below, but it itself introduced a record of the same cause, with the same decree, certified in the same way, in order to show the pleadings which the defendant had not offered. As the Michigan decree and the assignment in accordance therewith carry all of George T. Smith’s title to the receivers of the George T. Smith Middlings Purifier Company, the title of complainant to the patent sued on fails, and it becomes unnecessary to consider other questions raised as to the title, or those which have been presented on the merits of the patent and its infringement.
The decree of the circuit court is affirmed, with costs.