Court Opinion

ID: 6580113
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:37:36.658721+00
Date Added: 2024-06-11T15:57:08.104558
License: Public Domain

The opinion of the court was delivered by
Redfield, J.
Certain persons, becoming owners of a marble quarry in Rutland, proposed to form themselves into a corporation under the statute, to work the quarry. Before any corporation was formed, on the 9th December, 1867, three of such owners contracted with the Windsor Manufacturing Company to purchase a stone channeling machine, at the agreed price of $6000. In this contract, said company agrees “ to defend the patent-right, in case any litigation is commenced, and to save them harmless from loss, in case any damages are sustained by means of infringements of other patents.” This contract is signed by the three owners of the quarry and by “ E. G. Lamson, Pres’t.” The bill alleges that the purchase was made in the interest, and in behalf, of all the said owners of the quarry, and for the corporation then about to be formed, which was to receive the machine and pay for it. Such owners of the quarry formed an association under their hands and seals, on the 20th February, 1868. Before any stock was issued or further orgaization into a corporation, on the 1st of April, 1868, another contract, reciting that such owners of the quarry (naming all except Bennett), “ have this day bought of E. G. Lamson, owner of stone channeling machine, one of said machines.” In this contract, Lamson and the company agree to defend the patent-right, and save them harmless, &c. The bill avers that both contracts were made in behalf, and-inured to the benefit, of the corporation which was intended to, and soon after did, work the quarry. The owners organized under a special charter granted by the legislature in 1867, the name of which was changed to Eureka Marble Company *447by the legislature in 1868. This corporation received and paid for the machine. The bill further alleges, that at the October session of the circuit court of the United States for this district, at the suit of the “ Steam Stone Cutter Company,” a decision was had enjoining said Lamson and the Windsor Manufacturing Company, and forbidding the manufacture or sale of such machines, as an infringement of the right of said Steam Stone Cutter Company ; and a master was appointed to take an account of the profits, &e., and the orator corporation was also enjoined at the suit of the same company.
The defendants demur to the bill, and for causes state first, that the several stockholders are improperly joined with the corporation ; whereas the injury, if any, has accrued to the corporation alone. The stockholders in a corporation, as a general rule, can act only through the corporation ; and all causes of action are to be prosecuted in the name of the corporation. Hence, stockholders cannot, ordinarily, be properly made parties, but the suit should be in the name of the corporation alone. And when improper parties are joined as orators, the objection may well be taken by demurrer. There are exceptional cases where the stockholders, or even a minority of them, may bring a bill against the corporation and others confederating with its officers in some wrong. 2 Story Eq. Jur. § 1252. But the defendants in this case contracted with, and made covenants to, certain persons interested in the quarry, who merged their interest in the corporation after-wards created, in which they became shareholders. Lamson and the Windsor Manufacturing Company covenanted, under seal, to them, “ to defend the patent-right, and save them harmless from loss,” &o. They alone, at law, could sue upon that contract. The machine being delivered to and paid for by the corporation, thus fulfilling the contract that these owners had entered into, and with their consent, the corporation become the owners of the machine, and, beneficially, the assignee of the contract. In such cases, the assignor is a proper, and often a necessary, party. “ In cases, therefore, where an assignment does not pass the legal title, but only the equitable title, to the property, it is usual, if not indispensable, to make the assignor holding the legal title, a *448party to the suit.” Story Eq. Pl. § 153. “ If a bond or judgment be assigned, the assignor, as well as the assignee, must be a party.” Mitf. Pl. 179. The averment in the bill, “ that said machine was bought for the use, and was to become the property, of said association,” and that “ said Lamson and the Windsor Manufacturing Company well understood that the covenants contained in said' bontracts were to inure to the benefit of the corporation thereafter to be organized,” and that said machine was taken and put to use and paid for by the corporation, would, if true, make the corporation the owner of the machine, and, beneficially, the owner of the contracts, with the right, at law, to enforce the covenants therein of the defendants. The parties to such contracts, although the whole equitable ownership has become vested in the corporation, we think, may properly be joined as orators with the corporation.
The 2d, 3d, 4th, and 5th special causes of demurrer, are based upon the incongruity and impropriety of joining the two defendants The contract of December 9, 1867, purports to order a machine of the Windsor Manufacturing Company, of a specified kind and price, to be delivered at Windsor, by the 1st of April, 1868; $1000 to be paid on delivery, the residue by note on time. The company agree to “ defend the patent-right, and save them harmless from loss,” &c. The bill alleges that the machine was constructed, and ready for delivery on the day named in the contract ; and on that day, April 1st, 1868, for further assurance, all the owners of the quarry, except Bennett, took a. further guaranty under seal, signed by Lamson and Windsor Manufacturing Company by E. G. Lamson, Pres’t, reciting that “ W. & J. G. Flint,” (and seven others named) “ have this day bought of E. G. Lam-son, owner of stone channeling machine, one of said machines, built by the Windsor Manufacturing Company, in accordance with the contract made and signed December 9th, 1867 ; and the said E. G. Lamson has received $6000 in payment for said machine No. 6.” The writing further recites, that Lamson, “ on his part, in said sale, agrees that the parties shall have the right to run said machine, and in case of any litigation, * * * said Lamson and the company agree to defend and save harmless,” &c. And the *449company agrees to furnish repairs, &c. The two contracts constitute a singular piece of mosaic, with some joint and some,several covenants of each party ; both executed on the part of the company, by E. G-. Lamson, President. The bill avers that Lamson represented that he was the original inventor of the machine, and that the' company of which he was agent and president, was manufacturing them for sale. It is not to be presumed that these contracts were purposely drawn in a manner so involved as to puzzle any pleader in adapting process to their enforcement; but rather that Lamson, being owner of the patent, and being president and principal in ownership and management of the company, acted, generally, for and in behalf of the company in selling its machines, and that he sold this machine for the company; and in the last contract, he added his personal guaranty that he would defend the patent. The stipulation in the last contract, by Lamson, that such purchasers “ should have the right to run the same machine,” is in the same sentence with the principal guaranty where both Lamson and the company are guarantors, and is merely a repetition of what is always implied by the sale. There is ever an implied warranty of title in a sale. And a title implies a right to use. The principal may maintain an action in his own name, often, on a contract made in the name of the agent, and may become responsible for contracts of an agent made in his own name. The stipulations of Lamson and the company, are so intertwined, and overlaid each other, that the orator might, with plausibility, sustain equity jurisdiction, on the ground of avoiding multiplicity of suits. But there are many cases where defendants have not a co-extensive common interest or relation, and are properly joined as defendants. “ It is not indispensable that all the parties should have an interest in all the matters contained in the suit; it will be sufficient if each party has an interest in some matters in the suit, and they are connected with the others.” Story Eq. Pl. § 271 a.
The third cause of demurrer, that there has been no cost or damages awarded for infringement of the patent, and hence no *450breach of the contract to defend such suits and indemnify the parties against loss, is no sufficient ground of demurrer to the whole bill. If the joint relief sought in the special prayer cannot be awarded in the form asked, if the orators are entitled to relief upon the grounds alleged, the general prayer is sufficient to enable the court to award relief adapted to the case; for that has been held by the greatest chancellors to be a most “ effectual prayer,” when the case established a right to relief. The bill alleges that this Lamson machine has been adjudged an infringement of another’s right to the patent, by the circuit court of the United States ; asks that the defendants account for all gains ; and that an injunction issue, &c. It is also alleged that the same party has procured an injunction against the orator corporation, based on the same allegations as against these defendants. But no damages have been assessed or paid. And non constat that the orators will not be protected from all loss or damages by reason of any infringement of the patent; or that the defendants may not, ultimately, vindicate their right to the patent. The orators saw fit in the purchase of the machine, to take covenants of indemnity “ to defend the patent-right and save them harmless from loss, in case any damages are awarded by any legal courts for infringements on other patents, and legal costs; and step in and defend the suits.” There is no allegation that these covenants have been broken. We think the last contract is not a substitute for the other, but rather in addition to it, and that Lamson, being the owner of the patent, joined in the sale ; and in the contract of the first of April, he named himself as the vendor, and personally covenanted as to title, as the company, impliedly, had done in the contract of the 9th December, and that both defendants should be held as guarantors of title.
The decree of the court of chaucery is reversed, and cause remanded, with directions to refer the same to a master to take and state the account of all necessary damage to the orators, by reason of the loss of the use of said machine during the time its use was suspended at the request of the defendants, or in obedience to said writ of injunction; and make decree for the orators for the *451same. The defendants have leave to withdraw the demurrer and replead, by paying costs, and taking none during the pendency of the demurrer.