Opinion
March Term, 1903.
Elbridge L. Adams, for the appellant.
Abraham Benedict, for the respondent.
The facts, so far as they bear upon the questions involved upon this appeal, are not in dispute. The plaintiff, who was an inventor and expert machinist, together with two other men, Browne and Levis, about the year 1895, organized the defendant corporation, with a capital stock of $200,000. Sixty thousand dollars of the paid-up capital stock of the corporation was transferred to those three individuals, upon the express consideration that they would transfer to it their business and all the machinery and tools owned by them and used in connection therewith, which they did, and also in consideration of their agreement to assign and transfer a certain patent for improvements in paper box machines which the plaintiff had invented, as well as all future improvements, inventions and patents which might be invented by the plaintiff, relating to the business of the corporation, during the time the plaintiff remained in its employ. After the organization of the defendant, and after the agreement referred to had been made by the plaintiff and his associates, he entered into the employ of the defendant at a considerable salary, and devoted his time largely to inventing new machines or devices for the better and more profitable conduct of its business; and while thus in the employ of the defendant he made the inventions which are the subject of the patents referred to in the judgment appealed from.
Under this arrangement the plaintiff continued in defendant's employ for about three years and until about March, 1898, as did also Browne who assisted him in organizing the defendant, when both resigned from their positions with the defendant, and organized or entered into the employment of a rival corporation in the city of New York. During the three years the plaintiff was thus in the employ of the defendant he invented certain new and useful improvements of value to the defendant in its business, which were then or afterwards patented, and which are the same described in the judgment. Plaintiff's inventions made during said three years while in defendant's employ, whether they had ripened into patents or were merely in the form of applications for patents, although under the express agreement made between the plaintiff and defendant they belonged to and were its property, had not been transferred or assigned to it, and the defendant did not have the legal title thereto, but they stood in the name of the plaintiff. Upon leaving the defendant's employ the plaintiff assumed to assign and transfer them to other parties without any consideration being paid therefor, in disregard of defendant's right and in violation of the agreement which he had entered into with it.
Shortly prior to September 5, 1898, the date of the contract in question, plaintiff's venture in the city of New York having proved unsuccessful or unsatisfactory, he returned to the city of Rochester and again sought employment with the defendant. He acknowledged that he had violated his agreement; that he had assumed to transfer the inventions made by him and which of right belonged to the defendant, to other parties, but stated in substance that the assignments made by him had not been recorded in the Patent Office; that the purpose for which such transfers were made had failed; that there was no consideration for the same, and stated or expressed the opinion that the respective assignees would reassign the same to him.
The contract in suit was then executed. The purpose for which it was made is perfectly plain. The defendant expected that by the assignments from the plaintiff, which the contract provided for, it would secure the legal title to the property of which it was then the equitable owner, and if that could thereby be accomplished it was willing to give employment to the plaintiff for at least one year, and a one-quarter interest in the property which it then owned as against him, when such term of employment should end. The plaintiff on his part expected to and did secure employment, and he also expected to secure a one-quarter interest in his inventions upon the termination of his employment, provided the assignments executed by him to the defendant were effectual for the purpose intended. We may not assume that it was the intention of the parties that the defendant should give to the plaintiff an interest in this property, in case it turned out that he was powerless to perfect defendant's legal title to the same, or to do any other act in respect to such property which would be of advantage to the defendant. This was exactly the situation which developed. The defendant discovered that the assignments made by the plaintiff, in violation of his agreement with it, had been recorded in the Patent Office by the respective assignees; that they each claimed to be the owner of the patents or inventions so assigned to them, and denied that the plaintiff or the defendant had, as against them, any right, title or interest in or to the same. Therefore the defendant could not obtain the legal title to the inventions in question under the contract which it had executed, or by means of anything the plaintiff might or could do in the premises.
Thereupon, and in October, 1898, the defendant commenced an action in the Supreme Court, in which the plaintiff and all his alleged assignees were made defendants. It was alleged in substance in the complaint that the defendant (the plaintiff in that action) was the owner of the inventions in question, by reason of the agreement made at the time of the organization of the defendant corporation between it and this plaintiff, and appropriate relief was demanded. In May, 1899, the action was tried and resulted in a judgment which adjudged, in substance, that this defendant (the plaintiff in that action) was the equitable owner as against the defendants, including this plaintiff, of the inventions in question, and the judgment required the defendants in that action to assign to this defendant all the interest which they or any of them had in or to said inventions. From that judgment an appeal was taken to the Appellate Division, and the judgment was in all things affirmed. ( Rochester Folding Box Co. v. Brown, 55 App. Div. 444.) From such judgment of affirmance an appeal has been taken to the Court of Appeals, and is now pending.
Thus it has been judicially determined that at the time the contract in suit was executed, the plaintiff had no interest in the inventions in question which he could assign or transfer to the defendant. It has been judicially determined that at that time the defendant was the owner of such inventions, and that it, as matter of right, was entitled to an assignment by the plaintiff and his assignees of any and all interest which they or any of them claimed to have therein, wholly independent of the contract in suit, to the end that the defendant might thus acquire the legal as well as the equitable title to the property which it owned. Plaintiff's assignments of the invention in question to the defendant amounted to nothing; were no better than so much blank paper, because, as determined by the judgment of the court, he had nothing to assign; and such assignments were equally ineffectual to perfect the legal title of the defendant in and to such inventions. What was expected to be accomplished by such assignments failed, and the defendant was, therefore, required to resort to a suit in equity to accomplish the purpose for which the contract in suit was made.
It should be stated in this connection that at the time of the execution of the contract in question the legal title to a one-half interest in one of the patents in suit was in plaintiff's name, the other one-half interest having been assigned by him to Browne's wife. Such assignment, however, was made without consideration, and that patent, like all the others involved, in fact belonged to the defendant, by virtue of the agreement made when the defendant corporation was organized as was determined by the former judgment of this court.
Upon the foregoing state of facts, we think it must be held that the agreement made by the defendant to assign to the plaintiff a one-quarter interest in the inventions and patents described in the judgment was wholly without consideration and void. The proposition cannot be more pointedly put than by saying that at the time the contract was made which provided for an assignment by the plaintiff to the defendant of such inventions, he had nothing to assign; owned no inventions or patents and had no interest in any. He was not in a position to do any act in connection with the subject-matter of the contract, which could be of benefit to the defendant, that he was not legally and morally bound to do independent of such contract, and, as matter of fact, the defendant was obliged to accomplish through other means the purpose for which the contract was executed, to wit, the bringing and successfully maintaining an action in the Supreme Court, and which could not have been accomplished in any other manner, so far as the plaintiff was concerned.
In full compensation for his services for at least one year the plaintiff was to and did receive from the defendant thirty-five dollars per week. For vesting in the defendant his interest in the inventions in question the plaintiff was by the terms of the contract to be reinvested with a one-quarter interest upon leaving the defendant's employ. He had no interest in such inventions which by any act of his he could vest in the defendant; he did not even have the legal title to them, as it was supposed he had when the contract was executed, and so by his assignment the defendant obtained nothing, and could not obtain anything, by virtue of that part of the contract which this action was brought to enforce.
It is claimed, however, and it is stated in the opinion of the learned trial court to be a fact, that it was a part of the agreement between the parties, although in no manner alluded to or expressed in the written contract, that the defendant should commence an action or actions to enforce its rights in and to the patents or inventions in question, acquired by it by virtue of the original agreement, and "that the plaintiff would be a witness for the plaintiff (this defendant) in the action or actions which were to be brought, and testify and give evidence in behalf of the Folding Box Co. for the purpose of recovering the patents in furtherance of their agreement;" and it is urged that as the plaintiff was a witness and testified for and on behalf of the defendant in the action brought by it in which it was successful, such agreement on the part of the plaintiff furnished a sufficient consideration to support the contract in suit. We think it ought not to be held that such an agreement, if made, was sufficient as a consideration to render the contract valid. The defendant knew, independent of any information which it obtained from the plaintiff, that it was the equitable owner of the inventions and patents in question, by virtue of the agreement which had been made when the corporation was organized, and which induced it to transfer to the plaintiff and his associates $60,000, par value, of its full paid capital stock. It, therefore, knew that the plaintiff had no right to sell or transfer such inventions, and that if he had done so it was in fraud of its rights, and when informed that such transfers had been made by the plaintiff without consideration, the defendant had a right to assume that he would testify to the truth about the transaction, and it had the legal right to compel him to do so. He ought not to be heard to say that it was necessary for the defendant to promise him a certain interest in its property for the purpose of inducing him so to do. If it was, in fact, the understanding of the parties that the plaintiff should have an interest in such property, as a condition of giving testimony which would enable the defendant to establish its title thereto in an action brought for that purpose, such intention or agreement is contrary to public policy and ought not to be given force or effect by any court. The agreement as claimed to have been made did not involve the expenditure of any time or the incurring of any expense by the plaintiff. He was in defendant's employ when the action was commenced and tried; he was paid a weekly salary, and by the contract in suit had agreed to work for the defendant "faithfully and to further its interests in all ways."
The agreement which it is claimed was made between the parties, although not expressed in the written contract, and which it is now urged furnishes an adequate consideration therefor, is repugnant to every instinct of propriety and justice, as it in effect provides for pay as a consideration for giving evidence in an action which it is agreed shall be brought.
In the case of Lyon v. Hussey (82 Hun, 15) the rule is concisely stated in the head note as follows: "A contract to furnish evidence to establish the claim of one of the parties to an action about to be commenced is against public policy and will not be enforced."
Justice VAN BRUNT, in writing the opinion for the court, said: "But it may be proper to call attention to the fact that part of the contract, damages for the breach of which this action was brought to recover, was to furnish evidence to establish the claim of the defendant in a litigation to be commenced. It is clear that such a contract is against public policy. The recognition of contracts of this character would be the introduction of all sorts of fraud and deception in proceedings before courts of justice, in order that parties might receive compensation out of the results of their successful manufacture of proofs to be presented to the court, thus holding out a premium upon subornation. The mere statement of the proposition seems to show that such a contract could never be recognized in any court of justice."
We think the language of the learned justice which we have quoted is especially applicable to the case at bar.
Having concluded that that part of the contract which this action was brought to enforce is void because without consideration, we deem it unnecessary to consider any of the other questions involved upon this appeal.
It follows that the judgment should be reversed and a new trial granted, with costs to the appellant to abide event.
SPRING, WILLIAMS and HISCOCK, JJ., concurred; NASH, J., not sitting.
Judgment reversed and new trial ordered, with costs to the appellant to abide event upon questions of law only, the facts having been examined and no error found therein.