Opinion
No. 27833.
May 27, 1929. Suggestion of Error Overruled September 23, 1929.
WITNESSES. The evidence being relevant and material, witness is not privileged to refuse to disclose trade secret.
The defense to action on contract being worthlessness of and fraudulent representations in respect to plaintiff's secret formula for making paper, he, on cross-examination, may not refuse to disclose the formula, on the ground that it constitutes a trade secret which, if disclosed, would render it valueless to him; privilege of a witness to refuse to disclose trade secrets when disclosure would depreciate the value not being absolute, but qualified, and not availing where the secret is relative to an issue being tried and its disclosure is essential for the issue to be correctly determined and justice administered accordingly.
APPEAL from chancery court of Scott county, HON. A.B. SCHAUBER, Special Chancellor.
R.H. and J.H. Thompson, of Jackson, for appellant.
Complainant's case must stand or fall on the question of whether or not his alleged secret process is what he claims it is. The burden of proof was on the complainant to make out his case by a preponderance of the evidence. When complainant refused to state his process to the court, his bill should then and there have been dismissed. Complainant's cause of action was predicated on the allegation that his formula was of great value, exceeding one million dollars; he alleged this value as the foundation of his cause of action, and upon no known legal theory can it be maintained that the fact that complainant's process was a secret one changes the general rules of evidence.
The rules which prevent the introduction of parol evidence do not apply where it is offered to show that the contract was altogether void, or never had any legal existence either by reason of fraud or want of consideration or due execution or delivery. Buckles v. Cunningham, 6 S. M., 358; Matlock v. Livingston, 9 S. M. 489; Marsh v. Lisle, 34 Miss. 173; Pollen v. James, 45 Miss. 129; Wren v. Hoffman, 41 Miss. 616; March v. Lisle, 34 Miss. 173; Meyers v. Casey, 57 Miss. 615; Optical Co. v. Jackson, 63 Miss. 21; Howie Bros. v. Walter Pratt Co., 83 Miss. 15; Sims v. Eiland, 57 Miss. 607; Vincent v. Corbett, 94 Miss. 46.
James W. Cassedy, of Brookhaven, W.C. Eastland, of Forest, E.O. Sykes, of Washington, D.C., and James W. Cassedy, Jr., of Jackson, for appellee.
The law applicable. Representations as to value, profits, etc., are opinions and persons have no right to rely on them. Walker v. Railway Co., 34 Miss. 245.
He who alleges fraud must prove it by clear convincing testimony. Parkhurst v. McGraw, 24 Miss. 134; Dunlop v. Fox, 2 So. 169; Carter v. Lumber Co., 95 Miss. 651.
Every presumption of the law is in favor of the legality of the contract; it is incumbent on a party alleging its irregularity to show everything necessary to render it so though it involves proof of a negative character. Merill v. Melchoir, 30 Miss. 516; Brown v. Freeland, 34 Miss. 181.
To discharge one party to a contract on the ground of the failure of the other to perform his part, such failure must be clearly established by full, direct and satisfactory evidence. Wright v. Petrie, S. M. Ch. 282.
Rescission or cancellation demands clear and satisfactory proof. Halls v. Thompson, First S. M. 443; Ayres v. Mitchell, Third S. M. 683.
Where parties to a contract reduce their agreements to writing which is plain and unambiguous in its terms, parole evidence of antecedent agreements, negotiations and understandings are not admissible to vary, contradict or explain their meaning. All antecedent agreements are merged in the written contract and the contract is the sole exponent of the agreement. McInnes v. Manning, 95 So. 250.
Expressed written warranty excludes any verbal representations. The written warranty must be taken to contain the contract and to exclude the parole representations. Mizel v. Sims, 39 Miss. 331; Patterson v. Kirkland, 34 Miss. 423.
When parties embody their mutual agreements in a formal written instrument it must be taken as containing all they then desired to preserve the evidence of, and it is not competent to add to or take from it by parole evidence. Cock v. Blackburn, 58 Miss. 537; Baum v. Lynn, 72 Miss. 932.
A parole agreement cannot be admitted for the purpose of contradicting or altering the terms of a written agreement. Newman v. Meek, Freemans Chancery 441.
In the absence of fraud written instruments cannot be contradicted by parole testimony. McFarlane v. Randle, 41 Miss. 411; Coats v. Bacon, 77 Miss. 320; Hightower v. Henry, 85 Miss. 476.
A witness should not be required to disclose trade secrets. 3 Wigmore on Evidence, section 2212; Robinson v. Philadelphia R.R. Co. et al., 28 Fed. 350-341; Keller v. Goodrich, 117 Ind. 556, 562; Railroad Co. v. Stimpson, 14 Pet. 448, 461; Houghton v. Jones, 1 Wall. 702, 706; Titlow v. Savournin, 15 Phila. 170, 11 Wkly. Notes Cas. 191; Moxie Nerve Food Co. v. Beach et al., 35 Fed. 465; Dobson v. Graham, 49 Fed. Rep., 17.
Argued orally by J.H. Thompson, for appellant, and by E.O. Sykes and J.W. Cassedy, for appellee.
The appellee, who claims to have discovered a formula known only to himself for the making of paper from wood and other pulp in commercial quantities cheaper and of higher grade than can be made from the same character of pulp by the uses of the ordinary and usual processes therefor, procured the appellant to enter into a written contract with him by which she agreed to build and equip a mill for the making of paper, and give appellee a one-half interest therein; he would transfer to her a one-half interest in his formula for making paper. The appellant also agreed to pay the appellee a salary of three hundred dollars per month for services to be rendered by him in connection with the building of the paper mill. The appellee disclosed his formula for the making of paper to the appellant, but she declined to build the paper mill, whereupon this suit was filed by the appellee, the prayer of his bill of complaint being in substance that the appellant be enjoined from disclosing his formula, and that she be directed to specifically perform her contract or to pay damages for the breach thereof.
The appellant's defense is that she was induced to make the contract by representations made to her by the appellee that he had made, and could make, paper with his secret formula in commercial quantities of higher grade at less expense than could be done from the same character pulp by the use of the usual processes therefor; that these representations were false and were fraudulently made; and that the appellee's formula was wholly without value. A mass of testimony was introduced by both sides, much of it being seemingly irrelevant.
The decree of the court below upholds the validity of the contract, adjudges the appellant to have broken it, restrains her from disclosing the appellee's formula for making paper, and awards the appellee damages for the breach of the contract.
The appellee, while testifying in his own behalf, was asked on cross-examination to disclose his formula for making paper, but he declined so to do, and the court upheld him in so doing. The ground of the appellee's claim of immunity from disclosing his formula is that it constitutes a trade secret which, if disclosed, would render the formula valueless to him, for the reason that it would then be in the possession of, and could be used by others. The evidence here sought to be elicited from the witness was relevant and material to the issue being tried, and might have disclosed that the formula was inefficacious. The witness, therefore, should have answered the question, unless he had the privilege of refusing so to do. A witness has a qualified, but not an absolute, privilege of refusing to disclose trade secrets when the disclosure thereof would depreciate their value. He should not be compelled to disclose such secrets where so to do is not essential to the ends of justice; but where a trade secret is relative to an issue being tried, and its disclosure is essential in order that the issue may be correctly determined and justice administered accordingly, a witness is not privileged to refuse to disclose it. To hold otherwise would violate the general principle "that testimonial duty to the community is paramount to private interests, and that no man is to be denied the enforcement of his rights merely because another possesses the facts without which the right cannot be ascertained and enforced." 3 Wigmore on Evidence (2 Ed.), section 2212; 6 Jones' Commentaries on Evidence (2 Ed.), section 2481.
The appellee should have answered the question.
Reversed and remanded.