Ambler v. Choteau/Opinion of the Court

This is a suit in equity, and the case made by the bill may be stated as follows:

Ambler, the appellant, and one R. M. Whipple, invented an     improved mode of manufacturing gas from petroleum, for which      they were about to apply for patents, and being desirous of      securing each to the other one undivided half of what they      were doing, on the twenty-fourth of May, 1869, entered into      an agreement of copartnership to effect that object. The     third article of the agreement was as follows:

'Article 3. R. M. Whipple shall have the exclusive and entire     'business management' of the same, so as to include the      introduction of said invention to public use, and to secure,      as far as possible, the adoption of the same, both in this      country and in all other countries; and for which purpose,      and all and singular the purposes incident thereto, the said      R. M. Whipple shall have full and ample power and authority,      and is hereby granted by said Ambler full power and      authority, to act for him in the premises, to sign his name,      and make his seal to any instrument, and all instruments of      writing needful and necessary to carry out the object and      intention of this agreement, as fully and entirely as the      same may be done by the said Ambler if personally present at      the doing thereof; and the said A. I. Ambler hereby ratifies and      confirms all and singular whatsoever may be legally and      lawfully done in and about the premises.'

All patents secured for the invention were to be put into the     business and owned by the parties in equal shares. The     proceeds of sales and all other profits were to be equally      divided.

For the purpose of carrying into effect the provisions of the     partnership agreement, Ambler, on the twenty-fifth of May,      executed to Whipple an assignment of all his interest in the      invention and in the patents that might be issued thereon. The agreement and the assignment were both recorded in the     patent-office. On the thirteenth of July, 1869, a patent was     issued to Whipple & Ambler for 'Whipple & Ambler's Steam      Petroleum Gas-generating Apparatus,' which was embraced in      their inventions. In September, 1869, Whipple fraudulently     determined to exclude Ambler from the benefits of their      undertaking, and to accomplish that purpose formed another      partnership with one Thomas S. Dickerson, to whom, in      October, 1869, a patent was issued for an improved mode of      manufacturing gas from petroleum, which was the invention of      Whipple & Ambler. Afterwards another patent was issued to     Whipple & Dickerson, which came within the scope of the      Whipple & Ambler experiments. In this condition of affairs,     Ambler, on the fourth of January, 1870, began a suit in      equity in the supreme court of the District of Columbia      against Whipple & Dickerson, the object of which was to bring      the Dickerson and the Whipple & Dickerson patents into the      Whipple & Ambler partnership, and to get an account of sales      and profits. The supreme court of the district dismissed the     bill, but on appeal to this court that decree was reversed at      the October term, 1874, and the cause remanded with      instructions to enter another decree, 'declaring Whipple &      Dickerson to hold in trust for the benefit of Ambler to the      extent of one-half of the two patents issued to them,' and      'that an accounting be had as to the profits realized by      them, or either of them, from the use or sale, or otherwise,      arising from said patents.' Ambler v. Whipple, 20 Wall. 559.     A decree was entered in the court of the district on the      second of February, 1875, in accordance with this mandate, and afterwards upon an accounting a balance was found due      from Whipple of $666,052.35. Whipple is insolvent, and the     amount due from him is uncollectible. On or about the     twenty-first of April, 1870, Whipple & Dickerson sold and      conveyed to James G. Blunt and Merritt H. Insley, of the      state of Kansas, the right to use the Dickerson patent in      Missouri for $35,000, and on the twenty-third of December,      1871, the right to use the Whipple & Dickerson patent in the      same state for the same sum. On the eighteenth of December,     1871, Charles P. Choteau, Gerard B. Allen, Charles H. Peck,      Stilson Hutchins, Theodore Laveille, George H. Rea, Albert C.      Ellithorpe, John Kupferle, James G. Blunt, M. H. Insley,      Charles P. Warner, Frank Gregory, and Oliver B. Filley      organized a corporation under the general corporation law of      Missouri by the name of the Missouri Liquid Fuel Illuminating      Company, with an authorized capital of $500,000, divided into      5,000 shares of $100 each. The persons thus organizing the     corporation were, by the articles of association, constituted      directors for the first year. On the twenty-third of     December, 1871, Blunt & Insley, in consideration of $83,000      in cash, or its equivalent, and $417,000 in capital stock,      assigned to this company all their right to the Dickerson and      Whipple & Dickerson patents for the state of Missouri. At the     same time Whipple & Dickerson agreed with the company to make      such conveyance as might be deemed necessary to perfect the      title of the company under the assignment from Blunt &      Insley. When these several transactions took place all the     parties had full notice of all the rights and claims of      Ambler in the premises.

This suit is brought against Choteau, Harrison, Allen, Peck,     Rea, Laveille, Warner, Gregory, and Filley. All the other     corporators and directors, or, so far as appears,      stockholders, of the Missouri corporation are named as      defendants in the bill, but they were never served with      process, and have never appeared. Neither Whipple, Dickerson,     nor the Missouri corporation is even named as defendant. The     persons who are served, and who appear in the cause, hold, or      are interested in, the stock of the corporation to the amount      of $150,000, or thereabouts. The bill abounds in charges of     fraud and conspiracy, in a general way, against all the persons who are named,      whether parties to the suit or not, but so far as the      defendants served with process are concerned, the only      specific allegation to be found is that, being 'incorporators      of the Missouri Liquid Fuel & Illuminating Company,' they      'made said purchase, and paid said large sum of money with      full knowledge of the trust, and of the fraud and breach of      trust aforesaid, [that of Whipple & Dickerson,] and with      lawful and timely notice of your orator's legal rights and      equitable title therein, without any effort whatever on the      part of said directors of said company to protect your      orator's share of the purchase money, as they were bound in      law, in equity, and good conscience to do in this behalf, and      without the knowledge or consent of your orator, and to your      orator's damage and injury.'

At the opening of the bill it is expressly averred 'that the     subject-matter of this complaint, and the foundation and      gravamen of this bill, is the franchise, the trust, the      breach of trust, the collusion, conspiracy, and fraud between      the defendants and said Whipple & Dickerson, as the trustees      of your orator, the rights and remedies of your orator      against these defendants, and the prayer for relief.' It is      then stated 'that this cause is an action on the case in the      nature of a conspiracy, founded upon the fraudulent intention      and specific acts of the defendants to cheat, swindle, and      defraud your orator of his franchise, and the rights in the      patent and trust property aforesaid, and that said plan      consists in an agreement with a common design to do an unlaw      ful act, and which plan, agreement, and conspiracy, being a      common design to do an unlawful act, was fully carried out,      as will hereafter more fully appear, to the great damage and      injury of your orator.'

It is nowhere alleged that these defendants had any actual     connection with the transactions of Whipple & Dickerson      otherwise than as corporators, stockholders, and directors of      the Missouri corporation, though it is stated that they 'gave      to such fraudulent firm [Whipple & Dickerson] credit,      character, and support by dealing with them,' etc., and that      they 'took no steps whatever, legal or otherwise, to recover      said property or the proceeds thereof, or to stay Whipple &      Dickerson in the pursuit and furtherance of the fraud in the waste of the      proceeds of the trust,' etc. The prayer is that the      defendants may be enjoined 'from proceeding further with any      dealings with the said partnership and trust property      aforesaid,' and 'that the damages to your orator for the be      taken thereof before the master, *  *  * and that your orator,      upon the final hearing, be allowed, adjudged, and decreed      damages therefor.'

This is the substance of all there is material in the mass of irrelevant matter that incumbers the record and fills the voluminous argument filed by the appellant in his own behalf. Upon full consideration we have no hesitation in saying that it presents no case for such relief in equity as is asked. If, as is more than once distinctly alleged, the object of the suit is to recover damages for an unlawful and fraudulent conspiracy to cheat Ambler out of his interest in the original invention which is the subject-matter of the controversy, the remedy is clearly at law and not in equity. If an account of profits is wanted, and an injunction against the further use of the patented inventions under the transfers from Whipple & Dickerson, then the suit should have been against the Missouri corporation in its corporate capacity, and not against a part only of its stockholders and directors individually. If the object is to charge these defendants for the profits made by Whipple through his breach of trust, then he is a necessary party, and nothing can be done in his absence. In any event, these defendants are but purchasers from Whipple of specific interests in the property which he held in trust for himself and Ambler. While the allegations of fraud in their general terms are as broad as language can make them, specifically they are confined by other allegations to the use of the patented invention in Missouri by the Missouri corporation, of which the defendants are stockholders and directors. It is not in any manner alleged or claimed that the defendants have profited by what Whipple has done, except through the title acquired by the conveyance to Blunt & Insley, and from them, with the consent of Whipple & Dickerson, the faithless trustees, to the corporation. No effort is made to set aside these conveyances. It is conceded that Blunt & Insley actually paid Whipple & Dickerson $70,000 for the assignments which were made, and it is fairly to be inferred that in the accounting had under the decree of this court in Ambler v. Whipple, Whipple has been charged with the proceeds of this sale. But, whether that be so or not, no case has been made by the loose and general allegations in this bill for relief against these defendants. The words 'fraud' and 'conspiracy' alone, no matter how often repeated in a pleading, cannot make a case for the interference of a court of equity. Until connected with some specific acts for which one person is in law responsible to another, they have no more effect than other words of unpleasant signification. While in this case the offensive words are used often enough, the facts to which they are applied are not such as to make the defendants answerable to the complainant for the damages and other relief he asks.

The decree of the circuit court sustaining the demurrer and dismissing the bill is affirmed.