In re Boston & Fairhaven Iron-Works

29 F. 783, 1884 U.S. Dist. LEXIS 221
CourtDistrict Court, D. Massachusetts
DecidedNovember 18, 1884
StatusPublished

This text of 29 F. 783 (In re Boston & Fairhaven Iron-Works) is published on Counsel Stack Legal Research, covering District Court, D. Massachusetts primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Boston & Fairhaven Iron-Works, 29 F. 783, 1884 U.S. Dist. LEXIS 221 (D. Mass. 1884).

Opinion

Nelson, J.

Cyril C. Child offered for proof against the estate of the Boston & Fairhaven Iron-works, in bankruptcy, a decree for §.5,640.26, recently rendered in his favor by the circuit court of the United States for this district, in a suit in equity for the infringement of a patent pending against the bankrupt corporation at the commencement of the bankruptcy proceedings. It was admitted at the hearing that the decree was solely for profits actually received by the corporation before the bankruptcy from the wrongful use of the invention secured by the plaintiff’s patent, without any addition for damages; also that the decree might be admitted to proof under Rev. St. § 5106, if the court should be of opinion that such profits constituted a debt provable under the bankrupt act.

The bankrupt act allows prooi of “all debts due and payable from the bankrupt at the time of the commencement o f proceedings in bankruptcy, and all debts then existing, but not payable until a future day;” and further provides that “all demands against the bankrupt, for or on account of any goods or chattels wrongfully taken, converted, or withheld by him, may be proved and allowed as debts;” and also provides that “when the bankrupt is liable for unliquidated damages arising out of any contract or promise, or on account of any goods or chattels wrongfully taken, converted, or withheld, the court may cause such damages to be assessed in such mode as it may deem best, and the sum so assessed may be proved against the estate.” Rev. St. § 5067. The language of this section is broad enough and was intended to include all debts founded on contract, express or implied, and all wrongful appropriations of personal property of every description, for which an action at law or in equity could be maintained against the bankrupt.

[784]*784It can be no valid objection to the proof that infringement of a patent is in the nature of a tort. Damages for mere personal torts, such as false imprisonment, (In re Hennocksburgh, 7 N. B. R. 37,) assault and battery, (Black v. McClelland, 12 N. B. R. 481,) deceit, (In re Schuchardt, 15 N. B. R. 161,) slander, (Zimmer v. Schleehauf, 115 Mass. 52,) are not provable, unless reduced to judgment or otherwise liquidated before bankruptcy. But wherever an action of trover, or trespass, or money had and received, will lie a.t common law for the conversion of property, the cause of action is provable. Thus, if the bankrupt has unlawfully converted to his own use personal property; or has committed trespass on land by cutting and carrying away growing trees, or removing fixtures; or has obtained money or property by fraud, forgery, or embezzlement—the cause of action is provable as a debt. “Debts created by the fraud or embezzlement of the bankrupt” are provable. Section 5117. The wrongful conversion by the husband of the wife’s separate property is provable as an equitable debt-. In re Blandin, 1 Low. 543. These are all eases of tort, yet they are provable nevertheless.

To the objection that the claim is for unliquidated damages for a tort, there are two answers: First, the act allows proof of unliquidated damages for the wrongful conversion of all kinds of personal property, and provides for their assessment; and, second, profits of an infringer of a patent are not unliquidated damages. They are as capable of being ascertained by simple computation, as the amount due on a promissory note. Courts of equity do not award unliquidated damages except in cases where there is no possible remedy at law. The right to damages in addition to profits given by Rev. St. § 4921, is a statute remedy, and does not affect the question.

Nor is it an objection that such profits are only recoverable in equity. Equitable debts are provable on the same footing as legal debts. It was said by Judge Lowell in Re Buckhause, 2 Low. 331: “I have often decided that equitable debts may be proved under our bankrupt act, and I am not aware that a contrary decision has been made.” See, also, In re Blandin, supra. It is a rule that any debt for which the creditor could have maintained a bill in equity against the bankrupt at the date of the bankruptcy can be proved; and the right to sue in equity is conclusive in favor of the right to prove in bankruptcy. The only exception is when the claim is barred by some conflicting equity as between different classes of creditors. In re Lane, 2 Low. 333. In such cases the, debt may be proved 'against a surplus, and is released by the discharge. The district court is possessed of ample powers as a court of equity to ascertain the amount due on any equitable debt.

The theory on which courts of equity award profits against an infringer is stated and explained with great force and clearness in the elaborate judgment of Mr. Justice Matthews in Root v. Railway Co., 105 U. S. 189. It is only necessary to refer to that case for all the learning and all the leading authorities on the subject. It was decided in that ease that a bill for an account of profits only, filed after the expiration of the patent, when the right to an injunction no longer remained, could not [785]*785be maintained, for the reason that the right to an account of profits was incident to the right to an injunction, and the fact of infringement alone created no such fiduciary relation between the patentee and the infringer as to confer jurisdiction on a court of equity to administer the trust, and compel the trustee to account. But in deciding this the court was careful to reaffirm with emphasis the well-established rule that, having once acquired jurisdiction upon the equitable ground of relief hv injunction, the court would retain the cause for the purpose of administering a complete remedy; that, not being permitted by the principles and practice in equity to award damages, it would treat the infringer as though he were a trustee for the patentee in respect to profits, and would give profits as a substitute for damages; and in taking the account it would apply the same rule which it adopts in cases of trustees who have committed breadles of trust by an unlawful use of the trust property for their own advantage, and require the infringer to refund the amount of profit which he has actually realized. Pages 214, 215. The court cited with approval the language of Mr. Justice Miller in Burdell v. Denig, 92 U. S. 716:

“Profits are not the primary or true criterion of damages for infringement in an action at law. That rule applies eminently and mainly to cases in equity, and is based on the idea that the infringer shall bo converted into a trustee as to those profits, for the owner of the patent which ho infringes.”

What of all things in the world the court did not decide in Root v. Railway Co. was that, having jurisdiction to grant relief by injunction, it would not treat the infringer as a trustee for tbo patentee as to profits, and that profits are unliquidated damages. When the right to an injunction exists, the infringer’s liability for profits is the same as that of a trustee who has misapplied the trust property to his own advantage; and he is held liable to account on the just and equitable principle applied in so many cases, both by courts of law and equiiy, that the wrongful use of the property of another raises on the part of the wrongdoer an implied contract to account to the owner for what has been gained by the use.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Burdell v. Denig
92 U.S. 716 (Supreme Court, 1876)
Root v. Railway Co.
105 U.S. 189 (Supreme Court, 1882)
Clark v. Wooster
119 U.S. 322 (Supreme Court, 1886)
Zimmer v. Schleehauf
115 Mass. 52 (Massachusetts Supreme Judicial Court, 1874)
Child v. Boston & Fairhaven Iron Works
137 Mass. 516 (Massachusetts Supreme Judicial Court, 1884)
Black v. McClelland
3 F. Cas. 504 (U.S. Circuit Court for the District of Western Pennsylvania, 1875)
In re Blandin
3 F. Cas. 669 (D. Massachusetts, 1871)
In re Buckhause
4 F. Cas. 560 (D. Massachusetts, 1874)
Carver v. Braintree Manuf'g Co.
5 F. Cas. 235 (U.S. Circuit Court for the District of Massachusetts, 1843)
In re Hennocksburgh
11 F. Cas. 1136 (N.D. New York, 1872)
In re Lane
14 F. Cas. 1070 (D. Massachusetts, 1874)

Cite This Page — Counsel Stack

Bluebook (online)
29 F. 783, 1884 U.S. Dist. LEXIS 221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-boston-fairhaven-iron-works-mad-1884.