TOLEDO CO. v. COMPUTING CO.

Nos. 339 and 388.

261 U.S. 399 (1923)

TOLEDO SCALE COMPANY v. COMPUTING SCALE COMPANY. FIDELITY & DEPOSIT COMPANY OF MARYLAND ET AL. v. COMPUTING SCALE COMPANY ET AL.

Supreme Court of United States.

Decided April 9, 1923.


Attorney(s) appearing for the Case

Mr. George D. Welles and Mr. Frederick P. Fish, with whom Mr. Edward Rector, Mr. Harry W. Morgan, Mr. Thos. H. Tracy, Mr. Rathbun Fuller and Mr. Horace Kent Tenney were on the briefs, for Toledo Scale Company.

Mr. Charles Markell, with whom Mr. Edward Osgood Brown and Mr. Edwin J. Marshall were on the brief, for Fidelity & Deposit Company of Maryland et al.

Mr. John M. Zane, with whom Mr. Charles F. Morse and Mr. Drury W. Cooper were on the briefs, for Computing Scale Company.


MR. CHIEF JUSTICE TAFT, after stating the case as above, delivered the opinion of the Court.

It is insisted by counsel for the petitioner that it is within our power and it is our duty on this writ to go into the merits of the issue of the validity of the Smith patent and of the correctness of the money decree for profits. We were asked to do this by an application for writ of certiorari which we denied January 9, 1922. 257 U.S. 657. The decree then sought to be reviewed was entered in October, 1921. The application for this second writ of certiorari which we are now considering was not made until May 22, 1922, more than three months after the final decree in the Circuit Court of Appeals for the payment of profits. Section 6 of Act of September 6, 1916, c. 448, 39 Stat. 726, 727, directs —

"That no writ of error, appeal, or writ of certiorari intended to bring up any cause for review by the Supreme Court shall be allowed or entertained unless duly applied for within three months after entry of the judgment or decree complained of."

This deprives us of jurisdiction to consider the merits of the decree of October, 1921.

The case of Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., 240 U.S. 251, is cited to sustain a contrary view, but it fails to do so. In that case, a writ of certiorari had been applied for to this Court to review an interlocutory decree of the Circuit Court of Appeals and denied. The case went back to the District Court for a final accounting for infringement of a trademark and after a final decree for profits came again to the Circuit Court of Appeals and was affirmed. Then a second application was made for a certiorari and it was allowed. The respondent contended that this Court could not review the whole case including the merits of the interlocutory decree because of the denial of the first application for certiorari. We held that the denial constituted no bar because the decree sought then to be reviewed was not final. Our power to grant writs of certiorari extends to interlocutory as well as final decrees; and a mere denial of the writ to an interlocutory ruling of the Circuit Court of Appeals does not limit our power to review the whole case when it is brought here by our certiorari on final decree. In the case before us, the decree of October, 1921, which we declined to review in January, 1922, was a final decree and we are expressly denied power to review it after three months.

What we are to consider on this writ is whether the Circuit Court of Appeals on the petition for a rule against the Toledo Company had anything presented to it in the record in the Ohio court which required it to stay its hand in using available process to enforce its final decree. We are very clear that it had not. It has been necessary to make an elaborate statement to show the complicated facts; but when they are arrayed in order so as to be understood, there is no escape from the conclusion that the action of the Ohio court could not and should not interfere with or stay the due course of proceedings to enforce the Seventh Circuit decree.

The application to the Circuit Court of Appeals in 1913 to frame its mandate so as to permit that court to rehear the issue on the merits of the validity of the patent already found and affirmed by both courts, was addressed to the discretion of that court and that was exercised to deny the application, presumably because the application showed on its face a lack of the due diligence in not producing the alleged newly discovered evidence in time to have presented it to the trial court at the hearing in time to merits in June, 1912. The Toledo Company had been advised of the claim of its infringement of the Smith patent within a year after it began to make and sell the aluminum cylinder scale in 1906 by two suits of the Computing Scale Company and its attention had been directed to the necessity of preparing for a defense. This was further stimulated by the Chicago suit, the one at bar, in 1910, in which the Toledo Company filed an answer averring among other defenses that the Smith patent had been anticipated not only by the Phinney patent itself but by prior manufacture, sale and commercial use by Phinney of scales which embraced the device whose invention was claimed by Smith, and that this prior use was at Pawtucket, Rhode Island.

In spite of this, the agents and counsel of the Toledo Company never visited Pawtucket before the hearing on the validity of the Smith patent in June, 1912. The only reason for this failure is the suggestion that the model of the cylinder deposited by Phinney in the patent office with his application was a small solid wooden cylinder, not full size, which led counsel to think that no practice under the patent would show lightness of material and weight. It was a matter of equitable discretion for the Circuit Court of Appeals to determine whether this was sufficient excuse. Hopkins v. Hebard, 235 U.S. 287. Certainly it was not an abuse of its discretion to hold that it was not a good one. The natural and obvious course of one tracing out evidence of prior commercial use of Phinney which was formally averred in the Toledo Company's bill to have taken place at Pawtucket, would have been to go to Pawtucket and look up Phinney, or, if dead, his family and successors. Had this course been pursued, Phinney's widow and son would have been found there and several of those whose affidavits and depositions are now produced who say that they bought and used the Phinney scales made with light wood and paper cylinders. From those witnesses, too, the investigator would have been led directly to the proceedings in Federal Company suit in Philadelphia, the record of which contained all this evidence, and he would have found without difficulty the three original Phinney scales that were exhibits in that case. Nor can we say that it was an abuse of discretion for the Circuit Court of Appeals to refuse a similar application, made in October, 1921, to open up the case to permit a rehearing of an issue, settled nine years before, when the evidence as to the lack of diligence of the Toledo Company was just the same.

It is unnecessary to determine whether the applications of 1913 and 1921 come within the proper definition of a bill of review in a court of chancery. It is enough to say that whether they were merely motions for rehearing, like a motion for new trial at law, or were applications in the nature of a bill of review, they were addressed to the sound discretion of the Court, and based as they were upon the ground of newly discovered evidence, the indispensable condition of their being granted was that the failure to discover the evidence in time for the trial was not due to a lack of diligence on the part of the applicant. That condition precedent was not fulfilled.

Do the additional facts averred in the bill filed in the Ohio court change the situation? It is said they show extrinsic fraud committed by the Computing Scale Company upon proof of which a court of equity, although in another jurisdiction, having jurisdiction of the parties may enjoin the one guilty of the fraud from profiting by a decree so obtained. There has been much discussion as to whether extrinsic fraud is here alleged, and the case of United States v. Throckmorton, 98 U.S. 61, is cited and numerous other authorities since that case. We do not find ourselves obliged to enter upon a consideration of the sometimes nice distinctions made between intrinsic and extrinsic frauds in the application of the rule, because in any case to justify setting aside a decree for fraud whether extrinsic or intrinsic, it must appear that the fraud charged really prevented the party complaining from making a full and fair defense. If it does not so appear, then proof of the ultimate fact, to wit, that the decree was obtained by fraud, fails. That is the case here.

The allegations of the bill and of the affidavits are of a conspiracy by the inner circle of the Computing Scale Company's agents commenced in 1902, years before the Toledo Company began to make and sell cylinder drum scales, to monopolize the business of making and selling scales, to put the Toledo Company out of business, and after it began to make cylinder scales, to prevent it from so doing by suits brought on the Smith patent which it knew to be invalid because of the Phinney prior use. In pursuance of the conspiracy it is charged that it proceeded to buy up and keep from the Toledo Company knowledge of, and access to, the Phinney scales. Proof is adduced to show that the Computing Scale Company did buy up as many of the Phinney scales as it could secure. But there is not anywhere in the record, which we can find, or which has been pointed out to us, any real evidence that the Toledo Company was, in the slightest degree, interfered with by acts of the Computing Company in its search for evidence of the Phinney prior use. Had the Toledo Company found, as it might easily have done, the witnesses in Pawtucket, it would have found the oral evidence as to the existence of the Phinney scales and would have been led directly to the Philadelphia suit where it would have found the cylinders it did find after June 1912. Moreover there were the Randall suit in Philadelphia in 1901 and the Standard suit in Wisconsin where other Phinney scales were also exhibits and open to inspection by the Toledo Company before 1912. There is not a scintilla of evidence to show any effort on the part of the Computing Scale Company to induce any witnesses not to testify, or to spirit them away from contact with the Toledo Company. There is nothing to show that if the Computing Scale Company had not bought the Phinney scales, the Toledo Company would have found them any earlier. The passages in the brief on behalf of the Computing Company in the first hearing of the case on appeal in the Circuit Court of Appeals which stated that Phinney had not made scales for commercial use had reference of course to the record before the court, were made after the trial in the District Court and so could not have misled the Toledo Company in its preparation for that trial. The conclusion is unavoidable that the only cause of the failure of the Toledo Company to produce this Phinney evidence was the mistake of the counsel for the Toledo Company in assuming that an inadequate model in the patent office filed by Phinney showed no relevant prior use by him, and the failure of the Toledo Company's agents to take the ordinary and obvious course to make adequate inquiry at Pawtucket as to the prior use which it had averred in the bill. Certainly the Computing Scale Company was not responsible for the inadequacy of Phinney's model or for the failure of the Toledo Company to make the inquiry before June, 1912. The averments as to conspiracy to monopolize, and to drive the Toledo Company out of business and the details of the purchase of Phinney scales are all irrelevant because they are not shown to have had any causal connection with the failure of the Toledo Company to find out earlier what it did stumble on in 1913.

We do not understand it to be contended that there was any relation between the Computing Scale Company and the Toledo Company which made it the duty of the former to furnish evidence to the latter to weaken its own case or that silence in respect to the Phinney scales constituted that kind of fraud which would invalidate the decree unless it was accompanied by acts which actually prevented the Toledo Company's finding and availing itself of such evidence. Clearly there is no such rule of law in a case like this.

Another aspect of this record leads to the same conclusion. However nice the distinction between extrinsic and intrinsic fraud, we have been cited to no case where it has been held that fraud is extrinsic when the court rendering the decree attacked had before it the same issue of fraud on the same facts, only a little more elaborated as to the motive of the party charged with committing it. The necessary inference from the affidavits filed in May, 1913, by the Toledo Company, and its depositions in 1917, and its motion and briefs in 1921, in the Circuit Court of Appeals, was that the Computing Scale Company had been securing Phinney scales with a view of concealing them from the Toledo Company, and these were all before the Circuit Court of Appeals when it finally refused to open the decree on its merits in 1921 to let in the evidence. It did not add to the weight of that evidence for the purpose for which it could be used in either court, that this was the result of a conspiracy to monopolize trade or that it grew out of a malicious feeling toward the Toledo Company. What the District Court for Northern Ohio was doing in hearing the injunction suit and issuing a temporary injunction was merely reviewing the discretion of the Circuit Court of Appeals of the Seventh Circuit in dealing with the same ultimate facts and reaching a different conclusion. This was beyond its province. Embry v. Palmer, 107 U.S. 3, 11; Telford v. Brinkerhoff, 163 Ill. 439, 443; Marine Insurance Co. v. Hodgson, 7 Cranch, 332.

It is pressed upon us that the amount of this decree which by reason of growing interest will considerably exceed half a million dollars, is such that its enforcement may be ruinous to the Toledo Company, and yet that company has never had an opportunity to bring to a hearing this evidence of the Phinney prior commercial use which on the showing and argument is clearly a complete defense to a suit prosecuted by an unscrupulous competitor, conscious all the time of its falsity and injustice. This view of the case is not a fair one. The Toledo Company had a chance to make a defense of the Phinney prior use and failed to do so because of its own lack of diligence. As it did not secure a hearing of the Phinney defense, its opponent had no chance to meet it, as possibly it might have done by showing that the use relied on was a futile one because the Phinney scale as made was not practical or did not weigh accurately or accomplish the purpose of the Smith patent. The fact that but twenty machines were made, and that these ceased to be used years ago or were destroyed, suggests the probability of such an answer. We can not know what the result of the hearing would have been on this issue if tried, because only one side is presented. We are prevented from knowing it by a most salutary rule of law which after parties have had a full and fair opportunity to prepare their case, refuses to permit them to drag out litigation by bringing in new evidence which with due diligence they ought to have discovered before the hearing. The apparent hardship of particular cases should not and can not weigh against the application of this sound principle. As Mr. Justice Story remarked in Ocean Insurance Co. v. Fields, 2 Story, 59; 18 Fed. Cas. 532, "It is for the public interest and policy to make an end to litigation, or, as was pointedly said by a great jurist, that suits may not be immortal, while men are mortal."

The Surety Companies object to the order of the Circuit Court of Appeals directing the District Court to enter summary judgment against them for the amount due on the decree, because it causes them to pay a decree which the Toledo Company, their principal, deposited in Toledo banks enough money to their order to pay, but which a court of competent jurisdiction enjoins them from paying, or from using this money to pay. They say they are to be ground between the upper and the nether millstones. They say they are indifferent between the parties and only wish to be protected. The order which the Circuit Court of Appeals directed against them was within its jurisdiction. Pease v. Rathbun-Jones Engineering Co., 243 U.S. 273, 278. It was right, was final, and they must obey it. They can appeal from the order of the Ohio court. Indeed we are advised that the cause is now pending on appeal in the Circuit Court of Appeals of the Sixth Circuit. If they satisfy the decree of the Seventh Circuit, they can be reasonably confident that they will not be required to suffer a double burden. The Circuit Court of Appeals of the Sixth Circuit is not likely to ignore the ruling of this Court in the premises; and the cause pending in the Sixth Circuit can be brought within the jurisdiction of this Court at any time by certiorari.

It is objected that the Circuit Court of Appeals had no power to direct the District Court to enjoin the Toledo Company from further maintaining its Ohio bill or from filing elsewhere any similar bill. It is also objected that it can not direct the District Court to assess the Computing Company's expenses including a reasonable attorney's fee in the matter of the Ohio bill and to enter a summary decree therefor. We think these orders were within the power of the Circuit Court of Appeals. This Ohio proceeding was instituted to halt and defeat the decree of the Circuit Court of Appeals, while that decree was still in that court to be enforced by mandate to the lower court. Under § 262 of the Judicial Code, that court had the right to issue all writs not specifically provided for by statute which might be necessary for the exercise of its appellate jurisdiction. It could, therefore, itself have enjoined the Toledo Company from interfering with the execution of its own decree, Merrimac River Savings Bank v. Clay Center, 219 U.S. 527, 535; or it could direct the District Court to do so, as it did, Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356; Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294, 299; Kessler v. Eldred, 206 U.S. 285. Moreover, when the character of the proceeding initiated by the Toledo Company, a party before it, to stop the execution of its decree was disclosed on a full hearing on the petition for a rule against the Toledo Company, it had jurisdiction to determine whether the filing and maintenance of the bill was in contempt of its jurisdiction, New Orleans v. Steamship Co., 20 Wall. 387, 392; Swift v. Black Panther Oil & Gas Co., 244 Fed. 20, 29; and finding it to be so, to punish it by a compensatory imposition, Merrimac River Savings Bank v. Clay Center, 219 U.S. 527, 535; or to remand it to the District Court to do so.

What we are considering here is the rightful course of a court which having entered a final decree is proceeding upon the application of the successful party in the decree to put it into lawful execution. It is advised by this party that the quasi parties, the sureties who have made themselves directly liable upon summary process for prompt payment of the decree, have been enjoined from complying with their obligation to the court by a court of another jurisdiction, that the successful party has also been enjoined from seeking enforcement of the decree, and all this at the suit of the party condemned in the decree to pay and on the ground of fraud exercised upon the court itself in obtaining the decree. If the successful party though thus enjoined, is willing to risk punishment for contempt by the enjoining court, and applies for enforcement of the decree, the court whose decree it is, is clearly not ousted of jurisdiction to proceed to execute it. The proceeding in the enjoining court is solely in personam and does not affect the power or functions of the court whose decree is in question. If advised that there is real ground for impeachment of its decree, it may in its discretion stay its hand until the issue is determined in another court of competent jurisdiction, but if upon examination it finds no such ground advanced, it may properly proceed to secure to the successful party the fruits of his litigation. If the defeated party in his suit in another jurisdiction only seeks to restrain the successful party from prosecuting his decree to payment, there should be unusual circumstances of disrespect to the court entering the decree to justify punishment for contempt. But when he unites in his new suit for an injunction the sureties who, as quasi parties, are obliged to respond to the decree in the course of execution, he puts himself in contempt of the court whose decree it is, and may be punished for it. In the former case he is merely restraining a party who, without disobedience or disrespect to any obligation to the court making the decree, has full discretion and liberty to withhold his hand in pressing it to execution. In the latter case, he is obstructing the process of the court in a proceeding in which its action has been properly and lawfully invoked. The degree of punishment for contempt in such case is in the discretion of the court whose dignity has been offended and whose process has been obstructed. New Orleans v. Steamship Co., 20 Wall. 387. Certainly it was not an abuse of discretion in this case to impose as a penalty, compensation for the expenses incurred by the successful party to the decree in defending its rights in the Ohio court.

Decree affirmed.


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