Rensens v. The Mexican National Construction Company.

as collateral for the repayment of the $2,000,000 loan, on or before September 15th, 1884. On October 1st, 1883, the plaintiff had paid the amount subscribed by him, in instalments, as called by the defendant, and had received receipts therefor, which were not transferable without the consent of the defendant. It was provided, by the contract of subscription, that such receipts should be exchanged for formal certificates of interest in the loan, authenticated by the trustee, upon payment of the last instalment of the subscription. Before the payment of the last instalment by the plaintiff, the defendant transferred to the trustee named in the contract the securities specified therein, but this was done by a trust indenture, which prescribed the powers and duties of the trustee respecting the use and sale of the securities. Among other things, this trust indenture provided, that the trustee should execute, from time to time, as requested by the defendant, certificates of interest, entitling the registered holders to an interest in the securities, or the proceeds thereof, in case of a sale by him "under the provisions of the trust indenture," bearing the same proportion to the whole as the amount of each certificate should bear to $2,000,000. The indenture also provided, that the trustee should not sell the securities to satisfy the loan, unless holders of certificates representing twenty-five per cent. of the whole amount should request him to do so; and it also provided, that the holders of a majority in interest might waive any default in the payment of the loan on the part of the defendant, or instruct the trustee to do so, and extend the defendant's time for payment, and suspend or postpone the sale by the trustee, of the collaterals, at their discretion. So far as appears, the plaintiff was ignorant of the terms of the indenture, when he paid the instalments of his subscription, but, after it was executed, he demanded a certificate from the defendant, of the character specified in the contract of subscription. The defendant refused such a certificate, but offered one such as it had authorized the trustee to execute, by the terms of the trust indenture.

Rensens v. The Mexican National Construction Company.

The first question is, whether the deposit made of the collaterals, under the terms of the trust indenture, was such a departure from the contract of subscription as to amount to a breach of that contract. The contract was silent as to the conditions upon which the bonds should be deposited with the trustee, aside from the stipulation that the loan should be secured by an assignment in trust of the specified collaterals which were to be deposited with the trustee. The reasonable implication, however, is, that they were to be deposited to secure the repayment of the loan on the contract day, and that the trustee was to exercise the ordinary rights of a pledgee, to sell the securities and satisfy the debt for the benefit of the subscribers. Such a pledge would, doubtless, confer upon every subscriber a qualified right to call upon the trustee to satisfy the amount due to him by a sale of the securities. But the fund created was a joint fund, for the benefit and protection of the whole body of subscribers, and, therefore, is not to be dealt with upon the intervention of a single cestui que trust, to the disadvantage of the others. If the trust assignment had provided that the trustee should not sell the securities unless a sale should be advantageous to the common interests of the cestuis que trust, it would be unobjectionable, because it would only prescribe a condition which would be implied, and which a Court of Equity would impose, in the exercise of its jurisdiction over trusts, if applied to by any of the parties in interest. But the indenture contains arbitrary restrictions upon the powers of the trustee, which he cannot disregard, and which materially impair the rights of the subscribers. It substitutes the discretion of twenty-five per cent. in interest of the cestuis que trust, in place of the discretion of the trustee, and requires him, at the intervention of a majority of the subscribers, to extend the time of payment and postpone a sale of the securities. The plaintiff did not consent to the creation of such a trust. The conditions may have been designed to promote the best interests of all the subscribers; they may have been wise and expedient; but they were not such as were authorized by the

Rensens v. The Mexican National Construction Company.

plaintiff's contract. A Court of Equity might reform the terms of the trust indenture, if a suit were brought for that purpose, but, so long as they stand, would have to adhere to them, if called upon to intervene, upon the application of the cestuis que trust.

It remains to consider whether the plaintiff can recover back this money, in an action for money had and received, or whether his remedy is merely one for a breach of contract. The subscription agreement was a separate and independent contract between the defendant and each subscriber. The defendant could maintain a suit against each subscriber, upon his failure to pay the amount of the subscription, and it must follow, that each subscriber has a corresponding right of action against the defendant, for any breach of the contract, on its part, towards him. Similar contracts have been frequently adjudged to confer a several liability, and a several right of action, on the part of each subscriber. (Thompson's Liability of Stockholders, § 114; Whittlesey v. Frantz, 74 N. Y., 456.)

It is a familiar rule, that, when one party to an executory contract puts it out of his power to perform it, the other may regard it as terminated, and has an immediate right of action to recover whatever damages he has sustained. (Ford v. Tiley, 6 Barn. & C., 325; Bowdell v. Parsons, 10 East, 359; Heard v. Bowers, 23 Pick., 455, 460; Shaw v. Republic Life Ins. Co., 69 N. Y., 293; United States v. Behan, 110 U. S., 338; Lovell v. St. Louis Mut. Life Ins. Co., 111 U. S., 264.)

The plaintiff was under no obligation to tender his receipts. They were merely vouchers. They were to be exchanged for formal certificates, but, when the defendant had put it beyond its power to deliver the proper certificates, the plaintiff was not bound to tender them. No demand of the certificates was necessary, after the defendant had incapacitated itself from giving them. Where money is advanced upon an executory contract which the contracting party fails to perform, it is in the election of the other party either to

Pickhardt v. Packard.

sue upon the agreement and recover damages for a breach, or to treat the contract as rescinded, and recover back his money, as paid upon a consideration which has failed. (Hill v. Rewee, 11 Met., 268; Brown v. Harris, 2 Gray, 359; Wheeler v. Board, 12 Johns., 363; Lyon v. Annable, 4 Conn., 350; Appleton v. Chase, 19 Maine, 74; Shepherd v. Hampton, 3 Wheat., 200; Smethurst v. Woolston, 5 Watts & S., 106.)

If there had been a part performance of the contract, by which the plaintiff received some benefit, and the defendant could not be restored to the previous situation, the plaintiff's only remedy would have been for a breach of the agreement, and his damages would be measured by his loss. (Hunt v. Silk, 5 East, 449; Foss v. Richardson, 15 Gray, 303; Nash v. Lull, 102 Mass., 60.) He has received nothing, however, under the contract, and the law implies a promise on the part of the defendant to pay back what it has received.

Judgment is ordered for the plaintiff on the demurrer.

Michael H. Cardozo, for the plaintiff.

Joseph H. Choate, for the defendant.

WILHELM PICKHARDT AND ADOLPH KUTROFF

vs.

MITCHELL N. PACKARD AND WILLIAM KING. IN EQUITY.

The claim of letters patent No. 225,108, granted, March 2d, 1880, to Badische Anilin and Soda Fabrik, as assignee of Heinrich Caro, for an improvement in coloring matters produced from alpha-naphthol, namely, "As a new manufacture, the coloring matter, or sulpho-acid of dinitro-alpha-naphthol, obtained from the action of nitric acid upon the within described alpha-naphthol sulphoacids, substantially in the manner set forth, or by any other method which will produce a like result," is a valid claim.

Caro having been the first to discover the process by which the destructive sulpho-acids of alpha-naphthol, capable of treatment with nitric acid without

Pickhardt v. Packard.

the destruction of their sulpho-groups, could be produced, was entitled to claim broadly the product when made by his process, whether, as part of the process, the treatment of the sulpho-acids with nitric acid should be according to his method or by any other equivalent method which would produce his product.

It being shown that the defendants' coloring matter possesses the peculiar characteristics of the patented article, and produces the same results, and those results having been unknown until Caro's process was employed, there is sufficient prima facie evidence of infringement.

The plaintiffs being the owners of the exclusive right to make, use and sell, and to vend to others to use and sell, the invention, throughout the United States, have the entire interest, although the right to vend to others the privilege of making was not transferred to them.

(Before WALLACE, J., Southern District of New York, December 16th, 1884.)

WALLACE, J. The complainants have acquired from the patentee the full and exclusive right to make, use and sell, and vend to others to use and sell, throughout the United States, the invention described in letters patent of the United States, No. 225,108, issued to Badische Anilin and Soda Fabrik, a corporation, as assignee of Heinrich Caro, for a new and useful improvement in coloring matters produced from alpha-naphthol. The patent was granted March 2d, 1880.

The gist of Caro's invention, as described in the specification, is a process whereby alpha-naphthol is converted into sulpho-acids, which are capable of being treated with nitric acid without losing their sulpho-groups. Until this process was employed, the sulpho-acids of alpha-naphthol, when thus treated, lost their sulpho-groups, and were converted into dinitro-naphthol, or naphthalene-yellow, a coloring matter insoluble in water. Caro's sulpho acids, when thus treated, are converted into a yellow coloring matter, which is soluble in water, and is especially adapted for being used in dyeing and printing, in mixture with other dye-stuffs which possess similar acid properties, such as, extract of indigo, or the sulphoacids of azo compounds. The specification fully details the process of converting the alpha-naphthol into the requisite sulpho-acids, and also the process of treating the sulpho-acids