Full opinion text
RODNEY, District Judge. This action, based on fraud, traces its devious course back to 1929 and 1931. This preliminary and abbreviated statement of facts is largely taken from a former opinion of this Court of July 12, 1950, 92 F.Supp. 885. In 1929 and 1931 defendant’s predecessor, a South Dakota corporation of the same name as defendant, commenced two suits in this court against the Winkler-Koch Engineering Co. and the Root Refining Company, respectively, charging them with the infringement of two of its patents, the Egloff and Dubbs patents. These suits were consolidated for trial, and an opinion was filed on April 27, 1934, sustaining the validity of the patents and holding that they were infringed by the process practiced by Root. Root appealed to the Circuit Court of Appeals for this Circuit, and that court unanimously affirmed the decree of the District Court, the opinion being written by Judge J. Warren Davis. Rehearing of the case was subsequently denied by the Circuit Court of Appeals and the Supreme Court denied Root’s petition for certiorari. The present defendant was substituted for the South Dakota corporation in the Root case by an order of this Court entered pursuant to an opinion dated October 9, 1936, 16 F.Supp. 846. In the meantime Universal Oil Products had brought patent infringement suits against other oil companies, including plaintiff in the present action, and especially against the present plaintiff in a suit in Kansas. This last mentioned suit was settled by an agreement of April 1, 1937. Around this agreement and settlement cluster all of the difficulties of the present case. That agreement must herein receive such detailed consideration that it must be sufficient at this point to merely state that it is alleged by the plaintiff that it was induced to become a party to such settlement by fraud and by reason of its reliance upon defendant’s representation that it (Universal) had obtained a valid judgment in its favor in the Root case. In 1941 proceedings were instituted in the United States Circuit Court of Appeals for the Third Circuit, as it was then designated, upon the initiative of certain lawyers, who had originally represented Root Refining Company in the Root ease but who were now acting in a somewhat personal capacity, to have that court inquire into the integrity of its own judgment in the Root case. The suggestion was made that Judge Davis had been bribed by Universal to render a decision in Universal’s favor when the Root case went up to the Circuit Court on appeal. A master was appointed and seems to have made extensive investigation of the facts. Universal took part in these proceedings, but Root Refining Company did not do so, its former attorneys acting in the proceedings simply as amici curiae. The master rendered a report in 1943, in which he concluded that there was such fraud in connection with the appellate proceedings in the Root case as tainted and invalidated the judgments rendered by the Circuit Court of Appeals on June 26, 1935. On June 15, 1944, the Circuit Court of Appeals entered an order that the judgments be vacated and the cases reargued. Thereafter the amici curiae applied to the Circuit Court for an order directing that their expenses and compensation and those of the master be taxed against Universal. The Circuit Court granted this application on December 29, 1944, 3 Cir., 147 F.2d 259. Universal petitioned the Supreme Court for a writ of certiorari with respect to the order of December 29, 1944. The Supreme Court reversed the judgment of the Circuit Court, as far as the compensation and expenses of the amici curiae were concerned. Thereafter the Circuit Court of Appeals decided to vacate its order of June 15, 1944, and on June 20, 1947, it entered an order to that effect. The order also directed Universal to show cause why the judgment of affirmance in the Root case should not be set aside and vacated by reason of the alleged fraud and corruption practiced upon the Circuit Court by Universal or those acting for it; it permitted the intervention of Skelly Oil Company and authorized the Attorney General or some member of his staff to appear as amicus curiae. The Chief Justice of the United States designated three judges from other circuits to sit as the Circuit Court of Appeals for the Third Circuit in further proceedings in this matter. In the meantime Whitman filed a motion in the Circuit Court for leave to intervene. The intervention was permitted by an order of that court on April 6, 1948, over the opposition of Universal. In the same order the court formulated the charges to be tried, which were, in essence, whether the action of Judge Davis in the case had been influenced by an expectation of gain under an agreement with one Kaufman, and whether Kaufman had been employed by Universal to exercise improper influence upon Judge Davis. Hearings were held and extensive testimony was taken by the Court of Appeals. It found that the judgments in the Root case were tainted with fraud and ordered the judgments to be vacated. Finally, after Universal had unsuccessfully petitioned the Supreme Coui't for writs of certiorari and for rehearings upon the Supreme Court’s denial of certiorari, the Court of Appeals issued its mandate directing the District Court to vacate its decrees in the Root case and to dismiss the bills of complaint therein, by reason of the fraud practiced upon the Court of Appeals by Universal. In the meantime the Kansas suit of Universal against National which had been instituted in 1935 was being maintained. Intermittent attempts to arrange a license from Universal to National and a settlement of pending matters had continued, but on December 13, 1936, National had refused the license on the terms then offered. The Kansas ease was being prepared and trial had been set for April 26, 1937. On March 13, 1937, Universal filed an amendment setting up the original affirmance of the Root case in the Circuit Court of the Third Circuit as a bar to National’s defense on the merits on the ground of res judicata. The agreement of April 1, 1937 quickly followed and the then pending suit was discontinued. The plaintiff contends that the defendant had corruptly and fraudulently obtained the affirmance in the Root case and that it fraudulently used such corruptly-obtained judgment as res judicata in the Kansas case. The plaintiff therefore seeks rescission of the contract of April 1, 1937, together with other relief. It will be borne in mind that the name of the plaintiff, “William Whitman, Inc.,” is a new name for the same corporation formerly known as “National Refining Co.” and as mentioned in this opinion. This case contains many complex questions of law and of fact. Elaborate findings of fact and conclusions of law are separately filed. The case has consumed 97 days of actual trial, almost 13,000 pages of testimony in 32 volumes and contains many thousand exhibits. Voluminous briefs have been filed and numerous arguments had. It has been impossible to compress within more reasonable limits the consideration of the many questions presented. The skill, uniform courtesy and helpfulness of counsel have contributed to a very large extent in lessening the burdens of the court. Two questions should be disposed of in limine. In the agreement between the parties, hereinafter discussed in detail, some patents of the plaintiff were assigned to the defendant. Originally some claim as to these patents was made, but the question has been considered as moot and will receive no further consideration herein. Secondly, a great quantity of exhibits, over four hundred in number, were offered in evidence, en masse, by the plaintiff. The defendant has entered both a general objection and a series of individual and special objections and moves that the exhibits be stricken. In a large measure the exhibits represent the culling of old files of the parties, long discarded, and represent old correspondence and inter-office memoranda. No witness testified to the authenticity of the exhibits and they do not seem to satisfy the requirements of the Federal Business Records Act, 28 U.S.C. § 1732. None of the exhibits has been considered as material in the ensuing opinion and I think the motion of the defendant should be granted and the exhibits excluded. I have been requested, initially, to determine as to which jurisdiction we must look for the applicable law. There are so many facets involved in the case at bar it is difficult to determine as to which phase I am requested to examine the law of a particular jurisdiction. It is, of course, useless to expend a long time upon the question of the applicability of a particular jurisdiction where it is not shown to have a distinct application differing from that of other jurisdictions. There are, however, some aspects of the case in which the law is not entirely uniform. The plaintiff contends that the matter should be determined by what it calls the “Federal Common Law” and, failing that, the law of Ohio should be applied. The defendant contends that in this diversity case the law of the forum, Delaware, should be applied, and, failing that, the law of Illinois should control. The plaintiff contends that this case had its origin in the bribery and corruption of a Federal judge by the present defendant; that the Constitution and laws of the United States have fully and exclusively provided for the existence, appointment, tenure and all other matters concerning a Federal judge and that matters concerning the probity, or lack of such probity, are matters to be determined by Federal principles and not by State law. The plaintiff contends that all diversity cases are not subject to the rule of Erie R. Co. v. Tompkins. A number of cases hold that the rule of Erie R. Co. v. Tompkins is not applicable to those areas of judicial decision where the policy of the law is dominated by Federal legislation or control. If there be any peculiar principles of the so-called Federal Common Law differing from the principles of the applicable state law, which is not apparent to me, yet still I do not think such principles would have application in the present case. This case involves a contractual relationship between the parties to this action. It seeks rescission of that contract and other remedies connected with that contractual relationship. Any connection of the particular Federal judge with any of the parties in this case long antedated the direct contractual relationship between the present parties and with respect to which this present suit must be determined. The plaintiff in contending for the Federal Common Law largely relies upon the bribery and corruption of the Federal judge as the basis of the present action. At a later stage in this opinion it is found that any cause of action of the plaintiff is not based upon that fraud and corruption of the judge, but upon the fraudulent use of that corruptly-obtained judgment as res judicata in an action between the parties. I think any Federal Common Law as distinguished from applicable State law is not involved. I am thus, by Klaxon v. Stentor Electric Mfg. Co., remanded to the Delaware Courts for the applicable principle of Conflict of Laws. It has been held in Delaware, in tort actions, the law of the place of the wrong determines the question of the breach of duty and that the place of wrong is where the final act occurred which establishes liability. So in matters of contract this Court has held that under Delaware law the validity and construction of a contract is to be determined by the law of the place where the contract was made. Failing the adoption of a Federal Common Law, the plaintiff contends that the law of Ohio should govern. It contends that Ohio was the place where the operable facts were centered: (1) that it was the location of the plaintiff’s offices where negotiations for the contract were made; (2) that the contract was executed by the respective presidents and secretaries in Ohio; (3) that the royalty payments were sent from Ohio and additional reasons for the selection of Ohio are given. The defendant contends that if the law of Delaware should not govern, then consideration should be based upon the law of Illinois. The defendant, admitting the signature of the contracts in Ohio, contends they were not complete until seals were affixed in New York and delivery then made by mail, and that the contract was not effective until delivery. The defendant contends that the main obligation of the plaintiff was the payment of royalties and that by express provision of the license agreement this payment of royalties was to be made in Illinois. Parenthetically I may remark that insofar as the interposition of the corruptly-obtained judgment as res judicata in the Kansas case was concerned, such action formally and officially took place in Kansas. No element of the law is in more confusion than that under the conflict of laws and the conflict between the places of making and performance of a contract where such places are not the same. Even if this matter was an open one, I am spared such consideration. Here I am not confronted with questions of the validity or construction of the contract. No question of construction exists and the validity at the time of execution and for a number of years is unquestioned. The contract was a valid but voidable contract. The question is the rescission of the contract brought about by extraneous matters, viz., fraud, separate from and unmentioned in the contract. Similarly, I am not concerned with questions of performance of the contract except as such questions impinge upon the quantum of performance. Insofar as the impact of fraud upon a contract is concerned and as affecting rescission of the contract, I find little difference between the various jurisdictions. Other matters appearing herein, however, seem to require a more definite adoption of controlling law. In the license agreement, constituting a portion of the contract, appears this precise statement of agreement of the parties: “22. This agreement shall be considered as a contract executed and delivered at Chicago, Illinois, U. S. A.” It is thus clearly the intent of the parties that the place of a large part of the performance should be joined to the place of execution and delivery of the contract and that all should be “considered” to have occurred in Illinois. Many cases have held that the intent of the parties is the true test of the application of Conflict of Laws, and that questions, both of the making of the contract and its performance are, in reality, based upon principles of the intent of the parties. See 11 Am.Jur., Conflict of Laws, Sec. 119, page 404. Questions of the weight to be given to the expressed intent of the parties as to the governing law have usually arisen in connection with the validity of the contract or construction of its terms. I have neither question. That the intent of the parties to a contract that such contract shall be considered in connection with the law of a particular jurisdiction has been considered in many cases holding that such intent will be respected by the courts. Of course, such intent may not be violative of either the public policy or statute of the forum or adopted for the purpose of evading an otherwise applicable law. It is also true that the jurisdiction whose law is adopted by the express intent of the parties must be one which has a real connection with one or more of the various elements of the contract and parties may not arbitrarily select the law of some jurisdiction which has no relation to the matter in controversy. Indeed, in an annotation upon the latter point in 112 A.L.R. 124, it is assumed that a stipulation or agreement of the parties would be effective if it referred the contract to either the place where it was made or to the place where it was to be performed and the stipulation was only ineffective when it sought to make applicable the law of some jurisdiction having no ostensible connection with the contract. In 2 Beale on Conflict of Laws, p. 1100, in speaking of questions arising from validity or effect of a contract, it is said, “But, on the whole, as will be shown, the prevailing tendency is to regard the intention of the parties as controlling. * * *” Again, at page 1116, it is said, “When the parties expressly agree that the contract shall be subject to a" certain law, in other words, when their intention is expressed, it has been intimated, though never expressly decided by the Supreme Court, that the courts will give effect to that intention. * * * ” (Citing cases.) This express decision, it seems to me, came in 1953 in Lauritzen v. Larsen, 345 U.S. 571, 588-589, 73 S.Ct. 921, 931, 97 L.Ed. 1254, where it is said, “Except as forbidden by some public policy, the tendency of the law is to apply in contract matters the law which the parties intended to apply.” In Delaware, to whose law I must primarily look, it has been held in Wilmington Trust Co. v. Wilmington Trust Co., 26 Del.Ch. 397, 24 A.2d 309, 313, 139 A.L.R. 1117, that, “Contracting parties, within definite limits, have some right of choice in the selection of the jurisdiction under whose law their contract is to be governed.” There the court held that an expressed intent by a donor of a trust should “be respected by the courts, if the selected jurisdiction has a material connection with the transaction.” An expressed intent of the parties was also considered to some extent by this court in Kane v. Chrysler Corp., D.C., 80 F.Supp. 360. It has already been pointed out that the jurisdiction stipulated by the parties was that of Illinois, having a material connection with the transaction as being the place of performance of a large measure of the obligation of the plaintiff. The parties having expressly stipulated that the agreement “shall be considered as a contract executed and delivered” in Illinois, and that being a place of performance and a material locale, I must give that intent due weight. This would be so, I think, if conditions were reversed. If the plaintiff was in arrears in payment of royalties and defendant brought suit to recover such royalties, such right of action would, I think, be subject to the law of Illinois. At this early point in the discussion it becomes necessary to clearly understand the claim of the plaintiff and the remedy by which it seeks to enforce such claim. It will be advisable to consider certain language largely appearing in the pleadings, briefs and argument. The plaintiff contends that the action is for “restitution, rescission and other relief.” These words “rescission” and “restitution” are words much disputed in the present litigation as to both their concept and application. The word “rescission”, both as to its meaning and application, must receive elaborate attention herein. The word “restitution” as applicable to this case is not so clear. As a word descriptive of a distinct cause of action or claim of a party it has a definite meaning in the law; viz., that a party against whom an erroneous judgment or decree has been carried into effect is entitled, upon reversal of such judgment or decree, to have restitution, by writ of restitution if necessary, of what he had lost thereby. It also has a more general meaning as indicative of the principles attending the restoration or return or reparation to which a party may be proven to be entitled in an appropriate proceeding, and is connected with the principle of unjust enrichment. In such sense it is used in many authorities, and is specially treated by the American Law Institute as a separate volume. This, then, requires consideration of what is the cause of action or claim of the plaintiff. By “cause of action” I' do not intimate that the meaning of those words can be set out with exactitude. I am aware of the fact that the term is an elusive one having one meaning for one purpose and a different one for another. The Supreme Court has not committed itself to a single definition. I am aware that the Supreme Court has said, “A cause of action does not consist of facts, but of the unlawful violation of a right which the facts show.” I must, however, pin-point the unlawful violation of a right of which the plaintiff complains and endeavor to fit this with established principles and with the facts. The original complaint filed herein December 28, 1946 was largely and mainly based on rescission and prayed that the contract entered into between the parties and dated as of April 1, 1937 should be rescinded and tendering on the part of the plaintiff restoration of benefits received by it. On May 31, 1949 the present amended complaint was filed which is more elaborate. In this complaint rescission of the contract of April 1, 1937 is again expressly sought. In addition the plaintiff seeks the recovery of all monies paid by it as royalties under the contract of April 1, 1937 and a discharge of all accrued and unpaid royalties and all commitments under that contract. A judgment is sought for all expenses incurred in several matters formerly in litigation between the parties. Injunctive relief is sought concerning any action by defendant on any patents mentioned in the agreement of 1937, together with a reassignment to plaintiff of any patents assigned to defendant by plaintiff under that agreement. Finally, exemplary and punitive damages are sought by reason of the defendant’s fraudulent conduct. I must still determine the nature of the plaintiff’s action. That it is in equity seems clear. That it seeks the equitable remedy of rescission of the contract of April 1, 1937 and injunctive relief is equally clear. The plaintiff’s contention is that the action is for “restitution, rescission and other relief.” If by this word “restitution” is meant a method of restoration of that to which the plaintiff may be entitled, then certain principles would apply. If by such word there is claimed a specific cause or form of action cognizable in equity, then different considerations must arise. Under the Rules there is only one form of action. It is not now necessary to bring the action within the technical niceties theretofore required but, just as the new rules did not abolish the distinction between equitable and legal rights, so the facts alleged in a complaint must still show an allegation of facts consistent or appropriate to some enforceable cause of action. To determine the meaning of “restitution” as used by the plaintiff, it is necessary to again state a few basic facts. Universal sued Winkler-Koch Engineering Co. and Root in Delaware for patent infringement and succeeded in such suit. On appeal the decree was affirmed by the Court of Appeals. The affirmance, it has been found, was accomplished by fraud and bribery and the original decree and affirmance were set aside. I am estopped to question the fact of such bribery and fraud. Before the bribery and fraud were discovered or established, it is contended that the defendant, using the bribery-procured affirmance as a lever, compelled the plaintiff to enter into the contract of April 1, 1937 as a consequence of which the plaintiff has suffered the loss of which it complains. Bribery and fraud must be assumed by me in the obtaining of the affirmed judgment. This bribery and fraud was of a most serious character as affecting the purity and integrity of judicial processes. Without in any way minimizing the enormity of the bribery or fraud, I must inquire when the rights of the plaintiff emerged as a consequence thereof. The plaintiff was not a party of record to the action in which the bribery occurred. It received no rights as a member of the general public as a vindicator of public justice or an avenger of a violation thereof. It is contended that by reason of the bribed judgment the plaintiff was forced to enter into the contract of April 1, 1937 and that fact must be subsequently considered. The plaintiff contends, however, that with reference to the principles of the action of restitution it had, because of the facts, some personal rights in the judgment itself affected by the bribery. To consider this matter some further facts require attention. While the Root-cases (Universal v. Root) were pending in the Delaware District, Universal sued National in the Northern District of Ohio at Cleveland for infringement of the same patents as involved in the Delaware action. While the Root cases in the Third Circuit were pending on appeal, the case of Universal against National in Ohio was dismissed on plaintiff’s application and without prejudice and a new suit was instituted in Kansas. From the time of the determination of the Root cases in Delaware some negotiations had been conducted relative to National’s taking a license from Universal. When on June 26,. 1935 the Court of Appeals for the Third Circuit affirmed the decree of Judge Nields in the Delaware Root cases, Universal immediately telegraphed to National the fact of such affirmance and sent it a copy of the opinion. In March of 1936 the present defendant (Universal of Delaware) moved in the Kansas case to be substituted formally for Universal of South Dakota and set up the Root judgment as a persuasive precedent. For a long period and during all of the litigation concerning the validity of the Winkler-Koch process utilized by National there had been a defense fund maintained by and contributed to by the users of the Winkler-Koch process for use in defending such users from infringement actions. On March 13, 1937 Universal filed an amendment to its supplemental complaint in the Kansas case setting forth the affirmance by the Court of Appeals for the Third Circuit of the Delaware judgment in the Root cases and asserting it as res judicata against National and at or about the same time the facts concerning the defense fund and National’s contributions thereto were disclosed by depositions of National’s officers. National was informed by some of its counsel that the injection of the principles of res judicata would prevent the trial of the Kansas suit upon its merits and, after further negotiations, the license agreement between National and Universal was entered into as of April 1, 1937. Under these circumstances the plaintiff seeks to draw from the plea of res judicata by the defendant in the Kansas case some strengthening inferences in support of its theory of restitution. The plaintiff seeks to show that as it was bound by the plea of res judicata from defending the case in Kansas on the merits, so it was such a party interested in the Root decision, from which the basis of res judicata originated, that it was so interested in the subsequent reversal of that judgment that the action of restitution allowable in such cases devolved upon it. Without reviewing all of the evidence or critically examining the voluminous briefs on the subject, I am of the opinion that the plea of res judicata can have no such effect and did not constitute a sole or conclusive reason for the subsequent agreement. In the first place the doctrine of res judicata as applicable to the case then pending was never determined, nor is it clear that it ever would have been determined as preventing National from defending on the merits. While Universal seems to have considered for some time the applicability of the doctrine of res judicata, it does not appear to have been confident of its success. On the other hand, counsel for National had given early consideration to the subject and had early considered that National had little to fear and at least, one of its counsel thought that Universal itself could not expect to prevail. While-some of National’s counsel may have subsequently been of a somewhat different, opinion and more doubtful of the outcome, the doctrine of res judicata of and in itself does not seem to me to have been the sole cause of the agreement of April 1, 1937. Certainly the President of National did not present to his Board', of Directors the impossibility of defending the Kansas suit on the merits by-reason of the application of res judicata, as any reason for the consummation of' the contract of April 1, 1937. I am of the opinion that the cause of action of the plaintiff did not arise from, the bribery in an action to which the-plaintiff was not a party but arose, if at. all, upon the use of that bribed judgment, as a means of compulsion as to the contract of April 1, 1937. I am of the opinion that “restitution” as used by the plaintiff is not to be considered by me as a specific cause of action growing out of the bribed and fraudulently acquired judgment, but as a factor to be considered in connection with the rescission of the contract which, as it is contended, was obtained or compelled by reason of the use of that bribed judgment. In arriving at the foregoing conclusion I have, of course, given consideration to the cases mainly relied upon by the plaintiff, viz., Arkadelphia Milling Co. v. St. Louis S. W. Ry. Co., 249 U.S. 134, 39 S.Ct. 237, and Hartford-Empire Co. v. Shawkee Mfg. Co., 3 Cir., 163 F.2d 474. The Arkadelphia ease, insofar as here applicable, seems to me a plain case sustaining the established principles of restitution. There certain railroads enjoined a State from fixing lower freight rates. The defendants were the members of the Railroad Commission, in their ■official capacity, and two shippers. By the injunction the railroads continued to receive the higher rates theretofore existing. The companies were required to keep an accurate account showing the ■difference between the rates actually paid .and what would have been paid according to the lower and enjoined rates. The injunctions were made permanent, the court reserving jurisdiction. This decree was reversed by the Supreme Court and upon the dissolution of the injunction the District Court appointed a master to ascertain the damages sustained by various shippers. These damages were allowed, being the difference between the rates required to be paid and what should have been paid. The Supreme Court held it to be a typical •case of restitution, viz., where an erroneous judgment has been rendered it is inherent in a court to correct that which has been wrongfully done by virtue of its process. Of particular interest is the holding that the railroad commission represented all the shippers and by virtue of the injunction against the commission the railroads exacted from the individual shippers and claimants the excessive charges which were the subject of the claimed restitution. The distinction between the Arkadelphia case and the present is, to me, very plain. There the Commission represented all the shippers to the same extent as if each had been separately named; there the excess charges were exacted from the individual shippers by reason of the injunction. Here the present plaintiff was not a party or represented in the Root judgment; here there was no proven privity between the present plaintiff and those directly injured by the Root judgment. I am of the opinion that the principle of restitution as recognized in the Arkadelphia case is not applicable to the present litigation. Hartford-Empire Co. v. Shawkee Mfg. Co., 3 Cir., 163 F.2d 474, has much of interest. I shall not recite the long and much litigated proceedings of Hartford. It is sufficient to say that by fraud in the Patent Office Hartford obtained a patent in 1928. Hartford then sued Hazel-Atlas for infringement of that fraudulently-obtained patent. It eventually succeeded. In 1933 Hartford sued Shawkee for infringement of the same patent and, by virtue of the Hazel-Atlas case, obtained a decree. In 1941 the fraud of Hartford was brought to light. As a result of the exposed fraud a petition for a bill of review was filed in the Court of Appeals but was denied and this holding was reversed in 322 U.S. 271, 64 S.Ct. 1014, 1015, 88 L.Ed. 1269. In this latter case the fraud was expressly excoriated and the District Court was instructed to permit “Shawkee and the others to bring such further proceedings as may be appropriate in accordance with their prayer for relief.” In accordance with this broad command the defendant filed its counterclaim in the original suit. Passing now the proceedings in the District Court, I shall consider at this stage only that portion of the opinion of the Court of Appeals which has reference to the subject now discussed, viz., restitution. The court held that the only portion of the elaims of Shawkee cognizable under the principle of restitution was that of royalties, the other claims being designated as damages. The court held that Shawkee was entitled to restitution for the royalties paid under the following circumstances. Shawkee was a losing defendant in an infringement suit and against whom an injunction was issued. The royalty payments sought to be recovered by restitution were not made by any direct order of the injunction decree, but the court clearly held the royalty payments were made by reason of economic necessity as the result of the injunction decree. The court held: “ * * * We do think that the clear weight of the evidence, as indicated, is that but for the injunction the Hartford feeders would have been superseded by non-royalty machines. The injunction stopped all that and forced Glenshaw and McKee to retain their old royalty contracts with Hartford (which otherwise could have been terminated) and to renew them at their expiration. The enforcement therefore of Hartford’s fraudulent patent resulted in certain royalty payments * * which otherwise would not have been made.” The salient and important particulars as to restitution and distinguishing the Shawkee ease from the present is that Shawkee was a direct party to the original proceeding in which the fraudulent patent was the controlling element; that as a result of that fraud practiced directly on Shawkee the royalty payments were made and these royalties so paid were sought by restitution. It would be mere reiteration to show that here National was no party to the fraudulently acquired judgment and that such fraudulently acquired judgment was but an element entering into the contract of April 1, 1937. The plaintiff seeks rescission of the contract of April 1, 1937 because, as it contends, the gross fraud of the defendant was a material or controlling element in inducing the plaintiff to enter into such contract. It is axiomatic that when fraud has induced a contract the defrauded party may affirm the contract and sue at law for his damages or he may dis-affirm the contract and seek its rescission. Here the plaintiff, alleging fraud, seeks rescission. It is first objected that because the remedy the plaintiff seeks is wholly or largely made up of monetary considerations equity has no jurisdiction but the remedy is at law. For this is cited a number of cases, such as Buzard v. Houston, 119 U.S. 347, 7 S.Ct. 249, 30 L.Ed. 451. It seems clear from these cases that in many instances where fraud has induced a contract the defrauded party may treat the contract as rescinded, restore the status quo, and where his claim is solely of a pecuniary nature the action must be at law for no equitable relief is necessary. Where the damages sought are pecuniary and the remedy at law requires the return of the status quo, it is difficult to discover the remedy at law when the status quo, through no fault of the plaintiff, cannot be restored. If there be no remedy at law because, from the nature of the facts, the exact status quo cannot be restored, and if there be no remedy at equity because the damages are solely or largely pecuniary, where is the remedy? It cannot be that gross fraud, if it be the foundation of the contract, would go unpunished. I am of the opinion that where the action seeks rescission of a contract induced by fraud and the relief to be accorded can only be determined by the application of equitable principles or a balancing of the equities, a remedy in equity is available as being more adequate and efficient than any remedy at law, and this is true even though the only remedy sought in addition to rescission is pecuniary damages or, more properly speaking, a restoration of what has been unjustly obtained. The necessary resumption of the status quo applies to the status quo of the plaintiff as well as to that of the defendant, and where there is a necessary balancing of these equities which only a court of equity can bring about, a suit in equity is proper as it is only in the equitable moulding of the decree that the proper result can be accomplished. Of such cases is American Shipbuilding Co. v. Commonwealth S. S. Co., 6 Cir., 215 F. 296. If, then, as I think, the claim of the plaintiff is cognizable in equity, then I must inquire whether, as charged, the contract complained of was, in fact, so founded on fraud as to warrant its rescission at the suit of the plaintiff. After that would be considered the question whether other principles of law or actions of the plaintiff, if any, would prevent such rescission. A determination of the effect of the fraud on the formation of the subsequent contract between the parties necessarily involves consideration of many facts. It is difficult to compress within reasonable limits the great mass of testimony with the accompanying inferences and conclusions. I must be content with a general statement of what I deem to be pertinent facts. From 1929 and 1931 National had been a user of the Winkler-Koch process. Root Refining Co. was also a user of this process. In 1929 Universal sued Root in Delaware alleging the Winkler-Koch process infringed patents of Universal. Some time after 1931 National became interested in obtaining engineering services and indemnity protection from some outside source. National at that time seemed not too successful by means of its own facilities. Overtures were made with Gasoline Products Corporation which did not materialize, and from 1934 there were intermittent negotiations with Universal relative to a license agreement between the parties. In April, 1934 the Delaware District Court sustained the validity of Universal’s patents and held the Winkler-Koch process an infringement. Additional pressure was then exercised by Universal for National to take its license which was refused and active preparations were made for the trial of the Ohio action of Universal against National based upon the same patents as involved in the Root case. In July, 1934 the Root case in Delaware was appealed to the Circuit Court. In January, 1935 the Root case was argued on appeal in the Circuit Court before Circuit Judges Buffington, Davis and Thompson. In February, 1935 while the Root case was being considered in the Circuit Court, the Ohio case of Universal against National was dismissed without prejudice, and in April, 1935 a new infringement suit of Universal against National was instituted in Kansas and based upon the use of the Winkler-Koch process as an infringement of the same patents as involved in the Root cases. At this point the scene is shifted as we approach the bribery and fraud alleged as the reason for the rescission of the contract of April 1, 1937. This bribery originally involved one Kaufman and Judge Davis and concerned the relationship of Judge Davis with the Root cases. Kaufman was originally retained by Universal in 1932. No bribery of Judge Davis by Kaufman with reference to the Root eases is material at that time because then there had been no decision even in the District Court in the Root case until April 27, 1934. The connection of Judge Davis with the Root cases could not have been definitely known until he became a member of the court to hear the Root case on appeal on January 7, 1935. It has been judicially determined that Kaufman was engaged by Universal to improperly influence Judge Davis in the Root cases and that Judge Davis was so improperly influenced, although the bribery was not known or established until some years later. The actual bribery may not be the basis of the present plaintiff’s claim because the plaintiff was not a party to the action in which such bribery occurred, yet the use of that judgment obtained by bribery and utilized by the bribing party against the present plaintiff must receive consideration. The actual bribery, while not directly to be considered, loses none of its characteristics. As Justice Roberts said in Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 251, 64 S.Ct. 997, 1004, 88 L.Ed. 1250, “No fraud is more odious than an attempt to subvert the administration of justice.” I must now consider what use was made of this corruptly-obtained judgment by the present defendant to whom the fact of corruption was known and as against the present plaintiff which was ignorant of any judgment taint. Within a few days of the judgment Universal wired National the fact of the affirmance and soon thereafter sent a copy of Judge Davis’ opinion. A very obvious purpose of these notices was to facilitate the settlement of matters pending between Universal and National involving the same patents and looking toward a license from Universal to National. Notwithstanding the affirmance of the Root cases negotiations were intermittently continued between the parties and in March, 1936 Universal advanced, in the Kansas case, the affirmance of the Root judgment as a persuasive precedent. Whether negotiations were entirely broken off in December, 1936 or whether the door was left open for further negotiations is in some dispute, but seems of little importance. The Kansas case, on December 30, 1936 was set for trial on April 26, 1937. On March 13, 1937 Universal filed an amendment to its complaint in the Kansas case in which it presented the judgment of the District Court of Delaware in the Root cases (as affirmed by the corruptly-acquired affirmance of the Third Circuit) as res judicata of the issues involved and as preventing any defense by National on the merits of the action. This is an important event and around it clusters many of the contentions of the parties. The defendant (Universal) contends that the advancement of res judicata had no part in the consummation of the licenses as of April 1, 1937 and consequently is not material on the question of rescission. It contends that the licenses were taken because of the importance of the rights obtained by National and the superior quality of the services rendered by Universal and of National’s great need for them. The defendant contends that since the parties to the Kansas suit were not the parties to the Root judgment and the issues not identical, res judicata, as such, could not have been successfully presented. National contends that at the time the operation of its refineries was the most profitable part of its business. It contends that the licenses as finally executed contained substantially the same provisions that it had repeatedly refused and that the presentation of res judicata with the fear that National might not be able to defend the Kansas suit on the merits of the action was the controlling reason for the execution of the agreement of April 1, 1937. I shall not review even briefly the voluminous testimony, including inferences, bearing on the reasons for the agreement of April 1, 1937. It is certain that both parties had long considered the application of res judicata. Certain ones among National’s counsel had originally discounted its effect, but when National knew that Universal had obtained full information as to National's contribution to the defense fund of the Winkler-Koch process users, others among National’s counsel feared the effect of res judicata and the possible inability to put in any defense to the infringement. I shall not pause to consider the legal question as to whether res judicata could or could not have been successfully maintained and thereby estop National from any defense on the merits. It is sufficient if the fear of being deprived of any defense was one of the moving reasons for the agreement. That the interposition of res judicata on the eve of the Kansas trial was an important factor in the consummation of the agreement is, to me, obvious. Except for that plea the contract was the same which National had had the opportunity to accept for many months. The actual entry of res judicata with the background that National knew that Universal then possessed information as to the defense fund to which National was a party was sufficient, with other factors, to make National’s counsel accept the agreement. Insofar as Universal is concerned, it is clear to me that Universal intended the principle of res judicata to bring about the agreement. Why else was the fraudulent judgment interposed? Universal knew that the Root judgment was fraudulent and knew that National did not have this knowledge. The use of the fraudulent Root judgment as res judicata was in itself a fraud. The matter contains all the elements constituting fraud sufficient to furnish the remedy to the plaintiff and as set out in Southern Development Co. of Nevada v. Silva, 125 U.S. 247, 250, 8 S.Ct. 881, 31 L.Ed. 678. To the same effect is Nye Odorless Incinerator Corp. v. Felton, 5 W.W.Harr. 236, 252, 35 Del. 236, 162 A. 504, 510. With some changes in phraseology it seems to be the general law in establishing such fraud to show that: 1. The defendant has made a representation in regard to a material fact. 2. That such representation was false. 3. That such representation was not actually believed by the defendant, on reasonable grounds, to be true. 4. That it was made with intent that it should be aeted on. 5. That it was acted on by complainant to his damage. 6. That in so acting on it the complainant was ignorant of its falsity and reasonably believed it to be true. The fraudulent representation of the defendant, viz., that the merits of the infringement of the Winkler-Koch process upon the patents of Universal had been legally determined in the Root cases, need not have been the sole inducement for the subsequent contract. It is sufficient that such false representation was so material that the contract would not have been made in its absence. I am of the opinion that the fraud of the defendant was sufficient to rescind the contract entered into by reason of it unless other principles of law or actions of the parties prevent such rescission. The defendant advances a number of reasons which, it argues, should so operate that rescission of the contract of April 1, 1937 should not be decreed. The defendant argues: (a) that if the plaintiff ever had any right of rescission, such right was lost by the failure to act when such action should have been taken and such failure to act and the receipt, acceptance and continuance of the benefits of the contract estop the plaintiff from obtaining rescission. With this may be considered the cognate or related principle that the fraudulently-obtained Root judgment of affirmance in the Third Circuit could have been collaterally attacked by National in the Kansas suit; (b) that National is estopped from rescission by the Statute of Limitations ; (c) that National is estopped by laches; (d) that National is estopped by the application of the doctrine of unclean hands; (e) that National is estopped from rescission because of the impossibility of restoring Universal to the status which existed prior to the entering into of the contract and that the restoration of the “status quo” is a necessary element of rescission. These must receive separate but limited treatment. (a) The defendant relies upon the conduct of the plaintiff in failing to act in moving either to rescind or discontinue the contract when it should have acted and the continued receipt of benefits under the contract as a separate and distinct defense from limitations or laches. Some matters, including the dates of happening of certain events, may have a common interest. With reference to any action by National arising out of the fraudulent use as res judicata of the fraudulently-acquired judgment in the Root cases, certain dates have materiality. The fraudulently-obtained affirmance in the Root cases was June 26, 1935. This fraudulently-obtained judgment of affirmance was fraudulently interposed by defendant as a valid judgment constituting res judicata in the Kansas case March 13, 1937. The contract was executed as of April 1, 1937. In 1940 some grand jury proceedings considered the propriety of the relationship of Kaufman with Judge Davis in a different connection. In 1941 a master was appointed by the Third Circuit Court to investigate the validity of the Root judgment. The master reported October 19, 1943. This report was adopted June 15, 1944. Subsequent proceedings continued until 1948 and 1949. The contention of the defendant as to the failure of the plaintiff to have sought timely relief from the provisions of the contract must be considered from two aspects since not only may the time at which the suggested action should have been taken not be the same in the two aspects, but certain principles may have different applications. The two aspects are (1) the plaintiff, by the terms of the contract, could have cancelled such contract and been relieved of any of its obligations; or (2) it could have sought earlier rescission of the contract. (1) The contract of April 1, 1937 by Article 13 provided that National, if not in default, could have cancelled the contract as of December 31, 1938 and any year thereafter by giving three months' prior written notice. National paid no royalties after June, 1944. Before June, 1944 there had been no established fraud with reference to affirmance of the Root judgment. After June, 1944 National could not have cancelled the contract except by removing the default by the payment of all royalties then due. The cancellation of the contract by National would have been no adequate remedy. By 1944 when fraud in the Root judgment received even its first official recognition, National had paid some $800,-000 in royalties under the contract of 1937. The cancellation of the contract would have had no effect on the recovery of these royalties already paid. The cancellation of the contract would have made National immediately subject to a suit for infringement and by cancellation National would have lost all benefits and services under the agreement. Universal contends that it was the continued right to enjoy these benefits which prompted National to continue the agreement in force. National was in default in July, 1944. Under paragraph 8 of the agreement, in case of default Universal could itself have cancelled the contract upon giving a prescribed notice. Just as Universal contends the license agreement was not terminated by National because it was beneficial to National, so I must assume it was not cancelled by Universal because the continuance of the license agreement was then beneficial to Universal. I think the right to cancel the license agreement does not estop the present plaintiff in its application for rescission. (2) The second aspect of the claim that the plaintiff has forfeited its right to rescission of the contract of April 1, 1937 is based upon a claimed failure of plaintiff to seek timely relief by rescission. With this is inextricably interwoven the contention that the fraudulently acquired affirmance of the Root judgment in the Court of Appeals of the Third Circuit could have been collaterally attacked by National in the Kansas suit between Universal and National and before the validity of the Root judgment had been determined in the Circuit Court in which it was rendered. This latter point must be first considered. I am in entire accord with the general contention that there may be a collateral attack upon a judgment obtained by fraud of such a nature as to bring in question the jurisdiction of the court granting the judgment sought to be attacked or the legality of such judgment. Space and time do not permit a detailed discussion of the many cases cited by the defendant. It must be sufficient to state that I do not think that the affirmance of the Root judgment could have been collaterally attacked in the Kansas case by National prior to the determination of the Third Circuit Court itself. I think this is true both legally and factually. No case has been found where the fraud alleged as the ground of collaterally attacking a judgment of another court was the bribery of the court itself. Fortunately cases concerning the venality of a court or judge are of very rare occurrence. In no case has an inferior court in one .jurisdiction allowed a collateral attack involving the bribery of a judge of a superior or appellate court of another jurisdiction. In Crescent City Live Stock Landing & Slaughter-House Co. v. Butchers’ Union, 120 U.S. 141, 159, 160, 7 S.Ct. 472, 482, 30 L.Ed. 614, it is said: “It is an invincible presumption of the law that the judicial tribunal, acting within its jurisdiction, has acted impartially and honestly. The record of its proceedings imports verity; its judgments cannot be impugned except by direct process from superior authority.” In Restatement of the Law, “Judgments,” § 124, it is said: “ * * * Public policy requires that an attack upon a judgment because of wrongful conduct by a duly-constituted court acting within its powers should be made by direct rather than by a collateral attack. * * *» Factually, I am of the opinion that the Root judgment in the Third Circuit could not have been collaterally attacked in the Kansas suit so as to form the basis of the rescission of the agreement of April 1, 1937 prior to the conclusion of the investigation of the Root judgment by the Third Circuit Court itself. The sequence of dates must again be considered. In 1935 the corruptly-obtained affirmance of the Root judgment was rendered, although the fact of such corruption was not exposed until some years later. While some rumors of possible wrongdoing on the part of some one existed in 1940, I find nothing to warrant any action by National in Kansas. On June 5, 1941 the first intimation of wrongdoing in the Root judgment was presented to the Third Circuit Court of Appeals, and on November 26, 1941 a master was appointed to make inquiry of the matter. The master was invested with plenary powers. The master was directed “to receive relevant documents and evidence in the possession of the United States Department of Justice, its Bureau of Investigation, and United States Attorneys, and to inspect the federal grand jury proceedings in New York and Philadelphia.” He was given power “to summon and swear witnesses and subject them to the examination and cross examination of the attorneys” and his fees and expenses were ordered to be paid. None of these powers or facilities would have existed at the instance of a private party in a Kansas litigation. Even if, legally, the Root judgment of affirmance in the Third Circuit could have been collaterally attacked in Kansas, yet still I think it could not have factually been accomplished and the law does not require a vain thing. Notwithstanding the powers and facilities possessed by the master under the order of November 26, 1941, and in aid of the investigation, no report was made by him until October 19, 1943 and no confirmation of the report was had until June 15, 1944 when the judgment was vacated and the cases set for reargument. From August, 1944 negotiations were intermittently carried on between National and Universal for the settlement of National's claim and in March, 1945 Universal asked National to be patient with respect to the matter. These negotiations finally terminated November 22, 1946 when Universal informed National that it would no longer discuss National’s claim. The original complaint in this action was filed December 28, 1946. While these matters were transpiring the Court of Appeals for the Third Circuit, on December 29, 1944, made an order providing for counsel fees and expenses to the amici curiae who had first brought the matter to the attention of the Circuit Court. This matter eventuated in a reversal by the Supreme Court, June 10, 1946 and the Supreme Court intimated that the proceeding had lacked an adversary character. After several hearings and in line with the comment of the Supreme Court, the Circuit Court on June 20, 1947 set aside its order of June 15, 1944 which in turn had vacated the judgment of June 26, 1935. The entire question of venality of Judge Davis in the Circuit Court judgment of affirmance of the Root cases of June 26, 1935 was then heard before a specially constituted Court of Appeals for the Third Circuit which on July 16, 1948 filed its opinion. After certiorari was refused and rehearing denied, the matter on March 17, 1949 was finally closed by the finding that Judge Davis had been bribed by Universal in the Root cases. From this long and complicated state of legal events and factual happenings I cannot say that National is es-topped from seeking the rescission of its contract of April 1,1937 which, as it contends, was at least partially based upon the contention of Universal that the affirming judgment of Judge Davis was a valid judgment. (b) and (c) Statute of Limitations and laches. While the defendant relies upon the alleged failure of the plaintiff to act either to rescind or discontinue the contract and the continued receipt of benefits as a substantive defense and as distinct from the defenses of Statute of Limitations and of laches, yet the several defenses have much in common and particularly with reference to the dates or times when action could or should have been taken. I have considered this action as an equitable action seeking rescission. Whether the court of equity should consider laches, qua laches, or since much of the remedy might have been available at law, the court of equity should act in analogy to the Statute of Limitations, makes, in this case, little difference. The time from which either limitation of time or laches should operate is material. The mere fact that fraud is involved does not prevent the running of limitation or consideration of laches, but the nature of the fraud is a matter for consideration. In most cases of rescission involving fraud, the fraud is personal to the parties and a party will be required to act when he has had or could reasonably be expected to have had knowledge of the existence of the fraud, or of such facts as would put him upon inquiry. When, however, the alleged fraud involves the integrity of a judicial officer of almost the highest court of the country, reason and authority require that a large measure of reliance may be placed upon the presumption of probity inherent in the office and the establishment of the fraud prescribes the time from which the limitation or laches would run. I am of the opinion that when the Court of Appeals of the Third Circuit had commenced the investigation of the judicial conduct of Judge Davis, neither limitation nor laches by reason of his fraud began to run until his venality had been established by that tribunal. The most analogous cases are the Hazel-Atlas and Shawkee cases. There the fraud was perpetrated on the Patent Office and on the court; here the fraud consisted in the bribery of a member of the court itself. In the Hazel-Atlas case the original fraud was committed in 1928 and utilized upon the court in 1932. The Supreme Court, after reciting the facts, said: “Indisputable proof of the foregoing facts was, for the first time, fully brought to light in 1941 by correspondence files, expense accounts and testimony introduced at the trial of United States v. Hartford-Empire Co., D.C., 46 F.Supp. 541, an antitrust prosecution begun December 11, 1939. On the basis of disclosures at this trial Hazel commenced the pr