Opinion of the Court.

became fixed by the insolvency of the company, and must be computed as expectancies reduced to present values. It is true, the court does, in the next sentence, concede that the policy had a reserve value, but asks, "To whom was that value payable?" The plain answer was at hand, that the reserve value of each person's interest was payable to him or her. We cannot but think that if the true character of the interests in question had been brought to the attention of that learned court, it would have come to a different conclusion from that which was reached.

The counsel for the appellant further contends that, by the law of Louisiana, (which must undoubtedly govern the case,) compensation is not allowed against an insolvency in favor of a party whose credit was not due when the insolvency occurred. The Civil Code of Louisiana on the subject of set-off is identical with the Code Napoléon. The article apropos of the point now under consideration is the 1291st of the Code Napoléon, and the 2209th of the Civil Code of Louisiana, and reads as follows: "Compensation takes place only between two debts, having equally for their object a sum of money, or a certain quantity of consumable things of one and the same kind, and which are equally liquidated and demandable [exigibles, i.e. due]." Now, although upon a bankruptcy declared, all claims against the bankrupt become instantly due (subject, of course, if not matured, to a rebate of interest), and are equally entitled to dividends of the bankrupt assets, yet, in order that a claim may be the cause of compensation, the commentators hold that it must be due [exigible] at the time when the bankruptcy is declared. Touillier, vol. 7, art. 381; Demolombe, vol. 28, art. 540. There have also been judicial decisions to the same effect, though not uniformly so. Merlin Rep. vol. 3, p. 262, tit. Compensation.

See

But if there are technical reasons in the law of Louisiana for rejecting the defence when set up by way of compensation, it was nevertheless allowed by the Supreme Court of that State, by way of reconvention, in a case exactly like the present. Life Association of America v. Levy, 33 La. Ann. 1203. Levy was the holder of an endowment policy in the same

Opinion of the Court.

company as Hamilton, and in the same district (Shreveport). As in this case the policy had not matured. But the court held that it might be set up by way of reconvention, and that the amount to which the defendant was entitled could be recovered by him and deducted from the amount of his indebtedness to the company. This decision was based on a statute of Louisiana, enacted in 1839, as an amendment to article 375 of the Code of Practice. Article 375 was originally in the following form, to wit: "In order to entitle the defendant to institute a demand in reconvention, it is requisite that such demand, though different from the main action, be, nevertheless, necessarily connected with, and incidental to, the same; as, for instance, the demand instituted by the possessor in good faith against him who sues in order to evict him, or for the purpose of obtaining the payment of the improvements made on the premises." The amendment adopted in the act of 1839, and now forming part of the article, provides, "that when the plaintiff resides out of the State, or in the State, but in a different parish from the defendant, said defendant may institute a demand in reconvention against him for any cause, although such demand be not necessarily connected with, or incidental to, the main cause of action." The court in Life Association v. Levy, say: "The right of the defendant to set up and urge his demand in reconvention against the plaintiff, a resident of the State of Missouri, is, under our law, and the jurisdiction of our State, too plain to require argument;" and reference is made to Spinney v. Hide, 16 La. Ann. 250; Spears' Liquidator v. Spears, 27 La. Ann. 642. The court add: "The objections urged by plaintiff to the allowance of the reconventional demand, on the ground that it would be a compensation of plaintiff's demand, and that this cannot take place, because plaintiff is insolvent, and defendant cannot compensate his own debt, but is entitled only to such dividend as may be declared after a final settlement, and because the policy holders of the association are partners and can only sue for a settlement of the partnership affairs, are fully met, discussed, and overruled by the lower judge, and we think properly." The court, in its judgment,

Opinion of the Court.

allowed the cash value of the policy, as reported by the actuary, with interest thereon from the time of the adjudication in bankruptcy, November 10, 1879. In our opinion this was a just judgment, and the present case being precisely like, is governed by it.

It is true, the court, below disallowed the claim in reconvention; but it decreed a perpetual injunction against the enforcement of the defendant's mortgage, and thereby did substantial justice. The result which the court reached was correct, though it may have been led thereto on an insufficient ground. We are free to say, however, that if the court below went on the ground that the defendant was entitled to the benefit of compensation, we should be disposed to concur with it, notwithstanding the doctrine laid down by the commentators. We are inclined to the view that where a holder of a life policy borrows money of his insurer, it will be presumed, prima facie, that he does so on the faith of the insurance and in expectation of possibly meeting his own obligation to the company by that of the company to him, and that the case is one of mutual credit, and entitled to the privilege of compensation or set-off whenever the mutual liquidation of the demands is judicially decreed on the insolvency of the company. The case of Scammon v. Kimball, Assignee, 92 U. S. 362, is in concurrence with this view. It was there held, that a banker, having insurance in a company which was rendered utterly insolvent by the great Chicago fire of 1871, by which the banker's insured property was consumed with the rest, had a right to set up the amount of his insurance against money of the company in his hands on deposit. The insurance was not a debt due at the time of the insolvency; it became due afterwards, when the banker had performed all the conditions required in such cases. As the defendant took no appeal, the case is so clearly decided rightly as regards any complaint to be made by the plaintiff against the decree, that we have no difficulty in affirming it.

Decree affirmed.

Syllabus.

MORLEY SEWING MACHINE COMPANY v.
LANCASTER.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS.

No. 165. Argued January 11, 1889. Decided February 4, 1889.

Claims 1, 2, 8 and 13 of letters patent No. 236,350, granted January 4, 1881, to James H. Morley, E. S. Fay and Henry E. Wilkins, on the invention of said Morley, for an improvement in machines for sewing buttons on fabrics, namely, "1. The combination, in a machine for sewing shank-buttons to fabrics, of button-feeding mechanism, appliances for passing a thread through the eye of the buttons and locking the loop to the fabric, and feeding mechanism, substantially as set forth. 2. The combination, in a machine for sewing shank-buttons to fabrics, of a needle and operating mechanism, appliances for bringing the buttons successively to positions to permit the needle to pass through the eye of each button, and means for locking the loop of thread carried by the needle to secure the button to the fabric, substantially as set forth." "8. The combination, in a machine for sewing buttons to fabrics, of button-feeding and sewing appliances, substantially as set forth, and feeding appliances and operating mechanism whereby the feeding devices are moved alternately different distances to alternate short button stitches with long stitches between the buttons, as specified." "13. The combination, with button-sewing appliances, of a trough, appliances for carrying the buttons successively from the trough to the sewing devices, and mechanism for operating said appliances and sewing devices, as set forth," are valid.

The Morley machine contains and is made up of three main groups of instrumentalities: (1) mechanism for holding the buttons in mass, and delivering them separately, in proper position, over the fabric, so that they may be attached to it by the sewing and stitching mechanism; (2) the stitching mechanism; (3) the mechanism for feeding the fabric along, so as to space the stitches and consequently the buttons when sewed on. A description given of the devices used by Morley, which make up the three mechanisms; and of those used in the alleged infringing machine, (the Lancaster machine,) and making up the same three mechanisms. The Morley machine was the first one which accomplished the result of automatically separating buttons which have a shank from a mass of the same, conveying them in order to a position where they can be selected by the machine, one after another, and, by sewing mechanism, coupled with suitable mechanism for feeding the fabric, be sewed thereto at prescribed suitable distances apart from each other.

No machine existing prior to Morley's is shown to have accomplished the operation of turning a shank button, the head of which is heavier

Syllabus.

than its shank and eye combined, into such a position that a plane passing through its eye shall be perpendicular to a plane passing through the long axis of the sewing needle, so as to insure the passage of the needle through the eye.

The Lancaster machine infringes the Morley patent, although there are certain specific differences between the button-feeding mechanisms in the two machines, and also certain specific differences between their sewing mechanisms.

Morley, having been the first person who succeeded in producing an automatic machine for sewing buttons of the kind in question upon fabrics, is entitled to a liberal construction of the claims of his patent. Where an invention is one of a primary character, and the mechanical functions performed by the machine are, as a whole, entirely new, all subsequent machines which employ substantially the same means to accomplish the same result are infringements, although the subsequent machine may contain improvements in the separate mechanisms which go to make up the machine.

Morley having been the first inventor of an automatic button-sewing machine, by uniting in one organization mechanism for feeding buttons from a mass, and delivering them one by one to sewing mechanism and to the fabric to which they are to be secured, and sewing mechanism for passing a thread through the eye of the button, and securing it to the fabric, and feeding mechanism for moving the fabric the required distances to space the buttons, another machine is an infringement, in which such three sets of mechanism are combined, provided each mechanism, individually considered, is a proper equivalent for the corresponding mechanism in the Morley patent; and it makes no difference that, in the infringing machine, the button-feeding mechanism is more simple, and the sewing mechanism and the mechanism for feeding the fabric are different in mechanical construction, so long as they perform each the same function as the corresponding mechanism in the Morley machine, in substantially the same way, and are combined to produce the same result.

The defendant employs, for the purposes of his machine, known devices, which, in mechanics, were recognized as proper substitutes for the devices used by Morley, to effect the same results. In this sense the mechanical devices used by the defendant are known substitutes or equivalents for those employed in the Morley machine to effect the same results; and this is the proper meaning of the term "known equivalent," in reference to a pioneer machine such as that of Morley. Otherwise, a difference in the particular devices used to accomplish a particular result in such a machine would always enable a defendant to escape the charge of infringement, provided such devices were new, with the defendant in such a machine, because, as no machine for accomplishing the result existed before that of the plaintiff, the particular device alleged to avoid infringement could not have existed or been known in such a machine prior to the plaintiff's invention.