Bennett v. Iron Clad Manufacturing Co.

McLennan, P. J.: The. facts must be learned solely from the complaint, as it was dismissed upon the ground that it did not state facts sufficient to . constitute a cause of action. In such complaint it is alleged in substance that the plaintiff is the owner of two patents which relate to and cover a certain kind of metal basket; that in September, 1896, the parties entered into a contract in writing by which the plaintiff sold, assigned and transferred. to the defendant the exclusive right to manufacture and sell such baskets during the life of the patents,'and also agreed to furnish certain dies and tools made and owned by the plaintiff, for the purpose of such manufacture. The defendant agreed to pay to the plaintiff ten cents for each metal basket so manufactured by it; agreed to keep a correct account of the baskets so made and sold, and to submit such account to the plaintiff semi-annually, and at all times to permit the plaintiff to examine its said books of account relating thereto. [445] It is further alleged that after making such contract, and after the plaintiff had furnished tools and dies of the value of $468, the defendant commenced the manufacture and sale of the baskets in question, made reports of such sales and paid the. royalties specified in the contract until the year 1900, when it neglected and refused to make reports or pay any such royalties, although it continued to manufacture and sell the baskets. It is also alleged that the plaintiff thereupon cdmmenced an action in the Supreme Court against the defendant, based upon the contract and the non-performance thereof' by the defendant; that the defendant appearedin the action and answered by denying the plaintiff’s allegations; that the issues thus raised were referred to a referee to try and determine the same; that the action was tried and decided by the .referee in favor of the plaintiff. The report of the referee was made a part of the complaint herein, and by reference thereto it appears that the referee determined that the plaintiff was the owner of the patents referred to; that the parties entered into'tlie contract set forth in the complaint in that action; that the tools, 'dies and machinery furnishéd by the plaintiff should remain in the possession of the defendant during the continuance of the contract; that the said contract was for. the full term of the life of the letters patent; that the contract was fulfilled up to January 1, 1900, when defendant committed a breach thereof. The referee found as a conclusion of law that by failing to comply with the terms and conditions of said contract the defendant became liable to pay and plaintiff entitled to recover from it as royalties between January 1, 1900, and September 30, 1902, the sum of $572.20, and that the contract be adjudged forfeited and canceled, and the tools, dies and machinery furnished by the plaintiff should be returned to him pursuant to the terms of the contract, or if not so delivered that plaintiff recover their value, the sum of $468. The complaint also alleges that after the decision of j said action by the referee, and on or about July 15,1903, judgment was entered therein upon such report ; that on or about July 16, 1903, the defendant served a notice of appeal from said judgment to this court,.and furnished the usual undertaking to stay execution; that said appeal was heard on its merits and affirmed by this court in January, 1904; that in February; 1904, defendant took an appeal [446] from the judgment of affirmance to the Court of Appeals, and gave an undertaking pursuant to section 1327 of -the Code of¡ Civil Pro-' • cedure; that the appeal was dismissed by the Court of Appeals and the remittitur from that court filed in Herkimer county clerk’s office June 9, 1904. • ■ • - It is then alleged in the 'complaint: ■ “ That the defendant, during the pendency of said appeals, and until October 10, 1904, remained in possession of said tools' and appliances and continued to make- and sell and offer for sale sheet-metal baskets within 'the terms' of- said contract and have sold 6,441 sheet-metal ■ baskets. That the defendant has. manufactured and has now on hand, as this plaintiff, is informed and verily believes many thousand sheet-metal baskets covered by the contract, and. the defendant is liable to the plaintiff at .the rate of ten cents per basket for all baskets sold and for all baskets made and on hand for sale. That the precise number of metal baskets which the defendant has on hand is unknown .to the plaintiff,, but on information and b.elief he alleges that they do not exceed ten thousand. * ’ * * “ Wherefore, ¡the. plaintiff demands judgment against the defendant for the sum of Two.Thousand. Dollars, with interest'from. October 10, 1904, besides costs.” It is thus seen that the, action is brought solely to recover the royalties specified in the contract, and which it is alleged became due and owingzto the plaintiff by reason of the manufacture and sale of the patented baskets by the defendant during the pendency of -the appeal'from .the judgment, which, among other things, declared such contract to be forfeited- and canceled. ■ ■ We think the complaint states a good cause of actiom • - •:-The defendant, having continued to' manufacture and sell the baskets covered by plaintiff’s patents after judgment was rendered against it declaring the contract “ forfeited and canceled,” .and while contesting by appeal the correctness of such judgment,, incurred the liability imposed. by such contract, notwithstanding such judgment. • The'plaintiff, having failed to dissent from such manufacture.and sale by the defendant by procuring an injunction or takjng. some other summary remedy during the pendency of its appeal, was. not. thereby precluded from insisting upon compliance with-the -terms [447] of the contract as to royalties which became due after the rendition of- such judgment. The defendant by its acts in the premises assumed to treat the provision in the judgment that it was not entitled to manufacture, as erroneous, and ought not now to be permitted to disclaim liability for its acts under the' contract in question. The plaintiff at all times asserted, and successfully defended, the validity of the judgment, but it did not deem it expedient to compel obedience by injunction or other summary remedy, and it must be held that the provision declaring the contract forfeited, being for the benefit of the plaintiff, was one which he might waive if he so desired, and avail himself of his right of action thereunder. so long as the defendant by proceeding precisely, along the terms thereof conceded its validity to all intents and purposes, although disputing that fact as to a period of time prior to the one during which it was so operating under the contract. The plaintiff had already obtained a judgment in his favor under the contract. His confidence in the validity of his contract, belief in the defendant’s solvency and "other considerations may have been deemed sufficient by him to warrant him in allowing the defendant to proceed without restraint by legal proceedings. A holding that the defendant could proceed under the terms of its contract without incurring the liabilities thereby imposed upon it would be not only unreasonable, but exceedingly unjust to the plaintiff. It is quite possible that unless the plaintiff can recover the royalties specified in his contract he will be unable to recover any sum whatever. He may not be able to prove damages independent of his contract, but even if so, it ought not to be held that the defendant might manufácture and sell the baskets covered by the plaintiff’s patents with impunity and without incurring liability. By the action of the parties the provision of the judgment annulling and ending the contract was waived, and the plaintiff is entitled to recover the royalties specified in the contract, which accrued on account of the manufacture and sale by defendant of such articles during the pendency of the appeals. The cases cited by appellant’s counsel (Union Mfg. Co. v. Lounsbury, 41 N. Y. 363 ; Hyatt v. Ingalls, 124 id. 93, and Skinner v Wood M. & R. M. Co., 140 id. 217) are analogous in principle, and establish the' plaintiff’s right to recover in this action. [448] The judgment should be reversed" and e new trial ordered, with costs to the appellant to abide event. All concurred, except Spring and.Hiscock, JJ., who dissented in an opinion .by Spring, J, "