Sabo v. Delman

Peck, P. J. The question presented on this appeal is the sufficiency of the complaint. Although the three defendants occupy slightly different positions, they may, for the purpose of testing the complaint, be treated alike and referred to as the “ defendant ”. Plaintiff is an employee of defendant in the business of manufacturing ladies shoes. He claims to have invented a machine of use and value in shoe manufacturing. The complaint sets forth two agreements between the parties by which they undertook the exploitation of plaintiff’s invention. The first agree [240] ment, dated March 19, 1942, recites the assignment of applications for patents to defendant and contains the mutual undertaking of the parties to employ their best efforts to sell, manufacture, or lease the machine, plaintiff to receive 25% of the proceeds and defendant 75%. The agreement contains a reference to past expenditures by defendant in development of the machine and the possible requirement for further expenditures by defendant. There was no commitment, however, for any investment or expenditure on defendant’s part, but it was agreed that any such expenditures were not to be charged in any part to plaintiff’s interest in the proceeds. Defendant was given the right of using the machine without charge in its business. The agreement contained a provision that “ No verbal understanding or conditions, not herein specified, shall be binding on either party.” The second agreement, dated September 18, 1946, purports both to be a “ modification ” of and to “ supersede ” the prior contract. It provides for the organization of a corporation to take over the patents — the stock in the corporation to be held 75% by defendant and 25% by plaintiff. The second agreement is similar to the first in respect to the expenditure of funds for development and the use of the machine by defendant, and contains á provision that “No verbal understanding or conditions, not herein specified, shall be binding on either party.” There is no provision, however, referring to the undertaking of either party to use its best efforts to market the machine. The complaint, filed eight years later, is grounded in fraud and seeks a reassignment of the patents, an injunction against defendant’s use of the machine and an accounting. The claim is that defendant, while using the machine itself, has done nothing to exploit it commercially; that plaintiff was induced to turn the invention over to defendant upon the representations that it would finance the manufacture of the machine and use its best efforts to promote the sale or lease of the machine to other manufacturers; that said representations were false and fraudulently and deceitfully made to defraud plaintiff. Special Term dismissed the complaint, finding that the alleged fraudulent statements were promissory in nature and therefore not the basis for an action based on fraud. We agree with that holding and find the complaint insufficient on other grounds. The attached agreements purport to state fully and completely the undertakings of the parties and specifically provide that [241] there are no other verbal understandings or conditions. Plaintiff may not, therefore, assert alleged undertakings and representations by defendant not incorporated in the agreements. Furthermore, it is apparent that plaintiff is claiming nothing more, although adding a fraud touch, than that defendant did not employ its best efforts to exploit the invention, as it agreed to do in the first agreement. While the complaint cannot stand, as pleaded, we will allow plaintiff to amend, if he is so advised, to prosecute an action on other possible grounds. The complaint, although sounding in fraud, would seem to suggest a breach of contract on defendant’s part in not employing its best efforts to promote the commercial sale of the machine. There is also the possibility that if either agreement is not sufficiently explicit or implicit in undertakings on the part of defendant, it might be attacked as nudum pactum. We need not consider at this juncture the application to such possible causes of action of the Statute of Limitations, which seems to have been prominent in plaintiff’s mind in drafting the present complaint. The judgment appealed from should be reversed, and the order upon which it was entered modified so as to provide that the dismissal is with leave to replead in accordance with this opinion. Settle order.