Williamson v. Hill

Knowlton, J. The plaintiff was the owner of certain letters patent, and of an invention on which letters patent had been applied for, all for methods or processes of manufacturing elec — 123 — trical conducting wires. On April 26, 1887, lie made a contract in writing with the defendant to sell these letters patent and inventions, and stipulated also to sell and convey any other letters patent which he should obtain or inventions which he should make for wires of similar materials during the term mentioned in the contract. The contract proceeds in the following language: “ The conditions of sale, and the payments to be made, and the times and mode of so making them are hereinafter expressly stipulated, as follows. Said Warren S. Hill, or his assigns, shall pay to said Williamson, his heirs or assigns, the sum of twenty-five hundred dollars in one year from the first day of May, a.d. 1887.” Then follows a statement of sums to be paid annually on the first day of May, for fourteen years from May 1st, 1887, amounting in all, including the $2,500, to $250,000. “ It being understood and provided, that in case any of the aforesaid payments being due and having been demanded, and such payment be not made or tendered within the sixty days next succeeding such demand, (except as is hereinbefore provided,) then and in that case this contract and agreement and sale shall be null and void and of no effect from the date so determined, and the patents shall revert to said Williamson, or his assigns, discharged of any obligations, of whatever nature, due to this contract, and of any rights to manufacture thereunder.” The next clause relates to the places where the payments are to be made. The next stipulates that the defendant or his assigns may at any time within two years from the first day of May, 1887, make payment or tender of payment of $100,000 in cash to the plaintiff, and that the plaintiff shall receive the same, and the title to all such patents “ shall pass absolutely to said Hill or his assigns, discharged of all future payments.” The last provision is as follows : “ Said Warren S. Hill may assign this agreement, subject to all the conditions of payment, to any person or corporation ; and in case of the payment by such assigns or their assigns, or their successors in interest, at or before the conclusion of any calendar year, or shall make the special single payment on or before May 1, 1889, as above stipulated, the sale hereby provided for shall inure to the benefit of such assigns or persons having his or their title. But in case such payments be — 124 — not made, this agreement ceases and determines, as hereinbefore provided.” The action is brought to recover the first payment mentioned in the contract, which was duly demanded soon after May 1, 1888. At the trial, “ it appeared by the evidence that the sum of twelve hundred and fifty dollars was paid to the plaintiff, at or about the time of the execution of the contract, by one Edwin S. Thayer, and at the same time, or shortly after, the plaintiff paid two hundred and fifty dollars of this sum to the defendant Hill, in pursuance of a verbal agreement had by the plaintiff and defendant before the time of the execution of the contract; and that in all the negotiations between the plaintiff and defendant, concerning the making of the contract, the plaintiff insisted on a payment being made to him at the time of the execution of the contract, and the payment was made at such time in pursuance of this agreement, which was not contained in the contract; and by such agreement it was understood that twelve hundred and fifty dollars should be paid to the plaintiff at the time of the delivery of the contract, and that two hundred and fifty dollars of that money should be paid back by the plaintiff to the defendant Hill.” It also appeared that at the time the contract was made the wire had not been manufactured for the market, nor put to any use except for the purpose of testing its mechanical and electrical qualities, and there was uncontradicted evidence, that the plaintiff had been, for some years before the execution of the contract, trying to get some one to undertake the manufacture of the wire, and that on one occasion previously he had made a contract with the defendant concerning the purchase of the patents, which had run out. The question before the court is, What is the true construction of the contract in regard to the payments mentioned in it? Was it an absolute sale, and did the defendant become bound absolutely to pay the sum of $250,000, or was it a contract which merely secured him rights in the patents, on his making payments from time to time, so long as he continued to pay in accordance with the contract? The defendant contends that the purpose of the contract was to enable him to experiment with the patents, and to endeavor to obtain a purchaser for them, and that the payment of twelve hundred and fifty dollars — 125 — by Thayer, who testified that he was interested in the purchase of the patents, was to secure to the defendant rights in them for one year, and that at the end of the year he had his option either to pay twenty-five hundred dollars within sixty days after a demand by the plaintiff, and thereby secure control of the patents for another year, or to decline to pay, and so make the contract “ void and of no effect.” There can be no doubt that his failure to make the payment demanded terminated all his rights in the patents, and his liability for future payments. If such a failure had occurred several years later, after some of the payments had been made, it would have rendered the contract of no effect from that date; that is to say, so far as the contract had been completely executed in the making of payments it would remain in effect, but so far as it remained entirely executory, it would be terminated, and none of the payments provided for in the future could be collected. The only question of difficulty relates to the payment which had become due, either absolutely or conditionally, but. remained unpaid. As to that, is the contract in force, so that it can be invoked for the collection of it ? That depends on whether the payment had become absolutely due and payable before the contract became void. It is worth while to inquire whether the parties intended this provision for the benefit of the defendant, as well as of the plaintiff. Was the defendant entitled to be free from all future liability by refusing to pay on demand, or could the plaintiff, if he saw fit, compel him to pay the whole sum of $250,000? The stipulation is absolute, that on the defendant’s failure to pay, within sixty days after a demand, the contract shall become of no effect for the future ; and, considering the nature of the contract, we cannot doubt that the parties intended to allow the defendant to avail himself of this provision at the end of any year, to relieve himself from future liability. This the plaintiff’s counsel concedes in argument; but he says that the defendant could not relieve himself from liability for the payment which had been demanded, and which he contends had become absolutely payable on the first day of May. But the contract becomes void only after the expiration of sixty days from the plaintiff’s demand for the payment; and if the plaintiff’s con — 126 — struction were correct, following literally the terms of the contract, he would have nothing to do but to decline to make a demand, and at the expiration of a year the second payment would become due, and at the expiration of another year, with no demand, the third would become absolutely due, and so on, while the defendant would have no way of avoiding an absolute liability for the whole. To hold that each payment becomes absolutely due on the first day of May, when the contract says it shall be paid, is equivalent to holding that this provision of the contract is for the plaintiff only, and that the defendant has no. option if the plaintiff sees fit to- hold him as an absolute purchaser. If we look critically at the contract, we notice that the stipulation for a payment on the first day of May in each year is only one of the “ conditions of sale,” and is qualified by the clause beginning, “ it being understood and provided.” When we look at the subject matter of the contract, the situation of the parties, the apparently experimental nature of the transaction, and the payment made by the defendant in advance, we think the parties intended that each payment should be made only in case the defendant wished to keep the contract in force for his benefit, and that he was to have sixty days after a demand in which to determine whether to pay or to allow the contract to become void except as to those parts which had been fully executed. If he failed to pay, the contract would become of no effect as to the payment demanded. This appears also by' the last paragraph of the contract, which gives the defendant a right to assign “ this agreement, subject to all the conditions of payment, to any person or corporation,” and to be relieved from further personal liability upon it by substituting another in his place. On such an assignment, the assignee would be under no direct obligation to the plaintiff, and the plaintiff would have no remedies under the contract except as it gives him security on the patents. Yet it is stipulated that on payment by such assignee, or his assigns or successors in interest, “ at or before the conclusion of any calendar year,” etc., the sale provided for by the contract shall inure to his or their benefit. But if the payment be not made, the agreement ceases and determines, as before provided. Under this provision, — 127 — it is clear that, if the contract should be assigned, the plaintiff could not recover a payment which should subsequently accrue and be demanded of the assignee; and the contract assumes that this part of it is identical in legal effect with that on which this action is brought. We are of opinion, therefore, that the exceptions to the ruling at the trial should be sustained. In passing on the demurrer to the declaration, we are obliged to consider the question presented without the benefit of the facts proved at the trial, and the solution of it is not easy. But in the contract itself, although it does not appear that the payment was made in advance, there is much to show the experimental nature of the transaction. The principal patents had been in existence about three years, as appears by the description of them, and one application for a patent was then pending, and the contract by its terms looked to future inventions to be made and patents to be obtained by the plaintiff, which were to be assigned to the defendant. Then the provision for assignment by the defendant “ to any person or corporation,” and the stipulation that a payment of $100,000 at any time within two years might stand instead of $250,000 to be paid year by year, indicate that this was not considered an absolute sale, with security back to the seller, but a grant of a privilege to be kept alive by annual payments, or lost on the failure to pay annually. We are of opinion that the demurrer should' be sustained. Exceptions sustained.