Fowler v. Mallory

Park, C. J. This case depends upon the construction to be given by the following contract, entered into between the plaintiff and the defendant William H. Mallory, on the 22d day of April, 1878. [The contract is fully set out in the statement of facts, ante p. 421.] The plaintiff performed his part of the contract, and the defendant Mallory went to England, taking with him the two letters-patent belonging to the American Propeller Company described in the contract, and the letters-patent belonging to the plaintiff, to perform his part of the contract. He was duly authorized by the American Propeller Company to do all that he had undertaken to do in the contract, and no complaint is made regarding his efforts to sell all three of the letters-patent together, as the contract required if it could reasonably be done. But the case finds that it was impossible for Mallory to sell the letters-patent belonging to the plaintiff, owing to the fact that, in the year 1868, letters-patent had been granted to one Moodie under the authority of the Kingdom of Great Britain and Ireland, which anticipated the — 436 — plaintiff’s letters-patent to a great extent; still, the case finds that the result accomplished by the Fowler patent by means of the graduating and numbering of the dial-plate, which was common to both, was one “of great practical utility.” Mallory sold the two letters-patent belonging to the American Propeller Company, together with a steam launch belonging to the same company, for the sum of £22,000 sterling; of which amount £10,000 was to be paid in cash, and the remainder in the paid up stock of the English company, called the Mallory Propeller Company, Limited. The case finds that only |3,625.25 was received in cash on account of the two letters-patent, and the stock of the company, though delivered and received,' proved to be of no intrinsic value. Mallory tendered to the plaintiff a re-transfer of his letters-patent within the time specified in the contract, but the plaintiff refused to accept the same. The case further finds that neither the plaintiff nor the defendants had any knowledge of the Moodie letters-patent at the time of the execution of the contract, or at any time before Mallory learned of its existence while endeavoring to sell the letters-patent in England. The plaintiff made no fraudulent representations to either of the defendants concerning the value, utility, novelty or validity of his letters-patent at any time, and during the negotiations which ended in the contract Mallory gave the plaintiff to understand that he did not ask him to warrant or guarantee the validity of his letters-patent, and did not expect him to do it, but desired him to obtain' the opinion of a certain patent lawyer of New York regarding its utility and validity, which opinion was obtained by the plaintiff and given to Mallory shortly before the execution of the contract. The case further finds that the plaintiff made no express ' warranty of the value, utility, novelty or validity of his letters-patent to either of the defendants at any time, unless •such warranty can be inferred from the facts stated. — 437 — These are the principal facts of the case, and the question is, do they constitute a cause of action against the defendants ? In giving a construction to the contract which is the basis of this suit, we are to look at it as it appeared to the parties when they executed it. Here were three letters-patent, two of them owned by the American Propeller Company and one by the plaintiff, all relating to the same subject matter— the steering of steam propellers. The company’s letters-patent contained plans and descriptions of all the necessary machinery and appliances for the purpose, and the plaintiff’s set forth a mechanical operation for setting the machinery instantly and properly in motion as the exigencies of the case in steering such vessels might from time to time require. Often a moment’s delay in giving the proper direction to the vessel puts it in great danger, if it does not cause its destruction. These three devices seemed peculiarly adapted to each other, and necessary to make up one perfect system of steering propellers. A vessel that had the company’s devices would be in great need of the plaintiff’s or a similar device; and the plaintiff’s without the company’s or similar devices would be useless, and consequently valueless. Hence it must have appeared to the parties to the contract that it would be greatly to the advantage of all concerned to sell the three letters-patent together; for, apparently, by so doing each would enhance the value of the others, and be itself enhanced in value at the same time; the combination would largely increase the value of the whole beyond the aggregate separate value of each. They had heard of no device like the plaintiff’s, and as this mode of steering propellers was comparatively new, they must have thought that there was but little if any danger that either of the patents had been anticipated by others. We may safely conclude therefore that the parties to the contract were anxious to pool their patents; were anxious to make common property of the proceeds of their sales in a speculative adventure. They had large profits in anticipation. They talked of sales amounting to $150,000 and — 438 — more ; and their only trouble seems to have been how they should divide the proceeds of the speculation. Neither party asked the other to warrant or guarantee the validity, utility, novelty or value of his respective patent or patents. There is no pretence that the plaintiff requested it of Mallory; and the case finds that the jolaintiff made none regarding his patent, unless the facts found show it by implication. But none can arise by implication, for during the negotiations for the contract it is found that “Mallory gave the plaintiff to understand that he did not ask him to warrant or guarantee the validity of his patent, and did not expect him to do it, but desired the plaintiff to obtain the opinion of a certain patent lawyer of New York.” That opinion was obtained by the plaintiff, and delivered to Mallory shortly before the execution of the contract. How, then, is it possible that there could have been any warrant}' or guaranty by the plaintiff, express or implied, regarding the validity of his patent ? If nothing had been said on the subject there might have been an implied warranty that his patent was valid, and therefore salable; but here the matter was talked over by the parties, and the defendant told the plaintiff that he did not ask, and did not expect him, to warrant or guarantee the validity of his patent. He wanted the opinion of a certain lawyer, and when that was obtained and presented to him he was fully satisfied. There is no room to claim a warranty, either express or by implication; yea more, what passed between the parties amounted to an agreement that the plaintiff need not warrant the validity or salability of his patent, and that Mallory would take it as it was, and run his own risk regarding its validity and salability. He was expecting that the plaintiff’s patent would largely increase the value of his own, besides furnishing great pecuniary profit in its sale. He was willing, therefore, to forego all security of its salability in order to make the contract. • We come now to a consideration of the contract and an ascertainment of what it means. — 439 — The contention regarding its construction is confined to three important clauses. Two of them relate wholly to the plaintiff’s share of the proceeds of the adventure, and the other pools the three patents and makes common property of them in the speculation. It was impossible to forecast what would be the result. The plaintiff’s patent might sell the other two, and the other two might sell the plaintiff’s; and the combination might sell all, and add largely to the value of all. So in the first clause it was agreed that the three patents should be sold,leased or disposed of together. But does this clause mean that under no circumstances any of them could be disposed of without the rest? If we compare this clause with the one which says—“ and in case the aforesaid letters-patent, meaning either or all the said patents, shall be disposed of for a greater sum,” &c., we learn that such was not the meaning which the parties gave to the language used. They intended, and the clause should be so construed, that one or more of the patents might be sold or disposed of, after all reasonable exertions had been made, during a reasonable length of time, under all the circumstances that might be found to exist, to sell or dispose of them together. This must be the meaning .of that clause, or else Mallory violated the contract by selling the company’s patents without selling the plaintiff’s in the same sale; and well might it be contended that the plaintiff would have an equitable right to share in the proceeds of such a sale to the same extent that he would have had if his own had been included in the sale. Mallory would be estopped to say that the plaintiff’s patent was not included, if he had absolutely bound himself to sell all three of the patents together or sell none of them. ■ If we have given the correct construction to the first clause, then the contract must be construed in the same way that it would be if the first clause had contained the meaning we have given it, written out in full. The second clause in controversy immediately follows — 440 — the first, and is as follows:—“And in case said letters-patent are so sold, leased or disposed of, at any price, within the time aforesaid, then the said Mallory, his heirs, executors, administrators or assigns, are to pay to the said Fowler, his executors, administrators, heirs or assigns, the sum of eight thousand dollars, within six months after the date of such disposal or sale.” . The words, “so sold,.leased or disposed of,” refer to the first clause, and mean sold, leased or disposed of as therein described. This reference to the first clause makes it, with the construction that should be given to it, a part of this clause, as much as it would be if it was written out in full in it. We have seen that the first clause does not mean that the three patents must absolutely be sold together, but that one or more might be sold, after reasonable efforts for a reasonable time had been made to sell or dispose of them together. This construction is in full accord with the meaning which is clearly expressed in the third clause, and with which this clause must be construed. The third clause immediately follows the second, and is as follows: — “And in case the aforesaid letters-patent, meaning either or all the said patents, shall be disposed of for a greater sum than eighty thousand dollars, then the said Mallory, his heirs, executors, administrators or assigns, are to pay to the said Fowler, his heirs, executors, administrators or assigns, at the rate of ten per cent, or ten dollars for every one hundred dollars, over and above the said eighty thousand dollars, till the amount of such sales reaches the sum of one hundred and fifty thousand dollars, beyond which sum of one hundred and fifty thousand dollars sales the said F. G. Fowler is to receive nothing, or no further percentage.” The language of this clause is clear and admits of but one construction. After saying “ the aforesaid letters-patent,” it stops and defines the meaning of those words; which was not done in either of the other clauses, though a similar expression was used. “ Meaning either or all the — 441 — said patents,” is its language. This makes the clause read as follows:—“And in case either or all the aforesaid letters-patent shall be disposed of,” &c. What room is there for more than one construction of this clause ? What foundation is there for the claim, which one of the counsel for the defendants has urged with great persistency, that the words “meaning either or all the said patents,” are equivocal; that we are left to conjecture their meaning ? The words render the clause simple and easy to be understood and free from all ambiguity. There is unmistakable evidence that they were written with deliberation, and with full apprehension of their import, to prevent the claim being made, that has been made, that all the patents must absolutely be sold together. It would seem, if language is capable of debarring such a claim, that it has been done here. Again; it will be observed in relation to the third clause, that no sale of one or more of the patents can come within its limits, unless the amount o£ the sale shall exceed the sum of eighty thousand dollars, in which case all that the plaintiff could be entitled to recover would be ten per cent, of the amount exceeding eighty thousand dollars and not exceeding one hundred and fifty thousand ; so that, if a sale should be made of the plaintiff’s patent alone for the sum of one hundred and fifty thousand dollars all that he could be entitled to recover by this clause would be ten per cent, on seventy thousand dollars. And such would be the case if the Mallory patents alone should be sold for the same amount. But it is said that what the plaintiff would be entitled to receive under the third clause, is in addition to the eight thousand dollars that he would be entitled to under the second clause. The third clause does not so state, but doubtless it should have that construction, for any other would be absurd. Now, if it be true, as seems to be conceded by the brief of the senior counsel for the defendants, that if the plaintiff’s patent had been sold without the Mallory patents, or the — 442 — Mallory patents sold without the plaintiff’s, for the sum supposed, the plaintiff would be entitled to $8,000 under the second clause and $7,000 under the third clause, would he not be entitled to $8,000 under the second clause if the amount of the sale in the case supposed should not exceed $80,000? Clearly he would be. How could it be otherwise? A sale of one or more of the patents, for a sum exceeding $80,000, it is conceded comes within the second clause as well as the third. How can it come within the second clause unless a sale of one or more patents may be made directly under that clause ? It follows, therefore, that the sum of $80,000 was not intended as a limitation below which no sales of patents less than the whole number could be made, but as a limitation up to which the plaintiff could not receive more than $8,000, as the $150,000 is a limitation above which no percentage could be recovered. The plaintiff surrendered all claim to the surplus over $150,000 in consideration of his receiving $8,000 under the second clause, if sales should be made at any price; thus he gave up a possible advantage in one case to counterbalance a possible loss to Mallory in the other. In order to show this clearly, the two clauses were inserted with the plaintiff’s compensation for each separate and distinct. If a sale is large enough to come within both clauses, the compensations in both are to be added together. If it comes within the second clause only, then no addition to the compensation of that clause is to be made. Hence it is clear that the phrase, “ meaning either or all the said patents,” enters into the second clause, and determines the construction to be given to it. The defendants’ construction of the second clause is, that all three of the patents must be sold to entitle the plaintiff to anything; so that if the plaintiff’s patent alone had been sold for a large amount, or if it had been found that one of the Mallory patents had been anticipated by some English patent and thereby was rendered wholly unsalable, but the other two patents had been sold together for a large amount, the plaintiff, in either case, could recover nothing under — 443 — the contract, for strange indeed would it he that he could recover the percentage compensation of the third clause, when it is conceded by the defendants that the percentage is in addition to the compensation provided in the second clause. Manifestly such construction of the second clause never entered the mind of either party to the contract; and there should be clear and unmistakable language used in the clause to that effect béfore it should have that construction. Such a construction would make the plaintiff not only an insurer of the salability of his own patent, but an insurer of the salability of both the Mallory patents as well; when at the same time Mallory would run no risk in regard to the salability of either of the patents, but might be a great gainer by such a defect in some one of them, for then he could retain the entire proceeds of the sale, even if the defect was found to be in one of his own patents. There would lie no mutuality in the contract upon such a construction, and the claim is clearly untenable. Another claim is, that the plaintiff's patent must be sold, at all events, in order to entitle him to anything. This claim, likewise, makes the contract a one-sided affair, and deprives it of all mutuality between the parties. According to it, if the plaintiff’s patent had been sold alone for $150,000, Mallory would have nine times as much of the proceeds of the sale as the plaintiff, whereas if the Mallory patents had been sold alone for the same amount, the plaintiff would not be entitled to anything. This construction is untenable like the one we have considered; and both tend strongly to show that the construction we have given the second clause is correct. The case finds that Mallory sold his patents for more than one hundred thousand dollars. How then can the defendants escape paying the amount of compensation provided in the second clause of the contract? We have seen that whatever sales come within the third clause, come likewise within the second clause; and this the senior counsel for the defense virtually admits when he concedes that one or more patents may be sold under the third clause; in — 444 — ■which case, he further concedes, the compensation provided in that clause is to be added to the compensation provided in the second clause, which could not be done unless the sale comes within both clauses. In this part of the case the defendants contend that, by the terms of the contract, Mallory was merely a bailee of the plaintiff’s patent; that he took it to sell with his own, at the greatest price obtainable by the exercise of due diligence and reasonable effort, for the plaintiff’s benefit; all which, it is said, the case finds that he did, and made due return of the property to the plaintiff after all reasonable efforts had failed to accomplish the object. But in what sense can the contract be called a bailment? It is true that Mallory took the plaintiff’s property to sell with his own, and was bound to return it if no sales should be made of any of the properties. . But each party had an interest, and a right to share in the proceeds of all the sales that might be made of any or all the properties, as we have seen. There was a pooling of the properties for all purposes of the speculative adventure; and the proceeds of all sales were made common property, differing only in the shares which each party would be entitled to receive. If the plaintiff’s property only should be sold Mallory would share in the proceeds to the same extent that he would have done in a sale of one of his own properties for the same amount, and the share of the plaintiff would be the same in both. There would be no difference, in this respect, whichever property was sold. How then can it be said that Mallory, or the Propeller Company, (which in this case we speak of under his name) was simply a bailee of the plaintiff’s patent, to sell it for his benefit, and return the same if no sale should be made ? Again; it is claimed that there is a failure of the consideration for the promise in the contract to pay the plaintiff the sum of $8,000, should one or more of the properties be sold, and ten per cent, additional of the excess in the amount of such sales over $80,000 and up to $150,000, owing to the fact, as is claimed, that the Moodie patent — 445 — rendered the plaintiff’s patent unsalable by anticipating his device. We have already considered the answer to this claim while considering whether there was any warranty of the validity, salability, utility or value of this device by the plaintiff while negotiating the contract. We there showed that what passed between the parties during the negotiations amounted to an agreement that the plaintiff not only need not warrant the validity or salability óf his patent, but that Mallory would take the same running his own risk of its validity and salability. Surely he could do this, and by doing it deprive himself of the right to claim that there was no consideration for his promise on the ground that the patent was invalid when he accepted it. And further; it will be noticed that the defect claimed is not in the device itself. There is no pretense that it would not accomplish all that was claimed for it. The defect was in the letters-patent only. Had it been inherent in the device, and the device worthless in consequence, then the claim of the defendants might be sound. The defendants’ counsel illustrate their claim by supposing that Mallory was the owner of a valuable horse and Fowler the owner of its perfect mate. The owners supposed their horses would sell together for a much larger sum than could be realized from their separate sale, and could be sold to greater advantage in England than in this country. So they made a similar contract to the one in question regarding the sale of the horses. They agreed that Mallory should take them to England and sell them together as a pair. If the horses should be so sold at any pricé Fowler was to receive $500. If either or both should be sold for a greater sum than $1,000, Fowler was to receive ten per cent, on the excess of $1,000. Mallory went to England to perform the contract, and while engaged in trying to sell the horses together as a pair, Fowler’s horse met with an accident that destroyed its value and rendered it impossible to sell it. Mallory afterwards sold his horse for — 446 — the sum of $1,500. The counsel asks, has Fowler any redress ? We answer that we think he would have if the facts were similar in all respects to what they are here. If the owners of the horses, in order to obtain the much larger sum that they expected to get ty the sale of the horses together as a pair than could be realized by their sale in any other way, pooled their horses for the speculation, and made the proceeds of all sales of them or either of them common property to be shared by the parties in certain proportions, and it was further agreed that neither party need insure his horse from accidents of any kind, and if an injury should befall either of them it should be borne bjr both, it would be more like the present case. The supposed case would be more like the case in hand if, instead of the' horse being rendered worthless by an injury, we- should suppose that Mallory on his arrival in England found so many horses like Fowler’s in every respect, with which the Mallory horse could be matched, that the number destroyed the value of the Fowler horse as a match for Malloiy’s, and entirely frustrated the plan of the parties for the sale of that horse with the other. It is further said that if Mallory, after becoming satisfied that the Fowler patent could not be sold, had returned home and tendered a re-transfer of it to Fowler, he would have performed his full duty under the contract; and could then have returned immediately to England and have sold his own patents. This could not have been done if our construction of the contract is correct. We have seen that the contract made common property of the proceeds of all sales of the patents, whether one or more should be sold. Fowler had an interest to the extent of his compensation in whatever sale might be made of the Mallory patents, and Mallory had an interest in whatever sale might be made of the Fowler patent. If Mallory had found it impossible to sell his own patents, but had sold Fowler’s for $150,000, he would have had $135,000 of the amount and Fowler only $15,000. Is it — 447 — so that when he became satisfied that the Fowler patent could not be sold, but he could sell his own for a large amount, he could deprive Fowler of all right to share in the proceeds by postponing the sale till he could return home and tender a re-transfer of the Fowler patent, and then return and make his sale? We think not. We think Mallory was bound to conduct fairly and treat Fowler as he would treat himself. He was bound to sell either or all the patents, as the case might be, without discrimination, for whatever price was satisfactory to him under all the circumstances of the case. We fully agree with the defendants, that in actions upon bonds which are given to secure, and be answerable for, the faithful performance of contracts, the plaintiff can recover no more than is equitably due. But here the breach of the bond consists in a refusal by the defendants to pay the plaintiff a sum of money due him on the contract, of which money the bond was given, among other things, to secure the payment. The amount is equitably due, not as unliquidated damages, but as a sum of money promised to be paid in the state of things that existed. In conclusion we say that, although hardship exists in the case, it results mainly, if not wholly, from the inability of the defendants hitherto to realize the full benefit of their sale. Had Mallory received in cash the twenty-two thousand pounds sterling for which the sale was made, or had the stock of the “ Mallory Propeller Company, Limited,” been equal in value to what it was received for, and supposed to be worth at the time, and the remaining ten thousand pounds had been paid in cash, we doubtless should not have heard of any hardship existing in the case. When the contract was executed, so far as any forecast of future events could be made, it would be supposed that the plaintiff would run twice the risk, at least, that some other patent or patents had anticipated and rendered unsalable one or the other of the Mallory patents, than there was that such would be found to be the case in regard to the plaintiff's patent. Mallory had not only double the number, but — 448 — it was known at the time that there were other devices 'intended to produce similar results to his; but nothing of the kind was known in regard to the plaintiff’s patent. Surely the contract imposed no hardship upon Mallory. It is true he agreed to pay the plaintiff the sum of $8,000 if either or all the patents should be sold at any price; still he was not bound £o sell at any losing price. The contract left it wholly with him to say what should be the consideration of all sales he might make. “ To be sold for such a sum of money as the American Propeller Company shall deem advisable,” is its language. Mallory was not only secure from all loss in this respect, but he was entitled to the surplus of all sales over the sum of $150,000. Whatever might be the amount, the plaintiff could have no more than $15,000, nor less than $8,000. It is found in the case that the stock which Mallory received in part payment for the sale of his patents, never had any intrinsic value, and it is to be laid out of the case. We advise the Superior Court to render judgment in favor of the plaintiff for the sum of eight thousand dollars, and the interest thereon from the time the amount became due. In this opinion Pardee and Granger, Js., concurred.