Hansen v. Hall Manufacturing Co.

Weaver, J. The plaintiff, with one Grenard, claiming to hold letters patent from the United States for the manufacture and sale of an improvement in wagon tongues, entered into a contract with the defendant, Hall & Company, whereby the latter, in consideration of certain agreed royalties, was to acquire the exclusive right to manufacture and sell said tongues, and also to purchase and take over all the stock or material then held by said assignors which was capable of being used in such manufacture. Under this contract, Hall & Company began the manufacture and sale of the tongues, and paid certain amounts of royalty thereunder, when it objected to further performance, on the ground that plaintiff’s patent or patents afforded it no protection, being an infringement upon certain other prior patents, owned and held by one C. J. Bolte. To remove this obstacle, plaintiff, by agreement with Hall, sought out Bolte, and obtained from him an assignment of the alleged prior patents, the assignments being made direct to Hall & Company. It is the plaintiff’s claim that the purchase was made by him for $400, together with some other incidental expenses, and that, since he did not have the money to malte said payment, except in small part, Hall & Company furnished $395 for that purpose, under an agreement that reimbursement should be made in the form of a credit as for payment upon royalties thereafter accruing. After this settlement with Bolte and the transfer of the legal title to the Bolte patents to Hall & Company, the latter served notice on the plaintiff of the annulment and cancellation of the royalty contract, stating as the reason therefor that plaintiff had failed and neglected “to assign and transfer to the Hall Manufacturing Company the exclusive right to manufacture and sell under said patents and under patents claimed to have been granted by the government of the United States [3] to you since the execution of. said contract.” Since that time, the defendant denies- all obligation to pay royalty under said contract, and asserts full and exclusive ownership in itself of all the rights and privileges conferred by the Bolte patents. Without extension of this opinion to include particular statement of all the many pleadings and amendments found in the abstract, the. essence of the controversy now before us is substantially as follows: The plaintiff alleges that the assignment of the Bolte patents was taken by him in the name of the defendants, solely to secure and protect the latter in the enjoyment of the rights conferred upon it by the royalty contract and the patents therein mentioned; that, while the legal title to said Bolte patents is in Hall & Company, the equitable ownership is in himself; and that, since said defendant has assumed to cancel and refuse to perform the royalty contract, its authority to retain or assert any right to said patents is thereby terminated, and plaintiff is entitled to have the defendant’s possession thereof adjudged to be in trust only, and that he be invested with the legal title thereto. Defendant denies that it received said assignment in trust, or that plaintiff has any right or interest therein. In our judgment, the record clearly sustains the claim asserted by the plaintiff. To go back to the original contract, it is to be said that it does not provide for an assignment of the plaintiff’s patents to defendant, but it does grant to defendant the exclusive right to manufacture and sell the described articles during the life of the patents, subject to the specified -conditions. Under this agreement, plaintiff was bound to protect defendant in the possession and enjoyment of the right' conferred. It appears that the manufacture and sale under that right assumed profitable proportions, and the question whether Bolte had any conflicting prior right became a'subject of importance. Naturally, with the possibility existing of trouble from that source, defendant looked to plaintiff to prevent it. Plaintiff testifies unequivocally that Hall brbached the matter, saying that “it was up to him” (plaintiff) to take care of it, and advising him to go to Bolte and purchase his patent. Plaintiff undertook to do this, and was about to borrow the money needed for that purpose, when Hall proposed or offered to ad [4] vanee wbat was needed for that purpose and charge it against the accruing royalties. This was done, and plaintiff went to Bolte, obtained the assignment in defendant’s name, made a small payment in advance, and Hall advanced the remainder, $395. Thereafter, in making up a statement for the next quarterly accounting for royalties, the defendant did charge against them and take credit for said advancement of $395. As a witness, Hall says: “I sent Mr. Hansen to Columbus to buy the patent for us. * * * We sent a draft to the bank at Colpmbus to be turned over to Bolte when the patent assignment was made out to us. * * * We had no agreement or arrangement with Hansen or Grenard that this Bolte patent was to be taken . in trust for them. ’ ’ This denial may be literally true; but even though there was no mention, in terms, of a “trust,” the law implies a trust if it be true that the purchase was made pursuant to an understanding between them that plaintiff should buy the patent; that defendant would advance the money to him for that purpose ; and that the advancement was to be repaid by him out of the royalties accruing on the contract. On cross-examination, Hall, with evident reluctance, was compelled to admit that the purchase price of these patents was charged back to plaintiff, in accounting for royalties. Such being the case, it would be highly inequitable to permit the defendant, while refusing to perform its original contract, to assert ownership in its own right to the Bolte patents, in which it has never invested a dollar which has not been accounted for and returned. So far as appears, no person or party has ever asserted any right or intention to contest the validity of defendant’s claim to the exclusive right given to it by the original contract. Defendant has enjoyed the undisturbed possession of the right so acquired, and, so far as appears in the record, may still be exercising it and reaping the resultant profit, undiminished by any payments of the agreed royalty, thus' demonstrating the unreliability of the familiar saying that one “cannot eat his cake and keep it too.” Counsel for appellee seek to break the force of Hall’s admission upon the theory that Hall • & Company had become [5] liable to a claim for damages by Bolte by reason of infringement of his patents, and that these patents were assigned to defendant in the nature of indemnity against such liability. No witness so testifies. In Hall’s examination as a witness, his counsel ingeniously framed that theory in the form of a question, and asked him to state “whether or not” it was true. The witness side-stepped the suggestion, and made an entirely irrelevant answer. Moreover, the record is entirely devoid of any showing that Bolte ever made any complaint of that kind against the defendant, or that any such liability ever existed. Something has been said in argument to the effect that none of the patents, including those taken out by Bolte, is of any value. That, we think, is not a material inquiry, and we do not care to go into it. If defendant proposes to repudiate its contract, it can do no less than to restore to plaintiff that which it has received from him in consideration of the agreement which it refuses to perform. The decree below will be reversed, and a new decree will be entered, adjudging the plaintiff to be the owner of the Bolte patents, and requiring defendant to execute and deliver to him a good and sufficient assignment thereof. Another phase of this litigation was before us in Hanson v. Hall Mfg. Co., 184 Iowa 1091, a reading of the opinion in which will perhaps render easier a full comprehension of the merits of the issue here considered. We omitted to state at the proper place that Grenard, whose name is associated with plaintiff’s in the original contract, is now deceased, and plaintiff is the sole party entitled to .maintain the action. For the reasons stated in the foregoing opinion, the decree of the district court is reversed. If plaintiff so elects, decree granting him the relief prayed for will be entered in this court. —Reversed. Preston, C. J., Stevens and De Graef, JJ., concur.