Case ID: ny-st-rep_41/html/0628-01.html
Source: Caselaw Access Project
Author: {"author": "Gray, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

William Barry, Resp’t, v. Orson Coville et al., App’lts.
    
    
      (Court of Appeals,
    
    
      Filed December 15, 1891.)
    
    1. Deed—When may be shown to have been given as security.
    Plaintiff, in order to secure the payment of his indebtedness to defendants, in October, 1884, assigned two-thirds of certain patents to them, to be reassigned upon liquidation of said indebtedness. Subsequently the agreement was extended to July, 1885. In April, 1885, plaintiff executed and delivered to defendants a patent deed conveying to them two-thirds of his interest in one of said patents, no consideration being given. In July, 1885, defendants refused to continue their arrangements under the con- ‘ tract or to reassign the patent, although full satisfaction of plaintiff’s indebtedness was offered. Held, that there was sufficient evidence for the court to find that the deed was executed and delivered merely in furtherance of the agreement, and that it was in the nature of a security, and to compel defendants upon showing that nothing was due them to reassign to plaintiff.
    2. Same—Services.
    The court charged defendants upon the accounting with the value of plaintiff’s labor, performed in perfecting improvements upon "one of the inventions, and done at defendants’ request and upon their promise to compensate him for it, the contract not requiring him to do it. Held, no error.
    Appeal from a judgment of the supreme court, general term, fourth department, affirming interlocutory judgment and final judgment entered on referee’s report in favor of plaintiff.
    Plaintiff brought this action to compel the defendants to reassign to him certain interests which they had acquired in letters patent issued to him for inventions, etc., and for an accounting between the parties. The plaintiff had invented an improvement in door hangers, and in roller skates, a machine for stripping willows and a post office cancelling apparatus. He was somewhat in debt to the defendants, and, in October, 1884, to secure to them the payment of that indebtedness, as well as to make a provision in the future for a supply of goods, etc., for his support and for .some moneys to perfect a machine, he entered into a contract with the defendants, who were engaged in the grocery business. By this contract plaintiff assigned to the defendants two-thirds of his interest in his inventions, or patents, and the defendants agreed to furnish funds for manufacturing a certain trial machine, and to furnish to plaintiff goods and provisions “ so long as they shall be satisfied with the success of the manufacturing and carrying forward the business under said inventions as hereinafter specified •and limited, together with ten dollars per month for house rent and necessary fuel for said time.” The contract then goes on to provide that out of plaintiff’s share of the profits and proceeds of sales should be paid his past obligations and his indebtedness to defendants as it may accrue during the continuance of the contract. It is then finally provided that in case the defendants become satisfied after three months “ that it will not be profitable for them to continue their interest in this agreement in and to the manufacturing of the articles under said inventions, or in the performance of their obligations, they shall have the right to terminate the agreement, and the same shall become inoperative and wold, but shall retain their interest and claims therein till they .■shall be fully paid their said indebtedness up to such time as they shall terminate this agreement, but they shall upon payment to them of their said indebtedness reassign their said interest in said inventions ” to the plaintiff.
    Subsequently, the time to terminate the agreement was extended by agreement to July 1, 1885. In the month of April, following the agreement, plaintiff executed and delivered to the defendants a patent deed conveying to them two-thirds of his interest in the patent for door hangers, which was recorded in the patent office. Ho consideration was given for this deed and that expressed in its language was nominal. On July 1, 1885, the ■defendants refused to continue the arrangement under the contract, and they subsequently refused to reassign the patent interests ; though full satisfaction of their demands and of plaintiff’s ■indebtedness was offered them.
    The trial court decided that the transfers of patent interests by 'plaintiff were for a security for the repayment of plaintiff’s indebtedness as specified in the contract, and upon such repayment being made to defendants they should reconvey to plaintiff the interests in his patents acquired under contract or deed, and the court directed an accounting to be had before a referee as to the matters covered by the contract and as well as to services performed by plaintiff at defendants’ request. Upon that reference a balance was found resulting in favor of the plaintiff; after ■crediting, defendants with plaintiff’s debt to them for moneys advanced and goods furnished, and charging them with the value of certain services rendered by plaintiff and with royalties reeeived by them. From the judgment of the general term, affirming the interlocutory judgment and the final judgment entered upon the referee’s report, the defendants have appealed to-this court.
    
      M. M. Waters, for app’lts ; C. G. Baldwin, for resp’t.
    
      
       Affirming 36 St. Rep., 598.
    
   Gray, J.

The facts, which have been stated, sufficiently exhibit the positions of the parties and enable us to review the two-questions which the appellants’ counsel has argued here. He says-that the patent deed, conveying an interest in the patent described, was absolute, and that the evidence did not justify a finding that it was a security only. His argument is, in effect, that as no fraud was found, or practiced, in respect to-its execution, paroi evidence could not destroy the absolute-character of the conveyance, and equity was powerless to attach to it a defeasance. If the deed of this particular patent interest stood alone, and there was no light cast upon it, in which the intentions and understanding of the parties to it could clearly be read, of course it would stand as an absolute conveyance. But where, as here, the court had before it the circumstances connected with its making, and the conceded absence of any new consideration for it, it was proper and right to consider the facts which showed it to be for a security, and to judge accordingly. It is a perfectly well settled rule in equity that a conveyance, absolute upon its face, may be shown by paroi or extrinsic evidence to be in reality merely for a security, and to that end the presence of some fraud, or mistake, in the inception of the instrument is not at all essential to be shown. That is an ancient doctrine in equity, which has come down to present times, and to which the courts of this state are fully committed in many decisions. For a fuller discussion of the doctrine, reference may be had to Judge Allen's opinion in Horn v. Keteltas, 46 N. Y., 605.

In the present case the court had sufficient evidence before it upon which to find this deed to have been executed and delivered merely in furtherance of the agreement made in the previous October between the parties, and to be in the nature of a security.

The finding made in that respect is conclusive upon us. The contract defined the relations of the parties and their respective rights during a period of time which had not expired when this patent deed was made. Its provisions gave an absolute ownership to the defendants in the patent interests to the extent described while the contract lasted; but when, upon the default or the election of the defendants, its ceased to be operative, its provisions required the defendants to re-assign their interests; or, at, furthest, to retain them only so long as the plaintiff’s indebtedness was undischarged. The deed given during the running of the contract is unexplained, unless by the fact that it completed the assignment of the interest in the patents, which the contract had undertaken to transfer. It was delivered because of the contract, and its operation was limited by the understanding of the parties, as evidenced by the testimony and the existing agreement. If, by the force of their agreement, the ownership of the patent interests by the defendants was, in a certain contingency, to cease, and the plaintiff was to have them back, obviously this deed would be controlled by the agreement.

It would require proof of some other agreement, and of some new «consideration pending the running of the contract, to give to the patent deed a necessary operation independent of the terms of the contract. Its validity is not affected whether it is considered as an absolute conveyance of patent rights, or as a mortgage upon them. We will not, therefore, disturb the decree of the court adjudging as to the nature of contract and deed and that the defendants should re-assign to the plaintiff the patent interests they had acquired, upon a satisfaction of whatever obligations he might be shown to be under to them and as a security for which the contract was intended to operate.

But the appellants further insist that it was error for the •court to charge the defendants upon the accounting with the value ■of plaintiff’s labor. That labor, as it was correctly found, was performed in perfecting improvements upon the roller skate invention. It was performed, as there was evidence to show, at the «defendants’ request subsequently to the making of the contract, .and the request was only complied with upon the defendants promising to compensate plaintiff for his time spent. The terms of the contract did not require of him to do this particular work and there was no reason why he should not agree with the defendants to work especially for them, in reference to any one of the particular inventions (which seems to have been the case here), .and that he should be paid for that work as an independent transaction or arrangement. The appellants, however, find fault with the decision of the court below on the ground that the expenditures were upon the property of parties having joint interests in it and that plaintiff, as one of the parties, should not, therefore, Be allowed a credit for it. In support of this view the appellants’ counsel advances arguments based upon the rule governing the relations of tenants in common, or of mortgagor and mortgagee. But that line of argument is not applicable to the present case ; inasmuch as the court has found, upon sufficient evidence, that there was a special hiring of the plaintiff by the defendants to do the particular work in question. It was, therefore, not like a case •of work done by a joint owner, or by a mortgagee, in the improvement of the property in which there was a joint interest. This liability to pay plaintiff for his services arose upon their rendition and was, in a certain sense, as they were not called for by the contract, outside of the contract. He was entitled to be paid if the «contract continued and when it terminated such payment was a proper .charge against the defendants in stating the account between them and him to ascertain what, if any, claim they had upon the patent interests as security for the plaintiff’s indebtedness to them.

The appellants allege no other error and the judgment appealed from should be affirmed, with costs.

All concur.