Case ID: ny-st-rep_53/html/0412-01.html
Source: Caselaw Access Project
Author: {"author": "O’Brien, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Mann’s Boudoir Car Co., Resp’t, v. The Gilbert Car Manufacturing Co., App’lt.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed May 12, 1893.)
    
    Pbinoipal and agent—Contbact made by agent in his own name
    INUBES TO BENEFIT OF PBINOIPAL.
    The president of plaintiff, who had been the owner of. patents which he had assigned to the company, assuming that he retained ownership as to-cars manufactured for export, entered into negotiations with defendant in, his own name which resulted in a contract by which it agreed to pay a. specified royalty, and “to tins we will add to contract price a commission of five per cent, to you.” Subsequently the president acknowledged his mistake, and defendant agreed to pay the royalties to plaintiff, and sent a check for the sum specified, but withheld the commission, so called, claiming to offset it against a debt owing it from said president. Held, that under the contract as made the entire amount offered was'to go to the president by way of royalty for the use of the patents ; that the eonti act inured to the benefit of plaintiff, and that it was entitled to the commission as well as the other sums.
    Appeal from judgment on report of referee.
    
      Charles E. Patterson, for app’lt; G. W. Cotterill, for resp’t.
   O’Brien, J.

The single question involved is, whether the defendant should pay to the plaintiff, or to William D. Mann, five per cent, on the contract price, as royalty for using the plaintiff’s-patents in the manufacture of four sleeping cars sent to Australia.

It was conceded on the trial that Mann was originally the owner of the letters patent covering the inventions used by the defendant in the manufacture of four sleeping cars, and that the said letters patent were assigned to plaintiff prior to the making of the contract with defendant. And were it not for a doubt which evidently existed in the mind of Mann as to the extent and character of his assignments to the,plaintiff, no controversy could have arisen. The fact, however, that Mann assumed that, although he had assigned his letters patent covering the inventions which the defendant used, and for which it agreed to pay a compensation, he still retained his ownership with respect to cars-to be manufactured for export, for which the cars manufactured by defendant were intended, introduced in the relations between the parties confusion and doubt, which has necessitated this action. It is evident, from an examination of the correspondence-between the parties, beginning with the letter from Mann to the-defendant under date of July 3, 1885, that Mann, though known by the defendant to be the president of the plaintiff company, acted as though the contract he was about to make with the-defendant company was on his behalf and for his own benefit for that letter begins by saying: “I have an opportunity to build four cars for Australia. * * * I propose to, furnish the following articles myself,” and it closes as follows: “If so, will you -quote me a price, I furnishing the materials as above." In answering to this letter, under date of July 6th, and particularly in the letter of July 7th, which was the letter containing the agreement on the part of the defendant, the defendant wrote under the impression that it was dealing with Mann personally, for throughout the latter letter it is the individual and not the president of the company who is referred to and spoken of by defendant.

We think that this error into which seemingly both Mann and the defendant had fallen is important and material, as bearing upon the question whether the contract made between the parties involved the payment of royalties to one and, as separate and distinguished therefrom, a commission to another. It also has a bearing upon the weight to be attached to the expression in that letter, upon which so much stress is placed by the defendant as supporting the view of a divisible obligation, viz: “ and to this we will add to contract price a commission of five per cent, to you.” Keeping in mind the language quoted from Mann’s letter of July -8, what the defendant proposed to do, and for whom, is thus expressed in the answer thereto of July 7, already referred to:

“ In the first place, we would propose furnishing the materials mentioned in yours of the 3rd inst., as the materials you would furnish, you giving us description of the kinds, and such other information as you have at command. In other words, we to build and furnish the cars complete for a round sum, and in the second place, we would suggest your giving us your influence with Mr. Evans to secure this order, and in the event of our securing the same, we would pay you royalty as per your letter to us of September, 1884, giving us permit to build for export, to wit: $1,000 per car for royalty on sleeping car patents, and $250 for patent ventilation, making $1,250 per car, and to this we will add to contract price a commission of five percent, to you.”

We think that the claim made by Mann as to not having assigned his rights with respect to cars intended for export, and the suusequent abandonment of such position, together with the entire correspondence between the parties, show that when the contract was made between them it was a single and indivisible contract and agreement made by the defendant, under which it was to pay in the way of royalty and commission the amounts as specified in the letter of July 7; that, as correctly held by the referee, these words royalty ” and “ commission ” were used interchangeably and as synonymous by both the parties throughout their correspondence ; and that the claim now advanced, that the royalties were to go to plaintiff, and a commission, as separate and distinct therefrom, to Mann, is purely an afterthought, resorted to, no doubt, for the very proper purpose of assisting the defendant to ■collect, in part at least, the sum which was due it from Mann.

This view is enforced by the fact that, although the matter of what was to be paid by the defendant, namely, $5,000 and five per cent, was always referred to and spoken of as royalties, it was not until the 4th of January, 1886, that, in enclosing the note for $5,000, the defendant for the first time separated the $5,000 claim, which it conceded belonged to plaintiff, and the five per cent, which is thus referred to in the letter of that date: “ Our counsel advises us, as we have judgment against Col. Mann for claims greater than the five per cent commission at the time he assigned his lights to your company, that,” etc. Thus, the position which, throughout the relations between the parties, the defendant had taken, of regarding the sums to be paid as payable to the same person under one indivisible contract, was continued down to December 19, 1885, by defendant writing: “We have no hesitation in saying we will pay your company the royalties, which we.much. prefer doing.” During all this time there was not the slightest intimation or suggéstion that there was any question with regard t» the five per cent, especially as an independent matter; and it would serve no useful purpose to take extracts from the letters written by defendant to show how consistent up to January, 1886, had been the latter’s position in regarding it as a single sum, whether spoken of as royalty or commission, and payable to a single person.

As we have said, the whole trouble arose out of the mistake into which Mann had fallen of regarding himself as the principal in the transaction in dealing with the defendant. The evidence shows that long prior to the contract the defendant knew that Mann was the president of the plaintiff company; and Mann himself testified that the assignments of the patents had been shown to Mr. Gilbert, one of the officers of the defendant company. This mistake, however, was finally straightened out, as shown by the correspondence with, and notification to, the defendant, by the withdrawal by Mann from his untenable legal position, and by the consent of .the person to whom Mann had attempted to make an assignment of the use of the patents for export trade to the payment to plaintiff.. The position, therefore, as shown by the entire transactions and correspondence, was that the defendant made a contract originally with Mann for the payment to him by way of royalty for the use of the patents the amounts specified in the letter of July 7, and that both Mann and the defendant subsequently discovered that the rights in and to this contract were justly and legally claimed as belonging to plaintiff.

Upon well settled principles of law, it being conceded by defendant itself that plaintiff was entitled to whatever was due by way of royalties, we fail to see why the plaintiff should not recover, as held by the referee, in addition to the other amounts, the five per cent on the contract price, which was referred to in, the letter of July 7th as a commission. It is evident that the entire amount there offered to be paid was intended to go to Mr. Mann by way of royalty for the use of these patents by the defendant; and that this is so is evidenced by Mr. Mann’s own letter in reply, stating that he quoted the same terms to other parties, which included the five per cent on the contract .price as sued for here, and which was therein spoken of and designated by Mr. Mann as a royalty to be paid for the use of such patents. That the defendant did not intend to pay a royalty to plaintiff, and in addition a commission to Mr. Mann separate and distinct therefrom, as contended upon the trial and this appeal, is conclusively shown by the testimony, and were it not for the language used, ‘‘a commission óf five per cent to you,” there would be no room for argument. But with this in the case, all the other facts appearing, and more particularly the fact that the defendant did not agree or intend to pay a royalty to anybody but Mann, whom defendant assumed owned the patent rights, are consistent only with an entire contract, under which the defendant was to pay to whoever was entitled thereto royalties to be made up in the manner indicated in the letter of July 7th. °

While, therefore, we differ with the view of the referee that the commissions in question were originally agreed to be paid the plaintiff, yet we think that the contract made with Mann inured by the operation of law to the benefit of the plaintiff. .Mr. Mann was assuming to act for himself, and the defendant was treating with him as the principal. But does it not become evident that where it turns out that both are mistaken, and where, as here, a contract is made with respect to the use of patents which were then owned by the plaintiff, that the defendant, after using the same, would be obliged to pay to the owner thereof, when, as here, it is evident who such owner is, the price agreed to be paid for the use of the inventions covered by such letters patent ?

We think that the conclusion of the referee was right, and that the judgment should be affirmed, with costs and disbursements..

Yah Brunt, P. J., and Follett, J., concur.