Case ID: ad_143/html/0161-01.html
Source: Caselaw Access Project
Author: {"author": "Burr, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Gerhard T. Potthoff, Appellant, v. Safety Armorite Conduit Company, Respondent.
    Second Department,
    February 24, 1911.
    Contract — license to use patent — royalty — contract construed — acts of parties.
    To carry out the intention of a contract, words may be transposed, rejected or supplied, if necessary, to make its meaning more clear.
    Plaintiff’s assignor gave to defendant the exclusive right to use on iron and steel electrical conduit pipes a patented process of electro-galvanizing and electroplating. The contract provided that the defendant should pay “a fee or royalty of 50c per 1000 feet on all pipes electro galvanized by it during the said term for an output of five million, or less, feet per year and for all pipes of an output of over five million feet per year at the rate of 30c per 1000 feet.”
    
      Held, in an action to recover the royalty, that the clause should be construed as calling for two rates of payment when the output in any year exceeded 5,000,000 feet, namely, fifty cents per 1,000 feet on 5,000,000 feet of the output and thirty cents per 1,000 on the balance.
    In case of doubt as to the meaning of a contract, prior negotiations between the parties may be considered to aid in the determination thereof.
    
      Thus, the court in construing.the contract will take into consideration the fact that as first proposed by plaintiff’s assignor it was plain and unambiguous in calling for such rate of payment, and that the clause among others was changed to its present form on the suggestion of the defendant, who characterized such changes as “ not essential ” and tending to remove ambiguity.
    A party has no right to induce another to contract with him on the supposition that his words mean one thing, while he hopes the court will adopt a construction by which they will mean another thing more to his advantage.
    Appeal by the plaintiff, Gerhard T. Potthoff, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the 4th day of March, 1910, upon the decision of the court, rendered after a trial at the Kings County Trial Term, a jury having been waived, dismissing the complaint upon the merits.
    
      Louis Salant [Mortimer Fishel with him on the brief], for the appellant.
    
      Francis H. Finnicutt [George Whitefield Betts, Jr., with him on the brief], for the respondent.
   Burr, J.:

On December 15, 1904, the United States Electro-Galvanizing Company, plaintiff’s assignor, entered into a contract with defendant by which defendant was given the exclusive right to use on iron and steel electrical conduit pipes a process of electro-galvanizing and electroplating which the said company controlled under letters patent of the United States. The right of plaintiff to recover the sum claimed in this action depends upon the construction to be put upon the 3d clause of said contract, the material part of which is as follows:

Third. The party of the second part hereby agrees to pay dur- ■ ing the above term for the license hereby granted a fee or royalty of 50c per 1000 feet on all pipes electro galvanized by it during the said term for an output of five million, or less, feet per year and for all pipes of an output of over five million feet per year at the rate of 30c per 1000 feet; payments to be made monthly, on the- tenth day of each month, commencing January 10th, 1905, for the business done during the month next preceding and to be accompanied by a duly attested statement showing the amount of business done during the said month. The party of the second part agrees to pay to the party of the first part on minimum output of three million feet per year, to wit, at least $1500 per year, payable in monthly installments of $125.00 in advance, this amount to be paid monthly, irrespective of output being less than 250,000 feet during the previous month; but at the end of each contract year adjustment shall be made so that the actual amount paid during the year shall be at the stipulated royalty figure based on output, provided, however, said royalty for the year shall not be less than $1500.00.”

The learned counsel for the respondent in his brief fairly states the controversy in this language: The respondent maintains and the court below has found that * * * payment is to be regulated by the total output per year, so that when the output in the year is less than 5,000,000 feet the payment is at the rate of 50c. for every thousand feet of sucli output, but when the output in a year is more than 5,000,000 feet then the payment is 30c. for every thousand feet of such output. The appellant claims, however, that the clause is to be construed as calling for two rates of payment when the output in the year exceeds 5,000,000 feet, namely, 50c. a thousand feet on 5,000,000 feet of the output and 30c. a thousand feet on the balance of the output.” We think that the language of the clause in question sustains appellant’s contention. To carry out the intention of a contract words may be transposed, rejected or supplied, if necessary, to make its meaning more clear. (Jones Const. Cont. 302; Jackson v. Topping, 1 Wend. 388, 396.) Let us transpose the order of the words of the first sentence of the clause in question, so that it reads, “The party of the second part hereby agrees to pay during the above term for the license hereby granted on all pipes electro galvanized by it during the said term a fee or royalty of 50c per 1000 feet for an output of five million or less feet per year a/nd for all pipes of an output of over five million feet per year at the rate of 30c per 1000 feet.” It now appears quite clearly that the entire price is not made to depend upon an “ output ” of more or less than five million feet yearly. The first clause uses the term “ output,” the second does not use the same term. It says, “ all pipes of cm output of over foe million feet.” The first relates to the whole product, the latter to a part only, and to that part of the whole product which consists of pipes in excess of 5,000,000 feet. The conclusion that this is the meaning which defendant intended plaintiff’s assignor should put upon the contract is strengthened by defendant’s conduct prior to the making thereof. In cases of doubt as to the meaning of a contract, prior negotiations between the parties may be considered to<aid in the determination thereof. (Wald’s Pollock Cont. [3d ed.] 308; Kennedy v. Porter, 109 N. T. 526, 544; Greenfield v. Gil/man, 140 id. 168, 174.) The contract as originally drafted by plaintiff’s assignor contained these words: The party of the second part hereby agrees to pay during the above term for the license hereby granted a fee or royalty at 50c per 1000 feet on all pipes electro galvanized by it during the said term up to five million feet per year, and for all pipes in excess of five million feet per year at the rate of 30c per 1000 feet.” As it then stood, there could be little doubt as to the contract price. The draft of this proposed contract was returned by defendant with a letter which contained these words: The contract submitted, while pretty nearly right, would, however, admit of a few changes which in a way are not essential, but we would prefer to have them covered. There are some clauses in the contract that are ambiguous and it is our opinion that the copy which we submit herewith would be entirely satisfactory to you, and we would say that it will be to us, and we would, therefore, ask your acceptance of same in substitution of the other form.” The proposed draft with the proposed amendments subsequently became the executed contract. There were other changes proposed in the contract as originally submitted, to which the words “ not essential ” and “ ambiguous ” might fairly apply. The clause in the proposed contract with regard to price was not ambiguous, and such a radical change as defendant now insists the amended contract accomplished was far from “ not essential.” It may result in changes amounting to several thousand dollars a year. If the price was not to be as clearly expressed in the first proposed contract, defendant should have made equally clear in the second contract what it understood respecting the same. With such clear statement, if defendant insisted upon the price proposed by it, the minds of the parties might never have met. A party has no right to induce another to contract with him on the supposition that his words mean one thing while he hopes the court will adopt a construction by which they would mean another thing more to his advantage. (Fowkes v. Manchester & London L. A. & L. Assn., 32 L. J. [N. S.] 153, 159; Barlow v. Scott, 24 N. Y. 40; Tallcot v. Arnold, 61 id. 616; Gillet v. Bank of America, 160 id. 549 ; Stanton v. Erie Railroad Co., 131 App. Div. 879.) The adjustment clause above quoted contains nothing inconsistent with this view. ' The contract provided for a monthly payment in advance of $325, irrespective of the amount of the monthly output, and a yearly minimum payment of $1,500 irrespective of the amount of the yearly output. If, for instance, in the month of April, 1907, 500,000 pipes had been galvanized, the monthly payment must be made upon that basis. If in May no pipes were galvanized, still a monthly jiayment of $125 would be due, although the output for April would be sufficient in the yearly computation to fill the quota for both months. At the end of the current year all these advances would be adjusted and settled.

The judgment appealed from must be reversed and a new trial granted, costs to abide the event.

Jerks, P. J., Thomas, Caer and Woodward, JJ., concurred.

Judgment reversed and new trial granted, costs to abide the event-