Case ID: mich_48/html/0331-01.html
Source: Caselaw Access Project
Author: {"author": "Marston, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Hall Manufacturing Company of Grand Rapids v. American Railway Supply Company.
    
      Bstoppel from denying power to contract or mime of consideration
    
    "Where one who has contracted with a corporation for the exclusive right to manufacture and sell a certain patented article, has received the full "benefit of the contract, he cannot, in an action against him thereon, deny the authority of the corporation to make the contract, especially if the stockholders are satisfied.
    Where a contract for the exclusive right to sell a patented article on payment of a royalty is made by a person who owns a conflicting patent, and the agreement is made for the express purpose of avoiding any conflict and for dividing the royalty, he cannot, in an action against him on the contract, question the validity of the plaintiffs’ patent.
    Error to Superior Court of Grand Rapids.
    Submitted April 20.
    Decided April 25.
    AssuMPsrr. Defendant brings error.
    Affirmed.
    
      JS. A. Maher for appellant.
    A contract made by a corporation is invalid if not within the corporate franchises : Bank of Michigan v. Niles 1 Doug. (Mich.) 401; Orr v. Lacey 2 Doug. (Mich.)230; Thompson v. Waters 25 Mich. 214; Chapman v. Colby 47 Mich. 46; but see Rock River Bank v. Sherwood 10 Wis. 237; while a contract which is generally within the scope of corporate powers, but is, in some particulars, in excess of these powers, may be- enforced, a contract which the corporation has no legal authority to mate, is illegal and void: Madison Plank Road Co. v. Watertown Plank Road Co. 7 Wis. 58; Northwestern Union Packet Co. v. Shaw 37 Wis. 655; Dietrich v. Madison Relief Association 45 Mis. 79; Littlewort v. Davis 50 Miss. 403; Gold Mining Co. v. National Bank 96 U. S. 640; Germantown Ins. Co. v. Dhein 43 Wis. 420; the consideration necessary to support a contract must be something beneficial to one party, or dis1 advantageous to the other, or to persons whom the parties represent: Bishop on Contracts Q. 420; Sanford v. Huxford 32 Mich. 313; the grant of an interest or right under a void patent is not a valid consideration for a promise by the grantee: Eureka Company v. Bailey Co. 11 Wall. 488; Harlow v. Putnam 124 Mass. 553; Bliss v. Negus 8 Mass. 46; Dickinson v. Hall 14 Pick. 217; Bierce v. Stocking 11 Gray 174; Lester v. Palmer 4 Allen 145; Nash v. Lull 102 Mass. 60; Howe v. Richards 102 Mass. 64; Jackson v. Allen 120 Mass. 64; Rich v. Hotchkiss 16 Conn. 409; Nye v. Raymond 16 Ill. 153; Hawes v. Twogood 12 Iowa 582; Scott v. Sweet 2 Green (Iowa) 224; Cross v. Huntly 13 Wend. 13; Head v. Stevens 19 Wend. 411; McDougall v. Fogg 2 Bosw. 387; Dunbar v. Marden 13 N. H. 317; Geiger v. Cook 3 Watts & S. 270; Darst v. Brockway 11 Ohio 471; McClure v. Jeffrey 8 Ind. 82; Mullikin v. Latchem 7 Blackf. 136; Clough v. Patrick 37 Vt. 421; Rowe v. Blanchard 18 Wis. 441.
    
      Burch c& Montgomery and James R. Wylie for appellee.
    State courts have no jurisdiction.to determine the validity of patents (Elmer v. Pennel 40 Me. 430) but can enforce agreements to pay royalties for licenses to make, sell or use patented articles (Merserole v. Union Paper Collar Co. 3 Fish. Pat. Cas. 483) and the patent is presumed valid: Birdsall v. Perego 5 Blatch. 251; Kinsman v. Parkhurst 18 How. 289; Wilder v. Adams 2 Woodb. & M. 329; Pitts v. Jameson 15 Barb. 310; Herm. on Estoppel § 466; one who has received full consideration for his agreement must perform it: Cuthbertson v. Irving 4 H. & N. 742; Jackson v. Waldron 13 Wend. 128; Parkhurst v. Kinsman 1 Blatch. 489.
   Marston, J.

The plaintiff, a corporation organized under the act approved May 1st, 1875, providing for the incorporation of manufacturing companies, entered into an agreement with the defendant giving the latter the sole and exclusive license and right to manufacture and sell a certain patent rail upon a royalty to be paid therefor. The defendant manufactured and sold a certain number of tons and this action is brought to recover the royalty due therefor. The defendant alleges that the contract was one the plaintiff had no authority to enter into as it thereby abdicated a specific corporate function for a period of seven years.

The defendant should have thought of this sooner and not-waited until, after receiving the full benefit of the contract, it was called upon to perform on its part. Evidently the defendant does not set up this defense in the interests of the plaintiff or its stockholders, who seem to have been satisfied with the contract and made no objection thereto.

But was this contract an abdication of any of the plaintiff’s corporate powers?

The purposes for which the plaintiff was organized, were to engage in the manufacture and sale of this rail, and to sell rights and to grant license to manufacture on royalty or otherwise under the same, also buying, manufacturing and selling railroad rails, spikes, etc.

One of the objects specified was to sell rights and grant licenses to manufacture this rail on a royalty, and this was just what it did do in entering into this agreement with the defendant. In other words, it made a contract within the very letter of its charter. We think this contract was binding and that the defendant must carry out its part of the same.

It is in the second place said that this agreement was not made upon a valuable consideration, as the patent referred to was void.

This question we think is not open to controversy in the present case. The contract shows that'the defendant, at the time of this agreement, was the owner of the patent with which this is supposed to conflict, and that this agreement was entered into apparently to avoid any conflict, and in order that the royalty should be divided. The defendants therefore are in no position to question the validity of the plaintiff’s patent in the present action brought to recover a royalty earned or due on account of rails manufactured and sold thereunder.

The judgment will be affirmed with costs.

Cooley and Campbell, J J. concurred.