Case Name: JEREMIAH M. PELTON, Plaintiff and Respondent, v. HENRY W. BULKLEY, Defendant and Appellant
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1872-03-30
Citations: 2 Jones & S. 283
Docket Number: 
Parties: JEREMIAH M. PELTON, Plaintiff and Respondent, v. HENRY W. BULKLEY, Defendant and Appellant.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 34
Pages: 283–289

Head Matter:
JEREMIAH M. PELTON, Plaintiff and Respondent, v. HENRY W. BULKLEY, Defendant and Appellant.
The assignment and transfer of an invention and patent to a corporation, and receiving in payment therefor the entire capital stock of said corporation, coupled with an agreement between the parties to the effect that after the reception of said stock, the assignor should transfer to said corporation one thousand shares, and should sell and transfer two thousand five hundred shares to other members of the corporation for five thousand dollars, and should retain for himself the remaining two thousand five hundred shares, is a sale or disposition, within the meaning of either of those words, of the said invention and patent, as also of one-half of the same.
Before Monell, Freedman and Curtis, JJ.
Decided March 30, 1872.
■ Appeal from order at special term sustaining plaintiff’s demurrer to the answer.
The complaint alleges that on February 6, 1867, one Carvalho was indebted to the plaintiff in the sum of one thousand two hundred dollars, for money loaned; that Carvalho, on said day, was the owner of an invention and patent for super-heating steam, which he on the same day sold to the defendant; that the defendant, as a part of the consideration for the sale, agreed with Carvalho, and with the plaintiff, and in consideration of the plaintiff’s releasing Carvalho from his said indebtedness, that if he, the said defendant, should at any time sell or dispose of one-half interest in said invention, he would forthwith pay the plaintiff the whole of whatever the balance of the said sum of one thousand two hundred dollars remained unpaid ; that the defendant, on March 6, 1867, sold and disposed of said inven tion, and all the interest he had in it, to the Carvalho Steam Super-Heating Manufacturing Company; that no part of said sum of one thousand two hundred dollars has been paid, and that defendant refuses to pay.
The answer admits Carvalho’s indebtedness and, ownership, the sale by Carvalho to defendant, the existence of an agreement to pay the plaintiff, the non-payment, and defendant’s refusal. It then alleges that the agreement with the plaintiff was made in writing, as follows:
“How this agreement witnesseth that the said Henry W. Bulkley, for and in consideration of the herein-before recited premises, doth hereby for himself, his heirs, executors and administrators; covenant, promise, and agree to and with the said Jeremiah M. Pelton, his executors, administrators, or assigns, that he, said Henry W. Bulkley, will pay to him, the said Jeremiah M. Pelton, his personal representatives or assigns, in quarterly installments, commencing from the first day of February, 1867, the one-tenth part of any and all income, profits, or receipts, including any salary to be derived from any company or copartnership which he, the said Bulkley, may at any time hereinafter obtain, or receive, or be entitled to in any manner whatsoever, for or on account of or arising out of the one-half interest which the said Bulkley retains for himself in the said letters patent or invention for super-heating-steam, sold to him by the said Carvalho as aforesaid, whether the said income, profits, or salary be derived or received from or under a joint stock company, co-partnership, or in any other manner whatsoever. And the said Henry W. Bulkley, for himself, his heirs, executors, and administrators, hereby further covenants and agrees that if he shall at any time sell or dispose of any portion of said one-half interest in said invention retained by himself as aforesaid, he will pay to the said Jeremiah M. Pelton, his personal representatives or assigns, the one-tenth part of the purchase money which may be received therefor; and if he, the said Henry W. Bulkley, should at any time sell or dispose of the whole of his said one-half interest in said invention reserved as aforesaid, he will pay forthwith the whole of whatever balance may then remain unpaid of the said sum of twelve hundred dollars, to the said Jeremiah M. Pelton, his personal representatives or assigns; provided that, and it is the meaning of this agreement that the said Jeremiah M. Pelton shall not be entitled to receive, and the said Henry W. Bulkley shall not be obliged to pay to him, more than the aforesaid sum of twelve hundred dollars. And the said Henry W. Bulkley further covenants and agrees to render to the said Jeremiah M. Pelton, quarterly accounts of any and all income, profits, and salary which may be received by him as aforesaid, and to give or procure for the said Jeremiah M. Pelton, all reasonable and proper access to books and vouchers necessary to verify such quarterly accounts. And the said Bulkley also agrees to give good and sufficient security for the faithful performance by him of the foregoing agreement and covenants.
The answer further alleges:
“This defendant further answering says, that at the time of his purchase of the said invention and patent of the said Carvalho, and at the time of the making of the agreement in writing between the plaintiff and this defendant as aforesaid, there was conversation between the parties to said purchase and agreement to the effect, and it was well understood between them, that this defendant expected to retain for himself only one-half of the interest in said inven don and patent, and to dispose of the residue to a company to be formed for the purpose of doing business under said patent in the manufacture and sale of steam superheaters and re lating thereto ; and that the balance of the said indebtedness of the said Carvalho to the plaintiff, beyond the one-tenth of income, profits or receipts in respect to the one-half interest in said invention and patent retained by this defendant, and one-tenth of the purchase money which he might receive in case of a sale by him of a portion of the one-half Interest retained by him, was not to be payable until he had sold or disposed of the whole of the said one-half interest reserved by him, whereby ‘he might have the means and be able, without embarrassment, to pay the balance of said indebtedness.
The answer then denies a sale or disposition by defendant of said ■ invention to the company named, except in the following manner :
“ That in forming said company it was provided that its capital should be sixty thousand dollars, divided into six thousand shares of ten dollars each ; that on the organization of the company this defendant assigned the said patent to said company, and in payment therefor the said company issued to this defendant the entire six thousand shares of the capital stock of said company; that this defendant, by agreement with said company, then sold to persons who, with this defendant, became and were members of said company, three thousand of said shares, and received therefor five thousand dollars, which, by agreement with the company, he was- to have and retain for one-half interest in said patent; and by agreement with said company, the other one-half interest in said patent, and the stock representing the same, was to and did belong to this defendant; that by further agreement with said company, one thousand of the six thousand shares of said stock was to be and was contributed to the said company by the stockholders; and thereupon certificates for five thousand of said six thousand shares were issued, as follows: to this defendant, twenty-five hundred shares, and to the other members of said com pany twenty-five hundred shares, thus leaving one thousand shares with the company undistributed. That by the agreement between this defendant and said company, under which this defendant assigned to said company the said patent, this defendant was to transfer to said company one-half interest therein only; and the said assignment was made to embrace the whole interest in form by advice of the counsel of the company, that it would be the best mode of carrying out the agreement to have the assignment include the whole interest, and the company issue to this defendant of its stock an amount equivalent to the one-half interest in said patent, which was to be retained by this defendant, to represent that one-half interest; and therefore the business was done in that mode. That this defendant still retains the stock assigned to him as aforesaid; and the one thousand shares left with the company as aforesaid are still held by it undistributed.”
The answer concludes with a formal denial of each and every allegation of the complaint not expressly admitted, denied or controverted.
The plaintiff demurred to.the answer for insufficiency in not stating facts sufficient to constitute a defence.
The court sustained the demurrer and granted an order for judgment thereon, with leave, however, to the defendant to serve an amended, or further, answer on payment of costs of the demurrer.
The defendant appealed from such order.
T. R. Strong, counsel for appellant.
T. D. Pelton, counsel for respondent.

Opinion:
By the Court.—Freedman, J.
The question presented by the demurrer is whether the assignment and transfer of the invention and patent by the defendant to the Carvalho Steam Superheating Company, and the issue to him by said company of its stock, as set forth in the answer, amounts to a sale or disposition, within the meaning of either of said terms as used in the agreement existing between the parties, of the whole of defendant's one-half interest, which he had reserved to himself. If it dues, the answer admits all that it would be necessary for the plaintiff to prove upon the trial. In such case the event has occurred upon the occurrence of which the defendant undertook to pay the twelve hundred dollars, or any balance thereof remaining unpaid. After a critical examination of the law and the facts, as admitted by the answer, I entertain no doubt that the answer, as a pleading, contains a sufficient admission of a disposition by defendant of his reserved one-half interest, within the meaning of that word, as understood by the parties at the time of the execution of the contract between them. By his own showing, the defendant has parted voluntarily and for a valuable consideration with the whole of his interest, and in a manner by which he became divested of the title and lost the power of disposition over it. He has disposed of it so effectually that, in law, he can never sell or dispose of it again, and as he has no equities against the plaintiff, except such as he stipulated for, the plaintiff is not to be affected by the manner of such disposition, nor by the kind of consideration received by the defendant therefor. Consequently the claim, so ingeniously advanced and urgently pressed, that the defendant, by the acceptance of stock, retained an interest, and for that reason did not part with his entire interest in the invention and patent, cannot be upheld. Although the character of the company does not distinctly appear by the pleadings, yet it sufficiently appears that the company was organized upon a stock plan, that it was to consist of stockholders, and that its capital should consist of a certain number of shares. The certificates of stock accepted by the defendant represent, therefore, only an interest pro tanto in the capital of the company, no matter how invested, and are evidences, in addition thereto, of a right to dividends and to a pro rata distribution of the proceeds of the whole property of the company upon its dissolution; but they cannot, in the absence of other and further averments than are contained in the answer, be deemed to represent, as against plaintiff's claim, a disposable interest in the invention or patent conveyed, or in one-half of it.
The order appealed from should be affirmed, wiih costs.