Case Name: Federal Sanitary Clearing and Refining Company, Appellant, v. Maurice Loeb, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-12-01
Citations: 147 A.D. 737
Docket Number: 
Parties: Federal Sanitary Clearing and Refining Company, Appellant, v. Maurice Loeb, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 147
Pages: 737–741

Head Matter:
Federal Sanitary Clearing and Refining Company, Appellant, v. Maurice Loeb, Respondent.
First Department,
December 1, 1911.
Contract — assignment of patent right to corporation to be formed — suit by corporation to compel performance — defenses — breach of second agreement between same parties.
An inventor and two other parties to whom he had assigned or was about to assign a part interest in his patent, entered into a contract whereby for a valid consideration they all agreed to assign their respective rights and interests in the patent to a corporation about to be formed and to receive in consideration therefor proportions of the stock equal to their respective interests in the patent. The contract further provided that it was subject to the securing of a license for the use of a certain other basic patent.
On the same day a second contract was entered into between the same three persons, whereby it was agreed between them that when the corporation was organized it would employ the inventor and one of the other parties at a certain salary and that the third party should advance certain money to enable the corporation to carry on its business. The corporation was formed and all parties received and accepted their proportionate shares of its stock, although the license to use the basic patent was never secured. The inventor, however, refused to assign his interest in the patent to the corporation.
Held, in an action by the corporation to compel him to do so, that as he had never raised any objection or refused to proceed with the business because of the failure to secure the license to use the basic patent, and as he had received his stock knowing the facts, he is estopped from asserting that, since the license had not been obtained, he is not obliged to carry out the terms of the contract;
That the facts that the corporation had not agreed in writing to employ defendant, and that the money had not been advanced as agreed in the second contract, are no defense to the suit by the corporation which had never ratified that agreement.
Appeal by the plaintiff, the Federal Sanitary Clearing and Refining Company, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 14th day of April, 1911, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the complaint upon the merits.
Morgan J. O’Brien, for the appellant.
Daniel W. Blumenthal, for the respondent.

Opinion:
Dowling, J.:
Maurice Loeb, the defendant, was the inventor of a certain apparatus for separating fat from water, wherein he assigned a one-half interest to Maurice May, letters patent of the United States, No. 885,353, being issued therefor to Loeb and May, On April 21, 1908, said Loeb and May, as parties of the first part, entered into an agreement in writing with Edward Guckenheimer, as party of the second part, which recited the intention of the parties thereto to organize a. corporation under the laws of the State of New York, to be known as the Federal Sanitary Clearing and Refining Company, for the purpose of collecting fats and oils and making the same into tallow, fertilizers, soaps and other products; that one C. Kremer of Germany' was the owner of a basic patent for fat separating; that negotiations were pending between Guckenheimer and the assignee of said patent (Gesellschaft fur Abwasserklerung) in order that the parties to the agreement might, proceed to incorporate and enter in the business aforesaid, peaceably and undisturbed; that Loeb had assigned a one-half interest in his patent to May and that Loeb was to assign the remaining one-half interest to Guckenheimer, simultaneously with which assigmnent May was to reassign one-half of his own interest (being one-quarter of the whole) to Loeb; wherefore in consideration of the premises and of the sum of one dollar the parties agreed that they would all assign their respective interests and all their right, title and interest in and to said patent to the refining company about to be formed as soon as it was duly incorporated, so that the company should have (a) the use of the original Kremer patent by license and" (b) the sole and absolute title to the Loeb patent, in consideration of which assignments the parties before mentioned, viz., Loeb, May and Guckenheimer, were to receive the whole capital stock of the corporation to be formed, the same to be divided in the proportion in which the interests in the patent were divided, namely, twenty-five per cent to May; twenty-five per cent to Loeb and fifty per cent to Guckenheimer. The agreement contained the following clause: "It is further covenanted by and between the parties hereto that this and all contemporaneous agreements are subject to a license being granted for the basic patent by the Gesellschaft to the Refining Company corporation to be formed. " It was further agreed that upon the formation and due incorporation of the refining company, each of the parties thereto was to assign all his right, title and interest in and to the patent to the refining company and receive the proportions of the capital stock before set" forth. On the same day there was made a further agreement between the same three persons whereby it was agreed between them that when the corporation was organized it should execute and deliver agreements of employment with Loeb and May for a period to be named therein and at a yearly salary, payable weekly, to be fixed therein and based upon the future profits of the company; it was further agreed that Guckenheimer had advanced and should advance from time to time such amounts of money for the benefit of the company, up to the sum of $20,000, as the company and its president should deem necessary for the carrying on of its business. Pursuant to this agreement, the proposed company was organized, its certificate of incorporation bearing date April 21, 1908, and the incorporation tax being paid on the following day. The amount of the capital stock of the corporation was fixed at $3,000, divided into thirty shares of the par value of $100 each. The stock was duly divided among the three persons named in the proportion fixed by the agreement, the defendent receiving seven and one-half shares of stock, being one-fourth of the whole. He has never assigned his interest in the patent although demand has duly been made that he do so.
. This action is brought by the plaintiff to enforce performance of his agreement to assign that interest. The defendant claims that he is relieved from performance upon the ground that plaintiff has failed to perform its part of the agreement in that (1) the license under the basic patent has never been obtained; (2) the written agreement of employment of defendant has never been executed by the corporation; (3) Guckenheimer has never advanced the money agreed to be paid by him.
It is quite true that both agreements referred to are spe cifically stated to be subject to the granting of a license under the basic patent. But this was a condition precedent and could be waived by any or all of the parties. It would have been competent for any one of the three individuals to have refused to accept stock in the corporation in return for an assignment of his interest in the patent, upon the ground that no license had been so obtained. It is quite apparent that the purpose of the insertion of this clause was to enable the parties to refuse to proceed further, if they so elected, unless that license could be obtained, for in its absence Ktigation with the Gesellschaft might arise. But none of the parties raised that question or refused to proceed, and all accepted their stock in the corporation. They cannot now be heard to question what they then acquiesced in.
As to the other two objections raised to performance by defendant,- they are conditions subsequent which have no force as an answer to this cause of action. The corporation was not a party to the agreement and could not have been, for it was not yet organized. It never ratified the second agreement quoted, nor did it ever formally bind itself to perform it.
The first agreement was for the benefit of the corporation and provided a means for its creation. The second imposed burdens upon the corporation to which it has apparently never assented. Whatever may be the respective rights of the individuals as between themselves, the second agreement affords no reason for defendant's refusal to carry out this agreement to convey his interest in the patent. The corporation has paid him the consideration by transferring .to him the shares of stock, upon the receipt of which he agreed to assign his interest in the patent. He is now in the position of holding his stock and thereby being in effect the owner of one-fourth of the three-fourths interest in the patent which the corporation •holds by assignment from the other two parties and at the same time retaining his own one-fourth interest.
Under these' conditions and for the reasons indicated the plaintiff, upon the record before us, was entitled to judgment in its favor; but, in view of the form of the decision made herein and of the findings therein contained, all that now can be done is to direct a reversal of the judgment appealed from and to grant a new trial, with costs to appellant to abide the event.
Ingraham, P. J., Clarke, Scott and Miller, JJ., concurred.
Judgment reversed and new trial ordered, with costs to appellant to abide event.