Court Opinion

ID: 3986505
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:42:37.874929+00
Date Added: 2024-06-11T07:44:19.821889
License: Public Domain

I dissent. The evidence without conflict establishes the following facts: On February 20, 1931, the defendants made, executed, and delivered their promissory note to plaintiff. The note was for the principal sum of $3,500, was made payable one year after date, and provided for the payment of interest from date at 10 per cent. per annum and for the payment of a reasonable attorney's fee in the event suit was brought to collect the same. The $3,500 mentioned in the note was loaned to the defendants to enable them to purchase certain patents for an air valve and other personal property belonging to the Sim-Plist Spray Manufacturing Company which was in the process of being liquidated under a receivership proceeding. The defendants used the money furnished by plaintiff to purchase the patents and other personal property. The title thereto was taken in the names of the defendants. During the first few months after defendants acquired the patents and other personal property, they undertook to improve the valve and to manufacture a few machines to demonstrate the efficiency of the valve. Plaintiff, who was an expert machinist and an inventor, assisted in that work. He attempted to improve the valve. He also constructed or directed the construction of a few mechanical *Page 55 
devices upon which the valve was used. It soon became apparent that additional funds were necessary to make the venture a success. It was agreed by plaintiff and defendants that a corporation should be formed and some of the stock thereof sold to secure funds with which to carry on and to pay plaintiff the money owing to him on the note. Articles of incorporation were drawn up for the purpose of forming a Utah corporation. Plaintiff signed the articles but they were not filed. In November of 1931 the defendant H.A. Smoot and one W.B. Jacobs conceived the idea of forming a corporation in the state of Idaho. They represented to plaintiff that one E.A. Krussman was a man of considerable means and that he would invest money with which to pay plaintiff the amount owing him on his note and to finance the manufacture of the valve covered by the patent. Jacobs and defendant Smoot also informed plaintiff that before a corporation could be formed in Idaho it would be necessary to acquire the interests held by E.H. Moss, D. Ray Moss, John Jackson, and Kaskell Romney in and to the patents theretofore purchased. On November 16, 1931, Jacobs and defendant Smoot entered into agreements with each of the other defendants whereby each of such defendants agreed to sell, assign, transfer, and set over to Jacobs and Smoot all of his right, title, and interest of every name and nature in and to the patents and inventions together with improvements thereon and all of the remaining personal property theretofore purchased from the receiver of the Sim-Plist Spray Manufacturing Company. In consideration of such transfer, Jacobs and Smoot agreed "to pay or cause to be paid said note of $3500.00 to said Martin Muehl, together with any and every other obligation or claim incurred in the proposed incorporation of the aforementioned company or in the handling, manufacture, disposition or otherwise of the invention and/or machines aforementioned, agreeing to hold second party harmless and without liability from every such claim of whatsoever nature. Second party's interest in said invention, patent and other personal property *Page 56 
shall pass to first parties only upon the payment in full of the aforementioned note of $3,500.00 and other obligations."
After the agreements above mentioned were entered into, Jacobs, Smoot, and plaintiff Muehl went to Pocatello, Idaho, where they met E.A. Krussman. Negotiations were there had with respect to the forming of a new corporation to be known as the Smoot Compressed Air Valve Company. Preparatory to the forming of a new corporation, Jacobs, defendant Smoot, and plaintiff entered into a contract under date of November 19, 1931, wherein it was recited that:
The parties thereto were
"* * * interested in certain patents and patents applied for and patents pending pertaining to compressed air from an internal combustion engine and air valve, * * * that there were other parties interested who have now released all their interests in these above mentioned patents and patents applied for, etc., and being that there was a note that was signed by H.A. Smoot and a number of other parties interested, to Martin Muehl and being that Martin Muehl mutually agreed to release these parties off of the note, H.A. Smoot and W.B. Jacobs have hereby agreed with other associates to incorporate a company and take over all the interests of the patents and patents applied for and to proceed with the operation, assembling and manufacturing. H.A. Smoot and W.B. Jacobs have further agreed to secure Martin Muehl for the $3,500.00 due him by furnishing as security $5,000.00 worth of Dominion Reindeer Products Company 7 per cent first mortgage bonds, same being held by Martin Muehl until all the $3,500.00 with interest at 8 per cent is paid in full, and that Martin Muehl agrees to hold the security only until such a time as he is paid in full and then to return to them the above mentioned securities.
"It is further agreed by H.A. Smoot, W.B. Jacobs and Martin Muehl, that as soon as the company is organized, that they will use their very best efforts to develop and do everything humanly possible for the new company's best interest. It is further agreed that after the organizations expenses have been paid, and the operating expenses from month to month are paid, that 40 per cent out of each dollar that the company takes in, either from the sale of its products or the sale of its securities (if it sells any), will be turned over to Martin Muehl and that the above mentioned gentlemen also mutually agree that Martin Muehl will be paid as soon as it is humanly possible to do so. *Page 57 
"It is further understood that Martin Muehl will hold $5,000.00 worth of first mortgage 7 per cent bonds as previously stated and that in addition to that, and for his consideration and interest in the business, he is to receive $5,000.00 worth of common stock in the new company that is now being organized. This agreement will also act as mutually agreed by the above gentlemen, to turn all patents and patents applied for and patents pending, over to the officers of the newly organized company. The patents, patents applied for, and patents pending, will now, after the signing of this agreement, be the property of the newly organized company, known as the Smoot Compressed Air Valve Company."
On November 20, 1931, articles of incorporation of the Smoot Compressed Air Valve Company were executed by W.B. Jacobs, H.A. Smoot, and B.S. Gill. The authorized capital stock of the corporation was fixed at $100,000, divided into 100,000 shares of $1 a share. After the corporation was organized, 5,000 shares of its capital stock were issued to plaintiff. The Dominion Reindeer Products Company bonds were not received by plaintiff. Touching the reason why the bonds were not delivered, the evidence shows that it was agreed by plaintiff and Messrs. Smoot, Jacobs, and Krussman that Mr. Krussman should deliver the bonds to plaintiff; that when such agreement was made the bonds were in a bank in Seattle, Wash. There is evidence tending to show that the bonds were sent to Mr. Krussman at Pocatello. There is no evidence to the contrary. Plaintiff testified that at the time he signed the contract with Smoot and Jacobs, Mr. Krussman asked him (plaintiff) for his address so that the bonds could be sent to him; that plaintiff responded that Mr. Smoot had his address, "but you don't need to send them if you don't want to. I come up again anyway and see if I get the money." About three or four weeks later, plaintiff again went to Pocatello. On that occasion Mr. Krussman told plaintiff to come up to the office and get the bonds; that plaintiff went into Krussman's office but did not ask for the bonds; that he asked Krussman if he could borrow money on the bonds; and that Krussman replied that he did not think he could. Plaintiff further testified that on his *Page 58 
second visit to Pocatello he frequently asked Krussman and Smoot for money to apply on his note, but was unable to get any. The evidence further shows that the Smoot Compressed Air Valve Company for a time after its organization maintained an office and workshop at Pocatello, Idaho. In 1933 the corporation was delinquent in paying its annual license tax and unless the tax was paid on or before June 30th of that year its charter would be declared forfeited.
The foregoing facts, being, as they are, established without any controversy in the evidence, present for determination a question of law. Plaintiff, according to his own testimony, knew that Jacobs and defendant Smoot had the right to transfer the patents and property purchased from the Sim-Plist Spray Manufacturing Company on the condition, and only on the condition, that the other defendants be relieved from liability on the note sued upon in this action. Notwithstanding he had such knowledge, he signed the contract of February 19, 1931, with Jacobs and defendant Smoot. He participated in the organization of the Smoot Compressed Air Valve Company. After that corporation was organized and his contract with Jacobs and defendant Smoot was transferred to the corporation, he accepted 5,000 shares of its capital stock. To permit plaintiff to now say that defendants other than Smoot are still liable on the note would be to permit him to perpetrate a fraud either on such defendants or on the corporation. If defendants other than Smoot remain liable on the note, it follows that they should not be deprived of their interest in the property purchased from the Sim-Plist Spray Manufacturing Company. It is, to say the least, doubtful if such defendants may successfully maintain a claim to such patents and other property against the claims of the Smoot Compressed Air Valve Company or its creditors. Moreover, it is apparent from plaintiff's own evidence that his failure to receive the bonds of the Dominion Reindeer Products Company was due to his own fault. He told Mr. Krussman that he would call for the bonds. Mr. Krussman told him to come up to the office and get *Page 59 
the bonds. Plaintiff went to Mr. Krussman's office but did not ask for the bonds, but did ask for money. So far as appears, plaintiff at no time requested the delivery of the bonds, notwithstanding he told Mr. Krussman to keep them until they were called for.
The authorities dealing with the doctrine of accord and satisfaction recognize a distinction between an agreement which in and of itself is accepted as satisfaction and an agreement in which nothing short of the actual performance thereof is to be accepted as satisfaction. 10 A.L.R. 234 et seq., and cases there cited. As I read the evidence brought here for review, the distinction so made need not concern us in the instant case. By executing the contracts with Jacobs and defendant Smoot, the other defendants relinquished all of their interest in the patents and other property upon condition that they be relieved from liability on plaintiff's note together with any other obligations growing out of the venture. So far as appears, there were no other obligations. If there were, the defendants are not complaining because they have not been released from the payment thereof. The defendants other than Smoot have fully performed all that was required of them to carry out the plan contemplated by the parties to this litigation. Plaintiff, by his participation in the organization of the Smoot Compressed Air Valve Company, with full knowledge of all the facts, may not now be heard to say that he has not accepted the relinquishment of the interest of the defendants other than Smoot in and to the patents and other personal property in question. Having accepted such relinquishment, plaintiff may not hold them liable on the note. So, also, by requesting Krussman to hold the bonds until called for, plaintiff may not be heard to complain because the bonds have not been delivered, in the absence of a request for delivery. The defendant Smoot having, by and with plaintiff's consent, left the bonds with Krussman for delivery, is in no sense in default because the same have not been delivered. *Page 60 
In his reply, plaintiff charges fraud as to representations alleged to have been made with respect to the value of the bonds, but as there is no finding with respect thereto that question is not before us for review.
I am thus of the opinion that the judgment should be reversed, and the cause remanded to the district court of Salt Lake county, with directions to grant a new trial.