Court Opinion

ID: 5399916
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:35:35.855237+00
Date Added: 2024-06-11T08:30:26.062389
License: Public Domain

Bastow, J.
(dissenting). In April, 1937, plaintiff’s predecessor, Wired Radio, Inc., and the defendant hotel entered into an agreement in writing in connection with the reception by the hotel of the program service of the plaintiff and the transmission thereof to rooms in the hotel. Muzak agreed to install and lease to the hotel certain specified equipment. The hotel promised to pay therefor a rental of $600 per month for fifty-four months and the sum of $1 per month thereafter. In addition, the hotel agreed to pay as “ a license fee for the use of such equipment ” the sum of $100 per month. The contract was to continue for fifty-four months and thereafter until terminated by the hotel upon two months ’ notice. It was further provided that upon termination of the contract, the equipment was to be turned back by the hotel to Muzak.
In May, 1940, there remained unpaid twenty of the monthly-payments or a total of $12,000. The original contract was modified to the extent that Muzak agreed to accept $10,200 eo instanti in lieu of the remaining payments of $600 per month, and cancellation of the payments thereafter of $1 per month. Muzak delivered to the hotel a bill of sale for the equipment. The agreement further provided that the hotel was to continue to pay the license fee of $100 per month. It was agreed that the original contract, except as modified or as inconsistent with the modifications, should remain in full force.
The hotel continued to pay the monthly license fee of $100 for some twelve years thereafter until in June, 1952, it notified Muzak that it was canceling the 1937 contract, as amended, and would pay no license fees after August 31, 1952. Subsequently, this action was brought to recover the accrued unpaid monthly license fees. Judgment was rendered in favor of the plaintiff in Municipal Court but upon appeal the judgment was reversed by the Appellate Term and the complaint dismissed,
The defendant contends that the modification of the contract in 1940 did not eliminate from the original contract the provision that it might terminate the agreement upon two months’ notice, and, thereafter, it would no longer be liable for payment of the license fee. In other words, it insists, in substance, that immediately after the written modification was made on May 25,1940, *700expressly requiring it to continue to pay the monthly license fee of $100, it could have given notice that the contract was terminated as of July 25, 1940, even though it continued to use the equipment, and, thereafter, its liability for the license fee would have ended. Instead, it continued to make monthly license fee payments amounting to $14,750 over a period of twelve years before attempting to terminate the contract.
We construe the contracts as providing that the right of the hotel to terminate the agreement did not come into being until the end of the basic term of fifty-four months. Thereafter, the hotel was obligated to pay the license fee of $100 per month and had the right to terminate the contract upon two months’ notice that it was no longer using the equipment. The modification agreement did not affect the termination provision in the original contract since there is no provision in the later agreement inconsistent with the termination provision of the first contract. The modification simply substituted a lesser lump sum payment for the total amount of the remaining monthly rental payments.
We search both agreements in vain for any agreement, express or implied, that the hotel could avoid paying the monthly license fee by serving only a notice of termination if it continued to use the equipment. The conduct of the defendant in continuing the annual payment of $1,200 for more than ten years after the end of the contract period makes it plain that it did not so construe the contracts. It seems clear that so long as the hotel continued to use the equipment, it was bound to pay the license fee. Its sole remaining right was to terminate the contract by giving up the use of the equipment.
It is unrealistic that we should adopt defendant’s construction of the agreements in the light of its course of conduct. It is a well-recognized rule of interpretation of contracts that where uncertainty exists as to what a contract legally means, resort may be had to certain secondary rules. One of these is that “ The interpretation given by the parties themselves to the contract as shown by their acts will be adopted by the court ”. (3 Williston on Contracts [Rev. ed.], § 623; Restatement, Contracts, § 235, subd. [e]; Brooklyn Public Lib. v. City of New York, 250 N. Y. 495; Carthage Tissue Paper Mills v. Village of Carthage, 200 N. Y. 1; Woolsey v. Funke, 121 N. Y. 87.)
Sufficient may be gleaned from the record — although the trial court erroneously precluded plaintiff from developing all the facts — to find that a substantial portion of the equipment consisted of switching panels, monitoring devices and other electronic apparatus protected by patents. The imposition of *701the license fee, so long as the hotel continued to use the equipment, was not necessarily inconsistent with the fact of ownership if the license fee was, in effect, a royalty payment for the use of patents. A right to the use of a patented device may be severed from the right of ownership. (Cf. Porter Needle Co. v. National Needle Co., 17 F. 536.)
The majority attempts to fortify its conclusion to the contrary by stating that ‘ ‘ during the period from 1937 onward, defendant was subscribing to the Muzak Wired Program Service.” What actually appears in the record is that the contract under consideration and the contract to furnish wired program service were separate and distinct instruments requiring independent payments. Indeed, upon the trial, not only were further facts concerning the contract for wired program service not developed but the trial court summarily foreclosed exploration of this subject. It was not the basis for the decision of the trial court or the determination of the Appellate Term. Such a theory is not even advanced in respondent’s brief. A casual comment made in the course of the argument has been adopted by the majority in an attempt to explain the practical construction placed upon the contracts by the parties for a period of twelve years. It has always been understood that appeals should be disposed of on the same theory upon which the case was tried and decided and not upon a new theory developed upon oral argument of the appeal. (Cf. Archer v. City of Mount Vernon, 171 N. Y. 639; Singer v. National Fire Ins. Co., 154 App. Div. 783, and Oatka Cemetery Assn. v. Cazeau, 242 App. Div. 415.)
The determination of the Appellate Term should be reversed and the judgment of Municipal Court affirmed.
Cohn and Callahan, JJ., concur with Rabin, J.; Bastow, J., dissents in opinion in which Peck, P. J., concurs.
Determination affirmed, with costs.