Auburn Button Co. v. Sylvester — 54 N.Y. St. Rep. 858

Majority

p. 858

The Auburn Button Co., App’lt, v. Philip L. Sylvester, Impl’d, Resp’t.

(Supreme Court, General Term, Fifth Department,

Filed October 20, 1893.)

Headnote

.Patents—Assignment—Preference.

Certain patents were assigned to plaintiff in 1883, but the assignment was not recorded. In 1891 the same patents were assigned to the defendant by the same assignors.- Defendant had been the superintendent of plaintiff’s works, and knew that the machines for making the patented articles were in the possession of and used by it, and upon a sale of its assets remarked that the patents were not in the sheriff’s notice, and asked one of the former owners, from whom he subsequently received his assignment, as to who was the owner of the patents, who replied that he did not know, and defendant made no further inquiry. Held, that the facts were sufficient to put the defendant upon inquiry as to the title to the patents, and he was chargeable with notice of the prior assignment, and not entitled to preference under § 4898 U. S. R. S.

Appeal from judgment entered on decision of the court dis.missing the complaint.

The action was brought to restrain the defendant, Sylvester,

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from selling or encumbering certain letters patent issued in 1882 to the defendants, E. Delevan Woodruff and J. Herman Wood-ruff, and by them assigned to the plaintiff in 1883. The improvement covered by the letters patent was useful in the manufacture of buttons from plastic material. This was within the business in which the defendants Woodruff were engaged at the time the patent was issued to them. Their firm name was Woodruff Brothers, and they were in 1883 succeeded in the business by the plaintiff, a corporation then created and organized for that puipose.

The defendant Sylvester claims title to the letters patent by virtue of an assignment made to him in April, 1891, by the defendant E. D. Woodruff in the name of Woodruff Brothers.

The defendant Sylvester alone defends.

W. E. & F. E. Hughitt, for app’lt; E. C. Aiken, for resp’t.

The claim of preference for the assignment made to the defendant Sylvester in April, 1891, over that made to the plaintiff in 1883, is founded upon the fact that the latter hadnot been recorded, and by force of the statute which provides that “ Every patent or any interest therein shall be assignable in law by an instrument in writing. * * * An assignment, grant or conveyance shall be void as against any subsequent purchaser or mortgagee for a valuable consideration without notice, unless it is recorded in the patent office within three (3) months from the date thereof.” U. S. R. S., § 4898.

The view taken of the case is such that for the purposes of this review it is necessary to consider no question other than that whether or not the defendant was chargeable with notice of the assignment of the patent to the plaintiff at the time he afterwards took the assignment made to him. He went into the service of the defendants Woodruff in 1877, and continued in their service until in March, 1883, when the plaintiff was incorporated and organized. He then went into its service and continued there until after its leviable property was sold by the sheriff by virtue of an execution issued upon a judgment against the plaintiff, which sale was prior to April, 1891.

When the plaintiff was organized it became the successor of Woodruff Brothers in the business. They and "Paul C. Woodruff were the corporators. The property incident to the business, including the letters patent, was then transferred to the plaintiff. The assignment to it of the patent was by a separate instrument made March 9, 1883. The defendant Sylvester was advised of the organization of the plaintiff, understood that it was the successor ,of Woodruff Brothers in the business, and as such he went into its service. He was also cognizant of the fact that the ■machines by which use was made of the patent in the business were in the possession of and used by the plaintiff from the time ■ of its organization.

It seems quite clear from the evidence that the defendant had knowledge of facts sufficient to put him upon inquiry as to the previous transfer of the letters patent by Woodruff Brothers, to •whom they were issued.

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The evidence on the part of the plaintiff that the defendant was informed by Woodruff of the assignment of them to the plaintiff is hot to be considered upon the question, because it is in conflict with the evidence given by the defendant. He testified that, about the time the Button Company was formed he was asked by J. H. Woodruff to take stock of the company for the note he held,, which had been, given him by Woodruff Brothers for the patent,, and he declined to take the stock; that about the time of the sale,, and which he thinks was on the morning of the day the sale was made by the sheriff, of the property of the company, he saw the notice of the sale and then said to Paul C. Woodruff, who was present and the president of the company: “Woodruff, the patents are not in this notice,” and the-latter said “No,” and made no-further reply; that he called Woodruff’s attention to the fact that, the patents were not in the notice of sale because he (defendant)was interested in the patents and “ wanted to see where they were going, what was going to be done with them. He made no explanation to me why the„patents wasn’t in the notice of sale, none whatever, I gave him none. I asked him that question simply because I wanted to know whether the patent was going to be sold or not, there; ” that some time after the sale he asked J. H. Woodruff “Who owns the patent," and that he answered, “I don’t know.’? He further testified that' he did not ask him if Woodruff Brothers had assigned the patent to the Button Company. “Nothing of the kind; never asked him that question.”1 He afterward had an assignment from Woodruff Brothers to himself drawn up, and at his request it was executed by E. D. Wood-ruff in the name of Woodruff Brothers by him after inserting in it that the firm of Woodruff Brothel's had been dissolved, and that the assignee, Sylvester, was to save Him “ harmless from any suit or other liability growing out of this assignment.’^

He does not state what inquiry he made of E. D. Woodruff on the subject of the title, or that he did or not receive any information from him about it. His testimony of the interview with him-was, “I think I next made inquiry in reference to the title to this patent of E. D. Woodruff. * * * I said to' him I had inquired of J. H. Woodruff about the patent; had asked him to resign the right to me to use it and had been unsuccessful, that he had evaded my questions as to who owned the patent.”

By reference to the evidence of J. H. Woodruff it appears that he testified that the defendant came to him and inquired if he could not get the right to use the patent for himself, and the witness replied “that that could only be given by the plaintiff.”

The defendant had the position of superintendent for the plaintiff while he was in its service, and assisted in working the-patent machines. It was quite reasonable for him to suppose-that the company was using it pursuant to some right or title derived from Woodruff Brothers, its predecessor in the business; and it appears by the remark made by him when he" saw the sheriff’s notice of sale that he was apprehensive that the plaintiff had title to the patent or some interest in it. The answer which be says was given by J.

p. 861

then owned the patent, that he did not know, would seem to have indicated that it was not then owned by Woodruff Brothers, for if it had been he could not well have said he did not know. The answer would reasonably seem to have led to the further inquiry whether they had assigned it, and to whom, if the inquirer was faithfully in pursuit of information upon the subject.

The notice with which the facts put the defendant upon inquiry was that Woodruff Brothers had assigned the patent, and yet it seems that the defendant omitted to make any inquiry to .ascertain what the fact was in that respect.

The doctrine applicable to the subject is such that when there is some title or interest in conflict with that which a person is proceeding to purchase, and he has knowledge of facts sufficient to put him upon inquiry as to the existence of such title or interest, he is chargeable with notice of it. In such case the presumption is either that he has made the inquiry and ascertained such prior right, or that he has been guilty of such negligence as to deny to him the character of a Iona fide purchaser.

The question is in some sense one of good faith on his part. He may repel the presumption by showing that he has diligently and duly pursued the inquiry, and been unable to ascertain that any such title or interest in conflict with that which he is seeking to obtain exists. Williamson v. Brown, 15 N. Y., 354 ; Ellis v. Horrman, 90 id., 466 . This the defendant failed to give evidence tending to prove. The fact that Woodruff Brothers had several years before assigned the patent to the plaintiff was that in respect to which the defendant was by the circumstances within his knowledge put upon inquiry. And it would seem that if he had in good faith been seeking information in that respect, he would have made an inquiry necessarily calling for .it as to that fact. His omission to do so seems somewhat significant, and to say the least was such a want of reasonable diligence as’ to permit the presumption to remain effectual against him, and to require the -conclusion that he was charged with notice of such prior assignment. As the case as settled represents that it contains all the ■evidence of the trial “ pertinent to questions on this appeal,” the record does not permit the inference that any further evidence essential to the question here considered was given on the trial.

Eor these reasons the judgment should be reversed and a new trial granted, costs to abide the final award of costs.

Dwight, P. J., Lewis and Haight, JJ., concur.