Majority
p. 454LORENZ BOMMER, Plaintiff and Respondent, v. THE AMERICAN SPIRAL SPRING BUTT HINGE MANUFACTURING COMPANY, Defendant and Appellant. Before Curtis, Ch. J., and Freedman,- J. Decided March 3, 1879.
Headnote
I. Estoppel.1. BY ACCEPTANCE AND USER.
(a) When one assigned to a corporation, either duly organized or held out so to be, an improvement made by him, and his right to letters patent therefor, the consideration expressed in the assignment being $1, but the true consideration being, by an oral agreement, a certain royalty during the existence of the patent, and afterwards, but before the issuing of the patent, the corporation, if not before duly organized’organized, or if before organized reorganized, under the said name used in the assignment, and the assignor, without any notice of the change, procured the issue of a patent in the corporate name used in the assignment, and the company accepted the patent, entered into enjoyment thereof,- and for a time paid to the assignor the royalty claimed by him, without any notice to him of any defect in its corporate existence, at a period previous thereto; the company is ESTOPPED
from avoiding the obligation to pay the royalty originally agreed on.
II. Statute of limitations.
a. ROYALTY.
(a) In an action by an assignor for an accounting, as to articles manufactured under a patent, assigned by an instrument under seal in consideration of a certain royalty on each article so manufactured, and for payment of the amount of royalty found due, the accounting is not to be limited to a period of six years before the commencement of the action»
Appeal by defendant from a judgment entered
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upon a decision of a judge after trial at special term, and after the coming in of the report of a referee, appointed to take and state an account.
The action is to recover from the defendant a royalty of one cent for each pair of hinges manufactured by the defendant, under a patent for plaintiff’s invention of an improved spring hinge made in 1862.
The defendant in its answer pleads the statute of limitations, and states that it is a corporation organized August 26, 1863, and that it was not in existence January 17, 1863, the date of the assignment' of the invention and of the letters patent applied for, then executed by the plaintiff, but it admits that December 8, 1863, letters patent issued to it, and that it has ever, since continued the manufacture of the invention.
At the special term, the findings of law and fact were as follows:
As matters of fact:—I. That Lorenz Bommer, the plaintiff, was on January 17, 1863, the inventor and owner of a certain spring butt spiral hinge, as described in the specifications and drawings attached to letters patent No. 40,879, dated December 8, 1863, and issued by the United States of America to the defendant herein.
II. That on January 17, 1863, plaintiff sold and assigned to the American Spiral Spring Butt Hinge Manufacturing Company, by an instrument under seal, all of his right, title and interest in said invention and letters patent to be issued thereon by the United States, for the nominal consideration of $1, but the true consideration and agreed price of said assignment was the payment or royalty to plaintiff of one cent for each pair of hinges to be manufactured according to said invention during the term of said letters patent.
III. That plaintiff was paid said royalty of one cent for each pair of hinges sold from January 17, 1863,
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until March 5, 1864, without notice to him of any change in the company, and defendant has neglected and refused to pay anything to plaintiff since said date.
IV. That the defendant has, since said March 5, 1863, been continually engaged in the manufacture of plaintiff’s invention.under said letters patent, but has wholly failed to account to plaintiff therefor.
V. That the organization or reorganization of the American Spiral Spring Butt Hinge Manufacturing Company, on August 15, 1863, was without notice to plaintiff, and was, so far as it affects plaintiff or his rights, colorable only.
• . VI. That the defendant accepted said létters patent of plaintiff’s invention, pursuant to the terms of, and by virtue of the assignment of January 17, 1863, from plaintiff to the American Spiral Spring Butt Hinge Manufacturing Company, and subject to the payment of the royalty of one cent for each pair of hinges manufactured under said letters patent.
VII. That Mr. Hayes, Andrew J. Biker, and John S. Neville, with whom the contract for the purchase and assignment of said invention was made by plaintiff, made the same as officers of and for account of the American Spiral Spring Butt Hinge Manufacturing Company, and were officers and directors of the defendant, which claimed to be the owner of and accepted the said letters patent under said assignment of January 17, 1863.
VIII. That defendant, by discharging a part of their hands employed, and not paying promptly those employed, by not employing a sufficient number of hands, and requiring of plaintiff to manufacture a larger number of hinges than he could produce with the means furnished by defendant, and by other unjust and unreasonable exactions, compelled the plaintiff to
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resign, his position as foreman of defendant’s factory without any fault upon plaintiff’s part.
And as conclusions of law: First. That the defendant is estopped from denying that it contracted with plaintiff for the purchase of said invention.
I. Because no notice was given to defendant of any attempted or actual change in the organization of the company.
II. Because it accepted said letters patent under said assignment with full notice of its terms.
III. Because it adopted the conditions of said assignment and continued to pay the royalty.
IY. Because it compelled the plaintiff to resign his position as foreman, and defendant can take nothing by its wrongful act.
Second. That plaintiff is entitled to an accounting from, defendant of all the hinges manufactured or sold by it since March 5, 1864, under said letters patent, and to be paid a royalty of one cent for each pair of hinges made.
Third. That the defendant exhibit before the referee to be appointed, its books of account and of manufacture, showing the number of hinges manufactured or sold by the defendant since March 5, 1864.
Fourth. That the plaintiff be at liberty to apply on the foot of the decree herein for a further accounting by defendant for said hinges manufactured or sold by defendant herein after this date, during the existence of said letters patent, upon due proof to this court of the failure of the said defendant to account for any of said •hinges hereafter manufactured or sold by it.
Fifth. That a decree be entered in accordance herewith.
All of the foregoing findings of fact and law were excepted to by the defendant.
Theodore R. Shear, attorney, and Elihu Root, of
p. 458I. The judgment is erroneous, because it includes royalty upon hinges, manufactured and sold more than six years before the commencement of the action, any right of recovery for which was barred by the statute of limitations. The action was commenced March 7, 1877. The second conclusion of law under which the referee took and stated the account, includes all hinges manufactured or sold by the defendant since March 5, 1864. Either the plaintiff’s right of action does not accrue under his alleged contract until the termination of the letters patent, which will be in December, 1880, that is to say, it has not yet accrued; or it accrued when the hinges were manufactured or sold. In the former case, of course, this action could not be maintained. In the latter case, both principal and authority are conclusive that it cannot be maintained for any sums the right to which accrued more than six years before the commencement of the action (Code of Pro. § 383 ; Davis v. Gorton, 16 N. Y. 255 ; Rider v. Union India Rubber Co., 5 Bosw. 86 ; S. C., affi’d 28 N. Y. 379 ). The fact that there is an accounting involved in this action, does not take it out of the statute of limitations. It is only where there has been a mutual, open, and current account, where there have been reciprocal demands between the parties, that the cause of action is deemed to have accrued from the time of the last item (Code of Pro. § 386 ; Albro v. Figuera, 60 N. Y. 630 ; Hultslander v . Thompson, 5 Hun, 348 ). The report of the referee in accordance with which the judgment is entered, treats the plaintiff’s cause of action as accruing from time to time, as the hinges were manufactured and sold, and allows interest upon the sales of each year from 1864 to the time of the report. We thus have judgment for principal and interest upon a cause of action on simple contract, which accrued and
counsel, for appellant, on the questions discussed by the court, urged:
p. 459could have been sued upon thirteen years ago.. This cannot be sustained. II. The judgment should be reversed, because it appears by the evidence that the defendant was not incorporated at the time of the alleged contract. It seems to be supposed, on the part of the plaintiff, that the effect of this undisputed fact is evaded by the fifth finding of fact, that the organization (or, as it is called, reorganization) of the defendant on August 15, 1863, was without notice to the plaintiff, and was, so far as it affects the plaintiff or his rights, colorable only. It matters not whether it is called an organization or a reorganization, the defendant was a new and distinct corporate entity, not in existence at the time the contract was made; and while the effect of a contract made by the promoters of the defendant in anticipation of the defendant’s formation, or of a contract made by a preceding corporation to the rights of which the defendant succeeded by assignment, might be the same as if the contract were made by the defendant, that is another and a different cause of action, and depends upon facts not alleged in the complaint in this action, not met by the answer, and not properly before the court for its determination. The action is upon a contract made by this defendant, and not upon any obligation devolved upon it by authority of its relation to any preceding persons or corporation. ¡Not only were there no allegations to this effect in the complaint, although the plaintiff had full notice of the time of the defendant’s organization by its answer, and full opportunity to amend accordingly, but, throughout the evidence, no testimony was offered by the plaintiff, and no testimony was permitted on the part of the defendant to show what were the relations between the defendant and the preceding company, or what rights or obligations were devolved upon the defendant by those relations.
p. 460The defense appears to be this : 1. That the first assignee of plaintiff’s invention was a prior company of the same name, merged in the present one. 2. That the assignee of a non-negotiable chose in action, without notice for value, takes it discharged of the assignor’s obligations, the same as negotiable paper before due. (a) The first answer to these, propositions is that none of them are pleaded. The second is that plaintiff never had any notice of a second company; never assented to any mere assignment or contract. 3. The answer admits letters patent were issued to it. The patent shows the assignment was from plaintiff. Defendant cannot deny it (Cook v. Barr, 44 N. Y. 158 ; Fearing v. Irwin, 4 Daly, 396 ; Robbins v. Codman, 4 E. D. Smith, 325; Miller v. Moore, 1 Id. 743). The recitals in the patent bind defendant (Hardenburg v. Lakin, 47 N. Y. 111 ; Atlantic Dock Co. v. Leavitt, 54 Id. 38; Carver v. Jackson, 4 Pet. 83 ; Crane v. Morris, 6 Id. 611 ; Dem v. Cornell, 3 Johns. Cas. 176 ). 4. Defendant did have notice of the terms of the assignment, and paid the royalty until March 5, 1864. . 5. There is no evidence defendant
III. The judgment is erroneous in including two cents for each pair of double spring hinges made by the defendants, upon the theory that each double hinge is equivalent to a pair of single hinges. This is an unwarrantable extension of the terms of the contract. A pair of hinges is a pair.of hinges; and it is no more because by putting in two springs instead of one a door can be made to swing better. The plaintiff himself does not assert that a double-acting hinge would be expressed by the term “a pair of hinges,” but says, that if double-acting hinges are wanted this is expressed.
Bigismund Kaufman, attorney, and Lewis Banders, of counsel, for respondent, on the questions discussed by the court, urged:
p. 461paid anything for the .assignment, and it is not, therefore, a holder for value. 6. The old Code provides, section 112, that in case of an assignment of a chose in action, the action by the assignee shall be without prejudice to any set-off existing at the time of or before notice of the assignment. This preserves the old common law rule, where action had .to be in name of assignor. A purchaser of a chose in action must always abide the case of the peeson from whom he buys, and he stands entirely in the place of the latter (Crane v. Turner, 67 N. Y. 439 ; 61 Id. 88-105 ; 64 Id. 220-225 ; 50 Id. 66 ; 26 How. 161 ). 7. Defendant, holding as assignees of the patent, cannot repudiate its terms. By claiming the fruits of the assignment they must bear its burdens and ratify all the means by which it was obtained (Fowler v. N. Y. Gold Exchange Bank, 67 N. Y. 143 , and cases there, cited; Qui sentit commodum sentire debet et onus, Brown's Leg. Max. 682 ; Wood v. Perry, 1 Barb. 131 ; Chamberlin v. Day, 3 Cow. 353 ; Countryman v. Boyer, 3 How. 389 ).
The defendant is not in a position to-defeat the plaintiff’s claim for compensation, for the use and enjoyment of his invention, because it was not, as it insists, at the time the plaintiff’s assignment bears date, a corporation duly organized, under the laws of the State of Yew York, and was not in existence. The letters patent for the plaintiff’s invention issued to and were accepted by the defendant at a time subsequent to August 26, 1873, when the defendant alleges it was so duly organized as a corporation, and ever since the defendant has manufactured under it. As the plaintiff had no notice that the defendant was not duly organized, when he executed the preliminary assignment of the invention, and afterwards caused the issue of the letters patent to the defendant, at a time when it was duly organized, which
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issue was accepted by the defendant, and ratified by user and the payment of the accruing royalties thereunder to the plaintiff, until the defendant compelled him to leave its employ, no reason exists why the defendant should avoid -its liability. If the defendant held itself out.as a corporation, when not duly incorporated, and preliminary steps were taken, which resulted after it was duly incorporated in the issue to it, and the vesting in it of the letters patent of the plaintiff’s .invention, the defendant, after acceptance and enjoyment and part .payment at the rate claimed by plaintiff, .and .without notice to plaintiff of any defect in its corporate existence, at .a period previous thereto, is estopped from avoiding the obligation to pay the plaintiff.
The questions are .very much narrowed by the pleadings, though a wide field was presented on the argument.
The instruments under which the defendant has the use of the plaintiff’s invention, .and upon which the plaintiff claims, are under seal, and there appears to be no ground afforded in the case, for sustaining the defendant’s plea of the statute of limitations.
The evidence shows that one pair of double-acting hinges is composed substantially of two pairs of single-acting hinges, and sustains the findings that each of the double-acting hinges comprise two pairs of ■single hinges.
There is nothing presented in the -case and exceptions that leads me to the conclusion that there should be a reversal of the judgment.
The judgment and order appealed from should be affirmed, with costs.
-Freedman, J., concurred.
Cases cited
- Davis v. Gorton 16 N. Y. 255 p. 458
- Rider v. Union India Rubber Co. 28 N. Y. 379 p. 458
- Chamberlin v. Day 3 Cow. 353 p. 461