William Newell, Appellant, v. Ezra Wheeler, Frederick Lacey, Thomas Roundey, Jr., and Obadiah W. F. Randolph, Respondents

William Newell, Appellant, v. Ezra Wheeler, Frederick Lacey, Thomas Roundey, Jr., and Obadiah W. F. Randolph, Respondents. Question of implied agreement. The plaintiff transferred to the defendants the exclusive right to use his patent invention for cleaning coffee in the States of New York, Connecticut and New Jersey, with the exception of two counties in the latter State. The consideration for this transfer was the payment of $5,000 in cash, and the agreement to pay a certain amount for each and every bag of coffee that should pass through the plaintiff's cylinders or process. Held, that the defendants were not bound to run the cylinders to their full capacity; and that they were bound to pay the .percentage only upon what had actually passed through the cylinders or had been subjected to the process. This view is confirmed by the other portions of the agreement in question. This is an appeal from a judgment absolute against the plaintiff, rendered by the General Term of the Superior Oourt of the city of New York, reversing, with costs, a judgment entered in his favor upon the verdict of a jury for $21,-916.55, and dismissing his complaint as not stating facts sufficient to constitute a cause of action. The suit was brought upon the following contract, made between the parties March 17th, 1858, under seal: “ Whereas, William Newell, of the city of Philadelphia, and State of Pennsylvania, did obtain letters patent of the United States for a certain invention, styled W. Newell’s patent coffee-cleaning and polishing machine, which letters patent bear date November 3, 1857, for a period of fourteen years from that date. “That for and in consideration'of the sum office thousand dollars, in hand paid, the receipt of which is hereby acknowledged, and the fwrther payment of ten cents net, free from any charge or assessments of any kind, for each and every bag of merchantable coffee, and six cents for every bag of skimmings that passes through Wm. Newell’s cylinders' or process; and the said Wheeler, Lacey & Co. and O. W- F. Eandolph, or their successors, shall keep an accurate account of every bag of coffee that passes under the said Newell’s process, and furnish him, his heirs or assigns, with monthly returns of said product, verified under oath, and pay over in cash, on the first day of every month, to the said W. Newell, his heirs or assigns, his or their share of earnings, said ten.. cents and six cents for each and every bag of coffee, as before stipulated for; and if the said Wheeler, Lacey & Co. and 0. W. F. Randolph, fail to perform any part of this agreement, then this contract to be void and of no effect, and the payment of five thousand dollars aforesaid, together with the large iron cylinder, to be furnished by the said W. Newell, be forfeited to him, his heirs or assigns. The said sum of five thousand dollars before named, and part of the consideration money under this contract, to be refunded to the said Wheeler, Lacey & Co. and 0. W. F. Randolph, without interest; out ,of any excess of his, the said W. Newell, his heirs or assigns, share of earnings when they exceed two thousand dollars per annum; but no part of said five thousand dollars reverts back to said Wheeler, Lacey & Co. and 0. W. F. Randolph, in liquidation of said five thousand dollars, until his, W. Newell, his "heirs or assigns, share of earnings exceed' two thousand dollars per annum aforesaid. And it is further conditioned, that if any misunderstanding or litigation ensues, or other contingencies arise, between the said Wheeler, Lacey & Co. and O. W. F. Randolph, or their successors, that the said W. Newell, his heirs or assigns, shall not be prejudiced thereby, but that his or their interest shall be inviolate, by keeping in active operation the machinery herein contemplated and used by the said Wheeler, Lacey & Co. and O. W. F. Randolph, or their successors, so that it" be made available and productive, and payable as hereinbefore provided for. And it is further conditioned that no sale or transfer of said patent right herein referred to, on the part of the said Wheeler, Lacey & Co. and O. W. F. Randolph, their heirs or assigns, shall be valid without the written consent of the said W. Newell, his heirs or assigns, so expressed by indorsement on and made part of tins agreement. In consideration of the foregoing condition, and Compliance therewith on the part of the said Wheeler, Lacey '& Co. and O. W. F. Randolph, the said W. Newell, for himself, his .heirs or assigns, do hereby sell, assign and set over to the said Wheeler, Lacey & Co. and O. W. F. Randolph, their heirs or assigns, the exclusive right to use said patent right herein named for cleaning and polishing coffee, for . the States of New Fork and Connecticut, and for part of the State of New Jersey, say, excepting the counties of Camden' and Gloucester therein, which is hereby reserved to the use of the said W. Newell, his heirs or assigns. And it is further agreed that if the said Wheeler, Lacey & Co. and O. W. F. Randolph find it expedient, within three years from the date of this instrument, to commute the payment of ten cents and six cents for each and every bag of coffee, as aforesaid, by paying in lieu thereof twenty thousand dollars, deducting therefrom the five thousand dollars now paid and herein acknowledged, it shall' be considered in full satisfaction for the same, and a quitclaim deed made accordingly. And it is further conditioned, that if any infringement is made on the right of the patentee, affecting the interests of the other-parties hereto, that he, the said W. Newell, his heirs or assigns, shall prosecute, at his or their own expense, all such Offenders. And if any and all additional iron cylinders required by the said Wheeler, Lacey & Co. and 0. W. F, Randolph, and not exceeding in capacity of same structure and materials as the one now to be furnished as part of this agreement, said cylinders to be furnished by the said W. Newell, deliverable in Philadelphia, at a cost, say, not exceeding six hundred dollars each, and payable by the said Wheeler, Lacey & Co. and O. W. F. Randolph, their heirs or assigns.” ■ There was testimony'given as to the amount of coffee presented for cleaning, and how much had been cleaned. A question was made whether a failure to keep the machine in full operation was caused by the negligent and fraudulent operations of the defendants or the worthlessness of the machine. On these points the jury found for the plaintiff and gave him a verdict accordingly. The General Term; holding that the plaintiff could in no event recover upon the written agreement, reversed the judgment and ordered judgment absolute for the defendant. Elbridge T. Gerry, for the appellant. Wm. D. Booth, for the respondents. [MAJORITY — Hunt, J.] Hunt, J. The question in the present case, arises upon the written agreement set forth in the complaint. The plaintiff claims that the instrument contains an implied agreement on the part of the defendants, that they will keep the machine' in constant operation, provided they can with reasonable effort obtain employment for it. It is not claimed that there has been any greater actual use of the machine than has been accounted for. The claim is made that the defendants were bound to keep it in operation, and were bound to pay the toll upon the amount of coffee that could have been run through it, whether it was actually so run or not. The judge at the circuit decided this question in favor of the plaintiff. He held further that if the defendants were unable to procure coffee to be run through this mill, and that inability was the result of their own misconduct in managing the machine, they were still bound to pay the toll to the plaintiff in the same manner as if the grain had actually passed through the mill. The same question was stated by the judge at the circuit in another form, thus: “ The question for the jury to decide is whether these defendants have, by any wrongful act of theirs, as far as Hr. Newell is concerned, raised in the minds of the dealers in coffee a prejudice against this machine, and caused them to decline having if used in the preparation of their coffee. If they have been guilty of such wrongful act, then they are to be considered in the light of having had the opportunity and option of putting through this machine such coffee which they had received from its owners for cleaning.” As held at the circuit, the defendants, in addition to their express undertaking, impliedly agreed that they would keep this machine in constant operation in cleaning coffee, and that ey would not, .by any wrongful act of .theirs, raise a prejudice against it in the minds of dealers, which should operate to prevent its use. The jury held that they had violated this agreement, or some part of it, and held them liable for the tolls upon such amount of coffee as the machine was proved to be capable of cleaning. Let us examine this agreement. Its first branch was intended mainly to express the consideration of the assignment and the manner of its payment; which is of five thousand dollars in hand paid, and the payment of ten cents for every bag .of merchantable coffee, and six cents for every bag of shimmings that passes through the machine. Wheeler & Company were bound to keep an accurate account of every bag of coffee that passed under the process, and make monthly returns and pay in cash on the first of every month, the six cents and ten cents above stipulated for. If the defendants fail to perform, then the contract is to be void, and the $5,000 aforesaid, together with the large iron cylinder to be furnished "by Newell, shall be forfeited to him.' Thus far this agreement purports to contain no stipulations .on the part of the defendants. In form they are all on the part of the plaintiff. It does, however, contain several implied agreements on the part of the defendants, to wit, that _ they will pay the ten cents and six cents per bag for cleaning the different kinds of coffee mentioned, that passes through the cylinder,, also that they will furnish accurate monthly . accounts, and also that they will pay over in cash, on the first day of each month, the amount before stipulated, to the plaintiff, and also that if they fail to perform any part of the agreement, they will forfeit all their rights under it, together with a large iron cylinder, to be furnished by the plaintiff. The instrument recites that these things are to be done by the defendants; they are executory, they are for the benefit of the plaintiff, and when the defendants receive the instrument in which it is said they are to be done by them, and take the advantages given by it, they should be held bound to perform what is therein recited to be their obligation^, although there are no words of express agreement on their part. They are not conditions, hut are accepted recitals, that certain things are to be done by the defendants. In like manner, by implication, is herein contained an agreement by the plaintiff, that he will furnish a large iron cylinder to be used by the defendants in the prosecution of the business. He does not, in words, agree to furnish it, but I think he does by implication. It is then provided further, that when the amount of tolls thus cóming to the plaintiff under the stipulations above given, shall exceed $2,000 per year, the $5,000 paid to him by the defendants as first mentioned, shall be refunded by him to the defendants. It would be quite unreasonable to contend that this clause contains an implied agreement, that at some future.period, the amount of such tolls or earnings should be made to exceed such sum of $2,000 per year, and the plaintiff does not so claim. Thus far the main object has evidently been to specify the consideration that was to be made to the plaintiff, in gross and from the earnings of the machinery. With the same object still in view, knowing the trouble and embarrassment caused by the quarrels of partners in business to all who are connected with them, and having apparently great confidence in the success of his invention, the plaintiff inserts a “further condition,” that if litigation or misunderstanding occurs between the defendants themselves “ or their successors,” the plaintiff shall not be prejudiced thereby, but his “ interest shall be inviolate by keeping in active operation, the machinery herein contemplated, and used by the defendants or their successors, so that it be made available, payable and productive as hereinbefore provided for.” Passing by the suggestion, that this is a mere condition, it is an agreement, not implied, but in words, that there shall be no prejudice to the plaintiff’s earnings or tolls to arise by stoppage of the machinery, from dissensions among its owners. When the machine would run except for that cause, the plaintiff must receive the same benefit as if it did run. The observation naturally occurring on this clause, is unfavorable to the plaintiff’s claim. Here was one contingency not unlikely to arise, which, would result in a stoppage of the machine, and he required the defendants to bear the loss» of such stoppage. Many other contingencies might arise, as that the operation should prove too expensive, it could be done better or cheaper by other machineries or processes, the defendants might not choose further to prosecute the enterprise, they might neglect their business, they might be interested in some other similar patent, as to which the plaintiff, required no guaranty. The assumption is that he expected himself to take the risk on those points. He was confident of the merits of his invention, and was willing to trust to the self-interest of his grantees in keeping it in operation, except when a stoppage should be caused by litigation or misunderstanding between themselves. It will be perceived that this clause contains the first and only intimation of the extent of the machinery" to be used by the defendants, and it is somewhat uncertain what was intended to be understood on that subject. The opening recital states that the plaintiff had obtained a patent for an invention styled He well’s patent coffee-cleaning and polishing machine. A clause before quoted, refers to a “large iron cylinder” to be furnished by Newell, and .the agreement transfers all Hewell’s interest in the patent for the States of New York, Connecticut, and the State of New; Jersey, excepting certain counties -in the latter State. It no where appears what machinery was intended to be used, or who or what were the successors above referred to. It cannot, however, be useful further to consider the difficulties of this "clause, and I leave this view of it with the remark that it affords no countenance to the plaintiff’s claim in the present suit. A further condition is imposed that no sale shall be made of any right under the patent without the written assent of Newell; and the instrument then proceeds to set over and assign to the defendants the exclusivé right to all said patent for New York, Connecticut, and-parts of New Jersey. A -provision was then made for commuting the payment of the ten cents and -six cents toll by the payment of $20,000 less the $5,000 already paid, equal to $15,000, and, when done, a quitclaim deed was to be delivered. The other provisions are not material to be recited. A strong objection to the plaintiff’s construction of the contract, arises under the clause of the contract last quoted. The contract provides that upon payment of the sum of $15,000 the defendants shall be entitled to a quitclaim deed, and shall be forever discharged from the liability for tolls. The plaintiff, however, has recovered a verdict of $17,000 for non-user and non-payment thereof, during a period of five years. Upon the claim of interpretation made by the defendants, that this machine should be run as their interests or their convenience required, this provision was reasonable and sensible. If they found it to be a great undertaking, and were unwilling to pay such large tolls, they might commute at this intermediate sum, and the plaintiff would also thereby receive in gross a sum agreed upon as a fair compensation for his patent. But upon the plaintiff’s construction, he ceuld hardly have entered into this stipulation. By his present claim, the defendants were bound to run the machine to its utmost capacity during the existence of the patent, and to. pay him his toll therefor. He proved that the machine would clean 209 bags a day, which, at the lowest toll, would give him $3,762 a year. This, extended through the fourteen years of the patent, would amount to more than $50,000. Having this legal right, which would produce him really four times that amount, 'he would hardly have consented to abandon it for $15,000 at the option of the defendants. If the plaintiff’s theory is correct, I do not see upon what principle his right of recovery is limited to the results of one machine, in the city of New York. The people of Connecticut and New Jersey might desire to be benefited by this coffee-cleaning process, as well as those of Hew York, and why should not machines be erected in Trenton, and New Haven and Hartford, as well as in the city of New York? Why should not other sections of this State, as Albany, Buffalo and Rochester; have the machine erected in those cities ? They are large, commercial towns, and, it is believed, make large importations of coffee from abroad. The assignment is for the entire territory of the States mentioned, with the reservation of two counties of New Jersey. The agreement contemplates the erection of some other machinery, which, to a limited extent, is to be furnished at a specified price. I see nothing in this agreement to indicate that the parties were not to have the same rights, and to be under the same obligations throughout all the country, as were imposed for the city of New York. That the defendants assumed a liability to pay tolls on all the coffee that could be thus cleaned, could only be proved by clear and explicit language. Again, it was contemplated that sales should be made of the interests of the defendants in the patent, to which the plaintiff would assent in writing; and it is probable that Sales of territorial rights were contemplated, as is usual in the case of patent interests. The “ successors ” of the defendants are spoken of in many places in the contracts. The expectation of the parties is apparent that there might.be divisions and subdivisions of these interests, that the defendants would manage, in part or for a time, when they might be succeeded in the management by others, either for the whole or part of the territory embraced in the patent. The plaintiff’s right of toll, as claimed by him, would extend to all these persons, over all the territory and through all the changes. Wherever there was coffee, which could be the subject of the cleaning process, the defendants, or their successors, must, have a machine ready to clean it if offered; in default of which, they must pay the toll required. I do not think that this was in the view of the parties, or that it is the legal result of the language used by them. The plaintiff, no doubt, expected to receive compensation for the use of his patent, and for this he relied upon two agencies. He confidently believed that the patent was a valuable one, that it would be for the interest of the defendants to use it largely and freely, and in so doing, large tolls would necessarily come to him. He protected himself, also, to the extent of $5,000 in any event. That amount the defendants paid, and that amount, together with the cylinder, they forfeited, in case they failed to perform their.contract. I am quite satisfied that, by the terms of the instrument declared on, the defendants did not make the agreement claimed by the plaintiff and held by the judge at circuit, to wit, that they would operate the machine to its full capacity of cleaning coffee, and that they would do nothing to prejudice the coffee dealers against its use. The expressions relied upon do not sustain such a claim. McIntyre v. Belcher (32 Law Jour., C. P., 254; 14 Com. B., N. S., 654), is not an authority to the” contrary. There A sold to B his drugs and his practice as a surgeon, B agreeing to pay A at the end of each year for four years the one-fourth part of his earnings. B willfully disabled himself from carrying on the business and from making any earnings whatever. The court held him liable. Erle, Ch. J., said: “ Our duty is to give effect to the intention of the parties. We must look to the surrounding circumstances and at the nature of the transaction itself.” Bvles, J., said: “ The only consideration for the sale of the drugs and the practice, is the share which the plaintiff is to have in the proceeds of the business. It is not unreasonable to hold, therefore, that there is an implied agreement not to do anything to deprive the plaintiff of the benefit of the agreement.” The present case is quite different. There is here an additional consideration in the gross sum paid upon the making of the contract; and the “ surrounding circumstances ” point strongly to the opposite conclusion. In Wemple v. Steuart (22 Barb., 154, 160), Paige, J., says: “The contract is to deliver all the merchantable spruce plank1 they may saw.’ These words are not promissory in their nature, nor do they import a promise or undertaking to saw any plank. To construe this clause as agreeing by the defendants to saw all the plank they should be able to saw, would be making' a new contract for the parties.” In the recent case of The President, etc., of the Delaware & Hudson Canal Co. v. The Pennsylvania Coal Co., a decision was rendered by Nelson, J., in the United States Circuit Court, upon a contract involving similar generai principles with the one before us, and in accordance with the views I have indicated. It may also be doubted whether the particular clauses relied by the plaintiff are anything more than conditions to justify a forfeiture, and upon which no action will lie. They are called “conditions,” and it is not certain that they were intended by the parties to confer the right of action claimed, (Culver v. Sisson, 3 Com., 284; Palmar v. Fort Plain & C. R. R. Co., 11 N. Y., 376.) . In the view I take of the case, the plaintiff' cannot maintain his action, and a discussion of the rule of damages is unnecessary. The order for judgment absolute in favor of the defendants should be affirmed. All concur. Affirmed.