Ellery v. Morley Button Manufacturing Co.

The plaintiff, who for years had been the foreman of the finishing department in the defendant’s factory in 1902 invented a device called the “Perfection Nail” which was an improvement on an upholstering nail manufactured by the defendant. This invention he sold to the defendant in May, 1902, for a royalty aggregating $500, which was fully paid to him by October of that year. In January he took steps to start a company that would compete with the defendant, but, after a conference with one Merrill, the defendant’s treasurer, he executed the written agreement dated January 27, 1903, on which the present suit for royalties is based.

*498It is the contention of the plaintiff that under this contract of 1903 he was entitled to royalties so long as the defendant continued to manufacture the “Perfection Nail” at a profit, regardless of whether he remained in its employ; or, if any physical service by him was essential, that there was in fact such continuous service as the contract required down to the filing of this bill.

The contract of 1903 was drawn up by the defendant’s treasurer without legal advice, and its interpretation is not free from difficulty. There is force in the argument of the plaintiff, that what the contract contemplated was, to obtain the inventions which the plaintiff might make and to avoid his active competition. But by its terms it contemplated also his physical services. It recited that the defendant “is desirous that said R. L. Ellery shall remain in their employ.” The royalty in excess of $50 per month was to be paid quarterly “as soon after receipt of R. L. Ellery’s report of nails shipped and checking of same as convenient.” Paragraph 5 expressly stipulated: "R. L. Ellery agrees to remain with the Morley Button Manufacturing Co. on these terms for a period of .at least three years. Should he at any time leave the employ of the Morley Manufacturing Co. this agreement is to cease without notice from either party. It is understood that this agreement shall stand after said three years, so long as the Morley Co. shall continue to employ R. L. Ellery and continue to manufacture articles invented by said Ellery.” From these and other provisions it seems plain, notwithstanding the ambiguity of one isolated clause in paragraph 2, that the agreement contemplated the employment of the plaintiff; and in fact he continued in such employ until January 1, 1906. All the royalties due for that period were paid to him.

One of the provisions of the second paragraph was: “At the end of three years from January 1,1903, the Morley Button Manufacturing Company, if it shall continue thereafter to employ said Ellery, shall pay said Ellery a royalty of at least $50.00 per month, if it shall manufacture at a fair profit any article invented by R. L. Ellery.” The master finds that on January 1, 1906, the plaintiff physically left the defendant’s employ and never since has done any work for the defendant nor performed any duties similar to those which he had been performing. In January he started measures to form a. new corporation; but after some negotiations with the *499defendant’s treasurer the parties executed the agreement of February 19,1906. The 1906 agreement did not purport to continue the plaintiff in the defendant’s employment. On the contrary it recited that, “having been for many years in the employ of” the defendant, he was “desirous of getting out into a different line of business.” It seems quite apparent in the light of the circumstances that the main purpose of the retainer of $10,000 was to prevent competition by the plaintiff. His possible future services under the agreement were to be rendered only if and when they would not conflict with his outside business. If there were any doubt as to whether after the execution of the 1906 contract the defendant did “continue ... to employ said Ellery” under the 1903 agreement, thereby entitling him to continuing royalties, the construction placed on the earlier agreement by the parties themselves, as manifested by their conduct, plainly was that the 1903 contract ended for all purposes after the term of three years. For more than nine years thereafter the plaintiff made no claim on the defendant for royalties and never asked for any report of the number of “Perfection Nails” which had been sold. During all this interval he was engaged in a business on his own account. The master has found that “At the time when the parties signed the agreement of 1906, both understood that there was no subsisting rights or liabilities under the agreement of 1903.”

In view of our interpretation of the 1903 agreement, it is unnecessary to consider the defences of loches and the* statute of limitations. The interlocutory decree confirming the master’s report, and the final decree dismissing the plaintiff’s bill, must be affirmed with costs; and it is

So ordered.