Cook v. Automatic Fire Protection Co.
Cook v. Automatic Fire Protection Co.
Opinion of the Court
“It being understood that either party is not to sell or assign any of the said inventions or improvements thereon, or grant any licenses, shop rights, or otherwise part with any interest whatsoever in the inventions and patents to be obtained thereon.”
Cook agreed to make applications for letters patent on such inventions already made, or to be made, as should be deemed practicable and marketable. He was to pay the cost of so doing, and that cost was to be deducted from the first proceeds derived from the sale of
In the spring of 1903 Nolen and one Hewitt jointly invented some improvements in sprinkler systems. On the 28th' of April, 1903, Cook, Nolen, and Hewitt and a man named'Green entered into an agreement which recited that in addition to the application of September 11, 1902, Nolen had made six others, and that Hewitt and Nolen had jointly made another invention for which application for letters patent were then in course of preparation; that Cook had advanced $780, had spent in and about the development of the devices the sum of $535.12, had guaranteed the payment of certain Patent Office fees, and had by virtue of certain oral and written contracts, dated October 24, 1902, with Nolen, acquired an interest in all of such inventions and the patents issued, or thereafter,, to be issued, thereon. The agreement then provided that Nolen, Cook, and Hewitt should assign to a trustee, to be mutually agreed upon by all the parties, all their rights in such inventions and in the patents to be obtained therefor. The trustee was to hold the rights for their mutual benefit and to dispose of them in accordance with their instructions. In the event of such disposition the trustee was to receive the consideration therefor and to pay 7/24 of it to Nolen, a like amount to Hewitt, 6/m to Green, and V24 to Cook. By this contract Cook and Nolen mutually released each other from all obligations arising under and by virtue of the contract of October 24, 1902, in so far as it applied to the inve'ntions and letters patent to be obtained therefor. There were certain provisions which enabled the other parties to get rid of Cook by paying $5,000 for his interest. It was provided that in disposing of the inventions the trustee should stipulate that if the assignee should become insolvent, or should' otherwise fail to place the inventions on the market, all right
It was a curiously drawn agreement. It was very difficult of actual per formance, or at all events was very unlikely to be performed. Cook and Nolen seem to have come to that conclusion very early, for on the 29th of June, 1903, they entered into an agreement with the defendant McElroy which entirely ignored the existence of that of April 28th. The later contract recited that Cook and Nolen were the owners of certain inventions and improvements in fire alarm and signal systems and apparatus, which were then being perfected and for which applications for letters patent had been made; that McElroy was desirous of operating under the patents to be obtained thereon in connection with the giving of signals or alarms of fire, and wished to acquire the exclusive right to make, use, and install any and all inventions or improvements for that purpose which had been made, or which might he made, by Cook or Nolen, or either of them. Cook and Nolen gave such license to McElroy as trustee. The instrument recited that it was understood that the license should include and relate to the rights in such inventions or improvements as .had been or might be made by Cook or Nolen in connection with systems for giving signals or alarms of fire or burglars, automatic sprinklers, and other purposes of like nature. McElroy was to pay Cook and Nolen 3 per cent, of “all gross money received” from “the users of said inventions or improvements” of Cook and Nolen. McElroy agreed that the 3 per cent, should not be less than $2,000 per year. If he failed to> pay the minimum license fee, the license was to become null and void, and to revert to Cook and Nolen. The agreement contained a proviso, which it appeared Cook caused to be inserted, to the effect:
“That the license should take effect and have force from and after the 1st day of May, 1904, provided said Robert Ij. McElroy, trustee, shall within 60 (lays thereafter elect to accept and act under the license aforesaid; this agreement constituting an option whereby the said Robert R. McElroy, trustee, may within the 60 days elect to accept or refuse the license aforesaid.”
It appears that one of Cook’s purposes in requiring the insertion t>f this clause was to avoid any conflict with the agreement of April 28th, which by its terms would expire on the same day in 1904, unless various things were done which Cook felt sure never would be. The agreement of June 29, 1903, was under seal. It was understood by all the parties that McElroy was acting, not as an individual, but for
It seems that at the time this agreement was made neither Hewitt nor Green knew anything of it, nor did McElroy have any knowledge of Cook’s and Nolen’s contract with them. The day after the agreement of June 29th was executed, Plewitt in some way heard of it. He at once told one Shepherd, who, with McElroy, was interested in the Automatic Fire Protection Company, of the contract of April 28th. Various negotiations among all the parties followed, the upshot of which was that they all agreed that the interests of Hewitt and Green should be confined to inventions relating to the automatic fire extinguishing system, and should not include any of tiróse having to do with signaling. To carry this purpose into* effect, on the 11th of August, 1903, a new contract among Cook; Nolen, Hewitt, and Green was entered into. By it the agreement of April 28, 1903, was expressly canceled and declared null and void.
It was provided that in the automatic fire extinguishing system, for which letters patent had been or might be applied for, Hewitt and Nolen were each to have 17/rs and Green 14/48- From the construction subsequently put -on this provision by the parties, it seems that Nolen was to hold one-half of his 17/±s, or 17/96> for himself, and the other half for Cook. In the signaling apparatus and devices Cook and Nolen were each to have a one-half interest. Below the signatures of the parties an additional clause was added, and initialed by all of them. It declared that the agreement—
“shall extend to and be binding upon the heirs and assigns of each of the parties hereto. Said Hewitt, Green, and Cook hereby release the said Nolen from any contract or obligation, either written or oral, which said Nolen may have with them, or either of them, as to future inventions.”
The contract was executed in quadruplicate. The four copies were delivered to Shepherd, to be held by him in escrow as trustee; Cook’s signature being conditioned upon Shepherd’s securing an exclusive license and right to McElroy, as trustee, from Nolen, Green, and Hewitt in the several patents then applied for, or which might be applied for, and described in- the contract. Such license was to be on the basis-of 2 per cent, of gross sales, rentals, or other receipts from the devices. If such licenses were not received, the contract was to be returned to Cook. If the license was given, Cook was to have the option either of accepting 17/se of said 2 per cent., or by bearing one-sixth of the expenses, in no event to exceed $2,500, in making, the demonstration of the utility of the sprinkler devices, to become entitled to receive 3 per cent. If Cook was not satisfied with the license given to McElroy, those conditions which were unsatisfactory to him, so- far as his interests were concerned, were to be left to an arbitration committee o-f three to be selected in the usual manner, their findings to be final. If the committee’s findings resulted in Shepherd being unable to secure a license complying therewith, the four copies of the agreement bearing Cook’s signature were to- be returned to him. A satisfactory license was to be obtained within a year’s time; otherwise, the contract was to be at an end.
It has been suggested by counsel for the defense in this case that the agreement of October 24, 1902, did not cover the application of Nolen of September 11, 1902, because it is said that the agreement referred only to applications thereafter to be made. I do not think that such was the intention of the parties at the time they entered into the agreement. The subsequent action of all of them shows that they understood tile application of September 11th to be included under the agreement of October 24th. Indeed, that invention was the basic one. Unless all the parties felt that Cook had an interest in it, it is utterly improbable that the others would have dealt with him for the next 18 months as they did.
Cook claims, on the other hand, that the proviso' added to the agreement of August 11th, surrendering his interest and that of Green and Hewitt in all subsequent inventions of Nolen, was limited to such inventions as had to do with the sprinkler system, as distinguished from the alarm or signaling system. In view of the relation the parties then occupied to each other, and the substantially contemporaneous action of some of them, this contention cannot be sustained. It appears probable that the purpose of this clause was to get rid of the interest of Hewitt, Green, and Cook in the subsequent inventions of Nolen, no matter to what such subsequent inventions might relate.
It is not shown that the agreement of August 14th between McEl-roy and Shepherd, on the one part, and Nolen, on the other, was communicated to Cook; yet it is difficult to- believe that he did not know or have reason to think that Nolen had entered into their employ. He was thereafter very little about Cook’s factory. About that time he ceased to receive any appreciable sums of money from Cook. The latter must have known that he was employed elsewhere.
At this period Cook recognized that McElroy, or rather the company represented by McElroy, the defendant the Automatic Fire'Protection Company of Maine, was the exclusive licensee under the automatic fire alarm patents, and so notified persons who requested infor
At this interview it appears that some question was raised as to whether McElroy proposed to accept the option given him by the agreement of June 29th. The accounts of what was said on that subject differ. Cook claims that he told the others that if he was not paid his bills he would cancel the option of June 29th. They say he expressed reluctance to go on with the work they had given him, because he did not know whether McElroy would accept the option or not, and that thereupon McElroy verbally accepted it. By some letters written by some of the defendants at that' time it would appear that their then recollection of the conversation was the same as that now stated by them. In point of fact, all the parties appear to have gotten very angry. It is.likely enough that each of them may, in the course of the interview, have made statements not altogether consistent with what they said at another part of it. Very possibly the recollection of none of them is now absolutely accurate, at least as to the precise connection in which were uttered words they remember.
However this may be, on March 22, 1903, McElroy in writing notified Cook that he elected to accept the option under the contract of June 29th. A week later Cook replied, also in writing, that he canceled that option. On the next day McElroy answered, denying that Cook had any right of cancellation, and notifying the latter that he intended to insist upon the enforcement of the agreement of June 29th. On the 29th of March Cook wrote Shepherd that the agreement of August 15th between McElroy, Hewitt, and Nolen was unsatisfactory to him, in that it in no wise-recognized and protected his rights, and that he elected to terminate the escrow of the conditional contracts of August 11th. Shepherd on the next day replied. He told Cook that he was prepared to secure him either 17/96 of 2 per cent., or of 3 per cent., as Cook chose. He called his attention to the provision for arbitration in the event that the license given by Hewitt, Green, and Nolen was .unsatisfactory to him. He told Cook that he was willing to submit to such arbitration. He said that Nolen had authorized McElroy to páy Cook the 17/oo of the 2 per cent., or of the 3 per cent., so that his rights were fully recognized and protected. He concluded by stating, that the contracts were in force and that he would deliver them to the several parties entitled to them.
To this letter Cook made no reply, and on the 25th of July a Mr. Hatch, since dead, who was then counsel for Shepherd and McElroy,
On the 20th of September the same counsel who now represents Cook wrote Hatch, telling the latter that they believed he represented all interests adverse to Cook in the matter of the controversies on fire alarm and sprinkler system patents. They said that Cook had retained them to institute litigation with a view to» setting aside certain contracts and licenses. They stated that Cook would rather compromise the matter, receiving cash due him for materials furnished and labor performed, aggregating $1,015.42, and an additional sum of $7,500— $2,500 in cash and the balance in one or two years, represented by notes properly secured. Hatch in reply asked for a list of the several patents and applications for patents in which Cook claimed to have an interest, together with copies of the specifications of such applications as had not ripened into patents, wi1h a statement of what claims had been allowed and in what condition the applications in the Patent Office were. Cook’s counsel replied, under date of October 1st, that they did not desire at the time to furnish copies of applications. They said that McElroy knew what Cook had to sell, and if he indicated a disposition to accept the proposition they could satisfy both Hatch and McElroy with respect to the patent situation. On October 3, 1904, Hatch replied that McElroy was out of town. There the correspondence between the parties with reference to the matters involved in this litigation appears to have ended. In 1907 Cook sued in Chicago the Automatic Eire Protection Company of Maine for his bill of $1,015. An ultimate settlement of that particular controversy was arrived at, by the terms of which Cook received $700.
McElroy and Shepherd, and probably Cook as well, early appreciated that the inventions could be profitably and successfully exploited in any city only with the co-operation of some organization which had a regularly established telegraph and messenger service therein. Practically that meant that the assistance of the American District Telegraph Company and its subsidiary organizations were requisite to turn the inventions to profitable use. McElroy seems to have been in a position in which it was easy for him to get the ear of those influential in that corporation and to convince them that the inventions in question and others made by him and Shepherd were likely to prove highly useful. As early as the 18th of February, 1904, a contract between him and the American District Telegraph Company for the joint use of these inventions was entered into. The
It is not necessary or expedient in this opinion to attempt to unravel the precise relationship between these various companies. It may, I think, be taken as established, however, that all of them who are parties to this cause had, at the time they assumed any obligations or acquired any rights with reference to the patented devices in controversy, full knowledge of the various agreements to which Cook was a party and which have been heretofore recited. It does not appear that Cook, subsequent to October, 1904, did anything whatever to assert his alleged rights until the 3d of March, 1909, when, in the circuit court of Cook county, Ill., he filed a bill in equity against Nolen, Shepherd, McElroy, and the Automatic Fire Protection Company of Maine. In this bill he set up the contract of October 24th between himself and Nolen, said nothing whatever about any of the subsequent contracts to which he was a party, and alleged that Shepherd, McElroy, and the Automatic Fire Protection Company, with full knowledge of his rights in the premises, had been receiving gains and profits to one-half of which he was entitled. By that time the various individual defendants had removed from Chicago and were residing elsewhere, and the Automatic Fire Protection Company of Maine specially appeared and asserted that it had ceased to do business in Illinois and was not subject to suit therein. Perhaps because of these difficulties, plaintiff on the 17th of January, 1910, filed his bill in this court, and on the 25th of March of the same year dismissed his Illinois suit.
The theory of the second proceeding is that of the first. The later bill incorporates in substantially the same words all the material allegations of .the earlier. In like manner it ignores the existence of any of the agreements, subsequent to that of October 24th, to which Cook and Nolen were parties. The principal respect in which the New York bill differs from the Illinois is in the persons, natural and artificial, who are made defendants to it. Nolen and McElroy were sued in New York, as they had been in Chicago. Shepherd, who was a defendant in the Western case, was not proceeded against in the Eastern. As an amendment to the bill made on the 25th of June, 1910, explains, he was not made a party because he did not reside in the Southern district of New York. Leave was then obtained to
In the pending case the American District Telegraph Company was made a defendant, doubtless in part for purposes of discovery, and in part in order that any decree which might be passed would safeguard its rights, while protecting for the future those of the plaintiff.
The defendants all answered. From the answers of some of them it appears that they were not all residents of the Southern district of New York; but, as they proceeded to answer fully on the merits, they waived their rights to object that they were not properly suable therein. The defendants McElroy and Nolen in their answers say that Cook forfeited all his rights under the contract of October 24th, because he failed and refused to do what was therein required of him. They say he did not make application for patents on Nolen’s inventions and pay the cost of obtaining them; that he did not furnish means to develop such inventions, nor use his best skill and utmost endeavor to place them upon the market, nor did he commence the manufacture of appliances embodying them as soon as was practicable. Both Nolen and McElroy set up that Shepherd was an indispensable party. McElroy further alleged that he had acted under the agreement of June 29, 1903, and that under it he had, with Cook’s knowledge and acquiescence, paid Nolen or accounted to him for all sums coming to Cook and Nolen under such agreement, and that consequently Cook had no claim against him. Nolen alleged that, the contract of October 24th had been abrogated by subsequent agreements. The allegations of the other defendants need not be recited. They were for the most part either general denials or expressions of ignorance and demands for proof.
It was five years after the institution of his suit before Cook did anything else in the cause, except to file a general replication and obtain leave to amend the bill with reference to Shepherd in the manner above stated. On the 4th of April, 1914, he sought permission to amend his bill by making the Automatic Fire Protection Company of Maine a defendant. He also made the Same request as to Shepherd, apparently unnecessarily, in view of what had been done four years before. Judge Hough denied this petition, on the ground that the granting of it might conceivably remove the bar of the statute of lim
In its answer it set up the defense that the suit had not been brought within six years after the cause of action accrued; that the plaintiff was guilty of such laches as to make it inequitable to give him any relief; that Shepherd was an indispensable party; that Cook had forfeited all his rights under the contract of October 24th by failing to perform the obligations imposed on him thereby; and that by his attempted cancellation and repudiation of the agreement of June 29th he had shut himself off from any right to claim benefits thereunder.
Before inquiring whether the defense of limitations is available, it will be expedient to determine what contracts, if any, between the plaintiff and any of the defendants, are in force.
The contention of some of the defendants that the contract of October 24th has been abrogated by the failure of the plaintiff to perform the obligations imposed by it upon him does not seem to be persuasive. It is true that after June 29, 1903, Cook did little to develop and market the inventions, but before the end of March, 1904, nobody wanted him to, and after that time the defendants would not let him. It is equally certain that after the last-mentioned period Cook did nothing and spent substantially nothing, except in tire payment of charges connected with the prosecution of the patents. But it was impossible, under the circumstances, that he should do anything. His failure to make any attempt to do any of the things required of him by the contract of October 24th may be evidence, and is evidence, and strong evidence, that he regarded the relations between himself ami the others as governed by the agreements of June 29th and August 11th. But under all the circumstances it does not tend to show a breach by him of the contract of October 24th.
He says that the last-mentioned contract is the only one which is now in existence. In support of this contention he asserts, first, that, the agreement of June 29th was a mere offer, from which either party could withdraw until it had been made a complete contract by acceptance; that Cook had withdrawn verbally at the stormy interview in March, 1904, or, if not, he had certainly done so by his letter of March
I cannot think that the agreement of June 29th was a mere offer. McElroy and the Automatic Eire Protection Company proceeded at once to act under it. Cook knew they were doing so. Pie advised other people in writing that they held rights to the inventions now in question. He himself undertook to furnish them labor and materials required for the development and use of such inventions. After his attempted abrogation o f the contract he continued to seek instructions from them as to the manufacture of devices for which they could have had no use whatever, were the parties to be governed solely by the contract of October 24th. Whatever the right conferred upon McElroy was, it was not a naked option given without consideration. Under it McElroy and the Automatic Fire Protection Company acted, spent money, and incurred liabilities. They paid for it, and had the right to it, and of it Cook could not deprive them. It follows that the contract of October 24th was replaced by, or merged in, those of June 29th and August 11th.
Assuming these contracts to have been originally valid and binding upon the parties, nothing that Cook has done or left undone with
The Automatic Fire Protection Company of Maine-and the Fire Protection Development Company are Maine corporations. The pe~ 'riod of limitations for suits upon sealed instruments is by the law of Maine the same as it is by that of New York, viz. 20 years. Section 93, c. 83, Revised Statutes of Maine. It is true that the seals upon the instruments in question are mere scrolls, which, while they are valid as seals in Illinois where the papers were executed, and in New York where the suit is pending, are probably ineffective in Maine to make the agreements to which they are attached sealed instruments. McLaughlin v. Randall, 66 Me. 226.
It might be interesting to inquire whether under the circumstances the requisites for a seal are to be determined by the laws of New York, of Illinois, or of Maine; but it is unnecessary. In applying the statute of limitations, equity seeks to follow the law; but it is not bound in doing so to go to the lengths which would be required to hold this suit barred merely because the parties, when they entered into what they supposed were contracts under seal, did not attach their seals in a way required by the laws of a state of which none of them who personally executed the papers were residents, and in which the performance of the contracts was not contemplated, except in the same way in which it might have been hoped for in any of the other 47 states of the Union.
It is possible that, within the meaning of section 390a of the Code of Civil Procedure, this suit is on a cause of action arising outside
It follows that Cook is entitled to an accounting under these contracts, bearing in mind, however, that, as has already been stated, he has no interest in such of Nolen’s inventions as were made after August 11, 1903, if such limitation shall prove in point of fact material, as toi which nO' opinion is now intimated.
In advance of the accounting it docs not now appear to be necessary to anticipate any determination of the rights of McElroy, the Automatic Eire Protection Company of Maine, and the Eire Protection Development Company among themselves, and it might be inexpedient to attempt so to do. After the accounting has been had, such questions will probably be of easy determination.
A decree in conformity with this opinion may be drafted.
<&saFor other cases see same topic & KIOY-NID/EBEU in all Key-Numbered Digests & Indexes
Reference
- Full Case Name
- COOK v. AUTOMATIC FIRE PROTECTION CO.
- Status
- Published