Martin v. Morse Boulger Destructor Company

• Citation: 221 F.2d 218
• Decision Date: 14 March 1955
• Docket Number: Docket 23061.,No. 99,99
• Parties: Warren S. MARTIN, Appellee, v. MORSE BOULGER DESTRUCTOR COMPANY, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

221 F.2d 218 (1955)

Warren S. MARTIN, Appellee, v. MORSE BOULGER DESTRUCTOR COMPANY, Appellant.

No. 99, Docket 23061.

United States Court of Appeals, Second Circuit.

Argued January 10, 1955.

Decided March 14, 1955.

Herman Englander, New York City (Englander & Englander, New York City, on the brief), for appellant.

Frederick W. Newton, New York City (Wait, Wilson, Newton & Campbell, New York City, on the brief), for appellee.

Before CLARK, Chief Judge, and FRANK and HINCKS, Circuit Judges.

CLARK, Chief Judge.

Defendant appeals from a judgment awarding plaintiff patent royalties pursuant to contract, and dismissing its counterclaim for a declaratory judgment of outright ownership of the patents involved, covering multiple hearth furnaces. The basic disagreement between the parties remaining on this appeal¹ concerns defendant's obligation to pay additional royalties for the year 1950.

The legal rights of the parties are governed by two contracts entered into on February 13, 1946. On that date plaintiff obtained ownership, contingent upon payment of $21,000, of two different sets of patents from a former employer, The Underpinning & Foundation Co. Inc. The set here involved consisted of plaintiff's own patents, known as the Martin patents, which had only been licensed to Underpinning. Another group of Underpinning's own patents are not here in issue. All plaintiff's rights in the Underpinning contract were immediately assigned to defendant, who assumed the financial obligation contained therein. It is the Morse contract containing this assignment with which we are directly concerned here. It provided for absolute assignment of the Underpinning patents and for licensing of the Martin patents. Plaintiff was also obligated to devote his personal services to the exploitation of these patents for the mutual benefit of both parties and was to receive compensation of annual minimum royalties of $5,000 and additional royalties as earned according to the contractual scale.

In 1950, Morse Boulger, the defendant, contracted for two projects which the plaintiff claimed entitled him to $1,500 beyond the minimum royalties which he had been paid. He made a demand upon an officer of defendant, which demand was refused. Thereupon, relying on a provision in the contract that default in royalty payments would result in cancellation of the license agreement, he demanded their reassignment to him. When this also was refused, he stopped working for defendant. It is on this cessation of personal services that defendant's counterclaim relies, for another clause of the Morse contract provided that such a situation, unless the result of an arbitration award, would result in forfeiture of the patents to defendant. Judge Byers found that plaintiff's royalty computation was correct and that his subsequent refusal to continue in defendant's employ was rightful. Therefore he dismissed the counterclaim and awarded plaintiff $1,500 for 1950 and, in addition, minimum royalties since that time, because defendant retained use of the patents.

The royalty computation for 1950 is based on two projects: one a furnace for Merck & Co., Inc., and the other a garbage disposal plant for the City of Saginaw, Michigan. To the allowance of royalties on each of these, defendant raises various objections, any one of which, if accepted, would defeat plaintiff's right to more than minimum royalties.

The issue on the Merck project turns on whether that furnace is an incinerator or a calcinator. Under the contract, royalty payments for an incinerator are calculated on the tonnage of input materials, while royalties on a calcinator depend on output tonnage. Since output is substantially less than input, acceptance of the smaller basis would not bring plaintiff above the minimum for which he had already been compensated. Judge Byers referred the question to a special master, who took evidence and eventually found that the furnace is an incinerator. There is nothing to demonstrate that this conclusion does injustice to the evidence; and we shall accept it as certainly not clearly erroneous, as did the trial judge.

The Saginaw installation is conceded by both parties to have been a multiple hearth furnace for sewage disposal. Defendant argues first that the contract of sale of the City of Saginaw was not irrevocably accepted by the city until 1951 (and thus would not give rise to royalties until 1952); and second that, under an exclusion clause in the contract between it and plaintiff, no royalties whatsoever are payable on sewage projects.

The sale to the City of Saginaw was the result of an award after competitive bidding, as prescribed by § 33 of the Saginaw City Charter. The advertisement for bids prescribed that no proposals could be withdrawn by any bidder for a period of thirty days after the scheduled closing time for the acceptance of bids, which was November 28, 1950. Defendant was awarded the contract early in December, and was so notified, for it signed a contract dated December 12 and procured a surety performance bond, also dated December 12, which specifically recited that such an award had been made. In accordance with the requirements of a municipal ordinance,² the City Council approved the contract on December 26, 1950. Thus concededly all the substantial and potently disputable steps of the negotiation were completed with finality in 1950; the only contractual step in any way attributable to 1951 was the mailing of the contract back to defendant on January 5.

It is obvious that this is a technical objection, newly thought up by the defendant. Neither of the actual parties intended to or did at any time question with each other the binding effect of this contract. The question is raised only to prejudice the rights of a third person. It is clear that defendant as a bidder was not left as a free agent to press or withdraw its offer at will. The offer had to remain alive for thirty days and, if accepted by the City in that period, became a binding contract without regard to what the offeror might do. How that assent was to be signalized is not made explicit; it is clear, however, that a formal contract with supporting bond was to be approved by the City's legislative body, the City Council, which obviously must act openly and publicly by formal vote. It would seem likely that such notorious act would form the contract and that no under city official thereafter could modify or nullify it by ministerial action or nonaction. Such seems to be the result in somewhat similar situations which have come to our attention. See United States v. Purcell Envelope Co., 249 U.S. 313, 39 S.Ct. 300, 63 L.Ed. 620; Pennell v. City of New York, 17 App.Div. 455, 45 N.Y.S. 229; and see also cases cited 63 C.J.S., Municipal Corporations, § 1158, pp. 837, 838. At most the return of the contract would seem to be only a condition subsequent. We are cited to no authorities from Michigan or elsewhere suggesting the contrary. Under the circumstances we think plaintiff, who surely has all the equities, has established a prima facie case as to the law which defendant does not rebut. Indeed defendant appears to have itself conceded the weakness of its position by stipulating before the special master that the sale had been made in 1950.

Defendant's main argument as to the Saginaw furnace is based on the fact that this was a sewage installation. Defendant maintains that since the governing patent had been licensed, for sewage purposes, to The Underpinning & Foundation Co. Inc., it comes within a proviso clause of the Morse contract excluding all royalties. The clause in question reads: "the party of the second part agrees to pay the party of the first part * * * royalties as follows: (a) For all furnaces sold or constructed * * * incorporating the design or designs of and the use or uses of any of the Patents * * * enumerated in Schedule A hereto annexed. * * * anything herein contained to the contrary notwithstanding the party of the first part is not to receive any royalties for furnaces construced for the disposal of municipal garbage, municipal waste and...