E. Bement & Sons v. La Dow

• Decision Date: 04 March 1895
• Docket Number: 6,036.
• Citation: 66 F. 185
• Court: U.S. District Court — Northern District of New York
• Parties: E. BEMENT & SONS v. LA DOW.

66 F. 185

E. BEMENT & SONS v. LA DOW.

No. 6,036.

United States Circuit Court, N.D. New York.

March 4, 1895

Henry J. Cookinham, for complainants.

Alden Chester, for defendant.

COXE District Judge.

On the 22d day of March, 1889, the parties to this action entered into an agreement, which, so far as its stipulations affect the issues in this cause, is as follows:

'Agreement or License.

'Know all men by these presents: That whereas, C. La Dow, of Albany, New York, is the owner of a large number of patents on spring-tooth harrows, and Messrs. E. Bement & Sons, of Lansing, Michigan, are desirous to obtain rights to manufacture at Lansing, Michigan, and sell throughout the following territory, the harrow invented by said La Dow which is represented by the sample furnished said E. Bement & Sons by La Dow, and La Dow consenting thereto, therefore this agreement witnesseth: * * * That said La Dow hereby grants license to said Bement & Sons to build spring-tooth harrows (like the sample furnished them by La Dow) at Lansing, Michigan, under La Dow's patent of March 11 1884, for the territory of the United States, except the counties of Albany, Schoharie, Greene, Delaware, Schenectady, Rensselaer and Saratoga, in the state of New York, for and during the life of any patent now granted, or that may be granted said La Dow which relates to said harrow, upon the following terms and conditions, viz.: La Dow grants this license exclusive under said patent so far as embodied in said harrow, and also under patent to be applied for on said harrow, for the territory of the United States, excepting the territory hereinbefore reserved, and except that La Dow reserves the right to license to others within the territory hereinbefore granted said Bement & Sons, rights to use his inventions of fastening teeth directly between opposing parts of a harrow frame, without the use of a 'clip' when used in harrows, in which the frame bars do not stand edgewise vertically; and La Dow also reserves the right to use said invention in said territory in such style harrows as the 'None Such,' now made by McSherry & Co., of Dayton, Ohio, upon the conditions that the said Bement & Sons will build the said harrows substantially the same as the sample furnished them by La Dow, and in a substantial and workmanlike manner and of good finish, painting the harrow frames red and the teeth black, that they will thoroughly advertise and push the sale of said harrows in all of said territory, and use their best endeavors to sell as many of them in each year as possible, and to pay the said La Dow, his representatives or assigns, during the continuance of this agreement a royalty on each harrow made by them, as follows: Said Bement & Sons agree to pay royalty on not less than two thousand (2,000) of said harrows for the year 1889 at a royalty of fifty cents per harrow, payable one-half July 1, 1889, and one-half December 31, 1889. They also agree to build and pay for not less than ten thousand (10,000) of said harrows for the year 1890 and to build and pay on not less than then thousand (10,000) harrows in each year thereafter during the four years following, viz.: The years 1891, 1892, 1893 and 1894, and to pay to said La Dow or assigns a royalty of fifty cents on each harrow made in each of said five years aforesaid. The royalty year to begin January first in each year and the royalty to be paid as follows: Twenty-five hundred ($2,500.00) dollars of the amounts specified shall be paid on July first, and the balance of twenty-five hundred ($2,500.00) dollars together with royalty on any excess of the number specified shall be paid on December 31st of each year beginning July 1, 1890, and ending December 31, 1894. * * * Said Bement & Sons may bring suits against infringers at their own expense, and for their own benefit, except that La Dow shall retain his equity of fifty cents per harrow against all who infringe his patent, and said amount shall be paid La Dow as damages out of any money collected by Bement & Sons from infringers. * * * In case said Bement & Sons do not fulfill the terms and conditions of this contract, La Dow may declare it void and the rights hereby conveyed shall thereupon revert to La Dow or his assigns. Said Bement & Sons hereby accept said terms, and agree to faithfully fulfill their part of the same, for and during the time named, and that the same shall be binding on their representatives, successors or assigns. In witness thereof, the parties have hereunto set their hands and seals this 22d day of March, A.D. 1889.

Charles La Dow. 'E. Bement & Sons, 'By A. O. Bement, President.'

On the 2d day of September, 1889, the parties entered into a second agreement by which La Dow extended the license to the counties excepted from the original agreement. The royalty for these counties was fixed at $1 per harrow on not less than 500 harrows annually.

Briefly stated, there was a contract by which Bement & Sons took a license under La Dow's patents existing and to be thereafter granted for harrows, like the sample furnished, and agreed to manufacture not less than 2,000 harrows for the first year and not less than 10,500 for the five succeeding years and to pay La Dow 50 cents royalty for each harrow sold and a dollar royalty for harrows sold in the territory specified in the second agreement. The complainants seek to set aside these agreements and to recover $3,500 paid thereunder by them to the defendant, on the ground that they were induced by fraudulent representations made by La Dow and relied upon by them. These representations are alleged to be in substance as follows: Before the execution of the agreements La Dow stated to the complainants that he was well acquainted with the state of the art relating to harrows; that his inventions involved an entirely new principle, viz. that of grasping the harrow teeth edgewise, and also a harrow frame of zigzag form; that his patents, applications and inventions were very valuable and covered the two features referred to and the entire field; that he was the first to conceive of the idea of holding the teeth edgewise; that his inventions covered this field so completely that there would be no trouble or annoyance by other parties; that the complainants if they took the license would have this field entirely to themselves so far as the two features of clasping the teeth by the edges and the frame of zigzag form were concerned.

The defenses are-- First, that no fraudulent representations were made; second, that complainants with full knowledge of all the facts relating to the alleged fraudulent representations ratified and confirmed the agreements; third, that complainants have not offered to restore all that they have received under the agreements and are not entitled to relief until they do this-- restitution is now impossible; and, fourth, that the judgment in the action at law, in which La Dow recovered in this court for royalties under the agreements, is res judicata upon the present issues.

The law applicable to controversies of this kind is clearly stated in Development Co. v. Silva, 125 U.S. 247, 8 Sup.Ct. 881. The supreme court said:

'In order to establish a charge of this character the complainant must show by clear and decisive proof-- First, that the defendant has made a representation in regard to a material fact; secondly, that such representation is false; thirdly, that such representation was not actually believed by the defendant, on reasonable grounds, to be true; fourthly, that it was made with intent that it should be acted on; fifthly, that it was acted on by the complainant to his damage; and, sixthly, that in so acting on it the complainant was ignorant of its falsity, and reasonably believed it to be true. The first of the foregoing requisites excludes such statements as consist merely in an expression of an opinion or judgment honestly entertained; and, again (excepting in peculiar cases), it excludes statements by the owner and vendor of property in respect to its value.'

It is thought that the third of these propositions should be qualified by the further statement that if the defendant conveys the impression that he has actual knowledge of the existence of the facts when he is conscious that he has no such knowledge, he is as responsible for the injury caused by such representations, to one who believes and acts upon them, as if he had actual knowledge of their falsity. Iron Co. v. Bamford, 150 U.S. 665, 673, 14 Sup.Ct. 219; Marsh v. Falker, 40 N.Y. 562. In Slaughters' Adm'r v. Gerson, 13 Wall. 379, the supreme court said:

'Where the means of knowledge are at hand and equally available to both parties, and the subject of purchase is alike open to their inspection, if the purchaser does not avail himself of these means and opportunities, he will not be heard to say that he has been deceived by the vendor's misrepresentations. If, having eyes, he will not see matters directly before them, where no concealment is made or attempted, he will not be entitled to favorable consideration when he complains that he has suffered from his own voluntary blindness, and been misled by overconfidence in the statements of another.' Farnsworth v. Duffner, 142 U.S. 43, 12 Sup.Ct. 164; Farrar v. Churchill, 135 U.S. 609, 10 Sup.Ct. 771.

Mere expressions of opinion as to the value of property are not actionable; they are regarded as 'trade talk' which every man of intelligence receives cum grano salis. Gordon v. Butler, 105 U.S. 553; Mooney v. Miller, 102 Mass. 217. In Dillman v. Nadlehoffer, 119 Ill. 567, 7 N.E. 88:

'The defendant represented to plaintiffs that said improvements were his own invention, and that the patents issued thereon were genuine and valid, and that they

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