Benedek v. Mech. Prods., Inc.

• Decision Date: 13 May 1946
• Docket Number: No. 55.,55.
• Citation: 314 Mich. 494,22 N.W.2d 901
• Parties: BENEDEK v. MECHANICAL PRODUCTS, Inc.
• Court: Michigan Supreme Court

314 Mich. 494

22 N.W.2d 901

BENEDEK

v.MECHANICAL PRODUCTS, Inc.

No. 55.

Supreme Court of Michigan.

May 13, 1946.

Appeal from Circuit Court, Jackson; Charles O. Arch, Judge.

Action to recover royalties and other damages under claimed oral agreement by Dr. Elek K. Benedek against the Mechanical Products, Inc., a corporation. From an order dismissing Count 1 of the declaration, the plaintiff appeals.

Order affirmed.

BUSHNELL, J., dissenting.

Before the Entire Bench.

George H. Curtis and Kleinstiver & Anderson, all of Jackson, for appellant.

Bisbee, McKone, Badgley & McInally, of Jackson, for appellee.

BOYLES, Justice.

The order dismissing count one of the declaration should be affirmed. In count one plaintiff declares on an oral agreement not to be performed within a year and relies on a casual reference to it in a letter to the Selective Service board, as being a sufficient memorandum to satisfy the statute of frauds. As stated by Mr. Justice Bushnell, this is the controlling question in the case. I hold that the memorandum is not sufficient.

There is no dispute but that the oral agreement was not to be performed within a year. This brings to bear 3 Comp.Laws 1929, § 13417, Stat.Ann. § 26.922,¹ the applicable part of which provides as follows:

‘In the following cases specified in this section, every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say:

‘1. Every agreement that, by its terms, is not to be performed in one (1) year from the making thereof; * * *.’

The memorandum on which plaintiff relies, is a statement in a letter signed by the defendant's president and sent to the Selective Service board, as follows: ‘Recently our company secured the exclusive manufacturing rights of a complete line of industrial and aeronautical high pressure hydraulic pumps from Dr. Elek K. Benedek, consulting engineer, who is a specialist in fluid pressure variable speed pumps and transmissions. Dr. Benedek's office and laboratory is located at 9243 South Oakley Ave., Chicago, Ill.’

If this statement does not sufficiently disclose the terms of the alleged agreement, plaintiff cannot recover under count one. In that event it matters not, for the purposes of this case, that the letter was sent to a third party, not a party in interest. Under the authority quoted by Mr. Justice Bushnell from 112 A.L.R. 491: ‘Letters, telegrams, or other written communications by a party to a contract to one who is not a party thereto, which sufficiently disclose the terms of the agreement and admit it or affirm it, are, according to the great weight of authority, valid memoranda thereof within the requirements of the statute of frauds.’

Does such statement in this letter ‘sufficiently disclose the terms of the agreement’ to satisfy the statute? Naturally, we look to plaintiff's allegations in count one, which under the circumstances of the case are accepted as true, to ascertain what are claimed to be the terms of the alleged agreement.

Count one alleges that plaintiff is an experienced engineer, that he was the inventor of various improvements in fluid pressure variable speed pumps and transmissions, pitch propeller hubs and accessories and had various patents in relation thereto; that the defendant had a manufacturing plant; that plaintiff on November 29, 1943, granted the defendant a licenseto manufacture and sell the aforesaid devices, that the defendant agreed to manufacture and sell said pumps and devices and to pay plaintiff certain royalties with a minimum annual royalty of $10,000 during the life of the patents; that at defendant's request plaintiff gave the defendant an option to purchase all of said patents and pending applications; that the defendant carried out its agreement for only about three months, breached its alleged agreement, wherefore plaintiff claimed $10,000 per year royalties and other damages amounting to $45,000.

The only ‘memorandum thereof’ relied on by plaintiff is the statement in defendant's letter to the Selective Service board that it (the defendant) had ‘recently * * * secured the exclusive manufacturing rights of a complete line of industrial and aeronautical high pressure hydraulic pumps' from the plaintiff. No mention is made in the memorandum of defendant's agreement to sell, to pay royalties, the option to purchase patent rights, the length of term of the alleged agreement, that it covered transmissions and hydraulic pitch propeller hubs and accessories as well as high pressure hydraulic pumps. The memorandum is silent as to all the essential terms of the alleged contract claimed by plaintiff in count one, on which plaintiff relies for recovery under that count.

The identical language now found in the statute of frauds above referred to, 3 Comp.Laws 1929, § 13417, Stat.Ann. § 26.933, has been in the statute law of this State since 1846 (Rev.Stat.1846, chap. 81, § 2).² It has remained unchanged in so far as it applies to this case. The court has frequently held that a memorandum such as relied upon by the plaintiff in this case is not sufficient to validate an oral agreement which would otherwise be void under the statute.

In Hall v. Soule, 1863, 11 Mich. 494, a letter relied upon as the memorandum in writing to validate an otherwise void promise to pay stated at page 496 of 11 Mich.: ‘I think on the whole that you will have to rely on my pledge already made, that as soon and fast as I can, I will see that $500 of the demand you hold against Harry is paid; beyond that I do not think myself under obligation.’

In holding that this letter was not a sufficient memorandum, the court said at page 496 of 11 Mich.: ‘It is entirely clear from the tenor of this letter that it does not undertake to set forth the terms or conditions of any previous contract, but refers to it as a matter understood.’

In Whipple v. Parker, 1874, 29 Mich. 369, the verbal agreement was one not to be performed within one year. The court held that the plaintiff, having fully performed his part, could recover under the common counts (which is not a question raised in the instant appeal). The court said at pages 373, 374 of 29 Mich.:

‘It has sometimes been said that if the unwritten contract was to be performed on one side within the year, especially if it were even in fact so performed, this takes the contract out of the statute as to both, though the other party was not to perform his part till after that period:-- Donellan v. Read, 3 Barn. & Adol., 899; and this has been followed by several cases, both in England and some of the United States, in which it seems to have been intimated that if the consideration was actually paid by one party, he might maintain an action upon the verbal contract or undertaking of the other party, though that was not to be performed till after the expiration of the year. But I confess my inability to see how the fact of the consideration having been paid down, or within the year, or yet to be paid, affects at all the question whether the defendant's undertaking, contract or promise sued upon, was to be performed within or after the year; or if only to be performed after the expiration of the year, how the action can be maintained against the ‘party charged thereby;’ or, under our statute, how the contract can be valid and the defendant be ‘charged therewith,’ unlessthat portion of the contract, at least, upon which his obligation arises, is in writing. To hold otherwise, would, it seems to me, be a direct and palpable violation of both the letter and purpose of the statute, and a clear disregard of the considerations and policy which led to its enactment. Nor can I see what bearing the question of consideration has upon this particular point, whether the action can be maintained upon the special contract itself.

‘But if the contract has been executed by the other party, and he has received the consideration, and accepted its benefit, an action may be maintained against him for the benefit thus conferred, the money, property or value thus accepted and appropriated by him; not, however, upon the contract, but upon the appropriate common counts in assumpsit, and upon the duty, promise or obligation springing from the property, money or benefit thus conferred by the plaintiff and received and appropriated by the defendant.

* * *

‘It is, I think, entirely clear, that as the contract, agreement or promise of the defendant on which he is sought to be charged, was not to be performed till the expiration of the three years, it was void by our statute of frauds, and no action can be maintained upon it.’

In Palmer v. Marquette & Pacific Rolling Mill Co., 1875, 32 Mich. 274, plaintiff counted upon an oral contract not to be performed within a year and to validate the same relied upon a telegram from the defendants as follows at page 275, of 32 Mich.:

‘To Dwight Palmer: You may come on at once at salary of two thousand, conditional only upon satisfactory discharge of business.

‘(Signed) H. A. Burt, Agent.’ The court said at page 275 of 32 Mich.: ‘It was this telegram, with the previous negotiations, that the plaintiff relied upon to make out the contract.

‘As he had counted upon a contract not to be performed within a year from the time it was made, it was incumbent on the plaintiff to show that the contract, or a memorandum thereof, was reduced to writing and signed by or on behalf of the defendants. And a memorandum, when the contract is not written out, must embrace all its substantial terms (except the consideration.-Comp.L. § 4702), and cannot be aided by parol evidence when essentially defective.-Hall v. Soule, 11 Mich. 494; Abell v. Munson, 18 Mich. 306 . It is impossible to say that the telegram contains all the essential terms of a contract.’

In Fuller v. Rice, 1884, 52 Mich. 435, 18 N.W....