Brick v. Cohn-Hall-Marx Co.

• Decision Date: 07 December 1937
• Parties: BRICK et al. v. COHN-HALL-MARX CO.
• Court: New York Court of Appeals Court of Appeals

276 N.Y. 259

11 N.E.2d 902

BRICK et al.

v.COHN-HALL-MARX CO.

Court of Appeals of New York.

Dec. 7, 1937.

Action by George H. Brick and another, doing business under the firm name and style of Brick & Ballerstein, against the Cohn-Hall-Marx Company. From a judgment of the Appellate Division (251 App.Div. 300, 296 N.Y.S. 342), reversing on the law a judgment of the Special Term dismissing the complaint, defendant appeals.

Order of the Appellate Division reversed, and judgment of the Special Term affirmed. Appeal from Supreme Court, Appellate Division, First Department.

Milton C. Weisman and Melvin A. Albert, both of New York City, for appellant.

Eugene L. Bondy and Norman Winer, both of New York City, for respondents.

CRANE, Chief Judge.

On the 13th of May, 1924, the plaintiffs and the defendant entered into a contract regarding royalties to be paid upon the use of a certain package for marketing bolts of cloth. Both parties claimed patent rights, and the agreement was made to permit the use of the package pending patent litigation. The agreement provided for payment as follows:

‘First. The first party agrees to pay to the second party 7 1/2¢ per package for each package of bolted cotton or other goods described in said application sold or otherwise disposed of by said corporation, and 7 1/2¢ per package for each package sold or otherwise disposed of by any of its allied and/or subsidiary firms or corporations, and one-half of all sums of money received from all persons, firms and corporations to whom or to which licenses shall be granted to use such invention, and first party agrees to pay to the second party said amount, but it is agreed that the said one-half of the receipts to be paid to the second party by the first party shall not be less than 7 1/2¢ per package for each package used. * * *

‘Third. The first party agrees to keep accurate books and records showing clearly the number of said packages which shall be sold or otherwise disposed of by the first party and its allied and/or subsidiary corporations or businesses, which books shall be open to the inspection of the second party and their accountants, and the first party further agrees to render to the second party every three months, when payments shall be made as aforesaid, verified statements showing the number of packages sold or disposed of by it and/or by its affiliated and/or allied corporations and businesses during said period.

‘The first party further agrees to exhibit to the second party all contracts made by the first party for the use by others of said package and all licenses which shall be granted by it, and shall also render verified statements each three months showing the sums of money received by it for said manufacture and/or use of said package during said period, and shall also at the time of making payments as hereinbefore provided pay to the second party the sums due to the second party by reason of any and all licensing agreements relating to said package.

‘Fourth. The first party further agrees to use the said package for the purpose of merchandising and marketing its bolted cotton goods so long as there is in its opinion a reasonable market therefor.’

On December 28, 1925, this agreement was modified in an unimportant detail.

The plaintiffs in this action sue the defendant for moneys due on this contract since April of 1929, claiming that the defendant kept false books, rendered false statements, and made sales for which it did not account. The complaint alleges that the plaintiffs became entitled to receive under the contracts aforesaid, in addition to royalties actually received, royalties on at least 232,402 packages, to wit, the sum of at least $17,430.15.

As this action was not commenced within the six-year statute of limitations, the plaintiffs have brought action as in fraud, alleging that the books of the defendant contained false and fraudulent entries and that the defendant falsely and fraudulently represented to the plaintiffs that it had fairly and justly paid all that was due under the contract and had accounted for all the sales that were made, and that the plaintiffs did not discover the falsity of these facts until February of 1936. The claim is that the statute of limitations does not begin to run upon this claim of fraud until the fraud has been discovered. Section 48 of the Civil Practice Act reads:

‘The...