Carding Specialists (Canada), Ltd. v. Gunter & Cooke, Inc., 7514SC24

Decision Date07 May 1975
Docket NumberNo. 7514SC24,7514SC24
Citation214 S.E.2d 233,25 N.C.App. 491
CourtNorth Carolina Court of Appeals
PartiesCARDING SPECIALISTS (CANADA), LTD., and Crosrol Carding Development, Inc. v. GUNTER & COOKE, INC.

Smith, Moore, Smith, Schell & Hunter by Beverly C. Moore and H. Miles Foy, III, Greensboro, for plaintiffs-appellees.

Nye, Mitchell & Bugg by R. Roy Mitchell, Jr., Durham, and Richards, Shefte & Pinckney, P.A. by Channing L. Richards, Charlotte, for defendant-appellant.

MORRIS, Judge.

This appeal presents two related questions. The first is: In an action to recover under a contract entered into between plaintiffs and defendant, the purpose of which was to settle all claims of plaintiffs for patent infringement against defendant, may defendant validly raise the defenses that the patent infringed was not valid or was not actually infringed? The second question is necessarily answered when the first question is answered. It is: May the defendant assert a counterclaim for royalties it has actually paid under the compromise agreement on the ground that the patent which is the subject of the agreement upon which suit is brought is invalid or was not actually infringed?

At the time the parties entered into the 1968 agreement compromising the alleged liability of defendant for patent infringement, claims 1, 2 and 3 of the underlying Patent No. 3,003,195 had been declared invalid by the United States District Court for the Middle District of Georgia. See Carding Specialists (Canada) Limited v. Lummus Cotton Gin Company, 234 F.Supp. 444 (D.C.Ga.1964).

North Carolina has long recognized and adhered to the logic of the legal principle that where a party knowingly accepts consideration in full settlement of a disputed claim, the compromise agreement is valid, binding, and conclusive and will not be set aside or disturbed for mistakes of law. 2 Strong, N.C. Index 2d, Compromise and Settlement, § 1, p. 160; Keith v. Glenn, 262 N.C. 284, 136 S.E.2d 665 (1964), and cases there cited; McGill v. Freight, 245 N.C. 469, 96 S.E.2d 438 (1957); Penn. Dixie Lines v. Grannick, 238 N.C. 552, 78 S.E.2d 410 (1953); Askew's, Inc. v. Cherry, 11 N.C.App. 369, 181 S.E.2d 201 (1971), where plaintiff sued on an open account and defendants denied the debt, pled an accord and satisfaction as an affirmative defense, and also filed a third party action against Red Carpet Inn to recover any amount obtained by Askew in its action against them. Red Carpet Inn answered and pled a settlement agreement between it and defendants, third party plaintiffs, setting out the agreement in its verified answer. Red Carpet then moved for summary judgment and filed a supporting affidavit setting out in detail payments made under the settlement. The court granted the motion for summary judgment finding that there was no genuine issue of material fact. We affirmed on appeal.

In Fisher v. Lumber Co., 183 N.C. 485, 111 S.E. 857 (1922), plaintiff brought an action for breach of contract for support. Plaintiff's evidence was that he was in the employ of defendant company at one of its lumber mills in 1908 and was a strong and vigorous young man. He received serious and permanent injury as the result of an accident in the course of his employment. After his hospitalization had ended, he was preparing to bring a suit when he was called to defendant's office by one of its foremen and was told that if he would not enter suit the company would give him employment for the rest of his life at some work he could perform in his crippled condition and pay him a living wage sufficient to support him and his family. Plaintiff agreed and continued in the employ of the company for some 12 years receiving wages adequate to support his family. However, by 1920, due to the rising cost of living, his wages were no longer adequate to keep his family from want. He had an interview with a company representative and reminded him of the agreement. The company refused to increase his wages and plaintiff was forced to seek employment elsewhere. The company denied negligence, pled the statute of limitations to bar recovery on that ground, denied the existence of an agreement and averred that if an agreement were made, it was made by one without authority to bind the company, was too vague to be enforceable and was without consideration. The jury found plaintiff was injured by defendant's negligence, that plaintiff was not contributorily negligent, that there was a contract between plaintiff and defendant, that defendant wrongfully breached it, that plaintiff did not waive it, that the cause of action was not barred by the statute of limitations, and awarded damages. On appeal the Supreme Court found no error, holding that the contract was by way of compromise and adjustment of a bona fide claim of plaintiff against the company and such an adjustment would furnish the consideration for the agreement regardless of whether the claim was well grounded. The Court said:

"It is well settled that the law favors compromises, when made in good faith, whereby disputed claims are settled, and especially is this true when related to family controversies; and a promise, when thus made, in extinguishment of a doubtful claim, furnishes sufficient consideration to support a valid contract. While it is not necessary that the contention which forms the basis of such a compromise shall be meritorious in order to support the promise, yet it is essential in order to furnish a consideration therefor that the contention be made in good faith and be honestly believed in." Fisher v. Lumber Co., supra, at p. 525, 111 S.E. at p. 859, citing Dickerson v. Dickerson, 19 Ga.App. 269, 91 S.E. 346.

There is no question that a bona fide dispute existed between plaintiffs and defendant over patent validity and infringement of the patent prior to 23 February 1968. The agreement is, therefore, binding on the parties thereto. Defendant, by entering the agreement, compromised any dispute it had with plaintiffs with respect to past infringement, patent validity, and enforcement and gave up its right to take those matters to court. Neither plaintiffs in this action claim any rights against defendant on the basis of the separate licensing agreement allegedly entered into by the parties.

We conclude that unless the federal patent policy prevails over the general policy of this State favoring the settlement of disputes, the judgment of the trial court should be affirmed. We are of the opinion that no federal policy exists which requires a reversal.

Defendant urges that the principles enunciated in Lear v. Adkins, 395 U.S. 653, 89 S.Ct. 1902, 23 L.Ed.2d 610 (1969), holding unsatisfied license obligations could not be enforced if it were shown that the licensed patent was invalid, and Blonder-Tongue Labs. v. University Foundation, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1971), holding that a patentee whose patent is held invalid in his suit against one alleged infringer may be precluded under the doctrine of collateral estoppel, from asserting the validity of the patent in suit against a different alleged infringer, should be applied to the case before us and that by doing so, it becomes apparent that the court erred in striking defendant's further answer and defense and dismissing the counterclaim. We do not agree.

In Ransburg Electro-Coating Corp. v. Spiller & Spiller, Inc., 489 F.2d 974 (7th Cir. 1973), there had been an agreement executed in settlement of a 1965 patent infringement suit brought by Ransburg against Spiller, and the suit was dismissed. Under the agreement Spiller was to pay Ransburg $70,000 in 60 monthly installments as compensation for infringement of certain specified Ransburg patents. There was a separate agreement between the parties with respect to future licensing of Spiller's use of certain equipment involved in the dispute. Spiller paid Ransburg for 1966, 1967 and the first half of 1968 at which time the Fourth Circuit reversed the Maryland District Court and held that the equipment involved in the dispute between Ransburg and Spiller did not infringe Ransburg's patents. Very shortly thereafter, Spiller notified Ransburg that it would make no further payments under the settlement agreement. Ransburg brought suit to collect the balance due, but did not seek to enforce the licensing agreement. Spiller counterclaimed for all amounts paid under the settlement agreement. The district court by way of summary judgment, denied Spiller's counterclaim. On appeal, that judgment was affirmed. Chief Judge Swygert noted that the district court judge had found support in Lear and Blonder-Tongue for concluding that Spiller should not prevail on his counterclaim. The district court judge had written:

'The remaining issue as between Ransburg and...

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  • North Carolina Baptist Hospitals, Inc. v. Mitchell
    • United States
    • North Carolina Supreme Court
    • December 8, 1988
    ...this state favoring settlements of claims. See Fisher v. Lumber Co., 183 N.C. 485, 111 S.E. 857 (1922); Carding Specialists v. Gunter and Cooke, 25 N.C.App. 491, 214 S.E.2d 233 (1975). An injured party's right to actually take a share of settlement proceeds from a third party who receives t......
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    ...upon discovery of facts which would constitute a complete defense to the dispute settled. See Carding Specialists v. Gunter & Cooke, 25 N.C.App. 491, 495, 214 S.E.2d 233, 236 (1975) (agreement settling claim for patent infringement binding despite a court's decision that patent invalid wher......

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