Cinaudagraph Corp. v. Cornwell

• Decision Date: 16 July 1942
• Citation: 27 A.2d 375
• Court: Connecticut Supreme Court
• Parties: CINAUDAGRAPH CORPORATION v. CORNWELL.

27 A.2d 375

CINAUDAGRAPH CORPORATION

v. CORNWELL.

Supreme Court of Errors of Connecticut.

July 16, 1942.

Appeal from Superior Court, Fairfield County; Inglis, Judge.

Action for reformation of a contract and for other relief by the Cinaudagraph Corporation against Lionel B. Cornwell, wherein the defendant filed a cross-complaint. The case was referred to a state referee, the Hon. John W. Banks. The court accepted the referee's report and rendered judgment for plaintiff on the complaint and cross-complaint, and the defendant appeals.

No error.

Before MALTBIE, C. J., and AVERY, JENNINGS, ELLS, and DICKENSON, JJ.

Stanley P. Mead, of Stamford, and Frederick H. Sanborn, of New York City, for appellant.

Joseph L. Melvin, of Stamford, for appellee.

MALTBIE, Chief Justice.

The plaintiff brought this action to secure the reformation of a contract between it and the defendant. The case was referred to a state referee, and from the acceptance of his report and judgment thereon in favor of the plaintiff the defendant has appealed. The report states the following basic facts: The plaintiff is a corporation engaged in the business of manufacturing patented articles. Prior to May 27, 1935, the defendant had been engaged in building loud-speakers and had an application for a patent upon a loud-speaker pending in the Patent Office. On the date mentioned, the parties entered into a preliminary arrangement for the manufacture of these articles (exhibit 1) and also signed an agreement for the employment of the defendant as consulting engineer upon a part-time basis for the period of one year.

On September 26, 1935, the parties entered into a further agreement (exhibit A) with reference to the manufacture of loudspeakers under the defendant's application for a patent which in terms canceled exhibit 1. Under this agreement the plaintiff was given the exclusive right to manufacture or to license others to manufacture under this patent and all additions and improvements to it, and the defendant was to receive substantial royalties; the plaintiff, if it deemed it inadvisable to continue manufacturing the articles, could terminate the contract on ninety days' notice. On March 26, 1936, the parties executed a new agreement (exhibit B) which in terms canceled exhibit A and changed the provisions as to royalty payments to be made to the defendant. On June 8, 1936, the parties executed a new employment agreement (exhibit 3) upon a permanent full-time basis with a provision that it might be terminated by either party upon two weeks' notice. Under this agreement the defendant agreed to assign to the plaintiff all inventions he made or had made while in its employment, with the exception of the patent covered in exhibit B, and he was to receive a salary of $96.15 a week, one-half of which was deemed to be "payment for inventions, processes, etc." On July 1, 1937, the defendant assigned to the plaintiff a patent which had been issued to him subsequent to that referred to in exhibit B and in which eighteen of the twenty claims were taken from the earlier patent.

The manufacture of loud-speakers was not a financial success and from the beginning the plaintiff suffered substantial losses. The defendant voluntarily agreed in writing to the postponement of the payment of most of the royalties due him under his contracts. The officers of the plaintiff and the defendant discussed this situation and as a result a new agreement (exhibit C) was entered into on February 24, 1938. This agreement, which purported to cancel the agreement of September 26, 1935, provided for the payment to the defendant of $1,200 in cash in full settlement of all claims under that agreement. The exclusive license to use the first patent given to the plaintiff was to continue during the life of the patent provided the defendant continued in the plaintiff's employ, and, should he leave, the plaintiff would retain, for itself and its assignee, the right to manufacture, sell and use the products covered by the patent. Exhibit 3 was to remain in force but the exception in it of the patent referred to in exhibit B was stricken out. If the plaintiff went into bankruptcy, all its rights under the patent would revert to the defendant. The agreement provided for no further royalties to be paid the defendant. The cash payment was made. The agreement which the parties intended to cancel was the agreement dated March 26, 1936. By mistake of the scrivener the agreement canceled was described as that of September 26, 1935, which had already been canceled by the agreement of March 26, 1936. The referee found that in order to express the true intention of the parties the dates in exhibit C should be changed accordingly.

The manufacture of loud-speakers at a loss was continued by the plaintiff until December, 1939, when it ceased and the plaintiff discharged the defendant. The continued operations of the plaintiff were in reliance upon its belief that exhibit C freed it of any obligations to pay the defendant any royalties. The defendant at no time after the execution of exhibit C, and while he remained in the employ of the plaintiff, requested the plaintiff to pay him any royalties or notified it that he expected it to carry out any of the provisions of exhibit B. Except for the $1,200 paid under exhibit C, the plaintiff has paid the defendant no royalties since March 26, 1936, when it paid him $250, the minimum royalty due him on that date.

The defendant filed a remonstrance in two parts. In this he did not ask to have any of these findings stricken out. In the first part he sought to have many facts added to the report as admitted or undisputed. In the second part he stated that the report did not contain all the facts necessary to enable him to present his claims or the court to render judgment, the facts referred to being those stated...