Conry v. McLean

• Decision Date: 07 February 1925
• Docket Number: 25,080
• Citation: 232 P. 1030,117 Kan. 595
• Parties: JESSE CONRY, Appellee, v. B. F. MCLEAN, as Administrator, etc., of the Estate of T. J. HOLDRIDGE, deceased; THE FIDELITY NATIONAL BANK AND TRUST COMPANY, of Kansas City, as Executor of the Estate of FRED D. LARABEE, deceased; THE PRUDENTIAL TRUST COMPANY, of Topeka, as Executor of the Estate of FRANK S. LARABEE, deceased; And CLARA F. HOLDRIDGE, as Administratrix of the Estate of T. J. HOLDRIDGE, JR., deceased, Appellants
• Court: Kansas Supreme Court

232 P. 1030

117 Kan. 595

JESSE CONRY, Appellee, v. B. F. MCLEAN, as Administrator, etc., of the Estate of T. J. HOLDRIDGE, deceased;

THE FIDELITY NATIONAL BANK AND TRUST COMPANY, of Kansas City, as Executor of the Estate of FRED D. LARABEE, deceased; THE PRUDENTIAL TRUST COMPANY, of Topeka, as Executor of the Estate of FRANK S. LARABEE, deceased; And CLARA F. HOLDRIDGE, as Administratrix of the Estate of T. J. HOLDRIDGE, JR., deceased, Appellants

No. 25,080

Supreme Court of Kansas

February 7, 1925

Decided January, 1925

Appeal from Sedgwick district court, division No. 3, JESSE. D. WALL judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

CONTRACT--Secret Process of Manufacturing Gasoline--Error of Trial Court--Evidence--Instructions--Special Findings. The proceedings considered in an action to recover the price contracted to be paid on acceptance after demonstration of a secret process for manufacture of gasoline, and held, the court erred in respect to exclusion of evidence, admission of evidence, instructions given the jury, and approval of special findings of the jury.

Justin D. Bowersock, Robert B. Frizzell and Guy Vernon Head, all of Kansas City, Mo., for appellant The Fidelity National Bank and Trust Company; Robert Stone, George T. McDermott, Robert L. Webb, and Beryl R. Johnson, all of Topeka, for appellant The Prudential Trust Company; T. A. Noftzger, Benj. F. Hegler, George W. Cox, all of Wichita, for appellant Clara F. Holdridge.

Chester I. Long, Austin M. Cowan, Claude I. Depew, Thomas C. Wilson, Henry Lampl, all of Wichita, John H. Atwood, and John Hyde, both of Kansas City, Mo., for the appellee.

OPINION

BURCH, J.:

The action was one to recover the price stated in a contract proposing sale of a secret process for manufacture of gasoline. Plaintiff prevailed, and defendants appeal.

The contract was signed on August 26, 1918, by plaintiff, Jesse Conry, owner of the process, who for convenience may be called seller, and by Frank S. Larabee, Fred D. Larabee, T. J. Holdridge, Sr., and T. J. Holdridge, Jr., who for convenience may be called buyers. The contract provided for enlarging and improving an experimenting and demonstrating plant already in existence, at a cost not to exceed $ 500, to be paid by the buyers; for a fifteen-day test run, at buyers' expense, but under seller's supervision, to demonstrate practicability of the process for profitable manufacture of gasoline; for acceptance or rejection of the process by buyers at the end of the test run; for payment of $ 57,500 to seller by buyers in case of acceptance; and for nonrevelation of the secret process by buyers in case of rejection. A copy of the contract is appended to this opinion.

The experimenting plant was put in readiness, and a test was made on September 13, 14 and 15, 1918, but neither acceptance nor rejection of the process was announced by buyers. On October 4, 1918, Holdridge, Sr., died. On October 16, 1918, the surviving buyers assigned their interest in the contract to F. L. Slaughter. Early in November, 1918, H. J. Wilson became interested with Slaughter and negotiated with the seller for the process. Wilson testified that, after tests at the experimenting plant during a period of about five weeks, the seller being present part of the time, Wilson dropped negotiations.

Between November 4, 1918, and May 24, 1921, the seller wrote letters to the Larabees and to J. C. Pixley, which disclose the following facts: The seller did not consider that the buyers had accepted the process pursuant to the contract of August 26, 1918, and the test run, but he claimed to be owner of the process, with absolute dominion over it, including right to permit others to use it, and right to prosecute Slaughter and Wilson should they use it. The seller considered he had right of dominion over the experimental plant, was apprehensive that one J. L. McCabe, who will be identified later, was scheming to "freeze him out"; spent several weeks previous to January, 1919, trying to make the plant serviceable; went to the plant, which was located in Independence, in January, 1919, with the intention of moving it to Olathe; and in April, 1919, was willing to make J. C. Pixley an attractive offer to run the plant for the seller, if Pixley would help clear the title. (Mechanics' liens for improvement of the plant had been filed, which were subsequently foreclosed.) As early as November, 1918, the seller had information relating to the Larabees wanting to dispose of the contract and being induced to get out. The seller believed the Larabees had been misinformed, and added to a letter written at Independence and dated November 5, the following significant statement:

"We can make 60 B product now any day on a steam still just installed. No loss in volume (gallons)."

About two weeks before November 21, 1918, the seller considered giving a new option to Holdridge, Jr., Wilson and Slaughter, and he testified that at that time Wilson told him Wilson, Holdridge, Jr., and Slaughter were buying the Larabees out. On November 21, 1918, the seller proposed to the Larabees that they join him in putting in a gasoline plant in a certain natural gas field, and as an inducement suggested that he might allow the Larabees to use the process somewhere independently of him. On April 5, 1920, Fred D. Larabee died. On May 15, 1921, Holdridge, Jr., died. On May 24, 1921, the seller wrote Frank S. Larabee, sole surviving buyer, stating the seller had a gasoline plant, with a capacity of from 2,000 to 4,000 gallons per day, in operation; that he wanted to sell a controlling interest for $ 8,000, and asking if Larabee would be interested. On June 8, 1921, Frank S. Larabee died. On February 23, 1922, the seller sued the personal representatives of the deceased purchasers for the purchase price of the process.

Seller and buyers were brought together for negotiation of the contract by J. L. McCabe. He testified he acted at solicitation of the Larabees. In October, 1917, the seller gave McCabe a contract for use of the process in three states. McCabe testified he took the contract in his own name at the suggestion of Fred D. Larabee. In November, 1917, McCabe transferred his rights under the three-states contract to Holdridge, Jr. The latter contract was modified by a contract dated August 25, 1918. The assignment to Slaughter covered the three-states contract, as well as the contract of August 26, 1918, forming the basis of the suit. The operative portion of the assignment to Slaughter reads as follows:

"Now, therefore the parties of the first part hereby agree for valuable consideration, receipt whereof is hereby acknowledged, that if the party of the second part shall pay to them within twenty (20) days from this date the sum of three thousand dollars ($ 3,000) cash in hand, they will deliver to the party of the second part the said contracts above mentioned and described, and duly assign to the party of the second part or any other person he may designate."

The petition alleged that the buyers accepted the process on or about October 16, 1918, the day the then-surviving buyers assigned the contract to Slaughter. In reply plaintiff pleaded that the buyers were estopped to deny they took over the process and assumed and exercised dominion over the process, because of the assignment to Slaughter. There was a jury trial, and a verdict for plaintiff for the contract price of the process, with interest, against all defendants except the personal representative of Holdridge, Sr., who was relieved from liability by a peremptory instruction.

To sustain the issue of acceptance of the process under the terms of the contract, plaintiff produced as a witness Albert C. Lyon, a chemist and chemical engineer of Kansas City, Mo whose business was conducting laboratories and making tests. He testified that on August 24, 1918, two days before the contract was signed, Fred D. Larabee brought to his office a bottle of what Larabee called synthetic oil, to be tested. Larabee said that Conry had submitted to him a proposition relating to production of synthetic oil by a process which Larabee described to Lyon. Negotiations which resulted in the contract were then pending. Lyon tested the contents of the bottle and made a written report, giving the chemical analysis, and stating that by distilling the product a fair grade of gasoline could be obtained, and by adding casing-head gas the proposition would be promising. This report was admitted in evidence over objection of defendants that the character of the oil analyzed, whether good or bad, and the character of the Conry process, whether good or bad, were immaterial to the issues. Lyon said his report was delivered to the two Larabees, and they asked him for an explanation in detail. He gave such an explanation, which he repeated on the witness stand. He testified he knew the Larabees had casing-head gas plants in Oklahoma, and this would make an A-1 gasoline. As a result of this conference the Larabees engaged him to go to the experimenting plant at Independence to be present when the contemplated demonstration took place, which he did. On September 17, 1918, he made a written report of the demonstration, and the report was introduced in evidence. The conclusion of the report was embraced under the heading, "Remarks and Opinion." Afterward Fred D. Larabee asked for an opinion with reference to commercializing the product, and on September 26 Lyon wrote him fully, showing that a profit could be made of $ 600 per day for 300 working days of the year, or $ 180,000 per year. Subsequently Fred D. Larabee interrogated Lyon further about the cost and yield, and gave Lyon his idea of how to handle the process--form companies at...