Free-Flow Muffler Co. v. Kliewer, FREE-FLOW

Decision Date22 September 1955
Docket NumberNo. 6805,FREE-FLOW,6805
Citation283 S.W.2d 778
PartiesMUFFLER COMPANY, Appellant, v. E. A. KLIEWER, Sr., Appellee.
CourtTexas Court of Appeals

Smead & Harbour, William Hurwitz, Longview, for appellant.

Earl Roberts, Longview, Blalock, Clower, Lohman & Kliewer, Dallas, for appellee.

DAVIS, Justice.

Appellee, E. A. Kliewer, Sr., hereinafter referred to as Kliewer, filed suit against Free-Flow Muffler Company, a Texas corporation hereinafter referred to as the Corporation, for royalties alleged to have accrued under a license issued by Kliewer to the Corporation upon a patent for an improved type muffler for automobile, truck, bus and combustion engines. During the pendency of the suit, the Corporation was dissolved, and by amended pleading Kliewer sued the Corporation in dissolution and Tom Cook, L. C. Hoffman and Faye Myers, a feme sole, each individually and as trustees of the affairs of the Corporation in dissolution. Kliewer alleged a contract between himself and the Corporation dated July 30, 1947. The evidence shows the final certificate of dissolution of the Corporation was issued some time in March 1951.

Prior to the execution of the contract dated July 30, 1947, appellee had been issued patent No. 2,392,989, dated January 15, 1946, for the improved type muffler. On June 14, 1946, Kliewer, Tom Cook and L. C. Hoffman agreed to and did form a corporation for the manufacture of mufflers under the letters patent and improvement patent to be known as 'Free-Flow Mufflers' and a charter was issued on June 20, 1946. Capital stock of the Corporation was pledged at $9,000, and a contract was entered into, January 10, 1947, whereby Kliewer contributed his letters patent for a consideration of $3,000 of stock in the Corporation. This contract did not provide for the payment of royalty to Kliewer. The consideration to him was one-third of the profits of the Corporation. The manufacture of mufflers was commenced some time in 1946. When the contract dated July 30, 1947 was entered into, Kliewer was paid $3,000 in cash for his stock in the Corporation, and the contract (license agreement) provided for a royalty of 25cents on each muffler sold. After July 30, 1947, the Corporation commenced the manufacture of mufflers under the license agreement, and, according to the findings of fact of the trial court, continued until or shortly prior to the date of dissolution of the Corporation.

The pertinent parts of the contract involved in this suit are as follows:

'License Agreement.

'This Agreement, executed by and between E. A. Kliewer, Sr., of Gregg County, Texas, herein called Licensor, and Free-Flow Muffler Company, a Texas corporation having its principal place of business in Gregg County, Texas, herein called Licensee:

Witnesseth:

'Whereas, Licensor is the sole owner of Letters Patent of the United States of America, No. 2,392,989, dated January 15, 1946, for an improved type muffler for automobile, truck, bus and combustion engines; and

'Whereas, heretofore, on the 10th day of January 1947, Licensor, one of the incorporators of Licensee, executed and delivered to Licensee an exclusive License to manufacture and sell mufflers manufactured pursuant to the above described Letters Patent, in consideration for which Licensor received, and is the owner of 300 shares of common capital stock of Licensee; and

'Whereas, it is the desire of Licensee to enter into a license agreement with Licensor which shall be substituted for and in lieu of the License Agreement dated January 10, 1947, and to purchase from Licensor the 300 shares of the common capital stock of Licensee owned by Licensor;

'Now, Therefore, the parties have agreed as follows:

'1. Licensor does hereby grant to Licensee for the period of the life of the above described Letters Patent No. 2,392,989, the sole and exclusive license to manufacture and sell mufflers manufactured under said Letters Patent, together with the sole and exclusive license to manufacture and sell mufflers manufactured under any improvement patent issued to, or improvement application for patent filed by Licensor. Licensee shall be entitled to the benefit of any research which Licensor may choose to conduct incident to the improvement of the muffler, and any research shall become the property of Licensee.

'2. Licensee shall pay to Licensor a royalty of twenty-five cents ($0.25) on each and every muffler which Licensee sells or causes to be sold.

'7. In event of the breach by Licensee of any of the covenants contained in this agreement, and if such breach not be corrected and remedied within sixty (60) days after it occurs, Licensor shall have the right, at his election, to terminate the license herein granted, in which event this agreement shall thereafter be of no further force or effect and the rights herein granted to Licensee shall revert to and become the property of Licensor. If Licensee shall voluntarily discontinue the manufacture and sale of mufflers for a period of sixty (60) consecutive days, the license herein granted shall terminate and all rights hereunder shall revert to and become the property of Licensor.

'9. Licensee shall not assign this license or any part thereof without the written consent of Licensor.

'10. For and in consideration of the sum of three thousand ($3,000) dollars, the receipt of which is hereby acknowledged, Licensor does hereby sell, assign and transfer to Licensee three hundred (300) shares of the common capital stock of Licensee, being all of the common capital stock of Licensee owned by Licensor, and represented by Certificate No. 7, which has been duly transferred by Licensor to Licensee contemporaneously with the execution of this Agreement. As a further consideration for such transfer, Licensee expressly agrees to indemnify and save harmless Licensor from any and all debts, liabilities or causes of action held or owned by third persons and which may be asserted against licensee.

'11. This Agreement shall supersede and be in lieu of the said License Agreement dated January 10, 1947.'

On June 2, 1948, the Corporation executed and acknowledged a contract with Hancock Manufacturing Company, a corporation of Toronto, Ohio, hereinafter referred to as Hancock, and Hancock executed and acknowledged the same on September 29, 1948, wherein and whereby Hancock bound and obligated itself to manufacture and deliver to the Corporation for its exclusive use mufflers covered by Kliewer's letters patent, improvements thereon, developments and variations thereof.

On July 1, 1948, Kliewer executed an instrument giving his written consent for Hancock to manufacture such mufflers under said letters patent, together with all improvements thereon, developments and variations thereof, acquired by said Corporation.

On July 11, 1949, the Corporation caused a letter to be written by its attorney to Kliewer, which reads as follows:

'William Hurwitz

'Attorney at Law

'Suite 303 Bramlette Building

'Longview, Texas.

'July 11, 1949

'Mr. E. A. Kliewer, Sr.

'508 East North Street

'Longview, Texas

'Re: E. A. Kilewer-Free-Flow

'Muffler Company, Contract dated July 30, 1947-U. S. Letters Patent No. 2,392.989.

'Dear Mr. Kliewer:

'The Free-Flow Muffler Company has requested me to advise you that is has discontinued the manufacture and sale of mufflers under the above referred to Contract and Letters Patent for a period in excess of 60 consecutive days, and that it will no longer manufacture and sell mufflers covered by said Contract and Letters Patent.

'In accordance with the terms of the above referred to agreement the same has been terminated and you may use this letter as a release to you of the license granted by such agreement to the Free-Flow Muffler Company.

'Yours truly,

'/s/ Wm. Hurwitz

'Wm. Hurwitz.

'WH/f

'CC: Mr. E. A. Kliewer, Jr.

'c/o Blalock, Blalock, Lohman and Blalock.

'Gulf Building

'Houston, Texas

'Mr. Tom Cook, President

'Free-Flow Muffler Company

'Longview, Texas.'

There is no evidence that the letters patent were ever returned, or offered to be returned to Kliewer. By the letter, the Corporation attempted to repudiate the contract. Suit followed and trial was to the court who made extensive findings of fact and conclusions of law, and although doing so lengthens this opinion, we think it advisable to copy them at length herein. The reason for copying these findings of fact and conclusions of law is that they are so clear and concise in every detail and are decisive of this case. Omitting the captions and signature, they are as follows:

'Findings of Fact.

'1. Plaintiff, Kliewer, the owner of U. S. Patent No. 2,392,989, dated January 15, 1946, for a muffler, and defendants, Tom Cook and L. C. Hoffman, organized the defendant, Free-Flow Muffler Company, a Texas corporation (herein called Corporation) on June 20, 1946, for the purpose of manufacturing and selling mufflers pursuant to such patent and improvements thereon. The corporation had a capitalization of $9,000.00, owned equally by Kliewer, Cook and Hoffman. Cook and Hoffman paid for their stock in cash. Kliewer paid for his stock by executing to the Corporation an exclusive license to manufacture mufflers, dated January 10, 1947 (Defendants' Ex. 3).

'2. Thereafter, by consent of Kliewer, Cook and Hoffman, the plaintiff, Kliewer, and the defendant, Free-Flow Muffler Company, executed and entered into the agreement dated July 30, 1947, which forms the subject matter of this lawsuit (Plaintiff's Ex. 1).

'3. Continuously from January 10, 1947, to March, 1951, the date of dissolution of defendant, Free-Flow Muffler Company, said defendant manufactured and sold mufflers or caused mufflers to be manufactured and sold for its account.

'4. During the period beginning January 10, 1947, and ending more than sixty (60) days prior to June 11, 1949, the design of the muffler being manufactured and sold was, from time to time, altered. The record...

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5 cases
  • Lawler v. Aramco, Inc.
    • United States
    • Texas Court of Appeals
    • September 18, 1969
    ...constitutes a waiver of the defense. Mabry v. Priester, 161 Tex. 173, 338 S.W.2d 704 (1960); Free-Flow Muffler Co., v. Kliewer, 283 S.W.2d 778 (Tex.Civ.App.,--Texarkana, 1955, error ref., n.r.e.). Where the contract used on shows illegality on its face, an affirmative pleading to that effec......
  • Texas Rubber Supply, Inc. v. Jetslide Intern., Inc.
    • United States
    • Texas Court of Appeals
    • July 29, 1971
    ...the question of illegality of contract was a matter for affirmative pleading under Rule 94. Free-Flow Muffler Co. v. Kliewer, 283 S.W.2d 778 (Tex.Civ.App., Texarkana, 1955, ref., n.r.e.). The contract is not illegal on its face as it is subject to two interpretations, one of which, that urg......
  • VanHuss v. Buchanan
    • United States
    • Texas Court of Appeals
    • April 5, 1974
    ...that must be pleaded. If illegality is not affirmatively pleaded as a defense, it is waived. Free-Flow Muffler Company v. Kliewer, 283 S.W.2d 778 (Texarkana, Tex.Civ.App., 1955, ref. n.r.e.); Chapman v. Tyler Bank & Trust Company, 396 S.W.2d 143 (Tyler Tex.Civ.App., 1965, ref., n.r.e.); and......
  • After Hours, Inc. v. Sherrard
    • United States
    • Texas Court of Appeals
    • June 10, 1970
    ...Amarillo, 1925, writ dism'd). In support of their counterpoint, Appellees have cited us to Free-Flow Muffler Company v. Kliewer, 283 S.W.2d 778 (Tex.Civ.App., Texarkana, 1955, writ ref'd, n.r.e.) where the Court made the statement that illegality was an affirmative defense and must be plead......
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