Martin Stamping & Stove Co. v. Manley

• Decision Date: 17 December 1953
• Docket Number: 8 Div. 676
• Citation: 260 Ala. 112,69 So.2d 671
• Parties: MARTIN STAMPING & STOVE CO., Inc., et al. v. MANLEY.
• Court: Alabama Supreme Court

Page 671

69 So.2d 671

260 Ala. 112

MARTIN STAMPING & STOVE CO., Inc., et al. v. MANLEY.

8 Div. 676.

Supreme Court of Alabama.

Dec. 17, 1953.

John C. Martin, Tuscumbia, for appellants.

Watts & Salmon, Huntsville, for appellee. The agreement involved recites that Application No. 14,434 has been filed for Letters Patent from the United States Patent Office on an article to be used as metal awnings or shades by Hugh M. Manley, and that Martin Stamping & Stove Company, Inc., is desirous of manufacturing metal awnings and shades containing said patented improvements and selling same to retail chain stores and retail mail order houses which distribute this class of merchandise, which said chain stores have thirty or more stores, and not otherwise. It is then agreed as follows:

'1. Hugh M. Manley, for and in consideration of One ($1.00) Dollar in hand paid, receipt whereof is hereby acknowledged, and in consideration of the royalty payments hereinafter set forth, hereby grants unto the Martin Stamping & Stove Company, Inc., full authority and license to manufacture metal awnings and shades containing said patented improvements, which patented improvements have been or may be procured by Hugh M. Manley, and the exclusive right to sell the same within the United States of America to retail chain stores and retail mail order houses which have not less than thirty (30) stores operating in the United States, and handling the class of merchandise covered by this agreement.

'2. The Martin Stamping & Stove Company, Inc., shall pay to Hugh M. Manley, his heirs or assigns, ten per cent (10%) of the gross receipts of the articles manufactured and sold by said corporation under this agreement, the first payment to be made sixty (60) days from the date hereof, and ten per cent (10%) each sixty (60) days thereafter so long as this contract is in force and effect.

'3. The Martin Stamping & Stove Company, Inc., shall keep full and accurate accounts of all articles manufactured under this agreement, and a complete record of all sales of awnings and shades made hereunder, and each sixty (60) days, at the time of making payment of royalty on all articles manufactured and sold, shall deliver to the said Hugh M. Manley, his heirs or assigns, a complete statement of all awnings and shades manufactured and sold during the previous sixty (60) days, and to the date of making royalty payments.

'4. The Martin Stamping & Stove Company, Inc., agrees that Hugh M. Manley, his duly authorized agent, his heirs, or assigns, may at all reasonable times inspect the books and accounts of said corporation, relating to the manufacture and sale of awnings and shades under this agreement, and to take an inventory of all awnings and shades in stock, or on hand.'

Sections 5, 6 and 7 provide for the affixing of a plate or label to the manufactured articles showing patent status; for legal proceedings in event the patent be infringed; and for relief of Martin Company from payment of royalties on articles covered by the agreement, in event the patent be declared invalid, manufactured subsequent to judgment of invalidity.

Section 8 reads:

'8. If any royalties due and payable hereunder shall remain unpaid for sixty (60) days after the same become due, Hugh M. Manley, his heirs or assigns, may by written notice, terminate this agreement, and thereupon all rights of Martin Stamping & Stove Company, Inc., under this agreement to manufacture and sell, shall cease, but its liability for all unpaid royalties shall continue.'

Section 9 recites that a sample awning of the type covered by the agreement has been delivered to Martin Company, and that claims for patent filed by Manley under Application No. 14,434 are made a part of the agreement. Section 10 provides that if letters patent be finally refused to Manley, Martin Company may discharge its liability under the agreement by paying royalties on articles sold to date of such refusal of patent. Section 11 limits sale of articles manufactured under the agreement to the borders of the United States.

Other sections are:

'12. Beginning not later than one year from the date of signing this contract the Martin Stamping & Stove Company, Inc., agrees that it will produce a minimum of Two Thousand (2,000) awnings for that year and in subsequent years will produce a minimum of Five Thousand (5,000) awnings per year thereafter. These production figures will include the units produced for sale under this contract, or any other agreement between the parties, to be sold to others than those named in paragraph one (1) of this agreement, including sales to Hugh M. Manley, and associates. Failure to produce the above stipulated number of awnings due to fires, strikes, material shortages or other conditions beyond the control of said Martin Stamping & Stove Company, Inc., shall not be deemed sufficient cause for termination of this license. Nothing in this paragraph shall be interpreted or construed to allow penalty of the Martin Stamping and Stove Company, Inc., other than by the termination of the license for failure to comply with the conditions outlined.

'13. This contract shall run for a period of three (3) years from the date hereof, with an option on the part of Martin Stamping & Stove Company, Inc., to renew the same for three (3) years. In the event of renewal, the terms of renewal shall be the same, except that a minimum of Five Thousand (5,000) awnings or shades per year, shall be manufactured for the period covered by the renewal of this agreement.

'14. The said Hugh M. Manley shall have the right, at his option, in case of a breach of this agreement on the part of Martin Stamping & Stove Company, Inc., to declare this agreement terminated, upon written notice to that effect * * *.'

Section 15 provides that the license granted may not be assigned without the consent of Manley, and Section 16 reserves to Manley the right to manufacture and sell, or to license others to manufacture and sell metal awnings and shades to persons, firms or corporations not covered by the agreement.

LAWSON, Justice.

Hugh M. Manley, a resident of Madison County, Alabama, and Martin Stamping and Stove Company, Inc., an Alabama corporation, on April 7, 1948, entered into a written agreement, the material parts of which will be set out in the report of the case.

On August 1, 1949, the agreement of April 7, 1948, was amended in writing so as to reduce the royalties to which Hugh M. Manley was entitled from ten per cent to five per cent of the gross receipts of the articles manufactured and sold by Martin Stamping and Stove Company, Inc., under the provisions of the original agreement. When we hereafter refer to the written agreement we have reference to both the original agreement and the amendment thereto.

After the expiration of the period of time covered by the written agreement and on January 22, 1952, Hugh M. Manley filed his bill in the circuit court of Madison County, in equity, against Martin Stamping and Stove Company, a corporation, and against Frederick H. Martin, individually and as vice-president of Martin Stamping and Stove Company.

The written agreement of April 7, 1948, is made Exhibit A to the bill and the amendment of August 1, 1949, is made Exhibit B.

The case made by the bill is hereafter stated. We will summarize some of the averments of the bill and will also quote some of its provisions.

From April 7, 1948, until April 7, 1951, the period of time covered by the written agreement, Martin Stamping and Stove Company fully complied with the terms of the provisions of the said agreement, paying to Manley all royalties due him for metal shades and awnings manufactured and sold of the character or type covered by the said written agreement.

But shortly prior to April 7, 1951, the respondents notified Manley 'that after April 7, 1951, respondents would continue to manufacture such metal awnings and shades embodying the interlocking feature between panels, for which feature complainant's patent application was pending in the United States Patent Office, but that respondents would not pay complainant any royalties upon said metal shades and awnings which they would continue to manufacture and sell after said 7th day of April, 1951.'

Upon being so advised by the respondents, 'complainant served notice upon respondents that he had elected to treat said contract as amended, as renewed and/or extended and demanded performance of a said renewed and/or extended agreement for the additional term of three (3) years beginning on the 7th day of April, 1951.'

From April 7, 1951, until the date this bill was filed, 'the respondent did in truth and in fact continue to manufacture the aforesaid metal awnings and shades with said interlocking feature, and did in truth and in fact continue to sell said awnings and shades after April 7, 1951, but wrongfully failed and refused, on demand made by complainant, to pay him the royalties provided for under 'Exhibit A', as amended.'

Although the respondents continued to keep records as provided for in paragraph 3 of the written agreement, they failed and refused to deliver to complainant a complete statement of all awnings and shades manufactured and sold by them subsequent to April 7, 1951, and the respondents also 'failed and refused to allow complainant to inspect the books and accounts of said corporation relating to the manufacture and sale of said awnings and shades with the interlock feature between panels since the 7th day of April, 1951, notwithstanding complainant's demand,' although complainant was given that right by the provisions of paragraph 4 of the said written agreement.

It is further averred in the bill as follows:

'11. That complainant relied upon respondents complying with the provisions of Paragraphs 3 and 4 of said Exhibit to the bill, by keeping the records in said paragraphs agreed by respondents to be kept, and so relying, complainant failed to keep any...