Mitchell Novelty Co. v. United Mfg. Co., 10599.

• Decision Date: 14 November 1952
• Docket Number: No. 10599.,10599.
• Parties: MITCHELL NOVELTY CO. v. UNITED MFG. CO.
• Court: U.S. Court of Appeals — Seventh Circuit

199 F.2d 462 (1952)

MITCHELL NOVELTY CO. v. UNITED MFG. CO.

No. 10599.

United States Court of Appeals Seventh Circuit.

October 17, 1952.

Rehearing Denied November 14, 1952.

Warren C. Horton, H. B. Krulewitch, Dwight McKay, Chicago, Ill., for appellant.

Benjamin M. Becker, Bernard Savin, Robert H. Greenberg, Clarence E. Threedy, Chicago, Ill., for appellee.

Before MAJOR, Chief Judge, and KERNER and FINNEGAN, Circuit Judges.

MAJOR, Chief Judge.

Plaintiff corporation, located in Milwaukee, Wisconsin, is an operator of amusement devices. Defendant corporation, located in Chicago, is a manufacturer of such devices. Joseph E. Beck is president of the former and Lyndon A. Durant of the latter. While the suit is between the two corporations, the dealings and activities giving rise to the litigation took place between Beck and Durant.

We have difficulty in discerning the precise nature of the issues involved. The complaint alleges that Beck "conceived an idea original with him, for the development of a coin-operated game, which game contained certain unique features theretofore unused by the coin-machine industry"; that "incorporated into said game was an electrically controlled automatic scoring device" and "an automatic return to the player, of the puck or weight, said device being more commonly known as a `puck roll-back', the amusement game in this paragraph described, will for convenience be hereafter referred to as `Shuffle Alley'", and that "`Shuffle Alley' so conceived became and was a property right of the plaintiff and of great value."

The complaint alleges that negotiations were commenced between the parties during the latter part of July, 1949, with reference to the manufacture by the defendant of said "Shuffle Alley," and that Beck disclosed to Durant "its ideas for the development of the game, `Shuffle Alley', with the understanding that said disclosure was being made in confidence and with an expectation of remuneration if defendant should manufacture and sell games incorporating the ideas of the plaintiff hereinabove mentioned."

The complaint alleges that Beck requested a royalty of 10% of the selling price of each game, that Durant stated that 10% was too much but that a royalty of 5% would be a more reasonable figure, and "it was then and there agreed that a reasonable royalty to be fixed later * * * would be paid to the plaintiff for its ideas for the development of said game, based upon a percentage of the manufacturer's sales price of each game manufactured and sold by the defendant."

The complaint alleges that two models of "Shuffle Alley" were constructed by the defendant, turned over to Beck who placed them in location for testing purposes; that subsequently Beck made recommendations and suggestions as to their improvement and that defendant during the month of September, 1949, commenced the manufacture of said game; that defendant manufactured and sold in excess of 24,000 of such games, that on numerous occasions plaintiff requested an accounting of royalties and that "the reasonable royalty for the type of disclosure made by the plaintiff to the defendant of its idea for the game `Shuffle Alley' is an amount equivalent to five per cent (5%) of the manufacturer's selling price."

The complaint alleges that plaintiff purchased a large number of said games of "Shuffle Alley" from the defendant for use in plaintiff's business, that such games were purchased upon terms which provided for payment of one-half of the purchase price in cash, that the remaining balance was secured by conditional sales contracts and that there was an agreement between the parties that royalties accruing to the plaintiff would be credited on the balance due under said sales contracts.

The complaint alleges that defendant caused a judgment to be entered by confession in the Municipal Court of Chicago upon the balance due under the conditional sales contracts; that defendant had threatened to repossess the games described in the conditional sales contracts and that defendant's action was for the purpose of forcing plaintiff to make an unfair and unjust settlement of the accounts existing between the parties. Further, that defendant through its agents and officers acted fraudulently and conspired together to deprive plaintiff of its rights and property and to obtain control of plaintiff's invention; that defendant "should not in equity and good conscience be permitted to wrongfully appropriate the ideas incorporated in, and the valuable property rights of the plaintiff in and to the invention of the game `Shuffle Alley'", and that "unless the defendant is restrained by the injunction of this Court * * * this plaintiff will suffer irreparable injury and damage."

The complaint concludes, "Forasmuch, Therefore, as this plaintiff is without remedy except in a Court of Chancery," plaintiff prays that an accounting be had between the parties, that defendant be enjoined and restrained from taking possession of or instituting any action for the recovery of the games described in the conditional sales contracts, from pursuing or prosecuting any further action in connection with its judgment in the Municipal Court of Chicago and from the further manufacture and sale of the game referred to as "Shuffle Alley."

Defendant's motion to dismiss the complaint for failure to state a claim upon which relief could be granted was denied by District Judge Walter J. La Buy. In connection with such denial, Judge La Buy filed a memorandum opinion, D.C., 94 F. Supp. 612, 613, in which he stated "that no enforceable contract was made between the parties since the performance and duties of the parties are not reasonably certain", referring particularly to the allegation, "a reasonable royalty to be fixed later." Judge La Buy, however, citing Matarese v. Moore-McCormack Lines, Inc., 2 Cir., 158 F.2d 631, 170 A.L.R. 440, a case then and still strongly relied upon by plaintiff, thought that plaintiff had stated an action upon which relief might be granted upon the theory of unjust enrichment. It was for this reason that defendant's motion to dismiss was denied.

Defendant by its answer denied the material allegations of the complaint and alleged certain matters as an affirmative defense. Subsequently and in apt time, plaintiff filed its demand for a jury trial which, upon defendant's motion, was stricken by Judge La Buy. Later, the case was assigned for hearing to Judge J. Sam Perry, another judge of the same court. When the case was called, plaintiff called the attention of Judge Perry to the previous action of Judge La Buy in striking its demand for a jury trial and renewed its motion in that respect. Thereupon, the motion was denied by Judge Perry. A trial was then had before the court without a jury, during which a number of witnesses were heard, including Beck and Durant (the latter called by plaintiff as an adverse witness). At the conclusion of plaintiff's case, the court announced that the proof failed to show plaintiff entitled to relief. Thereupon, findings of fact and conclusions of law were made and, predicated thereon, a judgment was entered dismissing with prejudice the cause of action. It is from this judgment the appeal comes to this court.

Whether plaintiff still insists that it was entitled to relief upon a contract, express or implied, is not clear from the brief and argument in this court. It is certain, however, that such a theory finds no support in Matarese v. Moore-McCormack Lines, Inc., supra, so greatly relied upon by plaintiff. In that case, similar to the instant one in some respects, the plaintiff abandoned his contract theory upon which his case was originally predicated. Referring thereto, the court stated, 158 F.2d at page 632, "During the trial plaintiff abandoned his theory and, over the objections of defendants, amended his complaint by adding a prayer for recovery of quantum meruit upon the theory of unjust enrichment." It was upon that theory alone that the court affirmed a judgment in favor of the plaintiff and, as already noted, it was upon the same theory that Judge La Buy decided that plaintiff in the instant case might be entitled to relief, which resulted in his denial of the motion to dismiss the complaint.

We agree with Judge La Buy that no contract, either express or implied, upon which relief could be granted was disclosed in the complaint. The complaint failed to disclose a meeting of the minds upon the essential requisites of an agreement or contract. We need not labor this point, however, because plaintiff acceded to the ruling of Judge La Buy and tried its case before Judge Perry solely upon the premise that it was entitled to relief upon the theory of unjust enrichment. In an opening statement, counsel for plaintiff stated:

"Our theory is this: That the

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