Pacific Atlantic Wine v. Duccini

• Decision Date: 25 June 1952
• Citation: 245 P.2d 622,111 Cal.App.2d 957
• Court: California Court of Appeals Court of Appeals
• Parties: PACIFIC ATLANTIC WINE, Inc. v. DUCCINI et al. Civ. 15024.

Page 622

245 P.2d 622

111 Cal.App.2d 957

PACIFIC ATLANTIC WINE, Inc. v. DUCCINI et al.

Civ. 15024.

District Court of Appeal, First District, Division 1, California.

June 25, 1952.

Joseph L. Alioto, San Francisco, Marvin J. Colangelo, San Carlos, Robert J. Drewes, San Francisco, for appellant.

Elios P. Anderlini, San Francisco, for respondents.

FRED B. WOOD, Justice.

Plaintiff has appealed from a judgment of nonsuit and from an order denying its motion for a new trial. The appeal from the order must be dismissed, for the order is nonappealable.

The appeal from the judgment involves, primarily, the sufficiency of the evidence tending to prove plaintiff's case, disregarding all evidence in conflict therewith.

In April, 1935, plaintiff as first party and defendants Gaetano Duccini and Primo E. Caredio as second parties executed a written contract concerning a certain 'apparatus for the production of Vitreous and/or Metallic Surfaces,' a process which defendants had invented for liquefying glass and applying it to a metal surface by means of a spray gun.

Defendants agreed, with due diligence and at their own expense, to obtain patent rights to this apparatus and, with reasonable effort, to patent all improvements made thereon; to assign the patent rights, as soon as obtained, in exchange for shares of stock of a corporation to be formed and transfer to plaintiff 40% of those shares; and to devote their best efforts to perfect and demonstrate the workability of the apparatus so as to place it on a commercial basis at the earlest possible time.

Plaintiff agreed to pay defendants $1500 upon execution of this contract, receipt of which was acknowledged; to advance the cost of incorporation, not exceeding $250; to pay to defendants, one year from date, the further sum of $2000 if defendants had by then organized the corporation, assigned the patent rights, transferred 40% of the stock to plaintiff, and if defendants or the corporation had by then completed for other parties two satisfactory jobs by the use of this apparatus. If these conditions were not fulfilled within one year, payment of the $2000 would be suspended until fulfillment thereof by defendants, defendants to use their best efforts to comply with all of said conditions at the earliest possible time. Plaintiff further agreed to advance not exceeding $1000 to the corporation, to assist the corporation to undertake the manufacture of a 'Vitreous receptacle.'

The parties agreed to place the stock of the corporation under a voting trust for ten years, the trustees to be two persons named by plaintiff and two named by the defendants.

March 18, 1948, plaintiff filed this action against Duccini and Caredio, pleading the 1935 contract, alleging that plaintiff had performed all of its obligations thereunder except the advancement of the cost of the proposed incorporation; that defendants waived the incorporation and the parties agreed that no corporation would be formed and that their interest in the royalties would be 60 per cent for the defendants and 40 per cent for plaintiff; that plaintiff spent in excess of $5000 and assigned a number of its employees to perfect and demonstrate the workability of the patent and product, and placed it on a commercial basis; that about 1940 plaintiff secured Pacific Pumice Materials Company as a licensee under the patent and as direct result of plaintiff's activities in securing said licensee defendants had realized in excess of $40,000; that plaintiff has demanded that defendants account to plaintiff for 40 per cent of said royalties but defendants have refused to do so; and prayed for an accounting of all royalties and profits received by defendants, a money judgment for the amount disclosed by the accounting as due plaintiff, and for general relief. The complaint was twice amended pursuant to orders sustaining demurrers thereto. As last amended, the complaint is substantially the same as first filed except it alleges that defendants 'orally' waived incorporation and the parties 'orally' agreed that no corporation be formed and that their interest in the royalties would be 60 per cent and 40 per cent respectively.

At the commencement of the trial there was discussion of the question whether the provision for incorporation was of such a nature that its nonperformance by plaintiff would entitle defendants to declare a forfeiture; also, plaintiff's counsel stated he would prove substantial performance of all the conditions of the contract except the formation of the corporation and that incorporation was impliedly rather than orally waived, a waiver implied from the acts of the parties.

Plaintiff then put on its case. When plaintiff rested, defendants moved for a nonsuit, upon the ground that the evidence failed to show any express oral agreement to waive incorporation and allocate to plaintiff 40 per cent of the royalties. Plaintiff's counsel admitted there was no evidence of an express oral executed agreement and requested permission to amend the complaint to conform to the proof, claiming he had proved facts showing that defendants waived the condition with respect to the $250 and that a corporation be formed. The court denied permission to amend, stating that such permission could not be granted without a finding that the condition for incorporation had been waived; that a prima facie case of a waiver would be insufficient for the granting of the requested amendment; and that a written agreement can not be modified except by another written agreement or by an oral executed agreement.

Our examination of the record convinces us there was evidence of substantial performance by the plaintiff and of a waiver by the conduct of the parties, of the provision for incorporation, especially under a contract such as this which creates the relationship of joint adventurers.

Paul Agletti, a stockholder and the secretary of the plaintiff corporation since its formation in 1934, testified that in pursuance of the April 1935 contract plaintiff employed the defendants, paying them salaries, to develop and work on the patents, furnished them materials and equipment therefor, and rent-free space in plaintiff's winery building where the defendants carried on their work of development; that plaintiff expended $2,988.80 therefor until February, 1937, when plaintiff ran out of funds and terminated its winery business, liquidating its personal property assets to pay off its creditors.

Duccini then took the equipment to his place, but Aglietti continued, on behalf of plaintiff, to work with the defendants in the development and commercial exploitation of the glass lining apparatus, for which a patent had been issued in October 1936. He did this by soliciting other persons and corporations to finance the improvement and perfection of the apparatus, and by working with Duccini in the experimental work at the shop. Before the winery closed, Aglietti contacted a representative of a paint company, who investigated but did not invest. He negotiated with the Pacific Gas and Electric Company for a period of time without success. In September, 1936, a contract was executed between one Ingold and the plaintiff and the defendants for commercial exploitation of the device, a contract which expired in one year without bearing fruit. With the knowledge and co-operation of the defendants Aglietti negotiated with a number of other people, including Brown Brothers, the Lang Company of Salt Lake City, National Welding Equipment Company, Michael Ruck, the Pfaudler Company of Rochester, William E. Schlink, and Pacific Pumice Materials Company.

January 20, 1937, defendants made written demand upon plaintiff to advance the $250 for incorporation costs, failing which defendants would deem the 1935 contract at an end and plaintiff's rights thereunder terminated. Aglietti was then negotiating with National Welding Equipment Company, which resulted March 31, 1937, in a written agreement between that company and the defendants, approved by plaintiff, giving the company the exclusive right to manufacture this apparatus and the duty at its own expense to develop and improve it to commercial perfection within six months. This agreement recited that defendants owned the patent subject to plaintiff's equitable interest therein. This agreement was canceled by the parties thereto on March 28, 1938. At the trial, defendants' counsel stated that the cancellation notice of January 20, 1937, to plaintiff was waived by defendants.

Next, Aglietti negotiated with Michael Ruck. May 16, 1938, a contract was executed by defendants as first parties, plaintiff as second party, and Ruck as third party, for the development and perfection of the apparatus by Ruck, his costs to be paid by the three parties in equal shares, no charge to be made by any of them for labor or time expended for personal services of any of them; if within six months Ruck had perfected the apparatus to a commercially successful state, the net profits of the venture would be divided upon the basis of one-third to each of the three parties; if such perfection should not be attained within six months, the contract would terminate. This contract recited that plaintiff had an equitable interest in the patent. Concurrently, defendants wrote plaintiff a letter referring to the Ruck contract and stating that if Ruck's efforts should prove unsuccessful, the relations of plaintiff and defendant relative to the patent would be and remain fixed 'as per terms of contract [April, 1935] heretofore and now existing between us.' Ruck's efforts proved unsuccessful and the contract with him expired.

Aglietti then negotiated with the Pfaudler Company of Rochester. Negotiations looked very favorable at the beginning. Duccini went to Rochester, with expenses paid, and demonstrated the invention. Upon his return defendants' attorney wrote plaintiff's attorney, January 24, 1939, stating the Pfaudler matter looked...