Reed v. A.E. Little Co.
| Decision Date | 29 June 1926 |
| Citation | 152 N.E. 918,256 Mass. 442 |
| Parties | REED v. A. E. LITTLE CO. et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
OPINION TEXT STARTS HERE
Report from Supreme Judicial Court, Suffolk County.
Bill in equity by James H. Reed against the A. E. Little Company and others to cancel a release obtained from plaintiff and to determine the amount due him on the sale of an invention. On report of a single justice, after overruling so much of the answer as appears by way of demurrer. Order overruling demurrer affirmed.
R. Spring and R. C. Evarts, both of Boston, for plaintiff.
S. L. Whipple and E. C. Park, both of Boston, for defendants.
This case comes up on a report by a single justice of this court after overruling so much of the answer as appears by way of demurrer.
The plaintiff was a mechanic and inventor and was asked by A. E. Little, president of the defendant company acting as its agent, to enter the company's employment and assign to it certain patents and applications for patents on a lock-stitch machine in accordance with the terms of a written contract.
The contract was dated November 4, 1920, and provided, among other things, that the plaintiff should give all his time and best efforts to perfecting the patent; that the company's decision as to disposing of the same should be final; that the plaintiff would receive $75 per week and if the company should sell any of the patents the plaintiff would receive 10 per cent. of the selling price or $10,000 in place of 10 per cent. as he might elect. The plaintiff entered the employment of the defendant company and thereafter executed another contract with it, presented by Little, and dated August 7, 1923, by which the plaintiff agreed, in substance,to assign to the company all applications for patents on improvements made by him on certain machines named therein and on any other machines connected with the manufacture of shoes made by him while in the employ of the company. The agreement further provided that the plaintiff's interest in these machines should be the same as his interest in the lock-stitch machine under the first agreement. The plaintiff in all respects performed his part of the contracts.
In 1923 the plaintiff was about 63 years of age, without experience in business and financial affairs, and was ignorant of the commercial value of the patents referred to. He had acquired great confidence in the ability, business capacity and honesty of Little, and had come to believe that Little was friendly to him and was a man in whom he might have absolute confidence and to whom he might safely apply for advice and counsel touching matters outside the scope of the plaintiff's own experience. Little was fully aware of all these facts, and at all times referred to in the bill of complaint he acted as agent of and in behalf of the defendant company, was familiar with the value of patents, and was a man of wide business experience, marked ability and great shrewdness.
The A. E. Little Company, acting through its president, had for some time been engaged in negotiations with the United Shoe Machinery Company for the sale of the patents, and on December 17, 1923, had received an offer from that company for the purchase of the patents on substantially these terms: That they should be conveyed to a corporation to be organized; that about 51 per cent. of the shares of such new corporation should be issued to the defendant company, and the balance to the United Shoe Machinery Company in consideration of the payment by it of $1,000,000 to the defendant company; and that the United Shoe Machinery Company would have the right and option to buy the shares to be issued to the defendant company within a certain period for $2,000,000. The offer had not been accepted on the date last mentioned, but the company was in position to accept it, or if the negotiations had not progressed to that point they had reached a stage where the defendant company and Little well knew and firmly believed that the patents could be sold for a consideration of approximately $3,000,000 and that such sale was imminent and likely to take place within a brief period.
On December 17, 1923, the plaintiff was called to the office of the company and Little then stated to him, in substance, that the company desired to be relieved from its obligation to pay the plaintiff 10 per cent. of the purchase price of the patents and wished the plaintiff to sign a proposed contract then presented to him. The plaintiff read the proposed contract, and, reposing trust and confidence in Little, asked him to advise him as a friend in the interest of the plaintiff, in respect to the matters therein contained, and whether it was for the plaintiff's best interest to sign such an agreement and accept in lieu of the right to 10 per cent. of the sale price of the patents, a sum as therein stated between $50,000 and $75,000 to be paid within three months. Little thereupon pretended and undertook to advise the plaintiff as his friend, and in the plaintiff's interest, and advised him to sign the proposed contract, stating that in his opinion it was for the plaintiff's best interest that he should sign. The plaintiff believed the advice to be truthful and disinterested and accepted the same as given in his interest; but Little, intentionally omitting to disclose to the plaintiff any of the facts relative to the negotiations for the sale of the patents then pending as hereinbefore set forth, stated to the plaintiff that he did not believe an offer of over $200,000 would be made for the patents and that by signing the proposed contract the plaintiff would receive a larger sum than he would receive if he insisted on his rights under the original contracts.
In so advising and stating the facts and opinions, and in failing to disclose the true facts in respect to the negotiations. Little did not act as the plantiff's friend or in his interest, but solely on behalf of the defendant company, and with the intent and purpose of defrauding the plaintiff by taking advantage of his trust and confidence in him, and by concealing the truth and making affirmative statements of fact he intended to induce and succeeded in inducing the plaintiff to accept, in lieu of his rights under the original contracts, a sum far less than the amount which he well knew the plaintiff would be entitled to receive in the event that he did not sign the proposed contract. All of Little's statements of fact were made to deceive the plaintiff, and the statements of his opinion and belief were opposite to the real opinions and belief then held by him, and were made for the purpose of deceiving and defrauding...
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