Richardson v. Waterite Co., 34550
| Citation | 99 N.W.2d 265,169 Neb. 263 |
| Decision Date | 13 November 1959 |
| Docket Number | No. 34550,34550 |
| Parties | Elizabeth RICHARDSON, Testamentary Trustee under the Last Will and Testament of Ralph Newton Perkins, Deceased, Appellee-Cross-Appellant, v. WATERITE COMPANY, a Nebraska Corporation, Appellant-Cross-Appellee. |
| Court | Supreme Court of Nebraska |
Syllabus by the Court.
1. It is not the province of the court in construing a contract to make a new agreement for the parties by construction; its duty is confined to the interpretation of the one which the parties made for themselves.
2. Contracts are to be given a reasonable construction in the courts so as to give effect to the intention of the parties thereto and carry out, rather than defeat, the purpose for which they were executed.
3. Ordinarily where a purchaser has examined the subject of the purchase there is no implied warranty as regards defects which such examination ought to have disclosed.
4. To vitiate a contract for failure to disclose pertinent facts amounting to a fraud the evidence must show that such facts were within the knowledge of the person charged, that a duty to speak existed, that such information was material, and that the suppression of the information tended to induce action which the other party would not otherwise have taken.
5. In a declaratory judgment action to have the validity of a written contract and the rights of the parties therein determined, the plaintiff may, after a determination thereof in his favor, obtain a judgment for the amount due him under the contract by original petition or by subsequent application in the same proceeding.
Marks, Clare, Hopkins & Rauth, Omaha, for appellant.
Rogers, Field, Gentry & Jackson, Kansas City, Mo., Burbridge & Burbridge, Omaha, for appellee.
Heard before SIMMONS, C. J., CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE and BOSLAUGH, JJ.
This is a suit for a declaratory judgment by the trustee of a testamentary trust established by the last will of Ralph Newton Perkins, deceased, to determine the rights of such trustee in a contract entered into by Perkins and the Waterite Company. The trial court held the contract to be valid and decreed that defendant was liable for the amounts agreed upon for items manufactured and sold as set forth in the schedule attached to and made a part of the contract, including any scheduled items which have been improved. The defendant has appealed.
The deceased, Perkins, had been engaged for many years in designing perfecting, and building a water filter for swimming-pool use. Prior to December 10, 1952, he had designed and was manufacturing and selling what is known in this record as the Perkins filter. It is described as a vacuum diatomite filter and consisted of a tank containing a battery of cylindrically-shaped filters called septa, the number of which in each filter depended upon the volume of water to be filtered. A septum consisted of a cylindrical brass wire mesh skeleton supported at the ends by bronze rings and inbetween by bronze spider rings. The skeleton was covered by a fine wire mesh metal alloy called Monel. Due to the fact that the septa operated by pulling the water through the Monel and the diatomaceous earth placed on the Monel wire mesh to secure proper filtration by the vacuum pressure exerted by an electric pump, it was necessary to close the ends of the cylinder. This was done with bronze caps milled to size and pulled into place by a brass rod extending through the center of the cylinder. It appears that it was necessary that this method be used so that the end caps could be removed in order to clean the septa, the Monel being soldered to the cylinder and consequently not removable for that purpose.
The record shows and the contract indicates that Perkins and the Waterite Company were, and had been for several years, working together to increase the efficiency of the Perkins septs. Tests were jointly made to discover a more effective and longer lasting material than the Monel cover, such as flannel, Orlon, Nylon, Dynel, and various other plastics, including one known as Saran. On December 10, 1952, with the foregoing situation existing, Perkins and Waterite entered into the contract constituting the basis of this suit.
The contract recites that the parties were engaged in the same line of business and had been closely associated for 5 years prior to the excution of the contract. The contract recites that its purpose was to have Waterite take over the patent interests and manufacturing facilities of a Perkins for a period of 10 years. The contract stipulates that it is one in which the parties have a mutual interest.
Briefly stated, Perkins sold his interest in pending patent applications on his vacuum diatomite filter and its component parts, together with manufacturing and sale rights thereto. Perkins agreed to furnish all information he had on the filter and to act as consultant on all matters pertaining to its manufacture and sale during the term of the contract. He also conveyed title to his manufacturing and sales rights in all swimming-pool fittings, cleaning tools, and filter parts, including designs, patterns, core boxes, and special tools. Perkins agreed not to manufacture or sell any of the items enumerated and to submit any new items developed to Waterite for its consideration for 30 days. If Waterite failed to accept such new items within 30 days for manufacture and sale, Perkins was free to do so. All equipment and materials on hand were to be transferred to Waterite, together with all inquires and pending proposals for swimming-pool and filter equipment.
The contract provided for payments by Waterite to Perkins in four categories described as (1) Equipment and Pattern lists, (2) Intangible list, (3) Shop Material list, and (4) Schedule of Payment list. Full payment had been made on items (1), (2), and (3) at the time of the trial. The issue in the case was the meaning of item (4) and the amount due thereon.
The following rules are applicable in construing the contract: It is not the province of the court in construing a contract to make a new agreement for the parties by construction; its duty is confined to the interpretation of the one which the parties made for themselves. Johnson v. Loewen, 132 Neb. 389, 272 N.W. 217. Contracts are to be given a reasonable construction in the courts so as to give effect to the intention of the parties thereto and carry out, rather than defeat, the purpose for which they were executed. Gallagher v. Vogel, 157 Neb. 670, 61 N.W.2d 245; Southwestern Truck Sales and Rental Co. v. Johnson, 165 Neb. 407, 85 N.W.2d 705.
The Schedule of Payments list attached to the contract was a list of specific parts of the Perkins filter and swimming-pool fittings for the sale of each of which Perkins was to be paid a specified amount by Waterite during the life of the contract. The number of such items sold was testified to by public accountants who examined the books of Waterite. The real controversy involves not only the number of items sold and the price to be paid to Perkins therefor, but whether or not certain items are within the scope of the schedule of payments set out in the contract.
We point out that the contract does not provide that Waterite must manufacture and sell the items listed as designed by Perkins. It does not state that such items have been patented or are subject to patent, which they were not. The agreement contains no express warranty of any kind by Perkins, nor any minimum requirements by Waterite as to volume of sales. The evidence shows that Perkins died on October 16, 1954, and consequently certain provisions of the contract pertaining to the agreement of Perkins to act as consultant and expert adviser to Waterite were thereby terminated. This was an exigency contemplated by the contract when it provided that the contract was to be binding upon the heirs, administrators, and assigns of the parties thereto. On this point the contract also provided that Perkins would render personal service 'during the life of this contract, so long as he is able to do so, or until this contract is terminated * * *.'
It is contended that Perkins breached the contract in failing to obtain patents on the items upon which commissions were to be paid and that Waterite was thereby damaged in that competitors made use of the same filter at a lesser manufacturing cost. We point out that Perkins did not purport to sell Waterite patented items, nor did he contract that they were patentable. He contracted only to transfer any right to patents that he might have. Waterite relies upon a statement by Perkins in a letter to one Ackley that he had received no royalties on any of the items here involved. The evidence shows that Ackley was a half owner of any patent rights that might be obtained on these items. This would mean that Ackley would be the owner of one-half of any royalties that might accrue from any patent rights obtained. The statement by Perkins to Ackley that he had received no royalties on these items was a truthful one. The commissions that Perkins was to receive from Waterite were not royalties as that term is used in connection with patent rights. Such payments were nothing more than commissions or divsions of profit on items sold which were paid as a part of the consideration of the contract between Perkins and Waterite. We shall hereafter refer to these payments as commissions. The contract is indicative of this intended result when it refers to the payment for such items as 'schedule of payments,' and makes only a descriptive reference to them as 'royalties.' The term 'royalties' was used throughout the trial in referring to these payments as a convenient descriptive term and not in the sense of a patent royalty. They are not indicative of any fraud or misrepresentation practiced upon Ackley or Waterite.
Waterite contends that it was induced to enter into the contract by fraud and...
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