Sinkwich v. E.F. Drew & Co.

• Decision Date: 13 August 1959
• Citation: 189 N.Y.S.2d 630,9 A.D.2d 42
• Court: New York Supreme Court — Appellate Division
• Parties: Vincent J. SINKWICH, Plaintiff-Respondent, v. E. F. DREW & CO., Inc., Defendant-Appellant.

Page 630

189 N.Y.S.2d 630

9 A.D.2d 42

Vincent J. SINKWICH, Plaintiff-Respondent, v. E. F. DREW & CO., Inc., Defendant-Appellant.

Supreme Court, Appellate Division, Third Department.

Aug. 13, 1959.

Samuel J. Loewenstein, New York City, for defendant-appellant.

Godfred P. Schmidt, New York City, for plaintiff-respondent.

Before BERGAN, J. P., and COON, GIBSON, HERLIHY and REYNOLDS, JJ.

REYNOLDS, Justice.

Appeal by the defendant from a judgment entered on a decision of an Official Referee awarding plaintiff damages of $50,610.882. Defendant also appeals various orders pertaining to the reopening of the case and reinstatement of the judgment.

In December, 1940 the plaintiff entered into two agreements with Napthole, Inc., the defendant's predecessor in interest. Pursuant to the first agreement Napthole was given the right to manufacture and lease a detergent dispensing machine which the plaintiff had invested, for a period of one year with an option to purchase the machines and patent thereon and the trade name 'Mar-Vin'. Under the second agreement the plaintiff was employed as a salesman, this being terminable at will by either party, and providing that if the option were exercised the defendant was to pay the plaintiff 5% of the net profits on the sale of 'Mar-Vin Products' for so long as it leased the machines or used the name 'Mar-Vin'. 'Mar-Vin Products' were defined as those used 'in connection with' the dispensing machine. The option was exercised and in 1943 a modification of the original agreement was entered into. This provided that in place of 5% of the net profits the plaintiff was to receive 1% of the net sales of 'Mar-Vin Products'. In 1953 a dispute arose between the parties over a further reduction. As a result, plaintiff resigned and defendant notified him that as of August 1, 1953 he would only be paid 1% of the net sales of six out of more than thirty 'Mar-Vin' products, these six being the only ones used in the dispensing machines.

This action was commenced on December 17, 1953 and when it was previously before this court on review of a motion to dismiss the complaint, the court construed the cause of action stated in the present amended complaint to be for the recovery of royalties (Sinkwich v. E. F. Drew & Co., 2 A.D.2d 788, 153 N.Y.S.2d 648). The defendant counterclaimed for the conveyance of certain patent improvements and for money paid under mistake. The referee initially made an award to the plaintiff of $5,478.94, this not including prospective damages. Thereafter he reopened the case on plaintiff's motion, took further testimony from the plaintiff and made an award of $20,610.85 for damages to the end of 1957 and $30,000 for prospective damages. The defendant was later allowed to cross-examine the plaintiff and submit evidence but the award was reinstated.

The definition of 'Mar-Vin Products' in the original agreement as those used 'in connection with' the machines is clear and standing alone admits of no ambiguity. However, other terms of the agreements render it ambiguous. The defendant's obligation to pay the plaintiff was to continue so long as it leased the machines or used the name 'Mar-Vin'. It is clearly stated that the defendant was to pay as long as it used the name 'Mar-Vin' and this indicates that it was to pay on all products on which it used the name 'Mar-Vin'. There is further the language in the modification agreement stating that the plaintiff had theretofore received payments 'to which he was entitled.' At that time the defendant was paying on all 'Mar-Vin' products. This ambiguity makes applicable the rule of practical construction, that is, the interpretation which the parties have placed on the contract (Halperin v. McCrory Stores Inc., 207 App.Div. 448, 451, 202 N.Y.S. 385, 388, affirmed 239 N.Y. 547, 147 N.E. 189 and Brooklyn Public Library v. City of New York, 250 N.Y. 495, 501, 166 N.E. 179, 181). In Halperin, supra [207 App.Div. 449, 202 N.Y.S. 387], the plaintiff entered into a lease with defendant's predecessor in title which provided: 'The landlord agrees to furnish such heating to the demised premises as the plant at present installed will provide.' Plaintiff was engaged in a manufacturing business and required heat during the day and night during his busy season. Prior to the time defendant acquired the building such heat was furnished. Defendant claimed the heat was not intentionally furnished for plaintiff's purposes but was the result of keeping the water in the sprinkling system warm. The court pointed out that defendant's predecessor had entered into leases with plaintiff for other parts of the same building and had renewed the original, all of which contained the quoted provision. In directing judgment enjoining defendant from cutting off the heat at night, the court said (207 App.Div. at pages 450-451, 202 N.Y.S. at pages 387-388):

'If this action were brought under the first lease to compel the landlord to furnish heat at night, I think it would then be a question to be determined from the construction of this clause of the lease--whether heat was to be furnished at night or not. But I think the course of dealings of the parties has changed the question, to some extent at least. It is undisputed that when the lease was renewed each time the landlord knew that the tenant was using the leased premises for night work, that heat was essential to enable him to do so, and that the plant at that time installed was providing it. The lease then made must be construed in the light of the surrounding circumstances. Waiving the question of practical construction and considering only the construction of the lease in view of the surrounding circumstances, was not the lessee justified upon a renewal in believing that under the new lease he would be entitled to receive the same amount of heat and during the same hours he had under the former lease? The heating plant was the same. There was nothing to warn the lessee that any change was anticipated and, in fact, no change was...