Telegraphone Corp. v. Canadian Telegraphone Co.

• Decision Date: 19 February 1908
• Citation: 69 A. 767,103 Me. 444
• Parties: TELEGRAPHONE CORP. v. CANADIAN TELEGRAPHONE CO.
• Court: Maine Supreme Court

69 A. 767

103 Me. 444

TELEGRAPHONE CORP.

v. CANADIAN TELEGRAPHONE CO.

Supreme Judicial Court of Maine.

Feb. 19, 1908.

Appeal from Supreme Judicial Court, York County, in Equity.

Specific performance by the Telegraphone Corporation against the Canadian Telegraphone Company. Decree for complainant and defendant appeals. Appeal dismissed. Decree affirmed.

Bill in equity brought by the plaintiff corporation to compel the specific performance of a contract signed by the defendant company. The defendant company filed its answer to the bill, and the cause was then heard on bill, answer, and proofs by the justice of the first instance who sustained the bill and filed a decree in accordance with the prayer of the bill. The defendant company then appealed to the law court, as provided by Rev. St. c. 79, § 22.

The case appears in the opinion.

Argued before EMERY, C. J., and WHITEHOUSE, SAVAGE, SPEAR, CORNISH, and KING, JJ.

Isaac W. Dyer, for appellant. Frederick A. Hobbs and Anthoine & Talbot, for appellee.

WHITEHOUSE, J. This is a bill in equity brought by the plaintiff corporation to compel the specific performance of a contract signed by the defendant company. The bill was sustained by the justice presiding and a decree entered in accordance with the prayer of the bill. The case conies to the law court on appeal from that decree.

On the 30th day of April, 1906, the plaintiff corporation, organized under the laws of Maine, entered into a written contract with the defendant company, referred to in the contract as "the company," a corporation organized under the laws of Maine with a capital stock of $1,000,000, whereby the plaintiff was to assign to the defendant certain letters patent granted by the Dominion of Canada to Valdemar Poulson for improvements in apparatus for electromagnetically recording and reproducing speech and other signals. In consideration of this assignment, the defendant company agreed to pay to the plaintiff the sum of $25,000 in cash, upon the execution and delivery of the contract and of the assignment, and the sum of $5,000 in cash on or before May 15, 1906. The defendant also agreed to give the plaintiff four notes of $25,000 each payable October 1, 1906, April 1, 1907, September 1, 1907, and March 1, 1908, respectively, and deliver to the plaintiff 20 per cent. of the stock of the defendant corporation. The contract further stipulated as follows:

"(4) It is mutually covenanted and agreed that the said company, party of the second part hereto, shall be a legal corporation duly incorporated with a share capital of at least ($1,000,000) one million dollars, fully paid and non-assessable. It is also covenanted and agreed that should said company at any time hereafter issue any securities of any kind and fall to deliver as above provided to said corporation within thirty days after written notice from said corporation to said company (20 per cent.) twenty per cent. of said last mentioned securities then this agreement and the assignment of said Canada patent number 73,385 and the assignment or assignments of any patent or patents that said corporation may make to said company hereafter, shall thereupon terminate and become void, and thereupon the corporation shall have, hold and repossess said patent of Canada and all other patents that may have been assigned as aforesaid at any time to said company as if neither this agreement nor the assignment of said patent or patents had ever been made.

"(5) Said company hereby further covenants and agrees that it will cause and procure the payment into the treasury of the company, from the sale of stock or otherwise, the sum of ($25,000.00) twenty-five thousand dollars lawful money of the United. States to be used as working capital or for the payment of company expenses, on or before January 1, 1907, and if the company shall not cause and procure said sum of ($25,000.00) twenty-five thousand dollars to be so paid into the treasury as aforesaid, then said company shall on the 2nd day of January, 1907, pay over and deliver to the corporation the additional amount of (17 per cent.) seventeen per cent. of the present capital stock of the company and (17 per cent.) seventeen per cent. of any and every issue of stock and securities hereafter made by said company; and the company further covenants and agrees that it will cause and procure the payment, from the sale of stock or otherwise, the further sum of ($25,000.00) twenty-five thousand dollars lawful money, as aforesaid, to be used as working capital or for the payment of company expenses, on or before May 1, 1907, and if the company shall not cause and procure said further sum of ($25,000.00) twenty-five thousand dollars to be so paid into the treasury of said company shall on the 2nd day of May, 1907, pay over and deliver to the corporation the additional amount of (17 per cent.) seventeen per cent. of the present stock of said company and (17 per cent.) seventeen per cent. of any and every issue of stock and securities hereafter made by said company, and it is mutually agreed that if said company shall fail to pay over said additional shares of stock or any part thereof, then this agreement and the assignment of said Canada patent number 73,385 and the assignment or assignments of any patent that said corporation may make to said company hereafter shall thereupon terminate and become void; and thereupon the corporation shall have, hold and repossess said patent of said Canada and all other patents that may have been assigned at any time to said company as aforesaid, as if neither this agreement nor said assignments of patent or patents had ever been made.

"(6) It is further mutually covenanted and agreed that time is, and shall be the essence of this agreement."

It is not in controversy that, in accordance with the terms of the contract, the patent was duly assigned to the defendant company, and that that defendant thereupon paid to the plaintiff the sum of $25,000 in cash, and gave the plaintiff four notes for $25,000 each as specified, and 20 per cent. of its stock, all of which the plaintiff retains.

But, with respect to the agreements contained in paragraph 5 of the contract above quoted, the plaintiff's bill contains the following averments, viz.:

"Fifth. Said plaintiff corporation avers that said defendant company has not, from the sale of stock or otherwise, made, caused, and procured to be paid into its treasury said two sums of $25,000 each, as set forth in paragraph fourth hereof, and has not paid over and delivered to the plaintiff corporation the two amounts of 17 per cent. of the present capital stock of the said defendant company and 17 per cent. of any and every additional issue of stock and securities, or any part thereof, as set forth in paragraph fourth of this bill, but has wholly neglected and refused to do so.

"Sixth. And said plaintiff avers, on information and belief, that said defendant has only issued and caused to be provided for issue the share capital aforesaid, to wit, $1,000,000, and has wholly parted with and distributed, assigned, and transferred all of the shares of said $1,000,000 of capital, and said assignment and transfer and distribution by said defendant company has been among its own stockholders, promoters, and officers, and in total disregard of the plaintiff corporation's rights under the aforesaid agreement, and that, by its wrongful act, said defendant company has placed it out of its power to issue to the plaintiff corporation the 34 per cent. of its share capital as set forth in paragraph fourth hereof."

In its answer the defendant company admits the execution of the agreement and the assignment of the patent to the defendant as stated in the bill, but alleges that, before the expiration of the time within which it was to perform the stipulation set forth in paragraph 5 of the contract, the plaintiff waived the terms of it, and extended the time within which the defendant company was required to furnish the working capital of $50,000, or deliver to the plaintiff the two installments of capital stock as required by the agreement; and it denies that it has distributed all of the capital stock among its own stockholders and officers, or that by any wrongful act it has placed it out of its power to issue to the plaintiff the 34 per cent. of its capital stock as alleged in the bill.

The only evidence introduced consists of the testimony of Mr. Lindley, the president of the plaintiff corporation, and his testimony stands entirely uncontradicted and unexplained. No evidence was introduced in defense. Mr. Lindley states that the plaintiff corporation received "the payments provided for to be made upon the signing of the contract and the notes which were then to be...