Touchett v. E Z Paintr Corp.
| Decision Date | 08 February 1955 |
| Parties | Lawrence P. TOUCHETT, also known as A. L. Touchett, Appellant, v. E Z PAINTR CORP., a Wisconsin corporation, Respondent. |
| Court | Wisconsin Supreme Court |
Action begun November 12, 1949, by Lawrence P. Touchett (also known as A. L. Touchett) against E Z Paintr Corporation for breach of an alleged contract under which it is claimed the defendant agreed to purchase from plaintiff all paint rollers and allied products which defendant was to sell under its license from the plaintiff. Such suit is based upon the allegations contained in the third cause of action set forth in plaintiff's complaint.
The plaintiff is the inventor of a device for applying paint, called a paint roller. He secured a patent covering the roller, tray and cover. In 1945, with his brother and others, he formed a corporation to engage in the manufacture and sale of the products. Sales to jobbers were made in large lots, and difficulty was encountered in getting sufficient funds to keep up with these sales. The outside interests sold out to the Touchetts. Both plaintiff and his brother loaned money to the corporation. In 1947, their capital was exhausted, and the need for more cash was urgent. Financiers know as Stern & Company of Chicago were appealed to. After many investigations, Stern & Company made an investment on the following terms: A new corporation was to be formed, Stern interests would loan $25,000 and take one-half of the stock, being $25,000 par value, the Stern interests to have their representative as chairman of the board of directors, with full control of all corporate affairs until the loan was paid. In August of 1947, all of this was brought about.
In the late summer and fall of 1948, several stockholders' meetings were held, at which there was much discussion as to the sale of shares and stock of the corporation and the rights of the parties to manufacture and sell the products. As a result of these meetings a 'Memorandum of Agreement' was drawn up and signed on October 23, 1948, by E Z Paintr Corporation and A. L. Touchett. This agreement contained the following terms, among others:
'2. Touchett will sell, transfer and set over, or cause to be sold, transferred and set over to the corporation, and the corporation will purchase from Touchett and his wife, respectively, the number of shares which each of them has represented and warranted as owned by him or her in section 1 hereof.
'3. The consideration for the purchase and sale contemplated by section 2 hereof shall be the following:
'(a) The assignment to Touchett of all of the corporation's claim against the E Z Paintr Company of Canada;
'(b) The transfer to Touchett of inventory (finished, unfinished, or partly finished) and machinery of the corporation, the net value of which shall be the difference between $5,000.00 and the book value of the claims assigned pursuant to (a) of this section.
'All items of inventory (finished, unfinished or partly finished), and all pieces of machinery, shall for the purposes of this section, be valued at the figure at which the same are carried on the books of the corporation at the time of their transfer. The exact items of inventory and/or the specific pieces of machinery to be assigned and transferred to Touchett pursuant to this section shall be such as may be mutually agreed upon by the parties hereto.
'5. The corporation represents that it is the owner of the following United States Letters patent:
'No. 2444096 with respect to paint trays;
'No. 2444584 with respect to paint trays; and
'No. 2427581 with respect to paint rollers.
'At the time of closing, the corporation will assign to Touchett title to the above described patents and, simultaneously therewith, Touchett will enter into an exclusive license royalty agreement with the corporation in a form to be mutually satisfactory to the parties.
'5. The exclusive license royalty agreement provided for in section 4 hereof shall contain, inter alia, the following provisions:
'(a) A provision for the payment to Touchett by the corporation, as a monthly royalty, of a sum equal to 2% of the corporation's gross sales of patented paint rollers and paint trays, or $250 a month, whichever sum shall be the greater.
'(b) A provision precluding Touchett from manufacturing or selling, or causing the manufacture or sale, of any of the items covered by the patents above referred to, or of any paint rollers or paint trays substantially similar to the items covered by said patents, provided only that Touchett shall be entitled to manufacture such items upon the request and order of the corporation.
'(c) A provision conferring upon the corporation authority to sublicense other persons, firms, corporation, or association for the manufacture or sale of any of the items covered by the aforesaid patents.
'6. From and after the date of closing and during a period of 7 years thereafter, neither Touchett nor any partnership, corporation, person or firm controlled by him, directly or indirectly, or in which he has a substantial interest, direct or indirect, shall within the 'restricted territory' manufacture or sell, or cause the manufacture or sale of, any 'exploited product."
Disagreements between parties arose, and an action was begun November 12, 1949, by Lawrence P. Touchett, and in his complaint he set forth four causes of action. The first, second, and fourth causes of action were settled by stipulation. The third cause of action here set forth is for breach of contract. Plaintiff alleges:
'1. That he was the owner of common stock of this corporation of the value of $14,900.00 and was a director and president of the defendant corporation and that in consideration of his surrendering his stock to said corporation and resigning as an officer and director said corporation was to go out of business of manufacturing and was to become a sales agency only for the products then manufactured and sold by the defendant.
'2. This plaintiff further alleges that it was further agreed that this plaintiff was to continue the manufacturing of said items and articles which were to be sold to this defendant at a price which was then established and further this defendant was to sell to the plaintiff certain machinery and raw materials so that he might make all of the articles to be sold by this defendant.
'3. This plaintiff further alleges that this defendant corporation owned, conducted and operated a business at Sarnia, Canada, known as E Z Paintr of Sarnia, Canada, and this business was to be sold to this plaintiff free and clear of all claims or obligations or the rights which this defendant had against or to E Z Paintr of Sarnia and said selling price was to be $935.00.
'4. This plaintiff further alleges that the agreed value of the machinery, raw materials and goods in process which were to be delivered to this plaintiff by this defendant was to be of the agreed value of $4,065.00 and to consist of items listed in Exhibit 'B' made a part of this complaint and that machinery and items were to be left in a building then occupied by this defendant in such condition that this plaintiff could immediately start to manufacture said items to be sold by this defendant.
'5. This plaintiff further alleges that while president of the defendant corporation he had trained and employed a number of people who were qualified to continue the manufacturing of these items and that this plaintiff had available a building suitable for the manufacture of said articles.
'6. This plaintiff further alleges that without warning or notice of any nature this defendant did cause all of said machinery, goods in process and other items referred to in Exhibit 'B' to be removed from the city of Fond du Lac, Wisconsin, in the night time and said machinery, goods in process and materials were taken from the City of Fond du Lac to Butler, Wisconsin, and that at said place the defendant did install said machinery...
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