Tredick v. Walters

• Decision Date: 12 February 1910
• Docket Number: 16,374
• Citation: 81 Kan. 828,106 P. 1067
• Parties: A. C. TREDICK, Appellant, v. O. J. WALTERS, Appellee
• Court: Kansas Supreme Court

106 P. 1067

81 Kan. 828

A. C. TREDICK, Appellant, v. O. J. WALTERS, Appellee

No. 16,374

Supreme Court of Kansas

February 12, 1910

Decided January, 1910.

Appeal from Kingman district court; PRESTON B. GILLETT, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. PATENT RIGHT--Sale--Registration. Where a party owning or claiming to have a patent for the manufacture of a certain article contracts to sell to another party and to convey to such other party the exclusive right to sell in a certain territory, for a definite length of time, a mold or molds designed expressly and only to be used in the manufacture of the patented article, he undertakes by necessary implication to convey to such party the exclusive right to manufacture, sell and use the article patented, or claimed to be patented, within such territory during such time, and such contract is illegal and in violation of the laws of this state, unless the steps required by section 4356 of the General Statutes of 1901 have been complied with. Such contract, when executed, constitutes the sale of a patent right or of a right claimed to be patented.

2. PROMISSORY NOTES -- Consideration -- "Given for a Patent Right." The taking of a promissory note in consideration of such contract is illegal unless the words "given for a patent right" (Gen. Stat. 1901, § 4357) be legibly inserted in the body of the note, above the signature of the maker or makers.

3. PROMISSORY NOTES -- Notice of Fraud or Illegality--Presumptions and Burden of Proof. In the trial of an action brought by a transferee of a promissory note against the maker, the execution of the note being admitted, if the maker prove that the note was tainted in its inception with illegality or fraud the presumptions in favor of the holder's title are overcome, and the burden of proof shifts upon him to show that he or some prior holder took the paper in good faith, for value, without notice before maturity, and in the usual course of business.

4. PROMISSORY NOTES -- Same. In this case the execution of the contracts, copies of which are attached to the answer of the maker, being admitted by the holder, such contracts are sufficient evidence to cast upon the holder such burden of proof.

Charles C. Calkin, for the appellant.

L. F. Walter, and George L. Hay, for the appellee.

OPINION

SMITH, J.:

The appellant brought this action in the district court of Kingman county against the appellee and others, the appellee only being served with summons and the others not appearing, and set forth two causes of action upon two promissory notes, respectively, copies of which were attached to the petition. The allegation of the plaintiff as to the ownership of the notes in each cause of action is the same, and is as follows:

"That said defendant, O. J. Walters, is indebted to this plaintiff by reason of a certain promissory note, in the sum of $ 108 [$ 125 in the second cause], dated July 1, 1907 [July 8, 1907, in the second note], bearing eight per cent interest from date until paid, and due on the first day of January, 1908; . . . that said note was made payable to the National Concrete Post Company, and passed by indorsement and was purchased by this plaintiff before maturity, for a valuable consideration, and in good faith, and has remained and is now the property of this plaintiff; that said note was indorsed: 'The National Concrete Post Company, per M. D. Betz, General Manager. M. D. Betz.'"

The appellee answered, first, by a general denial, subject to the admissions in the second defense; second, admitted that M. D. Betz was the agent and authorized to represent the National Concrete Post Company in all respects, and admitted the execution of the notes sued on and the delivery of the same to M. D. Betz, general manager of the post company. The appellee alleged, however, that he and Betz entered into a contract purporting to appoint and authorize the appellee, as an agent of the post company, "to sell the molds referred to in said contract, and to manufacture the reinforced concrete posts referred to in said contract," in Richland township, Kingman county, Kansas. The contract alleged to have been executed at the time of the giving of the first note and attached to the answer to the appellant's first cause of action reads as follows:

"M. D. Betz, General Manager. W. J. Chamberlain, J. J. McCarthy, General Agents. The National Concrete Post Company, of Abilene, Kan.

"Owners of the patent on the reinforced concrete post, patented March 12, 1901, No. 669, 643, and also manufacturer of molds for making same.

"KNOW ALL MEN BY THESE PRESENTS: That the National Concrete Post Company, of Abilene, Kan., has this day authorized, constituted and appointed O. J. Walters, of Basil, Kan., R. F. D. No. 1, their true and lawful agent to sell the molds to manufacture the reinforced concrete fence post in the township of Richland, county of Kingman, and state of Kansas, as long as his sales amount to eight sets of molds a year.

"He has this first day of July, 1907, given his note for $ 108 to secure the company for payment in full for twelve sets of molds at $ 6 each; also a payment of $ 3 each on twelve sets more, leaving a balance of $ 3 each to pay on the remaining twelve sets of molds at factory when ordered. Molds ordered at any time by local agents. Price to agents $ 6; retail price, $ 12.50. Each set of molds to make five posts. The agent will make a report to the company at the end of each month. The company hereby agrees to take notes for payment when same are quoted good by local bank. Ship to Basil, Kan. Signed in duplicate.

M. D. BETZ, General Manager.

O. J. WALTERS."

The answer further alleged that the contract set forth was only fictitious, and in fact related to the sale and transfer of a patent right, or what was claimed by M. D. Betz to be a patent right, and was made for the purpose of evading the statutes of the state of Kansas relating to the sale and transfer of a patent right; that neither Betz nor the post company had complied in any way with the law relating to the sale of patent rights, as to filing a copy of letters patent or as to an affidavit of ownership, nor had they inserted in the note, as required by law, the words "given for a patent right"; that the note was without consideration, illegal and void; that the appellant did not purchase the same in due course, in good faith, but, knowing at the time such facts in regard to the transaction, his taking of the same amounted to bad faith; that he knew the note was given for a patent right and in violation of statute, and that the consideration for the note had failed.

The answer to the appellant's second cause of action was substantially the same, and the contract attached, while not identical, was also substantially the same in general purport, differing somewhat in conditions.

The reply was a general denial, not verified.

The case was tried to a jury, and at the inception of the trial the appellant moved the court to order that the burden of proof was upon the appellee. The motion was denied. The appellant excepted, and urges this as a prejudicial error in the case. This contention is not tenable. The contract alleged to have been executed at the time of the execution of each note was attached to the answer as an exhibit. And each contract by its terms identified the note executed at the same time, by reference to it. The execution of the contracts was not denied by a verified reply. The execution of the contracts was, therefore, to be taken as an admitted fact. (Civ. Code, § 108; Gen. Stat. 1901, § 4542.) This admission was not that the appellant knew of these contracts at the time he purchased the notes, but it stood in lieu of proof of the contracts at the time of the trial. We think that the contracts afforded sufficient evidence of illegality to shift the burden of proof, which usually rests upon a defendant to prove the plaintiff's knowledge of the illegality at the time of purchasing a note,...