Universal Products Company, Incorporated v. Emerson

Decision Date13 May 1935
Citation36 Del. 553,179 A. 387
CourtSupreme Court of Delaware
PartiesUNIVERSAL PRODUCTS COMPANY, INCORPORATED, a corporation of the State of Delaware, Defendant Below, Plaintiff in Error, v. ANNETTE E. EMERSON, Plaintiff Below, Defendant in Error

Supreme Court, No. 3, June Term, 1934. [Copyrighted Material Omitted]

Writ of Error to the Superior Court for Sussex County, Action of Debt, No. 26, June Term, 1931.

It appeared from the record that on and prior to October 15 1913, Annette E. Emerson, the plaintiff in the court below was the owner of a United States Government patent, on what was known as an improved universal joint, which was an important component part of the transmission of an automobile. The improved joint in question had been designed by Victor L. Emerson, husband of the said Annette E. Emerson, and the application for such patent had been made in his name, but Mr. Emerson had subsequently assigned all of his rights therein to Mrs. Emerson. The same was, also, true as to subsequent improvements made by Mr. Emerson on that joint.

Being such owner, on or about October 15, 1913, Mrs. Emerson entered into an agreement in writing to which Victor L. Emerson, her husband, was, also, a party, whereby she granted to one Franklin V. Killian the exclusive license to manufacture and sell such universal joints throughout the United States during the existence of her patent rights thereon. By said agreement, Mr. Killian agreed to pay Mrs. Emerson "a license, or royalty fee of twenty-five cents (25c) for each and every universal joint embodying the said invention, or improvements thereon," sold and delivered by him under said agreement. The rights of Mr. Emerson in the patent on a subsequent improvement made by him on the joint in question were not assigned to Mrs. Emerson until April 12, 1916, but it is conceded that the authority to manufacture that joint was covered by the above agreement.

On the twentieth day of September, 1915, Killian assigned and transferred that license agreement and all of his rights thereunder to Universal Products Company, Incorporated, the defendant below, the plaintiff in error, and that corporation expressly assumed all of his liabilities under that contract to Mrs. Emerson.

In the latter part of the year 1915, and after the assignment by Franklin V. Killian to Universal Products Company, that corporation began to manufacture, sell and deliver universal joints, embodying the invention, covered by the patent included in said license agreement originally made by Mrs. Emerson with Killian. It continued to manufacture and sell such joints under that agreement until February 3, 1931, when the patent rights of Mrs. Emerson expired.

On the 15th day of December, 1915, Mrs. Emerson assigned a one-half interest in the patent right in question, and, also, in the license granted by her to Franklin V. Killian, to Charles B. Shaffer, of Chicago, Illinois.

It, also, appeared, however, that all of the rights and claims of Mr. Shaffer in that patent and in the royalties provided for by the Killian agreement were reassigned to Mrs. Emerson on the fourth day of May, 1931.

The action by Annette E. Emerson in the court below was brought June 9, 1931. That action was for royalties, or license fees growing out of the contract in question, and which she claimed were due her from Universal Products Company for patented joints manufactured and sold by that corporation before the expiration of her patent on such joints on February 3, 1931.

The declaration of Mrs. Emerson in that court consisted of a special count in an action of debt in which, among other facts, the above facts were, in substance, alleged. She, also, declared on the common counts in the same form of action.

Universal Products Company, the defendant below, pleaded nil debit, payment, release and the statute of limitations.

Under its pleas of nil debit and payment that corporation, in defense of the plaintiff's action, produced evidence tending to show that by a subsequent agreement, which it claimed was made on September 27, 1926, or possibly on December 5, of that year, between Victor L. Emerson, acting as agent for his wife, Annette E. Emerson, the plaintiff below, and Universal Products Company, Incorporated, the defendant below, acting through J. B. Flick, its President, the original agreed royalty rate of 25c on each and every universal joint manufactured and sold was reduced to 12 1/2c on the so-called "G" or small joint. This claim was based on a series of letters and telegrams beginning September 9, 1925, and ending March 26, 1928. The material portions of this correspondence, as well as other material facts appearing in the record, will appear in the opinion of the court.

Before the case was submitted to the jury, the defendant below, the plaintiff in error, presented to the court, among others, the following prayers for instructions:

"5. That the jury must determine whether plaintiff and defendant on or about December, 1927, modified the original agreement by reducing the royalty payable on the G type joints 300 and 200 size.

"6. In determining whether the parties on or about December, 1927, agreed to change the amount of royalty payable on a certain type of joints, you are free to consider the acts of the parties both before and after such time, because what parties do under a contract is persuasive as to their understanding of it.

"7. If, after December, 1927, plaintiff knew from the monthly reports sent to her by defendant that royalty on the G type joint was being paid at the reduced royalty rate, and made no objection or protest, such absence of objection or protest tends to prove the existence of the new agreement as to reduction of royalty rate.

"8. A contract, or a modification of an existing contract, may be shown either by an express writing signed by the parties, or circumstantially by means of conversations, telegrams, letters and other papers passing between the parties. In this case there have been admitted into evidence telegrams, letters, and other papers passing between the plaintiff and defendant between September, 1925, and December 5, 1927, as evidence of the plaintiff's agreement to a change in the royalty rate theretofore payable. It is for you to determine from all the evidence, including such telegrams, letters and other papers, whether the modification of royalty rate claimed by defendant has been shown."

The substance of these prayers was incorporated in the court's charge to the jury.

If the original royalty agreement was not modified, in accordance with the claims of the defendant below, the amount due Annette E. Emerson, the plaintiff below, for unpaid royalties was $ 165,216.97; and the jury found a verdict for Mrs. Emerson for that amount.

If the alleged modification contract was, in fact, made, the greatest amount that could possibly be due the plaintiff below was $ 6400.00; and in any aspect of the case she was entitled to a verdict for $ 138.00.

After the verdict, the defendant below, the plaintiff in error, moved for a new trial on the following grounds:

1. That the verdict was against the law.

2. That the verdict was against the overwhelming weight of the evidence.

3. That the verdict was unreasonable, arbitrary and excessive.

4. That the verdict was a finding that the reduction of the royalty rate on G type joints in 1927 was not consented to, and as such it is without any evidence to support it.

5. That the verdict was a finding that the reduction of the royalty rate on G type joints in 1927 was not consented to, and as such was opposed to the uncontradicted evidence on the issue of such consent.

6. That the jury rejected the evidence on the issue of the plaintiff's consent to a reduction of royalty rate in 1927 on the G type joints, and in so doing acted arbitrarily and without right.

7. That the jury in finding that the reduction of royalty rate on G type joints was not consented to by the plaintiff, acted without regard to the evidence and to the Court's instructions as to the applicable principles of law.

8. That the verdict was arbitrary and capricious and without regard to the evidence, and violative of the jurors' duties and of the defendant's rights.

The motion for a new trial was denied by the trial court, and judgment was entered on the verdict.

The defendant below then took a writ of error from that judgment to this court, and filed, among others, the following assignments of error:

"3. That the Court erred in denying the motion for a new trial made by the defendant below, in that legal discretion required the granting of such motion."

"5. That the Court erred in failing to charge the jury as requested by defendant below in its prayer 7, viz.:

"'If after December, 1927, plaintiff knew from the monthly reports sent to her by defendant that royalty on the G type joint was being paid at the reduced royalty rate, and made no objection or protest, such absence of objection or protests tends to prove the existence of the new agreement as to reduction of royalty rate.'

"6. That the Court erred in failing to charge the jury as requested by defendant below in its prayer 6, viz.:

"'In determining whether the parties on or about December, 1927, agreed to change the amount of royalty payable on a certain type of joints, you are free to consider the acts of the parties both before and after such time, because what parties do under a contract is persuasive as to their understanding of it.'

"7. That the Court erred in charging the jury as follows:

"'If a contract, or the modification agreement be uncertain, or ambiguous, then the construction placed upon it by the parties by acts or other method is entitled to great weight but if the contract or...

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