Al v. Wilson

• Decision Date: 17 June 1937
• Docket Number: No. 35.,35.
• Citation: 280 Mich. 233,273 N.W. 552
• Parties: RIPPEY at al. v. WILSON.
• Court: Michigan Supreme Court

280 Mich. 233

273 N.W. 552

RIPPEY at al.

v.WILSON.

No. 35.

Supreme Court of Michigan.

June 17, 1937.

Action by John D. Rippey and another against Edward Wilson. Judgment for plaintiffs, and defendant appeals and plaintiffs cross-appeal.

Modified and affirmed.

Appeal from Circuit Court, Wayne County; Homer Ferguson judge.

Argued before the Entire Bench, except POTTER, J.

Percy M. Lovett and Florence N. Clement, both of Detroit, for appellees and cross-appellants.

Oxtoby, Robison & Hull, of Detroit, (Leo I. Franklin, of Detroit, of counsel), for appellant and cross-appellee.

FEAD, Chief Justice.

The parties live in St. Louis, Mo. Plaintiffs are patent attorneys and had judgment of $10,967.69 against defendant for legal services and advances in connection with the procuring and protection of a considerable number of defendant's inventions. Both parties appeal.

Defendant invented a Rotary Compressor, particularly adaptable to iceless refrigeration but having other uses. On September 8, 1928, he executed to Norge Corporation, of Detroit, Mich., a license to use his compressor on a royalty basis of 90 cents for each compressor sold by the licensee for refrigeration purposes, ‘embodying any of the inventions covered by this agreement,’ and requiring motive power of two or less horse power; and 5 per cent. of the manufacturer's selling price on others; with a minimum royalty of $10,000 per year. In connection therewith, Norge Corporation loaned defendant $40,000 to purchase the outstanding stock of a corporation then owning the patents and to have them reassigned to him. It paid defendant only the minimum royalty and charged against it $4,000 per year to apply on the debt.

Much of the dispute at bar rests upon the fact, and attending circumstances, that on May 11, 1932, the license agreement was amended by supplemental contract, reducing the royalty to 10 cents per compressor ‘sold by it for refrigeration use and embodying any of the inventions covered by this agreement,’ but retaining the provision for $10,000 minimum royalty. The supplemental agreement also provided that the debt of defendant to Norge Corporation, then about $35,000, and also all claims of defendant against Norge Corporation for claimed royalties above the minimum be discharged.

The case divides itself generally into three periods of time. From June, 1927, to March, 1930, plaintiffs were principally engaged in obtaining the compressor patents. From March, 1930, to November, 1931, their major services were in conducting interference proceedings, procuring patents, and broadening the claims on patents to cover the Norge compressors. After November, 1931, they conducted negotiations with Norge Corporation in an effort to obtain more than the minimum royalties for defendant.

In keeping their books and rendering statements to defendant, plaintiffs made charges for services and advances in connection with each project. These charges, aggregating over $5,000, are not disputed, as facts, by defendant. The dispute in fact is as to the so-called ‘conference’ charges. But defendant denies legal liability for any charge.

To 1930 defendant had paid plaintiffs little money, and finally they requested a settlement. In addition to the specific charges, for some of which they had rendered him statements, they presented items of $3,800 and $250 for ‘office conferences,’ on the claim that defendant had come to their offices almost daily and talked about the patent affairs. They computed or averaged the hours of the various conferences and charged at the rate of $100 per day. Defendant acquiesced therein and, on March 18, 1930, he and his wife executed to plaintiffs a promissory note for $7,676.92, payable in three months, with annual interest of 6 per cent., in settlement of plaintiffs' compensation to that date.

However, defendant demurred at the reservation of conference charges from the bills and insisted that in the future the statements should show his total debt. Thereafter regular statements were furnished to him by plaintiffs, containing charges for specific work and advances, each of which indicated the balance due. On their books plaintiffs made some entries of charges for ‘Numerous Conferences' or ‘Conferences' in connection with particular patents and included them in the statements to defendant. Defendant made monthly payments, aggregating $1,800, on account of services, and about $800 on account of expenses to February 20, 1932, and made no payments thereafter.

About 1929 Norge Corporation started to manufacture a new compressor, which it claimed did not involve defendant's inventions, and reported to him for royalty purposes only a small part of its output. Plaintiffs, for defendant, claimed the patents read on all the compressors manufactured by Norge and demanded royalties therefor. For a time plaintiffs devoted their efforts to procuring patents and broadening claims on them in order to satisfy Norge Corporation that it was protected thereby. Later the controversy over royalties became more vigorous. October 16, 1930, plaintiffs gave Norge Corporation notice of cancellation of the license. In the course of correspondence with the Norge Corporation's patent attorney, Mr. Hill, the notice of cancellation was withdrawn January 14, 1931, at Hill's suggestion and without any agreement. In November 1931, additional patents were issued to defendant which plaintiffs insisted to Norge operated to establish its liability for royalties on all units manufactured.

April 15, 1932, at a conference in Chicago, at the office of Mr. Hill, with Norge Corporation represented by its president, Mr. Blood, and defendant and plaintiff Rippey present, Blood insisted that the license be amended to provide royalties of 10 cents per compressor and threatened cancellation unless his terms were accepted. It was the general understanding that the 10-cent royalty should cover all compressors manufactured by Norge Corporation. The testimony does not go into detail, but it appears that Mr. Rippey asked whether the $35,000 debt of defendant to Norge Corporation would be canceled and Mr. Blood agreed to do it. At that time defendant's claim of royalties, which plaintiffs were making for him and believed to be sound, was about $80,000 above the minimum paid him. No agreement was reached at the conference.

Immediately on their return to St. Louis, Rippey and Wilson discussed the situation, Rippey advised Wilson that he could sue Norge Corporation for royalties, he thought recovery could be had but that action would be expensive, his firm did not care to engage upon it unless compensation and costs were provided, and suggested that Wilson think over the matter of accepting the Norge offer or resting upon the existing agreement. Wilson considered the situation over the week-end, apparently without final decision upon his course of action. Discussion was also had as to defendant's debt to plaintiffs for fees and advances and Rippey demanded security.

April 19th, plaintiff Kingsland, at Rippey's request, drafted an assignment of defendant's patents to plaintiffs ‘as collateral security for said indebtedness,’ which consisted of the note of March, 1930, and the subsequent open account stated in the assignment as $8,449.81. The instrument recited the negotiations with Norge Corporation and provided, ‘* * * that in event said negotiations result in a license agreement with said Corporation providing for a minimum royalty of at least Ten Thousand Dollars ($10,000.00) per annum, then the pledged property will be released to the said Edward Wilson by Rippey & Kingsland;’ but if the license agreement was not made within 60 days, plaintiffs could sell the patents at public or private sale. Defendant executed the assignment without objection. The items included in the amount of $8,449.81, to which defendant now objects, are:

‘To services day by day conferences in re licensed applications, reissue application, interferences, etc., from Mar. 18, 1930 to Nov. 17, 1931-approximately 35 days, $3,500.00

‘To services day by day conferences and negotiations with Norge Corporation (November 17, 1931 to May 18, 1932) resulting in cancellation of note of $35,000.00, and new licenses agreement, $3,500.00.’

These items appear upon the books of plaintiffs under date of May 18, 1932, and had not been included in bills rendered defendant. Plaintiffs' claim is that Mr. Rippey and defendant discussed the charges in detail when the security was given and defendant was satisfied with them. Defendant denies such discussion and states that he executed the instrument because he was asked to do so. Mr. Rippey claims to have kept account of the conferences by checking dates and averaging time, but, aside from the fact that such bookkeeping did not impress the trial court nor us favorably, the failure periodically to charge the conferences on the books and render statements therefor cannot but cast doubt upon their legitimacy.

After taking security, plaintiffs did no work for defendant except to write a letter to Norge Corporation asking that the terms proposed by changed to 20 cents per compressor, with a minimum royalty of $12,000, and after the controversy over fees arose, to prepare a claim under a patent for other counsel of defendant because of Rippey's greater familiarity with it. Defendant claims that he suggested to Rippey other possible terms of compromise on royalties and did not authorize the letter suggesting 20 cents, but the testimony does not so preponderate.

A few days later, Blood asked defendant to come to Detroit to aid in correcting a defect in the device. While there and on May 11th, after discussion in which Blood refused to consider other terms and without notice to p...