Wilson v. Mech. Orguinette Co.

• Decision Date: 08 April 1902
• Parties: WILSON v. MECHANICAL ORGUINETTE CO.
• Court: New York Court of Appeals Court of Appeals

170 N.Y. 542

63 N.E. 550

WILSON

v.MECHANICAL ORGUINETTE CO.

Court of Appeals of New York.

April 8, 1902.

Appeal from supreme court, appellate division, Second department.

Action by Annie E. Wilson, as administratrix of Henry Wilson, against the Mechanical Orguinette Company. From a judgment of the appellate division (68 N. Y. Supp. 173) affirming a judgment entered on a verdict directed for plaintiff for a part of the amount claimed and dismissing the complaint as to the relator, plaintiff appeals. Reversed.

Herbert T. Ketcham and Joseph E. Owens, for appellant.

William B. Hornblower, William L. Perkins, and Frank A. Butler, for respondent.

WERNER, J.

This action was brought to recover certain royalties upon patents applicable to mechanical musical instruments, under an agreement between the defendant and one Henry Wilson, the plaintiff's testator, made in October, 1882. There were no disputed facts. Two questions are presented for our consideration: (1) Did the trial court err in not submitting to the jury that part of plaintiff's cause of action as to which the complaint was dismissed? (2) If the trial court erred in this regard, can there be a reversal simply as to that part of the judgment, or must the whole judgment be reversed? A short recital of the salient facts of the case will suffice to point out the decision which must be reached upon one of these questions, and the practice at the trial adopted by the court and acquiesced in by both parties definitely disposes of the other. In 1882 Henry Wilson, the plaintiff's testator, was the owner of about 40 patents applicable to mechanical musical instruments, and the defendant was the owner of two patents of the same class, the latter being then in litigation. For the purpose of obtaining the undisputed right to use all of the patents owned by both parties, and of settling the litigations then pending, a tripartite agreement was entered into on the 30th day of October, 1882, between the defendant as party of the first part, said Wilson as party of the second part, and James Morgan, individually and as executor, and John Nichol, of the third part, by the terms of which the defendant assigned to said Wilson its two patents above referred to. Wilson in turn granted to the defendant an exclusive license to sell mechanical musical instruments embodying the inventions described in all or any of the patents above referred to, except in Great Britain, Ireland, the Channel Islands, France, and Germany, ‘with permission to the said party of the first part [the defendant] to manufacture for its own business, or procure to be manufactured therefor, by such manufacturers in the United States as it may specifically for that purpose from time to time appoint, all such instruments as it is hereby licensed to sell.’ This license was to continue during the term of the patent which had the longest term to run, subject to the following conditions: (1) That during the term mentioned the defendant, at the end of every three months, should pay to said Wilson, as a royalty, 3 per cent. upon the gross wholesale price of all mechanical musical instruments, or parts thereof, spools, and music paper sold by it, whether embodying the inventions described in the above-mentioned patents or not; (2) that during such time the party of the first part (the defendant) should keep accurate accounts of the sales made by it and render the same when required by the said Wilson; (3) that in case the royalties should not be paid at the end of any three months, and within 90 days thereafter, the agreement should be void at the option of said Wilson, his executors, administrators, or assigns, if at the expiration of that time he should serve written notice to that effect upon the defendant and the royalties were not paid within 90 days from the service of such notice; (4) in case of default in the payment of royalties when they became due, and the default should continue for 90 days thereafter, said Wilson, at the expiration of said 90 days, should have the right to sell, without notice, all instruments covered by said patents; (5) in case the royalties provided for should at any time not amount to the sum of $200 per month, said Wilson should be at liberty to engage in the sale of such instruments. Said agreement further provided that in case it should be terminated the defendant would have the right to manufacture and sell any of the improvements embodied in the letters patent transferred by it to said Wilson, and, in that event, the latter should grant to the former an assignable license to make, use, and sell under such patents, which license was to be exclusive except as to said Wilson, who was to hold and own said patents.

It is conceded that the term of the patent which had the longest time to run did not expire until February 5, 1901. So far as appears, the terms of said agreement were observed by both parties until 1887, when the defendant refused to pay further royalties thereunder. The record discloses that in July, 1887, there was a so-called consolidation of the defendant with another corporation, known as the Automatic Music Paper Company, of Boston, Mass. To effect this consolidation a new corporation was formed under the laws of Connecticut, called the AEolian Organ & Music Company, which name was subsequently changed to the AEolian Company, with a capital stock of $150,000. The defendant and the said Automatic Music Paper Company each had a capital stock of $60,000. It was agreed that the defendant should convey to the said AEolian Company all its property and assets in exchange for $60,000 of the capital stock of the new company, to be issued to the stockholders of the defendant in the same proporations in which they held the stock of the defendant. The Automatic Music Paper Company was to receive for its property, assets, and business $60,000 of the capital stock of the new company, to be divided among its stockholders in the same way, and $20,000 in cash, which was to be realized from sales of stock of the new company. Pursuant to this arrangement a bill of sale was made by the defendant, through its president and treasurer, to William B. Tremaine, its then general manager, of all its stock in trade, assets, and property, as more particularly inventoried and enumerated upon a schedule thereto annexed, together with ‘the patent properties which are held by the party of the first part, subject to payment of royalties, being conveyed subject to such royalties, which the party of the second part hereby assumes and agrees to pay.’ On the day following the execution of this bill of sale, said Tremaine assigned a two-thirds interest therein to James Morgan and John Nichol, the president and treasurer, respectively, of the defendant. On the same day the said Tremaine, Morgan, and Nichol assigned their interest in said bill of sale and the property therein described, to the AEolian Organ & Music Company. In neither of said assignments of said bill of sale and the property therein described was there any express assumption of the defendant's obligation to pay royalties under the agreement above referred to. Substantially all of the officers os the defendant were elected to the same offices in the new company. The latter took possession of the salesrooms and offices of the defendant, of the goods on hand, kept the same employés, and, to all outward appearances, continued the business which had previously been carried on by the defendant without material change. Evidence was given upon the trial which tended to show that the AEolian Company, from the time of its formation in July, 1887, down to October 30, 1898, sold mechanical musical instruments, spools, and music paper of the kinds upon which the defendant contracted to pay royalties, and upon which the royalties amounted to more than $70,000. This action was commenced on January 9, 1899. The complaint sets forth the agreement above referred to, and alleges that the defendant is indebted to the plaintiff, as administratrix, etc., of said Wilson, in the sum of $83,400 for royalties upon mechanical musical instruments sold under said agreement between October 30, 1882, and October 30, 1898. The answer is, in effect, a general denial, supplemented by affirmative allegations of payment and rescission of the contract. Upon these pleadings, and at the conclusion of the evidence, the trial court directed the jury to return a verdict in favor of the plaintiff for $12,000, that being the sum which the plaintiff was concededly entitled to recover for royalties which had accrued prior to July 25, 1887, the date of the sale to the AEolian Company, and which, with interest, amounted to $24,038.33. The court then dismissed the plaintiff's complaint so far as it related to claims for royalties accruing after the last-mentioned date.

The defendant concedes the plaintiff's right to recover the sum of which a verdict was directed, and no appeal was taken by either party from that part of the judgment which is based upon this verdict. The plaintiff alone appealed to the...