Laver v. Dennett/Opinion of the Court

This appeal is from a decree dismissing the complainant's bill, and the record discloses the following as the facts material to the determination of the controversy:

The appellees, in 1870, being British subjects, were owners     of letters patent of the United States bearing date January      4, 1870, granted to one Dennett, for the term of 17 years      from August 13, 1863, for an improvement in the construction      of concrete arches for building. On November 2, 1870, they     entered into a written contract with the appellant, an      architect, then residing in Albany, New York, but at the time      of filing this bill a citizen of California. By this contract     the appellees granted to the appellant, his executors,      administrators, and assigns, during the residue of the      unexpired term of the letters patent, 'full and free liberty, license, and authority to      make, use, and sell, or vend to others to be sold,' the said      invention within the divisions of the United States, as      thereinafter specified, or one or more of them, in the manner      and according to the provisions and agreements thereinafter      contained, and upon the payment of the sums of money as      therein provided, and not otherwise. For the purposes of the     license the territory of the United States was divided into      four districts, named, A, B, C, and D, respectively, and a      royalty of 10 shillings sterling per square of 100 square      feet was to be paid for all work actually done under the      patent, and which, from certain specified dates, it was      agreed should amount to an annual minimum sum of  500, and      not to be payable in excess of an annual maximum sum of      1,000 in each of such divisions. It was also stipulated that     the appellant might surrender the license at any time upon      giving six months' notice, and that the appellees might      revoke it upon any default of the appellant after 30 days'      notice. It appears that this contract was entered into after     many conversations between the parties, and after a draft      agreement had been prepared, and submitted to the appellant      for examination. Upon his suggestion it was amended and     finally executed.

Various unsuccessful efforts appear to have been made by the     appellant while at Albany, and after his removal to San      Francisco, and also by one Fuller, who acted as his agent at      Albany, to introduce the patent; and some correspondence took      place between the parties in regard to its progress and      prospects. This correspondence, as well as the negotiations     which led to the execution of the contract, was conducted on      the part of the appellees by Frederick Ingle; and it was to      him that the following letter was addressed by the appellant:

'SAN FRANCISCO, April 26, 1873.

'Frederick Ingle, Esq., 5 Whitehall, London, England:

'DEAR SIR: It now turns out, just as Mr. Fuller and myself     are about to close negotiations for the sale of your      patent-right, that I have no power to sell. Will you,     therefore, send me the proper papers from your firm, stating      that you will not grant licenses to any one else in the      United States? I inclose you an eminent legal opinion     thereon. Mr. Fuller had arranged for the sale of     Massachusetts, which includes Boston; but we wait for your      proper authority, which must be exclusive, or no value can be      attached to the license I hold. Of course I am aware of the     understanding which I have stated your firm would not go back      on, but then the parties purchasing hold that it is not      exclusive. In like manner I am unable to close with parties     here for section D. I have had so much trouble with this      matter, and now that it appeared to be in a good way to be      productive of profit, this annoyance arose. You can, however,     remedy it in the way prescribed.

'Yours, very truly,

AUGUSTUS LAVER.

'P. S. Send the papers to Mr. Fuller, at Albany, and then he     will send me duplicates.

A. L.'

This letter seems to have been received by Ingle, and in     reply he sent by cable the following:

'MAY 6, 1873.

'Fuller, Architect, Albany, New York:

'Dennett will alter agreement, giving Laver exclusive right.

'ROBERT DENNETT & CO.'

Fuller had evidently written a letter to Ingle, to the same     effect, about the same time, for, although it is not      contained contained in the record, Ingle's reply to it,      written the day he sent the cable message, was produced and      read in evidence. In this letter, dated May 5, 1873, he says,     referring to the objection to the terms of the license, that      'there is no objection on our part to alter it in any way to      suit the requirements of the case.' He adds: 'You will bear      in mind that this lease was granted to Mr. Laver to pay as an      annual royalty. If it had been proposed then to purchase out     and out, I dare say the terms to the exclusive right would      have been more precise; at any rate, our intention was for      Mr. Laver to have the exclusive right, (in all our      negotiations,) and when the document was signed we looked upon it as so      settled, unless he elected to throw it up before certain      dates for the respective sections as specified in the      agreement. He had the document to examine before signing it,     and could have made the objection then. At any rate you will,     I think, give us credit for having faithfully carried out      both the letter and spirit of the agreement. We have had many     applications from parties for permission to work the patent      in the United States since October, 1870, the date of our      agreement, but have had to reply in each case that our      arrangements as to licensing were made. * *  * I shall write      to our solicitor, Mr. Van Santvoord & Hauff, of Times      Building, Park Row, New York, and instruct him to get      whatever you require with regard to the specification. I     don't know in what respect it is incomplete. The agreement     can be altered to give any parties who propose to purchase      the most absolute rights, on payment of the purchase money of      section B.' He then proceeds, in answer he says to a request      to that effect, to give the prices for each division, upon an      out and out purchase of a gross sum; and referring to Laver's      statement that Fuller was on the point of completing the      negotiations for division B, he says: 'To faciliate      completion of the matter, had you not better write to or see      Mr. Van Santvoord, whom we will instruct to give you as much      assistance as he can. We could not, of course, undertake any     litigation in respect of infringements, after we had disposed      of our rights for a fixed sum.' He says, further: 'Our wishes      have always been to give him exclusive rights, and I thought      that the agreement expressed as much before you raised the      question. At any rate we are willing to alter it to faciliate     your negotiations. The question is, how is it to be done? One     plan is for us to send power of attorney out to Mr. Van      Santvoord, and tell him to alter the agreement and sign for      us. Another, and I think a preferable plan, is to write to     him to prepare two fresh copies of agreement, distinctly      giving Laver exclusive rights, and referring to the old      agreement, which will be thereby canceled. He will them let     you see the alterations. One copy must be sent to Laver for signature, and another to us,     and on the return you and Van Santvoord can exchange them. You must clearly understand, however, that we shall not     consent to any other alterations, or to introduce any fresh      clauses.'

On May 9, 1873, Ingle wrote to the appellant as follows:

'DEAR SIR: Yours of twenty-ninth Mrach came duly to hand,     with inclosures, and I delayed answering it for a week or      two, as I was expecting to hear from Mr. Fuller. I have now     heard from him, and you no doubt know to what effect. He     complains of the agreement not giving you exclusive rights. I     think it expressed enough for the purpose contemplated at the      time, and you were satisfied with it. At any rate, we     intended to give you exclusive rights, and have in all good      faith acted up to that intention, inasmuch as we have refused      many offers of agency since October, 1870, the date of our      agreement with you. I suppose Mr. Fuller will send you the     letter I wrote him in reply; at any rate I will write him by      this post a line requesting him to do so; then you will see      exactly what I propose to do. I may say that I have also by     this post instructed Mr. Van Santvoord, our solicitor in New      York, to prepare full agreements, giving you exclusive      rights, and send them to each of us to be resigned and      exchanged; when this is done they will supersede the others,      and I hope will be sufficient for Mr. Fuller's purpose.

'Speaking generally, our view with regard to this matter is     this, (I mean Dennett's and my own,) that we gave you a      liberal margin of time to make preliminary arrangements, and      asked for only a moderate royalty on each section. You had     the option of holding or abandoning up to certain dates. If     you had decided to surrender, we should have been losers of      two years of valuable time, and should have had all our work      to begin over again. As you elected to keep the patent-right,     you could hardly expect us to forego the just claims for      which we stipulated, after such very liberal reservations in      your favor. We do not suppose for a moment that you expect     this. We do not wish to press you hardly in the matter, but     it is really time now that some tangible return was made to      us; of course, if the section B is sold at once, and the      money paid over, as we hope it will be, we forego any claim      for royalties already due on that section.'

wrote to their solicitors in New York, giving  instructions in reference to drawing up a fresh   agreement, giving the appellant the exclusive rights   which he required; but that neither the appellant nor   Fuller, his agent, communicated with the solicitors on   the subject. It was not until November 3, 1873, that  appellant wrote to Ingle refusing to sign any new   agreement, and claiming that the defect in the original   agreement had resulted in the loss of the sale of the   patent in Massachusetts for the price of $30,000, and   intimating that, in con sequence thereof, the appellant   was entitled to trest the whole matter as at an end. On  October 12, 1874, the appellees, having in the mean   time, by further correspondence, insisted upon their   rights under the contract, and demanded payment of the   royalties which had accrued, brought an action in the   circuit court of the United States for the district of   California, against the appellant, to recover the amount   due on account thereof. And on September 3, 1875, the  appellant filed this bill in equity in the same court,   in which it was claimed that, by reason of the mistake   in omitting from the contract a grant of the exclusive   right to the appellant to use and sell the said   invention under the said patent, the said indenture was   not the agreement of the appellant, and that in   November, 1873, because of said defect, he had   surrendered said invention and indenture, and all his   rights thereto and thereunder, to the appellees. The  bill prayed that the indenture be ordered to be   canceled, as executed by mistake, and that the appellees   be perpetually restrained and enjoined from the   prosecution of the action at law upon it.

The chief, if not the only, instance in which it is alleged the defect in the license actually operated to the injury of the appellant, is the loss of the sale of the patent for the New England states; and as to that the proof wholly fails. The only witness examined on the subject is the appellant himself, who knew nothing of it, except as he learned it from Fuller, his agent; and his evidence, being hearsay, cannot be regarded. The parties with whom the negotiations took place, and who, it is said, refused to proceed after discovering the defect in the license, are not examined nor even named. Fuller, the agent of the appellant, who personally conducted the negotiation, is not examined as a witness at all; and in his letter to Ingle of June 23, 1873, gives an entirely different account of the reasons for the loss of the sale. He there says:

'Your decision not to protect the patent renders it     valueless, even if it could not be infringed. The duration of     the patent is so short no parties would dream of paying large      sums for it. Acting as Mr. Laver's attorney, I did the best I     could to dispose of it for New England states. That is now     abandoned unless the patent can be extended.'

There is no proof of fraud or misrepresentation on the part of the appellees, and all charges to that effect in the bill are substantially withdrawn by the appellant in his testimony.

It is claimed, however, on the part of the appellant, that he has a strict right in equity to the relief prayed for in his bill, on the ground that no contract was ever in fact entered into, the minds of the parties never having met upon the same terms. But there is no foundation for such a contention. The minds of the parties did meet. There was in fact an actual agreement, the terms of which were perfectly well understood by both parties. They acted upon that understanding from the time the instrument was executed; and when the appellant first discovered that it did not have the legal effect intended, and gave notice to appellees accordingly, there was no controversy between them on the subject. The common intention was at once admitted and the necessary correction promptly offered. There was, no doubt, a mistake, but it was in the instrument which undertook to express the agreement, and not in the agreement itself. It did not relate to any matter of fact which was the basis of the contract, an error in regard to which would be fundamental, and therefore fatal, but affected only the document which professed to express, but did so incorrectly, the actual intention of both parties. It is equally wide of the mark to say, as it was argued, that the contract has failed by reason of the failure of the consideration. The appellant cannot say that he did not acquire something by reason of the license, although his right was not, as it was intended to be, exclusive. But, so far as appears in the case, he had the same benefits and advantages he would have enjoyed if the instrument had contained the exclusive grant it was supposed to secure; for the parties on both sides acted upon that construction, and, as we have already shown, no actual loss is proven to have arisen to the appellant by virtue of the defective assurance.

That the instrument imperfectly expressed the agreement of the parties was not the exclusive fault of the appellees. It was the duty of the appellant to have discovered the error before executing the contract. He did not, in fact, find it out until after two years from its date; and then, applying for its correction, failed to avail himself of the offer of the appellees, promptly made, in response to his demand to execute a corrected agreement.

The only equity which the appellant could claim was to have the mutual mistaken in the language of the instrument corrected, until some default had occurred on the part of the appellees. But they were in no default. They offered to make the correction as soon as they had notice of the mistake; but the appellant declined to accept it. After the further lapse of more than six months, he insisted on his right to put an end to the agreement itself. This he was in no position to do. His delay to assert such a claim, if his right had been otherwise better founded, constituted such laches as would, at least, greatly weaken his title to relief, if it did not amount to a bar; and coupled with the loss to the appellees of the value of their own rights under the patent, which cannot be restored, would make it inequitable, as against them, to absolve the appellant from the legal obligation of his contract.

We see no ground in the facts of the case for the application of the principles and authorities invoked by the appellant as a warrant to grant him the relief for which his bill prays. The decree is accordingly affirmed.