Summary
In Spellman, as in the present case, the parties entered into two successive agreements, the latter of which was rescinded, the parties agreeing that rescission was properly granted.
Summary of this case from Travelers Insurance Co. v. CareyOpinion
October 7, 1965 —
November 2, 1965.
APPEAL from a judgment of the circuit court for Dane county: NORRIS E. MALONEY, Circuit Judge. Affirmed.
For the appellant there were briefs and oral argument by Vernon Molbreak of Madison.
For the respondents there was a brief by Roberts, Boardman, Suhr Curry, attorneys, and Thomas G. Ragatz of counsel, all of Madison, and Aberg, Bell, Blake Metzner of Madison, and Frank Hiller of Milwaukee, and oral argument by Mr. Ragatz.
The plaintiff, Francis Spellman, Jr., brought this action asking the trial court to rescind an agreement made with the defendants, Dean A. Ruhde, Kenneth P. Urso, and the Shovelveyor Corporation, to restrain the defendants the sale of the Shovelveyor device and the use of the name, "Shovelveyor," and to revest the title to the patent in the plaintiff.
Prior to March, 1963, the plaintiff invented and developed the Shovelveyor, built one, and sold it to the Dane County Farmers Union Co-operative. In March, Onley Equipment, Inc., hired the plaintiff as a salesman of its truck equipment. In an effort to develop and promote the sale of the device, the plaintiff agreed to work full time on this matter. George D. Onley, Dean A. Ruhde, and the plaintiff signed an agreement in July, 1963, which provided that the plaintiff would "devote his time and best effort to the supervision of fabrication of the device and to the procuring of orders therefor." It also provided that the device was to be fabricated by the Onley Corporation and that a separate corporation would be established to handle the manufacture and sale of the device whenever, in the judgment of the Onley corporate officers, Onley's investment had been returned and the orders received warranted a separate corporation. The plaintiff also had the right to purchase one half of the stock of the corporation when formed. The agreement also recited that Onley had invested over $10,000 in the development of the device. In February or March of 1964, George Onley sold all of his stock to Ruhde, who became the sole stockholder.
The device is mounted on a truck and, by an endless belt conveyor, loads the truck with feed, grain, or other bulk materials.
In order to bring new capital into the venture, the plaintiff, Ruhde, and Kenneth P. Urso, who also became interested in the enterprise, prepared a new agreement, which was in the form of a letter to the plaintiff. This agreement, dated May 18, 1964, which was accepted by the plaintiff, provided that the previous agreement was "cancelled and superseded," that a new corporation would be formed called Shovelveyor Corporation, with an authorized issue of 6,000 shares at $10 par value to be divided equally between Ruhde and Urso, and that the plaintiff would have the option to purchase one third the shares of each of the above named defendants, or a total of 2,000 shares. The assets of the Shovelveyor division the Onley Corporation were transferred to the Shovelveyor Corporation. Ruhde testified that he gave the Onley Corporation a note for $12,062.55, and that Urso paid him $13,500, which Ruhde then paid to the Onley Corporation to compensate for the value of the transfer of the Shovelveyor division.
A total of three sales was actually made by the plaintiff.
In November of 1964, defendants Ruhde and Urso sold their stock in the Shovelveyor Corporation to Joseph, Nathan, Ronald, Paul, and Frances Jakel. A total of $16,000 was paid by the Jakels for the corporation, but certain royalties on the sales of Shovelveyor were retained by Ruhde and Urso. The parties also agreed that Spellman would be able to exercise his option as set forth in the May 18, 1964, agreement.
The trial court held that:
1. Because of inadequate consideration paid by Ruhde and Urso, the May, 1964, agreement was fraudulent, was therefore rescinded, and the patent assignment made in reliance upon this fraudulent agreement was void.
2. The name, "Shovelveyor," was the property of the Shovelveyor Corporation, because the plaintiff had first used this name when he was employed by Onley Corporation.
3. Upon the rescission of the 1964 agreement, the 1963 agreement was in effect; and by virtue of the 1963 agreement, the Shovelveyor Corporation was entitled to shop rights.
4. The patent be assigned back to the plaintiff, provided that he pay the Shovelveyor Corporation within sixty days the sum that Shovelveyor had expended for attorney fees to secure the patent.
5. The plaintiff was entitled to purchase one half of the stock in the Shovelveyor Corporation.
The plaintiff appealed from the parts of the judgment awarding the name, "Shovelveyor," to the corporation, reviving the 1963 agreement under which the Shovelveyor Corporation acquired shop rights by agreement, and directing the plaintiff to pay the attorney fees expended by Shovelveyor Corporation as a condition to regaining the rights to the patent.
The plaintiff alleged in his complaint that there was fraud in the 1964 agreement, and he therefore asked that that agreement be adjudged rescinded and annulled. The trial court concluded that the plaintiff was right in his contention and, on the basis of fraud, set aside the 1964 agreement. The trial court, however, held that the setting aside of the 1964 agreement revived the agreement of 1963. The plaintiff objects to this portion of the judgment, for the 1963 agreement acknowledged in substance that the plaintiff had relinquished shop rights to his employer. He argues that the 1964 agreement was a novation, which completely extinguished the previous agreement. Rather than a novation, however, it appears that this was a new contract which was intended to replace the 1963 agreement and, had it been valid, would have discharged the obligations of the earlier contract. Since this agreement in 1964 has been found to be a nullity and both of the parties to this appeal agree that it was properly set aside, the rights under the 1963 agreement have not been extinguished.
Shop rights are defined in 35 Am. Jur., Master and Servant, p. 523, sec. 95, as follows:
"Under the `shop right' rule, an employee who, during his hours of employment and while working with his employer's materials and appliances, or with the assistance of helpers provided by the employer, conceives and perfects an invention which he patents must accord to his employer a right or license to use the invention." Note that shop rights generally do not give the employer the title to a patent that the employee may have received. See Barlow Seelig Mfg. Co. v. Patch (1939), 232 Wis. 220, 226, 286 N.W. 577.
As this court has previously said:
"To rescind a contract is to annul the contract and restore the parties to their relative positions which they would have occupied if no such contract had ever been made." First Wisconsin Nat. Bank v. Pedley (1932), 208 Wis. 628, 635, 242 N.W. 512. Generally, see 17 A C. J. S., Contracts, p. 552, sec. 440, and 17 Am. Jur.2d, Contracts, p. 1002, sec. 516.
Another standard textbook on the subject has stated the general rule to be:
". . . the substituted contract may itself be voidable for fraud, infancy, or other reasons; and if the power of avoidance is exercised, the avoided contract is nullified both as an executory contract and as a discharge. The prior claim then becomes again enforceable." 6 Corbin, Contracts, p. 196, sec. 1293.
The trial court properly concluded that the 1963 agreement must be considered viable upon the demise of the 1964 agreement. The facts show that the Shovelveyor was not conceived or originally manufactured on the premises of Onley Corporation or the Shovelveyor Corporation. However, for reasons best known to the plaintiff, he elected to acknowledge that shop rights were vested in the Onley Corporation. He agreed that, in the 1963 contract, Onley Corporation had the right to fabricate the device, and that it assisted in the development and the financing of Shovelveyor.
Having, at least by implication, acknowledged that Onley Corporation could properly exercise its shop rights, the plaintiff will not now be heard to impeach his own prior agreement.
While the courts traditionally have favored inventors as a class particularly beneficial to society, they nevertheless can contract away their rights. The United States supreme court has said:
"Inventors are a meritorious class. They are public benefactors. They add to the wealth and comfort of the community, and promote the progress of civilization." Consolidated Fruit-Jar Co. v. Wright (1876), 94 U.S. (4 Otto) 92, 96, 24 L.Ed. 68.
Clearly, Spellman in this case contracted away whatever rights the law might otherwise have reserved to him as an inventor.
There is no substantial dispute in regard to the initial use the name of "Shovelveyor." Plaintiff Spellman states that this was one name, among others, that he had considered prior to the time that he commenced employment with Onley Corporation. However, he first proposed it while working for the Onley Corporation. When this proposal met the approval of Mr. Ruhde, Spellman stencilled [stenciled] the name on the device that was being manufactured by Onley, and subsequent sales were made under that name. There is no evidence to the contrary, and, in any event, the court's finding that the name, "Shovelveyor," was first used under these circumstances is a finding of fact which this court will disturb only if it is contrary to the great weight and clear preponderance of the evidence. Kirchen v. Gottschalk (1965), 26 Wis.2d 123, 126, 131 N.W.2d 885. This finding must be sustained.
The court found that the assignment of the patent rights for the Shovelveyor was predicated on the existence of the 1964 agreement. Since that agreement is a nullity, the assignment of the patent also is a nullity. However, the facts clearly show that Spellman did nothing to secure the patent in his own name. He, in fact, assumed that what he had devised was not of such novelty as to be patentable. However, Mr. Urso of Shovelveyor Corporation thought otherwise, and, at the expense of Shovelveyor Corporation, caused a patent search to be made and, eventually, due to the efforts of Urso and the work of the patent attorney hired by Shovelveyor Corporation, the application for patent was granted. The trial court properly held that, under these circumstances, it would be inequitable for the plaintiff to receive the patent which had been secured, not through his own efforts or his own expense, but at the expense of Shovelveyor Corporation, unless he were willing to at least reimburse Shovelveyor Corporation for these costs.
We conclude that the trial court did not abuse its discretion in directing that the assignment back of the patent be conditioned on the payment of the expenses for the patent application.
The defendants, however, maintain that the plaintiff has at this juncture lost his right to acquire the patent, because he neither paid the attorney fees within the sixty days set by the court nor filed an undertaking pursuant to sec. 274.23, Stats., to suspend the execution of the judgment. Sec. 274.23, upon which the respondent relies, provides:
"If the judgment appealed from direct the doing or not doing of any other particular act or thing, and no express provision is made by statute in regard to the undertaking to be given on appeal therefrom, the execution thereof shall not be stayed by an appeal therefrom unless an undertaking be entered into on the part of the appellant . . . ."
The judgment in this case, however, does not direct that the plaintiff do a particular act or thing. Rather, it directs the defendant to do a particular act or thing, namely, to assign the patent rights in the event the plaintiff seeks to exercise his option. It appears, therefore, that the situation envisaged by sec. 274.23, Stats., is not present in the portion the judgment we are here considering. Our court has long taken the position that it is the established common-law rule that, in the absence of a specific statutory provision to the contrary, a properly taken appeal from one tribunal to another stays the proceedings below. Slabosheske v. Chikowske (1956), 273 Wis. 144, 153, 77 N.W.2d 497; David Adler Sons Co. v. Maglio (1929), 198 Wis. 24, 28, 223 N.W. 89; Hedberg v. Dettling (1929), 198 Wis. 342, 344, 224 N.W. 108. Generally, see 4A C. J. S., Appeal and Error, p. 423, sec. 627.
We conclude, therefore, that the sixty-day period within which the judgment gave the plaintiff the option to act was toiled by the filing of the appeal.
The plaintiff in his reply brief contends for the first time that, even though it be held that Onley Corporation acquired shop rights to this device by the 1963 agreement, the Shovelveyor Corporation could not acquire these rights, since shop rights are personal and not subject to assignment.
This court has long adhered to the rule that we will not consider matters that are raised for the first time on appeal and have not been presented to the trial court. Berning v. Giese (1957), 274 Wis. 401, 403, 80 N.W.2d 270. Because this question is presented for the first time on appeal, we are not obliged to decide the question. We note, however, that the defendants cite cases in 61 A.L.R.2d 356, which hold that, although shop rights are not assignable, they nevertheless do pass to a successor corporation.
By the Court. — Judgment affirmed.