Feaster v. Feaster Film Feed Co.

118 N.E. 912, 229 Mass. 550, 1918 Mass. LEXIS 862

• Court: Massachusetts Supreme Judicial Court
• Decided: March 1, 1918
• Status: Published

Opinion

Pierce, J.

This is a bill for specific performance of a contract dated October 17, 1914, whereby Byron Chandler, in the event of his election not to make either of two stipulated payments as provided in the contract, agreed to reconvey and reassign to the plaintiff, Edward B. Feaster, an assignable license under Patent No. 921537 and a patent under Letters Patent No. 1116580, together with all models, drawings, designs, dies, tools, contracts licensing or letting machines under said patents, and all trade marks and trade names used in connection with the aforesaid patents or machines manufactured thereunder, subject to all rights and licenses, leases and agreements theretofore issued or made by Chandler, “his representatives or assigns.”

On the payment of $10,000, contemporaneously with the execution of the contract and subject thereto, Chandler acquired all the right, title and interest of the plaintiff in and to an application for a patent, serial No. 744970 (patent No. 1116580), and all the right, title and interest of the plaintiff in and to a certain license dated November 17, 1913, granted by Charles B. Gillespie under Letters Patent No. 921537. On March 12, 1915, Chandler assigned, transferred and set over unto “Byron Chandler Inc., its successors and assigns, all the right, title and interest secured to me by an assignment of Edward B. Feaster under date of October 17, 1914, and recorded in the United States Registry of Patents.” On March 12, 1915, Byron Chandler, Inc. conveyed all the right, title and interest secured to it by the assignment of Byron Chandler of even date, to the Feaster Film Feed Company.

The agreement between Feaster and Chandler provided that Chandler “at any time after the date of this agreement shall have the full right, power and authority, anything herein to the contrary notwithstanding, to grant licenses and leases of, or exclusive territorial rights to and for, and make all kinds of agreements in respect of, or otherwise deal in and with said Feaster invention and application therefor, and any letters patent that may be issued thereon, freely and unreservedly, except that the party of the third part [Byron Chandler] shall not at any time prior to the making of both payments specified in paragraph ‘Eighth’ of this agreement, have any right or authority to make any absolute assignment or grant any exclusive license of said invention, patent application or letters patent, except subject to the -terms and provisions of this agreement. Such agreements, leases, licenses, territorial rights, etc., herein provided for may be made and granted to cover the entire life of the patent, or such part thereof as the party of the third part, his representatives and assigns, may determine.

“No licensee, lessee, grantee, or person or corporation making any agreement with the party of the third part [Byron Chandler], his representatives or assigns, with, respect to said invention, patent application or letters patent, shall be required to ascertain or determine that any of the obligations of this contract are performed or carried out by any of the parties hereto, but shall be free to deal with the party of the third part, his representatives and assigns, as having absolute authority and right to grant such rights under said invention and letters patent.”

On May 1, 1916, the Feaster Film Feed Company executed and delivered to Fannie M. Chandler, two instruments to secure the repayment of money advanced “in various instalments” by her “for the benefit and promotion of the enterprise in which both corporations were interested.” The trial judge found as a fact that the money was advanced “in good faith as a loan,” and that she in good faith received the agreements as security for the loan without any participation in a fraud upon creditors. The first of these instruments is “a license under the Feaster patent and under the Gillespie patent, the license to remain in full force and effect until the sum of twenty-eight thousand dollars due Mrs. Chandler from the Feaster Film Feed Company and Byron Chandler, Inc., had been paid. The second instrument was in the form of a bill of sale transferring all of the dies, models, drawings, designs and machines set forth in a schedule annexed, which property Mrs. Chandler was to hold as security for the repayment on or before May 1st, 1917, of the said sum of twenty-eight thousand dollars. This instrument stipulated that the Feaster Company should retain in its possession all the property conveyed until May 1st, 1917, and on that date Mrs. Chandler should have the right to sell the property and apply the proceeds to the amount of indebtedness remaining unpaid.”

On May 23, 1916, there was due to be paid under the agreement between Feaster and Chandler $15,000. Before this became payable Chandler notified Feaster that he elected not to make the payment. On May 24, 1916, the plaintiff demanded of Chandler a reassignment of the Letters Patent No. 1116580 and the license under patent No. 921537, and notified him “of his intention to take over all models . . . manufactured under said Patent. . . .”

After the bill was filed the defendants made a tender to the plaintiff of all these rights, title and interest in the patent and license in pursuance of the agreement of October 17, 1914, but “subject specifically to the terms of a certain agreement made and entered into by us or either of us with one Fannie M. Chandler, on or about the 1st day of May, 1916.” The plaintiff refused to accept any other than an unconditional conveyance, and thereupon the assignment was placed in the custody of the court.

It is the contention of the plaintiff that the title was in Chandler absolutely on May 23, 1916, because the instruments of conveyance to the corporations did not in formal words transfer the title subject to the provisions of the agreement; and because it was the clear intent of that agreement that the business should not be divided between the owner of the license and the owner of the patent right. As to the first of these grounds, we think it entirely clear that the corporations took title to the patent “subject to the terms and provisions of this agreement” because they took the right, title and interest of Chandler which, in terms, were subject to the agreement, and because each corporation had actual knowledge of the agreement and of its obligations. As to the second ground, the presiding judge found as a fact upon unreported evidence that the “license set forth in the bill . . . appears to be in the defendant, the Feaster Film Feed Company, Inc., and Fannie M. Chandler.” It is true the record does hot show any specific formal transfer and assignment of the license from Chandler to the Feaster Film Feed Company, but that fact may be inferred properly from the fact that on behalf of that company, as president, Chandler executed the agreement with Mrs. Chandler which in terms licensed the use of the patent and the license for the Gillespie patent.

If it be held, as we think it should be, that the patent and license were vested in the corporations subject to the terms of the agreement, the plaintiff contends that the Feaster Film Feed Company had no authority under that agreement to mortgage or incumber the patent and license other than by issuing licenses and territorial rights in the ordinary course of business. The mere findings that the assignments "conveyed away all of the property used in doing business” and were “voted in a private meeting of two of the three directors,” without a statement of other facts and circumstances are not sufficient to overcome the specific finding that “there was no fraudulent intent or conspiracy . . . practised by the defendants in obtaining the loan and executing the agreement securing such loan.” Nor do we think the mortgages void as a matter of law because it may be inferred that Chandler, and therefore the corporation, knew that the instalment to become payable May 23,1916, would not be paid, and that the result of the mortgages would be to retain control of the patent and license in the corporation in spite of the agreement.

We are of opinion the conveyances to Mrs. Chandler were authorized by the agreement between Feaster and Chandler. It follows that the decree dismissing the bill should be affirmed with costs. Curran v. Holyoke Water Power Co. 116 Mass. 90. Thaxter v. Sprague, 159 Mass. 397.

Decree accordingly.