Isherwood v. Newport News Shipbuilding & Dry Dock Co.

289 F. 282, 1922 U.S. Dist. LEXIS 1043
CourtDistrict Court, E.D. Virginia
DecidedNovember 2, 1922
DocketNo. 13
StatusPublished

This text of 289 F. 282 (Isherwood v. Newport News Shipbuilding & Dry Dock Co.) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Isherwood v. Newport News Shipbuilding & Dry Dock Co., 289 F. 282, 1922 U.S. Dist. LEXIS 1043 (E.D. Va. 1922).

Opinion

GRONER, District Judge.

This is an equity suit begun by plaintiff, Isherwood, a subject of Great Britain, against the defendant shipbuilding company, a corporation of Virginia, with its principal place of business in the Eastern district thereof. The purpose of the suit is twofold: First, to obtain a reformation of a certain contract entered into between the parties, dated January 1, 1910; and, secondly, an accounting for royalties.

Defendant admits the execution of the contract, but denies plaintiff’s right to reformation, and insists that, if an accounting is had, eight oil tank steamers, constructed for the United States government under a contract dated October 10, 1918, should be excluded upon the ground that plaintiff’s right to claim royalties as to said vessels is a claim against the United States, which cannot be asserted nor maintained in this litigation, and likewise insists that ten certain .other vessels constructed by it were constructed, not under plaintiff’s license, but under the so-called Gatewood patent, and that therefore, neither of these two classes of vessels should be included in an accounting.

[1] The-facts, as shown, make out the following case: Plaintiff, Isherwood, in -1906 obtained an English patent for a system1' of ship construction, generally called the Isherwood system. Some time thereafter he applied to the United States Patent Office for a similar patent, which, at the time of the execution of the contract of January 1, 1910, was pending. On or about the latter date plaintiff and defendant began negotiations, the object of which was to secure to defendant a license to construct vessels under the Isherwood system and to this end plaintiff forwarded to defendant under date of December 31, 1909, a license contract of date January 1, 1910, clause 5 of which, as then drawn, was as follows:

“In the event of any license being granted to any other shipbuilder on the east coast of the United States of America to build under the patent system of ship construction at a less rate than five shillings per ton gross, the royalties to be paid by the licensees shall be correspondingly reduced.” (Underscoring mine.)

The proposed contract granted to the licensee the right to use the invention in the construction of vessels at its yards at Newport News or elsewhere in the United States. Defendant, upon receipt of the proposed license contract, through its then general manager, W. A. Post, now deceased, advised plaintiff that an examination of the' license disclosed “some features in which it may fail to reasonably protect our interests with respect to competition with other shipbuilders in this country,” and pointed out changes which it' desired made in a number of other respects. These criticisms were made in accordance with the numbering of the paragraphs of the contract, and, as relating to paragraph 5, was as follows:

“We invite your attention to the fact that we are liable to be in competition with other shipbuilders of the United States besides those on the east coast.”

[284]*284And further, by way of comment upon the suggested changes, defendant’s letter concludes:

“You appreciate, of course, that, in offering the changes as above outlined, we are in no way desirous of taking any advantage of yourself, but, having a keen appreciation of the competitive conditions obtaining in this country, we feel that the above changes are necessary to properly protect us under conditions of competition with other shipbuilders which may arise,” etc.

Defendant, with this letter, forwarded to plaintiff a revised form of license, in which section 3, not material to an understanding of the case, was wholly omitted, and section 5, redrawn as section 4, was left as drawn by plaintiff, except that the words “on the east coast” were omitted, and the words “correspondingly reduced” changed to “immediately reduced,” the effect of which was to make the reduction apply in favor of defendant in the event a lesser rate was granted to-any other shipbuilder anywhere in the United States.

Defendant’s letter and redraft of contract were received at plaintiff’s office during his absence on the continent, and perhaps two months elapsed before the matter was brought to his attention; but in the latter part of March, 1910, he wrote defendant enclosing a third form of license, embracing many of the changes and modifications suggested by it, incorporating two new clauses, and changing others. Among the changes so made was a provision, not found in the first grant of the license, whereby the right of the licensee to use the system on the Great Lakes was denied. Paragraph 4, however, was left as submitted in defendant’s draft, except that its provisions were limited to vessels of 1,500 tons and upward. The redrafted license contract, as forwarded in the letter last mentioned, was accepted by defendant, duly executed by it and returned to plaintiff, and is the contract on which this suit is based.

About two years after the execution of the agreement between the parties a controversy arose between them, and in an effort to adjust their differences several interviews were had between plaintiff and representatives of defendant. In one of these interviews it developed that plaintiff had granted licenses to shipbuilding companies operating on the Great Lakes at lower rates than 5 shillings per ton gross. Upon obtaining this information, defendant insisted that, under clause 4, referred to above, it was entitled to a similar concession, and- declined to make any settlement with plaintiff except upon his admission of this right. Plaintiff, on his behalf, denied the right of defendant to a reduction from the 5-shilling rate, upon the ground that there-had been inadvertently omitted from clause 4 of the contract the. words “Great Lakes excepted,” the effect of which, if contained in-the clause, would have left plaintiff free to establish, without affecting the agreed rate in the contract, such rates as to shipbuilding on the. Great Lakes as he might desire; and one of the purposes of this suit, as already remarked, is to obtain this reformation of the contract..

In support of this position, the evidence of plaintiff and his clerk was taken in open court, and this evidence shows that when plaintiff returned to his office, from the continent, and found the letter and redraft of his first form of contract, which had been forwarded by de[285]*285fendant, he examined the latter and interlined and corrected it in accordance with his views as to what it should contain, and, as thus changed, handed it to. his typist for the purpose of having clean copies made. The copies thereafter produced by his clerk were submitted to and examined by him, and, with some interlineations inserted in his own handwriting, were executed by him, and one copy forwarded, in a letter, to defendant, in which he said:

“I inclose new form of agreement for your consideration and have the following remarks to make thereon and also in regard to the points as numbered in your letter.”

And then followed his comments on the various amendments, suggestions, and omissions made by defendant to the draft first submitted, under headings similarly numbered as by defendant. Under clause 5 he said:

“I must retain an entirely free, hand in regard to ‘the Great Lakes’ as I may dispose of the rights for the Great Lakes,; otherwise I agree to your suggestion.”

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Bluebook (online)
289 F. 282, 1922 U.S. Dist. LEXIS 1043, Counsel Stack Legal Research, https://law.counselstack.com/opinion/isherwood-v-newport-news-shipbuilding-dry-dock-co-vaed-1922.