J. H. Clark Co. v. Rice

106 N.W. 231, 127 Wis. 451, 1906 Wisc. LEXIS 150

• Court: Wisconsin Supreme Court
• Decided: March 20, 1906
• Status: Published

Opinion

Cassobay, O. J.

1. Error is assigned because the court refused to compel the defendant to elect as to the remedy upon which he would rely under the pleadings. The statute authorized the defendant, by answer, to set forth “as many defenses and counterclaims” as he might have, “whether they be such as were formerly denominated legal or equitable, or both.” Stats. 1898, sec. 2657. Under this section it has 'been held that “a defendant may plead'as many defenses and counterclaims as he may have, even though they are based upon inconsistent legal theories. With a defense of fraud for which he seeks a rescission of the contract sued on, and a counterclaim for payments made thereon, the defendant may, therefore, join a counterclaim for breaches of such contract, if held binding.” South Mil. B. H. Co. v. Harte, 95 Wis. 592, 70 N. W. 821; Roberts v. Decker, 120 Wis. 102, 108, 97 N. W. 519, 521. In this last case it was said that “under the Code a defendant may plead as many defenses as he has, even though they be based on inconsistent legal theories, unless they be so repugnant in fact that proof of one disproves •the other.” In the case at bar there is no such repugnancy. Besides, the defendant recovered nothing on either of his counterclaims. The judgment merely dismissed the complaint with costs.

2. Error is assigned because the court found, as a matter of law, that the note sued on in this action was given in violation of ch. 438, Laws of 1903, and hence was void. That act was amendatory of eb. 268, Laws of 1901, and declared, in effect, that all promissory notes and other evidences of indebtedness, taken or given for any patent, patent right, or interest therein, should have written or printed thereon in red ink the words “The consideration for this note is the sale of a . . . patent, patent right ... or interest therein,” as-the case might be, and declared that “any person who” should sell a patent, patent right, or any interest therein, without complying with such statute, should “be liable to- a penalty equal to the face of the note so taken,” and that “all notes- or other evidences of indebtedness taken” as required by the provisions of said statute should “be nonnegotiablé, and be subject to all the defenses in the hands of an innocent holder that the same would have if not transferred.” It appears-from the undisputed evidence, as well as the findings of the court, that the written agreement between the parties constituted a sale or assignment of an interest in a patent or patent right; and that neither of the notes taken therefor had written or printed thereon, in red ink or otherwise, the words required by the act, nor any such indorsement in words of' similar import. These things being so, it is obvious that iff the act in question is valid, then, by taking the notes without such indorsement, the plaintiff became “liable to a penalty equal to the face” of the notes so taken. This court has repeatedly held that a positive requirement of a statute and a penalty imposed for noncompliance render the transaction, if contrary to the statute, void. Troewert v. Decker, 51 Wis. 46, 8 N. W. 26; Howe v. Ballard, 113 Wis. 375, 89 N. W. 136; Julien v. Model B., L. & I. Asso. 116 Wis. 79, 91, 92 N. W. 561; Brown v. Gates, 120 Wis. 349, 351, 97 N. W. 221, 98 N. W. 205; Pearson v. Kelly, 122 Wis. 660, 664, 100 N. W. 1064. If the act in question is valid, then the-conclusion of the trial court is correct, that the note in suit was taken in violation of the statute and is therefore void. The important question in the case is whether ch. 438, Laws-of 1903, is a valid enactment. All must concede that Congress bas the power “to promote tbe progress of science and useful arts by securing for limited times to authors and inventors' the exclusive right to their respective writings and discoveries.” Sec. 8, art. I, Const, of U. S. The federal statute declares :

“Every patent or any interest therein shall be assignable in-law by an instrument in writing, and the patentee or his assigns or legal representatives may in like manner grant and convey an exclusive right under his patent to the whole or any specified part of the United States.” Sec. 4898, R. S. of U. S. [U. S. Comp. St. 1091, p. 3387].

The precise question presented is whether the act of our state legislature interferes with the rights thus given by federal authority. It seems to be well settled:

“Where, by the _ application of the invention or discovery for which letters patent have been granted by the United States, tangible property comes into existence, its use is, to the same extent as that of any other species of property, subject, within the several states, to'the control which they may respectively impose in the legitimate exercise of their powers over their purely domestic affairs, whether of internal commerce or of police.” Patterson v. Kentucky, 97 U. S. 501, 504, 506, affirming 11 Bush, 311.

■ It is said in the opinion of the court in that case that “the Kentucky statute under examination ... is, in the best sense, a mere police regulation, deemed essential for the protection of the lives and property of citizens. It expresses in the most solemn form the deliberate judgment of the state that burning fluids which ignite or permanently bum at less than a prescribed temperature are unsafe for illuminating purposes. . . . The right of property in the physical substance, which is the fruit of the discovery, is altogether distinct from the right in the discovery itself, just as the property in the instruments or plate- by which copies of a map' are multiplied is distinct from the copyright of the map itself.”' See, also, Minnesota v. Barber, 136 U. S. 313, 326, 327, 10 Sup. Ct. 862; Walla Walla v. Walla Walla W. Co. 172 U. S. 1, 16, 19 Sup. Ct. 77; Webber v. Virgina, 103 U. S. 344, 348; Emert v. Missouri, 156 U. S. 296, 316, 317, 15 Sup. Ct. 367; Bement v. Nat. H. Co. 186 U. S. 70, 90, 91, 22 Sup. Ct. 747.

But state courts and some federal courts differ widely as to wbat constitutes a legitimate exercise of domestic or police powers of a state over tangible property coming into existence by virtue of a patented device. The supreme court of tbe United States does not seem to have reached .the question here presented. In the earliest federal case found, a statute ■of Indiana was under consideration which required any obligation taken for a patent right to have inserted in the body of the instrument and above the signature of the maker the words “Given for a patent right,” and made it a misdemeanor not to comply with such statute. The case came before Mr. Justice Davis of the supreme court of the United States, who' held that:

“The law of Indiana regulating the sale of patent rights within that state is unconstitutional and void. Property in inventions exists by virtue of the laws of Congress, and- no state has a right to interfere with its enjoyment, or to annex ■conditions to the grant. If the patentee complies with the law of Congress, he has a right to go into the open market anywhere within the United States and sell his property.” Ex parte Robinson, 2 Biss. 309, Fed. Cas. No. 11,932.

That case was followed by Mr. Justice SwayNe of the supreme court of the United States, in considering a similar statute of Ohio, where a note taken for a patent right was required to have the words “Given for a patent right” prominently written or printed on the face thereof and above the signature, and it was held that such statute impaired the value of the property in the patent right created by the constitution and laws of the United States, and hence was unconstitutional and void. Woollen v. Banker, 2 Flip. 33, Fed. Cas. No. 18,030. Tbe Indiana statute was again considered' by tbe United States circuit court for Indiana, Judge Woods presiding, and it was again beld to be “clearly unconstitutional,” citing and following Ex parte Robinson, supra, and four adjudications of tbe supreme court of Indiana; and it was there pointed out that Patterson v. Kentucky, supra,. bad “reference to local restrictions upon tbe sale or use of’ tangible property” coming into existence under tbe patent,, and bad no application to a note taken on tbe sale of an interest in a patent right. Castle v. Hutchinson; 25 Fed. 394. So it has been beld that a state cannot impose a discriminating tax upon tbe exclusive right given to a patentee. In re Sheffield, 64 Fed. 833, 834.

An act of tbe legislature of Pennsylvania to regulate the-execution and transfer of notes given for patent rights required that any promissory note or other negotiable instrument given for an interest in a patent should have written or printed on the face thereof tbe words “Given for a patent right,” otherwise tbe note would be nonnegotiable, and, if’ taken with knowledge, tbe person taking tbe same would be deemed guilty of a misdemeanor; and tbe federal circuit court of tbe eastern district of that state beld that:

“Tbe monopoly granted by a patent is a property right created under tbe constitution and laws of tbe United States, and by those laws made assignable, and therefore a state law which prescribes that negotiable instruments in tbe ordinary form shall not be given or accepted for an assignment of tbe patent itself is unconstitutional, as obstructive of tbe exercise of a right vested by federal law.” Pegram v. Am. A. Co. 122 Fed. 1000.

It has been beld by tbe supreme court of Illinois that a state-statute of similar import to tbe Pennsylvania statute was “unconstitutional and void as an attempt to regulate and control by state legislation a matter of which Congress has sole jurisdiction.” Hollida v. Hunt, 10 Ill. 109. So it has been beld in Minnesota that “a state has no power to regulate or restrict the sale of patent rights.” Crittenden v. White, 23 Minn. 24. So tbe supreme court of Michigan held that a ■statute of that state “imposing unusual conditions on the •transfer of patent rights by requiring notes given therefor to show it, and making it a misdemeanor to take or transfer them otherwise, is unconstitutional as impairing rights that are regulated and protected by Congress.” Cranson v. Smith, 37 Mich. 309. To the same effect, People v. Russell, 49 Mich. 617, 14 N. W. 568; Wilch v. Phelps, 14 Neb. 134, 15 N. W. 361. In Comm. v. Petty, 96 Ky. 452, 29 S. W. 291, it was held that:

“While the states have jurisdiction to legislate on the matter of the use or sale of the article which is brought into existence by virtue of the application of the patented process, Congress alone has power to regulate the sale of the right of the inventor in his discovery, and the manner of the disposition of such rights.”

To the same effect, Rumbley v. Hall, 107 Ky. 349, 351, 54 S. W. 4.

As indicated, there are adjudications the other way, notably in New York, Pennsylvania, and Ohio. The adjudications seem to differ mostly upon the construction given to the local statute, or the effect given to the decision of the supreme court of the United States in Patterson v. Kentucky, 97 U. S. 501. So far as this court has spoken on the subject •'it is in harmony with the views above expressed. State v. Lockwood, 43 Wis. 403. It should be observed that Mr. Justice SwayNE was a member of the court and concurred in the decision of Patterson v. Kentucky, supra, and yet no mention was made therein of his decision in Woollen v. Banker, 2 Flip. 33, Fed. Cas. No. 18,030, decided only a little more than a year before, as it obviously would have been had there been any intention of overruling it. The ■same is true as to the decision of Mr. Justice Davis in Ex parte Robinson, 2 Biss. 309, Fed. Cas. No. 11,932, made a few years previously, and followed by Justice Swayue in tbe case mentioned. We are constrained to bold, upon reason and authority, that eh. 438, Laws of 1903, is an invasion of the federal statute, and therefore unconstitutional and void.

3. The special verdict, as originally drawn and submitted to the jury, contained this question: “Did the defendant, Bice, at the time he talked with Mr. Eussell relative to an extension of the time of payment of the note, have knowledge of all the facts and circumstances which he now claims to know?” After the jury returned into court and asked for information on the special verdict, the court withdrew that question from the consideration of the jury; and, after the rendition of the verdict, the court found, as matters of fact, “that within a few days after maturity of said note sued on, the defendant, Bice, inquired of one of the plaintiff’s officers as to whether the time of payment thereon could be extended, but the defendant did not, at the time of making such inquiry or at any other time, promise to pay said note or any part thereof, except the promise made in and by the’note itself ; that the defendant, at the time he made such inquiries, did not have full knowledge as to all the facts, or as to his rights in the premisesand, as a conclusion of law, the court found “that said defendant, G. B. Bice, did not, after the giving of said note upon which this action is brought, ratify said note in any manner.” The plaintiff contends that such findings of the trial court were not justified by the evidence, and that that court should either have answered the seventeenth question in the affirmative or submitted the same to the jury for determination. After careful consideration we are unable to say that the evidence bearing upon the question is undisputed, and hence it was error to withdraw 'the question from the jury.

4. The principal controversy is as to whether the defendant was induced to execute the written agreement and the notes in question by false representations made on tbe part of tbe plaintiff. Numerous exceptions are taken to tbe admission of testimony. A considerable portion of sucb testimony is mere hearsay. Nine witnesses were allowed to testify as to statements made on tbfe part of tbe plaintiff to other persons, not in tbe presence or bearing of tbe defendant, and some of them long subsequent to tbe execution of tbe notes and agreement. Of course, sucb statements could not have induced tbe defendant to sign sucb papers. Tbe admission of sucb testimony is sought to be justified, “not for tbe purpose of proving tbe representations made to tbe defendant,” but to prove bad faith and an actual intent to deceive on tbe part of tbe plaintiff. This court has recently held that, in an action upon a contract of sale which tbe defendant claimed he bad been induced to sign by false representations on the part of tbe plaintiff, it is immaterial whether sucb representations were made with a fraudulent intent or not, and that tbe admission of evidence of similar transactions between tbe plaintiff and other persons in no way involved in tbe litigation, offered for tbe purpose of showing sucb intent, was prejudicial error. Standard Mfg. Co. v. Slot, 121 Wis. 14, 18, 19, 98 N. W. 923, and cases there cited. To permit sucb proof of numerous independent transactions imposed upon tbe plaintiff tbe burden of disproving a multitude of collateral charges, not in issue nor involved in tbe controversy, and therefore was highly prejudicial to tbe plaintiff. For tbe same reason it was error to admit in evidence newspaper articles, circulars, pamphlets, etc., in no way tending to prove that tbe defendant was induced to execute tbe written agreement and notes in question by false representations made on tbe part of tbe plaintiff. Many of sucb articles were never seen by tbe defendant, and some of them were not in print until after the making of tbe notes and tbe agreement. And yet tbe.court charged tbe jury that they might consider all representations proven to have been made to tbe defendant up to tbe giving of tbe note in suit, whether made by word of month or in written or printed statements, proven to have been made by the company’s officers or agents, providing such statement was as to some existing or past fact. It is well settled that “representations, to be fraudulent, must relate to a.present or past state of facts, and relief as for deceit cannot be obtained for nonperformance of a promise looking to the future.” Patterson v. Wright, 64 Wis. 289, 25 N. W. 10; Louis F. Fromer & Co. v. Stanley, 95 Wis. 56, 69 N. W. 820; Field v. Siegel, 99 Wis. 605, 609, 75 N. W. 397; 14 Am. & Eng. Ency. of Law (2d ed.) 39. As a general rule, a mere .expression of opinion or belief as to the value or quality of an article sold, if so intended and understood, is not a representation of fact, and, though false, does not amount to fraud. The mere fact that a statement takes the form of an expression of opinion, however, is not always conclusive. Whenever there is any doubt as to whether it is made as a mere expression of opinion or as a statement of fact, the question must be determined by the jury or court. 14 Am. & Eng. Ency. of Law (2d ed.) 34-41; Mosher v. Post, 89 Wis. 602, 605, 62 N. W. 516; Maltby v. Austin, 65 Wis. 527, 27 N. W. 162; Warner v. Benjamin, 89 Wis. 290, 62 N. W. 179; Forest L. Co. v. Hanley, 94 Wis. 23, 68 N. W. 413; Deming v. Darling, 148 Mass. 504, 20 N. E. 107. Moreover, false representations, to be actionable, must be relied upon by the purchaser, and be of such a character and made under such circumstances as to justify the purchaser in relying upon them. Farr v. Peterson, 91 Wis. 182, 64 N. W. 863; Bostwick v. Mut. L. Ins. Co. 116 Wis. 392, 89 N. W. 538, 92 N. W. 246; Kaiser v. Nummerdor, 120 Wis. 234, 97 N. W. 932. See Kimball v. Bangs, 144 Mass. 321, 11 N. E. 113. Numerous exceptions were well taken to the admission of testimony in violation of one or more of the principles of law stated. Of course the terms of the contract were embodied in the written agreement, which speaks for itself.

6.Error is assigned because the defendant was allowed to read from the depositions of C. F. Mohr, J. E. Jones, and J. M. Russell, taken as adverse witnesses under sec. 4096, Stats. 1898, when such witnesses were present in court. This court has recently held that the president, secretary, or other principal officer of a corporation is, in effect, a party to the action, so that his examination, so far as competent, becomes independent evidence in the case, notwithstanding his presence in court. Johnson v. St. P. & W. C. Co. 126 Wis. 492, 105 N. W. 1048. Each of the witnesses mentioned appears to have been an officer of the plaintiff corporation. It is otherwise in case of a mere employee. Hughes v. C., St. P., M. O. R. Co. 122 Wis. 258, 99 N. W. 897; Eastern R. Co. v. Tuteur, ante, p. 382, 105 N. W. 1067.

6. Error is assigned for the rejection of testimony. We perceive no abuse of discretion in limiting the respective parties to fifteen witnesses on the question of the utility of the «device covered by the patent..

7. In charging the jury the court submitted questions 2, 4, '6, 8, 10, and 12 together, for the reason, as stated therein, that the instructions given thereon applied equally to each, ■and then submitted together questions 3, 5, 7, 9, 11, and 13, ■each of which was dependent upon the answer to one of such ■even-numbered questions. ' This method of submitting a special verdict is contrary to the spirit of the statute and to numerous adjudications of this court, commencing with Ward v. C., M. & St. P. R. Co. 102 Wis. 215, 78 N. W. 442. Sec. 2858, Stats. 1898.

8. The first question submitted was whether, at the time the note was given, the patented device had any practical •utility for the purposes for which it was patented. In charging the jury on the subject they were told that they must confine their “inquiry to the purposes named in the patent and those only,” but did not state the full purpose of the patent. This was misleading, although the jury were allowed to take the patent to their room and construe it for themselves.

9. Error is assigned because the court refused to instruct the jury to the effect that they must answer the first question “Yes,” unless it was established that the device was of no practical value; that, if the device was of any practical utility with any kind of coal, then they should answer that question in the affirmative. We perceive no. reason why such instructions or their equivalent should not have been given. Contrary to rules of law already stated, the court refused to instruct the jury to the effect that if the defendant had full opportunity to investigate the operation of the device and there was no concealment nor fraud on the part of the plaintiff, then it became the duty of the defendant to investigate and form his own opinion as to the value and utility of the device, and he could not rely upon mere expressions of opinion made by the officers or agents of the company.

10. Counsel for the plaintiff complain because the trial ■court did not follow the ruling of this court in Herman v. Gray, 79 Wis. 182, 48 N. W. 113. But the question as to the want of consideration, alleged as a defense in the answer, was not submitted to the jury. Besides, the judgment -dismissing the complaint, with costs, is not based upon the special verdict, but, as indicated, upon the findings of the court. This renders it unnecessary to review the numerous errors assigned, several of which seem to be well taken. The case ■seems to have been tried upon a misconception as to the legal rights of the parties. Upon a retrial the special verdict should be made to conform to the issues presented by the pleadings. We cannot say, as a matter of law, that the evidence fails to sustain any of the findings of the jury to the ■effect that the defendant was induced to execute the written agreement and notes in question by false representations made on the part of the plaintiff. Pratt v. Hawes, 118 Wis. 603, 611, 612, 95 N. W. 965. The rules of law applicable to the trial of such a question, are simple and well understood. Enough has been said to serve as a guide upon a new trial.

By the Court. — The judgment of the circuit court is reversed, and tbe cause is remanded for a new trial.