New York Bank-Note Co. v. Hamilton Bank-Note Engraving & Printing Co.

50 N.Y.S. 1093

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: April 15, 1898
• Status: Published

Opinions

O’BRIEN, J.

In the case of the New York Bank-Note Company against the Hamilton Bank-Note Engraving & Printing Company, upon the cross appeals from portions of an interlocutory judgment sustaining the defendant’s demurrer to the complaint on the ground that it failed to state facts sufficient to constitute a cause of action, many of the questions again pressed upon us were disposed of. 83 Hun, 593, 31 N. Y. Supp. 1060. As correctly summarized in the syllabus :

“If a person purchases from another a printing press, having knowledge of the existence of a contract between the vendor and a third person whereby the vendor has agreed not to sell such presses except under certain restrictions, such third person is entitled to enforce his contract as against the vendee, and in an action brought for that purpose is not bound to make any tender. Contracts prohibiting the use of personal property in a particular way are valid.”

It was further held that in such an action the Kidder Press-Manufacturing Company was a proper party, entitled to be heard, because it involved the question of its right to deal with its property. The Kidder Company was accordingly brought in by an amended complaint, and it now raises the objection that although it appeared in the action, and the case was tried upon the merits, and a judgment rendered, the court was without jurisdiction. Apart from the consideration of its actual presence in the litigation, and its vigorous contest of the plaintiff’s right to relief, which would seemingly make this a late day to raise the question of jurisdiction, it was made to appear that the contract between it and the plaintiff was made and signed in New York, and therefore, although both were foreign corporations, the court acquired jurisdiction. •

The Hamilton Company insists that the plaintiff’s acquiescence and laches in bringing its action, after full knowledge that it was purchasing or about to purchase machinery and plant for the purpose of printing strip tickets, is a bar to any relief, upon the principle that, “where the summary interference of a court of equity Is invoked, it must be invoked promptly,” which principle.has been applied in cases where parties have lain by and permitted large expenditures to be made in contravention of the rights for which they contend. While the soundness of such a rule is not disputed, it is not applicable to the facts here appearing. The first press purchased by the Hamilton Company was delivered in December, 1892; and on January 30, 1893, as appears by a letter of the plaintiff’s president, he knew that the Hamilton Company was attempting to secure a plant for strip-ticket printing. The most that can be said, therefore, is that after the first machine was purchased the plaintiff had knowledge; and, as to the second machine, it has been found that the Hamilton Company purchased it with full knowledge of the plaintiff’s rights, and in hostility thereto. Hence what was said in Beal v. Chase, 31 Mich. 532, is here applicable:

“Laches is a most important circumstance, where parties are proceeding to expend money in reliance upon a supposed right, and upon the apparent acquiescence of the party who might question the right. But in this case defendants were misled by no acquiescence. They entered upon their undertaking in open and known hostility to the complainant, and in reliance, not upon his acquiescence, but upon their ability to defeat him in a legal contest. They knew from the very first that their position in respect to this contract must be antagonistic to that of the complainant, and no consideration of good faith on his part could require that he should open the legal warfare at the very earliest opportunity. When a hostile attitude is thus taken, the challenged party may justly be expected, and reasonably be allowed, to be wary and deliberate in choosing his time and opportunity for attack. * * * He might have moved sooner, but the law does not demand the utmost exertion of diligence in repelling a hostile invasion of one’s rights, thus deliberately undertaken with full knowledge of all the facts.”

The next question presented is as to the assignability of the contract of October 12, 1891, and as to the right of the plaintiff, as successor to the former company, to maintain an action upon it. It is insisted that it was not assignable, either by its terms, or in its nature; that the assignment vested the plaintiff with no rights, as against either defendant; and that, upon, the dissolution of the plaintiff’s assignor, whatever rights it may have possessed died with it. In regard to the first press, wdiich was purchased by the Hamilton Company before the dissolution of the plaintiff’s assignor, there was, as against the Kidder Company, at least, one breach of contract which occurred before the assignment, and the damages for that breach were clearly assignable. How far the Hamilton Company was affected by that breach, we shall discuss hereafter. With respect to the assignability of the entire contract, we think the defendants’ contention untenable. The contract itself neither expressly permits nor forbids the assignment, and the general rule is that a contract is assignable. If this contract was, in its nature, assignable, we think it was covered by the language used by the plaintiff's assignor in transferring its property; so that all that is left is the question whether the contract is, in its nature, assignable. It is argued that as it vests the title to the presses in the contractee, and authorizes it to lease thé same and to collect payments, thereby involving the relation of personal trust, credit, and confidence, coupled with liabilities, the contract is nonassignable. In Clarke, Cont. p. 530, we find the rule stated as follows:

“It may be said generally that anything that directly or indirectly involves a right of property is assignable, with the exception that rights and liabilities under an executory contract for personal services, or contracts involving personal credit, trust, or confidence, cannot be assigned.”

In Pol. Cont. (4th Ed.) p. 425, it is said: '

“Rights arising out of contract cannot be transferred if they are coupled with liabilities, or if they involve a relation of personal confidence, such that the party whose agreement conferred those rights must have intended them to be exercised only by him in whom he actually confided.”

And Whart. Cont. p. 220, § 848, says:

“When the assignee of an executory contract can perform the duty imposed by it as effectively as could the assignor, the fact that this duty is personal cannot be set up by the defendant in a suit by the assignee on the contract.”

We think, however, that it is doubtful whether the element of personal trust is involved in dealing with an ordinary business corporation, for the reason that such corporation has no personality to receive the trust. Its board, and even its managing officers, are liable to shift at any moment. In New England Iron Co. v. Gilbert El. R. Co., 91 N. Y. 167, it is said:

“The matter of the contract involved no personal relation or confidence between the parties, or exercise of personal skill or science; for the. contractor was a corporation, and its work was necessarily to be done through agents or servants.”

And in Devlin v. Mayor, etc., 63 N. Y. 17, it was said:

“Parties may, in terms, prohibit the assignment of any contract, and declare that neither personal representatives nor assignees shall succeed .to any rights in virtue of it, or be bound by its obligations. But when this has not been declared expressly, or by implication, contracts other than such as are personal in their character, as promises to marry, or engagements for personal services requiring skill, science, or peculiar qualifications, may be assigned, and by them the personal representatives will be bound. * * * When the contract is executory in its nature, and an assignee or personal representative can fairly and sufficiently execute all that the original contractor could have done, the assignee or representative may do so, and have the benefit of the contract.”

Passing these considerations, however, we think that the decision of the trial court should not be interfered with. By the contract the plaintiff’s assignor obtained the exclusive right to the use of the Kidder Company’s presses for the purpose of strip-ticket printing, and the method of protecting that right was defined. In brief, the Kidder Company agreed to put all its presses under the control of the banknote company. The latter was to dispose of them by making to purchasers leases in perpetuity, containing clauses forbidding the use of the presses for strip-ticket printing. It was explicitly provided that the bank-note company should retain the title to the presses, evidently in order to enable it the more effectually to enforce the performance' of the covenants. These leases were to be made “for such money as the Kidder Press Company shall nominate”; and the banknote company covenanted to “deliver to the Kidder Press Company the full consideration” thus fixed by the latter. It is clear, from a reading of these various provisions, that the bank-note company was not the sales agent of the Kidder Company, in the ordinary sense. It did not choose customers or fix terms. All this was done by the Kidder Company, and the bank-note company had not the slightest interest in these matters. The whole arrangement was made with the sole view of enabling the bank-note company to protect its own contract rights. As the contract itself states, the system was adopted as “the most feasible and proper way to protect the interests of the bank-note company in and to the proper control and ownership hereby acquired in the ICiflder Perfecting Press.” The bank-note company did but act as the Kidder Company’s right hand in carrying out the latter’s agreements, exercising no discretion whatever. It is difficult to discern any element of a personal or confidential nature which would make the contract nonassignable.

We are, however, unable to agree with the learned counsel for the plaintiff that the moneys received from lessees of the presses did not pass through the hands of the bank-note company. A provision already quoted distinctly specifies that the bank-note company shall “deliver” to the Kidder Company the consideration received. It is true that in a former clause it is stated that the Kidder Company shall sell, and “collect the money for,” as many presses as it chooses, so long as the bank-note company’s rights are protected. But it is plain from the context that the money was to be collected, not directly from the vendees, but through the medium of the bank-note company. A general right to sell was conferred, but it was to be exercised in conformity with the arrangement so carefully defined. The bank-note company was thus under a liability to account to the Kidder Company for all moneys received from lessees. We agree that, in general, rights arising out of contract cannot be transferred if they are coupled with liabilities. Arkansas Val. Smelting Co. v. Belden Min. Co., 127 U. S. 379, 8 Sup. Ct. 1308; Pol. Cont., supra. We do not think, however, that the general rule applies to the facts of this particular case. The defendants contend that, as the assignor placed itself under a liability to the Kidder Company, the latter had the right to insist upon the responsibility of the company with which it had contracted, and to decline to receive in its stead that of another company, with which it had not contracted. The answer to this is that there was in truth no such substantial substitution of parties. Technically the contract was assigned, but practically it was not. The assignment was part of the reorganization, and but a means to that end. With it were assigned all the property and choses in action of the original company, with the exception of one designated claim. The stock of the new company was distributed ratably among the stockholders of the old. Technically the new company was a distinct legal entity from the old, but to all intents and purposes it was the same concern. It is strenuously urged that the management changed. In fact, this is not so. It appears that when the contract was made, in October, 1891, some men of financial standing were officers of the company who never had any interest in the new company. But these men left the company before the reorganization, and whatever advantage accrued to the press company from their presence in the old bank-note company had been lost in any event. The risk of such changes is assumed by every one who contracts with a corporation. The new company" had the same assets as the old, the same business, and, so far as appears, the same charter rights. To hold that it was an assignee of the contract, within the meaning of the rule relied upon, is to regard form and disregard substance. In the absence of special circumstances, there should, we think, be no hesitation in holding that the reorganization of a corporation does not prevent the new company from succeeding t*o all the rights and liabilities arising under contracts of the old. But, even if the plaintiff were not entitled to rely upon such a rule of law, the decision of the trial court that the contract was assignable ought not to be disturbed. The question of assignability is one of intent, to be deduced from all the circumstances, and may be controlled by express words in the instrument. So, also, general rules on the subject may be controlled by special facts. If the terms and subject-matter of the agreement leave any doubt upon the point, no reason is apparent why the difficulty should not be solved, as in any other case, by a resort to extrinsic proof. We think that the most the defendants can justly claim here is that such an ambiguity existed upon the face of the contract. To prove the real intention, the plaintiff showed that the assignor corporation had in September, 1890, passed a resolution authorizing a reorganization under the laws of West Virginia, and that Mr. Kidder, the treasurer of the press company, knew of this resolution before and at the time of the signing of the contract, and assented to a transfer of the contract to the new company. Mr. Kidder might not have been able to bind his company by" an agreement of this nature, but his knowledge of this fact was the knowledge of the company; for he was very prominent in the negotiations with the plaintiff and its predecessor, and was the officer who signed the contract sued upon in behalf of the press company. The press company thus knew of the contemplated transfer of the contract before and after it was made, yet it took no step indicating its disapproval, so far as can be seen, until the present action was brought. The point now made is evidently one raised by the ingenuity of counsel. This recognition of the plaintiff’s status is a relevant consideration. Devlin v. Mayor, etc., 63 N. Y. 8, 14. And upon all the facts the decision of the trial judge that it was intended that the contract might be assigned is not to be disturbed.

The only remaining question which we think it necessary to discuss is the question of damages, and, before, stating what we think the correct rule to be, it will be necessary to dispose of an incidental question, upon which the extent of damages to be allowed must be fixed. If the learned trial judge was right in his view that, when the Hamilton Company purchased the first press, they knew that there was a subsisting contract between the Hew York Company and the Kidder Company, but did not know its terms and conditions, and for that reason are not chargeable with any damages for tickets printed on that machine until the date when they became acquainted with such terms and conditions, then it is doubtful whether any damages would flow from the use of that machine, or as to whether its use could be enjoined. If that company, without notice, had purchased the machine, it would there.by have acquired an unrestricted right to its use; and it would be exceedingly difficult to formulate a principle upon which it would be liable for damages by reason of knowledge, which it subsequently acquired, that the machine which it had purchased without restrictions was subject to a contract which prevented its sale for unrestricted use. We agree with the construction given to the contract between the Kidder Company and the plaintiff’s assignor, that it covered the sale of the Kidder perfecting press, with or without attachments for printing strip tickets; and if the Hamilton Company purchased a perfecting press, without such attachments, with knowledge of the restriction existing as the result of the contract between the other companies, then it was liable for the damages which it inflicted upon the plaintiff in the use of such press for printing strip tickets. We are therefore brought to a consideration of the correctness of the finding of the learned trial judge upon the subject of notice by the Hamilton Company at the date of the purchase of the first press. He has found that the Hamilton Company knew of the existence of the contract, and it is not disputed that Gray, who signed the original contract on the plaintiff’s behalf, was at the time of the purchase of the first machine the vice president of the Hamilton Company, and knew all the terms and conditions of the contract; and, although his exact duties at the time of the purchase are placed in doubt by the testimony directed to showing that he was not the manager of the Hamilton Company at that time, it appears beyond dispute that he was really the agent who procured the purchase of the first press. Thus, in his letter of December 14, 1892, to Mr. Kidder, Gray says:

“Mr. Seebeck [president of the Hamilton Company] proposes, at my suggestion, to come on to-morrow, and arrange details of the machine with you Friday. He knows nothing of my conversation with you last night, but the bare fact that you offer to sell or build us one of the double perfecting presses.”

It therefore appears that Gray, who knew all about the plaintiff’s contract, was the procuring agent of the Hamilton Company in the purchase. We have also the evidence of Mr. Kendall that he read to Seebeck, prior to the purchase, all the material portions of the plaintiff’s contract; and Seebeck’s denial of this must be taken in connection with his letter of November 28, 1892, in which he asks whether the Kidder Company’s obligations cover any and all presses, or only the perfecting press. Pomeroy, in his work on Equity Jurisprudence (section 597), says:

“A purchaser, or person obtaining any right in specific property, is not affected by vague rumors. * * * On the other hand, the proposition is established by an absolute unanimity of authority, and is equally true, both in its application to constructive notice, and to actual notice not proved by direct evidence, but inferred from circumstances, that if the party obtains knowledge or information of facts tending to show the existence of a prior right in conflict with the interest which he is seeking to obtain, and which are sufficient to put a reasonably prudent man upon inquiry, then it may be a legitimate, and perhaps even necessary, inference that he acquired the further information which constitutes actual notice. * * * If, however, it appears that the party obtains knowledge or information of such facts, which are sufficient to put a prudent mart upon inquiry, and which 'are of such a nature that inquiry, if prosecuted with reasonable diligence, would certainly lead to a discovery of the conflicting claim, then the inference that he acquired the information constituting the actual notice is necessary and absolute; for this is only another mode of stating that the party was put upon inquiry, that he made the inquiry and arrived at the truth. Finally, if it appears that the party has knowledge or information of such facts sufficient to put a prudent man upon inquiry, and that he wholly neglects to make any inquiry, or, having begun it, fails to prosecute it in a reasonable manner, then, also, the inference of actual notice is necessary and absolute.”

See, also, Williamson v. Brown, 15 N. Y. 354; Kirsch v. Tozier, 143 N. Y.397, 38 N. E. 375; Baker v. Bliss, 39 N. Y. 70; Edwards v. Dooley, 120 N. Y. 553, 24 N. E. 827.

The evidence as to the knowledge of Seebeck, the president of the Hamilton Company, as shown by his letters, seems to us to be conclusive upon the question that, if he did not have in mind when the press was first purchased the exact terms of the plaintiff’s contract, he had sufficient information to put him upon inquiry; and he was bound, in order to put the Hamilton Company in the position of an innocent purchaser, to prosecute his inquiries, or ask for the contract. He undoubtedly knew that Gray had formerly been an officer of the plaintiff company, and he could have obtained all the information necessary by asking him. We think, therefore, that the finding, as also the decree, limiting the damages with reference to the first machine from the time of the repairing or rebuilding of the attachments by the Kidder Company, should be modified so as to permit the plaintiff’s damages to run from December 29, 1892, the date when the first machine was delivered, instead of from about August, 1893, as provided in the decree. We think, also, that the learned trial judge was in error in stating the rule of damages to be the actual profit which has been made by the Hamilton Company by the printing by it .of strip tickets upon both presses purchased of the Kidder Company. In this connection it must be remembered that the Kidder press, with the attachments, was not secured by patents to which the plaintiff’s assignor became entitled by virtue of its contract; but there were other means open of printing strip-tickets, which, however, required two operations to print on both sides. Thus, it was shown that there was a press in the possession of the -Hamilton Company for many years prior to 1891, which, though it did not print on both sides at once, did print in two colors on one side, and consecutively 'number and perforate strip tickets, and strip tickets were printed on it long prior to the making of the contract which lies at the basis of this action. • Such tickets had to be backed by running them through the press another time. These two operations necessarily took more time, and involved a greater expense, than the one. ■ The value of the Kidder perfecting press, with attachments, was in the rapidity, facility, and economy with which the tickets could be printed; thus enabling one who had a perfecting press to supply at a low rate the daily demand for large quantities of strip tickets, which could not be accomplished without such a press. Notwithstanding, however, the advantages of the Kidder press, it was necessary, in order for the plaintiff to secure, as a measure of damages, the whole profit derived by the Hamilton Company from printing strip tickets, to show that the Kidder perfecting press was the subject of a monopoly, by virtue of valid outstanding patents, or was the only available machinery for printing strip tickets. This it did not do. The evidence is susceptible of the inference that what these presses accomplished was a saving over any other method of printing strip tickets. In such a case, even in a patent suit, the damages would be confined to the exact saving thus effected. In Walk. Pat. (3d Ed.) p. 553, the rule is thus stated:

“The advantage which the defendant derived from using the complainant’s invention, over what he could have derived from using any other process, or any which was known prior to that invention, constitutes the profits which the complainant is entitled to recover.”

What .the defendants here are liable for is the natural and obvious consequences of the breach of the contract; and such consequences, in the shape of damages, could only be the gains by printing on the presses in question, instead of on any other press purchased elsewhere, or capable of being manufactured by others than the Kidder Company.

Our conclusion, therefore, is that the interlocutory judgment and decree should be modified with respect to the date from which the accounting as to the first machine should begin, and that upon such accounting the measure of damages to be applied should be as herein stated; and, as so modified, the judgment should be affirmed, without costs.