121 Misc. 78 | N.Y. Sup. Ct. | 1923
The action was for rescission of a contract licensing the defendant Pat J. Casey to make motion picture versions of thirteen plays owned or controlled by the plaintiff. After the obtainment of these motion picture rights to the plays, in 1913, Casey assigned the same to a corporation formed for the purpose of making the motion picture productions of the plays, which corporation was named “ Protective Amusement Company ” and which corporation was one of the defendants herein. Thereafter the Protective Amusement Company caused these plays, with the exception of one play, “ The Royal Mounted,” to be produced by the Biograph Company, a defendant herein, and the plays were thereafter distributed through the agency of one Waters for a time, and subsequently through the agency of the General Film Company, a distributing organization.
Under the license agreement between plaintiff and Casey the latter was required to make certain payments to plaintiff, based upon each week of actual exhibition of the pictures so produced. After his default in these payments and in November, 1916, the plaintiff rescinded its contract and so notified Casey and the other defendants. In spite of such rescission the defendants continued to distribute and exhibit the plays, and this action was brought to rescind the license agreement to Casey and to enjoin the defendants from further exhibition or other exploitat'on of these plays and for an accounting and damages.
After a lengthy trial Mr. Justice Hotchkiss rendered an opinion in which he found that there had been a breach by Casey of the essential conditions of the contract, and wherein he held that the said contract should be rescinded. It was found that Casey was bound to account to the plaintiff for all moneys received as a result of any exhibition or exploitation of the plays, from the time when his early payments ceased down, to the entry of the decree. On the theory that, independent of statutory proceedings based on infractions of the Federal Copyright Law, in the instant proceeding the plaintiff’s rights were determinable solely by resort to the provisions of the contract and such rights as were afforded by the common law; that since the contract licensing the exhibi
■Raftery v. World Film, Corporation, 180 App. Div. 470, is strikingly analogous. In that case there had been turned over to the defendants for production purposes a negative and twenty-six prints of a picture. The contract obligated certain payments to be made weekly with statements showing receipts, with privilege to plaintiff of inspection of defendants’ books monthly. The defendants defrauded plaintiff by not paying the proper percentage of the receipts, by maintaining fictitious and fraudulent books, and by preventing opportunity of inspection; there was, likewise, a retention of possession of the prints by defendants. There the court said in upholding the right to rescission: “ The consideration of the contract was the payment of fifty per cent of the gross proceeds after certain deductions. Inasmuch as the defendant was giving the production, through its different agencies, the amount of those proceeds were known only to the defendant. It was, therefore, deemed necessary to stipulate that the defendant should make weekly reports of the gross receipts, and should allow plaintiff access to its books that their accuracy might be tested. The giving of false and untrue reports of the proceeds and the refusal of the defendant to allow the plaintiff access to its books as stipulated, were clearly ‘ material and willful ’ breaches and ‘ repudiation of the contract or an essential part thereof,’ and also such breaches ‘ as substantially defeats its purpose.’ It would seem from this authority that the breach must be fundamental if it be not willful, but if willful, then a breach in any material stipulation constitutes ground for rescission. That the breach must be of a material provision is undoubted, but that false reports upon which payments are made under the contract and a refusal to allow a verification of those reports constitute a breach of a material stipulation in the contract is too plain for controversy. (See, also, Norrington v. Wright, 115 U. S. 188, 204, 205; Kokomo Strawboard Co. v. Inman, 134 N. Y. 92.)” It seems clear that the defendant Casey 'substantially failed to perform the agreement made by him, and has placed the plaintiff in a situation entitling a rescission of the agreement. Every contracting party has the legal right to consider himself absolved from his obligation where the other contracting party has failed to perform the substantial conditions of the agreement.
It is contended by defendants that, assuming all the foregoing to be true, under the notice of rescission the plaintiff has adequate legal remedies for its violated rights and equity should not decree a rescission remitting plaintiff to the protection of its rights in
From the foregoing, principles of equity jurisdiction, as construed by authoritative decisions, plainly entitle the plaintiff to a decree of this court declaring the plaintiff’s right to terminate the contract, as was done, and making effective, by decree, such determination. There are interesting questions arising, especially in view of the introduction of the new evidence as to the plaintiff’s additional rights of relief by way of accounting against the several defendants. It would seem unnecessary to dwell at length upon the patent liability of the defendant Casey to account to plaintiff for moneys received during the entire time, from the inception of the contract to the time of entry of decree. With the views of the justice who presided at the initial trial, respecting his liability, I am in entire accord. The promise on his part was a personal one notwithstanding who might exhibit or where the exhibitions under other auspices might take place. The terms of the contract are explicit, and fasten upon him that liability up to the time of the rescission. For the period following, the jurisdiction of this court is broad enough on well-known principles for the avoidance of circuity of actions, and its desire as well as practice is to afford whatever relief the nature of the case might require, including all phases up to the termination of the litigation. The necessity of turning over the gains on a basis somewhat analogous to that of a trustee who has acquired profits by wrongful use from the property of the recipient of the trust, is the logic of the claim; for which reason this court,
On the other hand, as to the period following the notice of rescission, it is claimed by the defendants that no relief by way of accounting can be afforded plaintiff in this action, for the reason that subsequent use of the plays in films placed the defendants in a position wheré, at the most, they could be charged with a violation of copyrights, necessarily denuding this court of jurisdiction. In other Words, after the enforced cancellation of the contract the defendants exercised rights dehors the contract as if license thereto had never been issued; that their use thereafter could not be construed as one by reason of contractual right but one constituting purely an infringement of copyright, cognizable alone by federal j urisdiotion, Henderson v. Dougherty, 95 App. Div. 346; Schalkenbach
The plaintiff is entitled to ■ a decree rescinding the original contract as of "the date of notice, declaring the same "canceled, and enjoining the defendants from asserting or exercising any rights under the contract and from the further use or disposition of the negative or positive prints of the plays; to the repossession of the plays and all rights therein; to the return of the manuscripts, directing the Biograph Company to transfer to the plaintiff the copyrights upon the three pictures on which it had obtained copyrights, directing the defendants Biograph Company and Protective Amusement Company to account to plaintiff for the moneys received by them, or either of them, after February 25, 1916, from the reproduction and exploitation by motion pictures of the five uncopyrighted plays, and directing the defendant Casey to account for all dealings with the copyrighted plays from the date of the contract to February 25, 1916, and as to the uncopyrighted plays, to the time of the decree. Submit findings and decree in accordance with the above.
Judgment accordingly.