Hall Manufacturing Co. v. American Railway Supply Co.

48 Mich. 331 | Mich. | 1882

Marston, J.

The plaintiff, a corporation organized under the act approved May 1st, 1875, providing for the incorporation of manufacturing companies, entered into an agreement with the defendant giving the latter the sole and exclusive license and right to manufacture and sell a certain patent rail upon a royalty to be paid therefor. The defendant manufactured and sold a certain number of tons and this action is brought to recover the royalty due therefor. The defendant alleges that the contract was one the plaintiff had no authority to enter into as it thereby abdicated a specific corporate function for a period of seven years.

The defendant should have thought of this sooner and not-waited until, after receiving the full benefit of the contract, it was called upon to perform on its part. Evidently the defendant does not set up this defense in the interests of the plaintiff or its stockholders, who seem to have been satisfied with the contract and made no objection thereto.

But was this contract an abdication of any of the plaintiff’s corporate powers?

The purposes for which the plaintiff was organized, were to engage in the manufacture and sale of this rail, and to sell rights and to grant license to manufacture on royalty or otherwise under the same, also buying, manufacturing and selling railroad rails, spikes, etc.

One of the objects specified was to sell rights and grant licenses to manufacture this rail on a royalty, and this was just what it did do in entering into this agreement with the defendant. In other words, it made a contract within the very letter of its charter. We think this contract was binding and that the defendant must carry out its part of the same.

It is in the second place said that this agreement was not made upon a valuable consideration, as the patent referred to was void.

This question we think is not open to controversy in the present case. The contract shows that'the defendant, at the time of this agreement, was the owner of the patent with which this is supposed to conflict, and that this agreement was entered into apparently to avoid any conflict, and in order that the royalty should be divided. The defendants therefore are in no position to question the validity of the plaintiff’s patent in the present action brought to recover a royalty earned or due on account of rails manufactured and sold thereunder.

The judgment will be affirmed with costs.

Cooley and Campbell, J J. concurred.