111 N.Y.S. 363 | N.Y. App. Div. | 1908
• The precise relation of the parties and their rights and obligations under the different contracts involved in somewhat complicated transactions must be ascertained before attempting to deal with the questions presented by this appeal. I shall content myself with a statement of my conclusions as to the effect of said contracts, so far as such conclusions seem to be obvious, and shall eliminate all details which do not appear to have an iñáportant bearing on the questions to be decided.
Prior to June 28, 1888, Thomas A. Edison, the inventor of the phonograph, organized and on that date controlled two corporations, The Edison Phonograph Company and The .Edison Phonograph Works;, the former undertook to exploit his said inventions in the United States and Canada, and to it he assigned his patents and was to receive certain royalties; the latter was given the.exclusive right to manufacture the patented articles. One JeSse H. Lippincott was the sole licensee of the American Graphop'hone Company, the owner of certain inventions, protected by letters patent, covering the grapliophone. Pursuant to contract with said Edison, made June 28,1888, said Lippincott organized the North American Phonograph Company for the purpose of uniting the control of said two inventions. Pursuant to contracts executed by all of said parties, said North American Phonograph Company undertook, and was given the exclusive right, to exploit and introduce commercially the phonograph and graphophone in the United States and Canada, and said Edison agreed to and did assign to it the stock of said Edison Phonograph Company, which he owned, in consideration of the payment of $500,000, which by. the agreement of June twenty-eighth was to be paid as follows, viz,: $10,000 on July 13, 1888 ; $115,000 on September 1, 1888 ; $125,000 on October 1, 1888, and $250,000. on November 1,1888. It was also provided by said agreement that the obligations of said Edison thereunder should cease in case a default in said payments should be made and continued for ten days, or in case said North American Phonograph Company should fail or refuse to execute the contracts contemplated. Pursuant to said agreement said Edison entered into a contract with said North American Phonograph Company under date of August 1, 1888, whereby he agreed to assign to it without further consid
The business contemplated by the parties to the* different contracts hereinbefore referred to was not as successful as they anticipated, and in 1894 said North American Phonograph Company became insolvent, and a receiver of it was appointed by the Chancery Court of New Jersey. On the 8th day of February, 1896, the assets of said insolvent company were sold by the receiver at public auction pursuant to a decree of said court, and Mr. Edison being the sole and highest bidder became the purchaser, paying $50,000 for the stock of the Edison Phonograph Company and $50,000 for the other assets which included his patents and the various contracts of said company. He assigned his bid to the National Phonograph Company, a New Jersey corporation then recently incorporated, and it assigned to a Mr. Ott its interest in said contracts under said bid. Said receiver transferred to said National Phonograph Company the stock of the Edison Phonograph Company and the patents owned by the insolvent and assigned said contracts to said Ott, who agreed to perform the several stipulations, covenants and agreements therein made by said North American Phonograph Company. The said National Phonograph Company proceeded to develop the business independently of the licensees of said North American Phonograph Company, and to sell the patented articles through other parties with whom it made so-called jobbers’ or dealers’ agreements. The defendant is purchasing said articles from said company at Orange, N. J., and selling them in the State of New York. This action was begun June 19, 1906, to enjoin the defendant from so doing, and for an accounting.
The trial court found that none of the inventions of Mr. Edison other than for factory processes made prior to the sale of the assets of the North American Phonograph Company, and used by the National Phonograph Company in the manufacture of phonographs, records or supplies, were in force at the time of the commencement of this action, all either having expired.by reason of expiration of the term of the patent or by reason of shorter term foreign patents, or having been discarded, but that an invention was made by Mr.
The respondent’s position is that the National Phonograph Company is the successor of the North American Phonograph Company ; but that position is untenable. (New York Bank Note Co. v. Hamilton B. N. Co., 180 N. Y. 280.) The National Company purchased through Hr. Edison the assets of the North American Company at receiver’s sale pursuant to a judicial decree. There was nothing in that decree which required the purchaser to assume the obligations of the insolvent company, and the purchaser at a judicial sale of the assets of an insolvent corporation does not assume the latter’s obligations. (Hoard v. Chesapeake & Ohio Railway, 123 U. S. 222; Sullivan v. Portland, etc., R. R. Co., 94 id. 806.) There is a finding “ that such acts (referring to acts set forth in previous findings) were done pursuant to a scheme or .plan and as an expedient and device to unlawfully invade the said exclusive territory of this plaintiff.” But so far as that may refer to the appointment of a receiver of the N orth American Phonograph Company, the sale of its assets and the purchase thereof by the National Phonograph Company, there is no evidence to. support it. It is unquestioned that the North American Phonograph Company was insolvent, a receivership was necessary, and Mr. Edison or a company organized by him had as much right to purchase the assets as anybody had. In fact his purchase was probably fortunate for the creditors. He may have intended that the new company organized by him should proceed to develop the business independently of the lessees or licensees of the North American Phonograph Company, in' whose hands it had proved a failure, but that lias nothing tó do with the rights acquired or the obligations' assumed by the National Phonograph Company. There was no privity of contract between it and the plaintiff, or between Mr. Edison and the plaintiff. Neither it nor Mr. Edison could invade the plaintiff’s rights, but we must first-ascertain what those rights were. Obviously they must be determined as of the date of .the receiver’s sale. At that time the plain
On that question we are not concluded by the decisions of the Federal courts. (See New England Phonograph Co. v. Edison, 110 Fed. Rep. 26 ; New York Phonograph Co. v. National Phonograph Co., 112 id. 822; Rahley v. Columbia Phonograph Co., 122 id. 623; Columbia Phonograph Co. v. Whitson, 18 App. D. C. 565; New York Phonograph Co. v. Edison, 136 Fed. Rep. 600 ; New York Phonograph Co. v. Nat. Phonograph Co., 144 id: 404, and the other decisions called to our attention.) All of those decisions save the last Avere made on. demurrer or on application for an in junction pendente lite, and the question was whether the bill was good, or whether a prima facie case was made appealing to the discretion of the court. Those decisions were made on the theory
The jurisdiction of this court, is invoked on the ground that the suit is to enjoin the violation of a negative covenant, express of implied; and 1 shall assume for the purpose of the discussion that the North American Phonograph Company was under covenant with the plaintiff not to invade the latter’s territory. Undoubtedly a suit to restrain the violation of such a covenant may be maintained against the covenantor or any one conspiring with said covenantor to violate it; but neither the defendant, his vendor, nor Hr. Edison is under any covenant with the plaintiff, and I am unable to perceive how a suit strictly to enjoin the breach of a covenant can be maintained unless someone bound to discharge the covenant participate in its violation. Certainly none of the cases relied upon support any such proposition. In New York Bank Note Co. v. Hamilton B. N. Co. (supra) and Standard Fashion Co. v. Siegel-Cooper Co. (157 N. Y. 60) the covenantor was one of the defendants ; and Murphy v. Christian Press Assn. Pub. Co. (38 App. Div.
Woodward, Jenes, Hooker and Gaynor, JJ., concurred.
Interlocutory judgment reversed and new trial granted, costs to abide the final award of costs.-»