Stephenson v. Allison , 123 Ala. 439 ( 1898 )

TYSON, J.

The bill in this cause was filed by the appellant on October 22, 1895, seeking a rescission and cancellation of a certain mortgage executed by him to the respondent Allison on the 27th day of September, 1894, to secure the payment of three promissory notes of $333.33 1-3 each, due respectively January 27th, 1895, May 27th, 1895, and September 27th, 1895, upon the ground of fraud.

It was alleged in the bill that this mortgage was executed by the complainant to secure an indebtedness contracted with the' respondent Allison for the sale of a right to sell a patented churn in the State of Arkansas, and that Allison represented he had a patent upon this churn, the same being a new and novel invention, when in truth he had no patent and if he had, the same was neither useful nor novel and therefore void, and consequently there was no consideration for the notes and mortgage. The bill further charges that Allison represented to the complainant that he had a patent upon a certain sample churn which he exhibited to the complainant, when in fact, if he had a patent at all, it was upon a-different churn than the one exhibited; and that he represented to the complainant that the patented churn was useful and salable, that he had made sales of tlie patent right to make and vend the churn in large areas of territory ih Alabama, Tennessee and Texas, when in fact, said representations as to salableness and of the sales of the patented right in those territories, were wholly false. , ■

There was an amendment to the bill in Avhich it was averred that before the commencement of- the suit the complainant demanded of Allison a rescission of the sale and transfer of the patent right to him for the State of Arkansas and a release of the mortgage, Avhich Allison had refused, and had offered to transfer and return to him all rights which the complainant had acquired under the deed to him from Allison to sell the churn in the State of Arkansas. It Avas also averred in another amendment to the bill, that “complainant submits himself to the jurisdiction of the court, and offers to restore or return anything which the court may consider him bound to do.

“After complainant’s return from Arkansas he sent one E. E. Gunn to defendant Allison to get him to agree to a cancellation or a rescission of the trade, but said Allison refused to do so, and then said Gunn saAV said defendant Harris who likeAvise refused to agree to a rescission even for a bonus of $500 though complainant was under no obligation to rescind. Not before complainant’s return from Arkansas did he know that Allison had not a pateht on the particular device exhibited to him.”

Allison ansAvered the bill in Avhich he. specifically denied making any false statements whatever, and asserting that he had letters patent from the United States government authorizing him to make and vend the churn throughout the said United States of America under the act .of Congress regulating patents, and setting up as a further defense, that if there Avas any fraud, the complainant had ratified and affirmed the contract of sale by making sales of the patent right to persons in the State of Arkansas to make and vend the churn in several counties in that State. Harris, the other respondent to the bill, who AA*as the OAvner of two of the notes secured by-a transfer from Allison, filed his answer showing his acquisition of these notes. Both the answers of Allison and Harris were made cross-bills 'and prayed a foreclosure of tlie mortgage. '

Tlie ansAVer of complainant to these; cross-bills contains, in addition to the averments of fraud alleged in his bill and amended bill, the defense that the letters patent issued to Allison Avere-invalid for the reason that the invention or device he sold- to complainant Avas not patentable.

‘ So 'far as the complainant’s right to maintain the bill and the decree denying him relief aré concerned, there are'two propositions supported by the undisputed evidence' conclusive of the correctness of the decision of the chancellór. Thé first proposition, upon Avhich the correctness of the decree may be based, is the failure of the complainant to prove any demand of Allison to rescind, the contract of sale at any -time,, or the refusal of Harris to agree tó a rescission for a bonus 'of $500, and the knowledge on the part of the complainant “that Allison had' not a patent on ■ the particular deAdce exhibited to him” until his return from Arkansas. On the contrary, the evidence affirmatively establishes that no demand Avas made upon Allison and no refusal'by Harris as alleged. Furthermore, complainant by his own testimony establishes that he had seen the letters patent before ■making the purchase,, and after making the trade he asked Allison for them, who informed him that he would have to send to Washington and get a copy. “I wrote to Troup at Washington and he sent them to me. I saw the letters patent about the time I made'the trade-or shortly afterAArards.”

The second proposition Avhich is conclusive against his right-to maintain'the bill to-rescind for fraud -is also supported by his testimony in which he shows,, that after he became aAvaré that Allison induced him to enter into the contract of purchase by fraudulent representations, as he alleges, he sold in the State of Arkansas a number of patent rights, receiving notes, money and land in payment therefor. Quoting his OAvn testimony on this point, in answer to'the question, “State whether or not you had received information of the falsity of the various representations made by Allison to you prior to disposing of this territory in Arkansas?,” he said: “Yes, sir, I did. I knew it before I went to Arkansas. Of course, I was into it and. had to do the best I could. After I commenced working I found that it was no good.” Continuing he said: “I learned that [referring to certain statements which he alleges Allison made that were false about the sale of the churns around Danville] before we left here. I also learned after I had purchased and before we left here that he had not sold Tennessee and Texas, but I had made the agreement and I thought I would make the money out of it if.,I could. After getting-into it I tried three times and could do nothing with it.”'

. No proposition is better settled than “if the party de-' frauded would disaffirm the contract he must do so at the earliest practical moment after discovery of the cheat. That- is the time to make his election and it must be done promptly and unreservedly. He must not hesitate ; nor can he be alloAved to deal with the subject-matter of the contract and afterwards rescind. The election is with him — he may affirm or disaffirm the contract but he cannot do both; and if he concludes to abide by it, as upon the Avhole advantageous, he shall not afterwards be permitted to question its validity. The party avFo would disaffirm a fraudulent contract must return whatever he has received from it. This is on a plain and j'ust principle. He cannot hold on to such part of the contract as may be desirable on his part and avoid the residue; but must rescind in toto, if at all.’’—Masson v. Bovet, 43 Am. Dec. 651; s. c. 1 Denio, 69, and note; Dill v. Camp, 22 Ala. 249; Barnett v. Stanton, 2 Ala. 181.

It Avas unquestionably the duty of the complainant not to deal with the patent right acquired by him from Allison by making sales in Arkansas under, it after he came into the possession of the knowledge of the fact that he had been duped, as he contends. As Avell Avas it his duty to offer to place Allison in statu quo, and he could not deprive himself of the power to do so by making sales of patent rights of certain counties in the State of Arkansas to other persons after he became informed of the existence of the alleged fraud. Having dealt Avith the property as his OAvn, and failing to make the venture a business success, notAvithstanding he conceived that he had been defrauded by Allison, he must now be held to his bargain, unless his defense to the cross-bill can be sustained. He must stand the consequences of his own speculation, and be held to a ratification of the contract in its entirety. He will not now be allowed to visit his misfortune upon the head of Allison. — Betts v. Gunn, 31 Ala. 219.

The remaining question is whether the letters patent issued to Allison were invalid by rea sop of being an infringement of other patents. This is the sole matter of defense to the cross-bill not disposed of in what we have said as to complainant’s right to maintain the original bill.

Much is said in the brief of complainant’s counsel as to the “utter uselessness” of the invention, its novelty, utility and worthlessness. It would seem as between suitors, where the question involved is infringement vel non, the rule is, the presumption óf patentability arising from the grant of letters must stand until overcome by proof, and the proof to overcome this presumption must be of such character as to establish the facts set up beyond a reasonable doubt. And this rule seems to prevail where the Avant of novelty and utility is invoked to overcome the presumption Avhich arises from the grant of letters.—Ross v. Montana, 45 Fed. Rep. 424; Washburn v. Beat ’em All, 143 U. S. 275; Cantrell v. Wallick, 117 U. S. 689. Says the court in the case oíCantrell v. Wallick, supra: “The burden of proof is upon the defendants to establish this defense [prior use and want of novelty]. For the .grant of letters patent is prima facie evidence that the patentee is the first inventor of the device described in the letters patent and of its novelty. Not only is the burden of proof to make good this defense upon the party setting it Tip, but it has been held that every reasonable doubt should be resolved against him.”—See also Lehnbeuter v. Holthaus, 105 U. S. 94.

As to what is patentable, it Avould seem, is any invention which embraces a new device or element or a new combination of known devices producing a new and useful result.—Parks v. Booth, 102 U. S. 96; Loom Co. v. Higgins, 105 U. S. 580. Or a new combination of old elements, so as to produce a useful machine or a new mode of applying old instrumentalities if it will produce a better result, are patentable.—Wicke v. Ostrum, 103 U. S. 461; Lawther v. Hamilton, 124 U. S. 1.

It appears tliat the court may examine the specifications and drawings upon which the letters patent are issued for the purpose of ascertaining the nature and character of the device or invention and compare it with the specifications and drawings which it is alleged to infringe.—Wicke v. Ostram, supra,; Brooks v. Fiske, 15 How. 212; Hogg v. Emerson, 11 How. 587. An examination of the specifications and drawings of the Allison patent and those of Wright and Cochran, shows that the Allison patent differs very essentially from either- of them. We will not undertake to point out these differences, since this question is unnecessary under the view we take of. the evidence in the record. The weight of the evidence as to the novelty and utility of the Allison patent, independent of the great weight given by the Federal courts arising from the presumption of the grant of letters, is with Allison.- Conceding the letters patent only create a prima facie presumption, we are of the opinion that the chancellor was correct in finding upon the evidence that the churn was novel and useful.

There is no merit in appellant’s point as to the misdescription of the lands in the register’s report of sale. The original decree condemning the land to the satisfaction of the mortgage lien properly describes it.

The notes secured by the mortgage contained the stipulation to pay “ten per cent attorney’s fees if not paid at maturity.” It was the manifest intention of the parties, maker and payee, that the maker should pay ten per cent, upon the amount due upon the notes, after maturity, in the event the payee was compelled to employ attorneys to enforce their collection. The purpose of the stipulation was to reimburse the payee or his assignee who, in consequence of the debtor’s default, should be put to the expense of employing an attorney to render services in the enforcement of his demand. Tompkins v. Drennen, 95 Ala. 466. That such contracts are legitimate and enforceable under the- decisions of this court, is beyond the pale of controversy. And there is no good reason why they should not be. Courts everywhere recognize the right of all persons sui juris to enter into such contracts as they may choose, and to put into them any term or stipulation they may agree upon, so long as the contract violates no rule of law. Many cases involving similar stipulations to the one under consideration, have been recognized by this court as binding and enforceable. And, so, too, it is competent for the contracting parties not only to stipulate for a reasonable attorney’s fee to be paid by the maker of a note in the event of the collection after default by an attorney, but to fix the amount of the reasonableness of such fee.' This proposition is clearly recognized in the cases of Wood & Bros. v. Winship Machine Co., 83 Ala. 424, and Ledbetter & Co. v. Vinton, 108 Ala. 644. In each of these cases .there was a judgment by default for the entire amount due upon the note, in which the fee was fixed at ten per cent, including this fee, without the intervention of a jury to assess the damages. In each of the cases this court upheld the judgments.

The only case we have been able to find which can be -construed in the remotest degree to militate against these, is the case of Camp, Glover & Co. v. Randle & Co., 81 Ala. 240. In this latter case the note also contained a stipulation to pay ten per cent attorney’s fee, and a charge was requested “that if the jury believe the evidence, they will find for the plaintiffs the amount of the notes and interest at the rate of 12 per centum per annum and a reasonable attorney’s fee.” This court said: “The plaintiff offered no proof of the value or amount of a reasonable attorney’s fee for bringing the suit. The' charge requested was properly refused, because it claimed a finding on that phase of the case, without any testimony to support it.” It needs no further comment to demonstrate that the court did not decide that the sipulation in the note sued upon was a stipulation for a reasonable attorney’s fee which required proof of its reasonableness before a recovery could be had upon it, or that the stipulation by which the amount of such fee was fixed did not furnish sufficient proof of its (reasonableness. Where such a stipulation inserted in a note or contract, becomes a convenient cloak for usury, we do not doubt it may be assailed by the maker in this respect, and lie would be allowed to defeat a recovery to the sanie extent as in other cases where usurious notes or contracts are sought to be enforced. But the stipulation for an attorney’s fee which is reasonable, has no vitiating infirmity which subjects it to the defense of being in violation of the statute against usury.—Shelton v. Aultman & Taylor Co., 82 Ala. 315; Munter v. Linn, 61 Ala. 492.

Furthermore, where the note is subject to this infirmity by reason of the amount of the fee fixed in it, the maker, in order to avail himself of it, would.have to specially plead it.—Kilpatrick v. Henson, 81 Ala. 464.

Nor is such a stipulation a mere penalty to be paid by a written promise.—Wood & Brothers v. Winship Machine Co., supra.

The record in the cause under consideration discloses that no objection or defense was made by the appellant by his pleading or otherwise to the stipulation in the notes under discussion. If he conceived that it vitiated the notes to any' extent On account of rendering tliem usurious, he should have made it known by his answer to the cross-bill.

It is true the record fails to disclose that any evidence was offered to prove that the attorneys in the cause rendered any services for the holders of .the ■ notes. The, pleadings filed in the cause in behalf of the owners of the notes to enforce their collection, disclose their appearance and necessarily the service performed in their preparation. Besides they are officers of the court, and presumably appeared in open court as counsel representing their clients, and presumably their appearance and the services rendered by them were with full authority to do so, either under an express or implied promise to receive compensation for sixth services. It would have been a work of supererogation and a useleess accretion of costs to have required them to propound interrogatories to themselves to prove the rendition by them of services in the cause; a fact as well known to the chancellor as to themselves. • Indeed, the preparation of the note of testimony and the submission of the cause for final hearing and other orders requested of the court, were services rendered by them in the very presence of the chancellor and under his immediate supervision. His knowledge of services rendered by them was just as much a knowledge of a fact upon which he was authorized to act, as the knowledge of a circuit judge that a defendant has made default, or says nothing in opposition to the rendition of a judgment, when a judgment nil elicit is asked for.

We find no error in the record, and the decree must be' affirmed.