Leupold v. Weeks

Schmucker, J., delivered the opinion of the Court. This is an appeal from an order of Circuit Court No. 2, of Baltimore City, dismissing the appellant’s petition to have two claims in his favor treated as liens upon a fund, in the hands of the appellees, produced by the sale of certain patent rights. One of his claims, which was for the return of $2,500 paid by him toward exploiting the patents, was allowed in part, and the other claim, which was for an agent’s commission of ten per cent on the proceeds of sale, was rejected entirely by the Circuit Court. ²⁸² It appears from the record that the Automatic Telephone Exchange Company, an American corporation hereinafter called the Baltimore Company, was the owner of patents issued by the United States and different European governments for an automatic telephone exchange and had applications pending for additional foreign patents relating to the same contrivance. Desiring to market the foreign patents in the territory ' of the governments by which they had been issued or before which they were pending, the Baltimore Company through its general agent promised the appellant to give him an option on the sale of its European patents if he would furnish $2,500 to be applied to the cost of sending to Europe an experimental exhibit of its exchange and an electrical engineer in order to .properly make known the nature of the invention.

The appellant accordingly paid the $2,500 to the Baltimore Company for which he received the following receipt from Joshua Horner, Jr., its treasurer. Baltimore, March 8th, 1898. “Received of Richard J. Leupold twenty-five hundred dollars ($2500.) advanced by him to guarantee the safety of certain telephone exhibits and to cover certain expenses to be incurred in effecting sale of the patent-rights upon a certain system of automatic telephone service and appliances appertaining thereto, in the countries of Great Britain, France, Germany, Belgium and Austria-Hungary, or in any one or more of said countries said expenses being chiefly in the cost of the necessary transportation of an exhibit consisting of telephones and switches to Europe, from place to place in Europe and the retransportation of said exhibit from Europe to Baltimore, cost of passage of Richard J. Leupold and an expert electrician to Europe, and the traveling and living expenses of the said Leupold and the said electrician in Europe, and their return passage from Europe. The above mentioned $2500 is received upon the following terms- and conditions that it shall be subject only to the draft of the said Leupold, for his expenses and expenses of said electrician, and the above mentioned exhibit, that in event of the sale of any of the patent-rights in and for all or any of the countries above named, that, then so much of said $2500 as shall remain after the payment of the expenses above described, shall be delivered to the Automatic Telephone Ex ²⁸³ change Company as part payment of the purchase price. In the events of failure to sell any of said patent-rights in any of the countries above mentioned, that the balance of the said $2,500, after the deduction therefrom of all the expenses above referred to, shall be returned to the said Richard J. Leupold, but in no event shall the said $2500 be diminished by draft as above provided for below the amount necessary to be expended to safely retransport said exhibit to Baltimore, Maryland, U. S. A. Signed.

Joshua Horner.” Witness : Morris J. Mitchell. The Baltimore Company thereupon on March 10th, 1898, issued to the appellant the following written authority to sell its foreign patents on a commission of ten per cent of the sales price. “Whereas the Automatic Telephone Exchange Company Limited, of Washington, D. C., has by power of attorney dated March 11th, 1898, empowered Richard J. Leupold and Brown, Shipley & Co., bankers to sell all the patents, rights and privileges in and to a system of automatic telephone service and for Great Britain, France, Germany, Belgium and Austria-Hungary, or any of them, collectively or separately, and whereas the said-are solely appointed to receive the purchase price or prices therefor and whereas the said Automatic Telephone Company Limited, has agreed to allow the said Richard J. Leupold ten peí centum (xo per cent) commissions upon the purchase price or prices received by sale of said patents, rights and privileges in andfor said countries or any of them, the consideration' of said ten per centum (10 per cent) commissions being services rendered and to be rendered by the said Richard J. Leupold in effecting a sale of the said patents, rights and privileges in the above named countries, or any of them. Now therefore, in the event of the sale of the patents, rights and privileges above described in and for the countries above mentioned, or any of them, the said Brown, Shipley & Co., are hereby empowered and directed to pay to the said Richard J. Leupold ten per centum (10 per cent) of the purchase price received from the sale of the said patents, rights and privileges in and for the countries above named, or any of them ; and it is hereby understood that in the event of a sale of the patents, rights and privileges above described in and for the countries above named, or any of them, having ²⁸⁴ been effected by any one or ones whomsoever at any time before the twenty-fifth day of September, eighteen hundred and ninety-eight, that the said Richard J. Leupold shall be nevertheless entitled to commission of ten per centum (io per cent) of the purchase-money or monies received from the sale or sales of the said patents, rights and privileges in the countries above named, or any of them, just as fully as though he, the said Leupold, had negotiated and effected said sale or sales.” This paper was executed and acknowledged by the Baltimore Company, the certificate of acknowledgment being dated March ioth, 1898. The appellant claimed and so testified that there was an understanding when he paid the $2,500 that it was to be returned to him in case any of the patents were sold, and he said he had a letter to that effect, but he did not produce the letter and we think his rights as to this $2,500 should be measured by the terms of the written receipt taken b} him, for the money, and by him produced in evidence.

Armed with the authority already referred to the appellant went to Europe taking with him an electrical engineer and an experimental telephone exchange as an exhibit which were paid for out of the $2,500 supplied by him and started to exploit the invention there. With the aid of his father, who was engaged in the consular service of the German empire, and certain friends of the latter he succeeded in interesting the officials of that government having charge of its telephone service in the automatic exchange and finally secured an agreement for a sale of the patents thereon for the use of that service. The German Postoffice Department known as The Reichspostamt controls the entire public telephone service throughout that country, but it does not purchase outright or own the patents under which the telephone instruments and appliances are made, but pays an agreed royalty for the use of such devices as meet its approval to the parties controlling the patents upon them. It therefore becaftie necessary to make the arrangement, for the introduction of the automatic telephone exchange into the German telephone service by a contract for ²⁸⁵ the sale of the patents to a third party subject to the approval of the device and its adoption by the Reichspostamt.

For that reason the formal contract of sale of the patents which appears in the record was made with the firm of Mosino, Sachs & Co., of the city of Berlin. It is unnecessary to state at length the terms of this contract. It is sufficient to say that it sells to Mosino, Sachs & Co. the German patents already issued and one in process of issue for $150,000 to be paid in cash upon the completion of the transfer, $100,000 additional when 10,400 telephones were installed and $250,000, to be paid in royalties on telephones to be used at the rate of two marks per instrument. The sale was conditioned upon the acceptance of the invention by the Reichspostamt after one year’s trial of 400 instruments which were to be installed in its offices in the city of Berlin by the company owning the patents at its own expense.

When the terms of this sale had been arranged by the appellant it was accepted by the Baltimore Company and the formal contract was signed on its behalf by Mr. Tyrer its general agent. The evidence shows that the sale had been negotiated by the appellant before Mr. Tyrer met or come in contact with Mosino, Sachs & Co. who were introduced to him by the appellant after the latter had negotiated the sale and arranged the terms upon which it was to be made. The 400 instruments were installed according to the contract in the German service at Berlin, but before the time fixed for their trial had expired the Baltimore Company sold to the Strowger Automatic Telephone Exchange Co. hereinafter called the Chicago Company all of its American patents and a half interest in its foreign patents and also in the contract for the sale of the German patents ; and Mosino, Sachs & Co. sold their rights under that contract to Messrs. Ludwig, Loewe & Co. and The Deutsche Waffen & Munitionfabrik.

On June 13th, 1901, after the appointment by the decree in this case of the receivers for the Baltimore Company, but prior to the expiration of the year allowed for the approval or rejection by the Reichspostamt of the 400 instruments furnished to ²⁸⁶ it on trial, an agreement was entered into by the Chicago Company with Ludwig, Loewe & Co. and the Deutsche Waffen & Munitionfabrik modifying the original contract of sale of November 5th, 1898, and extending the time for the trial of the 400 instruments by the Reichspostamt and subsequently a further extension of the time of trial was made. Both the agreement of May 18th, 1901, and the additional extension of time for the trial of the instruments afterwards received the approval of the appellees through Mr. Harman. Among the modifications made by the new agreement in the original contract of sale was the reduction of the cash purchase price to $50,000, together with $10,000 for the 400 instruments furnished on trial making $60,000, in all, but the royalty of two marks per instrument up to $250,000 was retained. On June 28th, 1901, after the date of the modification of the contract of sale of the patents the appellees filed their petition in the Court below, setting out the sale of these patents and other similar transactions and averring that they were in danger of falling through and that it was of vital importance to the reputation of the European patents that the German government should not refuse to adopt the machine, and asking that Samuel J. Harman, one of their number, be sent to Europe with full authority to sell and transfer the patents absolutely without first reporting his transactions for approval.

On this petition an order of Court was passed authorizing Mr. Harman to go