Stevens v. Privett

STURTEVANT, J.

This is an appeal from a judgment of rescission of a contract on the ground of fraud. By the terms of the agreement respondent was granted exclusive sales rights of a certain patented automobile inner tube called the “Boggs Compression Inner Tube,” within the entire territory of Idaho, as will more specifically appear.

The U. S. Compression Inner Tube Company, a of Tulsa, Oklahoma, was the owner and manufacturer of the “Boggs Compression Inner Tubes,” which were by two patents issued by the government in 1917. The right to sell said tubes within certain states was granted by said owner to appellants October 9, 1919. In consideration of the sum of $13,845 the appellants granted to respondent, by a written agreement dated 16, 1921, the absolute exclusive right' to sell said tubes within the county of San Diego, state of California. The purchase price consisted of respondent’s promissory note in the sum of $8,845 and a cash payment in the sum of $5,000. Of the cash payment $500 was subsequently

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funded upon a modification of the contract. On July 20, 192d, the contract was so changed that instead of the county of San Diego the state of Idaho was designated as the territory. A new written instrument was' executed as to the new territory and the written instrument as to San Diego was canceled. The contract was for the unexpired term of said patents which continued for some thirteen years from that date. After February 16, 1921, respondent entered the state of Idaho and commenced to make sales and for a period of about one year proceeded to sell tubes in the state of Idaho, purchasing them at the contract price from the IT. S. Compression Inner Tube Company at Tulsa, Oklahoma.

The complaint alleged and the trial court found that respondent contracted for the exclusive right to sell said tubes in the territory of Idaho for the unexpired term of said patent, in consideration of the sum of $13,845, which was paid to appellants as above stated, relying solely upon the representations by appellants that they were the owners and possessed of an absolute right to sell said Boggs Compression Inner Tubes within the territory of Idaho and elsewhere; that appellants falsely represented to respondent that they had secured such exclusive right by contract from the owner of said patents, and that said agreement was in full force and validity, while in truth and in fact appellants held no such property right, and had no authority to sell such territorial privilege for the reason that appellants’ contract with the owner of said patents, so far as it related to the territory of Idaho, was specifically conditioned upon the construction and operation of an inner tube factory which was to be built at Burbank, California, at an estimated cost of $100,000, which factory was in fact never completed nor operated, and that appellants’ right to sell said tubes in, or dispose of territory in the state of Idaho, was inoperative and had never vested.