Nelson v. H. D. Steele, W. E. Baxter, & Nelson Axle Oiler Co.

MELVIN, J.

This is an appeal taken from a judgment in favor of plaintiff and from an order denying the motion of defendants for a new trial.

The action was one whereby plaintiff sought to have canceled a certain contract by which he had leased to defendants Steele and Baxter, with the understanding that the said agreement should be assigned to a corporation to be formed by them, the right to manufacture, sell, and control a patented device upon which plaintiff owned the patent fights and known as “the Nelson axle oiler.” This agreement provided that Nelson should advance no money; that the defendants should manufacture, sell, and control the patented article; and that they should pay plaintiff fifty per cent “of the net proceeds from said Nelson axle oiler and from said corporation.” The contract contained a provision that a statement should be rendered, to Nelson by the manufacturer on the fifteenth day of each month. In the agreement was this paragraph: “That should this corporation not be on a paying basis within one year from date, this contract may be canceled at the option of any of the parties hereto, or may be extended under a new agreement, and upon a new basis.” The date of this instrument was May 14, 1909. On June 22, 1910, plaintiff sent to defendants the following notice, dated May 15, 1910:

“Messrs. W. E. Baxter, H. D. Steele, Los Angeles, Calif.

“Gentlemen: In accordance with our contract relative to the Nelson axle oiler, which expired May 14, 1910, and now becomes null and void, I wish to advise and serve this notice, that I will not continue, extend or renew any contract with you, as you have not fulfilled your part as per agreement.

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You must consider all obligations between us at a close. This as per our past agreement.

“Yours truly,

“ (Signed) R. Nelson.”

The court found that the contract was duly executed; that it was duly assigned to the defendant corporation; that monthly statements were rendered to plaintiff at times alleged in the answer, but that said statements showed neither the net earnings nor the financial condition of said corporation ; that defendants sold the right to manufacture and control the Nelson axle oiler in the territory known as Northern California for the sum of two thousand five hundred dollars, for which promissory notes were accepted, only five hundred dollars of which had been paid prior to May 15, 1910; “that in order to show the ‘net gain’ of $26.95 contained in defendants’ exhibit No. 1, the defendants treated as cash on hand promissory notes amounting to $2000, which were not yet due. The said notes being the unpaid portion of the promissory notes for $2500 received for the sale of the right to manufacture, sell and control the said Nelson axle oiler in Northern California.” The court also found that the notice of rescission quoted above was sent to defendants June 22, 1910, and as a conclusion of law announced that plaintiff was entitled to judgment canceling the contract in question, enjoining defendants and those claiming under them from using the Nelson axle oiler or in any manner dealing with it, and for costs, but that said judgment should be entered without prejudice to an action by any of the parties for an accounting.