Wisniewski v. Morris

FINLEY, J. pro tem.* This is an appeal by the defendant, David F. Morris, from a judgment declaring a contract between plaintiff, Matthew J. Wisniewski and Morris valid, and awarding $6,300 damages to plaintiff.

On March 17, 1961, plaintiff-respondent and defendant-appellant entered into a written contract which provided for the sale of certain secret formulae by respondent to appellant and for respondent’s employment by appellant for a period of five years. The contract stipulated that respondent was the sole owner of the formulae. Later appellant stopped making the payments called for in the contract and terminated respondent’s employment.

Respondent was the sole owner of North American Chemical Corporation. The corporation had issued no stock. On June 23, 1956, the corporation filed its petition in bankruptcy. At the time of this filing respondent claimed ownership of the formulae but upon request reluctantly delivered them to the trustee in the corporation bankruptcy proceeding. On January 14, 1957, respondent as an individual also filed his petition in bankruptcy. In his schedules he did not list the formulae as an asset. His bankruptcy was closed on the basis of no assets. The trustee in the corporation bankruptcy abandoned the formulae and upon close of the corporation proceedings delivered the formulae to respondent.

The contract for the sale of the formulae to and the em[582]ployment of respondent by appellant provided for a total consideration of about $184,000.00 for purchase of the formulae payable over a 50-year period. Respondent’s salary for a minimum period of five years was to be $200 per week. In the contract respondent warranted or agreed that he was the sole owner of the formulae with full rights to use or dispose of them.

Appellant contends that respondent was not the “sole owner” of the formulae but at the time the contract was entered into they were owned by the corporation. Appellant ’s reasoning is as follows .-

1. The title to the formulae once having passed to North American Chemical Corporation’s trustee in bankruptcy they became corporate property upon the trustee’s abandonment of them; or

2. That plaintiff, not having listed the formulae as assets in his personal bankruptcy held a bare legal title in trust for his creditors.

As all of the parties who may have an interest in the formulae are not before the court, we do not propose to determine the complete state of the title. It is enough that the respondent here warranted that he was the sole owner of the formulae, that this warranty has been breached, and that the breach excuses appellant from his duty to perform under the contract.