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Sabo v. Delman

Supreme Court of New York, Appellate Division

June 21, 1955

Sabo
v.
Delman

Page 239

[142 N.Y.S.2d 224] Armand Gilinsky, New York City, of counsel (Caroline K. Simon, New York City, and Robert Pesner, Brooklyn, with him on the brief; Gilinsky, Schur & Mishkin, New York City, attorneys), for plaintiff-appellant.

David W. Kahn, New York City, of counsel (Benjamin Seligman and William M. Kahn, New York City, with him on the brief; Seligman & Seligman, New York City, attorneys), for defendants-respondents.

Before PECK, P. J., and COHN, BASTOW, BOTEIN and RABIN, JJ.

PECK, Presiding Justice.

The question presented on this appeal is the sufficiency of the complaint. Although the three defendants occupy slightly different positions, they may, for the purpose of testing the complaint, be treated alike and referred to as the 'defendant'.

Plaintiff is an employee of defendant in the business of manufacturing ladies' shoes. He claims to have invented a machine of use and value in shoe manufacturing. The complaint sets forth two agreements between the parties by which they undertook the exploitation of plaintiff's invention. The first agreement,

Page 240

dated March 19, 1942, recites the assignment of applications for patents to defendant and contains the mutual undertaking of the parties to employ their best efforts to sell, manufacture or lease the machine, plaintiff to receive 25% of the proceeds and defendant 75%. The agreement contains a reference to past expenditures by defendant in development of the machine and the possible requirement for further expenditures by defendant. There was no commitment, however, for any investment or expenditure on defendant's part, but it was agreed that any such expenditures were not to be charged [142 N.Y.S.2d 225] in any part to plaintiff's interest in the proceeds. Defendant was given the right of using the machine without charge in its business. The agreement contained a provision that 'No verbal understanding or conditions, not herein specified, shall be binding on either party.'

The second agreement, dated September 18th, 1946, purports both to be a 'modification' of and to 'supersede' the prior contract. It provides for the organization of a corporation to take over the patents--the stock in the corporation to be held 75% by defendant and 25% by plaintiff. The second agreement is similar to the first in respect to the expenditure of funds for development and the use of the machine by defendant, and contains a provision that 'No verbal understanding or conditions, not herein specified, shall be binding on either party.' There is no provision, however, referring to the undertaking of either party to use its best efforts to market the machine.

The complaint, filed eight years later, is grounded in fraud and seeks a reassignment of the patents, an injunction against defendant's use of the machine and an accounting. The claim is that defendant, while using the machine itself, has done nothing to exploit it commercially; that plaintiff was induced to turn the invention over to defendant upon the representations that it would finance the manufacture of the machine and use its best efforts to promote the sale or lease of the machine to other manufacturers; that said representations were false and fraudulently and deceitfully made to defraud plaintiff.

Special Term dismissed the complaint, finding that the alleged fraudulent statements were promissory in nature and therefore not the basis for an action based on fraud. We agree with that holding and find the complaint insufficient on other grounds. The attached agreements purport to state fully and completely the undertaking of the parties and specifically provide that

Page 241

there are no other verbal understandings or conditions. Plaintiff may not, therefore, assert alleged undertakings and representations by defendant not incorporated in the agreements. Furthermore, it is apparent that plaintiff is claiming nothing more, although adding a fraud ouch, than that defendant did not employ its best efforts to exploit the invention, as it agreed to do in the first agreement.

While the complaint cannot stand, as pleaded, we will allow plaintiff to amend, if he is so advised, to prosecute an action on other possible grounds. The complaint, although sounding in fraud, would seem to suggest a breach of contract on defendant's part in not employing its best efforts to promote the commercial sale of the machine. There is also the possibility that if either agreement is not sufficiently explicit or implicit in undertakings on the part of defendant, it might be attacked as nudum pactum. We need not consider at this juncture the application to such possible ...


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