Finley v. Asphalt Paving Co. of St. Louis (69 F.2d 498, 1934)

WOODROUGH, Circuit Judge.

Sam E. Finley, the owner, and the National Fin-Mix Corporation, an exclusive licensee in a certain territory of patents covering apparatus for and method of preparing bituminous cement aggregate composition, as plaintiffs, brought this suit for alleged infringement of the patents in the usual form against Asphalt Paving Company of St. Louis, defendant. The defendant in its answer pleaded, among other things in bar, a license by contract and estoppel. A motion for advance trial, under Equity Rule 29 (28 USCA § 723), on the defense of license having been sustained, a separate trial on that issue was had, resulting in a decree by the District Court holding that the defendant was a licensee under the patents in suit and, therefore, had not infringed upon any of the rights of plaintiffs under the patents. The court made extensive findings of fact and conclusions of law, and entered its decree that the bill of complaint be dismissed at the plaintiffs’ cost. The plaintiffs appeal and present forty-seven assignments of error.

The court found upon the evidence before it:

That plaintiff Sam E. Finley is the owner and patentee of United States letters patent Nos. 1,462,994, and 1,522,431; that National Fin-Mix Corporation is and was at all of the times herein mentioned an exclusive licensee under the said patents, with certain territorial limitations, and with the right to sublieense the said patents.

The charter of the city of St. Louis provides for the letting of public work, including paving, to the lowest responsible bidder, and the board of public service of that city was the official administrative body having the duty of defining specifications for paving to be paid fox in whole or in part by special assessment against private property; and that prior to April 10, 1931, there were only two mixers constructed under the letters patent installed in St. Louis, one being in the plant of the Central Paving Company, whose stock was controlled by the same person who had control of the stock of the plaintiff National Fin-Mix Corporation, and the other in tho plant of the Bridges Asphalt Paving Company. That there were nine responsible contractors engaged in tho asphalt street paving business under contracts let by the city at the time.

7. The plaintiffs wanted to have the board of public service adopt the exclusive specification of asphalt paving materials mixed in a mixer1 and according to the process described in the plaintiffs’ letters patent, and solicited defendant and other asphalt paving contractors in the city to assist the plaintiffs to secure the adoption of such exclusive specification of their mixer and process.

8, 9. The board having invited all the responsible asphalt paving contractors in the city to attend a hearing on the question of the adoption of such specification, the plaintiff corporation and the defendant met, and tho plaintiff corporation represented to the defendant that if it would co-operate with the plaintiffs and the said specifications were adopted by the city of St. Louis, defendant could procure from plaintiff corporation a mixer and the right to use the process upon the payment of a deposit of $2,250 when the mixer was ready for delivery, and a rental or royalty of 40 cents per ton for the first fifteen thousand tons and 25 cents per ton for the subsequent amount of mixture prepared on said mixer, the said deposit to be absorbed by a refund or a deduction of 15 cents .per ton on the price of the first fifteen thousand tons, and that such mixer could be furnished within five weeks.

10. The defendant advised that it would not lend its co-operation and assistance in securing the adoption of such specifications unless it was assured that it could obtain the mixer on tho terms represented, ánd demanded that the assurance be reduced to writing, whereupon, the writing was signed and delivered by the corporation to defendant on April 9, 1931, the writing being as follows:

“Mr. L. J. Stiers,

“President Asphalt Paving Co.,

“St. Louis, Mo.

“Dear Sir:

“Confirming our verbal conversation of even date we hereby propose to furnish you with five ton rotary pressure type asphalt mixer on the following terms:

“400 per ton for tho first fifteen thousand tons and 250 ton for every ton of material mixed by said mixer thereafter.

“When said mixer is ready for delivery, a deposit of $2250.00 shall be made with the National Fin-Mix Corp., which amount will he credited to your account and you may deduct 150 per ton from payments until such time as said $2250.00 has been absorbed.

“The above terms will be set forth in a uniform contract if you desire to use this process.

“Yours very truly,

“National Fin-Mix Corp.,

“By C. L. Newbold, Vice-President “CLN :DC

“P. S. It will take approximately five weeks for delivery on the above mixer.

“C. L. Newbold.”

11. The defendant had, less than two years previously, erected a new asphalt paving mixture plant with a so-called “pug-mill” at a cost of about one hundred thousand dollars, and as the city specifications had previously permitted the use of either pug-mill type mixture or rotary pressure mixture, all of the asphalt paving contractors had boon on an equal footing in competition on city work so far as the kind of mixture was concerned, and had competed successfully with the Central Paving Company and Bridges Asphalt Company, using tho Finley rotary pressure mixer.

12. After the plaintiff corporation and tho defendant had come to their understanding and defendant was assured that it could obtain the plaintiffs’ mixer and method, and on April 10, .1931, the board of public service had its hearing on the question of the adoption of exclusive specifications of plaintiffs’ mixer and process. The members of the board knew at the time and the president of tho hoard announced that only the two plans referred to were equipped to comply with such an exclusive specification and that the other seven responsible contractors were not.

13. The purpose of the hearing before the board was to satisfy the board as to two points: (1) That the adoption of the proposed specification and the letting of contracts thereunder would not result in increased cost to the taxpayers; and (2) that the competitive bidding system would not be interfered with. Representatives of the companies which had the plaintiffs’ mixer stated that the exclusive specification would not result in increased cost of paving work. The other contractors were asked by the president of the board whether, under the exclusive specification, they would be as free to bid in competition in street paving work as theretofore. One of them who owned a large asphalt plant erected at a cost of $85,000, equipped ■with a pug-mill mixer, made answer: “That is what they (plaintiff! corporation) told me.” The defendant, being called on, said: “The thing we are concerned in of course, is the question of competition.” And being asked, if in the event the board adopted the specification his company would be free to bid on the specification, he replied: “Yes, I have been told we would, because we have been assured we could receive one of those mixers.” Being further pressed to answer whether as an independent bidder his company would! be free to bid competitively on the work, he said: “At the present time we would; yes, because of the fact that we have been assured, as I have stated, by the mixer people, we could have one of the mixers or they would arrange to secure asphalt from another plant at our cost.” Other independent contractors at said hearing answered that they felt they would be free to bid if they could get one of the mixers. The representatives of the plaintiff corporation, present at the hearing, heard these statements by the president of defendant corporation and representatives of the other independent contractors.

Inquiry was made at the hearing into the cost of alterations in the plants of the independent contractors for installation of a Finley mixer, and the information was elicited by the president of the board that the cost would run from $6,000 to $8,000, which cost could be amortized over a period of years at the rate of 10 per cent, per annum.

That the board of public service, by the representations so made in said hearing with the approval of the plaintiff corporation, was led to believe and did believe that the plaintiffs would furnish to any of said contractors a mixer on a basis that would not increase the cost of the paving to the taxpayers and which would leave the individual contractors as free to compete with the Central Paving Company and the Bridges Asphalt Paving Company as they had been under the then existing alternative specifications for street paving work, and that the independent contractors would be able to obtain a license to use the mixer for an unlimited number of years and thus be enabled to amortize the cost of altering their plants to install a rotary pressure mixer over a sufficient period of time so as not to add to the cost of street paving work as would result if such expenditure had to be charged off in the year in which it was incurred.

The board of public service by the said representations was also induced to believe and did believe that until defendant, or any other independent contractors, installed a Finley mixer in its own plant, the plaintiff would supply defendant and any other of said contractors with asphalt mixture complying with said specifications at a price no higher than it would cost the defendant, or any other such independent contractor, to produce such material with a mill at its own plant.

That in reliance upon the said representations made by plaintiff corporation to defendant and other contractors as reported to said board at said meeting in the hearing of - and without contradiction from the representatives of plaintiff corporation as aforesaid, the said board of public service believing that the said specification would not result in increase in cost of asphalt street paving and that free competition would not be interfered with did on May 5, 1931, adopt as an exclusive specification for asphalt street paving that the asphalt mixture for such work should be prepared in a sealed rotary mixer with an appliance for adding the asphalt cement in a fine spray under pressure to the aggregate in the mixer. That said specification cannot be complied with except by use of a mixer of the type of the Finley mixer.

14. That on or about April 20, 1931, plaintiff corporation and defendant entered into a contract in writing, as follows:

“April 17,1931.

“National Fin-Mix Corporation,

“1406 Ambassador Building,

“St. Louis, Missouri.

“Attention — Mr. C. L. Newbold, Vice-President.

“Gentlemen:

“We are in receipt of your letter of April 9th confirming our verbal conversation of the same date, in which you propose to furnish, for our use, a five-ton rotary asphalt mixer for mixing asphalt materials by the Fin-Mix 2>roeess, at such time as the process is specified in future work by the City of St. Louis.

“The terms of rental set forth are hereby accepted by us. With the adoption of said specifications by the City of St. Louis, you may enter our order. It is our understanding that delivery of the mixer is to be made within five weeks from said date.

“Yours very truly,

“Asphalt Paving Company,

“LJS :CLB By L. J. Stiers, President. “April 20, 1931.

“Accepted, National Fin-Mix Corporation, by C. L. Newbold, Vice Pres.” ■ — the same consisting of a written oiler from defendant to plaintiff corporation dated April 17, 1931, and an acceptance of said offer endorsed thereon and executed by plaintiff corporation. That by said contract plaintiff corporation agreed to furnish defendant for its use a five-ton rotary asphalt mixer for mixing asphalt materials by the Pin-Mix process at such time as said process should be specified in future work by the city of St. Louis, at the terms of rental set forth in the plaintiff corporation’s letter of April 9, 3931, viz., 4.0 cents per ton for the first 15,000 tons, and 25 cents per ton for every ton of material mixed by said mixer thereafter, a deposit of $2,250 to be made when the mixer should be ready for delivery and said amount to be credited to its account and to bo absorbed by deduction of 15 cents per ton from such rental payments; the defendant’s order for the mixer to be entered with the adoption of said specification by the city of St. Louis and the delivery of the mixer to be made within five weeks from said date. That the said specification of time of delivery was of the essence of the contract. That the sentence in the letter of April 9, 1933, “The above terms will be set forth in a uniform contract if you desire to use this process,” was not carried into and did not become part of the contract made np of the letter of April 17, 1931, and the acceptance thereof. That the said language, even if considered as part of the said letter of April 17, 1931, and the acceptance thereof was not by the parties intended to postpone the immediate taking effect of the contract, but merely manifests an intention to prepare and adopt a written memorial of the terms agreed upon. That the said letter of April 17, 3 931, and the acceptance thereof on April 20,1931, is a complete and definite contract.

15. That defendant bid npon and was awarded by the city of St. Louis contracts for paving work under said specifications, the first lotting under said specification being on Ma,y 9,1931, and defendant entered into contracts with said city for said work, to be performed within the limits of time fixed by said contracts respectively and gave bonds for the faithful performance of said contracts and the doing of said work in accordance with such specification. That defendant bid on said work and entered into said contracts in reliance upon the representations made by plaintiff corporation as to the furnishing and use of a mixer as hereinbefore found. That the plaintiffs knew that defendant bid upon said work and entered into said contracts with the city of St. Louis in reliance upon its contract with said plaintiff and upon the representations made by plaintiffs aforesaid.

16. That after the adoption by the city of St. Louis of the said specification and the awarding of a contract thereunder to defendant, defendant in writing dated May 14,1931, placed its order with plaintiff corporation for a mixer. The said writing being as follows:

“Kindly plaee our order for one rotary mixer as outlined in your letter of April 9, 1931, which proposition was accepted by us in our letter of April 17, 1931, and advise us when this machine is ready for shipment.

“Please acknowledge receipt of our order and also advise what time we may expect shipment.”

17. That plaintiff corporation did not furnish defendant with a mixer within the time of five weeks provided in the contract, and under da,to of July 11, 3931, defendant notified plaintiff corporation in writing of the default and called upon plaintiff corporation to account to defendant for such breach of its contract.

18. That thereafter on July 13, 3931, plaintiff corporation delivered to defendant a form of proposed contract (Defendant’s Exhibit 8). That said proposed uniform contract was for a limited period of one year with privilege of renewal for an additional year, included in addition to the rental specified in the contract Defendant’s Exhibit 5, 'a charge for engineering and inspection services, provided that the licensor should have supervision over the work done by licensee and the power to condemn and require to he taken up work done by the licensee, irrespective of the acceptance of such work by the city and contained other terms and provisions winch would have placed burdens upon the licensee preventing free competition under said city specification, and which provisions wore not within the terms of {lie contract under the defendant’s offer of April 17, 3931, and plaintiff corporation’s acceptance thereof on April 20, 1931. That said proposed contract was not a uniform contract within the meaning of that term as used in the letter of April 9, 1931, Defendant’s Exhibit 4. That on July 17,1931, defendant returned the said proposed uniform contract to plaintiff corporation and informed plaintiff corporation that defendant was standing upon its contract as embraced in said letters.

19. That on August 14, 1931, defendant notified plaintiff corporation in writing (Defendant’s Exhibit 30) that, as plaintiff had failed to make delivery of the mixer within five weeks from the date of the adoption of the specification, defendant was forced to buy asphalt mixture to complete its contracts with the city of St. Louis within the periods of tímfí specified in said contracts. That in reply, plaintiff corporation on August 15,1931, wrote defendant that delay in delivery was due to the fact that plaintiff corporation wanted to be assured that the blades of the mixer were perfect that this had caused considerable delay; that plaintiff had started assembling the drum of the mill and had ordered all parts and that they were staying right after the manufacturer and sincerely hoped that they would be able to deliver the same within the next ten days or two weeks, That there had been no negotiations between plaintiff corporation and defendant between July 17 and August 15, regarding a uniform contract.

^20. That -plaintiff corporation failed to it xt • • x j ¿ j x deliver the mixer to defendant within the time promised in said letter of August 15, 1931. That thereafter from the early part of September, 1931, until about the middle of Oetoher, 1931, there were negotiations' between plaintiff corporation and defendant for compromise and settlement of the • controversies growing out of the failure of plaintiff corporation to deliver said mixer, but no settlement was effected. That the efforts to agree upon modification of the contract form submitted by plaintiff to defendant on July 13, and which had been rejected July 17, were part of said negotiations of compromise, That plaintiff corporation about the middle of October, 1931, definitely informed defendant that it would not furnish defendant a mixGr.

21. That defendant did demand of plaintiff corporation the delivery of a Finley mixer and did make legal tender to plaintiff corporation of the sum of $2,250, being the amount of the deposit mentioned in the contract between the parties as hereinabove found, which tender plaintiff corporation refused and declined to accept.

22. That plaintiff corporation defaulted in its contract obligation to furnish a Finley mixer for defendant’s use, and upon such default defendant, in order to enable it to fulfil its contracts with the city of St. Louis and in order to enable it to bid competitively on pub-lie street paving work under the specification adopted by the city of St. Loui¿ as aforesaid, did have constructed for its use a mixer of the type required by the said speeifica-tions. That defendant had said mixer so acquired by it installed in its plant in the city of St. Louis. That the cost of procuring said mixer and the cost of alterations in defendant’s plant for the installation of said mixer was approximately $9,000. That defendant has prepared materials in said mixer for its contracts with the city of St. Louis under the specification aforesaid. That defendant has tendered to plaintiff corporation the rental or royalty for the use of a Finley mixer and process for materials mixed by defendant in said mixer at the rate per ton speei-fled in its contract with plaintiff corporation as hereinbefore found, but plaintiff corporation has refused to accept the said tenders,

23. That by reason of the conduct of the plaintiff gg skown bn the evidence and as hereinabove found, plaintiffs are estopped to ¿eny that defendant has a lawful license to ug0 ^ mixer and practice the said Fin-Mix process.

x-js- , „ • 24. That plaintiffs by reason of their eon- , J , . duf as„sl10^ ^ ^e evidence and as here be£of found’ are *ot entltled to re le '

The court also made its conclusions of law, as follows:

1. The letter of April 17,1931, and plaintiff corporation’s acceptance thereof dated April 20, 1931 (Defendant’s Exhibit 5) com-stitute a completed contract,

2. That the language in the letter of April ^ 193^ “The ab0ve terms will be set forth in a uniform contract if you desire to use this process,” is not incorporated in the contract made up of the letter of April 17, 1931, and the acceptance thereof.

„ ml x , . .. , ,, ■ 3. That even if said clause m the letter , • of April 9,1931, be considered as ineorporat-e