The questions arising on the record in the instant case are largely concerned with the construction of the contract of 1903 as modified in certain particulars by the supplementary contract of 1906. Upon such construction depends the answer to the question whether plaintiff left the employment of defendant for any reason other than the nonpayment to him by defendant of his salary, royalties and commissions; and if it is determined that he did not leave such employment for any other reason, then what factors of compensation should be considered in an accounting to be had between the parties. Subordinate to these considerations are plaintiff's claims that the provision that royalties, commissions and salary shall cease and determine in the contingency the plaintiff voluntarily should leave the employment of defendant for any other reason than nonfulfillment of the obligations of the defendant to him, is a penalty and not enforceable, and that the provisions for salary on one hand, and commissions and royalties on the other, are independent.
The trial court reached the conclusion, and found in its interlocutory judgment, that the contract of July 1st, 1903, as modified, continued in force until March 1st, 1917, when the plaintiff voluntarily left the employment of the defendant for reasons other ;than the nonpayment of his royalties and salary, and that at this time both parties to the contract regarded the contract between them as at an end, and rendered its judgment excluding from the accounting ordered, commissions and royalties beyond March 1st, 1917. *Page 285
The plaintiff assigns as error this conclusion, for the reasons (1) that the defendant first breached the contract by failing to give plaintiff an opportunity to perform the services required of him by the contract and thereby wrongfully discontinued his employment; (2) that the plaintiff left the employment because he was not paid royalties and salary and was denied the opportunity to render service as contracted; (3) that the plaintiff was entitled to leave defendant's employ at any time and without notice without breaching his contract; (4) that the provision in paragraph nine of the contract, that should plaintiff voluntarily leave the employment of defendant for any other reason than the nonpayment of royalties and salary, payment under the contract of royalties and salary should cease, but the right of defendant to the inventions of the plaintiff should continue, is a penalty and unenforceable.
The first requirement in the solution of this alleged error is to ascertain the chief obligations this contract imposes upon the parties to it. The plaintiff agrees to license defendant to make, use and sell, through the United States and foreign countries, brakes and coaster brakes embodying his inventions thereof, as in application pending in these countries and in letters patent granted thereon, for the life of the patents; and to give defendant information regarding all inventions or improvements upon such brakes or coaster brakes in such countries, and to grant to defendant exclusive license to manufacture and sell the same and to transfer the absolute title to the same to the defendant. The plaintiff further agrees to remain in the employ of the defendant and use his best efforts in its interest so long as it shall elect.
On its part, the defendant agrees to pay plaintiff a salary of $5,000, and certain specified royalties and *Page 286 commissions on brakes and coaster brakes, and upon all other manufactures of the defendant hereafter which shall embody any of the future inventions of the plaintiff not relating to brakes and coaster brakes, excepting those lines which the defendant was then making. The parties entered upon the performance of this contract and continued without a difference until 1914. The contract is in some particulars inartificially drawn. It obviously does not express the intention of both parties as to at least one of the obligations of plaintiff and one of the defendant, which both parties intended to be a part of the contract. Wherever one party to a contract enters upon the performance of an express obligation imposed upon him by a contract, the law implies a corresponding obligation on the part of the other party to the contract which reasonable men would understand must have been intended to be included. Thus, when one party promises to pay another royalties upon his future inventions, the law will imply an obligation upon the recipient of the royalties to license or transfer these patents to the person agreeing to pay the royalties, for this is the only way in which consideration for the payment of the royalties could be made. So where one party assumes an express obligation the law raises by implication a corresponding obligation on the part of the other party to the contract to provide him with all reasonable opportunity to perform the obligation. Obligations of this character implied by law are given the same force and effect as if expressed in the contract, and in fact are treated in the law as though written in the contract. This principle is of such universal acceptance that we cite only a few of the many authorities to it.
Williston on Contracts, Vol 3, § 1293, says: "It is not only for a breach of express promises that a contractor *Page 287 is liable but of implied promises as well. . . . Since the governing principle in the formation of contracts is the justifiable assumption by one party of a certain intention on the part of the other, the undertaking of each promisor in a contract must include any promises which a reasonable person in the position of the promisee would be justified in understanding were included. . . . So though a contract of employment contains no other express promise on the part of the employer than to pay a stipulated compensation, there is an implied promise to employ which is violated by a refusal to allow the employee to perform his duties as such, though there is no refusal to pay the compensation." We have completely adopted this principle. Thus in Hayes v. Clark, 95 Conn. 510, 515,111 A. 781, 783, we hold: "The defendant fails to appreciate that, under certain circumstances, written contracts bearing the signatures of both parties, which on their face and by their express terms appear to be obligatory on one party only, create a corresponding and correlative obligation on the other party by implication." Again in Lawler v. Murphy, 58 Conn. 294,309, 20 A. 457, 458, we say: "It is also a principle of general application that whatever may be fairly implied from the terms or language of an instrument, is, in judgment of law, contained in it."
The parties understood that patents on such inventions were to be transferred and plaintiff did transfer a very considerable list of these. The law would imply the provision for a transfer in order to meet the obligation upon defendant expressly imposed to pay for such manufacture and use. This implied obligation will also be aided by the other provisions of the contract requiring defendant to pay the cost of taking out such patents and providing that upon plaintiff voluntarily leaving defendant, its right to these inventions *Page 288 should continue. There is also a failure to provide in the contract that defendant shall continue to provide plaintiff with such employment that he may carry out the purposes of his employment. The primary purpose of the contract on the part of the defendant was to enable it to secure for itself plaintiff's inventive ability and all of his inventions during the life of the contract, and on the part of the plaintiff to obtain a more adequate compensation, as well as to "secure an opportunity to use his inventive and executive ability in a way to have them enure more largely to his benefit." In carrying out the contract, plaintiff did invent and transfer to defendant a large number of his inventions. These resulted in large profits to defendant and large amounts of royalties to plaintiff. To develop his inventions plaintiff had to use the equipment of defendant's factory and its employees at his will. He had to know defendant's manufacture, its methods and processes of business, the complaints and suggestions and needs of its customers, and of its employees. He got this by his active employment in the factory. He could not develop and improve existing inventions, methods and processes without this knowledge and this opportunity. From the earliest beginnings of this business plaintiff had had this opportunity, and through his executive ability and inventive genius with the means and instrumentalities at hand, had been developed a great manufacturing plant. It had grown out of the plaintiff's brain working with the opportunity which defendant furnished for the development of his inventions and improvements. The plaintiff contracted to "use his best efforts in the interest of the Company" in doing this work, which was the primary purpose of the contract. Without the opportunity which the defendant afforded him his inventive genius could neither develop nor improve. *Page 289 His employment must be an active one, the defendant must cooperate in furnishing him that, or there could be no inventive product from his brain. And without such there could be no royalties resulting. The salary was a minor consideration to the plaintiff; the chief compensation was to be in the expected royalties. Plaintiff's counsel are correct in their assertion: "His opportunity to make future improvements and inventions, and to receive royalties therefrom, was the real consideration moving him." Both parties intended in this contract that plaintiff should continue, as he had theretofore done, to transfer his inventions to defendant, and derive his compensation therefor from the agreed-upon royalties thereon. The unescapable conclusion of law from these considerations is that the law will imply that defendant did agree to give plaintiff this opportunity and to provide him active employment so that he could carry out the obligation of his contract, and defendant could carry out its obligation to manufacture the products of his inventions and pay him the agreed-upon royalties therefor.
Up to about the fall of 1913, the plaintiff and his associates in defendant company had cooperated in friendly relations, and the recognition was general that the extraordinary success of the defendant had been due to plaintiff's executive, mechanical and inventive abilities. At this time the defendant found that its extensive expansion had resulted in turning its quick assets into goods and enlarging its outstanding obligations so that it was unable to meet those maturing shortly, amounting to upward of a half million dollars. This extension had been due to plaintiff's misjudgment of business conditions, shared at first by his fellow officers and later persisted in against the advice of Treadway, the treasurer. Dissensions arose between *Page 290 the officers, who at his suggestion gave plaintiff an option on their stock and that which they could control. Plaintiff failed in his plan to take over this stock, and then the officers, with plaintiff's consent, arranged to raise funds to relieve the financial necessities of defendant and did so, and shortly defendant's business was again prosperous. A part of the plan of the new management involved the appointment of a general manager in place of plaintiff, with such authority as to cover all duties not specifically imposed upon the chairman of the board, the president and the treasurer. Thereafter plaintiff was given no duties to perform except formal ones, except that it was understood he should have general charge of patent matters. During 1914, 1915 and 1916, plaintiff was given no duties to perform except that he was to some extent consulted in patent matters by the patent attorney. He was not thereafter consulted by the officers of the defendant nor permitted to attend the weekly meetings of the heads of departments. He tendered his services in working out factory problems and in patent matters, but he was not permitted to assist in these matters. During all this period plaintiff was ready and willing to render any assistance in his power for defendant, but was not given such opportunity. Defendant's position during this period was that it desired no services from plaintiff, but that he by the contract was forbidden from going into a competing business so long as defendant continued to make payments to him as provided by the contract and to keep him in his nominal position. This involved the right to hold the plaintiff in inactivity and prevent his fulfilling his obligation under the contract to make inventions and improvements for defendant. Unless plaintiff could use the factory equipment and employees and have the opportunity to know defendant's needs, the employees' *Page 291 and customers' points of view, and to conduct experimentations, he could not fulfill his contract obligation. The finding makes it clear beyond all cavil that defendant took its position deliberately, and intentionally took from plaintiff all opportunity to render the service for which he was to receive his chief compensation. The defendant in fact denied him the opportunity to either improve existing inventions or to make new inventions for which under the contract defendant promised to pay him royalties. In 1915 it appointed him consulting patent expert. It was a nominal appointment, without duties, made to nominally fulfill its obligations to him and to prevent his going into a competing business. Defendant from the time the new management took over its control denied plaintiff his opportunity to fulfill his contract obligations. The right to this opportunity to make and develop his inventions was, as we have seen, an implied obligation of defendant and written into the contract by the law. As soon as defendant took and maintained this position, it breached the contract and thereafter plaintiff had the legal right to exercise his privilege and declare the contract at an end. Anvil Mining Co. v. Humble,153 U.S. 540, 14 Sup. Ct. 876.
In Sigmon v. Goldstone, 101 N.Y.S. 984, 986, the court said of a similar contention: "It was one of the implied covenants of plaintiff's contract that he should be permitted to labor in the manner specified. It was a breach of this covenant for the defendants, without cause, to prohibit the plaintiff from doing any work and to shut him up in a dark room doing nothing, notwithstanding they continued to pay his weekly salary." The case of In re Rubel Bronze and MetalCo. and Vos, L. R. (1918) 1 K. B. 315, is one of the most illuminating cases upon this point in the books. It fits with exactness the course taken by this defendant, *Page 292 and makes the demonstration complete that the denial of the opportunity to earn the contract sum may be by a course of conduct as well as by words, may be implied as well as express.
Near the end of the year 1914 plaintiff claimed that he should have had commissions on royalties received by the company from licenses given by it on domestic coaster brake patents, on account of which no payments had ever been made. He also made certain charges under the Copeland patent, and for royalties on single row bearings which latter had been theretofore allowed and paid him, but which later were claimed by the company not to be included under the terms of the contract and which the company proposed to charge back against the account of the plaintiff. Beginning in December, 1914, and up to April, 1915, tenders were made by defendant's bookkeeper covering the amount of plaintiff's salary, royalties and commissions, based on a statement of plaintiff's account made up in accordance with the claims of defendant, which tenders were refused by plaintiff solely for the reason that the amount tendered did not include royalties on single row bearings. On May 20th, 1915, plaintiff wrote defendant that he would not accept tenders of amounts which did not include royalties for single row and Radax bearings, and that this letter would obviate formal tenders and refusals in the future. In the latter part of 1915 or early in 1916, plaintiff sought to secure a payment on account of sums due him from the company, but his request was refused, and he was informed that no payments would be made to him unless he gave a full discharge of all the liabilities of the company to him. Plaintiff drew his salary up to May, 1915. No payment thereafter was made plaintiff until during the trial of the cause, when payment of the sum of $156,775.71 was made by defendant to plaintiff, the *Page 293 payment being made and accepted without condition. A written statement of the items making up this amount was then filed in court and is made part of the court's finding. Prior to January 27th, 1917, plaintiff had written defendant asking for payment of such sums as defendant admitted were due him. This request was ignored, and he repeated it in another letter of January 31st, 1917, and in a letter of February 5th, defendant, as on the former occasion, refused to pay anything unless the payment was accepted in full settlement to date.
From the statement just referred to, which is made up entirely from the viewpoint of defendant, and included no items claimed by plaintiff which defendant disputes, it appears that at the end of January, 1917, there was due plaintiff in round figures $105,000, without interest, and when interest is added, $150,000. This sum or any part of it defendant refused to pay, unless plaintiff gave a receipt in full.
The seventh paragraph of the plaintiff's amended complaint, which the answer denies, is as follows: "7. Since the 30th day of November, 1914, defendant has refused to pay plaintiff any sums either as royalty or otherwise, except amounts which were materially and substantially less than the amounts actually due, and then only on condition that the amounts so tendered by defendant be accepted by plaintiff as in full of all claims on his part relating to such salary and royalties."
In paragraph nine of the contract of 1903, it is provided that if plaintiff should leave the employment of defendant for any other reason than nonpayment of royalties or salary, then all payments to him should cease and determine. In the paragraph of the complaint above quoted there are set up facts showing that he could not obtain payment of his royalties and salary *Page 294 admitted to be due, unless he gave up all claims relating to certain other matters in dispute. Some of these disputed items the trial court found were in fact due him, but these latter he offered to waive and leave for further adjustment by suit, if necessary. By the contract plaintiff was to be paid a salary, also certain royalties and commissions not in dispute; he asks for payment of these and is refused unless he signs on the dotted line at the end of a receipt in full.
The trial court held that plaintiff did not withdraw from the employment on account of nonpayment to him, as above set forth, but voluntarily withdrew "because he was tired of his position of general uselessness and inactivity and because he had found an opportunity to use to better advantage his experience, knowledge and skill in the production of bearings." We do not think that this conclusion is borne out by the subordinate facts found, or that it legally or logically flows therefrom. It may well be that he was weary of the situation in which he found himself. Nothing is more apparent from the record, than that from the year 1914 and onward, other persons interested in the company were engaged in the process of freezing out the plaintiff, by depriving him of any position in the company where he could in any way conduct or supervise its production as he had theretofore done with marvelous success, and also by withholding money justly due him. His position was thereby probably made very irksome, and he might have longed to quit, as his associates in the business hoped he would. He naturally looked about to find some other sphere of activity, as he had a right to do, and Treadway and others concerned knew it, and he conferred and corresponded with the latter with a view to some adjustment of outstanding controversies which might bring about an amicable settlement. But the opposing parties did not want to let *Page 295 him go under any conditions which would involve business competition, and he did not wish to withdraw in a way which would cause him loss in respect to his past inventions. For three years there was fencing for position between the parties, but it finally became evident to plaintiff that no amicable withdrawal could be effected, and he must stand on his legal rights. The company refused to pay him what it owed him. This conduct was an additional legal reason which the contract gave him for withdrawing without sacrifice of all benefit from his patents; he availed himself of it and brought suit for an accounting. He might have had many reasons, acting powerfully on him, for a release from an intolerable situation, reasons which under the contract would not justify withdrawal from his connection with the company, but these reasons, however impelling they may have been, would not deprive him of the benefit of his legal reason arising out of nonpayment by the company of pecuniary obligations to him. In the discussion contained in defendant's brief it is pointed out that this action is not for damages for breach of contract, which is true; but it is an action on the contract, and the breach proved furnishes the legal ground, under the terms of the contract, for the withdrawal by plaintiff from service of the company and a recovery of what was due him under the contract.
The conclusion reached by the trial court is stated in the finding both as a conclusion of fact and law. The other facts found do not justify either conclusion.
Plaintiff had a right to stand upon the breach of the contract in 1915 or 1916, and also upon the breach of the implied contract to afford him facilities to work, which we have discussed above; but he continued on and did not elect to treat these breaches as affecting the contract until the events of January and February, *Page 296 1917, including defendant's last refusal to pay without a receipt in full.
The history of plaintiff's negotiation looking to a connection with the Standard Company, a competitor of defendant, is of no consequence, since the negotiations were abandoned. Moreover, they occurred after defendant had breached its contract with plaintiff by refusing to give him the opportunity to make and develop his inventions, and thereafter plaintiff could elect to stand on the breach and sever his connection with defendant without injury to his rights under the contract before his election, or to any right to recover damages or secure the retransfer of the patents transferred to defendant by him which might exist; in other words, the fact of his election would not prejudice any attempt which he might make to recover damages for the breach or a retransfer of the patents, or both remedies if appropriate. The continued tender to plaintiff of the salary and royalties, even though it had been made unconditionally and had included every item owed him, would not have satisfied defendant's obligations under this contract. Plaintiff had also the right to his opportunity to make and develop his inventions, and as counsel forcefully point out, the defendant not only denied him the opportunity to secure royalties from new inventions, but the keeping of plaintiff from his chosen field of labor was calculated to arrest his further growth and development as a manufacturer and inventor.
If our conclusions thus far be sound, it follows that it is immaterial in the consideration of the case whether or not plaintiff's contention that paragraph nine of the contract, which provides that "should the said Albert F. Rockwell voluntarily leave the employment of the Company for any other reason than the nonpayment of his royalties and salary as provided herein," all *Page 297 payments under the contract should cease and determine, but the rights of defendant to plaintiff's inventions should continue — is in the nature of a penalty and unenforceable, and also that the contract is not severable.
On March 1st, 1917, plaintiff entered into a contract with Marlin-Rockwell Corporation by which its manufacture of roller bearings should be conducted under his supervision, thus engaging in a business competitive with defendant's. This action by plaintiff, in a vote of the board of directors of defendant, is recited as a breach by plaintiff of his contract with defendant. At this time the trial court finds "both parties regarded the contract between them as at an end." Since defendant first breached this contract, plaintiff's entry into the new relation was no more than a decisive expression of his election to accept as final defendant's prior breach of this contract. The recitals in this vote, uncontested by plaintiff, and claimed to constitute admissions upon his part, have no such effect, since the vote was passed after the plaintiff had signified his election to stand on defendant's breach of contract in the Marlin-Rockwell circular of February 27th, and in beginning this action two days later. Each of the parties up to this time was maneuvering for position and apparently unwilling to have the contract terminate.
On or about March 1st, 1917, plaintiff made his election to withdraw from the employ of the defendant, and as we have seen, because of the failure of the latter to afford him opportunity properly to carry out his obligations and rights under the contract and also to pay him the amounts due thereunder. Eight days afterward defendant declared by vote of its board of directors that plaintiff had voluntarily left the employment of the defendant for reasons other than *Page 298 nonpayment of royalties and salary. There was no occasion for the plaintiff after receipt of the vote of March 9th, to deny the recitals in this vote and to reiterate the fact that his suit signified that he had brought his suit against defendant to recover by reason of the latter's breaches of the contract, which latter were the reasons of his leaving the employ of the defendant. The payment by the defendant on March 23d 1923, during the trial, was made and accepted without condition, and did not include items occurring after March 1st, 1917, and hence does not affect the conclusion so far reached by us. These breaches, the refusal to give plaintiff an opportunity to make and develop his inventions and to pay plaintiff what defendant admittedly owed him, were continuing breaches and existent when plaintiff withdrew from the service of defendant.
Plaintiff's claim to royalties on coaster brakes manufactured under the Copeland patent is disposed of by the fact that "the Copeland invention and patent were never possessed by the plaintiff nor did he ever have any rights in or to the same."
The trial court found that the plaintiff was entitled to commissions on domestic royalties on coaster brakes, and did not err in so doing.
At the time of the contract of 1903, a domestic license to the Corbin Company was in existence, and was therein ratified. Afterward, but before the supplementary agreement of 1906, domestic licenses had been issued to the Pierce Company and to the Pope Company. Meanwhile the defendant company had developed a large business in Europe in these products, operating under patents owned either by plaintiff or the company; factories had been established and licenses granted abroad. In 1906, the plaintiff and two other directors of the company were in Europe and had negotiated for the alteration of certain agreements *Page 299 under which the company conducted its business in Germany, and had also initiated certain arrangements looking to a possible sale of its foreign coaster brake business. After plaintiff's return from abroad a meeting of the directors of the company was held, and his actions and those of the other directors approved. A sale of the defendant's foreign business would require under the existing agreement between plaintiff and defendant, the written consent of the former, and this fact brought forward for consideration the provisions of that agreement, and finally led to the execution of the supplementary agreement in 1906, in modification of that of 1903. As set out in the statement of facts, the agreement of 1906 provided for the extension of the three domestic licenses then existing, and gave to the defendant the right to license other persons than those to manufacture and sell coaster brakes upon payment by defendant to plaintiff of a royalty of ten per cent upon gross receipts.
The change in the foreign business was undoubtedly the occasion of a revision of the relation between the parties as to coaster brake licenses, but there is nothing in the terms of the contract of 1906, which indicate that the new relations created by this instrument were only to apply to foreign licenses. On the contrary, there is every indication upon the face of the agreement that such was not its intent. If the parties were only contracting with reference to foreign licenses, why say anything about the three existing domestic licenses? These latter came in by way of exception from the other and general provisions of the agreement; had it been intended to apply only to foreign licenses, any mention of these three licenses would have been superfluous and inept. If only foreign business had been in mind, it is quite certain the fact would have been unmistakably indicated in the wording of the instrument, *Page 300 while in fact its provisions are general and sweeping. The fact that the agreement also provides for a sale of the patents without restriction of locality, upon payment to plaintiff of ten per cent of the selling price, favors the construction given the instrument by the trial court. If only the European patents were to be sold, the agreement would have so provided.
The fact that plaintiff instructed the bookkeeper to credit him with commissions on foreign royalties and not on domestic royalties, is not significant as bearing upon the construction of the contract, nor as constituting an estoppel from afterward claiming such commissions. At the time such instruction was given it appears that there were no domestic licenses in existence except the three on which plaintiff was to receive no commissions; so, at the time, the instruction was technically correct. It is evident that when the time came when the volume of royalty receipts from domestic licenses was of a size to justify commissions to plaintiff, he neglected to notify the bookkeeper of changed conditions. It is further found by the court that plaintiff left the keeping of accounts of credits in his favor to the bookkeeper and never asked for nor received any detailed statement, merely asking from time to time what appeared to be due him, and drawing against it in lump sums. Plaintiff, as a director, from time to time saw reports which indicated that he was being paid as respects foreign licenses, but not on domestic licenses, but plaintiff never particularly noticed the statements which showed the lack of credit to him in this regard. The contract of 1906 does not seem to have been scrutinized with any attention until dissensions arose between plaintiff and his associate officers in the company, and this is not strange; the progress of the company had been such as to afford a wonderful pecuniary return, money was plenty for all, and prospects *Page 301 of the company (as the sequel confirms) promised riches "beyond the dreams of avarice." The construction given to the contract by the trial court upon the point under discussion is not only justified by its terms, and the position of the parties at the time it was made, but is fair and equitable. Under paragraph four of the agreement of 1903, the written consent of plaintiff was required for all licenses other than the existing Corbin license; the provision in the modifying contract of 1906 does away with the necessity of that consent, and hence the commission provided is the only way in which the interests of the plaintiff might be safeguarded. The facts found by the trial court clearly support its express holding that the contract of 1906 was not made under any mutual mistake.
As respects payments due plaintiff upon proceeds of domestic royalties, the trial court applied the statute of limitations as plead by defendant, and thereby excluded from the account all items in this regard of earlier date than six years prior to the commencement of the action; we infer that the court applied the statute analogically upon the principle of laches, since the action is an equitable one and the statute is notstricti juris a bar. The action is for an accounting, for a judicial determination and statement of the true financial obligations between the parties. It would not have mattered if upon the company's ledger there had been no special account of plaintiff's earnings on one side and of payments to him from time to time on the other; providing the material for the preparation of such an account existed in the general books of the company, as was undoubtedly the case. "The word `account' has no clearly defined legal meaning or definition. In its primary meaning an account is some matter of debt or credit, or of a demand in the nature of debt or credit between the parties, arising out of a *Page 302 contract or fiduciary relation or from some duty imposed by law, and is not required to be in any particular from or necessarily to contain detailed information. The word is flexible in its meaning, depending somewhat upon surrounding circumstances and the connection in which it is used." State v. Illinois CentralR. Co., 246 Ill. 188, 227, 92 N.E. 814. The coaster brake account was not a distinct account separate from other debit and credit items arising out of the various contracts between the parties; it was not so in law, and it was not so in fact as kept by the bookkeeper, since the account so kept credited the plaintiff with his commissions on foreign licenses, together with all sums due him otherwise on his general transactions in his pecuniary relations with the company. The trial court has found that the failure of defendant to credit and pay plaintiff a commission upon certain domestic license was due to an oversight of both plaintiff and defendant; in other words, there was a mutual mistake in this respect. In that particular account items were omitted which should have appeared therein. Such being the case, equity considers the same to have been in the account, because they should have been there, and there can be no proper application of the statute of limitations, strictly or by way of analogy. It was as much the duty of defendant to see that these items were included as it was that of plaintiff. Considering such items as placed in the account, it becomes an ordinary mutual account, with items on each side thereof, with no hiatus of six years giving any warrant for applying the statute of limitations.
We now pass to the question of the right of the plaintiff to recover commissions, under paragraph six of the contract, on single row bearings. These did not contain within or as a part of their physical structure any invention of the plaintiff, but several patented *Page 303 machines or processes invented by plaintiff were used in manufacturing the balls contained in both double and single row bearings. On this state of fact the trial court ruled that the plaintiff was not entitled to commissions on single row bearings, because such bearings were not "manufactures embodying" any invention of the plaintiff. The words "embodied," "embodying" or "embody" are used thirteen times in the contract. The preliminary recitals describe one patent and three applications, all of which are for articles of manufacture as distinguished from machines or processes, and all of which are described as "applicable to and designed to be embodied in" coaster brakes; also that the plaintiff has patented named "improvements in bicycles, cyclometers, bells and other articles of manufacture;" also that the defendant company is engaged in the manufacture and sale "of devices embodying and containing" the inventions of Albert F. Rockwell "as set forth" in the "aforesaid" patents and applications, and is engaged in the manufacture and sale of coaster brakes "embodying the inventions or some of the inventions . . . of the said Albert F. Rockwell, hereinbefore set forth by date and number." In the first five paragraphs of the contract the word "embodying" or the phrase "embodying and containing" is used seven times; always referring to the embodiment in brakes or coaster brakes of one or more of the inventions set forth in the preamble; and since these inventions are specifically described either as brakes or improvements or devices or articles of manufacture designed to be embodied in brakes or coaster brakes, it necessarily follows that the term "embodying" is consistently used down to paragraph six in its primary and ordinary sense of incorporating, incarnating, or giving concrete form to the inventions referred to. Coming now to paragraph six, its material portions are as follows: "Upon all *Page 304 other manufactures of the Company which shall embody any of the future inventions of the said Albert F. Rockwell, not relating to brakes and coaster brakes, excepting those lines which the Company is now making, the Company is to pay no royalty to the said Rockwell, until the manufacture and sale of such other articles by the Company embodying any or all of such other inventions of the said Albert F. Rockwell shall in any particular line of such manufacture amount to and show a net profit to the Company [here follows the statement of the requisite profit] and in that event the Company shall pay . . . in addition to the royalties on brakes and coaster brakes, a sum equaling two per cent (2%) on the net sales," etc.
The presumption that the words "embody" and "embodying" are still used, as before, in their primary and ordinary sense is well-nigh conclusive, in the absence of any qualifying expression. Still more conclusive is the fact that in bargaining for royalties on future inventions, the parties stipulated for commissions on the sale of "manufactures" embodying any of plaintiff's future inventions, and did not use the comprehensive language of paragraph four, in which Rockwell agrees to assign to defendant "any and all other inventions or improvements of every description . . . which may be hereafter invented and acquired by the said Albert F. Rockwell." This distinction between "manufactures" and other classes of inventions is basic, statutory and familiar. The patent statute recognizes four classes of patentable inventions described therein, in the singular number, as "art, machine, manufacture or composition of matter." A "manufacture" is commonly called an article of manufacture, and that phrase is used in the preamble of this contract in its accepted sense of a concrete marketable product. That the word "manufacture" is also used in paragraph six in the statutory *Page 305 sense, is shown by the use of the phrase "such other articles" as synonymous with the "other manufactures" upon the profitable sale of which the payment of commissions is conditional. The trial court did not err in so construing the contract.
Plaintiff claims that the parties have put a practical construction on the contract by the payment and receipt of commissions on all bearings, without making any distinction between double row and single row bearings, between May, 1911, and September, 1914. The effect of including commissions on sales of single row bearings in these payments depends on the facts found. The contract was executed July 1st, 1903, and defendant's copy of it remained in plaintiff's hands for some years before it was turned over to defendant's treasurer with a mass of other papers. It was thereafter available for inspection by any director, and though all of them knew of its general character, none was familiar with its terms, and none examined the contract or considered its terms with reference to plaintiff's right to commissions on single row bearings until 1914. Defendant did not begin to make and sell any new line of articles to which paragraph six might apply until some time in the fiscal year ending June 30th, 1909, when it commenced the manufacture of double row bearings unquestionably embodying an improvement in double row ball bearings patented by plaintiff in that same year. From and after July 1st, 1909, the defendant's annual profits on double row bearings exceeded the minimum, below which commissions were not payable, but because defendant was indebted to a syndicate of bankers, the payment of commissions to plaintiff was postponed until the loan was paid in April, 1911, when plaintiff told Charles T. Treadway, the treasurer of defendant, that he was entitled to be credited with commissions on bearings. Without examining *Page 306 the contract, and accepting plaintiff's statement, "as at that time he would have accepted almost any statement of the plaintiff," Treadway instructed the bookkeeper to give credit to plaintiff upon sale of bearings without specifying any distinction as to types. The manufacture of single row bearings had not been commenced until some time, not specified, in the fiscal year ending June 30th, 1911, so that the accumulated commissions from July, 1909, then credited to plaintiff, must have been chiefly earned on profits from sales of double row bearings. Defendant did not, until September, 1914, keep any separate account of its receipts from single row bearings. The trial court finds that "in seeking credit for royalties upon the basis of sales of all bearings, including single row bearings, plaintiff was proceeding upon a vague recollection of the terms of the agreement of July 1st, 1903, and Treadway, in authorizing the bookkeeper to give those credits, was acting upon his trust and confidence in plaintiff and in reliance upon the soundness of any such claim as he might make."
At that time no person who was a director in 1903, except plaintiff and one other who had been inactive for some years, was a director of or otherwise connected with defendant corporation. Under the circumstances, we think the trial court did not err in refusing to hold that the conduct of defendant amounted to a practical construction of the contract, for the reason that the payments were not in fact predicated upon any construction of the terms of the contract or upon any fresh or distinct recollection of the original agreement evidenced thereby.
The trial court went a step further and held that defendant was entitled, in the accounting, to recover back the commissions paid on single row bearings, as money paid under a mistake. We find ourselves unable *Page 307 to agree with this ruling, because we are of opinion that the subordinate facts found are inconsistent with the existence of the kind of a mistake in respect of which equity will grant affirmative relief. Briefly, the parties stood on an equal footing, each having access to his own copy of the written contract, upon the true interpretation of which the existence of a debatable legal obligation depended. If Treadway, after consulting the writing, had deliberately agreed to plaintiff's interpretation of its terms, the payments of commissions on single row bearings would doubtless have been made under a mistake as to the legal effect of the document regarded as the sole expression of the intent of the parties. Yet it would then be idle to say that they were not voluntary payments, or that they might be recovered as money paid under a mistake of law. On the contrary, defendant would in such case be bound by consenting to a practical interpretation of its own contract which was within the limits of its possible construction. And while the fact that Treadway, the treasurer, acquiesced in the debatable claim of plaintiff, without looking at the contract, solely because he took it for granted that plaintiff was probably right about it, relieves defendant from the consequences of a deliberate and intentional assent to plaintiff's construction, it does not make the payments in question any the less voluntary in character, or impose upon plaintiff, who made his claim in good faith and still pursues it in good faith, any equitable obligation to refund the payments. In so holding, we do not question or weaken the authority of Northrop v. Graves,19 Conn. 548, and our many other decisions holding that money paid under a mistake of fact or of law, which the recipient has no right in good conscience to retain, may be recovered back. We do hold that when the parties to a written contract stand on an equal *Page 308 footing as to means of knowledge of their contract obligations, money paid by one to the other, in part performance of the contract, in response to a claim made in good faith and based upon a permissible but erroneous construction of the contract, cannot be recovered back as money paid under a mistake of law.
The contract contemplated the continued payment of royalties during the life of the patents under which the defendant manufactured articles embodying inventions of the plaintiff, or under which the defendant collected license fees for the use of patents issued to or acquired by the plaintiff. These payments were to cease in case the plaintiff voluntarily left the employ of the company for any other reason than the nonpayment of his royalties and salary. Otherwise, by clear implication, they were to continue.
We have held the conclusion of the trial court, that plaintiff left the employ of defendant voluntarily and for a reason other than the nonpayment of salary, etc., to be erroneous, and it follows that the fixing of the date of March 1st, 1917, up to which an accounting should be taken, is incorrect. In his amended complaint plaintiff demands an accounting, and in paragraph twelve alleges, and the facts found show, that up to the date of filing this complaint (November 23d 1921) defendant had continued to manufacture coaster brakes and bearings and other articles embodying plaintiff's inventions, and had sold the same for large sums, and that there had accrued to plaintiff a large amount of money, the amount of which is peculiarly known to defendant and unknown to plaintiff. The facts found, taken in connection with the more specific statement of patents filed therewith showing that some of the patents had not then expired, entitle plaintiff to an accounting down to the date of the *Page 309 judgment to be rendered by the Superior Court in accordance with this opinion.
In addition to the credits allowed plaintiff in the judgment appealed from, he should be allowed commissions on all domestic licenses which included inventions made or acquired by him for the full period during which the patents were granted. The defendant should not be allowed any sums as a return of payments heretofore made on account of single row bearings.
The judgment of the Superior Court is erroneous in part, and the case is remanded for proceedings in accordance with this opinion.
In this opinion the other judges concurred. ON REHEARING.
Defendant's motion for a reargument was confined to five points.
1. That the finding that plaintiff withdrew from the employment provided for in the contract because of defendant's breaches thereof was not properly before the court. This so-called finding was a conclusion, and is assigned in reason of appeal 6, and found in the plaintiff's claims of law 336, 337, 338, 339, 355, 356, 357, 358 and 360.
2 and 4. That the finding of the reason of plaintiff's withdrawal was one of fact, not of law, and not reviewable on this record. The so-called finding is a conclusion of fact reached from subordinate facts and is reviewable as a question of law. Hayward v. Plant,98 Conn. 374, 119 A. 341.
3. That the pleadings are inconsistent with a finding of voluntary retirement on March 1st, 1917, with a right to royalties thereafter accruing. As we construe *Page 310 the pleadings they are not inconsistent with the conclusion of voluntary retirement on March 1st, 1917, for the reasons stated in the opinion.
5. That the period of liability for commissions on domestic royalties should be made to correspond with the court's other holdings. The rescript has been corrected so far forth as this point is applicable.
Plaintiff's motion for a reargument was confined to the single point that the conclusions reached by the court upon plaintiff's claim for royalties on single row bearings were incorrect, and that plaintiff's claim thereon should be sustained. This claim has been reexamined, and as a result we find no occasion to change the conclusion reached by us or to supplement the grounds of our opinion upon this point.