
    Christian F. Dilg, Respondent, v. Gustavus Emil Strauss, Appellant.
    First Department,
    November 7, 1913.
    Limitation of actions — assignment of patent claims in escrow in consideration of deposits to be made by assignee — proviso that time of making deposit may be extended.
    Where the plaintiff, an inventor, agreed to place assignments of patent applications in escrow in consideration of an agreement by the defendant to deposit a sum of money to the credit of the plaintiff by a certain date and to prosecute the patent applications promptly and contest interference proceedings pending in the Patent Office, etc., with a further agreement that if on account of occurrences beyond the control of the parties a decision of the courts on the patent applications should not be obtained on or before the date 'the money was to be deposited to the plaintiff’s credit, the plaintiff would extend the time for said deposit, the Statute of Limitations — which is six years — began to run against the plaintiff’s claim from the time of the defendant’s wrongful neglect to prosecute the patent applications and not from the date to which the time of making said deposit may have been extended by the plaintiff.
    Clarke and Dowling, JJ., dissented, with opinion.
    Appeal by the defendant, Gustavus Emil Strauss, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 15th day of April, 1913, overruling a demurrer to the reply.
    
      Herbert R. Limburg, for the appellant.
    
      Howard A. Sperry, for the respondent.
   Scott, J.:

The action is for damages for defendant’s failure to promptly and diligently prosecute the application of plaintiff for a patent pursuant to the terms of a written contract annexed to . the complaint. One of the defenses (the fifth) is to the effect that the plaintiff’s cause of action, if any, is barred by the Statute of Limitations. The reply, which has been demurred to, sets up facts which, as the plaintiff insists, render the defense above stated unavailable.

The question involved is important to the parties because upon its answer may depend the outcome of the litigation.

The complaint, although we refused on a former appeal to strike out parts as irrelevant and redundant, and to require other parts to be made more definite and certain (152 App. Div. 943), is by no means a model pleading and is not distinguished for its clarity. It is not impossible, however, with some study, to ascertain the cause of action which it sets forth.

The contract, for the breach of which the plaintiff seeks damages, recites that plaintiff is the owner of a certain invention and applications for letters patent, pending in the Patent Office, as to which certain specified interferences had been filed. The plaintiff thereupon agreed to execute and deposit in escrow with the Twenty-third Ward Bank of the city of ¡New York assignments of said applications and of the patents to be obtained therein, said assignments to be delivered to the defendant when he should deposit the sum of $5,500 in the said bank to the credit of the plaintiff, together with an agreement to pay plaintiff $2,500 out of the profits to be derived from the use of said patents. The defendant on his part agreed to prosecute said applications promptly and to contest said interferences and to pay and bear all the expenses thereof. He further agreed to deposit the sum of $5,500 in cash in the said Twenty-third* Ward Bank to the credit of the plaintiff on or before the 1st day of January, 1906, and within thirty (30) days from the .time that a final court decision shall have been obtained sustaining said patent or patents,” and in addition to deposit in said bank an agreement to pay the plaintiff the further sum of $2,500 out of the moneys received from the use of said patents. There is a further promise that if on account of any unforeseen occurrences or causes beyond the control of the parties the court decision shall not have been obtained on or before the 1st day of January, 1906, the plaintiff would extend the time limit for the deposit of the $5,500 and the agreement as to further earnings for a further period of time to be mutually agreed upon.

The complaint alleges that defendant has never deposited the $5,500 as he agreed to do, and has not prosecuted plaintiff’s application faithfully and diligently, but on the contrary abetted, assisted and joined with one Klahn in filing and prosecuting applications for patents embodying the invention of plaintiff, with the result that plaintiff has been put to many years of delay and great expense in endeavoring to get his application properly allowed over the false claims presented with the knowledge and collaboration of defendant. The defense replied to sets forth that the rejection of certain of plaintiff’s applications by the examiner in charge thereof, and the affirmance of the decision of said examiner by the board of examiners of the Patent Office, and the affirmance of the decision of said board of examiners by the Commissioner of Patents, alleged in the 13th paragraph of the complaint, all occurred prior to the 7th day of February, 1905; that the decision or judgment of the Court of Appeals of the District of Columbia affirming the decision of the Commissioner of Patents was rendered on or about the 7th day of February, 1905, and that the alleged failure of defendant to prosecute plaintiff’s application promptly before the Patent Office and the alleged negligence, carelessness and delay of defendant in proceeding with reference to said application for patents all occurred prior to the 7th day of February, 1905, whence, as defendant avers, this action, which was commenced on February 16, 1912, was not commenced within six years after the cause of action alleged in the complaint arose. The reply to which defendant demurs alleges that the time limit for the deposit by defendant of the sum of $5,500 in the bank was extended by mutual consent to February 23, 1906, which was within six years before the commencement of the action. The question whether or not this reply sufficiently answers the plea of the Statute of Limitations depends upon the nature of the cause of action alleged. If it is for damages for breach of defendant’s agreement to promptly and diligently prosecute the application for the patents, the breach, if any, had been committed when the applications were finally rejected. But if the action is for the $5,500 agreed to be deposited in the bank, the alleged agreement to extend the time for making the deposit postponed the establishment of a cause of action until the agreed time had expired.

I think it is clear that the only cause of action alleged in the complaint, and the only cause of action plaintiff could have, under the circumstances detailed in his complaint, was for defendant’s negligence and bad faith in prosecuting plaintiff’s application so as to put plaintiff in a position to be entitled to receive the $5,500 down payment and the $2,500 to be paid out of earnings. Hence the plaintiff puts his damages at $8,000, the amount he would have been entitled to receive under his contract if his application had been allowed and the patents issued thereon. The provisions of the contract are perfectly clear that the $5,500 was to be deposited to plaintiff’s credit, and the agreement for a percentage of future earnings to be executed if and when the applications were granted. If defendant failed by wrongful neglect, or fraud to obtain the approval of the applications the time would never arrive for the payment of the $5,500 and the $2,500, but for such wrongful neglect and fraud he would be liable to respond to the plaintiff in damages, and the measure of those damages would be the amount the plaintiff would have been enabled to earn if the defendant had acted diligently and in good faith. If, as the answer alleges, the defendant’s failure to act diligently and in good faith all occurred prior to February 7, 1905, the cause of action then accrued against him, and if it is not the failure to deposit the $5,500 which constitutes the gravamen of the complaint, it is immaterial whether or not the time for making that deposit had been extended.

For these reasons I am of opinion that the demurrer to the reply was well taken and should have been sustained. Consequently the order appealed from should be reversed, with ten dollars costs and disbursements to appellant, and the demurrer to the reply to the fifth separate defense sustained, with ten dollars costs.

Ingraham, P. J., and Hotchkiss, J., concurred; Clarke and Dowling, JJ., dissented.

Clarke, J. (dissenting):

In brief the complaint alleges the sale of rights belonging to the plaintiff, under pending applications for a patent, upon an agreement by defendant to promptly prosecute interference proceedings before the Patent Office. The defendant was to pay $5,500 on or before the 1st day of January, 1906, and within thirty days from the time that a final court decision shall have been obtained sustaining said patent or patents, and in addition to deposit an agreement .for the payment of ten per cent royalty up to the sum of $2,500. There was a provision that if, on account of any unforeseen occurrences or causes beyond the control of the parties, the said court decision should not have been obtained on or before the 1st day of January, 1906, that then and in that event the party of the first part would extend the time limit within which the party of the second part must comply with the said requirements for a further period of time to be mutually agreed upon. It was alleged that the time limit was mutually agreed to be extended to and including the 23d day of February, 1906; that the defendant wholly failed and refused to either deposit the sum of $5,500 in cash or said agreement on or before January 1, 1906, or at any time thereafter; that the defendant did not prosecute said applications promptly, but proceeded so negligently and carelessly, and with so much delay, that said prosecution resulted in the rejection of said applications, which rejection was affirmed by the Court of Appeals of the District of Columbia, and then the defendant neglected, omitted and refused to proceed further to endeavor to procure a final court decision in the above-named litigation, and to obtain patents which might have been granted on the applications for more than a year before the 21st of February, 1906, when the contract between plaintiff and defendant expired.

It seems to me the action is to recover damages for the nonpayment by the defendant of the amounts agreed to be paid by him within the time extended by agreement, caused by the negligence and fraudulent conduct of the defendant in not prosecuting the proceedings with due diligence, and in not taking the further and necessary steps which he ought to have taken to procure the favorable decision upon which the amount agreed upon was to come due. It is a fair reading of all the allegations of the complaint, the contract and the reply, that the time in which the defendant was to do what he had agreed to do was extended to the 23d of February, 1906, and that the cause of action did not accrue until the expiration of the extended time given to perform. This action having been commenced within six years after the expiration of said time and the accruing of said cause of action, is not barred by the Statute of Limitations. Therefore, the order appealed from overruling the demurrer to these paragraphs of the reply should be affirmed, with costs and disbursements to the respondent.

Dowling, J., concurred.

Order reversed, with ten dollars costs and disbursements, and the demurrer to the reply to the fifth separate defense sustained, with ten dollars costs.  