
    Alice M. Fitch, as Executrix, etc., of William G. Fitch, Deceased, Respondent, v. The Shubert Theatrical Company, Appellant.
    First Department,
    October 20, 1916.
    Contract — agreement to pay author royalties on plays—modification of royalty induced by false representation — evidence — letter indicating good faith of defendant—proof of letter by letter-press copy— damages — proof justifying recovery of royalties — mutual mistake of fact.
    Action against a theatrical company brought by an executrix to recover royalties under a contract relating to the production of a play. It appeared that by the original contract the author of the play, which was a translation, was to receive from the defendant as royalty fifty per cent of the income from American licenses granted by the defendant. It further appeared that, unknown to the author, the defendant had purchased from the foreign authors of the play all rights for a small sum of money, and after the death of the author falsely represented to his administrator, who had succeeded to the author’s' rights, that it was continuing to pay thirty per cent royalty to the foreign authors in addition to the fifty per cent payable under the contract aforesaid, and that thereupon the administrator of the author modified the contract by agreeing to accept a much smaller percentage of the receipts as royalties. Evidence examined, and, held, that a judgment for the plaintiff should be affirmed. (Per Smith, J., and Clarke, P. J.; Scott and McLaughlin, JJ., dissented in part, with opinion.)
    Where the author’s administrator agreed to reduce the royalties by letter the defendant is not entitled to show, in order to establish that it made no false representations, that it wrote a letter to the administrator stat. ing that it had obtained the foreign rights, the receipt of which letter is denied by the plaintiff, by proving the contents by a letter-press copy, especially where there is no proof whatever that the letter itself was ever mailed by any one having such duty.
    Although the original letter of the administrator reducing the royalties demanded a confirmatory letter from the defendant, the fact that such confirmatory letter was written is not established by the fact that in a second letter the administrator failed to repeat the demand.
    Even though the defendant wrote a letter disclosing the fact that it had acquired the foreign rights, which letter was not received by the administrator, the defendant does not escape liability for royalties under the original contract, for in any event the reduction of royalties by the administrator was founded upon a mistake of fact which would warrant equitable relief.
    Moreover, the defendant cannot urge for the first time upon appeal that its letter, whether received or not, was evidence of good faith, when no such claim was urged at trial.
    " In such action it was proper for the court to charge that the plaintiff was entitled to fifty per cent royalties as the original contract provided, there being no clause therein calling for any deductions for amounts paid to foreign office.
    
      It seems, that if the defendant wished half of the sum actually paid for the foreign rights to be deducted from the recovery, it should have made that request at trial.
    Dowi/nsra, J., dissented, with memorandum.
    Appeal by the defendant, The Shubert Theatrical Company, from a judgment of the Supreme Court in favor of the plain-, tiff, entered in the office of the clerk of the county of New York on the 27th day of January, 1916, upon the verdict of a jury for $11,000, and also from an order entered in said clerk’s office on the 4th day of February, 1916, denying defendant’s motion for a new trial and resettling a prior order also denying its motion for a new trial.
    
      Charles H. Tuttle, for the appellant.
    
      Melville II. Cane, for the respondent.
   Smith, J.:

The plaintiff, as executrix of William Gf. Fitch, deceased, sues to recover from the defendant company for certain royalties received by the said company for licensing the plays “Girls” and the “Blue House” to he played in stock. The term “played instock” has a technical meaning in the trade, and refers to a play produced by some company other than the owner under a license, upon the customary compensation of ten per cent of the gross receipts. These two plays were adaptations of two German plays made by William Clyde Fitch. William Clyde Fitch died in the fall of 1909. William G. Fitch was one of his administrators, and upon the settlement of his accounts became the owner of this claim. This action was originally brought by William G. Fitch. Thereafter William G. Fitch died, and the action was continued by Alice H. Fitch as executrix under his will. Originally the rights to the English speaking production of the plays were purchased by the defendant from the German authors under a contract that the defendant should pay thirty per cent of the gross receipts derived therefrom. After the plays were rewritten and put in shape by Clyde Fitch a contract was made between him and the defendant giving the rights to license these plays to be played in stock, the said Clyde Fitch to receive fifty per cent of the income therefrom. This provision was omitted by mistake in the contract in reference to the play called “Girls.” In 1908, before the death of Clyde Fitch, the defendant through its German agent had purchased the rights of the German authors to this royalty for the sum of $1,200. After this contract was made with Clyde Fitch providing for the payment of fifty per cent and after the purchase by the defendant of the rights of the German authors and after the death of Clyde Fitch the contract was modified by his executrix so as to provide that the fifty per cent to which the estate of Clyde Fitch was entitled was .to be estimated upon the net proceeds, first deducting the thirty per cent payable to the German authors. This modification is claimed to have been induced by the fraudulent representation of the defendant Shubert to the effect that he was paying the German authors thirty per cent of the gross proceeds from the plays in stock and fifty per cent to the Clyde Fitch estate, and, therefore, was only receiving twenty per cent himself, which was an unfair division as to the defendant. The unfairness of this seems to have been acquiesced in by the estate of Clyde Fitch, and the contraéis were, therefore, modified as before stated, upon the understanding, however, as is claimed by the plaintiff in this action and as has been found by the jury, that the defendant was at that time still paying to the German authors thirty per cent of such proceeds. There seems to be abundant evidence from which the jury could have found that such misrepresentations were made, and in fact no question is made that the verdict is against the weight of evidence. The main question raised and argued upon the' brief is to the effect that a certain copy of a letter which was claimed to have been written by Shubert to the administrator of Clyde Fitch was not admitted in evidence. The modification of the contract was contained principally in a letter written by Megrue, one of the administrators of Clyde Fitch, upon February 15, 1911, and that letter in part reads: “Of all moneys so received, the royalties amounting to three per cent (3%) of the gross receipts for the German authors shall first be deducted and of the sums that remain, these shall be divided equally, fifty per cent to the Shubert Theatrical Company and fifty per cent to the Clyde Fitch Estate.” After the receipt of that letter Lee Shubert, the president of the defendant, swears that he called in the administrator, the writer of the letter, and told him that he had acquired the rights of the German authors. Megrue upon the witness stand swears that Mr. Shubert did not tell him that he had bought out the German authors or compromised with them in any way and that the first that he heard thereof was a year and a half after February, 1911, when Mr. Ernst told him, and that he then spoke to Mr. Shubert about it casually, as he was no longer an executor for the Clyde Fitch estate, and Shubert’s answer was, “No, Mr. Amberg, my German agent, owned them.” Shubert swears that within a few days after the receipt of this letter of February 15,1911, he dictated and signed a letter to Megrue. After having called upon the plaintiff to produce that letter and upon the assertion that no such letter was received the defendant offered a letter-press copy of such a letter, which the trial judge refused to receive, and this ruling is claimed to have been such error as to call for the granting of a new trial. In this letter-press copy of this letter it is stated that the defendant had obtained the German rights. While there is considerable proof as to the custom of dictating letters to a stenographer and the stenographer thereafter placing them in some receptacle, there is no proof that it was mailed by an office boy whose duty it was to take these letters to the post office or that such was their custom or that they actually took letters regularly in this way to the post office. It is unnecessary to discuss this evidence, because in Gardam & Son v. Batterson (198 N. Y. 175) it was held that evidence much stronger than that in the case at bar was insufficient to authorize its introduction, and defendant’s counsel upon the argument concedes that the proof alone is not sufficient within this authority. The claim of the defendant’s counsel, however, is that in this letter of February fifteenth Megrue demanded a confirmatory letter from Shubert and thereafter and upon February twenty-third Megrue again wrote to Shubert and did not repeat the demand for a confirmatory letter but treated the matter of the royalties as settled upon the basis desired by Shubert. The inference is sought to be drawn from this failure to repeat the demand in the letter of February twenty-third that the confirmatory letter, a copy of which is sought to be introduced, had been in fact received by Megrue. The mere fact of failing to renew the request for a confirmatory letter cannot be deemed such an admission of the receipt of the letter claimed to have been written as to make this letter competent evidence. The further claim is now made that, although this letter was never received by Megrue and although Megrue had no notice, nevertheless if a letter was in fact written and signed with the intention that it should be sent, it was evidence upon the question of the defendant’s intention to defraud, which was the question of fact submitted to the jury. But if this contract was made by the representative of the Clyde Fitch estate under a mistake of fact and upon the assumption that these moneys were being paid to the German authors, when it turns out that those rights had been purchased for a small sum by the Shuberts, a court of equity will give to the plaintiff some legal relief whether it be based upon a mistake of fact or constructive or actual fraud on the part of Shubert in not bringing to the knowledge of Megrue the real state of the case. Moreover, the question was treated at the trial purely as a question whether enough had been proven to raise an inference of the receipt of the letter by Megrue. It was not there suggested that the letter was competent for any purpose in case it were written and not received. After having urged its admission on that ground alone it would not be fair to the trial court nor to the plaintiff upon this appeal to take a new position claiming the letter was nevertheless competent for a purpose which did not occur even to the defendant’s counsel at the time the letter was offered, or, if it did occur to him, was suppressed. There was no claim then made that it was offered for any other purpose than to show knowledge in Megrue that the defendant was then the owner of the German rights. Our conclusion is that the refusal to receive the letter in evidence was, therefore, not error for which a new trial should be granted.

It is further claimed that the measure of damages was not proper. The damages were directed by the court to give to the plaintiff fifty per cent of the proceeds as the contracts originally read without any deduction for the amounts paid to the German authors. That would seem to us to be clearly the proper measure of damage, and the court was right in thus assuming. If the defendant had requested, the court might have allowed the defendant one-half of the moneys paid for these German rights, but that was not asked for upon the trial.

It is further objected that the charge of the .court was too strongly in plaintiff’s favor. The court was evidently strongly impressed with the equity of the plaintiff’s claim. The plaintiff had surrendered legal rights under her contracts and consented to a modification on what she supposed was an equitable demand of the defendant. This was apparently brought about by a concealment of the facts and by a demand which was far greater than what was equitable, due to a misrepresentation of the actual obligation resting upon the defendant as to the payment of these royalties to the German authors. The administrators of Clyde Fitch would never have consented to a modification of this agreement by which the defendant received $10,000 more "than its right if they had known that before that modification was made the defendant had for $1,200 purchased all of the rights of the German authors, and it is undoubtedly true this modification was made in ignorance of that fact, as to which there was a duty of disclosure or at least a duty to represent truthfully such facts as were in fact stated.

The judgment should, therefore, be affirmed, with costs.

Clarke, P. J., McLaughlin and Scott, JJ., concurred; Dowling, J., dissented.

Scott, J.:

I am inclined to think that the question as to the mailing and receipt of the letter, Exhibit B for identification, should have been sumitted to the jury, in view of Mr. Megrue’s refusal to testify positively that he had not received it. But I do not consider the question important because as I read the modified contract the judgment in favor of plaintiff is right as matter of law. It might have been argued with plausibility that, even under the original contract, it was intended that Fitch, the adapter, and defendant, the owner of the playing rights, were to share equally in the net royalties which defendant might realize from producing the play “Blue Mouse” in stock. The purpose of the amended agreement was to make this construction clear. It was, therefore, provided that the royalties received by defendant for production “ in stock ” should be divided equally between the Fitch estate and the defendant after there had been deducted “ the royalties amounting to three per cent (3%)of the gross receipts for the German authors.” If there were no royalties to be paid to the German authors there was nothing to be deducted from the gross receipts. As matter of fact there were no such royalties to be paid, because they had been commuted and released by the payment of a lump sum. Thus under the strict letter of the amended contract, the Fitch estate is entitled to what it has recovered. The provision for a deduction from the gross earnings looked only to the future, and if defendant had wished to be reimbursed for one-half of the payment it had already made in commutation of the royalties, which would have been equitable, it should have so provided in the amended contract. I am, therefore, of opinion that while the receipt in evidence of the letter above referred to might have relieved defendant of the imputation of intentional concealment it would not have affected the plaintiff’s right to recover.

The judgment should be affirmed, with costs.

McLaughlin, J., concurred.

Dowling, J. (dissenting):

I believe it was error to refuse to receive in evidence the letter of February 21, 1911, in view of the failure of the witness Megrue to deny its receipt by him, as it bore strongly upon the question of whether or not there was any intention to deceive, misrepresent or conceal as to the purchase of the rights of the European authors or any attempt to defraud. Moreover, upon all the evidence in the case as to the preparation of the letter, the whereabouts of the carbon copy, the failure to deny its receipt and Megrue’s letter of February 23, 1911, I think a question was raised for decision by the jury as to whether or not said letter had been sent and received. I, therefore, dissent from the affirmance of the judgment, and favor its reversal and the granting of a new trial.

Judgment and order affirmed, with costs.  