The opinion of the court was delivered by: KIRKPATRICK
In September or October, 1944, the plaintiff and the defendant entered into a partnership agreement the purpose of which was to make and sell a device, intended to be installed in ambulances, for producing anesthesia by mechanical refrigeration. At that time the defendant had pending an application for a patent (which issued March 21, 1945) and had spent something like $ 2,000 upon it, over a period of several years.
The agreement was that the plaintiff, who had certain contacts with government agencies, would devote his entire time to developing a market with the government and in assisting, so far as he could, the work of perfecting the device and making it commercially profitable. Until such time as they were ready to go into production, the defendant was to continue to put up all the money needed for development, but from that point on, the plaintiff and the defendant were to pay the expenses of the business equally and share equally in whatever profits might be realized. As to these terms, the testimony of the two parties is in agreement.
The question whether the patent itself, as distinguished from the profits arising from manufacture under it, became a partnership asset is in dispute. The plaintiff understood that it did, the defendant on the other hand testified that he was to keep the title to the patent, that he never agreed to give the plaintiff any interest in it -- 'only what we would obtain from the patent'.
In pursuance of the agreement, the plaintiff went to Washington in October, 1944, where he apparently created some interest on the part of the government in the device, predicated, however, upon putting a pilot model in the hands of the War Production Board before any orders for it could be obtained.
At this point both parties believed themselves ready for the commencement of production and the plaintiff for the partnership, began to look for a building, finally located one, and arranged for the purchase of its in July of 1945. From October, 1944, until July, 1945, the defendant continued to pay the expenses of development which consisted of work upon the pilot model. The amount of these expenses does not appear definitely but they were probably not large as there was much difficulty in obtaining materials and parts; and as a matter of fact no model was ever completed.
The contract for the purchase of the building was made in July, 1945, and the property was deeded to the two partners on October 30, 1945, for $ 3,000. Both sides agree that the building at the time of its purchase was partnership property.
The building having been purchased in anticipation of and for the purpose of going into production of the device, the defendant, under the partnership agreement was obligated to contribute half the cost. He did not do so however. The seller took a mortgage of $ 2,000 and the plaintiff paid the additional $ 1,000 in cash as well as all settlement costs. Beginning in the latter part of the summer of 1945, alterations were made upon the property, all of which were paid for by the plaintiff, the cost being more than $ 1,500 and less than $ 4,000.
It having become evident with the end of the war and the difficulties in obtaining materials that commercial operations would not be possible for a long time, the plaintiff and the defendant, sometime between October, 1945, and March, 1946, agreed that the building be sold; but before anything was done the plaintiff left to take a position in Los Angeles where he remained. All relevant communication between the parties after March, 1945, was by letter.
The property was placed for sale in the hands of an agent (Taylor and Son, realtors) who obtained a purchaser for the property at $ 7,000. A deed was prepared and executed by both the plaintiff and the defendant and settlement was made, through the agent (Taylor), on October 17, 1946. Part of the proceeds were used to satisfy the bond and mortgage and to pay costs incidental to the sale leaving a balance above said expenses of $ 4,567.45. Three checks totaling this amount were delivered to the defendant.
At this point the present difficulty began to develop. It did not, however, arise from any question as to the proceeds of the sale. Both parties were, and still are, in agreement that the understanding was that the whole amount belongs to the plaintiff.
The disagreement has to do entirely with the ownership of the patent; and the way in which it has given rise to this lawsuit is that the defendant has refused to indorse the checks or deposit them to the plaintiff's account unless and until the plaintiff gives him a written renunciation of all interest in the patent. His position is that the sale of the property was only half of the agreement dissolving the partnership, the other half being his retention of the patent as his exclusive property. His testimony on the point was: 'That was the way I thought to wash up the partnership; he to go his way, and I to go mine.
'Q. In other words, he was to take back what he put up, and you were to take back what you put up? A. That is right, leaving me free to promote the patent at some future date.'
The plaintiff's position is that the sale of the building was an entirely separate transaction intended to reimburse him for the money which he had put into that specific property, of which the defendant had been obligated to contribute one half, and that it was not intended to affect any other rights or liabilities of the partners. He says that he was and still is a half owner of the patent by virtue of the original partnership agreement.
It does not seem necessary in this proceeding to determine the ownership of the patent. Obviously, if the plaintiff is right about it, the defendant cannot withhold the checks, which he concedes belong to the plaintiff, in order to force the plaintiff to surrender his interest in the patent. If the defendant is right, he does not need a renunciation or release from the plaintiff and by analogy to rules governing tender. See Hepburn & Dundas ...