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HOLST v. BUTLER (11/08/54)

November 8, 1954

HOLST
v.
BUTLER, APPELLANT.



Appeal, No. 331, Jan. T., 1953, from decree of Court of Common Pleas No. 1 of Philadelphia County, Sept. Term, 1948, No. 159, in case of William H. Holst and G. Russell Hersam v. Robert W. Butler and Edward T. Butler. Decree affirmed. Bill in equity. Before PARRY, J. Adjudication filed finding for plaintiffs; exceptions to adjudication dismissed and final decree entered. Defendants appealed.

COUNSEL

Joseph S. Kleinbard, with him Walter I. Summerfield, Jr., Carlos Berguido, Jr., and Kleinbard, Bell & Brecker, for appellants.

Thomas A. Galbally, with him John J. Sullivan, for appellees.

Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.

Author: Stearne

[ 379 Pa. Page 126]

OPINION BY MR. JUSTICE ALLEN M. STEARNE

The appeal is from a decree of a court of common pleas directing an accounting by two partners, directing payment of sums of money found to be due and ordering reassignment of certain patents. The complaint in equity was filed by two of the partners, plaintiffs. The answer and defense of the remaining two partners, the defendants, was that the transaction was illegal because three of the partners were officers and employes of the United States Government and the partnership was rendering service to contractors who were dealing, and had contracts, with the Government. As to one item defendants contended plaintiffs had no interest whatever. The court below decided that plaintiffs were not engaged in any illegal transaction against which defendants could defend and that plaintiffs were entitled, within defined limits, to a share of profits and royalties in the article questioned. The appeal followed.

Plaintiffs are William H. Holst and G. Russell Hersam. Holst was an officer in the United States Navy from March, 1943 to January 31, 1946. Hersam was a civilian employe of the Navy from May, 1942 until October 15, 1945. The defendants are two brothers, Robert W. and Edward T. Butler. Edward was an officer in the Navy from 1942 to 1945. Robert was not associated with the armed forces in either a military or civilian status. Plaintiffs, while stationed at the Naval Ordnance Laboratory, Silver Springs, Maryland, invented a chemical formulation and a method of applying it known, generally, as the "cocoon pack" process, consisting of the preparation and application of a plastic coating for the protection of aircraft, guns, turrets, machinery, etc. Plaintiffs applied for letters patent on this process. Defendant, Edward T. Butler,

[ 379 Pa. Page 127]

    met the plaintiffs while he was also stationed at the Naval Ordnance Laboratory. He subsequently interested his brother, Robert, the other defendant, in the invention. The Butler brothers met with the plaintiffs and entered upon discussion relating to the commercial exploitation of plaintiffs' invention. On January 24, 1945, the parties signed a writing agreeing:

"(1) An organization will be formed which will offer Engineering Services.

"(2) This Organization will be set up so that; (a) 24% Interest will be assigned to William H. Holst. (b) 24% Interest will be assigned to G. Russell Hersam. (c) 24% Interest will be assigned to Edward T. Butler. (d) 15% Interest will be assigned to Robert W. Butler. (e) 8% Interest will be assigned to R. Donald Weir.

"(3) Any distribution of Profits shall be for the duration of the War and 92% shall be paid to Robert W. Butler who shall in turn redistribute to William H. Holst, G. Russell Hersam & Edward T. Butler, the amounts, less personal expenses and Income Taxes, those amounts paid to Robert W. Butler by virtue of the Interests so vested.

"(4) Robert W. Butler will execute a new will and Testament which will leave to William H. Holst, G. Russell Hersam & Edward T. Butler their respective 24% Interests in the Corporation.

"(5) The issuance or Transfer of the Stock in the Corporation shall be completed on the basis that;

"(1) When the Patent or Patents, now pending, covering the 'Strippable Coating' are issued to William H. Holst & G. Russell Hersam, such Patents will be sold to the Organization in exchange for their respective Interests, 24%, of William H. ...


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