Freeman v. Freeman , 136 Mass. 260 ( 1884 )

C. Allen, J,

Letters patent belonging to a firm are to be dealt with, on a dissolution of the firm, like other partnership property. If used by a surviving partner for the purpose of profit, he will be held to an account, as in other cases of using assets of the firm; and if a sale is necessary for the purpose of winding up the affairs of the firm, such sale will be ordered by the court, if not made voluntarily. The case of Mathers v. Green, L. R 1 Ch. 29, cited by the defendant, implies nothing to the contrary of this doctrine,- and has no reference whatever to the case of a partnership. It only holds that, where two or more persons jointly obtain letters patent, there is no implied contract that no one of them shall use the invention without the consent of the others, or, if he does, that he shall use the same for their joint benefit. This also was the doctrine of Vose v. Singer, 4 Allen, 226. But a contract of partnership implies an agreement that all the assets of the firm shall be used for the common benefit of all the partners ; and this implied agreement includes letters patent as well as other kinds of property; and supersedes the relation which the parties would otherwise sustain towards each other merely as joint owners. A surviving partner is bound by this implied agreement; and it is his duty to use, manage, or dispose of letters patent, as well as all other property of the firm, after its dissolution, for the common benefit of himself and the estate of the deceased partner. Crawshay v. Collins, 2 Russ. 325. Willett v. Blanford, 1 Hare, 253. Wedderburn v. Wedderburn, 22 Beav. 84, 112.

This duty of sale is not limited to a disposition of so much of the partnership property as is required to pay debts. The surviving partner is bound to wind up the partnership, and ordinarily to make sale of all the personal assets, and not only to pay the debts of the firm, but to distribute to the representatives of the deceased partner the share to which they may be entitled. This duty of the surviving partner may not be strictly that of a trustee, but it is analogous; and he is not allowed to derive a distinct and independent personal advantage, either directly or indirectly, from the use of the partnership assets, but he must manage and dispose of them with a single eye to the advantage of the partnership estate which he is to administer. This rule is universal in its application to fiduciary relations. Bowen v. Richardson, 133 Mass. 293. It extends also to the duty of a surviving partner, and he is bound to act in perfect fairness and good faith, according to the highest standard of honor, and with reasonable care and diligence, with reference to the decedent’s interest. That which was partnership property before the dissolution continues to be so afterwards; and a sale of the whole personal property will ordinarily be enforced by a court of equity, and an account ordered of profits made since the dissolution. The surviving partner is not allowed to divide this property in specie, or to take it himself at a valuation, or to have its value ascertained otherwise than by a sale; but he must turn all the assets into an available and distributable form, so far as this can be done. Lindley on Part. (4th ed.) 569, 666, 1015, 1016, 1041, 1046. Story on Part. (7th ed.) §§ 328, 344, 347, 350, 355. 2 Colly. Part. (6th ed.) §§ 623, 624. Lewin on Trusts (7th ed.) 255. Bush v. Clark, 127 Mass. 111. Dunlap v. Watson, 124 Mass. 305, 307. Shearer v. Shearer, 98 Mass. 107, 114. Moore v. Huntington, 17 Wall. 417, 424. Case v. Abeel, 1 Paige, 393, 398. Evans v. Evans, 9 Paige, 178. Heath v. Waters, 40 Mich. 457,464. Barry v. Briggs, 22 Mich. 201,206. Stevens v. Stevens, 39 Conn. 474. Wedderburn v. Wedderburn, 2 Keen, 722; 4 Myl. & Cr. 41; 22 Beav. 84, 100, 101, 103, 112.

The defendant was not relieved from this duty by his purchase of the bulk of the other property of the firm, for the plain reason that by that sale and purchase it was not the intention or understanding of either party to the transaction that a right to use the letters patent for his own benefit was thereby vested in him. It appears by the master’s report, that the plaintiff repeatedly requested the defendant, before, at the time of, and after this purchase, to dispose of the letters patent for the benefit of the firm.; and the defendant, in his answer and amended answer, not only made no claim to have acquired any right in the letters patent by the purchase of the other property, but stated expressly that whatever use he had made thereof had been exercised by virtue of his title as tenant in common with the plaintiff.

A somewhat technical argument has been addressed to us, to the effect that a patent is merely a grant of the privilege of excluding others from the use of the invention; and that, by merely manufacturing the articles covered by the patent, the defendant cannot be said to have used the patent in question at all. But we think the manufacture of goods under a patent, by one of the patentees, must be considered as a use of the patent.

The result is, that the plaintiff is entitled to maintain her bill for a sale of the letters patent, and for an account. The principle on which the accounting should be made has not been discussed, and it would be premature for us at this time to undertake to determine it. The exception, to the master’s report is sustained.

Decree for the plaintiff.