Smith v. Grove

Claiming that a partnership existed between the plaintiffs, Robert S. Smith, Jr., and Rufus G. Thayer, and the defendant Marvin H. Grove,- the plaintiffs commenced an action to obtain a decree of declaratory relief, the establishment of the existence of the partnership, for an accounting and other relief. The defendants answered. In their answer the defendants set forth many denials and many affirmative defenses. A trial was had before the court sitting without a jury. The court made findings in favor of the defendants and from the judgment entered thereon the plaintiffs have appealed.

For some time prior to the year 1929, Robert S. Smith, Jr., Rufus G. Thayer, and Marvin IT. Grove w'erc lieutenants in the navy and attached to Mare Island Nav.y Yard. While so acting the plaintiff Robert S. Smith, Jr., became interested in developing a regulating valve. The navy was in need of a more efficient and satisfactory valve than was then on the market. Later he developed a device which he thought had merit. Thereafter he consulted Rufus G. Thayer, the co-plaintiff, and the two of them worked together on the device. Still later they consulted with the defendant Marvin H. Grove. Shortly prior to October 30, 1930, both Lt. Smith and Lt. Thayer wére ordered to report for sea duty. Before leaving Mare Island the parties executed a written instrument as follows:

“The parties to this agreement are Robert S. Smith, Rufus G. Thayer, and Marvin H. Grove.

“Our subject of consideration is a reducing valve, known as the ‘Smith-Thayer Reducing Valve’, for which a patent application has been filed. The inventors of this device are Robert S. Smith and Rufus G. Thayer. Our object is to manufacture and sell this reducing valve or to dispose of the contemplated patent rights or otherwise exploit this invention to best advantage.

“We, the undersigned, to our mutual interest and benefit subscribe to the following conditions and agreements. The inventors desire the services of the third party in managing, patenting, manufacturing, selling or otherwise disposing of the invention. In consideration for this service, and for past services of the third party in designing, refining, patenting, proving in service and exploiting the invention, we, the inventors, and the third party, do enter into partnership, each of the three parties to share equally with the others in any benefits to accrue from the invention.

“Robert S. Smith,

“Rufus G. Thayer,

“Marvin H. Grove.”

In the trial court the plaintiffs introduced in evidence that writing, and a great deal of evidence explanatory thereof, and the circumstances surrounding its execution. They contended said written instrument and the evidence they had introduced showed a partnership of the three persons signing it. That contention was vigorously controverted by the defendant Lt. Grove. In view of the conclusions reached by us the solution of the controversy just mentioned is determinative of the action. However, before proceeding it becomes necessary to state additional facts to be found in the evidence.

The uncontradicted evidence is that the invention mentioned in said writing was invented by Lt. Smith; that through a mistake of law an application for a patent, No. 370,879, was filed June 14, 1929, in the names of Lt. Smith and Lt. Thayer; and that later, when they were informed of the mistake they had made, the said application was amended to make it an application solely by Lt. Smith. Said invention was the sole piece of property which was the subject of said instrument. There is not a particle of evidence that Lt. Smith ever assigned or agreed to assign any interest in the invention to either Lt. Thayer or to Lt. Grove. At the time said instru

The first power of attorney was acknowledged by Lt. Smith on February 2, 1931, in San Diego. It was acknowledged by Lt. Thayer on February 4, 1931, in Los Angeles. In paragraph seven it was provided: “Nothing in this power of attorney shall be construed as a power or authority to sell, assign, transfer or otherwise dispose of the patent rights in and to the device known as the Smith-Thayer regulating valve if and when the patent to the aforesaid device is granted, nor to sell, assign, transfer or otherwise dispose of the rights in

The plaintiffs call to our attention the use of the word “partnership” in the instrument written October 30, 1930, and to the same word used in the letter from which we have just quoted, and they argue earnestly that therefore the said instrument constituted a partnership agreement. We may not so hold. The trial court made a finding directly to the contrary. We are not at liberty to disturb that finding even though we disagreed with the trial court. (6 Cal. Jur. 329.) But we do not disagree with the trial court. The nature of the instrument is not to be determined by what the parties called it. (Klohe v. Pongratz, 38 Cal. App. (2d) 395 , 402 [ 101 Pac. (2d) 522 ].) Its nature is to be determined by its legal effect. The legal effect of an instrument claimed to be a contract of partnership must be measured by the rules of law applicable thereto. The first rule is statutory. A partnership is “ ... an association of two or more persons to carry on as co-owners a business for profit.” (Civ. Code, sec. 2400.) The rule was at an early date adopted from the common law and has since been followed in this state. (Wheeler v. Farmer, 38 Cal. 203 , 213; Dempsey-Eearns Theatrical & Motion Picture Enterprises v. Pantages, 91 Cal. App. 677 , 682 [ 267 Pac. 550 ].) But in the case before us Lt. Smith was the sole owner and never assigned nor agreed to assign to Lt. Thayer nor Lt. Grove any part of his interest. Another rule is that a partnership agreement between the parties must provide for the sharing of the profits and losses, or what is the same thing, of sharing the net profits. (Sees. 20 and 21, Story on Partnership.) But the agreement made by the parties to this action imposed solely on Lt. Grove the burden of bearing all expenses. Such were the facts in the ease cited above (Wheeler v. Farmer, supra), and it was there held that the parties created the relation of principal and agent and not that of a copartnership. Finally, to constitute a

During the trial plaintiffs contended that the defendant, Lt. Grove, had converted the invention of Lt. Smith to his own use and should account therefor. Lt. Grove vigorously denied that charge and called expert witnesses to sustain him. The trial court made findings on that issue in favor of the defendants. We may not disturb those findings. They were based on a mass of evidence, including that of the experts just mentioned, and on many other facts, including among others the following. About October 30, 1930, Lt. Grove was in such poor health that it was necessary for him to take a leave of absence or apply for a discharge. However, both prior and subsequent to the date above mentioned, he worked most earnestly with the plaintiffs in an attempt to perfect the device invented by Lt. Smith. At first he continued to work in the shops at Mare Island Navy Yard and later in other shops. The device had such good points that many became interested in it and tried it out. Several models were made. However, no single model was entirely satisfactory. The defects were such that all the parties to this litigation were convinced that the objections were well founded. Lt. Grove continued to try. Finally, in the absence of both plaintiffs, without any assistance from either of them, he prepared a device. Being informed that the patent fights to the so-called Fry invention might be infringed upon he personally purchased the patent rights to that in

In view of the conclusions just expressed, it follows the judgment appealed from should be and it is affirmed.

Nourse, P. J., and Spence, J., concurred.