Case Name: Louis J. Weinstein, Respondent, v. F. Stanwood Welden, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1914-02-06
Citations: 160 A.D. 554
Docket Number: 
Parties: Louis J. Weinstein, Respondent, v. F. Stanwood Welden, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 160
Pages: 554–557

Head Matter:
Louis J. Weinstein, Respondent, v. F. Stanwood Welden, Appellant.
First Department,
February 6, 1914.
Contract — agreement not to reveal trade secret or enter into competing business construed — injunction — partnership, termination of.
The owner of a patented process for using porcelain in filling teeth made a written contract with another, reciting that the parties were engaged “ in a joint enterprise concerning the manufacture and sale of dental supplies under a corporation to be formed to be called the Welden Dental Specialty Company.” It was further provided that neither party should reveal a trade secret communicated to him in connection with the business, or for a period of seventeen years enter into any business “which shall directly or indirectly interfere or compete with the said business of the Welden Dental Specialty Company.” The corporation was never formed, and a short time thereafter the owner of the patent notified the other party that he terminated the partnership, and he then commenced to sell porcelain to customers who had previously bought from the firm.
Held, that since the corporation was never formed the owner of the ' patent cannot be restrained from entering into competition or disclosing the trade secrets of the firm in violation of the contract;
That since the partnership assets, including its good will and contract rights, had been sold under an execution against the firm, and subsequently bought by the owner of the patent, the other party to the agreement had no interest therein, and hence no right to an injunction. Where no time is fixed for the duration of a partnership it may be terminated at will.
Appeal by the defendant, F. Stanwood Welden, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 30th day of April, 1913, upon the decision of the court after a trial at the New York Special Term.
Alexander S. Bacon, for the appellant.
Bernard Edelhertz, for the respondent.

Opinion:
McLaughlin, J.:
Appeal from a final judgment enjoining defendant, for a period of seventeen years, from divulging certain trade secrets and selling certain dental supplies without plaintiff's permission., The defendant patented a process whereby porcelain could be used in filling teeth instead of gold or other metal. After the patent was obtained he made an oral agreement with the plaintiff by which they were jointly to undertake the purchase and sale of porcelain to dentists and others, with permission to use the patented process. The plaintiff's part in the joint enterprise was to aid in managing and financing the business. The fact is undisputed that at the time the agreement was made the parties intended to carry on the business through a corporation to be organized by them; that they did not intend to enter into a permanent partnership. Pending the formation of a corporation, however, they started in business under the name of the Welden Dental Specialty Company and conducted the same as partners. On September 18,1911, about three months after the original agreement was made, the parties entered into a written contract, upon which the right to maintain this action is predicated. The agreement recites that the parties were engaged " in a joint enterprise concerning the manufacture and sale of dental supplies under a corporation to be formed to be called the Welden Dental Specialty Company," and it provided: (a) That neither party should reveal a trade secret communicated to him in connection with the business, or for a period of seventeen years enter into any business " which shall directly or indirectly interfere or compete with the said business of the Welden Dental Specialty Company;" and (b) that if either party should reveal any trade secret or sell any product manufactured and sold by the Welden Dental Specialty Company without the consent of the other, then the latter would he entitled to an injunction. The corporation was never formed, since the parties were unable to raise sufficient money for that purpose. When its formation was abandoned the parties contemplated entering into a formal contract of partnership for a fixed period, and a written contract was drawn up, but never executed. They continued in business, however, for a short time, when defendant notified plaintiff, in writing, that he terminated the partnership and he then commenced to sell porcelain to customers who had previously bought from the firm. Plaintiff then brought this action upon the theory that he had a right, under the contract, to enjoin the defendant, for a period of seventeen years, from entering into competition with the business of the Welden Dental Specialty Company and from disclosing the trade secrets of that firm.
Under this contract the defendant only agreed not to enter into competition or disclose the trade secrets in case a corporation was formed. The agreement expressly recites that a corporation was to be formed and should be known as the "Welden Dental Specialty Company." There is no provision in the contract which in any way bound the defendant not to compete in business with the firm or to preserve to it the trade secrets in any way. The finding of the trial court to the contrary is not sustained by the evidence. It is true that a short time after this contract was signed the parties filed a certificate, pursuant to section 440 of the- Penal Law, in the office of the county clerk, that they were doing business as partners under the name of the Welden Dental Specialty Company. This certificate in no way affected the contract between them, but merely .gave notice to the public that business was being carried on by them as partners under that name. The agreement fixed no time for the duration of the partnership and for that reason it was terminable at will. The defendant, therefore, was acting within his legal rights when he terminated it. The partnership, being terminated, could not thereafter carry on business, and if it could not, obviously the defendant could not enter into competition with it.
I am also of the opinion that the judgment is erroneous, for the reason that the plaintiff has no title or interest in the contract in question. It appears that a judgment was obtained against the firm, and an execution having been issued thereon and returned unsatisfied, proceedings supplementary to execution were instituted, and it there appearing that the firm had some property, including the contract in question, a receiver was appointed, who sold at public auction all the partnership assets, including its good will and contract rights. The judgment creditor purchased the assets at the receiver's sale and he acquired whatever rights the partners may have had under the contract'sued on. This right, whatever it may be,-has since been assigned to and is owned by the defendant, and the plaintiff has no interest therein.
The judgment appealed from is, therefore, reversed, with costs to the appellant, and the complaint dismissed on the merits, with costs.
Ingraham, P. J., Laughlin, Clarke and Scott, JJ., concurred.
Judgment reversed, with costs, and complaint dismissed on the merits, with costs. Order to be settled on notice.