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Paxton v. McDonald

Supreme Court of Arizona

June 25, 1951

PAXTON et al.

Opinion Modified on Rehearing October 9, 1951. See 72 Ariz. 378, 236 P.2d 364.

Modified and remanded with instructions on first cause of action and otherwise affirmed.

Snell & Wilmer, of Phoenix, for appellants.

Herbert Mallamo, of Phoenix, for appellee. Leslie Parry, Phoenix, of counsel.

Phelps, Justice. Udall, C. J., and Stanford, De Concini, and La Prade, JJ., concur.


Phelps, Justice.

Page 451

[72 Ariz. 242] This is an appeal from a judgment of the superior court of Maricopa County (1) from an order denying the objections of appellants to the form of judgment; (2) from the order denying their motions for a new trial; (3) for judgment notwithstanding the verdict; and (4) from their motions to strike appellants' statement of costs.

Appellant Industrial Research, Inc., is a corporation and will be hereinafter referred to as the company. In 1947 and up to the date of trial it was engaged in business in Phoenix consisting, among other things, of producing and selling upon the open market a flushing machine for use in connection with automotive and internal combustion engines. During the year 1947 appellee McDonald and co-appellant Paxton were employed by the company. In addition to being an employee of the company during this time Paxton was the owner of 25% of the capital stock and was vice president of the company. He is the inventor of, and has made application for a patent for the

Page 452

flushing machine produced by the company, as it was originally designed, and has since made some improvements upon it for which application for patents thereon have also been made.

In November, 1947, Paxton assigned to the company all of his right, title and interest in and to the applications for patent made by him upon the original flushing machine and improvements thereon. About the middle of December, 1947, Paxton either became dissatisfied with his connection with the company or was in need of ready money and sold his interest in the company to a Mr. Crile for $ 3,500 and quit the employment of the company. McDonald also quit working for the company three or four days later and he and Paxton on or about December 25th entered into an oral agreement to form a partnership by the terms of which Paxton was to invent what he said was a new mechanical device for flushing internal combustion engines which he represented to McDonald to be different from anything in use anywhere. He stated it would not be at all like the one then being produced by the company which he described in his testimony as: "* * * a balancing type of machine that was on a fulcrum, and water running into a tank, filled it with water, and when it got so heavy it would trip an air valve and water would run out through the motor and radiator and the balancing weight on the other end retripped it and sent it back to repeat the cycle again, * * *" whereas the machine he proposed to invent and patent, as a partnership asset, "* * * was a hydraulic method of pumping water backwards and forwards through a pipe by a diaphragm run by an electric motor. It had no air or no pneumatic action whatsoever." He said it was an entirely new principle, "it wasn't an improvement, it was a different idea entirely." Paxton was to perfect the model for testing and demonstrating and McDonald was to go to Kansas [72 Ariz. 243] City and contact the U. S. Chemical Company there with a view of selling a large number of machines as a basis for financing their manufacture. Paxton was to furnish a model of the machine to McDonald for demonstrating its efficiency to the U. S. Chemical Company. Each was to have a one-half interest in the partnership business.

Pursuant thereto Paxton went to Los Angeles to perfect the model in conjunction with a Mr. Rosenberg who is in business there and is a highly skilled mechanic and McDonald went to Kansas City to contact the U. S. Chemical Company. Paxton returned to Phoenix shortly after the first of the year, McDonald returning from Kansas City a few days later. Upon McDonald's return to Phoenix he found a request by Paxton awaiting him at his home for an immediate conference with him concerning another new invention which he described as a small flushing machine operated off of the spark plugs of the engine being flushed that could be carried "in your two hands." He discussed with McDonald the feasibility of producing the small machine as well as the diaphragm type machine, treating it as within the partnership arrangement, and proceeded to work on a model at Howard's Screw Machine Shop on South Central Avenue. The plan was that the two models should be sent to the U. S. Chemical Company at Kansas City in accordance with the understanding by the partners at the time the partnership agreement was consummated.

In order that a somewhat confused situation may be clarified we will state here that according to Paxton's testimony he he had invented four different types of flushing machines up to the date of the trial:

1. The machine being produced and sold by the company in 1947 described as operating on a fulcrum which by running water into a tank causes an air valve to trip and force the water ...

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