Pav-Saver v. Vasso Corp PDF

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Case Brief and Notes for Business Organizations I...

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PAV-SAVER CORPORATION v. VASSO CORPORATION 143 Ill.App.3d 1013, 97 Ill.Dec. 760, 493 N.E.2d 423 (1986) FACTS: Parties: Plaintiff: Pav-Saver Defendant: Vasso Corp Procedural History: 

Trial court ruled in favor of Δ

Relevant Facts: 

Π is owner of pav-saver trademark and certain patents



Harry Dale is the inventor of Pav-Saver slip form paver and the majority shareholder

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H. Moss Meersman owns and is sole share holder of Vasso

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PSC, Dale and Meersman formed Pav-Saver Manufacturing, Dale contributed services, PSC contributed patents and Meersman obtained financing

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The parties signed a partnership agreement o PSC shall grant to the partnership without charge the exclusive right to use on all machines manufactured and sold its trademark Pav-Saver, PSC has the right to inspect quality of machines o PSC grants to the partnership exclusive license without charge for its patent rights, which will remain property of PSC and all copies returned to PSC at expiration of partnership

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The partnership is permanent and cannot be dissolved or terminated by either party except upon mutual approval of both parties

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The terminating party shall pay as liquidated damages a sum equal to 4x the gross royalties received by PSC

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PSC terminated the partnership

ISSUE: 

Whether a partner that terminates a partnership in contravention to the agreement can insist on the return of property integral to the business when the business is continued by the non-terminating party

PARTIES’ ARGUMENTS: Plaintiff:  Defendant:  DISPOSITION OF THE COURT: 

Affirmed

RULE OF LAW: 

When dissolution is caused in contravention of the partnership agreement the rights of the partners shall be as follows: o Each partner who has not caused dissolution wrongfully shall have 

The right, as against each partner who has caused the dissolution wrongfully, to damage for breach of the agreement

o The partners who have not caused the dissolution wrongfully, if they all desire to continue the business in the same name, either by themselves or jointly with others, may do so, during the agreed term for the partnership and for that purpose may possess the partnership property, provided they secure the payment by bond approved by the court, or pay to any partner who has caused the dissolution wrongfully, the value of his interest in the partnership at the dissolution, less any damages recoverable o A partner who has caused the dissolution wrongfully shall have 

If the business is continued the right as against his co-partners and all claiming through them in respect of their interests in the partnership, to have the value of his interest in the partnership, less any damages caused to his co-partners by the dissolution, ascertained and paid to him in chase, or the payment secured by bond approved by the court and to be released from all existing liabilities of the partnership; but in ascertaining the value of the partner’s interest the value of the good will of the business shall not be considered

HOLDING: 

The non-terminating party has the right to retain property essential to running the business thought partnership agreement expressly states the property to be returned

COURT’S REASONING:     

PSC’s termination was in contravention to the agreement Vasso elected to continue the business The right to continue the business and use the patents, although the agreement called for the return of the patents, is provided for in the UPA The machines could not be produced or marketed without PSC’s patents thus in order to continue the business the patents are essential The value of the patents is only shown, through testimony, to be good will value and UPA expressly states good will is not considered in the calculation

DISSENTING OPINION:    

UPA provides that the UPA sections are subject to any agreement which is a contract that is assigning rights and duties The parties agreed that the patents be used only during the term of the agreement When the agreement was terminated the right to use the patents was terminated The party still has the right to continue the business but the statute does not carry any guarantee that the continuance of the business will be successful...