Opinion of the Court.

highest price which the stock reached within that reasonable time. In this conclusion we think the referee was correct, and as to this item we see no error in the result.

With respect to the third counterclaim set up in the answer, the referee found that the plaintiff did sell the fifty shares of "Ophir" stock mentioned therein, on the 22d day of November, 1877, as reported by him to the defendant. Consequently, the referee correctly found that the defendant was not entitled to any damages on that account, as no dissatisfaction with the sale was expressed by the defendant at the time. We see no

error in this conclusion.

It has been assumed, in the consideration of the case, that the measure of damages in stock transactions of this kind is the highest intermediate value reached by the stock between the time of the wrongful act complained of and a reasonable time thereafter, to be allowed to the party injured to place himself in the position he would have been in had not his rights been violated. This rule is most frequently exemplified in the wrongful conversion by one person of stocks belonging to another. To allow merely their value at the time of conversion would, in most cases, afford a very inadequate remedy, and, in the case of a broker, holding the stocks of his principal, it would afford no remedy at all. The effect would be to give to the broker the control of the stock, subject only to nominal damages. The real injury sustained by the principal consists not merely in the assumption of control over the stock, but in the sale of it at an unfavorable time, and for an unfavorable price. Other goods wrongfully converted are generally supposed to have a fixed market value at which they can be replaced at any time; and hence, with regard to them, the ordinary measure of damages is their value at the time of conversion, or, in case of sale and purchase, at the time fixed for their delivery. But the application of this rule to stocks would, as before said, be very inadequate and unjust.

The rule of highest intermediate value as applied to stock transactions has been adopted in England and in several of the States in this country; whilst in some others it has not obtained. The form and extent of the rule have been the sub

Opinion of the Court.

ject of much discussion and conflict of opinion. The cases will be found collected in Sedgwick on the Measure of Damages, [479,] vol. 2, 7th ed. 379, note (b); Bayne on Damages, 83, (92 Law Lib.); 1 Smith's Lead. Cas. (7 Amer. ed.) 367. The English cases usually referred to are Cud v. Rutter, 1 P. Wms. 572, 4th ed. [London, 1777] note (3); Owen v. Routh, 14 C. B. 327; Loder v. Kekulé, 3 C. B. (N. S.) 128; France v. Gaudet, L. R. 6 Q. B. 199. It is laid down in these cases that where there has been a loan of stock and a breach of the agreement to replace it, the measure of damages will be the value of the stock at its highest price on or before the day of trial.

The same rule was approved by the Supreme Court of Pennsylvania in Bank of Montgomery v. Reese, 26 Penn. St. (2 Casey,) 143, and Musgrave v. Beckendorff, 53 Penn. St. (3 P. F. Smith) 310. But it has been restricted in that State to cases in which a trust relation exists between the parties, relation which would probably be deemed to exist between a stock-broker and his client. See Wilson v. Whitaker, 49 Penn. St. (13 Wright) 114; Huntingdon R. R. Co. v. English, 86 Penn. St. 247.

a

Perhaps more transactions of this kind arise in the State of New York than in all other parts of the country. The rule of highest intermediate value up to the time of trial formerly prevailed in that State, and may be found laid down in Romaine v. Van Allen, 26 N. Y. 309, and Markham v. Jaudon, 41 N. Y. 235, and other cases, although the rigid application of the rule was deprecated by the New York Superior Court in an able opinion by Judge Duer, in Suydam v. Jenkins, 3 Sandford (N. Y.) 614. The hardship which arose from estimating the damages by the highest price up to the time of trial, which might be years after the transaction occurred, was often so great, that the Court of Appeals of New York was constrained to introduce a material modification in the form of the rule, and to hold the true and just measure of damages in these cases to be, the highest intermediate value of the stock between the time of its conversion and a reasonable time after the owner has received notice of it to enable him to replace the stock. This modification of the rule was

Statement of the Case.

very ably enforced in an opinion of the Court of Appeals delivered by Judge Rapallo, in the case of Baker v. Drake, 53 N. Y. 211, which was subsequently followed in the same case in 66 N. Y. 518, and in Gruman v. Smith, 81 N. Y. 25; Colt v. Owens, 90 N. Y. 368; and Wright v. Bank of Metropolis, 110 N. Y. 237.

It would be a herculean task to review all the various and conflicting opinions that have been delivered on this subject. On the whole it seems to us that the New York rule, as finally settled by the Court of Appeals, has the most reasons in its favor, and we adopt it as a correct view of the law.

The judgment is reversed, and the cause remanded to the Supreme Court of Utah, with instructions to enter judgment in conformity with this opinion.

WADE v. METCALF.

APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS.

No. 163. Argued January 10, 1889. — Decided January 21, 1889.

Under Rev. Stat. § 4899, a specific patentable machine, constructed with the knowledge and consent of the inventor, before his application for a patent, is set free from the monopoly of the patent in the hands of every one; and therefore, if constructed with the inventor's knowledge and consent, before his application for a patent, by a partnership of which he is a member, may be used by his copartners after the dissolution of the partnership, although the agreement of dissolution provides that nothing therein contained shall operate as an assent to such use, or shall lessen or impair any rights which they may have to such use.

THIS was a bill in equity, filed December 4, 1880, by William W. Wade, a citizen of Massachusetts, against Henry B. Metcalf, a citizen of Rhode Island, and William McCleery, a citizen of Massachusetts, alleging that letters patent, numbered 228,233, granted to the plaintiff June 1, 1880, upon his application filed July 26, 1879, for improvements in machines

Statement of the Case.

for making buttons, had been infringed by the defendants' use of forty-eight machines embodying such improvements. At the hearing upon pleadings and proofs, the case, so far as it is material to be stated, appeared to be.as follows:

The parties to this suit, owning earlier patents for improvements in buttons, were in partnership in the business of making and selling buttons, under the name of the Boston Button Company, from January, 1875, until the dissolution of the partnership in October, 1880. By the copartnership agreement, certain salaries were to be paid to the plaintiff for improving and developing the machinery, to the defendant Metcalf for assistance in financial matters, and to the defendant McCleery for general superintendence; and the profits of the business were to belong one half to Metcalf and one fourth each to the plaintiff and McCleery. The forty-eight machines, with the improvements in question, were constructed by the partnership, with the knowledge and consent of the plaintiff, before the application for the patent sued on, and were used by the partnership during its continuance, and by the defendants after its dissolution. The partnership was dissolved October 30, 1880, by an agreement in writing executed by the three partners, the terms of which were as follows:

"First. It is agreed that the firm composed of said Metcalf, McCleery and Wade, and doing business under the style of the Boston Button Company, shall be this day dissolved.

"Second. The said William W. Wade, in consideration of the payment to him of the sum of twelve thousand dollars by the said Metcalf and McCleery, receipt of which is hereby acknowledged, hereby sells and conveys to the said Metcalf and McCleery all his interest in the property and assets of every name and nature of said firm of the Boston Button Company, together with the good will of the same, with authority to use his name if necessary in the premises, saving him harmless from all cost in the same.

"And whereas certain machines, forty-eight in number, with a certain improvement thereon, manufactured by said firm, have been and are now in use by said firm, and the same Metcalf and McCleery claim the right as members of said

Opinion of the Court.

firm, by virtue of the manufacture and use by said firm of said machines with said improvements, to continue such use, and the said Wade reserves the right to deny such claim:

"Therefore nothing in this sale and conveyance shall operate as an assent on the part of said Wade to the right to use said improvements upon said machines, or as granting any rights for such use, other than said Metcalf and McCleery now have, whatever they may be; and nothing in this reservation shall be construed to lessen or impair any rights which the said Metcalf and McCleery may have to such use.

"It being further understood that each party shall have the right to manufacture and use machines under patents for improvements in buttons, one dated March 23, 1869, and numbered 88,099, and one dated April 27, 1869, and numbered 89,450; but neither party shall vend to others the right to use or manufacture under said patents without mutual consent, except as the same may be necessary in the reorganization or liquidation of their own business.

"The said Metcalf and McCleery hereby assume the payment of the debts of said Boston Button Company, and agree to indemnify and save harmless the said Wade therefrom."

The Circuit Court dismissed the bill. 16 Fed. Rep. 130. The plaintiff appealed to this court.

Mr. George F. Betts for appellant.

Mr. Edward W IIutchins (with whom was Mr. Henry Wheeler on the brief) for appellees.

MR. JUSTICE GRAY, after stating the case as above reported, delivered the opinion of the court.

The decision of this case turns upon § 4899 of the Revised Statutes, by which it is enacted that "every person who purchases of the inventor or discoverer, or with his knowledge and consent constructs any newly invented or discovered machine or other patentable article, prior to the application by the inventor or discoverer for a patent, or who sells or uses one so constructed, shall have the right to use and vend to