Canadian Industrial Alcohol Co., Ltd. v. Nelson

• Citation: 188 A. 39,38 Del. 26
• Court: United States State Supreme Court of Delaware
• Decision Date: 28 July 1936
• Parties: CANADIAN INDUSTRIAL ALCOHOL COMPANY, LTD., a corporation organized and existing under the laws of the Dominion of Canada, Plaintiff in Error, v. JAMES R NELSON and JOSEPH ERNEST RICHARDS, Defendants in Error

188 A. 39

38 Del. 26

CANADIAN INDUSTRIAL ALCOHOL COMPANY, LTD., a corporation organized and existing under the laws of the Dominion of Canada, Plaintiff in Error, v. JAMES R NELSON and JOSEPH ERNEST RICHARDS, Defendants in Error

Supreme Court of Delaware

July 28, 1936

Supreme Court, No. 2, October Term, 1935.

Writ of Error from a judgment entered by the Superior Court for New Castle County on the verdict of a special jury.

This case involved an action of assumpsit by James R. Nelson and Joseph Ernest Richards, the plaintiffs below, for the recovery of a commission alleged to be due them from the Canadian Industrial Alcohol Company, Ltd., the defendant below, for procuring, at the request of that corporation, a purchaser for a large quantity of whiskey belonging to it and stored in Canada.

Nelson and Richards in the court below declared on the common counts, including work and labor done, at the request of the defendant company; and the amended bill of particulars attached thereto was as follows:

"Canadian Industrial Alcohol Company, Ltd. to

"James R. Nelson and Joseph Ernest Richards.

"June 1st, 1934. To services rendered August 24th, 1933, to November 15th, 1933, in procuring and in connection with negotiations between Canadian Industrial Alcohol Company Ltd. and National Distillers Products Corporation, for the sale and marketing of 8,000,000 gallons of whiskey belonging to Canadian Industrial Alcohol Company, Ltd. and of a value of $ 50,000,000, and in procuring the sale or marketing of said 8,000,000 gallons of whiskey, $ 5,000,000."

The defendant company, among other things, pleaded non assumpsit. The facts pertaining to the controversy were, in substance as follows:

In 1932 the Canadian Industrial Alcohol Company, a Canadian corporation, engaged in the manufacture and sale of whiskey owned and had stored in that country, approximately 8,000,000 gallons of certain types of rye whiskey. National Distillers Products Corporation, of which Mr. Seton Porter was the president, and Daniel K. Wieskopf was a Vice-President, was also, a large American company engaged in the same business.

Some time in the middle of the year 1933, one Louis V. Wright, who represented the Canadian Industrial Alcohol Company, the defendant below, approached Mr. Wieskopf with a proposal relating to the marketing in the United States, for medicinal purposes, of the whiskey belonging to the Canadian company.

In April, of 1933, Mr. Wright, acting for the Canadian company, the defendant below, again saw Mr. Wieskopf about the same matter at the office of the National Distillers Products Corporation in New York. At that time, Mr. Wright, also, saw Mr. Seton Porter, the president of the National Distillers Products Corporation, and Mr. Schwartzhaupt, another Vice-President of that corporation; and at that time they tentatively discussed the formation of an American corporation to market and distribute the whiskey which had been manufactured by the Canadian Industrial Alcohol Company, Ltd., and which was then in storage in Canada. Under the plan discussed, the stock of this new corporation, if formed, was to be held in equal proportions by the National Distillers Products Corporation and by the Canadian Industrial Alcohol Company.

No definite agreement about that matter was, however, made at that time as the eighteenth amendment to the Constitution of the United States had not then been repealed; but there was evidence in the record that would seem to sustain the contention that the plan tentatively considered had not been entirely abandoned in case it should be repealed, and, in fact, active negotiations for the sale of the whiskey still continued between the two companies through and beyond the summer of 1933.

Lord Shaughnessy, of Montreal, Canada, was president of the Canadian Industrial Alcohol Company, Ltd. He was, also, president of "Sir Mortimer Davis, Inc.," a Canadian corporation that owned a majority of the stock of the Canadian Industrial Alcohol Company, and together with Lady Davis, afterwards Mrs. Loder, was an executor of the Estate of Sir Mortimer Davis. Nelson, one of the plaintiffs in the court below, lived in New York, but had at one time lived in Montreal; he had been the secretary of the elder Lord Shaughnessy, who was then president of the Canadian Pacific Railroad Company, and had known the present Lord Shaughnessy many years. He testified that he was a financial agent or broker engaged in raising money for corporations, and that the present Lord Shaughnessy, who was a lawyer, knew that and, in fact, on one occasion had represented him in a brokerage transaction.

Richards, the other plaintiff, also, lived in New York, and testified that he was a private broker engaged in various kinds of business and financing.

In the early summer of 1933, Nelson claimed that he had been informed by some friends in New York that the Canadian Industrial Alcohol Company had a huge quantity of American type Rye Whiskey for sale. Knowing that Lord Shaughnessy was the president of that company, claiming to act for one Higgins and one Murphy, he then wrote him from New York, on June 27th, 1933:

"I have a group here who are prepared to purchase for cash bonded warehouse receipts covering rye and bourbon whiskies now in bond. My friends understand this whiskey to be over 7 years old and to amount in quantity to over 8,000,000 gallons.

"Will you please quote prices and let me know if I am covered on any commission. The transaction could be handled through the Canadian Bank of Commerce here.

"Another plan that could also be worked would be to sell direct to a corporation owned by this group which would furnish a certified copy of their U.S. Government Permit and legal withdrawals, and this company of theirs I would be interested in. They would want to make a contract to purchase all of your supply over a period of a year, with deliveries of a proportionate amount monthly.

"I will be grateful if you will wire me if you are interested, and write me giving prices. * * *"

In reply to this letter, Lord Shaughnessy wired Nelson on June 29th, 1933, from Montreal,

"Not anxious now quote prices but any proposition from substantial people will be carefully considered."

On July 5th, 1933, Nelson again wrote Lord Shaughnessy from New York:

"Your telegram of June 29th was received in due course, and I am grateful for the prompt attention given to my letter.

"The group, at whose instance I wrote, are prominent Democrats with ample capital, and I expect to communicate with you again, or visit there to see you in person, as soon as their plans are complete. Meantime, if quite consistent, I would like to know for my own information, approximately the quantity of whiskey, over seven years old, which is available. * * *"

Both of these letters were addressed to "Rt. Hon. Shaughnessy, Consolidated Distillers Corporation, Canada Cement Building, Montreal, Canada." That corporation was the selling agency of the product of the Canadian Industrial Alcohol Company, the defendant below.

Shortly after the last letter, Nelson claimed that he met Lord Shaughnessy at a New York hotel. At that meeting, Shaughnessy was reluctant about giving any information as to the age and gallonage of the whiskey belonging to his company, but finally said that he would hate to see it sold for less than $ 6.00 per gallon.

On August 11th, 1933, Nelson, together with Mr. Higgins, went to Montreal and saw Lord Shaughnessy. Higgins said that he would like to arrange to purchase the entire quantity of American type whiskey over a period of time. Shaughnessy said that he was prepared to entertain any offer from substantial people as he had said to Nelson in his telegram. Higgins then offered $ 4.50 per gallon, and Lord Shaughnessy remarked that that was the first decent offer that he had received and that if Mr. Higgins would satisfy him as to his ability to finance such a purchase he would submit it to his people for their consideration. The Higgins' transaction never materialized because he was unable to satisfy Lord Shaughnessy as to his financial responsibility.

Some other representations as to possible American purchasers were, also, made by Nelson to Lord Shaughnessy, but he ascertained from private sources that the parties named were not interested.

While in Lord Shaughnessy's house in Montreal, and after the discussion about the proposed Higgins' transaction had been completed, Nelson testified that he told Lord Shaughnessy that he had "presented" to Mr. Richards, the other plaintiff, "the business of buying--rather of selling on behalf of the Canadian Industrial Alcohol Company, Ltd., the whiskey or the control of the company belonging to the Mortimer Davis Estate," and asked him whether, in the event of a purchase of the shares by any associates of Mr. Richards, he would be willing to pay the cost of listing those shares on the New York Stock Exchange. Lord Shaughnessy replied that he would, and Nelson claimed that he telegraphed Richards to that effect. He, also, claimed that he told Lord Shaughnessy who Richards was and whom he understood his friends and associates were, and that he thought "he was a likely person to find a purchaser for either the whiskey or the shares of stock." He further stated that Lord Shaughnessy was extremely anxious to sell either the whiskey or the controlling interest of the Davis corporation in the Canadian Industrial Alcohol Company, and so expressed himself on various occasions.

On August 22nd, 1933, Nelson wrote Lord Shaughnessy from New York:

"I am enclosing a letter from Mr. J. Ernest Richards. His references, in case such are considered necessary, are Mr Harvey D. Gibson, President, Manufacturers Trust...