Bassick v. Aetna Explosives Co., Inc.

• Decision Date: 19 December 1917
• Docket Number: 2.,1
• Citation: 246 F. 974
• Parties: BASSICK v. AETNA EXPLOSIVES CO., Inc., et al. JOHN v. SAME.
• Court: U.S. District Court — Southern District of New York

246 F. 974

BASSICK v. AETNA EXPLOSIVES CO., Inc., et al.

JOHN v. SAME.

Nos. 1, 2.

United States District Court, S.D. New York.

December 19, 1917

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

James A. O'Gorman, George Gordon Battle, Louis B. Eppstein, and Harry A. Rosenberg, all of New York City, for plaintiffs.

George L. Ingraham and John B. Stanchfield, both of New York City Robert G. Dodge, of Boston, Mass., and William M. Parke and J. Arthur Leve, both of New York City, for defendants.

MAYER District Judge.

The substantial amount involved, the number of the agreements between the parties in controversy and the contracts to which they relate, and the varied facts and circumstances leading up to and surrounding them, require a rather full statement of the case. The actions are at law. The defendants, inter alia, set up a cause of equity (AEtna Explosives Co. v. Bassick, 220 N.Y. 767, 116 N.E. 1032), and ask for affirmative relief. By stipulation, the causes were tried by the court without a jury.

The original complaints were framed on the theory that the services performed by plaintiffs in all instances were those of brokers, and the recovery demanded was for commissions, or for the amount of certain notes arising out of commissions. As all the litigants are desirous of a decision on the merits, without danger of the case going off on some technicality, permission was given liberally to amend the pleadings to conform with the proof. Reference to the pleadings, where necessary, will be made as the different phases of the litigation are discussed.

In November, 1914, Arthur J. Moxham (hereinafter called Moxham) and Frederick L. Belin (hereinafter called Belin), who had been associated in an executive capacity with the Du Pont Powder Company, organized the defendant AEtna Explosives Company, Incorporated (hereinafter called AEtna), and caused it to be incorporated under the laws of New York on November 28, 1914. Thereafter AEtna acquired the plants and assets of Keystone National Powder Company, AEtna Powder Company, and Miama Powder Company, which theretofore had been engaged in manufacturing dynamite and black powder for commercial purposes. At the outset AEtna had an authorized capital stock of $7,000,000 common and $5,500,000 preferred, but by subsequent action it was provided that the amount of capital should be $18,000,000. Presumably the stock is widely held by the public.

From the beginning until March, 1916, the board of directors of AEtna (with the exception of the first few days when there were dummy directors) was composed of Moxham, Egbert Moxham, his son, Belin, and his cousin, C. A. Belin, and Josiah Howard, who had been connected with the Keystone Company. Moxham was president from February, 1915, until March, 1916, and Belin was treasurer from February, 1915, until November, 1916. In March, 1916, the board of directors was increased from five to nine, the personnel was changed, and later this new board ordered that no more notes be given and that no further payments be made on account of the agreements with Bassick.

One of the actions brought by Bassick and the action brought by John are based upon notes-- 18 to Bassick, aggregating $321,583.78, and 5 transferred by Bassick to John on account of the latter's share, aggregating $141,564. The complaint (as amended) in the other action of Bassick (called in the case the contract action) alleges various causes of action in which Bassick asserts a claim either as a broker or for services rendered to AEtna in connection with the sale of explosives. The total amount of the judgment demanded is upwards of $3,000,000. The amounts represented by the notes sued on by Bassick and John, as well as by certain other notes transferred by Bassick upon which actions have been brought in the New York Supreme Court by one Delancey Smith (on a note for $135,973.71) and Lenpier Trading Company, Incorporated (on a note for $101,931.91), are included in the amount sought to be recovered in the contract action, and no credit is given by Bassick in his complaint for any of the sums represented by those notes.

The answers to these actions set forth that the agreements with Bassick were made without authority, that the amounts involved were so excessive as to amount to a gift of corporate funds, and that Bassick, in violation of his duty as a broker, concealed material facts from Moxham, and thus induced him to enter into certain of the attacked agreements. The answers further set forth that large sums in cash, $170,000 in the form of 1,700 shares of preferred stock, and large sums in payment of notes have already been paid out by the president and treasurer of AEtna without authority and in violation of their duties. The affirmative relief sought is:

'(1) That the alleged agreements for commissions and all notes assumed to be given in pursuance of said agreements be declared void, and that said agreements and notes be delivered up and canceled; (2) that the fair value of any services that may have been rendered by Bassick in connection with the sales of explosives, if it be found that services were rendered and that they had any value, be ascertained; (3) that Bassick be ordered to account; and (4) that Bassick and John be ordered to reconvey to the AEtna Company so much of the 1,700 shares of its preferred stock as is now owned and controlled by them and to account for and repay all sums of money received by way of dividends on said shares. In addition to the above, the answer sets forth counterclaims for money had and received, based upon the misconduct of the plaintiff as broker for the defendant, the fact that the agreements were made without authority, and the unconscionable character of the agreements, and asks for the recovery of the money paid to the plaintiff under the various agreements.'

There were in all 11 contracts of sale by AEtna to various vendees, upon which Bassick claimed commission or compensation. In the pending actions, plaintiffs' complaint in the contract action seeks recovery for commissions or services on 9 of these contracts. Seven of these contracts were with the French government, represented in four instances by Col. Johannet, controller of the French Purchasing Commission, and in three instances by J. P. Morgan & Co. Two contracts were made with Canadian Car & Foundry Company, Limited (hereinafter called Canadian Co.). Besides these 9, there are 2 other sales to the French government, through Col. Johannet (of smokeless powder, dated March 15, 1915, and March 26, 1915), which, while not made the basis of any recovery by Bassick, enter into the counterclaims of defendants.

It has been agreed that the ascertainment of the exact figures involved in each action and in each contract shall be delayed until the judgment upon this decision is ready for entry. The following table displays data as to the contracts:

Cause of Plaintiff's Action. Exhibit. Date. Purchaser. Material. Amount. Price. ------------------------------------------------------------------------------- 1st 26 Mar. French Toluene 82,000 $ .60 1/15 government gallons through H. J. Johannet 2nd 27 Mar. French Gun cotton 5,400,000 .60 9/15 government lbs. through H. J. Johannet 5th 28 Mar. French T N T 4,000,000 1.00 9/15 government lbs. through H. J. Johannet 3rd 29 Mar. French Picric acid 4,000,000 1.45 9/15 government lbs. through H. J. Johannet 30 Mar.13- French Smokeless 2,805,000 .97 /15 government lbs. through H. powder J. Johannet 31 Mar.26- French Smokeless 1,800,000 .97 /15 government lbs. through H. powder J. Johannet 8th 32 May Canadian Car Smokeless 6,400,000 1.00 12/15 & lbs. Foundry powder Co., Limited 9th 33 May Canadian Car T N T 1,000,000 1.15 20/15 & lbs. Foundry Co., Limited 4th 34 Dec. French Gun cotton 5,250,000 .55 17/15 government lbs. and 750,000 through H. lbs. a J. month Johannet beginning (Note: The 55 ct. price on this contract of December 17, July 31/16 1915, was subject to a discount of 2 1/2 cts., making until 30 52 1/2 cts. net.) days after close of war. 6th 35 Mar.31- French Smokeless 3,000,000 .80 /15 government lbs. through H. powder J. Johannet 7th 36 Mar.31- French Smokeless 1,000,000 .80 /15 government lbs. a for month 1st 3 months through H. powder beginning deliver- J. May 1/16 y; 75 Johannet cts. for until 30 all del- days iveri- after es close of war; thereaf- ter.

The following table shows the total of the amount heretofore paid plus the amount claimed by Bassick to be still payable:

The Contract		Amounts Payable to Bassick.
Plaintiff's Ex. No.
26	Toluene ...........	$ 49,200.00
27 & 37	Gun cotton ...........	585,000.00
28	T. N. T...............	400,000.00
29	Picric acid ........	1,800,000.00
30	Smokeless powder .....	272,085.00
31	Smokeless powder .....	174,600.00
32	Smokeless powder .....	316,800.00
33	T. N. T...............	150,000.00
34	Gun cotton ...........	329,403.76
35	Smokeless powder ......	90,000.00
36	Smokeless powder .....	358,180.31
	Smokeless powder .....	160,000.00
		-------------
	Total ..................	$4,685,269.07

In addition to the foregoing, Bassick claims continuing commissions from March 1, 1917, of some $57,000 (in round numbers) per month on the two French contracts (per J. P Morgan & Co.), of (a) December 17, 1915, for gun cotton, and (b) March 31, 1916, for 1,000,000 pounds of smokeless powder per month. While it is desirable to set forth the history of the transactions chronologically, in order to see the true picture of the dealings and relations between the parties, it will be helpful,...