Cray, McFawn & Co. v. Hegarty, Conroy & Co.

• Decision Date: 05 April 1939
• Citation: 27 F. Supp. 93
• Parties: CRAY, McFAWN & CO. v. HEGARTY, CONROY & CO., Inc., et al.
• Court: U.S. District Court — Southern District of New York

27 F. Supp. 93

CRAY, McFAWN & CO. v. HEGARTY, CONROY & CO., Inc., et al.

District Court, S. D. New York.

April 5, 1939.

COPYRIGHT MATERIAL OMITTED

Holthusen & Pinkham, of New York City (Spencer Pinkham, William F. Purcell, and Charles E. Oberle, all of New York City, of counsel), for plaintiff.

Mack, McCauley, Spiegelberg & Gallagher, of New York City (George A. Spiegelberg, of New York City, of counsel), for defendant Hegarty, Conroy & Co., Inc.

Simpson, Thacher & Bartlett, of New York City (Louis Connick, of New York City, of counsel), for defendant Atlas Corporation.

WOOLSEY, District Judge.

My judgment in this cause is that the complaint should be dismissed as against both defendants with costs, which will include all taxable disbursements and allowances.

I. A. My subject matter jurisdiction herein is based on diversity of citizenship.

The plaintiff, Cray, McFawn & Company, is a corporation of Michigan, engaged in the business of the purchase and sale of corporate securities.

The defendant Hegarty, Conroy & Co., Inc., hereinafter often referred to as Hegarty, is a corporation of the State of New York, also engaged in that business.

The defendant Atlas Corporation, hereinafter often referred to as Atlas, is a corporation of the State of Delaware, with its principal business office in Jersey City, New Jersey, and is what is known as an investment trust.

B. This suit was originally brought in the Supreme Court of New York County, but was removed thence to this Court by Atlas on a petition claiming that there was diversity of citizenship between it, as a Delaware corporation, and the plaintiff, as a Michigan corporation, and that the suit as against it involved a controversy separable from the controversy between the plaintiff and Hegarty.

The circumstances surrounding the removal — which were somewhat out of the ordinary — are given in detail in the decision of the Circuit Court of Appeals for this Circuit approving the removal, on an appeal by the plaintiff from an injunction, which had been granted to Atlas by this Court to stop further proceedings in the State Court after the removal petition had been filed here. Cray, McFawn & Co. v. Hegarty, Conroy & Co., Inc., et al., 2 Cir., 85 F.2d 516.

C. My jurisdiction in this cause, being based on diversity of citizenship, comes within the ambit of the principles laid down in the decision of the United States Supreme Court in Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, and, because of the somewhat granulated jurisprudence which is the almost inevitable result of our federal system, and of the fact that this cause involves transactions in more than one state, some questions of conflict of laws are involved in it.

But this does not mean that any state law which may have to be considered must — as the plaintiff seems to imply in its brief — be proved as a fact in this court.

For the accepted rule almost since the beginning of our federal jurisprudence has been that the law of any State of the Union, whether statutory or the result of judicial decisions, is a matter of which the courts of the United States may take judicial notice without plea or proof, because the laws of the several states cannot in courts of the United States properly be regarded as foreign laws. Owings v. Hull, 9 Pet. 607, 625, 9 L.Ed. 246; Pennington v. Gibson, 16 How. 65, 81, 14 L.Ed. 847; United States v. Turner, 11 How. 663, 667, 13 L.Ed. 857; Covington Draw Bridge Co. v. Shepherd, 20 How. 227, 234, 15 L.Ed. 896; Cheever v. Wilson, 9 Wall. 108, 121, 19 L.Ed. 604; Brown v. Piper, 91 U.S. 37, 42, 23 L.Ed. 200; Elwood v. Flannigan, 104 U.S. 562, 568, 26 L.Ed. 842; Lamar v. Micou, 114 U.S. 218, 223, 58 S.Ct. 857, 29 L.Ed. 94; Roberts v. Reilly, 116 U.S. 80, 96, 6 S.Ct. 291, 29 L.Ed. 544; Martin v. Baltimore & Ohio R. Co., 151 U.S. 673, 678, 14 S.Ct. 533, 38 L.Ed. 311; Straton v. New, 283 U.S. 318, 328, 51 S.Ct. 465, 75 L. Ed. 1060.

D. Here the forum is in New York State, although it is not in a court thereof.

Under the law of New York State a contract is made at the time and place where the final act necessary for its formation is done. Franklin Sugar Refining Company v. Lipowicz, 247 N.Y. 465, 160 N.E. 916, 59 A.L.R. 1414; George A. Ohl & Co. v. Standard Steel Sections, Inc., 179 App.Div. 637, 167 N.Y.S. 184; Howard v. Daly, 61 N.Y. 362, 19 Am.Rep. 285; Hyde v. Goodnow, 3 N.Y. 266; and cf. Restatement of the Law of Contracts, Section 74, and the Whiteside's New York Annotations thereto.

According to the law of New York State, the laws of the state wherein the contract was thus made govern the contract "in matters bearing upon the capacity of the parties to contract and upon the execution, the interpretation and the validity thereof." U. S. Mortgage & Trust Company v. Ruggles, 258 N.Y. 32, 38, 179 N.E. 250, 251, 79 A.L.R. 802. Cf. Restatement of Conflict of Laws, Section 311, and Cheatham's New York Annotations thereto.

This, I take it, means that under New York law whether a particular kind of contract constitutes a joint venture or not, depends on the law of the place in which it was made. Cf. Restatement of Conflict of Laws, Section 325, and Cheatham's New York Annotations thereto.

II. In addition to the parties hereto, there are three other dramatis personae involved herein who should be mentioned and described at the outset of this opinion, namely:

A. John C. Grier & Company, a Michigan corporation with offices in Detroit, of which the President, Mr. John C. Grier, Jr., was the nearest man, so far as the matters herein involved are concerned, to the President of the Mueller Brass Company, Mr. Oscar Mueller, who, together with the members of his family, had the control of the stock thereof. Prior to July 1935, Mr. Grier had purchased from the Mueller Brass Company and from Mr. Mueller upwards of 40,000 shares of the common stock of the Mueller Brass Company and was, not unnaturally, anxious to broaden the market therefor.

B. Peter, Lander & Company, a Michigan corporation, a selling organization— corporately and in respect of ownership independent of John C. Grier & Company— which was operated from the same suite of offices, and existed because Mr. Grier did not wish to have any selling done by his corporation, John C. Grier & Company.

C. Melady & Company, a firm of brokers with offices in New York and memberships in the New York Stock Exchange and in the Stock Exchanges of Chicago, Winnepeg and Toronto, which did business on commission in those Exchanges, and which was represented in the proceedings hereinafter briefly described by one of its partners, Richard J. Buck.

III. In view of the decision of the United States Supreme Court rendered April 25, 1938, on Equity Rule 70½, 28 U.S.C.A. following section 723, in Interstate Circuit, Inc. v. United States, 304 U. S. 55, 56, 57, 58 S.Ct. 768, 82 L.Ed. 1146, and under Rule 52(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, it is now a work of supererogation to write a considered and detailed opinion on the facts in what used to be an equity cause and is now called a non-jury cause, for the place of the opinion must now be taken by formal findings of fact and conclusions of law, separately stated and numbered. Title 28 United States Code, Section 723, 28 U.S.C.A. § 723.

I shall, therefore, deal herein merely with certain general aspects of the facts, and with the conclusions of law which I draw in the cause, and leave it to counsel to submit, in accordance with my instructions at the end of this opinion, such findings of fact and conclusions of law, separately stated and numbered, as they may be advised.

IV. This is a cause in which the substantive juridical relations, — out of which the equities invoked herein are claimed to have arisen, — are wholly based on oral evidence of witnesses who testified before me at the trial.

As there is not any witness who may fairly be accused of consciously testifying falsely, what is involved here for me, as the trier of the facts, is to determine whether there are faults in emphasis on the facts made by, or mistakes in the memory of the witnesses for any of the parties.

As to the plaintiff's principal witnesses, Mr. Cray and Mr. Nauman, I have not any hesitation in saying that the effect of their testimony on me was to make me feel that their alleged cause of action was nothing more than a figment. I think that they were throughout magnifying their office, and trying to turn what was only an opportunity given to the plaintiff by Mr. Hegarty through Mr. Grier, to share in any "finder's fee"¹, to which Mr. Grier might properly be entitled, into a joint venture which would cover all the bonds and stock of the Mueller Brass Company which Hegarty or his principal—unnamed at the time of the alleged contract of joint venture of July 19, 1935—might succeed in getting, in order that the plaintiff would have a basis for claiming an accounting to it from Hegarty, Conroy & Co., Inc., as a co-adventurer.

It may be said here also that—as is oftentime the case—by chewing the cud of what they conceived to be their grievances, Mr. Cray and Mr. Nauman have actually come,—I think probably without being aware of it,—so much to exaggerate those grievances in their own minds as to satisfy me, when the evidence is read in connection with the evidence of the defendants' witnesses, that they have greatly distorted in their memories the situation in regard to the Mueller Brass Company deal which existed in June, July, August and September 1935, the crucial period herein.

On the other hand, it seemed to me that the quality of all the principal witnesses for the defendants was unexceptionable. Indeed, Mr. Rathvon, Mr. Hegarty, Mr. Buck and Mr. Grier are among the best witnesses whom I have ever heard give evidence before me.

Because the essence of the cause turned wholly on oral evidence, I watched and listened to all...