Ames v. Ideal Cement Co.

• Decision Date: 27 November 1962
• Citation: 235 N.Y.S.2d 622,37 Misc.2d 883
• Parties: Amyas AMES, Plaintiff, v. IDEAL CEMENT COMPANY, Defendant.
• Court: New York Supreme Court

Page 622

235 N.Y.S.2d 622

37 Misc.2d 883

Amyas AMES, Plaintiff, v. IDEAL CEMENT COMPANY, Defendant.

Supreme Court, Special and Trial Term, New York County, Part XI.

Nov. 27, 1962.

Sullivan & Cromwell, by Inzer B. Wyatt and Dennis C. Mahoney, New York City, for plaintiff.

Cahill, Gordon, Reindel & Ohl, by Robert G. Zeller and William Jannen, Jr., New York City, for defendant. ABRAHAM N. GELLER, Justice.

Defendant has moved at the close of plaintiff's case to dismiss the first cause of action in the complaint on contract upon the ground that it is barred by the applicable statute of frauds. No such motion addressed to the alternative second cause in quantum meruit has been made.

The briefs on that question submitted by both counsel during the course of the trial, as well as independent research by the court, indicate that the answer cannot be entirely free from doubt in view of the unsettled and confusing area of law embracing that issue as affected by the nature and circumstances of this case. This is an action to recover a finder's fee with respect to a multi-state corporate merger. Involved in the statute of frauds issue is a matter of conflicts-of-law theory in addition to the basic question of the applicability to a 'finder' of the New York Statute of Frauds, Personal Property Law, § 31(10), dealing with business brokers.

Although the court has decided to deny the motion to dismiss, counsel are entitled to some statement of its reasons, which may serve to explain the rather unusual procedure proposed by the court relative to the jury's rendition of a verdict on both causes of action. This statement may also serve a useful purpose in placing the problem in proper focus so that, if deemed advisable in the public interest, the rationale and scope of this statute may be reviewed.

It is necessary first to have a full and correct understanding of this concept of a 'finder.'

In Seckendorff v. Halsey Stuart & Co. (234 App. 61, 254 N.Y.S. 250, reversed solely as to Halsey Stuart & Co. at 259 N.Y. 353, 182 N.E. 14), the court referred to plaintiff's agreement for an 'originating commission' and described him as follows (at p. 70, 254 N.Y.S. at p. 260):

'Plaintiff was in nowise a broker. * * * He merely was a finder of this piece of business. He was to receive his compensation for finding the business and bringing the same to the attention of Rogers Caldwell & Co. and its associates. He claimed his compensation solely upon the ground that he was the originator of the business and had disclosed to Rogers Caldwell & Co. and its associates the opportunity to engage in its financing.'

In Knauss v. Krueger Brewing Co. (142 N.Y. 70, 36 N.E. 867), the court referred to plaintiff, suing to recover for services allegedly rendered for defendant in regard to the sale of its brewery, as not a broker 'in the strict sense of the word' (at p. 73, 36 N.E. 867). The court pointed out (at p. 74, 36 N.E. 867):

'The record shows there was evidence of the employment of the plaintiff for the mere purpose of bringing the possible buyer and seller together, and with the understanding that if a sale were to result, the plaintiff was to have some compensation from the defendant for his services. The plaintiff testified that he was to have nothing to do with fixing the price or the terms of sale; the principals were to do that part of the business; all he had to do was to bring them together, and if, through their subsequent negotiations a sale should result, the plaintiff was to be entitled to some compensation.'

Having thus clearly distinguished between Knauss' function in that transaction and that of a broker in the usual transaction, the court proceeded to find inapplicable a New Jersey statute--the brewery was in New Jersey--prohibiting a broker selling real estate from claiming a commission unless authorized in writing to sell the property. That distinction also led it to conclude that Knauss could recover from defendant despite his having received, unknown to defendant, some compensation from the purchaser. It held that the rule, which barred a broker from recovering any compensation from either party in the case of undisclosed employment by both of them, could not be invoked where plaintiff's employment was solely to find a purchaser, with no participation in the subsequent sales negotiations to be carried on exclusively by the parties. The court observed that such information as was asked and given by plaintiff was incidental and preliminary in nature and purpose and merely to determine whether it was worth while to take up the matter.

The same distinction between a finder (who finds, interests, introduces and brings the parties together for the deal which they themselves negotiate and consummate) and a broker (whose duty is to bring the parties to an agreement on his employer's terms) has been noted in all the decisions dealing with the subject (see, for example, P. W. Chapman & Co. Inc. v. Cornelius, 2 Cir., 39 F.2d 555; Lindeman v. Textron, Inc., D.C., 143 F.Supp. 955; Kuffler v. List, D.C., 144 F.Supp. 776; Bittner v. American-Marietta Company, D.C., 162 F.Supp. 486). A more precise designation for a finder would appear to be an 'intermediary' or a 'middleman.'

The services performed by finders may vary from case to case. But their distinction from the status of a broker, if the circumstances of the particular case require such a distinction to be drawn, lies in their bringing the parties together with no involvement on their part in negotiating the price or any of the other terms of the transaction. Of course, with respect to real estate, commissions are payable only to a licensee and only when he produces a buyer who agrees to seller's terms, unless otherwise expressly agreed.

In this case plaintiff's evidence shows that the services performed by plaintiff's assignor, Kidder, Peabody & Co., an investment banking firm, were those of a finder or intermediary. Albert F. Donohue, one of its vice-presidents, who handled this transaction on its behalf, performed the essential function of a finder of introducing and bringing together the parties to the merger transaction. Actually, after Kidder Peabody's assistance in a possible plan of merger had been requested by the largest stockholder of Volunteer Portland Cement Company, it was Donohue who suggested that defendant, Ideal Cement Company, be contacted, obtained authorization for such purpose, and thereafter induced and interested defendant to undertake merger negotiations. In addition, he supplied defendant with financial information concerning Volunteer and made some general suggestions, based on his knowledge of Volunteer's activities and set-up, regarding the procedure to be followed by defendant in its dealings with Volunteer. However, the evidence offered on plaintiff's behalf shows that, though Donohue offered to go with defendant's representatives to talk with the Volunteer people, defendant decided to handle the negotiations alone. Had Donohue been permitted to participate in the negotiations, Kidder Peabody's status might have been that of a broker. Under these circumstances, however, it was merely that of a finder, though it rendered some incidental and preliminary services prior to the actual negotiations conducted by the principals themselves. Unless defendant presents evidence of such participation, this view of Kidder Peabody as a finder, rather than broker, in this transaction will be adhered to, insofar as such distinction, if existent, is required by the wroding of the statute of frauds.

Perhaps it should be observed at this point that defendant's denial of liability to Kidder Peabody is based not only on the statute of frauds, but also on certain factual grounds to be passed on by the jury under proper instructions at the close of all the evidence: that there was neither contract nor any understanding on the part of defendant that it was the party which was to compensate Kidder Peabody for its services; that, after the parties had failed in two attempts to agree, Kidder Peabody abandoned this deal and acted for other and conflicting interests; and that the merger, ultimately effectuated about three years after the original introduction, was not the result of Kidder Peabody's services but was the result of independent intervening factors.

Our present concern is with the form of the contract for compensation upon which Kidder Peabody relies. It claims an agreement with defendant implied in fact or in a course of conduct, including a number of telephone calls, exchanges of writings, and one personal meeting. The claim is that in Donohue's first telephone call with defendant's president he explained why Kidder Peabody would look to defendant for payment of its compensation if the deal went through, although no figure was then given. In a follow-up letter sent that same day to defendant he referred to his firm being 'protected' relative to the fee, stating that he and his associates believed it should be 1 1/2% of the consideration paid to the stockholders of Volunteer. (The consideration, paid in stock, being $22,612,500., the amount sued for in the first cause of action is 1 1/2% thereof, or the sum of $339,187.50; while the amount claimed alternatively in the second cause in quantum meruit is $504,187.50.)

It is not claimed that defendant accepted that offer either orally or in writing, but rather that its subsequent request for and acceptance of Kidder Peabody's services with knowledge that the latter expected to be paid therefor at the stated rate constituted an implied acceptance of the offer. It is clear that there was no contract, or note or memorandum thereof, signed by defendant, agreeing to pay the compensation claimed in this case.

The pertinent statute is Personal Property Law, § 31(10), which provides:

'Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and...