Arthur H. Richland Company v. Morse

• Decision Date: 28 January 1959
• Docket Number: Civ. A. No. 10515.
• Citation: Arthur H. Richland Company v. Morse, 169 F.Supp. 544 (D. Md. 1959)
• Parties: ARTHUR H. RICHLAND COMPANY v. William R. MORSE.
• Court: U.S. District Court — District of Maryland

169 F. Supp. 544

ARTHUR H. RICHLAND COMPANY v.William R. MORSE.

Civ. A. No. 10515.

United States District Court D. Maryland, Civil Division.

January 28, 1959.

Norwood B. Orrick, Robert R. Bair, Venable, Baetjer & Howard, Baltimore, Md., for plaintiff.

Ralph W. Powers, Hyattsville, Md., for defendant.

CHESNUT, District Judge.

This is a suit by an agent or broker to recover commissions earned by him in accordance with a contract made with the defendant for the sale of the latter's great majority holdings (practically all) of the stock (8529 shares) of a Maryland corporation known as Maryland Electronic Manufacturing Company, the plant of which is situated at College Park, Maryland, a few miles from Washington, D. C.For brevity this corporation will be referred to as "Memco".

After the stock had been satisfactorily sold to Litton Industries, Inc., a California corporation, the plaintiff demanded payment of the commissions as provided for in the contract, but this was refused by the defendant with this suit resulting therefrom.The case has been heard non-jury on extensive testimony in court and certain depositions.It was orally argued by counsel at the conclusion of the case and supplemented by extended briefs for the parties.Upon all this I have considered the facts and law and will now, as briefly as possible, state what I believe to be the most important facts developed in the evidence making the findings largely as ultimate facts without prolonged discussion of particular supporting evidentiary facts.So far as possible I will state these findings chronologically.

1.First, as to who are the principal parties involved.The plaintiff, Richland, is an experienced broker for the sale and purchase of industrial business enterprises or the stock interest of parties therein.His principal office is in Chicago, Illinois, and as his business is by its nature largely national in scope, he has an Eastern representative, one Adelberg, whose office is situated in Jenkintown, Pennsylvania.

The defendant, Morse, some years ago started and has successfully operated for about ten years, a manufacturing enterprise known as "Memco" in this case, with a large capital stock of which he is practically the whole owner, the Company being engaged in the production of electronic instruments, including particularly antennae, in connection therewith.The Company has also had as one of its largest customers, the United States Government.In 1956, by reason partially of health, Morse decided to lighten his business activities by the sale of his stock interests in Memco which, at that time, he valued at something more than $2,000,000.

The Litton Company, which became purchaser of the stock, is a very large California enterprise with many branches distributed throughout the United States and in some foreign countries.Its products have been largely of electrical or electronic nature.Its growth to great proportions in output has been brought about in recent years very largely by its acquisition of smaller business enterprises of the same general nature.Prior to 1956 it had a branch of its business also situated in College Park, Maryland.This branch had previously been owned by William Ahrendt from whom Litton Company acquired it about 1955, retaining, however, for the time being, Ahrendt as its local representative and manager of the plant.Although Memco and the Maryland branch of Litton were close neighbors in College Park and not unfriendly in relation, there was no business affiliation of any kind between them prior to 1957.Executives of the Litton Company in California whose depositions have been taken in this case, were Charles Thornton, Ray Ash and H. W. Jamieson.

2.On May 21, 1956, Morse entered into a contract with Richland with regard to the prospective sale of the former's stock in Memco.The undisputed terms of the employment were as follows: "The plaintiff and defendant agreed that if the plaintiff was successful in producing a buyer ready and able to acquire defendant's stock for a consideration satisfactory to the defendant, the latter would pay the plaintiff a commission equal to five per cent of the first $1,000,000 of the consideration received by the seller, and three per cent of the should exceed $1,000,000."The agree-amount by which the purchase price ment was not an exclusive one for Richland but it was contemplated that if a sale was successfully made the consideration might well be in stock of the purchaser.

In pursuance of this agreement Richland at once instructed Adelberg, the Eastern representative, to visit Morse in College Park and to obtain a full description of the nature, extent, volume and assets of the business, unfilled orders and other financial data relating to the value of the stock offered for sale.After carefully assembling all this data and obtaining an attractive brochure of Memco's business and plant including an important element of so-called "backlog" of unfilled orders, Richland, by reason of general business experience in such matters, made a list of prospective purchasers who might be interested.Among them he included the Litton Industries of California and on or about September 7, 1956he brought the subject to the attention of Litton by correspondence.Although Litton had a Maryland branch also in College Park, this was the first information that Litton had that Memco might be for sale.Richland's communication with Litton was to Thornton, the President of Litton.The latter at once was interested and promptly instructed its local manager at College Park to make a visit to and submit his recommendations, if any, as to the desirability of acquiring Memco.Apparently Thornton did not communicate to Ahrendt the fact that the Memco property had been offered to Litton by Richland who had requested Thornton to communicate with him, Richland, directly with reference to the matter.Richland also at about the same time advised Morse that he had submitted the property to Litton.Ahrendt visited Morse after some little time, about November 1956, and advised Thornton or the Litton Industries that he, Ahrendt, felt Litton would not be interested in making a purchase because the price indicated (over $2,000,000) was, as Ahrendt thought, too high for the business at that time.Thereupon Thornton advised Richland that Litton would not be interested.

3.Despite this temporary lack of success with Litton, Richland continued actively to interest other prospective purchasers and on or before July 1957he had succeeded in very much interesting the Stewart-Warner Corporation as a prospective purchaser.In the meantime, by virtue of correspondence by letter, or by telephone, Richland had apparently persuaded Morse that his asking price for the stock was much too high.

4.About October 1956 a Dr. Harvard Hull(who had previously been engaged in connection with the now well-known Manhattan project) became associated with the Litton Industries in California; and there is some evidence that there was some discussion between Thornton or other executives of Litton with Hull about the further development of the Maryland branch of Litton at College Park and the possible relation thereto, if any, of the acquisition of Memco, but apparently Hull was not advised at that time about Richland's prior relation to the matter.About March 1, 1957 Hull was appointed local manager at College Park of the Litton Industries.Both Ahrendt and Hull have testified as witnesses in the case.Their testimony seemed to me to be fair and unbiased.Neither of them is presently associated in any way with Litton.Dr. Hull's idea for the development of extension of the College Park business of Litton was quite clearly one of expansion with relation to the acquisition of Memco although he took no important steps with regard thereto until July 1957.The Maryland branch of Litton was engaged in the production of electro-mechanical instruments while the more particular business of Memco was electronic.Some time before July 1957 Dr. Hull, with some other representatives of Litton from California, made an extended inspection of Memco but without relation at the time at least to anything being said about the purchase.

5.We now come to a very important date and meeting between Richland and his associate Adelberg with Morse at College Park on or about July 16, 1957.The particular occasion for this meeting which also included a representative of Stewart-Warner Company as a prospective purchaser, was to discuss with Morse further details and negotiations regarding a possible sale to Stewart-Warner.

6.When Dr. Hull took over the management of Litton at College Park he learned from Ahrendt, his predecessor, that there was a possibility that Memco could be bought by Litton.On July 15, 1957 Dr. Hull went to see Morse (apparently without information as to the meeting of Morse with Stewart-Warner and Richland the next day) to have some talk with Morse about a possible purchase of Memco.On this visit he learned from Morse of the meeting arranged for Morse and Stewart-Warner the next day and with intimation from Morse that the latter expected to have a satisfactory and important offer for the purchase of Memco.Immediately Dr. Hull was greatly interested for some action to be taken by Litton and at once telephoned to Mr. Ash in California what the situation was, with the result that he had at least tentative authority from Litton to tell Morse in substance that he felt very sure that Litton would meet any offer made by Stewart-Warner.

7.The next day, July 16, 1957, Morse, Richland, Adelberg and Stewart-Warner representatives held their conference at College Park.It appears that a satisfactory price to Morse was offered by Stewart-Warner but there were some further details to be considered and no definite agreement was reached on that day.However, with this particular situation developing as it had and coming to a near...