Dellefield v. Blockdel Realty Co.

• Decision Date: 06 May 1942
• Docket Number: No. 219.,219.
• Parties: DELLEFIELD v. BLOCKDEL REALTY CO., Inc., et al.
• Court: U.S. Court of Appeals — Second Circuit

128 F.2d 85 (1942)

DELLEFIELD v. BLOCKDEL REALTY CO., Inc., et al.

No. 219.

Circuit Court of Appeals, Second Circuit.

May 6, 1942.

COPYRIGHT MATERIAL OMITTED

Nathan Friedman, of New York City (James Male, Maurice V. Seligson, and Irving J. W. Marx, all of New York City, on the brief), for appellants.

Isidor Lazarus, of New York City, for appellee.

Before AUGUSTUS N. HAND, CLARK, and FRANK, Circuit Judges.

CLARK, Circuit Judge.

In this action plaintiff, the widow of Albert S. Dellefield, suing individually and as administratrix of her husband's estate, has recovered a generous verdict and judgment — over a quarter of a million dollars all told — for a deceit which rests in final analysis upon her word against the word of the two individual defendants. The circumstances call for close scrutiny of the extensive record before us. From our study we are convinced that several important errors occurred which make unsupportable the verdict obtained from the jury and the judgment thereupon rendered.

Plaintiff's claim is that on September 28, 1935, defendant Louis Block, supported by his wife, defendant Lillian H. Block, represented that the stock of defendant Blockdel Realty Co. was worthless, and that upon that representation she assigned 50 shares to the company, and her husband, president and director of both defendant corporations, assigned 25 shares of defendant Third National Realty Corporation to defendant Louis Block.

The jury found for plaintiff as to the Blockdel transaction in the sum of $178,000, and for plaintiff as administratrix as to the Third National transaction in the sum of $11,000, in each case against all four defendants jointly and severally; and the court entered judgment thereon, together with interest and costs, to make a total with reference to Blockdel of $238,647.50, and with reference to Third National of $14,740. Further as to the Third National transaction, it also held that the same money judgment should be entered on an additional count for equitable relief, limited, however, to a single recovery. The court also entered judgment upon the jury's verdict finding against Blockdel's counterclaim for $15,783.84, alleged to be due it as a debt from the deceased.

Plaintiff's testimony was that her husband had been in a hospital early in September, 1935, afflicted with an illness which the doctors pronounced as probably fatal, and that she wished to take him back to their old home in Chicago. A few days before their trip she appealed to Louis Block, the other active officer of these companies and both a close business and an intimate personal friend of herself and her husband, for advice as to what she should do, particularly as to obtaining money. She asked for some money "on my stocks." He advised her that the Blockdel stock was worthless, but that he would take it and hold it, as it might be worth something in some time to come and might be good for Calvin, her minor son; and as to the Third National stock owned by her husband, that also was of no value, but he would pay back the money invested in it by Dellefield, to wit, $2,500 (on its recent organization the previous spring). He also said that, since Al (Dellefield) would not be able to do his work as when in the office, "they" would have to cut his salary from $200 to $100 a week. This conversation took place, apparently on September 24, in the Dellefield living room and out of the husband's hearing. Block then said he would have to get the stock certificates out of the Blockdel safe; and on September 28, just shortly before the Dellefields started for Chicago, he returned with them and asked her to sign the transfer. They were then in the sickroom. Her husband had been given morphine, but was awake and in control of his senses. She asked her husband what she should do, and he responded that anything Lou (Block) said to sign was all right. And Mrs. Lillian Block, also present, told her not to worry and that Lou would take care of everything. Then she signed the assignment on the back of her Blockdel certificate, dating it September 24 because Lou told her to put in the date they first talked about the matter; and her mother, Mrs. Perlman, signed as a witness. Dellefield then signed the assignment of his Third National certificate, and both certificates were delivered to Block.

Limited corroboration of plaintiff's testimony came from Mrs. Perlman and the nurse. Both recalled the signing of papers on September 28, but neither knew any details of the transaction. The nurse remembered only that "they" asked plaintiff if she knew what she was signing, that she said yes and then asked Mr. Dellefield if it was all right and he said that anything Lou said to sign was all right for her to sign. Mrs. Perlman remembered little other than that plaintiff said to Mr. Block that she was leaving everything to him, that Mrs. Block said they would take care of everything for her, that Mr. Block said the same, and that Mrs. Block said that plaintiff should trust them and everything would be all right and that they would take care of everything. On the other hand, both Mr. and Mrs. Block took the stand and, while admitting the farewell visit, denied that any such conversation took place. But when Mr. Block attempted to testify that the transfer took place on September 24 under an arrangement he was making with Mr. Dellefield, the court excluded all such evidence under circumstances more fully discussed below.

It was conceded by all, and shown by documentary evidence, that plaintiff's certificate was thereafter treated as assigned to the Blockdel Co., and the stock therein as treasury stock, while an entry of credit in the sum of $5,000 was made to the account which Dellefield owed the corporation. As to the Third National, the certificate was cancelled and a new one in a like sum of 25 shares was issued to Louis Block, who paid $2,500 therefor — $1,000 by checks directly to Dellefield after he reached Chicago and $1,500 to Dellefield's father, thus paying a loan which Dellefield had obtained on his original purchase of the stock.

Dellefield did not then die, but recovered sufficiently to do considerable work for the company and to return to New York from time to time, being there for one considerable period from July, 1936, to February, 1937. His salary, which was reduced from $200 to $100 a week, was increased to $175 when he returned to work; but when he became sick again it was reduced to $75 and then finally to $50 a week, which amount he received until his death early in 1939. He continued as president of both companies until the summer of 1937, when, at Block's request, he submitted his resignation. The Dellefields and the Blocks remained intimate during this period, and more than one hundred letters passed between the families showing the same close affection as before. During all this time no claim was ever made by the Dellefields as to any of the matters above stated; and although Dellefield in several letters had occasion to plead for the continuance of his salary in response to Block's suggestions for a reduction or discontinuance, he invariably limited his plea to his immediate needs and his hope of still rendering the company service. As a matter of fact, he did some advertising designing for both companies even after he had finally left New York and did a certain amount of work, the details of which are somewhat disputed, for other concerns in Chicago. After his death plaintiff made no claim until September, 1939, when, as she says, she first learned of the imposition upon her and that the corporations were valuable properties. Defendants relied strongly on the fact that Dellefield continued to participate in the affairs of the company, signing checks, income tax statements, and the like, until his resignation as officer, as well as on other circumstances discussed below which, it is claimed, show both the propriety of the transaction and its complete acceptance by Dellefield throughout his life and by plaintiff until after his death. As has appeared, the jury, however, accepted plaintiff's version.

Some background facts must also be stated. Prior to 1926, Louis Block, Sol Koff, and August P. Sargol had been in partnership in the real estate business in Chicago. Dellefield, then in the advertising business in Chicago, had done advertising and other work for the partnership. The partners decided to organize a business in New York City for the purpose of buying land in Bergen County, New Jersey, improving it with streets, sidewalks, and sewers, subdividing it into building lots, and selling such lots on the installment plan. An agreement was then made by the partnership with Dellefield whereby he was to go east as active manager of the new business; and early in 1926, Blockdel Realty Co., Inc., was organized under the laws of the State of New York, with capital stock of $20,000. Of the 200 shares authorized, each of the three partners took 50, while the other 50 were allotted to Dellefield under a further agreement that if 75 per cent of the lots originally laid out were sold in a certain period of time the stock should be his. This contract also provided for Dellefield's employment as officer, general manager, and sales manager of the company for a five-year term, with a provision for resale of his stock to the company, if desired or if the employment was terminated during its term, at $100 a share. The accountant for the company set up as a charge against Dellefield the face value of this stock, to wit, $5,000, which is the original entry of the corporation's account with Dellefield. Dellefield was chosen president and director and managed the business until some two years later, when Block also moved to New York, serving first as vice-president and later, after the withdrawal of Sargol, also as secretary.

In May, 1929, Block and Koff arranged to buy out Sargol as a part of the process of winding up the affairs of the...