Hotel Woodward Co. v. Ford Motor Co.

• Decision Date: 14 May 1919
• Docket Number: 210.
• Citation: 258 F. 322
• Parties: HOTEL WOODWARD CO. v. FORD MOTOR CO.
• Court: U.S. Court of Appeals — Second Circuit

258 F. 322

HOTEL WOODWARD CO. v. FORD MOTOR CO.

No. 210.

United States Court of Appeals, Second Circuit.

May 14, 1919

Holm Whitlock & Scarff, of New York City (Charles H. Tuttle, of New York City, Stephen C. Baldwin, of Brooklyn, N.Y., and Victor E. Whitlock, of New York City, of counsel), for plaintiff in error.

Crisp Randall & Crisp, of New York City (Alfred Lucking, of Detroit, Mich., and W. Benton Crisp, of New York City, of counsel), for defendant in error.

Writ of error to judgment entered in the District Court for the Southern District of New York.

Very little of an unnecessarily voluminous record was necessary to present the legal questions involved. Plaintiff here and below is a corporation of New York; it keeps a hotel, and will be hereinafter called 'hotel company.'

Defendant here and below is a corporation of Michigan, hereinafter called 'motor company,' and primarily engaged in the manufacture and sale of motor cars, but its corporate powers and the laws of New York enable it to purchase and improve (in the manner giving rise to this litigation) real property in this state.

By the early part of 1916 motor company had decided to buy land in New York City and erect thereupon a salesroom and warehouse. Several officials of motor company knew the president of hotel company, and negotiations ensued looking toward the erection above the New York warehouse and salesroom of motor company of many additional stories to be rented for a long term of years to hotel company, whose already existing hostelry was contiguous. Most of these negotiations took place in Michigan. Building plans were made, expenses considered, and the talk of at least three high officials of motor company with hotel company's president was offered in evidence.

Mr Robertson, a member of the bar, was exclusively in the employment of motor company, having his office with and in those of the corporation. In August, 1916, under instructions from at least one of the vice presidents of motor company, he received from the president of hotel company a form of lease, and in Michigan and by said vice president was instructed to 'fix it up.' Having examined this draft, Mr. Robertson (as was testified on behalf of plaintiff) 'said he would go ahead and prepare this lease and later on we would execute it. ' Thereupon, at the request of hotel company's president (Green), and in Michigan, Mr. Robertson wrote, and delivered to Mr. Green, the following letter:

'Ford Motor Company.

'Detroit, U.S.A., August 31, 1916.

'As soon as the lease is ready we will come on to New York and close up the entire matter of the execution of the lease and the security as agreed. In the meantime you may go ahead with any plans you have in connection with this proposition, so that there will be no delay when the architects' plans are ready.

'Trusting this will be entirely satisfactory, we are.

'Yours very truly,

Ford Motor Company,

'L. B. Robertson, General Attorney.'

Shortly thereafter, Mr. Robertson did prepare and send to hotel company in New York a form of lease. The form thus prepared was a revision of the draft received by him as above stated. The lease was to run for 21 years; the rental was to depend upon the cost of construction, which at the time was evidently estimated at approximately $700,000; but the document provided that any excess expense should cause a rise in rental amounting to five per cent. per annum on such excess.

This form of lease prepared by Mr. Robertson was submitted to motor company's counsel in New York, and some changes suggested. New York counsel for hotel company likewise made some suggestions, as to all of which there was evidence of acceptance by hotel company. On November 2d, 1916, motor company's board of directors met in Michigan and at that meeting the following resolution was offered:

'Whereas, this company owns a parcel of land on Broadway and Fifty-Fourth street, New York, suitable for New York offices and salesrooms.

'And whereas, the land is very valuable, and to construct simply an office and salesroom, would result in an exorbitantly high cost for offices and salesroom.

'And whereas, the management of this company, on account thereof, has entered into preliminary negotiations with the Hotel Woodward to occupy part of a suitable building on such site:

'Therefore, resolved, that this company proceed with the erection of the proposed building suitable to that site, for the use of this company as offices and salesroom, and that the negotiations of the management looking to the lease of the balance thereof to the Hotel Woodward Company for a period of twenty-one years be and they are hereby ratified and confirmed, and the management is authorized to erect the building at an approximate cost of $740,000, and enter into said lease.

'After some discussion further consideration of this resolution was deferred until the next meeting.'

At the next meeting of the board the matter was thus treated:

'It was moved by Mr. Rackham and supported by Mr. Klingensmith, that the resolution pertaining to the building on the property owned by the Ford Motor Company at the corner of Fifty-Fourth street and Broadway, New York, as outlined in the resolution of the meeting of November 2, 1916, and at which time the resolution was deferred, be ratified, and that officers be given authority to proceed.'

Hotel company gave evidence tending to show that, after receipt of Mr. Robertson's letter of August 31st, both parties had assumed that the matter was closed, except for details to be adjusted by attorneys for each party and the formal execution of a written lease.

On the part of motor company, evidence was given tending to show that, so far as the talk between the officers of the two corporations went, it had at all times been made plain by motor company that the making of any lease, and not only the renting, but even the construction of what was to be rented, depended upon the making of satisfactory and reasonably economical contracts for physical construction of anything more than motor company needed for its own business in New York City.

In the early part of 1917 it was discovered (according to evidence given for motor company) that the cost of construction would be not approximately $700,000, but about a half million more than that. When this possible enormous excess was communicated to hotel company, it declared its willingness to pay by way of additional rental, 5 per cent. per annum, even on such enormous excess; but motor company was either not willing, or not able, to spend the additional money, and refused altogether to proceed with the matter.

This action at law was then brought by hotel company against motor company to recover damages for breach, not of a lease (for no document called a 'lease' was ever delivered or even executed), but to obtain compensation for the breach of a contract to make a lease.

The defenses pleaded were, in substance, that there never was any such meeting of minds as could be called a contract; but that, if there were, the same was voided under the statute of frauds.

The language of the answer in setting up the statute plainly referred to the New York Act, i.e. section 259 of the Real Property Law (Consol. Laws, c. 50) which is as follows:

At the close of the whole case the trial judge dismissed the complaint, holding in substance that, if the minds of the parties had met in an agreement to make a lease in the form shown in evidence, such agreement or contract was voided by the statute of frauds, but gave no intimation as to whether he deemed the New York or Michigan statute applicable to the matter in hand.

Judgment having been entered upon this direction, this writ was taken, and, though plaintiff in error insists upon all duly taken exceptions, two principal questions have been argued:

(1) To the transaction shown, is the statutory law of Michigan or of New York to be applied?

(2) If the applicable statute does not bar the suit, was plaintiff below entitled to go to the jury?

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

HOUGH Circuit Judge (after stating the facts as above).

One matter of procedure justifies preliminary attention. The trial judge dismissed the complaint after having heard all the evidence adduced by both parties. It is clear from the record that the court ordered a dismissal instead of directing a verdict for the defendant because plaintiff's trial counsel insisted that nothing more than a dismissal was proper under the New York Code of Civil Procedure.

This was a mistake in form; a dismissal (not upon the merits) is a nonsuit, but where, after hearing all the evidence, the trial judge reaches a correct conclusion in favor of the defendant, the jury should be directed to enter a verdict in that defendant's favor. Stumpf v. Hallahan, 101 A.D. 383, 91 N.Y.Supp. 1062; affirmed 185 N.Y. 550, 77 N.E. 1196. The rule in the federal courts we stated in Re Iron Clad Manufacturing Co., 197 F. 281, 116 C.C.A. 642.

The case being before us, however, on a nonsuit, we 'must assume * * * that plaintiff's testimony is true, and that they are thus entitled to the benefit of every fair inference therefrom. ' Davis v. Carnegie Steel Co., 244 Fed.at page 933, 157 C.C.A.at page 283.

Another trial matter must be noted: The amendment pleading the Michigan statute of frauds should have been denied. It has been often held that the statute may be availed of under a general denial (e.g. Third National Bank v. Steel, 129 Mich. 434, 88 N.W. 1050, 64 L.R.A. 119); but this defendant had specifically pleaded the New York statute, as required by Crane v. Powell, 139 N.Y. 379, 34 N.E. 911, and Matthews v. Matthews, 154 N.Y. 288, 48 N.E. 531. Doubtless...