Marco v. Dulles
| Decision Date | 25 June 1959 |
| Citation | 177 F. Supp. 533 |
| Parties | William MARCO, as administrator of all and singular, the goods, chattels and credits of Harry Marco, deceased, a stockholder of Blue Ridge Corporation, now Blue Ridge Mutual Fund, Inc., on behalf of himself and all other stockholders similarly situated, and on behalf of Blue Ridge Corporation, now Blue Ridge Mutual Fund, Inc., and Ridge Realization Corporation as assignee of Blue Ridge Corporation, Plaintiff, v. John Foster DULLES, Arthur H. Dean and David R. Hawkins, as Executors of the Estate of Harrison Williams, Deceased, John Foster Dulles, Sidney J. Weinberg, Waddill Catchings, Walter E. Sachs, Arthur Sachs, Howard J. Sachs, Henry S. Bowers, Louis E. Kilmarx, Blue Ridge Corporation now Blue Ridge Mutual Fund, Inc. and Ridge Realization Corporation, Defendants. |
| Court | U.S. District Court — Southern District of New York |
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David M. Palley, New York City, for plaintiff. David M. Palley and Morris Gottlieb, New York City, of counsel.
Fennelly, Eagan, Nager & Lage, New York City, for Ridge Realization Corp. Leo C. Fennelly, of counsel.
Sullivan & Cromwell, New York City, for defendants John Foster Dulles, Sidney J. Weinberg, Waddill Catchings, Walter E. Sachs and David R. Hawkins as Executor of the Estate of Harrison Williams, Deceased. Milton Pollack and Henry N. Ess, III, New York City, of counsel.
Is plaintiff's claim in this Federal action the "same cause" as that which plaintiff formerly asserted in a prior dismissed state court action against the same defendants?
This is the principal, though not the only, question raised by defendants' motions for summary judgment (F.R.Civ.P. rule 56, 28 U.S.C.A.) and judgment dismissing the complaint (F.R.Civ.P. rule 12) in this action, jurisdictionally based on diversity of citizenship. The words "same cause" are quoted from New York Civil Practice Act section 23;1 and the answer to the principal and related questions posed by the motions requires an interpretation of the phrase "a new action for the same cause" in that section, which relevantly provides:
"If an action is commenced within the time limited therefor, and * * * is terminated in any other manner than by a voluntary discontinuance, a dismissal of the complaint for neglect to prosecute the action, or a final judgment upon the merits, the plaintiff * * * may commence a new action for the same cause after the expiration of the time so limited and within one year after such a * * * termination."
The court has concluded that (a) plaintiff has standing to maintain this action; (b) plaintiff is not barred by former adjudication from maintaining this action; (c) this court has jurisdiction over the subject-matter of this action; (d) the complaint alleges a claim on which relief may be granted; (e) the New York statutes of limitation do not bar the grant of relief herein; (f) there are genuine issues of material fact to be adjudicated herein; (g) the defendants' motions are denied in all respects, except that the time of the defendants to answer or to move for an order with respect to the complaint under Rules 12(e) and 12(f) is enlarged until ten days after the date of the filing of this decision.
In amplification of the foregoing, the court has specifically concluded that this Federal action was effectively commenced under New York Civil Practice Act section 23, and that the complaint herein satisfies F.R.Civ.P. rule 23(b); that the former state court action had been dismissed for Ida Marco's failure to appear for an examination before trial; that the former state court action had not been abandoned nor had it been terminated by a voluntary discontinuance or a dismissal of the complaint for neglect to prosecute or a final judgment upon the merits; that neither the 1951 assignment of this cause of action (more fully discussed below) nor the 1951 corporate merger (likewise more fully discussed below) has the effect of precluding this action or incapacitating the plaintiff from bringing it.
In September 1936, Harry Marco (now deceased) commenced a stockholder's derivative action in the Supreme Court of the State of New York, Kings County. That state court action was dismissed on January 7, 1958 for failure of the plaintiff therein (Ida Marco, as ancillary administratrix, etc., of Harry Marco, deceased) to appear for examination before trial.
On March 5, 1958 (within one year after the state court dismissal), the present stockholder's derivative action was brought by William Marco, as administrator, etc. of Harry Marco, deceased, against the same defendants on the basis of the same business transactions as had been alleged in the dismissed state court action.
The defendants include persons who were, in the years complained of, directors of Blue Ridge Corporation (hereinafter "Blue Ridge"). Blue Ridge, a Delaware corporation organized in 1929, was in the investment business. Marco's claim was based on certain stock and loan transactions allegedly made by the said directors on behalf of Blue Ridge in collaboration with other defendants.
The multitudinous events between 1936 and March 5, 1958 are the historical and legal matrix of defendants' present motions. In a tug-of-words, each side blames the other for stalemating the state court litigation. It is not necessary, were it possible on the paper record before this court, to resolve the question of comparative dilatoriness.
Various aspects of the facts of this case have already been reported by the courts. E. g., Marco v. Dulles, D.C.S.D. N.Y.1959, 169 F.Supp. 622; Marco v. Sachs, Sup.Ct.Kings Co.1951, 201 Misc. 928, 106 N.Y.S.2d 522, also 201 Misc. 934, 109 N.Y.S.2d 226. But it is inescapably necessary to detail the course and chronology of the prior litigation and to describe closely the post-1936 corporate history of Blue Ridge because the defendants' present contentions are premised upon their version and interpretation of what happened in and outside the courts prior to March 5, 1958, when this Federal action was started.
Blue Ridge was incorporated in Delaware in 1929. In about August or September 1929, Harry Marco acquired 35 shares of the common stock of Blue Ridge at the time of the original offering. His stock certificate is dated April 21, 1930. Harry was a stockholder at the time of the transactions complained about. He was a stockholder at the time he commenced the state court action in September 1936. The latter fact is shown by the corporate records of Blue Ridge, which also establish that there has never been a transfer of the stock out of his name.
On or about July 8, 1942, Harry died intestate. At the time of his death he was a citizen and resident of the State of New Jersey. Some time before he moved to New Jersey, he had resided in Brooklyn and had an office in Manhattan.
At his death in 1942, Harry owned the 35 shares of Blue Ridge stock; his estate became the owner of them. The Marco estate never sold or otherwise disposed of those shares.
By virtue of a certain 1951 assignment and 1951 merger (to be described in detail below) and the terms of said assignment and merger, the Marco estate, in 1951, became (and is) the equitable owner of shares in two other corporations, namely, 35 shares of Ridge Realization Corporation and approximately 13½ shares of Blue Ridge Mutual Fund, Inc.
The records of the transfer agent of Ridge Realization Corporation show that there was issued to Harry Marco on August 7, 1951, 35 shares of stock of Ridge Realization Corporation. The certificate for said shares was never received by Harry's representatives, who suggest that the certificate must have been sent to either Harry's 1929 Brooklyn residence address or to his old Manhattan office address. In any event, the stock transfer records of Ridge Realization Corporation as of December 24, 1958, show that Harry is the registered owner of record of 35 shares of stock of Ridge Realization Corporation.
The stock records of Blue Ridge Mutual Fund, Inc. show that Harry is entitled to receive shares of that corporation as a Blue Ridge Corporation stockholder (pursuant to the plan of reorganization of Central States Electric Corporation). The actual issuance of Blue Ridge Mutual Fund shares to Harry's estate presently awaits only the submission of appropriate Surrogate's Court documents.
Contrary to defendants' contentions, the Marco estate is an equitable or beneficial owner of the above indicated stock of Ridge Realization Corporation and Blue Ridge Mutual Fund, Inc. As such owner, the estate has the necessary stock interests for purposes of this action.
On or about November 24, 1943, letters of administration upon the estate of Harry Marco were issued to his wife, Ida, by the Atlantic County Surrogate's Court of the State of New Jersey. Ida qualified as administratrix.
On or about January 27, 1944, ancillary letters of administration were granted to Ida by the Surrogate's Court of Kings County, State of New York; and she qualified as ancillary administratrix.
On or about October 16, 1944,2 as ancillary administratrix, Ida revived and continued the action which had been commenced by Harry in September 1936.
On July 12, 1956, Ida was discharged as administratrix by the Atlantic County Surrogate's Court of New Jersey. On July 13, 1956, her son William was substituted by the New Jersey court as administrator in her stead. William qualified as such administrator.
On or about July 19, 1956, Ida made an ex parte application before the Surrogate of Kings County for the revocation of her ancillary letters....
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