Marco v. Sachs

• Decision Date: 22 April 1960
• Citation: Marco v. Sachs, 202 N.Y.S.2d 681, 25 Misc.2d 763 (N.Y. Sup. Ct. 1960)
• Parties: Ida MARCO, as Ancillary Administratrix of the goods, chattels and credits of Harry Marco, Deceased, a stockholder in the Blue Ridge Corporation, on behalf of himself and all other stockholders similarly situated, and on behalf of said Blue Ridge Corporation, v. Arthur SACHS, Clifford F. Stone, Henry S. Bowers, Louis E. Kilmarx, Samuel Sachs, Waddill Catchings, Walter E. Sachs, Howard J. Sachs, Sidney J. Weinberg, Blue Ridge Corporation, John Foster Dulles, 'Walter' C. Ross, 'George' A. R. Narlian, 'Carlo' W. Schroeder, the first names of the last three defendants are fictitious, the true first names of said defendants being to the plaintiff unknown, Ridge Realization Corporation, and Arthur H. Dean, John Foster Dulles and David R. Hawkins, as Executors of the Estate of Harrison Williams, Deceased.
• Court: New York Supreme Court

Page 681

202 N.Y.S.2d 681

25 Misc.2d 763

Ida MARCO, as Ancillary Administratrix of the goods chattels and credits of Harry Marco, Deceased, a stockholder in the Blue Ridge Corporation, on behalf of himself and all other stockholders similarly situated, and on behalf of said Blue Ridge Corporation, v. Arthur SACHS, Clifford F. Stone, Henry S. Bowers, Louis E Kilmarx, Samuel Sachs, Waddill Catchings, Walter E. Sachs Howard J. Sachs, Sidney J. Weinberg, Blue Ridge Corporation John Foster Dulles, 'Walter' C. Ross, 'George' A. R. Narlian, 'Carlo' W. Schroeder, the first names of the last three defendants are fictitious, the true first names of said defendants being to the plaintiff unknown, Ridge Realization Corporation, and Arthur H. Dean, John Foster Dulles and David R. Hawkins, as Executors of the Estate of Harrison Williams, Deceased.

Supreme Court, Special Term, Kings County, Part I.

April 22, 1960.

David M. Palley, New York City, for plaintiff.

Fennelly, Eagan, Nager & Lage, New York City, for Blue Ridge Corp. and Ridge Realization Corp.

Sullivan & Cromwell, New York City, for defendants Walter E. Sachs, Sidney J. Weinberg and Waddill Catchings.

JAMES S. BROWN, Jr., Justice.

This stockholders derivative action was commenced in September 1936 by Harry Marco (now deceased). In January 1958 a judgment was entered, 12 Misc.2d 518, 170 N.Y.S.2d 390, dismissing the complaint because of the failure of the plaintiff, Ida Marco, as ancillary administratrix of the estate of said Harry Marco, to appear for examination before trial. That judgment was entered upon the order of Mr. Justice Schwartzwald after a lengthy hearing and a determination by him that Ida Marco had wilfully and deliberately disobeyed a prior order.

Relying on the January 1958 judgment to claim the benefit of section 23, Civil Practice Act, William Marco, as administrator of the estate of said Harry Marco (the aforementioned Ida Marco being still alive) on March 5, 1958 brought a similar action in the United States District Court, Southern District of New York against the same defendants on the basis of substantially the same business transactions as had been alleged in the complaint in this action.

The movants, who are three individual defendants in this action, as defendants in that federal court action thereupon moved to dismiss the complaint therein on the grounds, among others, that (a) the plaintiff therein lacked standing to maintain the action; (b) the plaintiff therein was barred by a former adjudication from maintaining the action; (c) the Federal Court had no jurisdiction over the subject matter of the action.

The motion was denied in all respects on June 17, 1959. The court, Marco v. Dulles, D.C., 177 F.Supp. 533 (Herlands, J.) in a lengthy decision concluded that (a) plaintiff had standing; (b) plaintiff was not barred by a former adjudication; and (c) the Federal Court had jurisdiction. The court also concluded that the Federal action was effectively commenced under section 23 of the New York Civil Practice Act in that the action in this court had been dismissed for Ida Marco's failure to appear for examination before trial and had not been abandoned nor terminated by a voluntary discontinuance or dismissal of the complaint for neglect to prosecute or a final judgment on the merits.

These defendants are now moving in this court for an order vacating the judgment herein dated January 7, 1958, and the order dated January 3, 1958 directing entry of said judgment and setting aside all proceedings in this Court herein after January 4, 1956, on the ground that the same were in error and the Court lacked jurisdiction to proceed herein following the termination of this action under and pursuant to Rule 302, Rules of Civil Practice, on or about January 4, 1956.

They argue, as they did in the Federal Court, that the State court action had been automatically dismissed, effective January 4, 1956, under Rule 302, subd. 2, N.Y.C.P.R., and Rule 17(e) of the Special Term Rules of this Court, for failure to prosecute. They state that this Court and the Appellate Division and the parties overlooked the previous termination of the case on January 4, 1956; that all subsequent proceedings, including the judgment under attack, were void and that this is a motion to correct the court's record.

The reason for this present motion is understandable. A decision favorable to movants would constitute an adjudication that this action had been terminated by a dismissal for failure to prosecute and that would make section 23, C.P.A., by virtue of which plaintiff had instituted the Federal Court action, unavailable to plaintiff.

The pertinent portion of the calendar history of this action begins with January 4, 1955, on which date the case appeared on the day calendar of Special Term III and was marked 'off'. The attorneys received a notice dated April 12, 1955 from the Clerk of Special III that the case would appear on the call calendar on April 20, 1955. On April 20, 1955 the calendars of Special Term III had two headings. The first was 'Ready Day Calendar'. The second was 'General Call Calendar of cases Marked 'off." Marco v. Sachs appears on that latter calendar with the notation 'Contd. off.' The New York Law Journal of this date lists the case on the calendar of cases marked 'off.' A copy of the minutes of the Clerk of Special III (Ex. 4) contains the following:

'Nov 10 1953 1/14/54 Off--Restored by notice dated

12/21/54--For Jan. 3, 1955,

Off Abandoned--complaint and C.C. if any dismissed--Rule 302 R.C.P.

On Cal 4/5/56 Steinbrink, J. Stayed to be Restored 5 days Notice.

Oct. 7, 1957--No statement of readiness having been filed to date, with Clerk of Special Term Part 3, as required by Special Rule of App.Div.2d Dept. sub. 3 the Clerk struck this case from the calendar.'

All parties agree and the submitted photostatic copies of the Day Calendar and of the New York Law Journal show that the case appeared on the Special Term Part III Day Calendar of January 4, 1955 and was marked 'off'. Movants argue that since the case never appeared on the calendar after that date, it was dismissed automatically on January 4, 1956 by operation of Rule 302 and point to the rubber stamp entry of dismissal as additional evidence of that fact.

Plaintiff's affidavit in opposition states that all the attorneys were notified by a card (Exhibit A) dated April 12, 1955, mailed by the Clerk of Special Term Part III, that the action would appear on the Call Calendar on April 20, 1955 and that the attorneys were directed to appear in person and advise the Court as to the present status of the case. The affidavit further states that all the attorneys appeared, that the case was No. 11 on the General Call Calendar of cases marked 'off' and was again marked 'off'.

Subsequently the corporate defendant served a notice restoring the action to the calendar of April 5, 1956, on which date the case appeared on the calendar and was marked 'stayed to be restored on 5 days' notice when stay vacated'. This notation referred to an order of Mr. Justice Keogh, dated January 27, 1955 staying the plaintiff from proceeding until after the examination before trial of the plaintiff, which order had been affirmed by the Appellate Division. 149 N.Y.S.2d 486. In reference to this point, it is a fact, as Judge Herlands pointed out on his opinion (177 F.Supp. at page 547), that

"The stay contained in the order of Mr. Justice Keogh, dated January 27, 1955, would not prevent plaintiff from moving to avoid or open a default based on a failure to calendar the case, for the courts have limited the extent of a stay by confining it to some onward movement in the action furthering the interests of the party in default through giving him some affirmative relief therein, and have held that it does not apply to an act of self defense on his part.' Thompson v. McLaughlin, 3d Dept. 1910, 138 App.Div. 711, 714, 123 N.Y.S. 762, 765; Blair v. Blair, Sup.Ct.Kings Co. 1913, 145 N.Y.S. 397, 399.'

Plaintiff states that this action has been very actively litigated at all times and contends that there never was the suggestion by anyone that this action had been dismissed pursuant to Rule 302 of the Rules of Civil Practice, and points to the opinion of Mr. Justice Schwartzwald (N.Y.L.J. 6/12/56) in connection with a motion to dismiss made prior to the one which resulted in the order and judgment of dismissal, which opinion stated in part:

'The action is presently on the General Calendar and plaintiff is stayed from proceeding with the same until she submits to an examination before trial requested by the defendant.'

Plaintiff also refers to the statement of Milton Pollack, defendants' counsel, in his affidavit dated September 23, 1957 in support of his final motion to dismiss the action:

'While the case was put on the calendar by the corporate nominal defendants in November, 1953, the case was presently marked off the calendar by the plaintiff and remained off the calendar for all practical purposes except for actual token restoration to frustrate the rule of automatic dismissal under rule 302, R.C.P.'

Plaintiff comes to the conclusion that there was no dismissal under Rule 302, R.C.P., because:

(1) The case appeared on the calendar and was called on April 20, 1955.

(2) The case was restored to the calendar of April 5, 1956.

(3) No one objected to the notice of restoral for April 5, 1956; and that notice, although not a notice of motion to restore, was at most an irregularity concurred in by all the parties; and defendants waived any technical objections to such irregularity.

(4) The motions, appeals and hearings concerning Ida Marco's physical condition and ability to undergo her examination before trial, which were initiated by defendants and covered a two-year period after the alleged dismissal, constitute a waiver and estoppel as a matter of law; and if defendants had raised the question of...