Sillman v. Twentieth Century-Fox Film Corp., CENTURY-FOX

• Citation: 165 N.Y.S.2d 498,3 N.Y.2d 395,144 N.E.2d 387
• Decision Date: 03 July 1957
• Docket Number: CENTURY-FOX
• Parties: , 144 N.E.2d 387 Leonard SILLMAN et al., Appellants, v. TWENTIETHFILM CORPORATION, Respondent, et al., Defendants.
• Court: New York Court of Appeals

Page 498

165 N.Y.S.2d 498

3 N.Y.2d 395, 144 N.E.2d 387

Leonard SILLMAN et al., Appellants, v. TWENTIETH CENTURY-FOX FILM CORPORATION, Respondent, et al.,

Defendants.

Court of Appeals of New York.

July 3, 1957.

Jay Leo Rothschild, Scarsdale, and Max Chopnick, New York City, for appellants.

Whitman Knapp, David Simon and David D. Brown, III, New York City, for respondent.

FROESSEL, Judge.

Defendant Berman Swarttz Productions, Inc., (hereinafter called Swarttz) entered into separate contracts, under date of June 30, 1953, with plaintiffs and various other persons interested in the Broadway musical revue 'New Faces of 1952', in order to produce a motion picture version of the state production. Plaintiffs' contracts may be summarized as follows:

Swarttz agreed to pay each plaintiff a certain percentage of the net profits of the picture. In exchange, The Intimate Revue Company (hereinafter called Revue), in the basic agreement, granted Swarttz the exclusive right to use the physical properties of the show; New Faces Inc., (hereinafter called New Faces) granted Swarttz the exclusive right to use its trade names; Julian K. Sprague (and others) invested moneys in the picture by way of interest-bearing loans; and Leonard Sillman agreed to act as the associate producer.

In addition, in the Revue and Sprague contracts, Swarttz agreed to give the distributor of the picture a 'Notice of Irrevocable Authority' directing it to pay directly to Revue and Sprague their share of the profits. Similarly, in the New Faces and Sillman contracts, Swarttz agreed to deliver a 'Notice of Irrevocable Assignment and Authority' directing the distributor to pay directly to New Faces and Sillman their share of the profits and also agreed that their share would be so paid. All of the contracts permitted assignment.

It was originally contemplated that the picture was to be distributed by the United Artists Corporation in third dimension and color. Shortly thereafter, however, so as to obtain the benefits of the CinemaScope process, it was decided to distribute the picture through defendant Twentieth Century-Fox Film Corporation (hereinafter called Twentieth Century).

In order to effect these new arrangements, Swarttz, on September 8, 1953, entered into a contract with defendnat National Pictures Corporation (hereinafter called National), which had a CinemaScope license and a distribution agreement with Twentieth Century. Under this contract, Swarttz assigned to National all of Swarttz's rights under the various agreements with persons, including plaintiffs, having an interest in the production. In consideration, National agreed to pay Swarttz a certain percentage of the net profits of the picture less the percentages to be paid to the persons, firms and corporations, including plaintiffs, entitled thereto. National accepted such assignments and expressly assumed all of Swarttz's obligations thereunder. National also agreed to give Twentieth Century a 'Notice of Irrevocable Authority' directing the latter to pay to Chemical Bank and Trust Company for the accounts of Swarttz and of plaintiffs their percentages of the profits and that the bank was to pay these sums directly to Swarttz and plaintiffs.

National's distribution agreement with Twentieth Century had been entered into on April 16, 1951, or more than two years prior to the making of any of the aforesaid agreements. Twentieth Century alleges that plaintiffs knew of this contract before Swarttz's contract with National, but plaintiffs deny that they had any knowledge of the contract until November, 1953. Under its terms, National is to furnish Twentieth Century with 7 to 10 pictures during the ensuing 7 years, each picture to cost a minimum of $400,000 and to be free from all incumbrances and from the claims of owners of any material used in the pictures.

At least 10 days prior to the delivery of each picture, National is to deliver to Twentieth Century: 'Photostat copies of all contracts for the acquisition of literary or other material used in the Picture and with producers, directors, musicians, actors, actresses and any other persons who render services for or in connection with the production of the Picture.' Twentieth Century is given the right (but not the obligation) to examine such contracts and if, in the opinion of Twentieth Century's attorneys, they are not sufficient to permit full exercise of Twentieth Century's rights or the picture fails to conform to the agreement, National shall, upon written notice within 60 days of receipt of the contracts, be deemed in default. Twentieth Century may terminate the contract upon any default of National. Acceptance of the picture by Twentieth Century shall not be construed to release or relieve National of any of its representations, warranties, indemnities or covenants in the agreement, one of which was to 'discharge (1) all claims'.

After deduction of a distribution fee and expenses, the receipts of the picture are 'payable to or for the account of' National (emphasis supplied). Except for assignments by National to two named corporations, or for the purpose of securing loans by a prescribed procedure, article Twenty-Fourth of the agreement provides, among other things: '(a) * * * neither party hereto shall assign this agreement, in whole or in part, or any rights or monies payable hereunder, without the prior written consent of the other party, nor shall any right hereunder or any property or contract covered hereby devolve by operation of law or otherwise upon any receiver, trustee, liquidator, successor or other person through or as representative of either party.' It was further provided that Twentieth Century shall not be required to pay any sum payable to National to anyone except National or one designee only; that Twentieth Century shall not be required to recognize any assignments; and that if Twentieth Century shall receive notice of the existence of any assignment, it shall have the right to withhold payments until the assignment is cancelled or withdrawn.

Under the provisions of this agreement, plaintiffs' contracts with Swarttz and Swarttz's contract with National were submitted for inspection to Twentieth Century, which evinced no objection to any part of these contracts. The picture, although costing only $220,000 instead of the required $400,000, was delivered to and accepted and distributed by Twentieth Century under this agreement. Shortly after the first release of the picture, plaintiffs' attorney gave notice to Twentieth Century's attorney of the direct payment provisions in plaintiffs' contracts and was assured by him that Twentieth Century could and would 'hold up distribution of moneys to National' under its contract.

Chemical Bank and Trust Company has refused to accept such funds as a distribution agent, and this contributed to the present controversy. Twentieth Century now holds a portion of the receipts deposited with defendant 'Chase National Bank' and threatens to distribute such receipts in disregard of plaintiffs' claims. Both National and Swarttz have refused to execute notices of irrevocable authority as required by their contracts.

In this action, plaintiffs seek a declaration of thier rights, the impression of a lien upon the receipts of the picture, a direction to pay to each of them a stated percentage of such receipts, an injunction prohibiting Twentieth Century from otherwise distributing them, an accounting and a money judgment for such sums as they claim are now due them. In addition, specific performance is sought of the agreements of National and Swarttz to execute and deliver the irrevocable notices. At Special Term, Twentieth Century's motion for summary judgment, or, in the alternative, for joinder of indispensable parties, was denied. The Appellate Division reversed on the law, and granted summary judgment without passing on the motion for joinder.

Both National and Swarttz are California corporations doing no business and having no assets in New York. They were served only in California and neither has appeared in this action, although the corporate defendant Swarttz has executed stipulations by Swarttz as president for extensions of time to answer. Other persons, whose contracts with Swarttz in regard to this picture entitle them to similar percentage payments as plaintiffs, have brought suit in California where their claims in some respects are said to conflict with those of plaintiffs.

In our opinion, Special Term was correct in denying defendants' alternative prayer for relief, viz., that assignees other than plaintiffs be brought into this action as indispensable parties. They are not such parties. Each of the plaintiffs in the case relies on a separate and distinct agreement. Even if we deemed them and other assignees as united in interest and conditionally necessary parties, they are all without the jurisdiction of this State, and therefore are not required to be brought into this action, for it can effectively be disposed of without them (Civil Practice Act, § 194; Keene v. Chambers, 271 N.Y. 326, 3 N.E.2d 443; Howard v. Arthur Murray, Inc., 281 App.Div. 806, 118 N.Y.S.2d 677; Silberfeld v. Swiss Bank Corp., 266 App.Div. 756, 41 N.Y.S.2d 470; see China Sugar Refining Co. v. Anderson, Meyer & Co., 6 Misc.2d 184, 152 N.Y.S.2d 507). And so with the defendnats, National and Swarttz, plaintiffs' assignors (Bergman v. Liverpool & London & Globe Ins. Co., 269 App.Div. 103, 54 N.Y.S.2d 204). Though also outside the jurisdiction of this State, they have nevertheless been named as parties defendnat in this action, have been served outside the State under the provisions of sections 232-235 of the Civil Practice Act, and are subject to an in rem judgment.

Since plaintiffs have no direct contractual relationship with Twentieth Century, they can prevail in their claim for direct payments only on the theory of an assumption of such an obligation by Twentieth...