Simon v. Electrospace Corp.

• Decision Date: 17 February 1971
• Citation: 28 N.Y.2d 136,269 N.E.2d 21,320 N.Y.S.2d 225
• Parties: , 269 N.E.2d 21 Harold SIMON, Respondent, v. ELECTROSPACE CORPORATION, Appellant.
• Court: New York Court of Appeals Court of Appeals

Page 225

320 N.Y.S.2d 225

28 N.Y.2d 136, 269 N.E.2d 21

Harold SIMON, Respondent, v. ELECTROSPACE CORPORATION, Appellant.

Court of Appeals of New York.

Feb. 17, 1971.

John A. Sullivan and William S. Busch, New York City, for appellant.

Hyman L. Rutman, New York City, for respondent.

BREITEL, Judge.

Plaintiff, a finder of business opportunities, has recovered judgment against defendant for commissions, including interest and costs, for $920,967.25. Following a full trial, two limited issue trials, and two appeals to the Appellate Division, defendant appeals directly from the described final judgment rendered in the trial court, thus bringing up for review only the questions determined by the two intermediate orders of the Appellate Division (CPLR 5501, subd. (b); 5601, subd. (d)). The orders, however, embrace the two principal issues in the case, liability and measure of damages.

The issue of liability is whether plaintiff earned a commission by reason of the corporate merger two and a half years after he was retained by defendant's predecessor under a written agreement. Defendant contends that the retainer was abandoned, that the merger was not the kind embraced by the retainer, and in any event, plaintiff was not responsible for the transaction. If there was evidence to support the findings of fact in plaintiff's favor affirmed by the Appellate Division, albeit by a divided court, there may be no further review of the facts, but only of the legal issues raised. Since the findings are supported and no rules of law were applied improperly, the issue of liability must be resolved in favor of plaintiff. As to damages, that is another matter. The quantum of recovery is egregiously out of line under rules determining damages in breach of contract. Consequently, there must be a redetermination of damages, but on a formula, the elements of which are supplied by the record, thus requiring no more than a simple arithmetic computation.

Critical to liability are the subordinate issues; namely, whether the merger of two corporations was within the scope of the retainer, and whether plaintiff was responsible for the merger within the terms of the retainer.

On October 14, 1964 plaintiff received the following letter agreement of retainer from Mr. Brown, then president of Electrospace Corporation, the corporation eventually merged into defendant which bears the same name:

'This will confirm our conversations regarding Electrospace Corporation.

'In the event a sale of stock, or all the assets, or a merger is arranged by you with a corporation, company, or individuals introduced by you on terms approved by the stockholders of Electrospace Corporation, a fee of 5% Of the gross value of the transaction will be paid as a commission at the time of closing, in cash or stock of the company purchasing.

'This is a non-exclusive arrangement, and, in the event we do sell or merge to other parties not introduced by you, no compensation is earned due or payable. This commission is not earned due or payable until and unless title to the assets or stock is actually transferred to the purchaser or the merger is legally consummated.'

In the period following, until Brown left Electrospace, plaintiff, directly or indirectly through associates, arranged meetings with several prospects, including a Mr. Taxin, principal of a corporation holding a substantial interest in its affiliate, Robosonics, the eventual partner in merger with Electrospace. The object of these meetings was largely to bring about the purchase of the assets or corporate stock of Electrospace. By September, 1965, when Brown left Electrospace, nothing had come of these meetings. Thereafter, until the very early part of 1967, plaintiff or associates of his continued to present prospects to Brown's successor, Wolf, or at least so plaintiff's witnesses testified. Defendant's witnesses either denied or minimized the later efforts. From the early part of 1967 until the merger in June, 1967, plaintiff and his associates testified that they were kept in the dark about negotiations between Robosonics and Electrospace, and their inquiries were averted.

What had happened in the meantime is that somehow Taxin, the man interested in Robosonics, and Wolf of Electrospace, had gotten together on a merger scheme between the two corporations, each of which lacked sufficient working capital either to continue as it was or to purchase the other. The catalyst for the scheme was a proposed underwriting by a firm headed by one Federman, originally for $1.5 million, but later.$2.5 million, of convertible debentures to be sold to the public on behalf of the surviving corporation. It was first planned to merge Robosonics, the smaller corporation, into Electrospace. The plan was changed when it was realized that Robosonics had a valuable 'asset' preservable only if it were the surviving corporation, namely, a considerable tax loss which could be carried forward to offset future profits in the payment of income taxes. Instead, Electrospace was merged into Robosonics, and the name of Robosonics was changed to Electrospace. While the principals in both corporations remained with the surviving corporation, there is no question that the Electrospace people became the dominant figures. Stock in the merged corporation was issued in exchange to the stockholders of the constituent corporations by formula, utilizing in the case of Electrospace four new shares for one of the old.

Sharply contested on the first and full trial and still argued vigorously is whether the merger was within the scope of the retainer. Defendant argues that the retainer contemplated only a sale of Electrospace to another, not the reverse, or any substitute for a sale. Plaintiff argues that the retainer contemplated 'any kind of a deal' which would bring about a viable enterprise, with or without financing, or an outright disposition by sale. It suffices that, despite contradiction, there was testimony to support plaintiff's view, and both the trial court and the Appellate Division found in favor of plaintiff (32 A.D.2d 62, 299 N.Y.S.2d 712). What had been contemplated as the future transaction was certainly a question of fact. The letter agreement, referring to 'a sale * * * or a merger', does not resolve the issue in favor of defendant. This is so, even if the additional language describing the commission to be payable 'in cash or stock of the company purchasing' is weighed.

In any event, as concluded by the trial court and the Appellate Division, on the first appeal to that court, the change in the 'set-up' for the final transaction would not alone preclude recovery of a commission (32 A.D.2d 62, 299 N.Y.S.2d 712). As stated by Mr. Justice Geller, in his opinion following the trial:

'The fact that a 'different' set-up from that originally discussed at the initial meetings finally eventuated is 'a matter of no materiality whatever' (Seckendorff v. Halsey, Stuart & Co. Incorporated, 234 App.Div. 61, 70, 254 N.Y.S. 250, 259--260, reversed on other grounds 259 N.Y. 353, 182 N.E. 14). In Seckendorff plaintiff was merely a finder, in nowise a broker. Here plaintiff was not called upon by defendant to carry on negotiations either in the 1965 or 1967 meetings. In both situations the plaintiffs had nothing to do with the nature or form of the deal and their right to recovery could not be made dependent on the form the transaction ultimately took.

'In Seckendorff the Court of Appeals stated (p. 357 (182 N.E. at p. 15)): 'Tracing a connection between plaintiff's introduction of the business and the termination of the entire transaction was for the jury's consideration * * *.' There was a time lapse of almost two years between those events. Here there was a time lapse of about eighteen months between the first Robosonics meeting and the reactivation of the deal by Taxin's call to the new president. Tracing a connection between the two is supported by the facts and the reasonable inferences to be drawn therefrom and is not to be rejected because of the intervening lapse of time.'

Enough has been stated to indicate that the evidence, albeit contradicted, also sufficed to establish a continuing connection between plaintiff's initial efforts and the merger that came about. The issue, therefore on this score, is beyond review in this court (CPLR 5501, subd. (b); Cohen and Karger, Powers of the New York Court of Appeals, pp. 447--455).

Given these facts, plaintiff's failure to 'arrange' the deal, as prescribed in the retainer agreement, and even giving full value to defendant's argument that plaintiff before earning his commission would have been bound to be midwife for the consummated transaction, his failure is excused. On defendant's version as well as plaintiff's no one was permitting plaintiff to nose into the Robosonics-Electrospace negotiations in 1967. The trial court so found and the Appellate Division affirmed.

The rule is well-established in brokerage cases, and is analogous here, that interference with the opportunity of a broker to complete his services does not bar his right to commissions (e.g., Sibbald v. Bethlehem Iron Co., 83 N.Y. 378, 383--384; 6 N.Y.Jur., Brokers, § 128). The rule is but a species of the more general doctrine that a promisor is not discharged by the nonperformance of a condition precedent or return promise imposed on the promisee but which the promisor prevented or hindered (Sibbald v. Bethlehem Iron Co., Supra, p. 384; Restatement, Contracts, § 295).

Consequently, plaintiff is entitled to recover a commission. How that commission is to be measured occasions difficulty only because untraditional measures were applied by the trial court and the Appellate Division. Notably, the trial court which heard the limited issue on remand, and an unspecified majority of the Appellate Division on the second appeal, were of the view that the measure of damages directed on the first appeal was...