Mengis v. Fitzgerald

Hiller, J.:

The plaintiff lias recovered a verdict of $1,110,000 on an alleged contract made more than three years before the trial of the action, disputed by the defendant, evidenced by no writing, and established in its essential element, if at all, by the unsupported testimony of the plaintiff.

After a careful perusal of the record, I am unable to agree with the conclusion that the verdict is amply supported by the evidence, and that the record presents-no errors prejudicial to the defendant.

The plaintiff pleaded an express contract to pay the stipulated sum of $1,000,000 for information and services, in the following language: “ That on or about and between the 1st day of January, 1901, and the 1st day of" July, 1901, at the Borough of Manhattan, City and State of ¡New York, the plaintiff rendered certain services to the defendant, at his request, in procuring and furnishing to the said defendant certain data and valuable information relating to the prospective purchase of the securities and the control of a certain railway known as the Western Maryland Railroad Company, and for which said services in procuring said data and information the defendant promised and agreed to pay to the plaintiff the sum of One Million ($1,000,000) dollars.’5

It is claimed that this contract is1 established by the testimony of the plaintiff, his then counsel, Mr. Lauterbach, and the secretary of the latter, Mr. Katz, the plaintiff and Mr. Katz testifying to the conversation at which the contract is claimed to have been made, and Mr. Lauterbach to a subsequent conversation with the defendant claimed to be confirmatory thereof. It is so unusual for parties to trust the proof of contracts for the payment of so large amounts to the infirmities of both human memory and human nature, and it is so easy by the slightest changes to give conversations long past a meaning not contemplated by the parties at the time, that we analyze and scrutinize with care the testimony relied upon to establish such a contract. For the purpose of comparison I quote the part of the testimony of each of the plaintiff’s witnesses relating definitely to the alleged contract, viz., by the plaintiff: “ Said I, ‘ General, I want a more distinct understanding with you about these papers. I can’t get an option on that railroad or on these securities. It is impossible for me td get an option. I am nqt doubting your integ- ' rity at all, but I want it understood that if I leave with you these papers, or disclose the- name of this railroad, I shall receive one million dollars from you when you acquire the securities or purchase the road, or any .company that you might form, or any syndicate that you might form or become interested in, either one company or syndicate — I shall receive one million dollars-for my ' services and information to you. I shall have to spend a great deal of time to aid you in the investigation.’ General Fitzgerald said, ‘ Leave your papers.’ I am a little ahead of my story. ’ I said, ‘ General, I am only protecting myself. I don’t want you to go into it with any other company or body of men, because your name . is a tower of strength.’ He says, ‘ You needn’t be afraid. 'If I don’t go into it with you, I won’t go into it with anybody else, unless. I pay you the one million dollars.’ ”

By Mr. Katz: “He” (meaning the plaintiff) “-said in substance, ‘Are you in a position to take up the underwriting of a bond issue of about $10,000,000 on a railroad proposition in the Middle States, which I consider to be a great bargain ? ’ He mentioned the num-' her of miles of the road and its earning .capacity, and the General said that, if this thing was so good a thing he might not care to go . into any underwriting; he might prefer to take up, thé whole thing . himself, Mr. Mengis then told him that he wanted a distinct understanding before divulging the name of the road. Before that ; he said, ‘In case I do take the thing up what would you expect?’ . Mr. Mengis then .said, ‘ I consider it a great bonanza,’ or words to that effect; ‘ I want to make enough to retire for life. I want a million dollars out of it.) The General said if the thing were what he represented, to bring in the papers and he would look into them, ’ and that was practically what took place.

“ By the Court: Q. Have you. told all of the conversation ? A. No ; I did not recall it at the time, blit I do recall more that took place at the .-time. Mr. Mengis then said, in addition to the remarks , that were made, ‘Now, I want it distinctly .uhderstopd, General, that if you become interested in this thing, or any,company or body of men or syndicate’ — or things to that effect—‘if you become ‘ interested in any of them that I am to be taken care of, and if you, after investigation-, find that what I say is not true, and drop it, you will have' nothing further to do with it of- any character,’ and General Fitzgerald said, 1Ton can rest assured that if I don’t go into this thing with you I will never have anything further to do with it.’ ” By Mr. Lauterbach: “ I then said to the General, 1 General, if you don’t do this transaction through Mr. Mengis I want to exact a promise from you that you will not do it at all, either directly or indirectly.’ Said he: £ Of course not. If I don’t take the property through Mr. Mengis I won’t take any interest in it at all.’ ”

The testimony of the plaintiff does tend to establish a definite agreement of the defendant to pay $1,000,000 conditioned only on his becoming in any manner interested in the purchase of the road or the securities, but it is very difficult to spell such an agreement from the testimony of Katz. According to his testimony the defendant promised two things only, first, that he would look into the papers, and, second, if he did not go into the thing with the plaintiff that he would have nothing further to do with it. His version of the transaction tends to indicate that it was the understanding of the parties that if after investigation the defendant concluded to go into the enterprise he would do so with the plaintiff, the defendant to contribute the money and the plaintiff information and services to be valued at $1,000,000, and that if he did not go in with the plaintiff he would not lend his name and financial aid, which the plaintiff said was “ a tower of strength,” to any one else, thereby interfering with the consummation of the plaintiff’s scheme through some other channel. This version is much the more reasonable of the two, and is confirmed by the testimony of Mr. Lauterbach.and by subsequent events, and in considering the testimony of the latter it should be observed not only that he was the plaintiff’s counsel, actively assisting in the promotion of the enterprise, but that' he also had a large pecuniary interest in its success, because thereby he hoped the plaintiff could realize money with which to repay him large loans, which the plaintiff had used in enterprises so unfortunate as to have reduced him to insolvency. It is fair to assume, therefore, that the plaintiff had carefully detailed to Mr. Lauterbach whatever agreemeilt he then claimed to have with the defendant, and if so it is incomprehensible that Mr. Lauterbach would exact a promise that the defendant would not take any interest whatever in the property if he did not take it through the plaintiff, because, according to the latter, it was no concern to him how the defendant took an interest in it, he was to he paid the $1,000,000 in snch event, and it is difficult to harmonize an agreement to pay $1,000,000 conditioned upon doing a certain thing with a positive agreement not to do that thing, for a breach of the agreement, which the testimony of Mr. Lauterbach and of Mr. Katz tended to establish, if a breach was proven, the plaintiff could recover such damages only as he sus-.' tai-néd, while on the contract which his testimony tended to establish, he could recover the stipulated sum of $1,000,000 upon proof . that the event, which was -made, .a condition of :such payment, had occurred — two very different causes of action.'. '

It is fair to consider the nature of the information and services- , which,were the consideration for the remarkable' contract claimed by the plaintiff. The information was" that the mayor of the city of Baltimore was resolved to sell the city’s controlling interest in the Western Maryland railroad, but this was no secret locked in the. plaintiff’s breast, it was public property at least in. the city of Baltimore, for-the mayor in liis first public utterance had declared such to bp his unalterable purpose. The services were claimed to be.' valuable because of the'plaintiff’s peculiar ability to influence a sale by the city by reason of his acquaintance with the social and political friends of the mayor, but the alleged social and political friend when called as a witness by the plaintiff- testified that he declined to enter into any arrangement with the plaintiff becausb he did not care to have anything to do with him, and the mayor testified that he positively refused to permit a sale of the road to any one with, whom the plaintiff was associated, because he feared lest on'account of' Mr. Lauterbach’s ownership- of an uncompleted road from Baltimore to Drum Point, the latter place should become the seaport terminus of the road. These facts are not controlling,; because the defendant was at liberty to make a poor bargain,, but they-aré entitled, to' consideration. Following the conversations testified to as above stated, the plaintiff from -time to time over a period of three or four months furnished ihíormation and data concerning said road to the defendant or liis representative, Mr. Krech, and it is fairly inferable that this was done for the purpose of informing the defendant, about the road and thereby persuading him to take an interest in the plaintiff’s scheme. The plaintiff sought to make it appear that this information was of a confidential nature, collected by him at large expense and labor, and doubtless the jury were impressed by the mass of exhibits covering many pages of this record, which upon examination are found to consist mainly of statutes of the State of Maryland, ordinances of the city of Baltimore and public reports of the road, to which reports were annexed the reports of the accountant Little, the accountant of the road, containing the exact data which the plaintiff claims to have employed the said Little to obtain and furnish to the plaintiff. During this same interval the plaintiff was endeavoring through the aid and in the name of Mr. Lauterbach to purchase the road from the city of Baltimore, and the letter written by the latter to said Little within a week after the alleged conversations with the defendant is significant. I quote: “ I am endeavoring to effect the purchase of all the securities of the Western Maryland Railroad Company owned by the City of Baltimore and an assignment of its claims against the Railroad. When I shall have accomplished this purchase I propose to institute proceedings for the reorganization of the Company. In all these matters I desire to secure your co-operation and to have the full benefit of your services.”-

These efforts to acquire the road before the defendant had even decided whether he would become interested, tend strongly to support the inference that they were made on behalf of the plaintiff instead of the defendant, in the hope that the defendant might ultimately decide to finance the scheme, and in the event of his refusal that some one else might be induced so to do, and in fact after the defendant notified the plaintiff about May, 1901, that he would not undertake it, the plaintiff unsuccessfully undertook to interest the firm of J. P. Morgan & Co. It is true the plaintiff testified that the defendant said that he would not go into it unless the plaintiff could satisfy him that he, the plaintiff, could get the road, but if this be true the plaintiff failed to meet the condition ■imposed by the defendant, because his effort to purchase the road failed, and his offer was rejected ; in the language of the mayor,, he “ turned it down.” Thus, as early as May or June his negotiations with the city and the defendant had resulted in a refusal of the city to sell to him, and a refusal of the defendant to become interested with him.

In December, 1901, more than six months after said failure of the plaintiff, one Edward L. Fuller purchased the stock of the West Virginia Central with the idea, as he says, of either extending it to Baltimore or of acquiring the Western Maryland and connecting the two by building sixty-five miles of roach Fuller was .a total stranger to the defendant. • In January, 1902, said West Virginia Central stock was taken over by the so-called Fuller syndicate, in which .the 'defendant is not claimed to have had any interest. On March 6, 1902, the city of Baltimore advertised in Baltimore, Chicago and New York, for sealed bids for its interest in the Western-Maryland,, and on the 17th of March, 1902, said Fuller, Myron'T. Herrick and Winslow D. Pierce submitted a bid, which on May seventh was accepted. Said Pierce was the counsel of Mr. Gould to whom the defendant the year before, at the suggestion o.f Mr. Lanterbaeh, had. submitted the plaintiff’s papers relative to said Western" Maryland, but Pierce testifies that the proposition was brought to him by Fuller, and that he only consulted Mr. Gould to the extent of obtaining his consent that he go into it wdth Fuller, and Fuller testifies that he obtained all his information relative to the road from Mr'. Hood, its president. Subsequent to the bicl of March seventeenth a new syndicate,, called the West' Virginia Central and Western Maryland, was formed to take over the holdings of the Fuller syndicate, to acquire the Western Maryland if the bid was accepted, to extend the West Virginia Central from Cumberland to Pittsburg and to connect it with the Western Maryland, thereby furnishing the Wabash system an outlet to tidewater, the scheme being' to issue stock and bonds to the amount of $60,000,000^ respectively, based upon said two roads with said extensions and certain coal properties that were acquired with the West Virginia Central. After the formation of said latter syndicate said Pierce and Herrick in its behalf applied to the defendant through Mr. Krech for a loan from the Mercantile Trust Company, of which the defendant was president • and said Krech vice-president, which was refused. Thereafter Mr. Gould, Mr. Krech, the defendant and many others prominent in the financial world became 'subscribers to the West. Virginia Central and Western Maryland syndicate, the subscription of the defendant being for $200,000, one-half of which he- sold at cost, and thereafter Mr. Krech as one of the syndicate managers assisted in tlie physical transfer of the securities held by the city of Baltimore.' The plaint tiff now claims that the scheme finally consummated was his idea at the start; that the defendant’s refusal to go oh with him was made in bad faith and that in fact the defendant, taking advantage of the information imparted to him, caused the formation of said syndicates and the purchase of said road, and that his subscription of $100,000 makes him liable on his contract to pay the plaintiff $1,000,000. There is no-evidence whatever, unless it can be inferred, that, after his refusal to go on with the plaintiff in May, 1901, the defendant had any thing.to do with the matter, knew anything about it, or imparted aqy information in reference to it to any one up to the time that he was applied to for a loan after the successful bid was made, and both he and the parties engaged in the enterprise testified that he had had nothing to do with it directly or indirectly prior to said time.

Assuming that the evidence presented a question for the jury and that we would not be warranted in disturbing their verdict upon the facts, there is yet in my judgment an unsurmountable obstacle to the affirmance of this judgment. I take it we must agree that the defendant was entitled to have the cause of action declared upon by the plaintiff submitted to the jury. I quote from the charge: “ The two prominent questions which yon will be called upon to consider are these: First, was there an agreement made between the plaintiff and the defendant, such as the plaintiff contends, and if so, had the defendant broken that agreement ? * * * The contract, as the plaintiff contends, was that if the defendant did not go on with it, then he should not go on with any one,' but that the knowledge and information that lie had acquired would be still in his own breast, and that he would take no part, or have nothing to do with any organization or syndicate or combination that would enter into that purchase. It was, as you see, the only way in which the plaintiff might safeguard his rights. He had to rely upon the defendant. It was a matter in which he had to trust him entirely. '* * * He produces. another witness, Katz, who accompanied him at that time, and who also details to you the conversation that took place then between the plaintiff, as he says, and the defendant, and they are in substantial accord as to what was agreed at that time. * * * Then Mr. Lauterbach tells you that he was care-fill to exact from the defendant a promise that unless he went on with the plaintiff in regard to this matter he would not go into it with any one in any shape whatever, or words to that effect; that .is the substance of it. * * * If you find that such a contract existed, then you come to the further question of fact, and that is whether the defendant by entering into this Fuller Syndicate broke . that agreement. * * ■ * It was not a contract that could be expected to extend indefinitely, but for a reasonable period thereafter he was bound to abstain from entering into ■ any enterprise that was in conflict with this agreement which he had made. With the plaintiff. * * f If there was no connection between this contract which the defendant made with the plaintiff and .the subsequent purchase made by the Fuller Syndicate, then you are at liberty to say that there was no breach of that agreement. * ■ * '* Certainly if such an agreement was made by the defendant,.and in entering into this Fuller Syndicate in the purchase of tlm property he violated that agreement, you should, not hesitate to give the plaintiff a verdict for the amount to which lie is entitled. * * * Tour anxiety- only can be to know- what the contract was and to know whether it has been, kept or whether .it has been violated. If 1 the defendant made such a contract and his acts in entering into the syndicate and the purchase of that property were in violation of that contract, then he cannot ask you to absolve him from the obligation of his contract.” '

And it is said that this charge considered in its entirety followed closely the allegations of the complaint. I confess that, after the most careful scrutiny, I have been unable to detect the slightest resemblance between the cause of action submitted and the one alleged. It certainly will not be claimed that a cause of action on contract to recover a stipulated' sum is the same as an action to recover damages for breach of contract; they are both dissimilar and inconsistent; one rests upon performance* the other non-perfórmaneé; the recovery in one is measured by the agreement, in the other by the damages, proven. It will not do to say, as the trial court subsequently said, that the breach referred' to the refusal to pay the' sum'stipulated, because the court repeatedly defined the breach as being the, act of the defendant ih entering the Fuller , syndicate. The contrast between the cause! of action pleaded and the one submitted is as marked as the contrast between the plaintiff’s version of the conversation with the defendant and Katz’s version of the same conversation. The learned trial court was doubtless impressed that the testimony of Katz and Lauterbacli with the other testimony in the case established, if any, a cause of action for breach of contract, and in effect told the jury that if they believed Katz and Lauterbach and found that there was any connection between the transaction of the plaintiff with the defendant and the transaction resulting in the actual purchase of the road, they should give the plaintiff $1,000,000 damages, and in my judgment the jury rendered its verdict upon that theory. If we could ignore th„e well-settled and salutary rule necessary for the protection of the substantial rights of litigants, that the judgment must be secundum allegata etprobata, we should be confronted with the difficulty that thé cause of action upon which this verdict was rendered was neither alleged nor proved, but the jury were required to fix the damages resulting from the alleged breach of contract at $1,000,000, without there having been even an attempt to. prove damages.

•This manner of submitting the case was clearly excepted to, and an exception was taken to the refusal of the court to charge that the plaintiff could not recover damages for breach of contract in this action. Thereafter the following request was made by the defendant’s counsel, viz.: “The jury must find a verdict for the defendant, even if they find Gen. Fitzgerald made the promise alleged, if they find Gen. Fitzgerald in good faith withdrew from the attempt to purchase the securities without any intention on Gen. Fitzgerald’s part to proceed otherwise, or with other parties to the purchase of the securities, and if .in, fact the jury find that Gen. Fitzgerald made no attempt to purchase or promote the purchase of the securities.” In my opinion the defendant was entitled to have this request charged, and it was important in view of 'the evidence tending to prove that the defendant had nothing to do with the purchase from the city of Baltimore, but it may fairly be said that the court had covered the point in the main charge, although not in the precise form requested.

The court’s attention at this point had been called to the error pervading the main charge; nevertheless in response to this request that error was repeated and emphasized as follows: “ The Co'urt: The contract was, if there was any contract at all, that he should not unite with any one in the purchase, or that in substance. I thought that when you drew that request you did not appreciate the point. Outside of - that I charge what is there. (Defendant’s counsel) : I except to your Honor’s modification of the charge and to the charge as made.”

This statement as applied to the request made the defendant liable for breach of contract by reason of his subscription to the syndicate agreement, irrespective of whether there was any connection between the contract with the plaintiff and the subsequent purchase by the Fuller syndicate, and, therefore,’’not only repeated the error in respect to misstating the nature of the cause of action, but tended to nullify the portion of the main charge in which the court had told the jury that it was necessary there should be such connection to enable the plaintiff to recover." I think this exception presents reversible error. But it is claimed that these errors were cured by the colloquy -which subsequently occurred, as. follows: The Court :• “ This is an action upon the contract for breach of the contract, tlie agreement being that he would pay him a million dollars if he went with somebody else, and they claim that he did go ..in with somebody else, and ■ he has not paid, the million dollars. (Defendant’s counsel): F except to your Honor’s remarks, and also to your Honor’s statement that tins is an action for breach of the contract. The Court: In the sense that he has not paid the million dollars. (Defendant’s counsel): I except to your Honor’s refusal to charge. The Court: The distinction, should be made clear. Perhaps, gentlemen of the jury,-in view of this request, I ought to make it a little dlearer. • The plaintiff’s contention is that the defendant made this agreement that he would pay a million dollars if he went in with any one else-in the purchase of the property ■ and the plaintiff also claims that when he went into the Fuller ' Syndicate he did go in with somebody else, and therefore became indebted to him in the sum of a million dollars. That is a more correct statement of the issue here than the one I gave you in the principal charge. (Defendant’s counsel): I except to your Honor’s statement.”

The learned court evidently appreciated at this point the error of the main charge, but can we say that error was cured ? I think we would all say as the result of our observation at the bar and while holding Trial Term that the jury get their impression of the issues from the charge in chief and that the colloquy between court and counsel respecting requests to charge serves more frequently to present pitfalls to the judge than to enlighten the jury. Of course, distinct statements which can be dissociated from the rest of the charge may be corrected in such manner as to cure any error, but here the charge was based upon the wrong theory of the cause of action, and in its entire scope was radically wrong. The error pervaded almost every statement of the court, and, assuming that the jury got the force of the last statement as quoted above, can we say that they were able to dissociate the errors in the charge from the statements with which they were connected, so as to understand such statements thus relieved of the false coloring of the associated error ? The court by iteration and reiteration had impressed upon the minds of the jury that if they found that by entering the Fuller syndicate the defendant had broken the agreement testified to by Katz and Lauterbach, they were to give the plaintiff a verdict of $1,000,000. (In using the words “ Fuller syndicate” the court evidently meant and was understood to mean the West "Virginia Central and Western Maryland syndicate, as the defendant was concededly not a member of the Fuller syndicate.) And yet we are asked to say that by restating the plaintiff’s contention, in a single sentence, in the midst of colloquy with counsel during the making of requests to charge, and then adding the statement that “ that is a more correct statement of the issue,” the wrong impression created by the main charge covering seven pages of this record can be entirely removed. Merely saying that a different statement was “ clearer ” and “ more correct” did not apprise the jury that the main charge was wrong, much less in what respect it was wrong. In my judgment such error as pervades this charge could be cured, if at all. only by stating plainly to the jury that the entire charge as made was wrong and should be disregarded and then by stating the issues as they should originally have been charged. Unless we are prepared to say that this single sentence obliterated the charge in chief and became the charge of the court we should reverse this judgment, and if we say that, the respondent is in no better position, I repeat the statement; “ The plaintiff’s contention is that .the defendant made this agreement that he would pay a million dollars^if he went in with any one else’in the purchase of the property; and the plaintiff also claims tliatwhen. he went into the Fuller Syndicate (evidently meaning the West Virginia Central and Western Maryland) he did go in with somebody else, iand therefore became indebted to him in the sum of a million dollars.” The court simply states' this as the claim of the plaintiff, but if it. is to have the effect claimed it must be regarded as. a direction to the jury to find for the plaintiff in case they find that the agreement was as stated, because concededly the defendant did go into said syndicate, which, of course, was going “ in with somebody elsed’ This statement was' excepted to, and was' clearly erroneous in that it entirely eliminated the question whether there was . any connection between the transaction with the plaintiff and the - purchase of the road by the syndicate of which the defendant after-wards became a member. ' It will not do to say that this was not called to the attention of the court at this point, because it had just before been called to its attention by a proper request that had been . refused, neither will it. do' to say that the jury were not misled because, if it was sufficiently impressive to obliterate from their minds the wrong impressions previously created, it obviously must liaye misled the jury and sent them out with the impression that they ’ had only a single question with which to deal, to wit, whether the. agreement claimed by the plaintiff was made. In my judgment the ' jury .were misled" by this- charge in respect to a vital point in the case, but this, discussion must demonstrate that it is at least a. matter of speculation' whether they were, and where conceded . error has." been committed which we cannot-, say was harmless, it is bur duty to grant, a new trial’ I, therefore, vote' for a reversal of the judgment.

Woodward and Jenks, JJ., concurred; Rich, J., read for affirmance, with whom Hirschberg, P. J., concurred.