Court Opinion

ID: 5769818
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:29:54.976981+00
Date Added: 2024-06-11T08:41:44.626125
License: Public Domain

Stetjer, J. (dissenting).
Electrospace Corporation, a New York corporation (hereinafter Electrospace [NY]), was in 1964 engaged in the electronics business, the bulk of its business being government contracts. Its stock was closely held by its officers and management and by people sach as its landlords, who had some interest in it. At that time these people, led by Brown, its president, desired to cease active basiness and to realize on the good will and assets of the company. To this end it contacted plaintiff, with whom it entered into a written contract for a nonexclusive brokerage contract to procure a purchaser either for the assets or stock of the company by outright sale or merger of the company into another.
To find such a parchaser plaintiff sought the advice of Louis Taxin, president of a commercial lending company, who suggested one of his clients, Robosonics, Inc., also engaged in a phase of the electronics basiness. Plaintiff arranged a meeting *68between the principal officers of both companies. It shortly developed at that meeting that Robosonics was in no financial position to buy Electrospaee (NY), and the meeting broke up.
Plaintiff did nothing further after that. Electrospaee (NY) continued to seek a buyer through other brokers but with no success. After some 18 months had elapsed, Taxin approached defendant with a new idea. He pointed out that if Electrospaee (NY) acquired Robosonics it would be greatly to the former’s advantage in that Electrospaee (NY) would be facilitated in expanding its business in private, as opposed to governmental, operations; it would acquire a substantial operations loss (available for tax deductions), which loss resulted from Robosonics’ operations and would offset Electrospaee (NY)’s profits; and would have the benefit of Robosonics’.stock exchange listing.1 Discussions followed. It was discovered that the original purpose of a sale of Electrospaee (NY) to Robosonics was still out of the realm of possibility. And it was further recognized that a purchase by Electrospaee (NY) of Robosonics would defeat two of the major attractions of the deal — for with the absorption and demise of Robosonics both its tax advantage and its connections for marketing its stock would disappear. Taxin was equal to the situation. He proposed that the merger take the form of the absorption of Electrospaee (NY) into Robosonics. And so it eventually did.
Plaintiff takes the position that the transaction was as the documents necessarily indicate — an acquisition by Robosonics of Electrospaee (NY). Regardless of interested testimony and the wording of the formal instruments, the real nature of the transaction appears without possibility of contradiction from the following indisputable facts. The officers and directors of Electrospaee (NY), with minor exceptions, became the officers and directors of Robosonics.2 The same is true of the management. The Robosonics plant and office were moved to the premises occupied by Electrospaee (NY). The name of Robosonics was changed to Electrospaee Corporation. However, as Robosonics was a Delaware corporation, the new Electrospace Corporation was likewise a Delaware corporation, and will be referred to as Electrospaee (Del.). The obvious purpose *69of this change of name was that the Electrospace business could be continued with customers and others without embarassment, interruption or interference. The stockholders of Eobosonics traded in their shares on a one-for-three basis, while the Electrospace (NY) shareholders received four for one, giving them complete control. As far as assets are concerned, a comparison of the price of Eobosonics and Electrospace (Del.) stock indicates that about 80% of the contribution to the reorganized company came from Electrospace (NY). It is not subject to dispute that in fact Electrospace acquired Eobosonics and not the reverse.
There was a stumbling block to consummation of the deal. It required money which neither party had. Money was needed for these reasons: Taxin insisted that a loan by his corporation to Eobosonics be liquidated; the physical transfer of the old Eobosonics operation to the Electrospace plant in Long Island would entail considerable expense; a reserve had to be set up to buy out possible dissenting stockholders; and additional working capital was needed for the contemplated expanding operations. Taxin undertook to find this money and he did in the form of an underwriting of debenture bonds of Electrospace (Del). _
_ It is inconceivable that on these facts plaintiff is entitled to any recovery at all. Employed to bring about a certain transaction, neither that transaction nor any reasonably related to it was ever effectuated. Oases where the ultimate transaction is so radically different from the one plaintiff was hired to procure are not common, but are not unknown. In Brown v. Snyder (57 App. Div. 413) plaintiff was hired to sell defendant’s gas company to United Gas Improvement Co., or to buy from that company a subsidiary which was competing with defendant’s company. Plaintiff introduced the parties but negotiations did not succeed. Later the parties met and concluded an arrangement which involved neither of the alternatives. It was held there was no performance and no recovery.
Even if with utter disregard of the facts it be deemed that this was a merger within the terms of plaintiff’s contract, still no recovery is warranted. A broker with a nonexclusive contract acquires no vested interest, even with regard to persons he introduces. His agreement is for a reasonable time only and the consummation of a sale after that time through the efforts of others gives him no rights (Sibbald v. Bethlehem Iron Co., 83 N. Y. 378, 384). Where the person introduced by the broker refuses to do business with the seller but, after a considerable lapse of time, changes his mind and does, the *70broker does not benefit by the original introduction (Sternberg v. Bellanca Aircraft Corp., 259 App. Div. 538). It is true that in Sternberg the brokerage contract contained a provision that time was of the essence, but this court (Dore, J.) had this to say (p. 541): “ Were there no expressed mention of the fact that time is of the essence, it could not be said that two years was a reasonable time.” The lapse of time between the original introduction and an eventual contract is significant in that it obviates any question of bad faith on the part of the broker’s employer. Where there have been no dealings between the seller (buyer) and the person produced by the broker for a period of years, it can hardly be said that the failure of the original transaction was sham and a subsequent fruitful arrangement indicates bad faith.
Plaintiff argues that these considerations do not apply because he was not hired as a broker but as a finder. While this argument is contrary to the tenor of the agreement and the finding of Trial Term, it is, even if true, of no moment. A finder must, in order to satisfy his agreement,' find someone willing to perform according to this employer’s terms. And he must perform within a reasonable time. Of course, if the negotiations are continuous until fruition, the finder has performed. But if they are broken off in good faith and not resumed within a reasonable time, the original introduction is meaningless. It should be noted that in Brown (supra) and Sternberg (supra) the plaintiffs’ agreements would make them finders.
In the view taken, questions as to damages are not reached. But the conflict on this point illustrates the validity of the conclusion reached herein. Ordinarily, nothing is simpler than to calculate a broker’s commission, based as it is on an agreed percentage of the price received by the seller. Here there are three contentions as to what that figure should be. The stipulated percentage is 5%. Plaintiff claims 5% of the value of all the shares issued on the reorganization of Robosonics in exchange for the shares previously held by the Robosonics and Electrospace (NY) shareholders, plus the same percentage of the face value of the debentures issued in connection with the reorganization. Trial Term rejected this contention and awarded judgment for 5% of the value of the stock issued to the Electrospace (NY) stockholders. This court rejects this determination and awards 5% of the stock issued to Electrospace. None of these can be logically supported because, as seen, there was no sale by Electrospace (NY) or its stockholders and they received nothing that they *71did not already have. Trial Term, recognizing this, ruled that as there was some different transaction, a commission was payable, but, as indicated, it is impossible to determine what it should be. No one has yet hit upon a method of inserting a square peg into a round hole.
The judgment should be vacated and the complaint dismissed.
Capozzoli and McGivern, JJ., concur with Nunez, J.; Steuer, J., dissents in opinion in which Eager, J. P., concurs.
Judgment modified, on the law and the facts, to the extent of ordering a new trial limited solely to the issue of damages to be assessed in accordance with the opinion of this court filed herein and, as so modified, affirmed without costs and without disbursements.

. Just what that listing was at the time is not clear. Robosonics’ stock had been traded in on the over-the-counter market for some time and later it was listed on the American Stock Exchange.

. There was one notable exception. Brown, the Electrospaee president, adhered to his original idea to get out. He traded in his stock for the stock of a small subsidiary company. The new president of Electrospaee (Del.) was the former vice-president of Electrospaee (NA).