Court Opinion

ID: 5196885
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:44:37.762385+00
Date Added: 2024-06-11T08:27:07.183017
License: Public Domain

Rich, J. (dissenting):
The defendant has taken this appeal from a judgment against . ■him, rendered upon the verdict of a jury for $1,112,510.71. The plaintiff is a promoter, and his recovery was for services alleged to have been rendered defendant and information imparted to him in *39connection with the sale of the Western Maryland railroad. He claims that defendant promised to pay him for information that he possessed regarding the railroad, and for his services in obtaining data as to its earning capacity, etc., $1,000,000.
When the learned counsel for appellant disclosed the nature of this controversy and the extraordinary contract alleged by plaintiff to have been made, we had grave suspicions as to the justice of his claim. It is disclosed upon a careful examination of the record that the city of Baltimore was a creditor of the Western Maryland railroad to the extent of several million dollars; had secured through législative enactment control of its board of directors and was" practically the owner of the road, which ran from the city of Baltimore westerly to Cherry Run, a distance of about ninety miles, and in addition to this the road controlled about two hundred miles of leased lines.
The plaintiff, prior to the year 1900, had resided in the city of Baltimore, was acquainted with some of the municipal authorities and knew of the 'public sentiment in favor of a sale of the road. Through his acquaintances, who were social and political friends of the mayor of the city, he became conversant with the latter’s determination to sell the interests of the city in the railroad; he had knowledge of the further fact that the mayor would not consent to its sale to either the' Pennsylvania or Reading companies; he also knew that the Wabash railroad system, then controlled by the Goulds, and running to Pittsburg, was anxious to obtain an eastern connection to tidewater which could be effected by uniting with the Wabash system the West Virginia Central and Pittsburg and Western Maryland railroads, by constructing about sixty-five miles of new road, and that with this connection and its possibilities and excellent construction was a very valuable property and could be acquired for much less than its actual value. He came to Hew York in December, 1900, with the apparent determination of securing the ownership and control of this road, through syndicate organization or otherwise. He applied to the defendant, who was the president of the Mercantile Trust Company and a* business associate of the Goulds, for aid. Upon the trial he testified to several interviews with defendant, as follows: “ Beginning with my first interview, I said, ‘ Gen. Fitzgerald, I know of a railroad about ninety *40miles long, controlling about two hundred. miles of leased 'lines; ’ that the road was earning about $800,000 net. It was a most valuable railroad. This is what I said to Gen. Fitzgerald; the bonds — the principal and interest were vested in the hands of one or two parties, and the principal and interest were in default for a number of years and we could buy a railroad cheap ; a railroad worth from about five or six to ten millions. I said, ‘ General, it is one of the best propositions that I ever heard of in my life.’ I said to him, ‘Would you entertain a railroad proposition of that kind ? ’ He said, ‘ I am always willing to entertain any good railroad proposition and glad to see you with your papers in connection with it.’ He wanted to know where the railroad was. I told him not far from New York, that we. did not have to go to Nebraska or Dakota. He said, ‘ Bring in your papers when' you are ready.’ A few days after-wards I had some more interviews with him and told him I had seen a great many people in connection with the road, and they told me the road was worth from twenty to tw.enty-five million; the president of the road said that the road was worth fifteen to twenty million. The General said, ‘"Well, I.have not got the time now. Bring in your papers. It seems to be a very good thing. Bring in your papers ? ’ I had several interviews with Gen. Fitzgerald about underwriting the bonds and furnishing the money to pay for defaulted securities, and underwriting a new, issue of bond. I went and got some more papers and came back to Gen. Fitzgerald', and I said, ‘ General, I have papers now that I can submit in reference to that railroad proposition,’ not mentioning the name. I said, ‘ General, now it is time to come down to business, and I would like to have you underwrite these bonds.’ He said, ‘To what extent?’ Says I,‘About $10,000,00.0 will cover it—the cost of the road. There is a million dollars in it for you.’ After thinking it over, he said, ‘I don’t care about underwriting bonds. If it is such a good thing I may want to buy it myself, or form a syndicate. The only way I will entertain the proposition is, yon name a price that you want for your services and information and then I will irivesti- ' gate.’ Said.I, ‘ General, I offered you just now $1,000,000 to underwrite these bonds to furnish me the money to pay for these securitiés. Now, I never offer anything unless I am willing to take the same medicine. I will take a million dollars paid to me on the acquisition *41of these securities or the control of the road.’ He saysj ‘ All right. A million dollars is a good deal of money.’ Says I, ‘General, you are not bound to take it up if you don’t want to take it up. . Drop it right there and I will sell it to some one else, after your investigation.’ He said, ‘Well, leave your papers.’ 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 to get an option. I am not doubting your integrity 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.’’ Thereupon I gave him the name of the railroad and the regime of the road, showing the city’s interest, stating that the city of Baltimore owned the railroad and had a majority of the directors, eight out of thirteen ; and showed him the earnings. A few days afterwards I came back and I said, ‘ General, I have engaged a man who is acting as my attorney in this matter, and perhaps he can give you very valuable assistance.’ He says, ‘Who is he?’ I said, ‘Edward Lauterbach, a man that I know you have confidence in.’ Says he, ‘ Will you make an appointment with Mr. Lauterbach ? Tell him I would like to see him.’ I went "to Mr. Lauterbach’s office-and told him that Gen. Fitzgerald wanted to see him; that I thought I had succeeded in interesting him in making an investigation into the railroad. * * * A couple of weeks after that I went in to Geh. Fitzgerald and 1 said, ‘ General, this is Mr. Little, an expert accountant, that l have engaged to help me in railroad matters. There is a $25,000 expert. Ton see I don’t get the whole million; I have *42got to pay.a part out at least;and I introduced Mr. Little and Gen. Fitzgerald.” (This conversation is also testified to by Mr., Little, and not denied by the defendant.) “On one of these occasions I was referred to Mr. Krech. After I left my papers, before he told me he wanted to see Mr.’ Lanterbach, he says, ‘By the by, if you have any more papers to leave, I wish you would . leave them with Mr. Krech. I have not time to investigate' this thing. You tell me there is a big mass of papers. I wish you would give them to Mr. Krech.’ I said, ‘ Who is Mr. Krech ? ’- He says, He is vice-president of the Mercantile Trust Company, who makes my investigations for me.’ Says I, ‘ I would like to , know who he, is and where I , can find him.’ He says, 6 He, is á man'you can, rely, upon just 'as you can rely upon me. Whatever he does he is doing for mé, in investigating, the matter' Sub-. sequent to that I handed papers. concerning information about this road to Mr. Krech ; for three or four months.. Handed him: papers and information maps. . These investigations went along some time.” ' ■
. Mr. Lanterbach testified: “I called on Gen. Fitzgerald at.his office in the Mercantile Trust Company and told him that Mr. Mengis had requested me tó call upon him at his — as I understand it,, at his, Gen. Fitzgerald’s request. The General said that that Was correct, that Mr. Mengis had called upon him in reference to a railroad matter and had told him that' I represented him, and that he would be glad to see me, and that he was glad that I had come. 1 then stated . to him that I had been examining the matter with great care for some weeks, and that I was convinced that a purchase of the securities held by the. city of Baltimore, of the Western Maryland Railroad Company, would be a most advantageous purchase ; and that I was of the impression, that the securities held by the city of Baltimore could be acquired, owing to the attitude that had been publicly assumedhy the Mayor; that I had investigated the condition of affairs, the status of'the road, with some care, and that I believed that the purchase would be a very'profitable one. I went over some of the features of the enterprise. I spoke of the franchises that were controlled by the Western Maryland Railroad Company, that would bring it to tidewater through the city of' Baltimore. I told him that I thought it was possible that the burden of a con*43tract under which the Western Maryland Railroad Company entered the city through the tunnel could probably be avoided ; I thought that if the railroad made connections with other systems it tvould be of great advantage; * * * that in my opinion the road could be capitalized at a very much larger sum than its then capitalization, and that it would be a dividend-paying road upon a very largely increased capitalization ; and I spoke very favorably of the enterprise. I said that I had gone over the matter with Mr; Little, in whom I had very great confidence, who was thoroughly familiar with the present status of the road, and that he had been sanguine in his statements concerning it, without regard to the development of the road which it was susceptible of, and that in proper hands I thought it would be a brilliant investment. Mr. Fitzgerald said he was very much obliged to me for calling, that the matter was of interest to him, and then said, that Mr. Krech would go on. with the matter for him, and that I should give Mr. Krech the fullest information that I could, and continue to assist him in the investigation of the matter, which I agreed to do. I then said to the General, 1 General, if you don’t do ihis 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, c Of course not. If I don’t take the property through Mr. Mengis, I won’t take any interest irr 'it at all.’ I then saw Mr. Krech, at his suggestion. Either at that time or the second interview, I am not sure which, but at an early part of the transaction, the General said to me, ‘ Mr. Mengis’ requirements in this matter are very large — exceedingly large.’ I think he mentioned the sum, but I am not sure; I don’t know that the sum $1,000,000 was mentioned; and I said that that was true, but that the property was a very valuable one, the profits in its acquisition would be very large, and that the steps necessary to ascertain -the situation of the property and its legal status, and the obtaining of the property from the city, the city’s interest and the outlying interests — because some of - the securities were held outside of the city, not a very large amount — would require a great deal of attention; that Mr. Mengis would be put to a very large expense to Mr. Little and to experts and to lawyers, and that that ought to be taken into consideration, and that therefore I thought that Mr. Mengis was entitled to very sub*44stantial bonification. * * * I saw Mi’. Krech on that day and went over the matter then and agreed to furnish him with any papers that he wanted and' stated to him that I would continue my investigation of the matter so that if the General determined to take the property we would be in a position to know ‘ all the circumstances connected with it and to facilitate obtaining it from the city. He asked me to do so. I told him that Mr. Little had reported to me concerning the status of the property. I told him that I had examined many of the papers affecting it, that I was quite familiar with it, and went over the matter with him, talked with him about the valuable franchises which could be had, about the possibility of getting rid of the burden of payment of the rental for the use of the tunnel, and the great opportunities that would exist if the ownership of the road were in individual or corporate hands and no longer in the hands of the city of Baltimore. I went into details fully with him, as fully as I had them, and then talked repeatedly about it and gave him such papers as I could from time to time; arranged a meeting or two with him and Mr. Little, and 'Mr. Little made his statements to him in my presence; and I think sometimes —on one occasion only I went there with Mr. Little, and, being busy, went. away again, and called at Mr. Krech’s office repeatedly, sometimes two or three times a week, sometimes telephoned him, to know, what progress he was making, and when he would ask for any additional information, would obtain it and hand it to him.; and then after the course of four or five weeks he said he would examine the matter and required no further information; and then I would telephone lnm frequently, once a week, or twice a week, how he was getting along) and he would say that they were getting along and making the examination and proceeding with it, until about the month of May. * * * In about May, I -think it was, I saw Mr. Krech, ■ as I had frequently done, and he told me that they had concluded not to go on with the matter and that I should see Gen. Fitzgerald. I went in and saw Gen. Fitzgerald and spoke to him about it and he said that they did not want to go on further-under the arrangement with 'Mr. Mengis, and that they would drop the matter, and he asked me whether I would act .as counsel for other parties, and that I would be liberally paid as counsel. I said that I could not assume that relation because I had represented Mr. Mengis and *45could not represent any one else; and I then stated that I did not think that either he or I ought to have any interest in the matter with other people, except through Mr. Mengis. * * * During one of my conversations with Gen. Fitzgerald I made the suggestion of, associating with him Mr. George J. Gould in the enterprise; I think I did that. I recall using the name of George J. Gould, very distinctly. I don’t recall using the name, except as one having a possible interest in securing an eastern connection for his western roads, and that I knew of the intimacy between Gen. Fitzgerald and Mr. Gould and thought that he would be an admirable associate to have in the matter if he wanted one.”
From the first interview in December, 1900, down to the time of this conversation in. which the defendant declined to proceed further in the matter under the arrangement with the plaintiff, the latter and his expert employees and attorneys were engaged in obtaining information consisting in part of reports of public officials, opinions of lawyers, industrial statistics, many' of which were specially prepared and demonstrated the manner in which the earnings of the road could be greatly increased, as well as its status, earnings and expenses; maps showing the territory through which it passed and the lines with which it was connected, a synopsis of which fills over 100 pages of the record and took several months to accumulate and prepare. He employed expert public accountants and lawyers in Baltimore and New York to aid him. The information thus acquired was imparted to Mr. Krecli as defendant directed, who submitted it to Mr. Gould in conformity with defendant’s instructions.
In the spring of the following year a syndicate was formed, of which Mr. George J. Gould and the defendant were members. They purchased the Western Maryland railroad and under their management it became a part of the Wabash system which was thereby brought to tidewater on the Atlantic. Mr. Kreck was an active participant in the consummation of this result and one of the two syndicate managers. He testifies that he did not become a syndicate subscriber or manager until he had obtained the consent of. the defendant. It appears that he acquired all of his information concerning the road from the plaintiff, his counsel and assistants, because he testifies that he had this information on July 1, 1901, and that after that date (when negotiations with the plaintiff were *46terminated)' down to' the.. time the ' road was purchased,, he did not obtain any additional. information of any kind concerning the road, its earnings or value." ■
Mr. George J. Gould {to whom Krech had submitted the papers and information he received through the plaintiff) had evidently acquired from such information a thorough understanding of conditions and values, for he subscribes $1,000,000 aftera very brief conversation with his attorney, and the other members of the syndi-. cate subscribed $15,000,000 Without personal examination or statements made to them of matters connected with the road. The presumption is that their action was induced by knowledge acquired from the information plaintiff had procured and furnished to the defendant. The' jury were justified in drawing this conclusion from the evidence before them. ' •
The defendant testified that he knew this road was for sale as ■ early as the year 1892; the terms upon which it could have been purchased at that time, however, do not appear. He denied having made the agreement to which the plaintiff testified, and said he had • no part in the formation of the syndidat'e and no knowledge of it, but admits that he became a member and subscribed $200)000, one-half of which he sold to the St. Louis .Trust Company.
In determining whether the verdict of the jury is against‘the weight of the evidence it is proper that we should take into consideration the business methods of the parties so far as they are, dis= ■ closed by the record. Is it reasonable to expect that an. agreement such as the plaintiff has1 testified to would be made by the defend- - ant? He only undertook to pay in the event of his becoming interested in the purchase. After becoming possessed of the plaintiff’s information, he.had only to turn the project down to save himself from liability. He saw fit, however, to become a part of the syndi- . cate which purchased the road for $8,751,370.45, and immediately following issued1 stock, now held by the syndicate members, for $60,000,000, and bonded the property they acquired (of Which this railroad formed the larger and more valuable part) for a like amount,. $50,000,000 of which Was first and $10,000,000 second mortgage bonds, with the Mercantile Trust Company (of which the defendant was president and Krech vice-president) as trustees.- At the time of the trial these bonds were selling in the market at between *47eighty-six and eighty-nine per cent of their par value. There was nothing disclosed to justify this.great capitalization, but it enlightens us as to the manner in which the members of this syndicate do business, and indicates that they were in the transaction for the money. It illustrates the ease with which the burden of paying interest charges and dividends upon shell an over-capitalization may be pláced upon the shippers and the traveling public. Is it reasonable to suppose that the agreement to pay the plaintiff the sum he claims was' made ? The jury have answered in the affirmative. Viewed in the light afforded by these facts, the alleged agreement to pay the plaintiff $1,000,000 'is relieved of the suspicions we entertained at the opening of the case. We cannot say, therefore, that the verdict is against the weight of the evidence; on the contrary, we think it is.amply supported by it.
It is true that, judged by the standard of men who earn their money, the plaintiff did not earn $1,000,000, but it is not'true, as stated by the learned counsel for the appellant, that he gets something for nothing. He employed able and experienced counsel,, both in New York and Baltimore, to aid him, and became obligated to pay an expert accountant $25,000 for services in making an investigation into, the affairs of the road. He was entitled to $1,000,000 or nothing, and the defendant cannot be permitted to avail himself of the fruits of the purchase and escape liability to the plaintiff for his agreed compensation, even if it be conceded that his contention that the agreement was preposterous is well founded.
In view of the large amount of the recovery we have carefully examined the questions presented by the twenty-eight exceptions taken by the appellant’s attorneys to the rulings of the learned trial justice during the progress of the trial, and find no error prejudicial to the defendant. The charge relating to the agreement considered in its_ entirety followed very closely the allegations of the complaint, and we are unable to agree with the suggestion that the court presented to the jury a different issue from the one raised by the pleadings. If the agreement alleged in the complaint was made it was broken beyond question, for. the defendant admits that he was interested as a member of the syndicate that acquired the road, and the court expressly stated that the breach of contract to which it referred was the defendant’s failure to pay the $1,000,000.
*48The issues were fairly and impartially presented to the jury in a charge free from error, and the judgment and order appealed from must be affirmed, with costs.
Hirschberg, P. J., concurred.
Judgment and order reversed and new trial granted, costs to abide the event.