Claughton, Appellant, v. Bear Stearns & Company.
Supreme Court of Pennsylvania
October 21, 1959
reargument refused December 30, 1959.
MR. JUSTICE BENJAMIN R. JONES
2. A negro purchases a home in a white neighborhood. Rowdy white elements who live ten blocks distant converge on this house and howl and yell and greatly disturb the neighborhood. Negro visitors engage in fighting with the whites who endeavor to prevent them from entering the house. Is the negro who has purchased the home for lawful residential purposes, and thereby created a situation in which the conduct of third persons is highly offensive and disturbing to the neighborhood, guilty of maintaining a nuisance by continuing to live in his new home? Would any court order him to move out in order to preserve neighborhood peace, as the Chancellor ordered Brodsky to move out in this case? In such circumstances should the court not limit itself to controlling the objectionable misconduct?
To visit upon this lawful business the penalty of extinction because of community disapproval seems to me to flout the mandate of the legislature and the decision of the Liquor Control Board which acted in accordance with the opinion of this Court in the Obradovich case, supra.
I dissent.
Mr. Justice COHEN joins in this dissenting opinion.
Francis W. Sullivan, with him Sydney C. Orlofsky, and Strong, Sullivan, Saylor & Ferguson, for appellant.
Owen B. Rhoads, with him Norma L. Shapiro, and Barnes, Dechert, Price, Myers & Rhoads, for appellee.
OPINION BY MR. JUSTICE BENJAMIN R. JONES, October 21, 1959:
This appeal involves a question of the fidelity and loyalty to its principal of a stock brokerage concern which acted as agent for a decedent‘s estate in the sale of a large block of the common stock of a railroad company.
On June 14, 1955, Mrs. Claughton, her son, her brother, and several attorneys, including her principal attorney, Roy Sadler, Esq., met in Miami, Florida, with one Salim Lewis, a partner in a New York stock brokerage firm known as Bear Stearns and Company (herein called Bear Stearns). The purpose of that meeting was to discuss the possible sale of 525,000 shares of the MKT common stock.2 After some discussion Lewis was then granted a “modified exclusive agency” to effect a sale of this stock, i.e., Mrs. Claughton reserved the right to deal with persons who might contact her directly or with persons previously contacted on her behalf by Attorney Sadler without the
On June 23, 1955 Lewis telephoned Attorney Sadler to inform the latter that Pennroad Corporation (herein called Pennroad) and State Street Investment Corporation (herein called State Street) had evinced an interest in purchasing the stock, but they required of Lewis a firm price.4 Lewis recommended to Attorney Sadler a price of $13.75 per share, less taxes and commissions of $18.75 per hundred shares, and that said price be fixed for 24 hours. It is to be noted that Bear Stearns itself had agreed to purchase, with Pennroad and State Street, 50,000 shares of the block of stock; when this information was imparted to Mrs. Claughton and Attorney Sadler is a controverted matter. On that same date, Mrs. Claughton called Lewis and authorized the sale of the stock at the price recom-
On June 27 Lewis called Attorney Sadler and informed him that the Claughton offer had been accepted. On June 28 written telegrams were exchanged between the parties by which Bear Stearns, Pennroad and State Street offered to purchase and Mrs. Claughton accepted their offer upon the basis of $13.75 per share less taxes and a commission of $18.75 per hundred shares. Later that same date in Florida a written contract was drawn by the Claughton attorney and an attorney selected by the former to act for Bear Stearns; this contract was executed by Mrs. Claughton, as the seller, and by an Attorney Keith, as the agent for Bear Stearns. On June 29, Mrs. Claughton, in her capacity of executrix, petitioned the Dade County Probate Court in Florida for its approval of the sale of the estate stock, setting forth, inter alia, in such petition the price offered, that said price closely approximated the average market price for said stock on the New York Stock Exchange over the past month, that the market for the stock was “thin“, that the stock could not be sold except at private sale without incurring great loss and finally that she, Mrs. Claughton, believed “said offer represents the best price obtainable for said stock and that it is to the best interests of the estate that said offer be accepted“. The Dade County Court, upon these representations, approved the sale.
Since the New York Stock Exchange rules require that its members obtain the Exchange‘s permission before effecting an “off the Exchange floor” transaction in a listed stock, Lewis secured on June 28th the approval of the transaction from the Chairman of the Board of the Exchange, revealing to the Exchange that Bear Stearns was charging a commission to both the buyer and seller as required by the Exchange rules, and that the sale price corresponded to the then market price. Settlement of the sale and purchase of the entire block of 525,000 shares was made by the Guaranty Trust Company of New York on July 5, 1955. Mrs. Claughton on behalf of the estate as the result
On July 22, 1955 Mrs. Claughton‘s counsel wrote to Bear Stearns and complained that it had violated its duty of loyalty and its fiduciary relationship to the Claughton Estate. The onus of the Claughton complaint against Bear Stearns is that the latter acted in a dual capacity of agent for both buyer and seller, charged double commissions, participated in the sale itself for its own interest and failed to secure an adequate price for the stock, all without the knowledge and consent of its principal-seller.
On November 14, 1955 Mrs. Claughton, in her representative capacity, instituted an assumpsit action against Bear Stearns wherein she claimed damages because of alleged fraudulent and deceitful acts on the part of Bear Stearns in the amount of $4,146,712.27 measured in the following manner: (a) the difference between the best price available, 21 5/8 per share, less taxes and commission, and the actual sale price of 13 3/4 per share less taxes and commission, (b) the commission paid to Bear Stearns by the estate, $95,531.25 and (c) the commission received by Bear Stearns on the estate‘s stock from Pennroad and State Street $74,839.22. Upon issue joined the matter was heard before Judge (now Justice) BOK without a jury and after hearing judgment was entered for Bear Stearns. From the entry of that judgment we have this appeal.
In passing upon the propriety of the entry of this judgment certain principles must guide our review:
The instant trial judge filed two opinions, one entitled “Memorandum of Findings” and the other “Opinion“. While appellant argues that the trial judge “failed to state the facts found by him separately and distinctly and failed to clearly state the conclusions of law upon which he relied . . . ., in accordance with the requirements of the Act of April 22, 1874” such argument is without merit both upon this record and under the law. The
An examination of the trial judge‘s “Memorandum of Findings” indicates a finding of the following facts: (1) that Lewis acted for the Claughton interests as seller and for Pennroad and State Street as buyers; (2) that Bear Stearns took 50,000 shares for itself; (3) that the price of $13.75 per share, minus commission of $.1875 to the seller, and $13.75 plus the same commission to the buyers represented the market price at the time and reflected the size of the block of stock being sold; (4) that Lewis made full disclosure to Attorney Sadler, Mrs. Claughton‘s attorney, both of the fact that Bear Stearns was itself purchasing 50,000 shares and that it would receive double commissions; (5) that the price and the double commissions were specifically approved by the New York Stock Exchange. From these facts the trial judge concluded that the price “was an excellent price“, that Lewis’ version concerning the impartation of knowledge to Mrs. Claughton and her attorney was the “more accurate“; that Mrs. Claughton had failed to sustain her burden of
On this appeal the appellant has three complaints: (1) That Bear Stearns failed to sustain its burden of proof that the appellant had knowledge, active or constructive, of appellee‘s dual representation, the double commissions collected, etc., and had consented thereto; (2) by reason of the trial court‘s failure to rule on objections or to make specific findings of fact, the record in the court below is such as to render impossible a determination of the facts upon which the court based its general findings; (3) that the court erred in denying leave to the appellant to take depositions of certain witnesses during the trial.
If appellant is to recover it must be upon the theory that Bear Stearns, while acting as her agent, was under a duty to disclose to her the fact that it represented both the proposed buyers as well as herself, that it intended to and did receive commissions from the sale of the stock from both the buyers and herself and that Bear Stearns for its own account purchased a large number of the securities. Generally, an agent cannot represent two principals in the same transaction and if dual representation takes place the validity
In Warner Company v. MacMullen, 381 Pa. 22, 27, supra, we recognized that: “The rule that an agent cannot act for both parties to a transaction has no application where such double representation was known to the parties and not objected to by them at or previous to the time when they executed their agreement: [citing cases].” See also: Restatement, Agency 2d, § 390, § 392.8
Our independent examination of the record indicates that the findings of fact and conclusions of the trial judge are based upon evidence both adequate and sufficient. In making such an examination we were mindful that the contacts made by Lewis on behalf of Bear Stearns were made either directly with Mrs. Claughton, the principal, or with Attorney Sadler, her counsel. Under the circumstances herein portrayed we are satisfied that the authority of Attorney Sadler to act in this transaction was such that notification to him was notice to Mrs. Claughton (Restatement, Agency 2d, § 268) and that any knowledge on the part of Attorney Sadler concerning this transaction was such that it was his duty to transmit such knowledge to Mrs. Claughton (Restatement, Agency 2d, § 272). It is evident that knowledge was brought both to the principal and her agent to the effect that Lewis was
Appellant next argues that the trial judge by failing to make specific findings of fact and conclusions of law and by failing to rule upon objections and motions left the record in a state of confusion. In the course of this opinion we have had occasion to note that, under Rule 270 of the Courts of Common Pleas of Philadelphia County, “(b) The decision of the trial judge may consist only of his decision of the case, but he may include also such other matters as he deems desirable“. Such rule relieves a trial judge in Philadelphia County from making specific findings of fact and conclusions of law. However, an examination of both opinions in the court below indicates that certain findings of fact and conclusions of law were made, albeit in general terms; a failure to enumerate specifically such findings of fact and conclusions of law does not detract from the fact of their presence in the court‘s opinions as a reading thereof will readily indicate. The opinions of the court below reveal that all the relevant and competent evidence was thoroughly taken into consideration by the court. The technical argument now advanced cannot prevail in the face of a record which indicates that appellant‘s case was fairly and thoroughly tried.
Appellant‘s final argument is that during the course of the trial the court below refused to grant her the right to take the depositions of certain officials and employees of Pennroad and State Street. The court below in its opinion has fully and adequately
“This is moot because the Pennroad and State Street personnel appeared and testified for defendant after plaintiff had been told that they were in Court and was given the chance to call them as her witnesses. This incident was a fishing expedition and no legal harm was done [to] plaintiff by not allowing it.”
All pertinent and competent evidence was fully and completely considered and the cause fairly tried in the court below; the result reached was based on adequate and sufficient evidence.
Judgment affirmed.
Mr. Justice BOK and Mr. Justice MCBRIDE took no part in the consideration or decision of this case.
DISSENTING OPINION BY MR. JUSTICE BELL:
I agree with the authorities and the principles of law stated in the majority opinion, but not with their application to some of the facts in this case.
For approximately 2,000 years the civilized world has believed the ancient moral precept that man cannot with fidelity serve two masters when their interests are conflicting. This moral principle has become embedded in the law. In this case defendant attempted to serve two masters-the seller and the purchasers of 475,000 shares--and also itself (in the capacity of both agent and principal), and to take for itself an agent‘s commission from the seller on 525,000 shares of stock (including a commission on 50,000 shares which it purchased as principal), and still another commission from the purchasers of 475,000 shares. The majority agree that this can be lawfully done only if defendant proved such an arrangement by the clearest possible evidence, and the entire transaction was clearly explained to and agreed to by plaintiff. Obviously, the best evidence was not a telephone conversation between defendant‘s representative and plaintiff‘s lawyer which preceded the written contract and produced oath against oath the best evidence was the telephoned telegram sent by Bear Stearns & Company, and especially the subsequent written contract entered into between plaintiff and Bear Stearns & Company.
The seller was an inexperienced woman who was in a critical financial condition. On June 28th she and Bear Stearns signed a written agreement of sale for 525,000 shares “for the price of $13.75 per share less $18.75 per 100 shares, less Federal and State transfer taxes,....” Defendant admits that plaintiff accepted
The telephoned telegram (June 28, 1955) was sent to plaintiff‘s attorney and reads: “This confirms offer to purchase 525,000 shares of Missouri Kansas Texas common stock by a group of which Bear Stearns & Co. is a member at a price which is the equivalent of 13 3/4 less $18.75 per hundred shares less tax. (Signed) Bear Stearns & Co.” If this telegram can be said to clearly disclose that Bear Stearns was acting as principal and also as plaintiff‘s agent in the sale of this stock, it is clear as crystal that nothing is said as to its also receiving a commission from the purchasers of 475,000 shares.
The written agreement between plaintiff and defendant dated June 28, 1955 is very short and pertinently provides:
“Whereas, the purchaser representing a group of investors of which it is a member is desirous of purchasing said 525,000 shares of the common stock aforedescribed, subject to the terms and conditions hereinafter set forth:
. . .
“(1) The Seller hereby agrees to sell and deliver to the Purchaser stock certificates evidencing said sale, 525,000 shares of the common stock of Missouri-Kansas-Texas Railroad Company for the price of $13.75 per share less $18.75 per hundred shares, less Federal and State transfer taxes, said purchase price to be paid in cash at the time of delivery of said stock certificates.”
To summarize: In my judgment, there is nothing in the telephoned telegram, or in the written contract which clearly and sufficiently disclosed to plaintiff that Bear Stearns & Company was not only charging plaintiff as her agent a commission on 525,000 shares (including a brokerage commission on 50,000 shares, which, we repeat, it purchased from her as principal) but was also charging the purchasers a brokerage commission on 475,000 shares. In other words defendant did not reveal its dual conflicting position.
Mr. Felix, plaintiff‘s counsel, has aptly expressed my feelings on this transaction in his letter of July 22nd, the relevant portions of which are as follows:
“Dear Mr. Lewis: [Bear Stearns & Company]
“Two facts, which were not disclosed prior to Monday night, June 27, when you telephoned that you had sold the above-mentioned stock, have caused Mrs. Claughton and ourselves a great deal of concern. Up until after the time the offer, made through you as her agent, had been accepted, she believed, as she had every right to believe, that you were representing her at the bargaining table solely and exclusively as her agent and with the ‘singular loyalty’ which that fiduciary relationship implies. And it was because of that relationship and the confidence she placed in your integrity and judgment that, in a telephone conversation with you on Friday, June 24, she, at your insistence, reluctantly agreed to a firm offer of the estate‘s
“You will recall, however, that in that conversation she stated that she thought this block of stock, because of its control feature, was worth considerably more and only acceded to the $13.75 price you urged upon the condition that you would exert every effort to get a higher price . . . .
“When you recall these circumstances and keep in mind the implicit trust she placed in you, you can readily understand what a shock it was when, at the time you telephoned that the sale had been made, you disclosed, for the first time, that you were buying 50,000 shares of the stock yourself. Also, what a second shock it was when she learned for the first time on July 6 and after the stock had been transferred, that you were being paid a commission by the other purchasers. She reasons that a commission implies a service, and wonders how, in good conscience, you could sit on ‘both sides of the bargaining table’ and properly serve two masters. In other words, she seriously questions whether the price of $13.75 was negotiated and fixed in the arms-length manner which your agency, as well as your statements and advice to her, led her to believe that it was.”
Under the above mentioned facts, I believe that Bear Stearns and Company is not entitled to any commissions from plaintiff.
Mr. Chief Justice JONES joins in this dissent.