309 N.Y. 581 | NY | 1956
This is an action upon a judgment of the Supreme Court of New Jersey. The following is a summary of the background of the litigation.
In the spring of 1948 Ketcham and Banff began negotiating for the acquisition of the stock of the Tacony-Palmyra Bridge Company. With the aid of the Sarjem Corporation, an Illinois corporation which dealt in the purchase and sale of bridges and other public utilities, options were acquired for the purchase of 80% of the stock of this bridge company at approximately twice the price at which it was then being sold on the Philadelphia Exchange. The total offer by the Sarjem Corporation for all the stock of the Tacony-Palmyra Bridge Company was $6,487,500. On October 6, 1948, it was agreed that the Bridge
During this same time in the fall of 1948 certain members of the syndicate made contact with Freeholder Snover, an elected official of Burlington County, and told him that they had a proposition which would benefit that county. He was informed that if the freeholders should establish a bridge commission, the syndicate would be able to sell to that commission the two bridges here involved for $12,000,000, to be financed by the issuance of $12,400,000 in bridge revenue bonds. No other freeholders were informed of this transaction until the night of October 20, 1948, when a meeting of the freeholders was called at the home of Freeholder Snover. Snover explained the syndicate’s proposition and submitted to his associates copies of various documents obtained by the syndicate. The freeholders were told that the entire transaction had to be completed within forty-eight hours “as is ” or the proposition would be withdrawn. Before that evening meeting was over, the freeholders had agreed to adopt the syndicate’s plan and offer in all particulars, even to the selection of bridge commissioners. The following day the newly chosen bridge commissioners-to-be met with members of the syndicate and accepted the entire proposition. There was no independent inquiry or investigation made by the commissioners, no outside advice was sought by them, and no change in the syndicate’s proposition was suggested. On the next day, October 22,1948, the scheduled public meeting of the Burlington County Freeholders was held, and as the first order of business it unanimously adopted, without discussion, a resolution establishing the Burlington County Bridge Commission and appointing as its members the men selected two days previously. Within a short time the plan for the acquisition of the two bridges was effected. In the words
On December 3, 1948, the Governor and Attorney-General of the State of New Jersey commenced an action in that State which resulted in the judgment now sued upon in New York and culminated in the present appeal. The original complaint filed in New Jersey alleged the facts substantially set forth above and sought relief in the form of (1) a declaration voiding the resolutions creating the bridge commission, (2) a declaration that all the acts and resolutions of the bridge commission were null and void, (3) a declaration that the deeds transferring the two bridges were null and void, and (4) an order directing that the two bridges be returned to the two companies, respectively, from which the syndicate had purchased them, and “ such other and further relief as this Court may deem just and equitable in the premises.”
On February 6, 1950, the plaintiffs filed an amended complaint which alleged, inter alla, that as a result of the trans
The Superior Court of New Jersey determined that the bridge commission should (1) reconvey title to the two bridges to the Burlington-Bristol Bridge Company; (2) retransfer the stock of that company to the respective sellers thereof; (3) repay the bondholders $400,000 plus the net revenues from the bridges from the date of their acquisition; and (4) return to the Bridge Company, to be held subject to the order of the court, the $550,000 which was in the Bridge Company’s treasury at the time the bridge commission acquired it. The Bridge Company and the members of the bridge-selling syndicate who received the purchase money for the stock of the Burlington-Bristol Bridge Company from the bridge commission were directed to repay the bondholders all moneys received from them, and “ each shall disgorge and be required to repay such part of the purchase price as each received.” The bondholders were given (1) the right to be subrogated to the rights of mortgagees and other lienors of the Bridge Company as of October 22, 1948, to the extent that such encumbrancers were paid off with the bondholders’ moneys, and (2) a lien on the revenues of the bridges until the bonds were paid off, subject to the State’s right of condemnation. A judgment was entered on December 29, 1950, incorporating the terms of the decision, and requiring each individually named defendant to pay a specific sum of money. That judgment provided in part as follows:
“ 3. The members of the bridge sellers’ syndicate (hereinafter referred to as the ‘ judgment debtors ’) shall repay the sum of $3,050,347.00 which they received as the purchase price for their stock in the Burlington-Bristol Bridge Company, and judgments in favor of the Commission are directed as follows:
Against Richard C. Nongard $343,164.03
Against Tuthill Ketcham 343,164.03
Against Rowland H. Murray $ 76,258.68 * * * M
An appeal was taken from that judgment by certain of the defendants to the Supreme Court of New Jersey. A judgment was entered upon the decision of that latter court on March 14, 1952. It differed from the judgment of the Superior Court in this important respect: instead of directing the reconveyance of the two bridges back to the Bridge Company, the return of the stock of that company to its sellers and the repayment of the bondholders by the Bridge Company, the judgment entered upon the decision of the Supreme Court confirmed title to the two bridges in the bridge commission. It then ordered the sellers of the Bridge Company to pay to the bridge commission all profits received from the transaction, and it decreed that all participants in the bond syndicate with the exception of the partnership firm of Ketcham & Nongard were holders in due course of the bridge revenue bonds, and as such “ entitled to enforce the Bonds held by them to the extent of their interest therein and according to the terms thereof.”
Respondents thereafter commenced this action in New York upon the New Jersey Supreme Court judgment. The New York Supreme Court denied respondents’ motion for summary judgment but the Appellate Division reversed and granted that motion. The judgment entered upon the order of the Appellate
“ There appears to be no valid reason why a judgment should not be entered here as demanded in the complaint.” (286 App. Div. 220, 231.) That partnership was an active party in the litigation in New Jersey and it may be that it could have been adjudged jointly liable with the members of the selling syndicate for $3,050,347. Neither court of that State, however, imposed such liability. The judgments of both courts in that State carefully specified not only who but for how much each named judgment debtor was liable. In addition, the judgment entered upon the decision of the Supreme Court of New Jersey specified that certain of the individual defendants were jointly and severally liable for the full amount of gross profits, while the remaining individual defendants were severally liable only for specific sums. This language which emphasizes the absence of any intention to adjudge the partnership firm of Ketcham & Nongard liable for the total amount of profit, is as follows: “ The obligation to repay this sum [i.e., $3,050,347] is both joint and several as to Robert K. Bell, Theodore R. Hanff, Tuthill Ketcham, Richard C. Nongard and Clifford R. Powell, but shall be several only as against the remaining sellers in the amounts they each receive specifically: * * *.” (Emphasis supplied.) (See 8 N. J. 501.) It is significant that in adjudging the liabilities of the three partners of Ketcham & Nongard mentioned in this part of the judgment two — Nongard and Ketcham as individuals — were adjudged jointly and severally liable for the entire $3,050,347, whereas the third partner — Murray — was adjudged liable severally only and for but $76,258.68. The partnership of Ketcham & Nongard, however, was not included in the enumeration of parties, defendant
The New Jersey judgment entered upon the Supreme Court decision decreed that all but one of the participants in the bond syndicate — including the Chemical Bank & Trust Company as well as B. J. Van Ingen & Co., Inc. — were holders in due course of the bridge revenue bonds and were entitled to enforce them as such. The sole exclusion was the partnership firm of Ketcham & Nongard, as to which the New Jersey judgment decreed that the bonds held by it were null and void “ except to the extent that the Chemical Bank has an interest therein as pledgee.” If and in the event that the Chemical Bank & Trust Company exercised its rights as the pledgee of the bridge revenue bonds owned by the partnership firm of Ketcham & Nongard, “ so that the Bridge Commission either pays or remains obligated to pay principal or interest thereon the Bridge Commission shall be subrogated to all the rights of the Chemical Bank against Ketcham and Nongard arising out of the note dated October 27, 1948 of the bond syndicate which, the Bonds were pledged to secure.” The firm of Ketcham & Nongard owned $1,240,000 of the bridge revenue bonds, and was obligated to the extent of $1,131,715.66 on the note of October 27, 1948. By its check dated December 1, 1948, the partnership firm of Ketcham & Nongard had paid the sum of $350,000 in reduction of this liability. Between April 3, 1952, and February 15, 1954, the Burlington County Bridge Commission paid off the entire balance of $781,715.66 remaining due as Ketcham & Nongard’s liability on the note of October 27, 1948, together with interest in the sum of $104,676.87, a tota7 of $886,392.53.
In the second cause of action in the plaintiff’s amended complaint in the Supreme Court of New York, the plaintiffs demanded monetary damages against the partnership of Ketcham & Nongard based upon those payments made to the
It was suggested that certain liability imposed upon the defendant partnership was beyond the jurisdiction of the New Jersey court, and hence that the judgment of that court was not entitled to be enforced in New York. In Reynolds v. Stockton (140 U. S. 254), however, the Supreme Court stated that “ The requirements of that section [i.e., U. S. Const., art. IV, § 1] are fulfilled when a judgment rendered in a court of one State, which has jurisdiction of the subject matter and of the person, and which is substantially responsive to the issues presented by the pleadings, or is rendered under such circumstances that it is apparent that the defeated party was in fact heard on the matter determined, is recognized and enforced in the courts of another State.” (140 U. S. 264; emphasis supplied.) In the present case no one argues that either the defendants or the subject matter — i.e., the cause of action for equitable relief based upon fraudulent conduct in the acquisition and sale of the bridges — were not before the New Jersey courts. The relief finally awarded was, in the judgment of the New Jersey court, the only equitable relief possible in this case. As the court said in Nongard v. Burlington Co. Bridge Comm.
It is not necessary to go into the reasoning of the New Jersey court, the logic or consistency of its reasoning, or the legal principles upon which its decision was based. Thus, even if there were legal error committed when the partnership of Ketcham & Nongard was required to pay to the bridge commission any moneys which that commission might pay to the bank with which the bonds owned by the partnership had been pledged, that is not a matter subject to review in this State. It was open to the New Jersey Court to decide as it did under the equitable cause of action.
The original complaint in the New Jersey action recited the facts substantially as found by the courts of that State. The specific relief sought by that complaint was rescission of the entire transaction and the dissolution of the bridge commission. Of those transactions the New Jersey Supreme Court wrote that “ One cannot read the record in the instant case fairly without being forced to the conclusion that the members of the selling syndicate through the medium of their political influence or professional prestige knowingly and intentionally for their private profit and without regard to their obligations as citizens induced the chosen freeholders and the bridge commissioners to violate their public trust by blindly agreeing to the syndicate’s proposal.” (8 N. J. 479.) Accordingly, the New Jersey court concluded that the transactions initiated by the defendants-appellants herein might not be permitted to stand. Appellants do not question that conclusion. Their primary argument is that in decreeing the specific relief to be afforded under the circumstances of this case the New Jersey court exceeded its
It is important to note that the premise underlying this argument is the constitutional requirement of due process of law. In Standard Oil Co. v. Missouri (224 U. S. 270) the United States Supreme Court considered a similar argument and concluded that it had no merit, writing that ‘ ‘ In civil suits the pleadings should no doubt contain a prayer for judgment so as to show that the judicial power of the court is invoked. The rules of practice also may well require that the plaintiff should indicate what remedy he seeks. But the Prayer does not constitute a part of the notice guaranteed by the Constitution. The facts stated fix the limit of the relief that can be granted. While the judgment must not go beyond that to which the plaintiff was entitled on proof of the allegations made, yet the court may grant other and different relief than that for which he prayed.” (224 U. S. 285.)
In Milliken v. Meyer (311 U. S. 457, supra), the Supreme Court of the United States reversed a decision of the Supreme Court of Colorado which had in turn reversed a judgment of the court of Wyoming upon the ground that the Wyoming judgment was void because of an inconsistency between the findings and the decree. That was held to be a violation of the .full faith and credit clause of the Federal Constitution, which “ precludes any inquiry into the merits of the cause of action, the logic or consistency of the decision, or the validity of the legal principles on which the judgment is based.” (311 U. S. 462.)
The judgment here sued upon in New York is a judgment entered upon the decision of the Supreme Court of New Jersey. Appellants do not contest the general equitable jurisdiction of that court, nor do they contest that it had in personam jurisdiction over themselves. We shall not repeat here the findings of misconduct made by the New Jersey court, but those findings were unquestionably adequate to warrant a rescission, and this the appellants do not contest. The Supreme Court of New Jersey could, if the factual allegations Avere established, decree such relief as the case warranted. The factual allegations constitute the notice required by the Federal Constitution, and the appellants have not shown that any other type of notice is
Appellants have also argued that the plaintiffs were not entitled to “ money damages ” because of an alleged “ waiver ” of any claim to such damages. It appears, however, that the only ‘1 waiver ’ ’ of damages took place when the plaintiffs ’ counsel stated that they would not pursue the cause of action for damages set forth in the amended complaint in the New Jersey action. He was not referring to such incidental relief which the court might award as might require the defendants to repay to the bridge commission moneys to which the court might find that the defendants were not entitled. But that is exactly what the court did in fact do: it required the defendants to give up the profits that they had realized by their illegal conduct. The court was not required by the due process clause of the Federal Constitution to allow to the Ketcham and Nongard syndicate moneys or expenses which they had invested in the enterprise from which the bridge commission derived no benefit. Referring to this matter, the Supreme Court of New Jersey decided ‘ ‘ This waiver was relied upon by the defendants in determining what witnesses to call in their defense and accordingly is binding on us as well as on the court below and prevents any assessment of damages based on the amended complaint against the selling syndicate. This waiver does not preclude us, however, from requiring the members of the selling syndicate over whom the court acquired jurisdiction to disgorge the profits which they received from this illegal transaction. Where rescission is prayed for and is warranted by the facts, but cannot be decreed because of the intervening equities of innocent third parties such as the bondholders here, under general principles of equity the court may require the wrongdoers to account for their profits so that as nearly as may be the parties will be protected and equity done * * (8 N. J. 499.) It is clear, therefore, that not only were the factual issues before the New Jersey courts upon which the award of money “ damages ” incidental to the general equitable relief afforded
The judgment appealed from should be modified by reversing so much thereof as adjudged the partnership of Ketcham & Nongard as such liable for $3,050,347, less certain deductions and payments and plus interest, totaling $3,283,024.46, and, as modified, affirmed, with costs.
Desmond, Froessel, Van Voorhis and Burke, JJ., concur with Conway, Ch. J.; Dye, J., taking no part.
Fuld, J.,'dissents, in part, and votes to affirm in the following memorandum: Since it is my opinion, as it was that of the unanimous Appellate Division (286 App. Div. 220, 231), that the New Jersey judgment for some $3,000,000 runs against the partnership of Ketcham & Nongard, I am for affirmance of the judgment entered below.
Judgment of Appellate Division modified in accordance with the opinion herein and, as so modified, affirmed, with costs.