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Karlin v. Warren E. AVIS and AVIS Industrial Corp.

decided: March 10, 1972.


Hays and Oakes, Circuit Judges, and Clarie, District Judge.*fn*

Author: Oakes

OAKES, Circuit Judge:

Plaintiff-appellant Irving Karlin sought below to recover from each defendant a "finder's fee" for his role in the sale of Avis Industrial Corporation (Industrial) stock to Ultra Dynamics Corporation (Ultra).*fn1 Judge Bartels, 332 F. Supp. 957, granted defendants' motion for summary judgment pursuant to Fed.R.Civ.P. 56(b). We affirm.

The stock was held in part by Industrial as treasury stock and in part by Warren E. Avis (Avis),*fn2 owner of a controlling interest in Industrial. Appellant received from Ultra 9,000 shares of its common stock as his finder's fee, but he contends that at most this stock constituted only one-half of his fee, with Avis and Industrial obligated to furnish the remaining one-half.

Despite disagreement between the parties as to whether appellant or Industrial officials first broached the idea of selling stock in Industrial to Ultra, it is agreed that appellant brought together Industrial officials and Ultra officials. The question is whether defendant Industrial or defendant Avis ever agreed to pay a finder's fee to appellant. The lower court concluded that no writing existed sufficient to bind Avis or Industrial under the New York Statute of Frauds on finder's fees. N.Y.Gen.Oblig.Law ยง 5-701(10) (McKinney 1964).

The underlying facts are not in dispute. On October 15, 1968, appellant introduced officials of Industrial and Ultra. Prior to that meeting, Richard H. Weisinger, chairman of the board of Ultra, signed a letter in which he agreed that, if Ultra acquired control of Industrial by purchasing stock from Avis, appellant would receive a five per cent commission, half paid by Ultra as buyer and half by Avis personally, as seller of the stock. Avis was not a party to this arrangement. At the October 15 meeting Sidney McNiece, an officer of Industrial, told appellant that Avis as an individual would under no circumstances pay any part of a finder's fee. A letter of October 16, 1968, from appellant to Thomas Ault, president of Industrial, noted the agreement between Weisinger and appellant; Ault did not respond to that letter. One month later, on November 16, appellant sent a letter to McNiece of Industrial, in which he enclosed a letter of October 28 from Weisinger to Avis. The Weisinger letter to Avis proposed that Ultra and Avis split the finder's fee cost evenly between them, and contained a blank for Avis's signature of agreement. Avis did not sign, and McNiece told Weisinger over the telephone that Avis had rejected the idea.

Negotiations regarding purchase of the stock continued despite the disagreement over the finder's fee. On January 9, 1969, at a meeting between Ultra and Avis representatives, the possibility that Ultra might purchase treasury stock directly from Industrial (as opposed to purchasing from Avis individually) was discussed. Appellant, who was not present at the January 9 meeting, was told within a week about the new purchase possibility and about Avis's continuing refusal to pay any part of the finder's fee. During a meeting between Avis's and Ultra's representatives in Detroit on January 16, 1969, Avis and Ultra reached a tentative sales agreement of which appellant, who was present at the meeting place, was advised. At the same time, after negotiating with Messrs. Reich and Weisinger of Ultra, appellant signed an agreement in which he agreed to accept 9,000 shares of Ultra common stock as ". . . full consideration . . ." for his work as finder "in connection with the agreements between you [Ultra] and Warren E. Avis and you and Avis Industrial Corporation . . . ." [Emphasis supplied.]*fn3

Ultra then signed sales agreements with Avis personally and with Industrial. The agreement between Ultra and Avis mentioned the finder's fee in a way adverse to appellant's claim:

2(c). You [Avis] have not dealt with any broker or finder in connection with the sale of the shares, other than Mr. Irving P. Karlin.

15. We [Ultra] acknowledge that no broker or finder has been involved in our negotiations except Mr. Irving P. Karlin. We agree that we shall pay in full the finder's fee payable to Mr. Karlin upon final consummation of this transaction.

The agreement between Ultra and Industrial did not mention the finder's fee.

On November 10, 1969, plaintiff accepted the 9,000 shares of Ultra, the certificate for which marked the shares as restricted stock.*fn4 On July 19, 1971, some 2 1/2 years after agreeing to accept the stock as full compensation, appellant for the first time claimed, in a letter to Weisinger of Ultra, that the restricted stock "was not in accordance with our agreement." That letter came when Ultra's stock had dropped to about $1 per share from its $12 1/8 value at the time of transfer to appellant in 1969. This suit followed shortly after the July 19 letter.

We agree with Judge Bartels that the New York Statute of Frauds is applicable to this case. Minichiello v. Royal Business Funds Corp., 18 N.Y.2d 521, 277 N.Y.S.2d 268, 223 N.E.2d 793, (1966), cert. denied, 389 U.S. 820, 88 S. Ct. 41, 19 L. Ed. 2d 72 (1967). Appellant argues here for the first time that the pertinent section of the statute*fn5 applies only to the sale of a majority interest in a corporation's stock. Minichiello explicitly rebuts this argument by its conclusion that the phrase "including a majority of the voting stock interest" in the statute explains one aspect of, rather than restricts the meaning of, the statutory language concerning sales ". . . of a business opportunity . . . ." 18 N.Y.2d at 527-528, 277 N.Y.S.2d at 272, 223 N.E.2d at 796.

While Morris Cohon & Co. v. Pennsylvania Coal & Coke Corp., 10 A.D.2d 667, 668, 197 N.Y.S.2d 125 (1st Dep't 1960), contains language to the contrary, it was effectively overruled by Minichiello, supra, and explicitly by Clivner v. Ackerman, 51 Misc.2d 856, 857, 274 N.Y.S.2d 112, 114 (Sup.Ct.1966), aff'd, ...

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