Sullivan, Foley and Leonard. The opinion of the court was delivered by Foley, J.A.D.
American Machine and Foundry Company (AMF) appeals from a $114,363.84 judgment entered in favor of plaintiff, M. Dean Kaufman, Inc. This judgment was based upon a jury verdict finding defendant liable for $94,348.94 in brokerage arising from the breach of a contract which obligated defendant to pay plaintiff a commission as a result of plaintiff's efforts in defendant's acquisition of Tuboscope Company, a named party defendant dismissed from the suit before trial with the consent of both parties. Plaintiff's suit, sounding in both contract and tort was submitted to the jury on the contract issue alone. After receiving the jury verdict in favor of plaintiff, the court, having calculated interest in the amount of $20,014.90, entered judgment for the sum stated above.
We reverse, ruling that this judgment was improvidently entered, and that the trial court erroneously denied defendant's motion for judgment made in accordance with R.R. 4:51-2(a) at the close of the evidence presented at trial.
The factual circumstance which prompts this ruling revolves around an agreement by which defendant contracted to pay a commission to plaintiff which might best be described as a "finder's fee." The agreement arose in the following manner. Plaintiff, a corporation operated exclusively by M. Dean Kaufman, publicly offered services both as an industrial real estate agent and a business broker who would initiate and facilitate the merger and acquisition of businesses seeking such unions. It was in its secondary or "matchmaker" capacity that plaintiff, through Kaufman, first contacted AMF suggesting a potential interest which defendant might have in an undisclosed manufacturing company. This initial contact was made by an unsolicited letter dated April 3, 1959.
Defendant acknowledged its interest by return correspondence of April 15 requesting information relating to the name, profits, balance sheet and stockholder structure of the unnamed company, as well as the fee arrangement desired by Kaufman. Plaintiff supplied this information by letters of April 23 and June 9 stating that the fee was to be based upon percentages of acquisition cost on a scale sliding between 10% and one-half of 1% relating to candidates first presented by plaintiff which were ultimately acquired by defendant.
The statistical data and name of the initial prospect (American Seating Company) when forwarded to defendant were subjected to defendant's customary analysis preliminary to an "early" expression of interest in acquiring the merger candidate. This analysis served a twofold purpose by which the management of AMF maintained necessary internal controls which (1) fostered a cohesive program of corporate expansion; and (2) protected against multiple brokerage liability for finders' fees between matchmakers rivaling for commissions. Controlling the avenues of expansion involved statistical evaluations of the candidates' business and performance, while protection against the finders was effected through the use of a "source" file which AMF consulted
each time a merger candidate's name was proposed. This alphabetical candidate index, listing all brokers who had made prior proposals, permitted AMF to quickly determine whether the candidate had been offered before and, if it had previously been submitted, the "source" through whom the prior proposal was made. In this way AMF could establish the position of a prior broker before proceeding with a proposal initiated through a new broker. Therefore, AMF would display an interest in acquiring a candidate through the proposing matchmaker only after the preliminary analysis affirmatively demonstrated that: (1) the candidate was objectively interesting to AMF, and (2) the finders' fee arrangement was clear.
It was against this background of AMF's business custom that Kaufman, informed by his own personal research (home study and analysis of financial reports and business periodicals), proposed the names of five companies which he felt were merger candidates for union in the AMF corporate family. In order of their presentation the candidates were (1) American Seating Co., (2) Riley Stoker Co., (3) Baker Oil Co., (4) Tuboscope Company, (5) Hammond Organ Co.
After determining that a prior broker of American Seating Co. had made its proposal without the necessary foundation of authority to offer, AMF expressed to Kaufman its interest in acquiring this company based upon its "screening survey." Through Kaufman's dual agency a meeting between representatives of AMF and American Seating was held. As a result of the meeting the acquisition department reported to the executive management of AMF that because of potential trade regulation problems the American Seating proposal should not be pursued. The ultimate rejection is witnessed by a letter of December 11, 1959 from plaintiff to defendant in which Kaufman confirmed in substance prior conversations in which the offer to submit other proposals was extended to Kaufman by the director of planning at AMF.
Kaufman orally presented Riley Stoker Co. at a personal meeting with defendant's assistant director of planning. Since defendant's source file indicated prior presentation, priority as broker of record was given to plaintiff only after the prior broker's absence of interest was first established. Preliminary meetings were not held between the candidate and defendant in this instance because the screening survey indicated that Riley did not fall within the projected areas of AMF's growth interest.
Baker Oil Co., submitted as a third candidate, was also deemed ineligible as not being within a preferred area of planned expansion. Although it, too, was previously submitted by another broker Kaufman was given ...