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Sarnoff v. Ciaglia.

decided: December 22, 1947.

SARNOFF ET AL.
v.
CIAGLIA.



Author: O'connell

Before MARIS, O'CONNELL and KALODNER, Circuit Judges.

O'CONNELL, Circuit Judge.

The appeal at bar raises questions concerning Rule 56 of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c.*fn1

Jurisdiction is based upon diversity of citizenship. Plaintiffs, residents of Pennsylvania, have alleged in their complaint, as elaborated in the bill of particulars and affidavits, that defendant, a resident of New Jersey employed as adviser by plaintiffs, "fraudulently and for the purpose of intentionally deceiving, cheating and defrauding the plaintiffs," represented to them that machinery they had ordered from the F. J. Stokes Manufacturing Company "would not manufacture suitable phonograph records"; that defendant knew the representations to be untrue; and that, in reliance upon those representations, plaintiffs cancelled orders not only for that machinery but also for equipment which plaintiffs had agreed to purchase from other suppliers. Plaintiffs further allege that, relying upon other false representations made by defendant, they purchased from the United Rubber Machinery Exchange other machinery and equipment which could not be converted to accomplish the manufacture of phonograph records without extensive expenditure; and that defendant split the profits United gained from the sale of this machinery with one Liebstein, who is associated with United.According to plaintiffs, the machinery which was purchased is worth $2000 less than the sale price; the charge imposed upon plaintiffs for cancelling the order with the Stokes Company was $103; defendant has been paid $100 by plaintiffs for the services he was supposed to have rendered; $1850 to date has been spent in an effort to render usable the machinery purchased from United; and $30,000 in profits from tentative orders for phonograph records placed with plaintiffs has been lost by virtue of the delay suffered in production.

Defendant moved for a bill of particulars which plaintiffs thereafter filed. Defendant thereupon made a motion for dismissal of plaintiffs' action and for summary judgment. Accompanying defendant's motion were affidavits (1) by defendant, alleging a substantially different set of facts from those set forth in the complaint, and (2) by employees of several of the companies involved, who made statements apparently inconsistent with those alleged in the complaint and plaintiffs' bill of particulars. Plaintiffs, in reply, moved to dismiss defendant's motion and submitted affidavits which, in effect, reiterated the allegations of the complaint and bill of particulars.

The district court decided that a cause of action was sufficiently alleged by the complaint and bill of particulars, but granted the motion for summary judgment. The opinion of the court below discloses that the basis of decision was the impression made by the affidavits submitted by defendant of "people who are not parties to the action." In its view of the case, the district court felt that plaintiffs did not meet the affidavits "by averring specific facts supporting their alleged cause of action." In short, the lower court chose to believe the version of events related by defendant.

In Merchants Indemnity Corporation of New York v. Peterson, 3 Cir., 1940, 113 F.2d 4, 6, we stated that "summary judgment may not be given under Rule 56 of the Rules of Civil Procedure if there be an issue presented as to the existence of any material fact." This principle was reiterated in Toebelman v. Missouri-Kansas Pipe Line Co., 3 Cir., 1942, 130 F.2d 1016, in which we said, 130 F.2d at page 1018: "Upon a motion for a summary judgment it is no part of the court's function to decide issues of fact but solely to determine whether there is an issue of fact to be tried. Ramsouer v. Midland Valley R. Co., D.C. Ark. 1942, 44 F.Supp. 523. All doubts as to the existence of a genuine issue as to a material fact must be resolved against the party moving for a summary judgment. Weisser v. Mursam Shoe Corporation, 2 Cir., 1942, 127 F.2d 344 [145 A.L.R. 467]." See also Doehler Metal Furniture Co. v. United States, 2 Cir., 1945, 149 F.2d 130, 135.

As we understand defendant's position, it is conceded that allegations of the complaint are in dispute; but it is contended that none of these are necessary or material. Defendant asserts that, even if it be assumed that defendant was guilty of fraud, plaintiffs suffered no injury. To ratify this assertion, however, defendant is compelled to ask us to weight the credibility of conflicting averments and decide such questions in his favor without the formal submission of proof and without gaining the benefit of cross-examination. For example, plaintiffs have alleged that "a verbal agreement to purchase" incidental equipment was made with Mears-Kane-Ofeldt, Inc.; the affidavit of one E. D. Paul, identified only as being "in the employ" of that company, states that the files of Mears-Kane-Ofeldt contain no order from plaintiffs. Should Paul's affidavit be deemed contradictory of plaintiffs' allegation, at this posture of the case it nevertheless cannot be categorically determined which of the two statements is true. If in fact plaintiffs did place such an order, and if defendant was guilty of fraud causing cancellation of that order and consequent delay in production, plaintiffs are entitled to seek legal relief for the harm suffered, if any. The same analysis, in general, may be applied to other issues of fact raised by the proceedings in the instant case to date, not the least notable of which is plaintiffs' allegation, which defendant disputes, that defendant induced them to accept machinery worth $2000 less than the sale price and then divided the profits of the sale with Liebstein. On the basis of the record before us, and in view of the weight to be accorded the complaint on a motion for summary judgment, we are not prepared to say that defendant's version must be believed, nor that the allegations of plaintiffs, which the court below deemed "roughly drawn," are so vague and general as to strip them of all credibility. The resolving of such issues must be left to the finders of fact, and not decided upon a motion for summary judgment.

For the reasons stated, the order of the district court will be reversed and the complaint reinstated for further ...


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