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Kaiser-Frazer Corp. v. Eaton

Superior Court of Delaware, New Castle County

September 21, 1953

KAISER-FRAZER CORP.
v.
EATON et al.

Action in tort was brought against nonresidents for alleged wrongful inducement of breach of contract, and writ of foreign attachment was issued. Nonresidents refused to make a general appearance, and default judgment was entered against them in rem. Nonresidents then made motions to have default judgment vacated and judgment entered for them, or to have default judgment opened and to have defendants permitted to appear and defend the action. The Superior Court, Herrmann, J., held that ‘ good cause’ may be shown for opening of default judgment under foreign attachment statute notwithstanding fact that defendant had knowledge of suit from its inception and knowingly and wilfully permitted default judgment to be entered.

First motion denied and second motion granted.

Page 346

[48 Del. 238] Upon defendants' motions and petitions (1) that default judgment for the plaintiff be vacated and judgment be entered for the defendants; or (2) that the default judgment be opened and the defendants be permitted to appear and defend the action.

S. Samuel Arsht (of Morris, Steel, Nichols & Arsht) Wilmington, for plaintiff.

William Prickett, Wilmington, for defendants.

HERRMANN, Judge.

This is an action in tort for alleged wrongful inducement of breach of contract.

By its complaint, the plaintiff alleged that the defendants, without privilege to do so, induced and purposely caused First California

Page 347

Company and Otis & Co. to fail to perform a certain underwriting contract, dated February 3, 1948, which the plaintiff had with those companies. The plaintiff alleged that, in [48 Del. 239] order to furnish an excuse for such nonperformance, the defendants ‘ plotted’ and ‘ procured the filing of an action’ against the plaintiff and certain of its directors by one Masterson, a stockholder of the plaintiff corporation. The plaintiff alleged that by reason of the acts of the defendants, in inducing and causing First California Company and Otis & Co. not to perform their contract with the plaintiff, the plaintiff sustained damages in the amount of $2,588,919. It was further alleged in the complaint that on July 10, 1951, the plaintiff had been awarded a judgment against Otis & Co. in the sum of $2,588,919, together with interest and costs[1], in the United States District Court for the Southern District of New York, the said judgment having been rendered against Otis & Co. for its breach of the underwriting contract of February 3, 1948, and for causing First California Company to breach that contract. A copy of the Order directing the entry of that judgment and of the District Court's findings of fact, conclusions of law and opinion were attached to the complaint and ‘ by reference made a part’ thereof.

This action was commenced on August 1, 1951. Since the defendants were not residents of Delaware, a writ of foreign attachment was issued. The defendants' stock in Otis & Co., a Delaware corporation, was attached and that corporation was summoned as garnishee. By its answer as garnishee, Otis & Co. declared that it was obligated to the defendants for cash and securities which the defendants had advanced to or deposited with it.

On December 6, 1951, the attorneys for the defendants filed applications for leave to appear specially for the defendants for the purpose of challenging the jurisdiction of the Court on the ground that the writ, the return and the attachment or garnishment were insufficient and ineffective. Simultaneously, alternate motions were made on behalf of the defendants for leave to appear specially to defend the action on its merits with liability limited to the value of the property of the defendants validly [48 Del. 240] attached or garnished. The jurisdiction of the Court was sustained, after leave to appear specially to challenge jurisdiction had been granted, and the Court denied leave to appear specially to defend on the merits with limited liability. See Del.Super., 85 A.2d 752.

A judgment nisi for want of general appearances was entered for the plaintiff on December 27, 1951 and, because the defendants did not thereafter enter general appearances, the judgment became absolute on January 7, 1952. On the same date, the plaintiff moved that a judgment in personam be entered in its favor against the defendants on the ground that their activities in the proceedings to that time constituted general appearances. That motion was denied and the default judgment in rem was entered.

On January 25, 1952, the plaintiff moved the Court to adjudge that the defendants' actions, before and after the entry of the default judgment, constituted or resulted in general appearances. The defendants contested the motion under special appearances. As late as March 14, 1952, during the argument on that motion, the plaintiff urged the defendants to enter general appearances and to defend on the merits of the case, but the defendants declined. On March 15, 1952, the plaintiff's motion was denied.

On April 1, 1952, an inquisition by jury was had upon the default judgment and the jury ascertained the amount of the plaintiff's damages to be $3,232,329. A judgment in that amount was entered in favor of the plaintiff.

While the proceedings were thus being carried on here in Delaware, Otis & Co. had appealed to the Circuit Court of Appeals the judgment which had been entered against it in the plaintiff's favor in the

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United States District Court for the Southern District of New York. On April 7, 1952, the Circuit Court of Appeals reversed that judgment, Kaiser-Frazer Corp. v. Otis & Co., 2 Cir., 195 F.2d 838, holding that the underwriting agreement of February 3, 1948, was unenforceable because, [48 Del. 241] by reason of misrepresentations in the accompanying prospectus, the agreement violated the laws of the United States, the Securities Act of 1933, 15 U.S.C.A. § 77a et seq., and contravened the public policy expressed in those laws. The Court held that, the contract being unenforceable, the plaintiff was not entitled to recover damages from Otis & Co. for breach thereof and that Otis & Co. was not liable in damages for interfering with the performance of the contract by First California Company.

On April 8, 1952, in execution of the judgment entered herein on April 1, 1952, the plaintiff moved this Court for an Order of Sale of the attached stock of the defendants. An Order of Sale was entered on April 21, 1952. On April 25, 1952, the defendants filed the motions and petitions[2], now before the Court, in which this Court was asked to grant the following relief: (1) That the plaintiff's judgment and the Order of Sale be vacated and judgment be entered for the defendants; or (2) that the plaintiff's judgment be opened, the defendants be permitted to enter general appearances and be let in to trial, and the Order of Sale be vacated; or (3) that the Order of Sale be stayed until termination of proceedings in the United States Supreme Court regarding the New York action, or until disposition of the defendants' instant motions.

The sale of the attached stock and any further proceedings to enforce the judgment entered herein were stayed on May 1, 1952, and further proceedings upon the defendants' motions of April 25, ...


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