MacKubin v. Curtiss-Wright Corp.

Delaplaine, J., delivered the opinion of the Court. Mrs. Maud P. Mackubin, appellant, a stockholder in Curtiss-Wright Corporation, a manufacturer of aeronautical equipment, claims that she is a third-party beneficiary under a stock listing agreement made by that corporation with the New York Stock Exchange, and that she is consequently entitled to recover certain loss which she alleges she sustained as a result of a breach of the agreement. It appears from the record that on June 1, 1982, Curtiss Wright Corporation, which is incorporated under the laws of Delaware, filed an application to list its $2 noncumulative Class A ($1 par) stock on the New York Stock Exchange. In consideration for the listing of the stock, the corporation agreed, among other things, “to publish promptly to holders of listed stock any action in respect to dividends on shares, or allotments of rights for subscription to securities, notices thereof to be sent to the Stock Exchange.” On March 6, 1946, plaintiff, through the brokerage firm of Mackubin, Legg & Company, in which her husband is the senior partner, bought 200 shares of the CurtissWright Class A stock at $31 per share; and also entered an order, good till cancelled, to buy 100 additional shares at $30.

Quarterly dividends of 50 cents per share had been paid by the corporation on this stock in 1943, 1944 and 1945. On March 18, 1946, the directors of the corporation met in its principal office at 44 Rockefeller Plaza, New York City, for the transaction of business, includ ⁵⁵ ing action on quarterly dividend. They met at 4:15 p. m., and at 5:30 p. m. voted to omit the dividend. They decided to make public announcement of their action, but when the meeting adjourned at 5:55 p. m., there was no one in the office from which the news releases are usually distributed.

There was no announcement that evening or on the following morning. The delay was due to the fact that some of the experienced employees were away from the office, and a new employee in charge of news releases was not aware of the importance of making the announcement promptly. It was at noon on March 19 that it was learned by officials of the corporation that announcement had not been made. Efforts were then made to send the information to news release services.

It was 2:30 p. m. when the first announcement was made. One of the employees telephoned it to Dow, Jones & Company, publisher of the Wall Street Journal, 44 Broad Street, which operates a teletypewriter service. The ticker tape immediately gave the announcement of the dividend omission. It was followed by a quick drop in the price of Class A stock.

Prior to the announcement it was selling at 3144. Immediately afterwards it fell to 25, recovered to 29, and closed at 25%- Plaintiff’s order to buy 100 shares at $30 per share was executed at 2:34 p. m., four minutes after the announcement was put on the ticker. On March 21 Guy W. Vaughan, president of Curtiss-Wright, called on Emil Schram, president of the New York Stock Exchange, and assured him that all news releases thereafter would be distributed to the Stock Exchange and the public immediately after the action of the board. Since March 19 the Class A stock has never sold as high as 30.

Plaintiff claims that, inasmuch as she became a stockholder in the corporation prior to March 19, she is entitled to recover her loss in the market value of the 100 shares bought on that day, because, if she had received prompt notice of the board’s action, her husband would have cancelled the order to purchase early on the morning of March 19. ⁵⁶ The trial judge held that, even though Curtiss-Wright Corporation may not have promptly announced the board’s decision to defer action on declaration of dividend, plaintiff had no cause of action against the corporation. He accordingly directed the jury to render a verdict for defendant. From the judgment entered on that verdict plaintiff brought this appeal. The original rule of the common law was that privity between the plaintiff and the defendant is requisite to maintain an action on a contract, even though the contract is for the benefit of a third person.

There has been a gradual relaxation of this rule. Seaver v. Ransom, 224 N. Y. 233 , 120 N. E. 639 , 2 A. L. R. 1187; Ultramares Corporation v. Touche, 255 N. Y. 170 , 174 N. E. 441 , 74 A. L. R. 1139. In Pennsylvania Steel Co. v. New York City Ry. Co., 2 Cir., 198 F. 721, 749 , Judge Noyes made the following comment on the subject: “In England and in some of the States the rule is adhered to that the only persons who can sue upon a contract are the parties; that a third person for whose benefit a contract is made cannot maintain an action upon it.

The reason for the rule is said to be that there is no privity between the contracting party making the