The opinion of the court was delivered by: WILLSON
In this case there is now pending a motion for a new trial only. In his complaint plaintiff charged that the defendant did willfully, wantonly, wrongfully, maliciously and without proper cause enter judgment on certain notes in the office of the Prothonotary, Erie County, Pennsylvania in this judicial district. The case was tried to a jury over a period of six trial days. It was a vigorously tried case in which each side was represented by able, experienced counsel. It is noticed that plaintiff in his brief on his motion for a new trial characterizes the suit as one for damages for malicious use of process and malicious abuse of process. Defendant in its brief says the case is a civil suit to recover damages for an alleged malicious prosecution consisting of the entry of a judgment on judgment notes in the Court of Common Pleas of Erie County, Pennsylvania, on March 22, 1949, in the amount of $ 26,250, etc. It is my view that the cause of action described in plaintiff's complaint and which was litigated in the trial is an action for malicious use of civil process. It had to do with the initiation of proceedings and not the perversion of them.
In Publix Drug Co. v. Breyer Ice Cream Co., 347 Pa. 346, 32 A.2d 413, the defendant had entered judgment by confession on judgment notes as was done by the instant defendant. The Supreme Court of Pennsylvania held that the action before it was one for malicious use of civil process and said, in part:
'* * * It was essential in this case that plaintiff should show that the judgments were entered with malice, without probable cause to believe that the defendant could succeed and that the original actions finally ended in failure.'
As this is a diversity action, this court is required to apply the law of Pennsylvania. As trial judge, believing that the law on the instant case was as pronounced in the Publix Drug Co. v. Breyer Ice Cream Co. case, an interrogatory was submitted to the jury as follows:
'1. Was the Aluminum Seal Company, Inc. motivated by malice in entering the notes as judgment liens in the Prothonotary's office of Erie County, Pennsylvania?'
This motion to set aside the verdict and grant a new trial is a matter of federal procedure, governed by Fed.Rules Civ.Proc. rule 59, 28 U.S.C. It is not subject in any way to the rules of state practice. '* * * On such a motion it is the duty of the judge to set aside the verdict and grant a new trial, if he is of opinion that the verdict is against the clear weight of the evidence, or is based upon evidence which is false, or will result in a miscarriage of justice, even though there may be substantial evidence which would prevent the direction of a verdict.' Aetna Casualty & Surety Co. v. Yeatts, 4 Cir., 122 F.2d 350, 352. The motion for a new trial is addressed to the sound discretion of the court. It is my view that the weight of the credible evidence in this case favors the defendant. As I am required to do, I have reviewed the evidence to determine whether in the light of the weight of the evidence a new trial should be granted. It is my belief that the jury's verdict on the issue of malice was correct under the evidence and that the verdict should stand. See Magee v. General Motors Corp., 3 Cir., 213 F.2d 899. See also Barron & Holtzhoff, Federal Practice, Volume 3, Section 1302.
It is necessary that the facts be briefly discussed in order that this court's reasons for refusing the motion for a new trial be clearly understood. There is no substantial dispute on the essential facts which gave rise to the suit by plaintiff. The suit was brought against Aluminum Seal Company, Inc., an Indiana corporation. This corporation was the successor to the rights and liabilities of Aluminum Seal Company, a Pennsylvania corporation, which originally contracted with the plaintiff. Those two corporations have been dissolved and their assets are now owned by the Aluminum Company of America. The three corporations will be mentioned and referred to simply as 'defendant.' The transaction between the parties which was the forerunner of the present litigation can be briefly summarized. In 1947, defendant needed housing facilities for its employees which it was to transfer to a new manufacturing plant situate in the City of Richmond, State of Indiana. The parties entered into two written contracts, both dated May 14, 1947. The first provided for the construction of thirty-five houses called the 'Homesite.' In this agreement plaintiff agreed to build thirty-five dwelling houses and have them ready for occupancy within one year from the date of the agreement. Time was stated to be the essence of the agreement. Defendant had a preference in placing its employees in the dwelling houses as tenants under plaintiff. The houses and building project were to continue to be owned by plaintiff and for a period of five years plaintiff could neither assign the contract nor convey the Homesite without the prior written consent of the defendant. Construction was to begin by July 1, 1947. As a subsidy, defendant agreed to pay plaintiff $ 25,000, which money, however, was to be held in escrow at the National Bank and Trust Company of Erie, Pennsylvania, and disbursed by the bank in accordance with the terms of the escrow agreement. The escrow agreement was a three-party contract between the National Bank and Trust Company of Erie, plaintiff and defendant. In it the bank held the $ 25,000 paid by defendant. As the building project progressed, plaintiff was privileged to draw on the $ 25,000 subsidy. When he did so he was required to deposit with the bank notes in an amount equal to his withdrawal, which notes were held by the bank as security for his performance. Under this agreement plaintiff withdrew $ 5,000 immediately and gave his note. Ten thousand dollars was to be paid plaintiff upon presentation of a certificate for recording of the deed of the building project 'Homesite.' Five thousand dollars was to be paid to plaintiff upon presentation to the bank of the certificate of final approval of completion of the Federal Housing Administration for eighteen houses upon the Homesite. The remaining $ 5,000 was to be paid plaintiff upon presentation to the bank by plaintiff within one year of the date of the agreement of the certificate of final approval of completion of the thirty-five houses by the Federal Housing Administration, and upon the certificate of final approval being issued, the bank was to deliver to plaintiff all his promissory notes theretofore received by the bank under the escrow agreement. The agreement provided that if within one year from its date plaintiff did not present to the bank the certificate of final approval of completion of the Federal Housing Administration of the thirty-five houses, the bank was to then forthwith pay to the company any balance of said sum of $ 25,000 then held by it and deliver to the company all the promissory notes theretofore received by the bank. Thereafter and by mutual agreement the subsidy was increased from $ 25,000 to $ 35,000 and the period for compliance was extended from May 14, 1948 to August 12, 1948. The evidence showed that during the course of construction, financial aid was afforded to the plaintiff by the defendant in addition to the subsidy. For instance, on September 8, 1947, defendant advanced $ 50,000 to plaintiff. On December 19, 1947, defendant loaned an additional $ 25,000 to plaintiff. On February 24, 1948, defendant consented to a payment of $ 5,000 from the escrow fund at a time when plaintiff was not entitled to receive it under the terms of the agreement.
On February 26, 1948, defendant loaned $ 65,000 to the plaintiff for use in the Richmond project, which loan was secured by a second mortgage on four Erie apartment houses. On June 18, 1948, defendant authorized the escrow agent to release $ 5,000 of the escrow funds to the plaintiff. By August 12, 1948, plaintiff had received from the escrow agent a total of $ 35,000, as provided for in the escrow agreement, and had delivered to the bank in return notes totaling $ 35,000, payable to defendant. Of the notes, $ 25,000 were promissory notes containing warrants of attorney for confession of judgment and one note in the sum of $ 10,000 was without such authority. On the compliance date, as extended, that is August 12, 1948, the plaintiff had not secured the F.H.A. certificates. Defendant waited until November 12, 1948 and then demanded of the escrow bank delivery of all plaintiff's notes and the escrow bank did deliver the notes to the defendant.
Up to this point in the transaction, the evidence shows no substantial dispute between the parties. Although the F.H.A. certificates were not furnished, the building project was substantially completed by plaintiff. However, the evidence does show that during this period plaintiff needed additional finances, particularly for various other business enterprises. The evidence shows also that some of the moneys which plaintiff received from defendant for use in the Richmond project were diverted to other enterprises. During the fall of 1948, plaintiff and the president of the Aluminum Seal Company, Inc., M. M. Kipfer, had disagreed on various matters connected with the project, particularly rentals. About October 1, 1948, plaintiff testified that Mr. Kipfer said to him: 'You will be sorry for this day. We will get you, we'll get you good. You are through, you're done.'
By June 21, 1948, defendant had advanced the plaintiff $ 125,250 for use in the housing project. This sum was made up of the $ 35,000 escrow fund, $ 65,000 mortgage loan and further advances of $ 25,250, which latter amount, however, was secured by assignments of moneys due plaintiff under the mortgage arrangement he had with the Prudential Insurance Company, which was financing the housing project known as Homesite. In August of 1948, payments of interest on the $ 65,000 mortgage became overdue and were unpaid by plaintiff. In November of 1948, plaintiff and Mr. C.L. Lycette, Assistant Secretary of defendant, had discussed plaintiff's financial difficulties and problems. Mr. Lycette made a suggestion as to settlement of all of the business between the parties, but on November 8, 1948, plaintiff rejected Mr. Lycette's offer. Afterward the parties held conferences in Pittsburgh on January 6 and January 17, 1949, in an effort to find a solution to the obligations outstanding in the entire matter. Particularly, however, at the latter time, plaintiff informed Mr. Lycette of the fact that he would be unable to meet a $ 5,000 payment on the $ 65,000 mortgage principal, nor an interest payment in the amount of $ 975, both of which would become due in February. At that time plaintiff demanded the return of the escrow notes from Mr. Lycette. At the latter conference, plaintiff informed defendant that the first mortgage held by C. W. Zuck & Sons on the apartments in Erie was also in default and that there was due on the first mortgage the sum of $ 83,400. At that meeting also, plaintiff informed defendant that suit had been entered in Indiana by Fox Bros. Manufacturing Company and The Celotex Corporation to recover $ 17,500 still due for materials furnished the housing project at Richmond. In the meantime, plaintiff had placed a second mortgage in the sum of $ 38,000 on the Richmond Homesite.
During the course of the transactions defendant was represented by William J. Kyle, Jr., a member of the law firm of Smith, Buchanan, Ingersoll, Rodewald & Eckert, Esqs. He consulted with Mr. Lycette, Assistant Secretary of defendant, in 1947 and 1948 with regard to the housing project. In November of 1948, Mr. Kyle conferred with Mr. Lycette relative to whether defendant was entitled to return of the notes from the escrow bank. In the latter part of January of 1949, Mr. Lycette summarized the transactions up to that time in a letter to Mr. Kyle. Mr. Kyle testified in response to a question relating to the contents of the letter of January 21, 1949, as follows:
'Q. Now, what was the question posed to you by your client Alcoa? What was the problem? What was the job you were given?
'A. The job was to determine and recommend to them the best remedies available to them for the collection of the hundred thousand dollars which in our opinion Mr. Baird owed to them, and at the same time, if possible, to collect as much as we could on the hundred thousand dollars and retain the benefits of that rent preference agreement which the company had made initially -- in other words, if possible, to see that ...