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DAM v. GE

August 27, 1956

Milton E. DAM and Everett S. Dam, copartners doing business under the firm name and style of Dam Brothers, Plaintiffs,
v.
GENERAL ELECTRIC COMPANY, a foreign corporation, Defendant



The opinion of the court was delivered by: DRIVER

Defendant, General Electric Company has moved for summary judgment. The motion is based upon a number of grounds, but only limitation and laches, set up as affirmative defenses in defendant's answer, will be discussed. The others clearly appear to involve genuine issues of material fact and will not, therefore, be considered.

The second amended complaint, as further amended by deletion and interlineation, consists of three 'causes of action.' The third involves only a defendant not now before the court. The allegations of the first 'cause of action,' in so far as they are pertinent to the present inquiry, may be briefly summarized as follows:

 The plaintiffs, who had for some time conducted investigations, surveys, and studies of the feasibility of developing and utilizing the Priest Rapids site on the Columbia River in the state of Washington (primarily for the irrigation of a large area of adjacent arid land, and, secondarily for the generation of electric power), in 1910 formed a partnership for the furtherance of that project. The partnership operated under the name of Dam Brothers and through the contributions of the individual members, and by their joint efforts, the partnership acquired the control of the lands in what was known as the Priest Rapids Highlands Project, consisting of approximately 135,000 acres of land owned by approximately 1,000 landowners. Originally plaintiffs contemplated diverting the waters of the river for irrigation without constructing a dam or other obstruction to navigation.

 For about three years prior to 1913, defendant had been considering the development of the Priest Rapids site, primarily for electric power purposes by the construction of a high dam across the river. Defendant encountered serious difficulties, however. It discovered that its plans would interfere with the project of plaintiffs and that the Columbia river was a navigable stream under the control of the Federal government, and that the development of a hydroelectric power project at Priest Rapids was not feasible until favorable amendment of the Federal laws pertaining thereto could be secured.

 On learning of such obstacles, defendant proposed to plaintiffs that they jointly develop the Priest Rapids project for both power and irrigation purposes and suggested and a meeting be held in New York City to work out the details of such a joint enterprise.

 The meeting was held and the principal representative of defendant was Charles A. Coffin, originally its president and then chairman of its board of directors. Defendant also was represented by Sidney Z. Mitchell, President and Managing Director of Electric Bond & Share Company (a corporation completely dominated and controlled by defendant), and Henry Pierce, also connected with Electric Bond & Share Company. As a result of the meeting and negotiations carried on in the year 1913, the plaintiffs, and the defendant through its agents Coffin, Mitchell and Pierce, entered into an oral joint venture agreement for the development of the Priest Rapids site.

 In the joint venture agreement, the plaintiffs on their part agreed to, 1) abandon their own plans to develop Priest Rapids and join with defendant in the development thereof; 2) assist in securing additional power and industrial sites and lands to be turned over to defendant and its subsidiaries for construction of a dam for the generation of power and for irrigation purposes upon the passage of favorable Federal legislation; 3) make available to defendant all of plaintiffs' 'records, investigations, field logs, filed work and knowledge' with reference to the irrigation and power development; 4) jointly acquire with defendant 55,000 acres controlled by plaintiffs, being railroad grant lands, and to endeavor to secure control over other privately owned lands in furtherance of the irrigation feature of the joint project; and 5) employ plaintiffs' resources and efforts to obtain the enactment by the Congress of the United States of favorable water power legislation which would make it feasible to develop the Priest Rapids site.

 On its part, defendant by the joint venture agreement, undertook to, 1) 'allot' to plaintiffs $ 500,000 worth of common stock of a corporation to be known as the Priest Rapids Power Company which defendant would cause to be organized and incorporated with par value capital stock of $ 40,000,000 upon the passage of favorable legislation affecting the Priest Rapids power site; 2) give plaintiffs a 30% interest in a land-holding 'syndicate' to be formed immediately following the making of the joint venture agreement for the purpose of acquiring the 55,000 acres of railroad grant land, which syndicate was to be jointly controlled by plaintiffs and defendant; 3) deliver to plaintiffs a 10% stock interest in corporations to be formed, to be known as the Terminal Townsite Company 'and other companies' for the purpose of developing industrial and transportation facilities in the vicinity of the Priest Rapids site, which corporations were to be formed and organized 'immediately following' the passage of favorable Federal power site legislation; 4) allot and deliver to plaintiffs a 10% interest 'in any and all of the various syndicates or corporations' to be formed or organized for the purpose of acquiring or developing mineral rights, minerals, and building materials in connection with the Priest Rapids project; and 5) directly and through its subsidiaries, furnish all necessary funds and pay all expenses 'during the pre-construction and construction period', and 'diligently prosecute all necessary activities and perform all acts necessary or required for the fruition and realization of the plans and prospects of the parties for the development of said Priest Rapids site for power and irrigation purposes.'

 Plaintiffs generally performed their part of the joint venture agreement and specifically assisted in various ways in securing the enactment of favorable water power legislation by the Congress of the United States. The passage of the legislation was delayed because of the insistence of the defendant upon the inclusion of provisions which the Congress would not accept; but such legislation was enacted into law in March, 1920.

 In further performance of the joint venture agreement plaintiffs acquired 'for the land syndicate formed for such purpose' the 55,000 acres of land for irrigation, and other lands; and acquired Tufa mineral deposits immediately adjacent to the proposed dam and town site, which deposits, it was agreed, were to be turned over to a corporation to be organized as the Tufa Natural Cement Company.

 After the enactment of the favorable water power legislation in 1920, defendant through its various subsidiaries procured a permit, and later, a license, to construct the proposed dam at Priest Rapids, and performed preliminary diamond drilling and engineering work in preparation for the construction of the dam. The permit was granted about the year 1925. Defendant assured plaintiffs that it intended to proceed immediately with the construction of the proposed project, and plaintiffs believed and relied upon such assurance.

 Defendant at no time abandoned the performance of the joint venture agreement on its part and at all times advised and assured plaintiffs that it still intended to proceed with the proposed plans, which assurance plaintiffs believed and relied upon, but defendant was hindered and delayed in the prosecution of the work by the general economic depression which began in 1929, and, later on, by the Second World War.

 Just prior to the commencement of the action, plaintiffs learned that a subsidiary of defendant had secretly sold and disposed of lands of the land syndicate, thus putting it beyond the power of the defendant to perform the joint venture agreement. On June 14, 1951, plaintiffs made written demand upon defendant to complete the performance of the joint venture agreement, to which demand there was no response. The present action was then instituted promptly. (The complaint was filed on July 16, 1952.)

 As a direct and proximate result of defendant's failure to perform the joint venture agreement, and the necessary change of position of plaintiffs brought about by the performance of their part of the agreement, plaintiffs have ...


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