Opinion
06-29-1901
ROGERS et al. v. ROGERS LOCOMOTIVE CO. et al.
R. H. McCarter, for petitioner and for Longbottom, a stockholder. John W. Griggs, for purchaser. William Pennington, for receivers. Flavel McGee, for stockholder trustee.
Action by Jacob S. Rogers and others against the Rogers Locomotive Company and others. Petition of the International Power Company for leave to file a petition to revoke the order of the court confirming a sale of the property of the defendant locomotive company. Petition denied.
R. H. McCarter, for petitioner and for Longbottom, a stockholder.
John W. Griggs, for purchaser. William Pennington, for receivers.
Flavel McGee, for stockholder trustee.
EMERY, V. C. In this case the receivers appointed under the statute to settle the affairs of the defendant company, a solvent corporation in voluntary liquidation, entered into a written contract of sale with Smith & Halloran for the sale of the factory plant and other property. The contract of sale was dated and executed May 1, 1901, and provided for the payment of $602,000, $102,000 of which was to be in cash, at the times and in amounts specified in the agreement, and $500,000 was to be secured by mortgage in the manner specified. By the last clause of the agreement it was expressly provided that the parties should not be bound by the agreement until it was confirmed and approved by the court of chancery. The receivers made to the court a report in writing of the execution of the contract of sale, and recommended its approval. A time and place (May 14, 1901, at the chancery chambers in Newark) were thereupon fixed by an order of the court for hearing the application to confirm this contract of sale, upon notice to all of the stockholders. At the time and place fixed, the petitioner, in open court, offered to give $155,000 in Cash, instead of $102,000; the remaining $500,000 to be secured by mortgage, as in the Smith & Halloran contract. At the hearing on the application the sale was confirmed, and an order confirming the sale and directing the execution of the contract was advised on May 14, 1901. The order confirming the sale was not appealed from by any stockholder or other party in interest. The petitioner having subsequently, and on June 13th, presented the present petition to set aside the order confirming sale, and it being considered by me that, inasmuch as the petitioner was not a formal party to the suit, a question might properly be raised whether it was entitled to file a petition in the suit, notice of an application for leave to file the petition was directed to be given to the purchasers, the receivers, and the stockholders. Upon the hearing of the application for leave to file the petition, affidavits were read on behalf of the purchasers and receivers. Such affidavits may be read on application of this character, for the purpose of ascertaining the nature and character of the defenses raised to the application, and for the purpose of determining whether, as between the petitioner and the respondents, the issues are of a character which should be or can be tried in a summary manner by proceedings on the petition, if allowed to be filed. The petition states, substantially, that previous to May 2, 1901, the petitioner had been in negotiation with the receivers for the purchase of the plant, and was informed by the receivers and their counsel that the plant was for sale to the highest bidder, and that a bid could be made and received by them up to May 14, 1901, at 2 p. m., and that, relying on these statements, they attended at that time at the chanceiy chambers in the city of Newark, and then and there, in open court, made a bid for the plant of $055,000, offering $155,000 in cash and $500,000 in bonds similar in form, character, and security to the bid of Smith & Halloran. It is further alleged that petitioner did not then know that the contract or tentative sale had been made between the receivers and Smith
& Halloran, and that in attending at the time and place, when, as it alleges, it was asked by the receivers and their counsel to appear and offer a bid, it supposed the property was still open for bids, and information to the contrary was entirely concealed by the receivers; that the petitioner attended and presented its bid of $50,000 additional, which for some reason then unknown was not accepted, and an order was then made confirming the sale, against the protest of the petitioner and stockholders. It is further alleged that the purchasers have not yet paid the $102,000 cash as required; that they are unable to do so; that no deed has been delivered, and that the sale as made is for an inadequate sum, and will fetch $50,000 less to the stockholders than petitioner's offer, if it is accepted, and that the petitioner, either purposely or otherwise, was kept in the dark as to the true state of affairs; and that, through mistake, or by connivance of persons interested to have the sale to Smith & Halloran perfected, petitioner's bid was prevented from being accepted or even considered. Upon these facts the petitioner prays specially that the order confirming the sale be vacated; that petitioner's bid, which is renewed by the petition, with the additional offer to pay all cash if the court desire, may be accepted; that the sale be set aside, and the receivers be directed to sell the plant and property to the petitioner, and to accept petitioner's bid.
The purchasers, the receivers, and counsel for one or more stockholders oppose the application to file the petition. The affidavits read on behalf of the purchasers and the receivers in opposition to the filing of the petition, and the arguments of counsel, show that the following defenses are raised to any application made in any form by the petitioner to set aside the order confirming the sale: First. That immediately upon the confirmation of the sale, and on the day following, Smith & Halloran, the purchasers, took possession of the factory and plant under the contract which, upon the confirmation by the court, is claimed to have had the effect of vesting property rights in both parties, and that in pursuance of these rights under the contract the purchasers have on their part fulfilled the terms of the contract as to the payments required by the contract, and have entered into possession of the premises, and have since operated the same on an extensive scale; and, further, that in reliance on the contract and its confirmation, and their possession under it, the purchasers have entered into large and important contracts and obligations, involving hundreds of thousands of dollars, to the benefit of which they are entitled, and the obligations of which they must fulfill under the penalty of great loss and damage. Second. That the purchasers, Smith & Halloran, were not in any way connected with or responsible for any mistake or misapprehension which may have existed on the part of the petitioner as to the nature of their contract with the receivers, or as to the receipt of bids after the execution of this contract, and cannot be deprived of their rights under their own contract by reason of the said mistake on the part of the petitioner, if it existed. Third. That the petitioner, before the execution of the contract with Smith & Halloran, declined to bid on the property, and depreciated its value; that the receivers, at the time they made the contract with Smith & Halloran, believed that the petitioner would make no bid for the property; and that the petitioner, after its refusal to bid on the property, and before making its bid in court, knew that the contract for sale to Smith & Halloran by the receivers had been made subject to the approval of the court. Fourth. That the present application is not made in good faith, but for the purpose of embarrassing the purchasers, and, if possible, of injuring their credit.
It is manifest, I think, that, if the petition shows an equitable case against the purchasers, the questions raised by these defenses cannot, against the objections of the purchasers, be considered or decided in any summary manner, or upon a petition to set aside the order confirming the sale. The petition is made by a person not a party to the suit, and is made after a decree or order in the cause which so far as a stranger to the suit is concerned, fixed the rights of all the parties to the cause in the subject-matter of the order, and also the rights of the purchaser under the contract. The purchaser, by the execution of the contract subject to the approval of the court, became to that extent and for that purpose a party to the suit. As against all persons not parties to the suit, the purchasers, as well as the receivers, are both entitled to stand upon their rights under this contract of sale, and to insist that these rights shall not be disturbed by any order or proceeding subsequently taken in the suit by a stranger thereto. But, leaving out of view the defenses which are made to the claim of the petition, and considering only the facts presented by the petition itself, I am of opinion that no case is presented entitling the petitioner to set aside the order of sale, or to require the acceptance of either its former or present bid. The relief sought by the petition is based, as it seems to me, upon a misapprehension of the nature of the rights which the purchasers, Smith & Halloran, had under the contract between them and the receivers, and of the status of an intending or actual bidder after that contract was executed in good faith between the parties. The Rogers Locomotive Company, a solvent corporation, was dissolved by the stockholders themselves, and upon its dissolution the directors were, under the statute ("Corporations," Revision 1896, § 54), constituted trustees, and empowered by the statute (among other things)to sell and convey the property" of the corporation. Subsequently, on the application of the principal stockholder, the present receivers were appointed under the authority of section 56; the order directing that they "be appointed in place of the directors of the company to settle its affairs, collect its assets, sell its property, and divide its remaining assets after payment of its debts." Under this order, the receivers, acting honestly and in good faith, had authority to make a private sale, and to make a written contract of sale. Nor was it necessary to the validity of such contract that it should be approved by the court, unless the sale is within the provisions of the act of 1889 (3 Gen. St. p. 2990, par. 36). Such approval, made on notice to all persons interested in the sale, is", however, usually obtained, even where not required by statute, in order to prevent any sacrifice of the property, and for the protection of the receivers, as well as the stockholders, by allowing objections to the sale to be heard before it is carried out, rather than on exceptions to the receiver's accounts after the execution of the sale. When confirmation by the court is to be obtained, a provision making the contract dependent on this confirmation is inserted After the execution of a formal contract of sale, valid against both parties under the statute of frauds (if the property consists of real estate), and to take effect on confirmation, the mere offer subsequent to the contract of a higher bid will not be sufficient ground for refusing to confirm the contract of sale. In reference to those public sales which are required by statute to be confirmed by the court, this rule, that the sale will not be disapproved merely because of an increased bid, has long been settled, and is constantly applied. Railroad Co. v. Scranton (Runyon, Ch.; 1881) 34 N. J. Eq. 429; Morrisse v. Inglis (Err. & App.; 1889) 46 N. J. Eq. 300, 19 Atl. 10; Bethlehem Iron Co. v. Philadelphia & S. S. Ry. Co. (McGill, Ch.; 1892) 49 N. J. Eq. 350, 23 Atl. 1077; Bliss v. Insurance Co. (Err. & App.; 1893) 51 N. J. Eq. 630, 25 Atl. 381, 30 Atl. 429. The same rule is also applied to private sales made by guardians and others under authority of the court of chancery. In Leary's Case, 50 N. J. Eq. 383, 25 Atl. 197, Vice Chancellor Green held that the same reasons applied to both public and private judicial sales, and refused to open a private sale by the guardian of a lunatic after the sale had been confirmed. In these cases the objections to the confirmation or the application to open were made, not by a bidder subsequent to the sale, but by or on behalf of persons whose sole pecuniary interest was to secure the largest price for the property; and in these cases the rule as to both public and private sales is that where the sale is made for a fair price and in good faith, and there is no irregularity, fraud, mistake, or legal surprise, with which the purchaser is or ought to be chargeable, the subsequent offer by another bidder of a higher price is not of itself sufficient reason for refusing confirmation of a sale, or of reopening the confirmation. If subsequent bidders have the right to be heard in their own behalf at all, it is clear that as to them the rule to be applied cannot be more liberal than towards the owners; for one interest of such bidder is manifestly to secure the property at as low a price as possible and for as small an advance as practicable. But the petitioner, as such subsequent bidder, as it now strikes me, has no standing whatever for any action or relief, either as against the receivers or the purchasers under the contract. The present application concerns lands and real estate, and the legal and equitable relations of the receivers, purchasers, and petitioner all come within the scope of the statutes relating to the enforcement of contracts or agreements relating to lands. Unless the receivers have, by some writing or memorandum signed by them, made some agreement in relation to the real estate and plant of the company with the petitioner, valid under this statute, or facts have been shown which make the statute inapplicable, no action, by petition or otherwise, can be brought to enforce a contract, accept a bid, or to make an agreement of sale. In the present case the receivers had, by their written contract with Smith & Halloran, agreed to convey the property, subject to the approval of the court. Had the court, by reason of the offer of the petitioner, or for any other reason, refused to confirm this contract with Smith & Halloran, it could not then have acted itself as auctioneer, and put the property up at auction in open court; but the whole extent of its action would have been to refuse to confirm the sale to Smith & Halloran, and to leave the receivers to negotiate another sale, to be likewise reported and acted on. Under the statutes and the practice of the court, the right, power, and duty to negotiate and make the contract of sale are imposed on the receivers, and not on the court, whose whole power extends only to approving or disapproving, and in the latter case remitting the matter to the receivers for further action. If this be the true status of the receivers in reference to the private sales of the property of the corporation under the statute, then it is plain, I think, that in relation to such sales of real estate, which come within the statute of frauds, the court cannot, against their will or judgment, compel or direct receivers to accept a bid, or to make a contract for sale thereof, unless the receivers, as well as the bidder, have either bound themselves by writings which are valid under the statute, or have relieved the bidder from the operation of the statute by equitable circumstances of such a character as would-entitle him to a specific performance of a verbal contract. Neither of these conditions exists in the present case. The receivers have not, by writing or otherwise, accepted the petitioner's bid; nor does the verbal encouragement or invitation to bid alleged tohave been given by the receivers or their counsel after the Smith & Halloran contract had been executed operate in equity to give any right against the receivers relating to the real estate in their control. The purchasers, who are in possession of the lands under a written contract and "who are not, so far as appears by any facts set up in the petition, chargeable with the petitioner's mistake as to the receipt of bids after the execution of their contract, have also the right as it seems to me, to require that the petitioner, who seeks to take from them any benefit of their purchase, and impose on them any loss from its rescission, shall at the outset show a contract in its own favor which a court of equity has the right, under the statute of frauds, to enforce against them. The petition, in my judgment, discloses no such contract, and discloses no case for the relief prayed, and the leave to file the petition must for this reason, also, be denied.