Boucher v. Hamilton Mfg. Co.

• Decision Date: 13 April 1927
• Citation: 156 N.E. 424,259 Mass. 259
• Parties: BOUCHER et al. v. HAMILTON MFG. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

259 Mass. 259

156 N.E. 424

BOUCHER et al.

v.HAMILTON MFG. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

April 13, 1927.

Report from Superior Court, Suffolk County; Marcus Morton, Judge.

Bill in equity by Israel E. Boucher and others, trustees, against the Hamilton Manufacturing Company, for appointment of a receiver for defendant and application of defendant's assets to payment of its debts. Decree by the superior court was entered authorizing receivers to sell defendant's property, and case was reported. Decree of sale affirmed.R. C. Evarts and W. M. Burse, both of Boston, for stockholders.

H. W. Brown, of Boston, for receiver.

C. F. Choate, Jr., of Boston, for certain stockholders.

B. E. Eames, C. H. Tyler, and J. P. Wright, all of Boston, for prospective purchasers.

RUGG, C. J.

In July, 1926, in a suit by creditors, receivers were appointed for the defendant, a Massachusetts corporation which for many years had conducted successfully the business of manufacturing and selling cotton goods at Lowell in this commonwealth. The receivers filed a petition for authority to sell at public auction the property of the defendant, wherein they set forth that they had conducted the business of the defendant to the end that all but its fixed assets be converted into cash and receivables, and that as a result no raw cotton, yarn or finished product was in its mill, and finished cloth on hand was in its warehouse, and that its machinery and buildings had been cleaned and put in order and were ‘in charge of a skeleton crew consisting of watchmen and firemen,’ and that in their opinion a sale of its property would be wise, having regard to the interests of the defendant and its creditors. At the hearings upon this petition, it appeared that an offer to purchase at private sale had been made to the receivers. A decree was entered authorizing sale in accordance with that offer and without auction. The judge reported for the consideration of this court the decree and order for sale.

The judge found that the ‘rights and interests of the creditors, stockholders and all parties in interest would be better protected and the value of the company's remaining assets be better conserved by the acceptance’ of the offer. Relevant facts set forth in the report are that the carrying charges for the property are about $4,900 a week; that for about a year it has been known to shareholders and the public that the property was for sale and full opportunity has been given to the shareholders to reorganize, and constant efforts have been made by the receivers to obtain offers; that ‘the offer in question is the only real one made to the receivers, although an oral offer for cash of $400,000 with a payment down of $50,000 was made, and just prior to the receivership an offer of $500,000 had been made to the company with a payment down of $5,000;’ that unless the present ‘offer was accepted it was apparent that the property should be sold at once by public auction;’ that differences of opinion existed among experts about the probable result of an auction sale; that at a hearing another judge of the superior court had concluded that no more than $500,000 would be obtained at a public sale; that the condition of the textile industry in Massachusetts and particularly in Lowell is serious; that no facts appeared leading ‘to any reasonable probability of obtaining as much by public’ auction as by accepting the offer; that the price obtained thereby ‘will pay the creditors almost in full and give the shareholders at least a chance to obtain something on account of their shares.’

The decree of sale recites the offer made to the receivers. Its substance is that the offerers will buy all the property of the defendant, including choses in action, with a single exception and excepting also accounts and cash receivable, for the sum of $700,000 payable as follows: (1) $100,000 cash and two notes of the defendant for $25,000 each at time of signing agreement. ‘This $150,000 in cash and notes is supplied by Arthur R. Sharp. Mr. Sharp is willing to participate in the purchase to this amount in consideration of his release’ from the suits and claims of the defendant or its receivers against him as officer or director of the defendant. (2) $150,000 in cash on passing of papers, the offerers simultaneously to be afforded opportunity at their option to make sale for their own account on prices and terms to be determined by them of mills numbered 2, 4 and 6, and an office building. (3) The balance, approximating $395,000, to be paid in bonds of a Massachusetts corporation to be organized to take title to the property, payable in or within one year, to be secured by mortgage, and to bear interest. The decree also recites that the offerers propose to tender participation in the purchase to the stockholders of the defendant by organizing a Massachusetts corporation with an authorized issue of seven thousand shares of five per cent. preferred $100 par stock noncumulative and seven thousand shares of no par common stock; the seven thousand shares of preferred to be offered to present stockholders at $100 per share payable in cash, each share of preferred stock so taken and paid for to carry with it one share of no par common stock; the present stockholders to have the right to subscribe at the rate of one share of preferred stock with one share of common stock for each five shares of stock now held. It is also recited in the decree that ‘for the advance of approximately $150,000 to be made by Arthur R. Sharp under paragraph 1 of said offer, he is to take preferred stock and no par common stock at the same price as subscribing stockholders. Should all the preferred and common stock be taken by the present stockholders in accordance with said offer,’ the offerers ‘are to receive five per cent. (5%) commission in cash, to wit, thirty-five thousand dollars ($35,000), which payment in that event would be their entire reward in the enterprise. Any balance of the no par common stock not taken by subscribers to preferred stock as aforesaid is to remain the property of’ the offerers. The form of the authority for sale need not be further recited save to say that there is to be excepted from the sale to the offerers all claims of the defendant or its receivers against any present or past officers and directors and other individuals, firms or corporations liable to the defendant for actionable wrongdoing or breach of duty in connection with its recent financial difficulties, and as a part of the transaction the receivers are authorized ‘to execute and deliver to Arthur R. Sharp an appropriate instrument in the form of a covenant not to sue said Arthur R. Sharp, his heirs, executors, administrators and assigns either as an officer or director of said company or otherwise on account of any matter heretofore existing,’ not thereby releasing or discharging any other officer or director.

It is stated in the report that at next to the last hearing on the question of the approval by the court of the acceptance ‘of the offer no objection was raised’ and at the last hearing, counsel for the appealing stockholders objected to the entry of the decree but not to its form. No argument has been presented at the bar of this court against the decree except in behalf of stockholders.

The decree authorizing sale in accordance with the offer was entered by virtue of these findings, as recited in the original report, and also ‘in the exercise of what was intended to be a reasonable discretion in view of all circumstances called to my [the judge's] attention by the receivers, stockholders and others and of certain facts in regard to the condition of the textile industry commonly reported and of which I took judicial notice.’ The judge further said in the original report, ‘Sales of similar mill property in the cities of Lowell, Lawrence, New Bedford and Fall River at approximately 10% of the assessed value are matters of common knowledge.’ When the case was argued before the full court, sharp attack was made upon these two statements as constituting an error of law on the part of the judge by extending beyond permissible bounds the doctrine of judicial notice and thus vitiating the decree founded in part thereon. Thereupon the judge, in order that the ‘ambiguity’ in this particular in his original report might be removed and that ‘the Supreme Judicial Court may have a clear understanding of the exact situation and that complete justice may be done,’ at once requested the permission of this court to file a supplementary report or to amend his original report by adding thereto the following:

‘All the facts referred to in said report as facts of which I 'took judicial knowledge’ were reported to me in open court by Mr. Rowley as receiver, while the matter in question was being heard, as facts which he had ascertained in connection with the discharge of his duties as receiver and such report was made by Mr. Rowley in his official capacity as a part of his report and recommendation to the court in favor of the acceptance of the offer. * * * Said facts so reported by Mr. Rowley were not challenged or contradicted by any persons present in court when said report was made nor did any such persons object to the consideration of said facts by me in reaching my decision. I believed said facts to be true and accepted them as such and gave them due consideration in reaching my decision. Other than as above stated I took judicial knowledge or notice of no facts whatever in connection with this matter except the general depressed condition of the textile industry in New England. The sales of similar mill properties in Lowell, Lawrence, New Bedford and Fall River, referred to in the report, were specifically reported to me by name by Mr. Rowley in the manner and under the circumstances above set forth.'

The case comes before us on report. Such a report is ‘in the nature of an extension of...