Forbes v. Wells Beach Casino, Inc.

• Citation: 409 A.2d 646
• Parties: Vander W. FORBES v. WELLS BEACH CASINO, INC., et al.
• Decision Date: 27 December 1979
• Court: Supreme Judicial Court of Maine (US)

Page 646

409 A.2d 646

Vander W. FORBES v. WELLS BEACH CASINO, INC., et al.

Supreme Judicial Court of Maine.

Dec. 27, 1979.

J. Armand Gendron (orally), Sanford, for plaintiff.

Smith, Elliott, Wood & Nelson, P. A., Charles W. Smith (orally), Stephen R. Lamson, Saco, for defendants.

Before McKUSICK, C. J., and POMEROY, ARCHIBALD, GODFREY and NICHOLS, JJ.

POMEROY, Justice.

Appellee Forbes filed a complaint on December 20, 1963, against Wells Beach Casino, Inc. and its two stockholders, Elias M. Loew and Lawrence G. Laskey, requesting specific performance of a contract for the sale of real property in Wells, Maine, and other incidental relief. Forbes thereafter acquired 50 percent of the outstanding stock of Wells Beach Casino, Inc. and amended his complaint to include a supplemental claim for derivative relief.

By agreement of the parties, the matter was heard before a referee in two separate sessions, the first on the issue of liability, the second on the issue of damages. Over appellant Loew's objections to the referee's report, the Superior Court accepted the referee's findings of fact and conclusions of law, and ordered entry of judgment in accordance with the report.

On appeal, Loew contends that the referee's findings regarding the "fraudulent" nature of Loew's and Laskey's bids, the validity of Forbes' shareholder derivative action and the appropriateness of the award of damages were clearly erroneous.

We sustain appellant Loew's appeal on the issue of damages only.

We are not unfamiliar with the facts of this case, having rendered two decisions already during the course of this protracted litigation.

In early 1960, Elias Loew and Laskey were each 50 percent stockholders in the Wells Beach Casino Corporation, the principal asset of which was the Casino property, the subject of this suit. Loew was a director and the treasurer of the Corporation, Laskey was a director and the president. On July 20, 1960, Laskey filed a complaint in York County Superior Court charging mismanagement of the Corporation and seeking its dissolution. In connection with this action Loew and Laskey on October 6, 1960, entered into an agreement in writing for the appraisal and sale of the Casino property, and for the liquidation of the Corporation.

Three real estate brokers, named as appraisers in accordance with the terms of the contract, determined the fair market value of the Casino property to be $28,834.00. It was agreed that the property would be sold by sealed bid to the highest bidder. Loew and Laskey agreed that each would be permitted to submit a single sealed bid for the property without deposit. A deposit by certified check in the amount of $1,000.00 was required with all other bids. The property was offered subject to marketable title, free of all encumbrances.

On January 5, 1961, a lease to Elias Loew's brother Moritz Loew dated November, 1958 was recorded. The lease had allegedly been given by the Corporation for a period of ten years and five months on a variety store occupying a small portion of the Casino property.

Three bids for the purchase of the Casino property were received. Laskey submitted a bid in the amount of $45,000.00, without deposit, for the property free of encumbrances. Forbes submitted a bid for $39,100.00, also for the property free of encumbrances, and enclosed the required $1,000.00 deposit. Loew entered a bid for $35,000.00 for the property "subject to the outstanding lease on the Variety Store," without deposit.

In April, 1961 Laskey, having not yet paid in his bid amount, commenced an action against Moritz Loew and the Corporation seeking to have the lease set aside. Seven and one half years later, on November 15, 1968, the action was dismissed under Rule 41(b)(1), M.R.Civ.P., for want of prosecution.

On December 20, 1963, Forbes commenced this action by filing a complaint against the Corporation, Elias M. Loew, Lawrence G. Laskey and Moritz Loew, and by attaching the Casino property. Forbes alleged that the bids of Elias Loew and Laskey were not made in good faith and requested specific performance of their contract to convey the Casino property to the highest bidder, namely, himself. Plaintiff also prayed that the allegedly fraudulent lease to Moritz Loew be declared null and void, or, if found valid, be assigned to Forbes.

Elias Loew filed a motion to dismiss for want of personal jurisdiction over him. The motion was ultimately reported to this Court. On May 11, 1966, we held that personal jurisdiction was constitutionally permissible under our "long arm statute." Forbes v. Wells Beach Casino, Inc., Me., 219 A.2d 542 (1966).

On August 14, 1964, the Town of Wells filed liens against the Casino property for the collection of unpaid taxes in the amount of $1,800.40 tax plus $64.48 interest. In April, 1966, after the liens had matured, the Town of Wells brought suit against the Corporation to confirm its title. In April, 1968 Elias Loew individually paid $15,000.00 to Wells. The Town conveyed title in the property to Loew, individually, reserving a portion of the property to itself.

On July 5, 1968, Forbes filed supplemental pleadings seeking to have Loew adjudged a constructive trustee for all parties in interest in the property, including Forbes, and subject to his demand for specific performance.

On December 2, 1968, Wells Beach Casino, Inc. had its corporate charter suspended for non-payment of franchise taxes.

Laskey was defaulted in the pending suit, and a default judgment was entered against him on November 22, 1969. Forbes subsequently acquired Laskey's 50 percent stock ownership of the Corporation, and in July, 1970 filed a second supplemental pleading alleging a deadlock in management and requesting dissolution of the Corporation. ¹ Forbes also alleged that Loew's individual purchase of the Casino property constituted a fraud upon the Corporation and its stockholders. On the same date, Forbes voluntarily dismissed as to Moritz Loew, the lease having terminated by lapse of time.

The Superior Court dismissed the complaint and supplemental pleadings for failure to state a claim upon which relief can be granted, under M.R.Civ.P. 12(b)(6), whereupon Forbes appealed. Forbes' appeal was sustained. That decision dated June 28, 1973, held that the agreement between Loew and Laskey to sell the Casino property for the highest cash bid was an unconditional contract rather than an agreement for the solicitation of offers. We also found that Forbes had standing to bring a shareholder's derivative action for the purpose of remedying any wrongs that may have occurred prior to the acquisition of his shares of stock. Forbes v. Wells Beach Casino, Inc., Me., 307 A.2d 210 (1973) (hereinafter referred to as Forbes II.)

On remand, the case was heard before a referee by agreement of the parties. In accord with Rule 53, M.R.Civ.P., the Superior Court found specifically that there was evidence of probative value to support the referee's findings:

(1) that Forbes is a valid stockholder of 50 percent of the capital stock of Wells Beach Casino, Inc.;

(2) that there was no collusion between Forbes and Laskey;

(3) that Loew's and Laskey's bids were both fraudulent;

(4) that Forbes was the highest good faith bidder;

(5) that the Casino property conveyed to Lowe individually by the Town of Wells is held by Loew as constructive trustee;

(6) that Forbes is entitled to dissolution of the Casino Corporation;

(7) that Forbes is entitled to damages as found by the referee.

The Superior Court found that the referee's conclusions of law were in accord with the Law Court's Forbes II decision, and ordered entry of judgment in accordance with the report, to wit:

(1) that Elias M. Loew convey the subject real estate, acquired by him from the Town of Wells, to Wells Beach Casino, Inc.;

(2) that a receiver be appointed for the dissolution of Wells Beach Casino, Inc.;

(3) that said receiver convey the real estate in question to Forbes for the consideration set forth in his bid, $39,100.00;

(4) that Forbes recover from Elias M. Loew, individually, and against Wells Beach Casino, Inc., jointly and severally, but with only one satisfaction, compensatory damages in the amount of $190,021.89, punitive damages in the amount of $15,000.00, and damages in the amount of $6,919.60 for land contracted to be sold to plaintiff, but reserved by the Town of Wells in its conveyance to Loew, individually.

SCOPE OF APPELLATE REVIEW:

As a preliminary matter, Loew argues that where, as here, the referee bases his findings of fact on a demonstrably erroneous rationale, the Law Court must reject the findings as clearly erroneous. Rule 53, M.R.Civ.P. requires that the court in which the action is pending adopt the referee's findings of fact unless clearly erroneous. Rule 52, M.R.Civ.P., states that on review, "(f) Indings of fact shall not be set aside unless clearly erroneous . . . . The findings of a referee, To the extent that the courts adopts them, shall be considered as the findings of the court." (Emphasis added). In the instant case, the Superior Court Justice found that there was evidence of probative value to support the referee's findings of fact. He did not explicitly adopt the referee's rationale, which, therefore, is not before this Court on review. The findings of the Superior Court will be upheld if supported by credible evidence on the record. Jolicoeur v. Kennebec Water District, Me., 356 A.2d 193 (1976).

SPECIFIC PERFORMANCE:

In Forbes II, we interpreted the agreement between Loew and Laskey for the sale of the Casino property to be a binding contract to sell for the highest cash bid. We construed the words "highest cash offer" to mean the highest Good faith cash offer, and concluded "that if the Plaintiff can demonstrate that Laskey's higher bid was not bona fide, then Plaintiff is entitled to purchase the property." 307 A.2d at 220.

A. Whether plaintiff is the highest good faith bidder.

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