Grozier v. Post Pub. Co.

• Decision Date: 14 February 1961
• Citation: 342 Mass. 97,172 N.E.2d 266
• Parties: Helen D. GROZIER, executrix and trustee, v. POST PUBLISHING COMPANY et al. (and a companion case).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 266

172 N.E.2d 266

342 Mass. 97

Helen D. GROZIER, executrix and trustee, v. POST PUBLISHING COMPANY et al. (and a companion case).

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 5, 1960.

Decided Feb. 14, 1961.

George Broomfield, Boston, for Fox.

Francis J. Ulman, Boston, for Grozier.

Before WILKINS, C. J., and SPALDING, WILLIAMS, CUTTER, and KIRK, JJ.

CUTTER, Justice.

These are appeals upon a consolidated record from final decrees in two equity proceedings. One suit was brought by Mrs. Grozier (the executrix) as surviving executrix and successor trustee of the will of Richard Grozier against Post Publishing Company (Publishing) and John Fox. The other suit was by Fox and Publishing against Second Bank-State Street Trust Company (State Street) and the executrix. The executrix seeks to enforce an agreement, dated June 17, 1952 (the 1952 agreement). By this, she and her then co-executor, who has since died, undertook to sell to Fox all the stock of Publishing. Fox's bill, apart from asking injunctive relief no longer of importance, sought to obtain an accounting and a determination that the executrix had made false representations in violation of the 1952 agreement and that there had been breaches of warranties contained in that agreement. The cases were tried together.

The trial judge found the following facts. The 1952 agreement set September 2, 1952, as the closing date for the sale of the stock for $4,000,000, less the amount of Publishing's operating loss for the eight months from January 1, 1952, to August 31, 1952, to be computed on a basis and by a procedure mentioned in the margin. ¹ All Publishing's stock was to be deposited on the closing date with State Street as escrow agent and Fox was then to pay $2,000,000 'as an initial payment.' The balance was to be paid, one half on or before February 28, 1953, ² and the remainder on or before August 31, 1953. Fox paid $1,300,000 on September 15, 1952, but did not complete payment even of the whole balance of the $2,000,000 due on September 2, 1952, until June 10, 1953.

In December, 1952 'an audit report was submitted by Ralph S. Perkins & Co. [Perkins] which, subject to certain qualifications * * *, showed * * * [the] net loss * * * for the eight months. * * * This was reviewed by * * * accountants for * * * [Fox] and certain adjustments * * * were agreed upon.' On March 2, 1953, this was adjusted 'subject only to adjustments for accounts receivable uncollected on June 30, 1953, and possible losses in pending law suits.' On March 1, 1955 (the judge in his findings by inadvertence refers to an interim of April 7, 1954), a final net loss of $761,535.95 was certified by Perkins. No request was made by Fox for review of the certifications. Upon the basis of these, a total price of $3,238,465.05 was due to the executrix. By August 13, 1953, a total of $2,365,000 had been paid, leaving an 'unpaid balance * * * [of] $873,464.05.'

The 1952 agreement also provided (a) that Fox, 'for the duration of the escrow agreement, [would] exercise the rights appertaining to the stock only in such manner as will maintain * * * [Publishing] as a going concern * * * and shall vote the stock only so long as there shall be no default' under the 1952 agreement or the escrow agreement, and (b) that Fox would make 'no withdrawals of the assets of' Publishing during the continuance of the escrow agreement, unless the withdrawals were delivered to the escrow agent to be applied in reduction of the unpaid balance. In various respects ³ described more fully in the margin, Fox failed to comply, or to cause Publishing to comply, with these provisions. On August 16, 1956, Publishing filed a voluntary petition in bankruptcy.

The breaches of warranty alleged by Fox related principally (1) to an alleged understatement of severance pay liability in Publishing's balance sheet of December 31, 1951, warranted by the executrix to be 'true and complete'; (2) to a failure to disclose 'secret agreements' with certain executives and workers; and (3) to alleged inaccuracies in Perkins's statement of the eight-month loss. The trial judge found that the balance sheet as of December 31, 1951, 'reflected a normal operation of the exercise of severance of * * * employees.' He also found that any losses to Publishing by reason of the so called 'secret agreements' amounted only to some $23,000 to $24,000, in the aggregate; that Fox did not give seasonable notice of one group of losses; and that the losses, in any event, were less than the $173,768.28 owed by Publishing to the executrix on an unpaid demand note of August 29, 1952, for a loan made by the executrix after the execution of the 1952 agreement.

The trial judge concluded that Fox was bound by Perkins's determination of the eight-month losses; that the final price to be paid was $3,238,464.05; that because Fox did not make the payment due on February 28, 1953, the entire unpaid balance ($1,552,732.12) then became due; that the December 31, 1951, balance sheet presented a true, complete statement of Publishing's financial condition at that time; that there was no breach of warranty with respect to Publishing's reserve for severance and death benefits; that Fox failed to give notice of his claim of certain alleged breaches of warranty 'with reasonable promptness after acceptance of * * * [Publishing's] stock and * * * business'; and that the executrix is entitled to set off an obligation to indemnify Publishing for about $6,000 to $7,000 against the much larger sum owed to the executrix on Publishing's demand note. The judge also concluded (a) that Fox owed the executrix '$873,464.05 * * * with interest,' and (b) that the executrix had performed her obligations under the 1952 agreement and escrow agreement and Fox had not done so.

A final decree was entered (a) enjoining Fox from action no longer of practical importance because of Publishing's bankruptcy, and (b) ordering Fox to pay to the executrix $1,161,052.32. The final decree upon the bill brought by Fox determined (a) that Fox owed State Street $553.37 upon a counterclaim for expenses, and (b) dismissed the bill. Fox has appealed from each decree. The evidence is reported. We consider only questions argued in Fox's brief with adequate clarity. See Rule 13 of the Rules for the Regulation of Practice before the Full Court (1952), 328 Mass. 698; Lolos v. Berlin, 338 Mass. 10, 13-14, 153 N.E.2d 636.

1. The trial judge correctly ordered Fox to pay the balance of the price with interest. The tentative price of $4,000,000 was to be adjusted (see footnote 1, supra) only by the eight-month loss, determined in a particular manner. The trial judge was justified in finding that Perkins finally certified the amount of the eight-month loss, that Fox's accountants negotiated certain adjustments in the amount so determined, and that Fox did not request a review of the determination by Haskins & Sells. That firm in effect had been given final authority to appraise the amount of the loss if the parties did not accept the Perkins determination. See Eliot v. Coulter, 322 Mass. 86, 89-91, 76 N.E.2d 19. Cf. Martignette v. Sagamore Mfg. Co., 340 Mass. 136, 138-139, 163 N.E.2d 9. Any request by Fox for a review by Haskins & Sells had to be made within fifteen days after receipt of Perkins's certification. In the absence of such a request, Perkins's determination thus became 'the conclusive determination of the operating loss.' The judge could not reasonably have found that this requriement of a request for a review, or any requirement of notice under the 1952 agreement, was ever waived by the executrix. Instead, the evidence indicates that her counsel in all relevant respects insisted upon her strict rights.

The contract did provide (see footnote 1, supra) for certain later adjustments of items not 'determinable or determined prior to January 1, 1953.' Fox argues that Perkins gave no allowance for certain advertising rebates, credits for newspaper returns, and vacation pay, which might affect the eight-month loss. The trial judge was not required to believe testimony that these items were not properly taken into account by Perkins. Indeed, from Perkins's report 'that the final net loss * * * [for the eight-month period] is $761,535.95,' the most reasonable inference was that the report was complete. It could appropriately be regarded as in effect a certification that Perkins had disposed of all relevant items after proper consideration, particularly in the light of evidence that Perkins's computations had been checked for Fox by his auditing advisers, Leidesdorf & Company, and by one Linton, and that 'the final results were approved and accepted by * * * [Linton] as well as by * * * Leidesdorf & Company.' The judge could also reasonably rely on testimony, which need not be set out here, that Linton in a letter of February 20, 1953, and Fox in one of April 23, 1953, and in testimony before the Federal Communications Commission in December, 1954, had admitted in effect the propriety of Perkins's determinations (at least so far as not affecting the severance pay reserve).

Fox has failed to establish any basis for any present contest of Perkins's determination. There was no error in the decree that the executrix is now entitled to recover the unpaid balance of the purchase price fixed pursuant to Perkins's final certificate.

2. In the 1952 agreement, the executrix, among other things, warranted (a) that Publishing's December 31, 1951, balance sheet was 'true and complete'; (b) that, except as therein reflected or reserved against, and except for newsprint, labor, and certain executory agreements, Publishing then had no liability of any nature; and (c) that, except for such executory labor and union contracts (among others specified), no commitments extended beyond August 31, 1952. The executrix agreed to indemnify Publishing and Fox 'at all times' against any damage from any...