Higbie v. Higbie

• Court: Michigan Supreme Court
• Writing for the Court: CHANDLER
• Citation: Higbie v. Higbie, 306 Mich. 577, 11 N.W.2d 248 (Mich. 1943)
• Decision Date: 11 October 1943
• Docket Number: No. 75.,75.
• Parties: HIGBIE et al. v. HIGBIE et al.

306 Mich. 577

11 N.W.2d 248

HIGBIE et al.

v.HIGBIE et al.

No. 75.

Supreme Court of Michigan.

Oct. 11, 1943.

Action by Carlton M. Higbie and another against N. Bradley Higbie, Jr., Shatterproof Glass Corporation, and others, for an injunction to prevent the Shatterproof Glass Corporation and William B. Chase from having anything to do with operation of the McAleer Manufacturing Company, and to set aside an alleged contract, wherein the Shatterproof Glass Corporation and William B. Chase filed a cross-bill for specific performance. From a decree for plaintiffs, the Shatterproof Glass Corporation and William B. Chase appeal.

Affirmed.

Appeal from Circuit Court, Oakland County, in Chancery; Frank L. doty, judge.

Before the Entire Bench.

Clark, Klein, Brucker & Waples, of Detroit (Pelton & McGee, of Pontiac, of counsel), for appellees.

Armstrong, Weadock, Essery & Helm, of Detroit, for appellees N. Bradley Higbie, Jr., and McAleer Mfg. Co.

Fred Dye, of Detroit (Butzel, Eaman, Long, Gust & Bills, of Detroit, of counsel), for appellants Shatterproof Glass Corporation and William B. Chase.

CHANDLER, Justice.

The record of the testimony in the instant case is a voluminous one and shows much conflict. However, such conflict appears quite largely on matters we deem of little importance to the real controversy involved herein.

We find that the facts, considering the size of the record, are so concisely and understandingly stated in the findings and conclusions of the trial court that we quote his opinion in full:

‘The question in this case arises out of a purported contract under date of February 13, 1942, whereby Carlton M. Higbie Corporation, a Michigan corporation, undertook to sell and the Shatterproof Glass Company, a Delaware corporation, undertook to purchase 57,949 1/2 shares of common stock, one dollar par value, of the McAleer Manufacturing Company, a Michigan corporation.

‘The case also involves a contract of even date between N. Bradley Higbie, Jr., and the Shatterproof Glass Corporation for the sale and purchase of 32,130 shares of common stock, par value one dollar, of McAleer Corporation. The binding effect of this particular contract is contingent upon that between the Carlton M. Higbie Corporation and the Shatterproof Glass Corporation and stands or falls with it.

‘To understand the situation and the questions involved it is necessary to briefly relate some of the background leading up to the negotiations culminating in the transaction for the purchase and sale of the stock of the McAleer Corporation.

‘For several years the McAleer Corporation, located at Rochester, Michigan, was engaged in the business of manufacturing and sale of automobile body polish and floor wax, also, as a side line, heaters for automobiles. The war situation, coupled with poor business management, put the company in an unsound financial condition.

‘Visualizing the possibility of salvaging something from the company and putting it on its feet, so to speak, in 1941, the Carlton M. Higbie Corporation and N. Bradley Higbie, Jr., purchased ninety per cent of the McAleer stock, consisting of 90,079 1/2 shares of common stock, par value one dollar, about sixty-one per cent going to Carlton M. Higbie Corporation and twenty-nine per cent to N. Bradley Higbie, Jr.

‘The business of the McAleer Corporation was taken over and operated from then on by the new owners of the stock. N. Bradley Higbie, Jr., became the President and General Manager and Carlton M. Higbie, Chairman of the Board of Directors.

‘It became necessary during 1941 for the Carlton M. Higbie Corporation to advance money to the McAleer Corporation from time to time in order to keep the McAleer Corporation in operation.

‘The financial condition of the Company, owing to war conditions, did not improve, and other fields of endeavor were being considered. Late in 1941 N. Bradley Higbie, Jr., through certain contacts and suggestions from others, conceived the idea of manufacturing aeroplane flares for the Ordnance Department of the War Department. Prime contractors were obtained, these being the Brunswick-Balke-Collender Company and the Kalamazoo Stove Company. In this way the McAleer Corporation obtained an A 1 A priority rating for material to be used in the construction and manufacture of the flares. After some experimentation the McAleer Company started production on a small scale. To carry out the program large amounts of money were needed and its source was in doubt.

‘N. Bradley Higbie, Jr., President of McAleer and a heavy stockholder of Shatterproof Glass Corporation, located in Detroit, was on very friendly terms with William B. Chase, President of Shatterproof.

‘Shatterproof Glass had also been affected by war conditions and the declaration of war by this Country practically ruined its business. William B. Chase, its President, then began looking around for other fields of operation.

‘Then occurred a meeting between N. Bradley Higbie, Jr. and William B. Chase, whereat the sale and purchase of the stock of the McAleer Corporation was proposed, N. Bradley Higbie being anxious to sell and William B. Chase being anxious to buy.

‘Before any definite commitments were made it was necessary for N. Bradley Higbie to contact his brother, Carlton M. Higbie, President of the Carlton M. Higbie Corporation, a holder of the majority of the stock. This was done. Exchange telegrams took place between Carlton M. Higbie and William B. Chase, setting forth proposals of sale and purchase of the McAleer stock.

‘On February 8, Carlton M. Higbie met William B. Chase at the latter's home in Northville. Again the details and conditions of sale were discussed to the extent that Fred Dye, attorney for Shatterproof Glass, was instructed to draft a proposed agreement to be checked by William Essery, attorney for the McAleer Corporation.

‘As the business of Carlton M. Higbie kept him out of Detroit a great deal of the time he agreed that N. Bradley Higbie, Jr., his brother, President of McAleer, conduct preliminary negotiations, but the final draft must be approved by Duncan McNabb, Vice-President of the Carlton M. Higbie Corporation. Various drafts of the proposed contract were drawn and finally, on February 13, one, being apparently satisfactory to both sides, was signed and is known in this case as Exhibit 1. Duncan McNabb signed in behalf of the Carlton M. Higbie Corporation. Before signing it a controversy arose over paragraph 2 of the proposed contract, which paragraph reads as follows:

“Price: The price at which such shares shall be sold and purchased shall be determined by ascertaining the true, sound, genuine net asset valud of said McAleer Manufacturing Company as of the date hereof, such value to be determined by means of a balance sheet from the books of account of McAleer Manufacturing Company to December 31, 1941, now in the process of preparation by Lawrence Scudder and Company, Certified Public Accountants, as modified by changes therein between December 31, 1941, and this date, such changes to be determined by reference to socalled ‘company figures' or in such other manner as may be approved by the accounting firm of White, Bower and Prevo of Detroit, Michigan. Any items included in such balance sheet which the purchaser may question as being in excess of true, sound, genuine asset values, shall be subject to decrease by mutual agreement between said accounting firms of White, Bower and Prevo, and Lawrence Scudder and Company, or, in the event such two accounting firms shall not be able to agree as to any item or items, by an umpire to be selected by such two accounting firms, whose decision on such item or items submitted to him shall be final. When such net asset value has been determined, such figure shall be divided by the total number of issued and outstanding shares of McAleer Manufacturing Company to determine the value per share, and such value per share, subject to the adjustments hereinafter set forth shall be applied to the shares, the subject of this agreement. The purchase price of said shares to be determined shall be subject to the following adjustments:’

‘McNabb signed the proposed contract on the advice and understanding that the ‘true, sound, genuine, net asset value of said McAleer Manufacturing Company as of the date hereof’ meant appraised value.

‘Acting on this understanding of paragraph 2, McNabb sent to McAleer Corporation, on February 16, appraisers to appraise the assets of that company. This appraisal was completed February 28. The appraisal showed something like thirty-eight thousand dollars above the value as show by the books of the company.

‘Then trouble started and intense bitterness developed. Certain modifications to the original agreement, Exhibit 1, were made, which were accepted, but the main controversy was over the interpretation of paragraph 2 of Exhibit 1, which was never agreed upon. Plaintiff claims that it means ‘appraised value,’ defendant ‘book value.’ Shortly after February 13 numerous meetings were held and arguments continued to April 11. These meetings and discussions usually revolved upon the meaning of paragraph 2 of Exhibit 1. Additions to Exhibit 1, modifications of Exhibit 1, substitutions for Exhibit 1 were discussed, drafted and redrafted. Finally it was agreed upon that Mr. Dye and Mr. McNabb try to settle the controversy between themselves. After two days those two parties agreed upon what is known in this case as Exhibit 10B. This William B. Chase refused to sign. Other proposals, such as Exhibit 3, were submitted to Mr. McNabb which he refused to sign and so the arguments and controversy continued.

‘In the meantime the Shatterproof Glass moved into McAleer, took possession, moved books, records, purchasing and sales departments to the offices of the Shatterproof Glass Company, at Detroit. Mr. Chase also sent employees from the Shatterproof to McAleer in Rochester and assumed general command of the...