Martignette v. Sagamore Mfg. Co.

Citation340 Mass. 136,163 N.E.2d 9
PartiesCharles J. MARTIGNETTE and others v. SAGAMORE MANUFACTURING COMPANY and others.
Decision Date17 December 1959
CourtUnited States State Supreme Judicial Court of Massachusetts

Edward J. Flavin, Boston, David J. Cohen, Boston, for plaintiffs.

James D. St. Clair, Boston, Earle C. Cooley, Boston, for defendant Sagamore Mfg. Co.



The plaintiffs, having voted their 564 shares of the common stock against the proposal, effective August 10, 1956, to consolidate their corporation with two other corporations, made demand upon the consolidated corporation, the defendant (Sagamore), within the statutory 30 day period (G.L. c. 156, § 46E) for payment for their shares. Failing agreement on the value, the plaintiffs and Sagamore each appointed an appraiser as the statute provides (G.L. c. 156, § 46E, by reference to § 46 1). The two appraisers could not agree on a third and the plaintiffs brought this bill of complaint for the appointment of an appraiser, and to require payment of the awards with interest from the date of consolidation. The court appointed the third appraiser and the parties stipulated that this was to have the same legal effect as though he had been named by the other two.

On September 22, 1958, a majority of the appraisers reported to the parties their finding that the value of the common stock on August 10, 1956, within the meaning of the statute, was $145 per share. The nominee of Sagamore dissented. There followed in the Superior Court a hearing pursuant to an order to 'find what determination was made by a majority of the appraisers * * * and take whatever further action is required.' The judge filed 'Findings and Order for Final Decree' which set out, inter alia, the facts stated in this opinion. The final decree ordered Sagamore to pay to the plaintiffs for their shares total sums computed at $145 per share with interest at six per cent a year from September 10, 1956, and that each plaintiff upon receiving the payment forthwith transfer and assign his stock certificate to Sagamore. This is Sagamore's appeal from the final decree. Sagamore contends that the decree errs in confirming an award bad in law because it exceeded the shown market value of the shares and because not made by all the arbitrators, and also errs in the award of interest.

1. The findings of the appraisers, though 'final' (G.L. c. 156, § 46), are subject to review for error of law. This is not a case where parties have agreed that there shall be paid whatever others determine shall be paid (see New England Trust Co. v. Abbott, 162 Mass. 148, 153, 38 N.E. 432, 27 L.R.A. 271; Krauss v. Kuechler, 300 Mass. 346, 349, 15 N.E.2d 207, 117 A.L.R. 1355; Eliot v. Coulter, 322 Mass. 86, 89-90, 76 N.E.2d 19, and cases cited; Jordan Marsh Co. v. Beth Israel Hosp. Ass'n, 331 Mass. 177, 185-186, 118 N.E.2d 79; Lewis v. H. P. Hood & Sons, Inc., 331 Mass. 670, 121 N.E.2d 850, 48 A.L.R.2d 383), or to be bound by the award of arbitrators. See Baldwin v. Moses, 319 Mass. 401, 402, 66 N.E.2d 24; Phaneuf v. Corey, 190 Mass. 237, 247, 76 N.E. 718. The statute requires a transfer of property and a payment, not of whatever sum the appraisers say, but of the 'value of the stock' as ascertained by them. It is implicit that the parties will respectively have to pay and to receive what the statute means by 'value,' as determined by the appraisers in their honest judgment. If it is shown that the appraisers have not so acted as to give them this, their findings are not enforceable. See, as to review of error in the findings or determinations of administrative or executive officers or boards, whose findings are, by statute, final, McLaughlin v. Mayor of Cambridge, 253 Mass. 193, 199-200, 148 N.E. 458; Pacific Mills v. Director of Div. of Employment Security, 322 Mass. 345, 346, 77 N.E.2d 413; Moen v. Director of Div. of Employment Security, 324 Mass. 246, 247, 85 N.E.2d 779, 8 A.L.R.2d 429. See also Santa Fe Pac. R. Co. v. Fall, 259 U.S. 197, 42 S.Ct. 466, 66 L.Ed. 896; Silberschein v. United States, 266 U.S. 221, 225, 45 S.Ct. 69, 69 L.Ed. 256; United States v. Williams, 278 U.S. 255, 257-258, 49 S.Ct. 97, 73 L.Ed. 314; Dickinson v. United States, 346 U.S. 389, 394, 74 S.Ct. 152, 98 L.Ed. 132.

We need not now determine to what extent the procedure must be such as to present questions of law, there being no statutory or other express rules governing the appraisal. Here evidence of what the appraisers did was received under an interlocutory decree to which no exception was taken.

It is to be expected that, in jurisdictions where the court appoints the appraisers, questions of law will be reviewed. See Chicago Corp. v. Munds, 20 Del.Ch. 142, 172 A. 452; Republic Fin. & Inv. Co. v. Fenstermaker, 211 Ind. 251, 252, 6 N.E.2d 541; American Gen. Corp. v. Camp, 171 Md. 629, 190 A. 225; Wall v. Parrot Silver & Copper Co., 244 U.S. 407, 37 S.Ct. 609, 61 L.Ed. 1229 (Montana statute); Prall v. United States Leather Co., 6 N.J.Misc. 967, 143 A. 382, affirmed 105 N.J.L. 646, 146 A. 916; Matter of Bickerton, 232 N.Y. 1, 133 N.E. 41; Roessler v. Security Sav. & Loan Co., 147 Ohio St. 480, 72 N.E.2d 259; Adams v. United States Distrib. Corp., 184 Va. 134, 34 S.E.2d 244, 162 A.L.R. 1227. So also in States where the court determines the value. See Fenderson v. Franklin Light & Power Co., 120 Me. 231, 113 A. 177; Johnson v. C. Brigham Co., 126 Me. 108, 136 A. 456; Ahlenius v. Bunn & Humphreys, 358 Ill. 155, 165-166, 192 N.E. 824, 95 A.L.R. 913; N.Y.Consol.Laws, c. 59, § 87, by reference to § 21 (court in New York now determines value or appoints an appraiser).

The issue was raised in New York when the statute (N.Y.Consol.Laws, c. 59, § 17) provided for application to the Supreme Court for the appointment of three appraisers and that 'they or any two of them, after being duly sworn * * * shall estimate and certify the value of such stock * * *. When the corporation shall have paid the amount of such appraisal, as directed by the court, such stockholder shall cease to have any interest in such stock * * *.' Matter of Bickerton, 232 N.Y. 1, 6-10, 133 N.E. 415, held that the court had the incidental power and the duty to examine the proceedings and that the appraisers were obliged to proceed on competent evidence and preserve a record. Contrast Hanley v. Aetna Ins. Co., 215 Mass. 425, 430, 102 N.E. 641; Eliot v. Coulter, 322 Mass. 86, 89-90, 76 N.E.2d 19.

2. It does not appear that there was error in the finding that the value was $145 per share.

We pass the point that the findings show that there was evidence before the appraisers not shown to the court which conceivably could have controlled the result. The judge after stating evidence which the appraisers considered found that they 'also heard counsel for the plaintiffs and for the corporation, at which hearing arguments were heard and additional material and data was furnished the appraisers by the parties * * * [which the] appraisers considered * * * in determining the value.'

Turning to the evidence in the record, we note that the appraisers had evidence of over the counter sales of 648 shares of the stock from February 13, 1956, to August 10, 1956, at prices per share from $100 to $119. The stock was not listed on any exchange. There were 28,295 outstanding shares. The appraisers also had balance sheets, profit and loss statements, the dividend record, a breakdown of the inventory, and statements of the market value of the corporation's securities, uncollected receivables, a five year record of machinery purchases and sales, fire insurance in force, and insurance appraisals.

The appraisers rightly did not confine themselves to the evidence of over the counter sales. This court in 1916 in Cole v. Wells, 224 Mass. 504, 512-513, 113 N.E. 189, 191, in construing the statute said, 'It is obvious that 'the value of the stock' means not merely the market price if the stock is traded in by the public, but the intrinsic value, to determine which all the assets and liabilities must be ascertained.' Although it is true, as Sagamore says, that this ruling was not necessary to the decision and was said in respect of stock not shown to have had a market, we think the rule should not be recast in terms of market value.

Courts elsewhere, under statutes which specify 'value' or 'fair value' or 'fair cash value' (32 Col.L.Rev. 60, 67), reject the confining connotations of 'market' and state broad rules. Chicago Corp. v. Munds, 1934, 20 Del.Ch. 142, 153-154, 172 A. 452; Tri-Continental Corp. v. Battye, 31 Del.Ch. 523, 74 A.2d 71; Ahlenius v. Bunn & Humphreys, 1934, 358 Ill. 155, 167, 192 N.E. 824, 95 A.L.R. 913; Republic Fin. & Inv. Co. v. Fenstermaker, 211 Ind. 251, 6 N.E.2d 541; American Gen. Corp. v. Camp, 171 Md. 629, 637, 190 A. 225; Matter of Fulton, 257 N.Y. 487, 493-495, 178 N.E. 766, 79 A.L.R. 608; Matter of Marcus, 273 App.Div. 725, 79 N.Y.S.2d 76; Matter of Silverman, 1953, 282 App.Div. 252, 122 N.Y.S.2d 312; Roessler v. Security Sav. & Loan Co., 1947, 147 Ohio St. 480, 482-483, 72 N.E.2d 259; Adams v. United States Distrib. Corp., 184 Va. 134, 146, 34 S.E.2d 244, 162 A.L.R. 1227; 32 Col.L.Rev. 60, 66 et seq. 45 Harv.L.Rev. 233, 258 et seq. 47 Harv.L.Rev. 847, 851 ('market price' measure is 'rarely recognized'). See Robbins v. Beatty, 1954, 246 Iowa 80, 91, 67 N.W.2d 12. Compare Prall v. United States Leather Co., 6 N.J.Misc. 967, 143 A. 382, affirmed 105 N.J.L. 646, 146 A. 916 (statute reading 'market value').

Cole v. Wells, supra, brings forward the distinction between 'market price' and 'value.' Because under ideal conditions market price will reflect all valuable aspects of property, the common statement of the rule is in terms of market value. Conditions may be such, however, that market price will not adequately show value and other evidence is required. Tigar v. Mystic River...

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12 cases
  • Shear v. Gabovitch, 94-P-152
    • United States
    • Appeals Court of Massachusetts
    • October 14, 1997
    ...did here, by finding the value represented by all the shares and apportioning pro rata. See Martignette v. Sagamore Page 1187 Mfg. Co., 340 Mass. 136, 138-143, 163 N.E.2d 9 (1959); Piemonte v. New Boston Garden Corp., 377 Mass. 719, 724-734, 387 N.E.2d 1145 (1979); Sarrouf v. New England Pa......
  • Valuation of Common Stock of Libby, McNeill & Libby, In re
    • United States
    • Supreme Judicial Court of Maine (US)
    • August 16, 1979
    ...held stock bought for investment by well informed persons (are) entitled to 'considerable weight'." Martignette v. Sagamore Mfg. Co., 340 Mass. 136, 139, 163 N.E.2d 9, 13 In the case at bar the appraiser recommended assigning stock market price a weight of 40%. The dissenting shareholders a......
  • Simonds v. Guaranty Bank & Trust Co., Civ. No. 74-1105-K.
    • United States
    • United States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of Massachusetts
    • April 30, 1980 scope, as is the review undertaken by this court in the remainder of this opinion. Cf. Martignette v. Sagamore Manufacturing Co., 340 Mass. 136, 163 N.E.2d 9 (1959) (though Mass.Gen.Laws ch. 156, § 46 provides that findings of appraisers as to value of dissenting shareholder's stock shal......
  • Sarrouf v. New England Patriots Football Club, Inc.
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • May 14, 1986
    ...significant earnings prospects, the earnings and worth of the corporation as a going concern are important. Martignette v. Sagamore Mfg., 340 Mass. 136, 142-143 [163 N.E.2d 9] (1959) (Whittemore, J.). Piemonte v. New Boston Garden Corp., 377 Mass. 719, 724 [387 N.E.2d 1145] (1979)." In the ......
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1 books & journal articles
  • "Fair value" as an avoidable rule of corporate law: minority discounts in conflict transactions.
    • United States
    • University of Pennsylvania Law Review Vol. 147 No. 6, June 1999
    • June 1, 1999
    ...N.E.2d 14 (Mass. App. Ct. 14 applies control premium (Mass. App. Ct. 1992). Martignette v. Sagamore Mfg. MA Rejects implicit minority Co., 163 N.E.2d 9 (Mass. discount 1959). Pooley v. Makato Iron & Metal, MN Rejects minority discount Inc., 513 N.W.2d 834 (Minn. Ct. App. 1994). Foy v. K......

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