Matteson v. Wm. S. Sweet & Son, Inc.
| Decision Date | 09 July 1937 |
| Docket Number | No. 1310.,1310. |
| Citation | 193 A. 171 |
| Parties | MATTESON v. WM. S. SWEET & SON, Inc. |
| Court | Rhode Island Supreme Court |
Appeal from Superior Court, Providence and Bristol Counties; Patrick P. Curran, Judge.
Suit by Thomas H. Matteson against Wm. S. Sweet & Son, Incorporated, wherein a receiver was appointed for the defendant corporation. From a decree impressing assets in the hands of the receiver with an equitable charge in favor of the Providence Fruit & Produce Building, Incorporated, the receiver appeals.
Reversed and remanded with directions.
Hart, Gainer & Carr and Edward G. Carr, all of Providence, for Providence Fruit & Produce Building, Inc. Arabian, Gonnella & Barad, of Providence, for receiver.
This proceeding is before us on an appeal by the receiver of the respondent corporation from the entry of a decree by the superior court under which certain assets in his hands are impressed with an equitable charge of $505 in favor of Providence Fruit &, Produce Building, Inc., which sum the receiver is ordered to pay to such last-named corporation.
The record shows that Providence Fruit & Produce Building, Inc., a corporation, hereinafter referred to as the lessor, rented certain space in its building to the respondent corporation, which we shall term the lessee, and which conducted in such premises a produce business. The original letting was under a written lease for one year, which lease was renewed and extended from year to year by written renewals duly executed thereon. The last renewal was made April 1, 1935, to extend the lease from April 15, 1935, to April 15, 1936. On September 9, 1935, a temporary receiver of the respondent was appointed under the statute by the superior court, such receiver thereafter being made permanent. The purpose of the receivership proceedings was to dissolve the respondent corporation, it being alleged that such corporation was unable to meet its obligations as they came due.
The original lease contained the following provision: "And the said lessee covenants that in case of the termination of said lease in any manner specified in the foregoing proviso, said lessee will indemnify and save harmless the lessor against all loss of rent or other payments which it may suffer by reason of such termination; and that all fixtures, furniture and improvements and all goods, wares, merchandise and stock in trade of whatsoever name or nature that said lessee may put in or about the premises, hereby are and shall be and shall stand pledged for the fulfillment of the covenants and agreements herein contained * * *."
This court has held that, the lease being valid, such a provision constitutes a contract for a lien, enforceable in equity, on the property covered, whenever the lessee is in default on payments due under the lease. Groton Mfg. Co. v. Gardiner, 11 R.I. 626.
In the instant cause it is agreed that the lessee, at the time the receivership proceedings were instituted, owed the lessor $1,021.82 for rent and other payments due under the renewal of the lease in question. It is also undisputed that the receiver is holding, subject to the determination of the present appeal, the sum of $505, being the proceeds of the sale of fixtures and produce formerly belonging to the lessee.
The receiver of the respondent corporation contends that the lease in question and the present renewal thereof are invalid, and hence that the lessor is not entitled to an equitable charge or lien on the property of the lessee or on the proceeds of the sale of such property. The lessor disputes the position taken by the receiver. The first matter to be considered is the bearing and effect, if any, of section 21, chapter 248 of General Laws 1923, on the lease and the renewal thereof. That section is as follows:
The facts proved in the present proceeding reveal that the lessor and the lessee corporations which were contracting with each other by way of lease had a common director, one William S. Sweet. It appears from the evidence that the original lease and the present renewal were signed by the president of the lessor and William S. Sweet, its secretary, who had been a member of its board of directors since the corporation was organized. The lease and renewal were executed on behalf of the lessee by the same William S. Sweet, who did not state in what capacity he signed for that corporation. The evidence shows, however, that he had been vice president and active manager of the lessee for some time, and had been on its board of directors for at least five years.
The law generally as applicable to transactions between corporations having one or more common directors is fully set out with citations of cases in 3 Fletcher Cyc. Corps. (Perm.Ed.) §§ 961-964. The decisions are not uniform. By the weight of authority, however, such transactions are not void but only voidable. The cases are in conflict as to what it is necessary to show in order to have the transaction set aside or avoided. Certain jurisdictions, adopting a strict rule, hold that the mere fact that there are common officers is sufficient to bring about that result, without considering the merits or fairness of the transaction.
In section 961, supra, the author makes the following statement as representing...
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...void or voidable merely because not approved or ratified in accordance with the foregoing provisions.' In Matteson v. Wm. S. Sweet & Son, Inc., 58 R.I. 411, 193 A. 171, 114 A.L.R. 293, this court held that § 7-4-7 fixes the only proper method whereby a corporation can contract with a direct......
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...When we consider such evidence together with the inferences fairly and reasonably deducible therefrom, Matteson v. Wm. S. Sweet & Son, Inc., 58 R.I. 411, 417, 193 A. 171, 114 A.L.R. 293, it shows that the break in the pipe was solely attributable to the failure of defendant's employees, not......
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