Maybury v. Spinney-Maybury Co.

• Decision Date: 13 April 1923
• Citation: 120 A. 611
• Parties: MAYBURY v. SPINNEY-MAYBURY CO.
• Court: Maine Supreme Court

120 A. 611

MAYBURY

v. SPINNEY-MAYBURY CO.

Supreme Judicial Court of Maine.

April 13, 1923.

Report from Supreme Judicial Court, Knox County, in Equity.

Bill in equity by James H. Maybury, for the dissolution and distribution of the assets of the Spinney-Maybury Company. On report from the Supreme Judicial Court of Knox County. Decree ordered to be entered accepting report of special master as modified. Final decree to be entered upon report of receiver, and final distribution ordered.

Argued before CORNISH, C. J., and SPEAR, HANSON, DUNN, MORRILL, and DEASY, JJ.

Arthur S. Littlefield, of Portland, for Alan L. Bird, receiver.

Walter Bates Farr, of Boston, Mass., for United Shoe Machinery Co.

MORRILL, J. The issues here presented to us relate solely to the account for which United Shoe Machinery Company, hereinafter sometimes called the claimant, may prove its claim against the defendant and share in the distribution of its assets.

Upon a bill filed May 12, 1917, a receiver of the defendant corporation was appointed on May 19, 1917. The United Shoe Machinery Company had delivered to the defendant, for the equipment of its factory, some 58 machines designed for use in the manufacture of boots and shoes; said machines were in the factory of defendant at Warren when the receiver was appointed. The contracts under Which the defendant used these machines vary in their terms, but all of them contain a clause in substantially the following words:

"If the lessee becomes insolvent or bankrupt, or has a receiving order made against him, or makes or executes any bill of sale, deed of trust or assignment for the benefit of his creditors * * * then and each such case any and all leases or licenses to use machinery then existing between the lessor and the lessee, whether as the result of assignment to the lessor or otherwise, shall at the option of the lessor cease and determine, and the possession of and full right to and control of all machinery the leases or licenses of which are so terminated, shall thereupon revest in the lessor free from all claims and demands whatsoever."

Each contract also contains a clause in some form reserving to the United Shoe Machinery Company the right to terminate the contract upon default by lessee or licensee in the observance of its terms, and that, upon termination of the contracts, the lessee or licensee shall forthwith deliver the machinery to the lessor or licensor at its factory, sometimes stated to be in Beverly, Mass., in good order and condition, reasonable wear and tear alone excepted.

On May 22, 1917, the United Shoe Machinery Company sent to Spinney-Maybury Company a notice reading:

"You are hereby notified that in the exercise of our rights in the premises, we have elected and hereby declare our option to terminate all leases and licenses which have heretofore been granted to you, covering machines belonging to us. You are hereby notified that the said leases, and licenses and all said rights and privileges are hereby terminated, revoked, canceled and annulled,"

enumerating the various machines covered by the several leases, and demanding that they forthwith be returned to the machinery company at Beverly, Mass. It also gave a like notice to the receiver.

The machinery was afterwards returned to the factory of the claimant at an expense of $81.50 for freight.

On March 9, 1918, a special master was appointed to pass upon claims against the defendant company; he allowed claims of the United Shoe Machinery Company as follows:

Actual repairs charges

$1,012 71

Return charges

4, 192 49

Royalties and rentals.

766 20

Mdse. account

322 82

Actual freight, etc

81 60

$6,375 82

Less credits

6 84

$6,368 38

The agreed statement of facts under which the case is submitted states:

"All the account except the merchandise and freight paid on return of machinery is disputed.

"The repairs, cost of which are given, were not simply those which were required by the machines that they might be in working order, nor those which were necessary, wear and tear excepted, but were such repairs as restored the machines to their original condition, by the replacing of all worn parts and restoring the machine and to all intents and purposes putting the respective machines in the same condition as they were when new.

"The return charges are in addition to these freight and repair items, and are claimed to be justified by the specific provision of the various leases, few of which contracts are precisely alike, in the clauses affecting the repairs and return charges."

Repair Charges—This item is claimed under a certain clause contained in seven of the contracts in question, substantially in the following terms in each contract:

"Upon the expiration or termination of this agreement or any extension thereof or of the lease and license herein contained the lessee shall forthwith deliver the leased machinery to the lessor at Beverly, Mass, in good order, reasonable wear and tear alone excepted, and shall thereupon pay to the lessor without prejudice to any other rights or remedies of the lessor such sum as may be necessary to put the leased machinery in suitable order and condition to lease to another lessee."

Upon this item the master allowed actual repair charges of $1,012.71. We think that this amount was properly allowed. Counsel for the receiver contends that these items arose after the receivership, and cannot be a claim against the funds in the hands of the receiver. The adoption of such a doctrine would limit altogether too narrowly the rights of creditors and the procedure in this class of cases. It is true that upon a strict construction of the language of the contracts, if a receiving order is made against the lessee, all leases terminate at the option of the lessor, and upon default by the lessee the lessor shall have the right by notice in writing to the lessee to terminate the contracts; yet the lack of any specific requirement of notice in the one case, or the termination by notice in writing in the other case, affords no ground for distinction in the probability of the repair charges. Some evidence of an election to exercise the option was required, and that election the claimant made known by the notice of May 22, 1917, ten days after the bill was filed and three days after the appointment of the receiver. The notice speaks in the present, "said leases and licenses and all said rights and privileges are hereby terminated," but the liability to pay, upon termination of the leases, the sum necessary to put the machinery in condition to lease to another lessee existed at the date the bill was filed. To exclude from sharing in the assets this debt or liability, the amount of which was determined within the time fixed by the court for presentation of claims, is in our opinion inconsistent with the equitable principles upon which these proceedings should be conducted. It does not matter that the claim was perfected by the act of the claimant, if such must be considered to be the effect of the notice of May 22, 1917; some notice of the election of the lessor to exercise its option was required and was contemplated by the terms of the leases. William Filene's Sons Co. v. Weed et al., Receivers, 245 U. S. 597, 602, 38 Sup. Ct. 211, 62 L. Ed. 497, 504. The form of the notice was appropriate to evidence an election. In re Desnoyers Shoe Co., 227 Fed. 401-405, 142 C. C. A. 97.

This bill is filed by a stockholder and officer, who is also a creditor of the defendant corporation, praying for its dissolution and for the equitable distribution of its assets. Jurisdiction in equity for that purpose is given by R. S. 1916, c. 51, §§ 82-88. The statute does not state what claims shall be provable; it does not prescribe procedure further than to fix a minimum period within which claims shall be presented. The corporation may be dissolved; the receiver is to collect and receive all property and assets of the corporation, convert the same into cash, and from time to time distribute them. "The debts of the corporation shall be paid in full, when the funds are sufficient; when not, ratably to those creditors, who prove their debts, as the law provides, or as the court directs," any balance is to be distributed among stockholders. Section 88. The court has jurisdiction in equity of all proceedings, and may take such orders and decrees as equity may require. Section 87.

It may be stated in a general way that, in equity proceedings for winding up the affairs of a corporation and distributing its assets among its creditors, where there is no-statute otherwise controlling, those creditors may share in the distribution of the fund, whose rights accrue while the fund is in the control of the court, and within a time consistent with an expeditious settlement of the estate. Pennsylvania Steel Co. v. New York City Ry. Co., 198 Fed. 721, 738-741, 117 C. C A. 503; N. Y. Security & Trust Co. v. Lombard Inv. Co. (C. C.) 73 Fed. 537; Woodland, Adm'r, v. Wise, 112 Md. 35, 76 Atl. 502 (in which it was held that the appointment of receivers for an insolvent corporation does not work its dissolution, in the absence of a judicial declaration to that effect, nor does it determine the rights of any of the parties concerned); People v. St. Nicholas Bank, 151 N. Y. 592, 45 N. E. 1129 (distinguishing between a chancery receivership and an assignment for the benefit of creditors whose powers and duties are prescribed by that instrument as in Matter of Hevenor, 144 N. Y. 271, 39 N. E. 393, cited by counsel for the receiver in the instant case); Kalkhoff v. Nelson, 60 Minn. 284, 62 N. W. 332 (which arose under a statute very similar to the one before us, holding that the procedure as to proof of claims is with the court, which may direct the manner in which claims may be proved, and that "all discussions of what claims may or may not be proved against the estate of an insolvent under bankrupt and insolvency laws, * * * are...