New England Theatres Inc. v. Olympia Theatres, Inc.

• Decision Date: 14 September 1934
• Citation: 192 N.E. 93,287 Mass. 485
• Parties: NEW ENGLAND THEATRES, Inc., v. OLYMPIA THEATRES, Inc., et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

287 Mass. 485

192 N.E. 93

NEW ENGLAND THEATRES, Inc.,

v.OLYMPIA THEATRES, Inc., et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 14, 1934.

Appeal from Superior Court, Suffolk County; Whiting, Judge.

Receivership proceedings by New England Theatres, Incorporated, against Olympia Theatres, Incorporated, and another, in which E. M. Loew's, Inc., and others were allowed to intervene. From the decrees the interveners appeal.

Decrees affirmed.J. J. Kaplan, B. A. Trustman, and L. B. Newman, all of Boston, for plaintiff.

L. A. Friedman and P. A. Atherton, both of Boston, for defendants.

RUGG, Chief Justice.

This is an appeal by intervening petitioners from two decrees; one, so far as now assailed, in substance and effect overruled a demurrer, denied a motion to dissolve a decree appointing receivers, and continued the receiverships; the other denied a motion to correct the record. The plaintiff is a corporation organized under the laws of Delaware, having a usual place of business in Boston. The two defendants are corporations organized under the laws of this Commonwealth, each having its usual place of business in Boston. The allegations of the bill as amended, filed on February 1, 1933, in brief are that the defendant Olympia Theatres, Inc., is indebted to the plaintiff and to others in large sums; that the defendant Olympia Operating Company is indebted to Olympia Theatres, Inc., in large sums, and the solvency of the latter depends to a substantial extent on the continued operation of the Olympia Operating Company; that the defendants, although solvent, are without sufficient quick assets to carry on business, are unable to borrow money for that purpose, and could not meet their liabilities as they matured; that attachments of their property have been made upon disputed claims, and other attachments are threatened; that an attempt by the plaintiff to enforce its claims at law would precipitate similar actions by others and would result in the waste and dissipation of the defendants' assets; and that, if a receiver were appointed, the defendants would be able to pay their liabilities. On the day the bill was filed, each defendant answered admitting its allegations and consenting to the appointment of receivers. A decree was entered appointing temporary receivers and notice was issued to all known stockholders, creditors and lessors of the defendants to show cause why the receivership should not be continued. Shortly thereafter, a petition for leave to intervene in behalf of itself and all other like attachment creditors of the defendants, was filed by E. M. Loew's, Inc., a corporation organized under the laws of this Commonwealth, setting out that it was an attaching creditor of the defendants by writ issuing out of the District Court of the United States for this district in actions under the antitrust laws of the United States, and challenging the jurisdiction of the court to appoint receivers and alleging that the proceedings were collusive in order to prevent the attachment by the intervener. Subsequently, other corporations were allowed to join as copetitioners and cointerveners with E. M. Loew's, Inc.

The case was heard by a judge of the Superior Court. Three questions were involved: (1) Whether the court had jurisdiction to appoint receivers, (2) whether the facts justified the appointment of receivers, and (3) whether there was such collusion in the appointment of the receivers that they should be discharged and the bill dismissed. The trial judge filed findings of fact, rulings, and order for decree. Those findings, so far as material to the grounds of this decision, are these: The plaintiff and the defendants are subsidiaries of the Paramount Publix Corporation, one of the largest corporations in the country engaged in the production, distribution and exhibition of moving pictures. In New England alone it controlled the showing of such pictures in more than two hundred theatres, operated mainly through the plaintiff and the defendants. It owned all the stock in the plaintiff. Its officers and employees constituted all the directors and officers of the plaintiff and a majority of those of Olympia Theatres, Inc., but a substantial minority represented other interests. The latter corporation wholly controls, through ownership of all its capital stock, the other defendant. The relations of the two defendants are so close and complex that the solvency of one depends upon the solvency of the other. Receivership of one should include the other. All the theatres owned and controlled by the plaintiff and defendants were managed from a central office in Boston through still another corporation owned by the Paramount Publix Corporation. Rent due for many theatres and interest on mortgages were unpaid with respect to theatres of the defendants, and these creditors were disturbed and were pressing for payment of the sums due. Large amounts of money had been paid in fitting up some of the theatres, which would be lost if the lease were terminated. On January 26, 1933, a receiver was appointed in New York for the Paramount Publix Corporation. It could no longer afford aid to the defendants. This precipitated financial difficulties for the defendants. The intervener and other creditors of its class brought actions in the Federal court and made attachments on January 30, 1933. Knowledge of these actions quickly reached other creditors of the defendants and other actions were threatened. These well might result in closing the theatres and destroying their goodwill and wasting many valuable assets.

While each defendant owed large sums of money, each was solvent, but neither had sufficient quick assets to continue business or to meet its obligations in the ordinary course of business. If the assets were conserved and the corporations efficiently managed, and their business continued, there would be sufficient to pay the debts and leave a substantial sum for the stockholders. The business could not be carried on except by a receiver, and a receivership was necessary to preserve the assets of the defendants. The plaintiff was a creditor of the defendant Olympia Theatres, Inc., to the extent of more than $350,000, and the Paramount Publix Corporation to the extent of more than $4,000,000. The plaintiff had made no demand upon that defendant for payment of its indebtedness prior to filing its bill. The object of this suit is not to collect its indebtedness but to conserve the assets of the defendants. The procedure to be followed in order to get receivers appointed was agreed upon by the parties before the suit was instituted and was carried out except as changed by the court. No ‘fraud or deceit was practiced upon the court in connection with the appointment’ of the receivers. Counsel for the plaintiff and for the defendants acted with propriety for the purpose of preserving the properties of the defendants so far as permitted by law and ‘did nothing illegal or unethical in the matter.’ There was no collusion in a sense importing moral obliquity or any secret agreement for a wrongful purpose. Disclosure of the whole situation was made to the judge. There were full acquiescence and agreement between the representatives of the Paramount Publix Corporation and its subsidiaries in an attempt to work out a plan for saving the assets of the plaintiff and the defendants. Many parties were represented and heard, but the intervening petitioner alone objected to the continuance of the receivership.

The trial judge upon the foregoing facts found by him refused to vacate the decree appointing receivers or to dismiss the bill, and ruled that the court had jurisdiction to appoint receivers. These conclusions were embodied in substance and effect in a decree entered on May 31, 1933, continuing the receiverships. That decree was so far final in its nature as to be appealable to this court. Cambridge Savings Bank v. Clerk of Courts, 243 Mass. 424, 427, 137 N. E. 872.

The evidence is reported in full. It consisted largely of oral testimony. It has been examined with care. It amply supports the findings of fact made by the trial judge. Those findings, therefore, cannot be pronounced plainly wrong. Under the familiar rule they must be accepted as true and made the basis of the decision. Lindsey v. Bird, 193 Mass. 200, 79 N. E. 263;Curtis v. First Church in Charlestown (Mass.) 188 N. E. 631.

The court had jurisdiction as a branch of its general chancery powers to appoint receivers of a domestic corporation for the conservation of its assets and other appropriate purposes. It was empowered to take this action at the instance of a simple contract creditor who had not reduced his claim to judgment, provided the defendants made no objection. That was expressly decided in Hampden National Bank v. Hampden Railroad Corp., 246 Mass. 404, 141 N. E. 107. The plaintiff in that case was a simple contract creditor. The defendant, through counsel and pursuant to vote of its stockholders and directors, appeared in open court and assented to the appointment of a receiver. It was held that the Superior Court had jurisdiction to consider the case and to appoint a receiver as a part of its general jurisdiction in equity. Supporting authorities are there collected. In Falmouth National Bank v. Cape Cod Ship Canal Co., 166 Mass. 550, 568, 44 N. E. 617, the discussion proceeded upon the theory that the court had jurisdiction to appoint a receiver but that the facts did not make out a case for such action. There are numerous cases in our reports where it appears from the papers that receivers have been appointed for corporations at the instance of creditors who have not reduced their claims to judgment, without any challenge as to jurisdiction. Merrill v. Cape Ann Granite Co., 161 Mass. 212,...