New England Theatres, Inc. v. Olympia Theatres, Inc.
| Decision Date | 12 September 1934 |
| Citation | 287 Mass. 485 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | NEW ENGLAND THEATRES, INC. v. OLYMPIA THEATRES, INC.,& another. |
November 16, 1933.
Present: RUGG, C.
J., CROSBY, PIERCE DONAHUE, & LUMMUS, JJ.
Equity Jurisdiction, Receivership proceedings. Corporation Receivership, Corporate entity. Attachment. Jurisdiction. Fraud. Equity Pleading and Practice, Decree, Appeal.
A decree, entered in a suit in equity against a corporation after the appointment of a receiver of the defendant, whereby in substance a vacation of the decree making such appointment and the dismissal of the bill were refused and a ruling was made that the court had jurisdiction to appoint the receiver was so far final in its nature that an appeal lay from it by a party to the suit who opposed the receivership.
The general equity jurisdiction of the Superior Court includes the power to appoint a receiver of a solvent domestic corporation, for the purpose of preserving its assets and for other appropriate purposes, at the instance of a contract creditor of the corporation who has not reduced his claim to judgment, where the corporation makes no objection to the receivership and there is no fraud nor collusion in procuring it.
The question, whether such an appointment should be made, rests in sound judicial discretion, to be exercised only with circumspection and only in cases where otherwise there would be wasting and loss of property which ought to be made available for payment of the debts of the corporation and which cannot be conserved in any other way so satisfactorily as by the appointment of a receiver. Per RUGG, C.J. The general jurisdiction in equity to appoint receivers is not narrowed by
G. L. (Ter.
Ed.) c. 156, Section 51.
In receivership proceedings brought in 1933 by a corporation against two domestic corporations, it appeared that the plaintiff was a simple contract creditor of one of the defendants, which owned the capital stock of the other defendant and had control of it; that the relations of the defendants were such that the solvency of the one depended upon the solvency of the other; that the plaintiff and both defendants were subsidiaries of and were controlled by a fourth corporation; that financial difficulties of the parent corporation had affected the defendants adversely; that attachments of the defendants' property had been made and others were threatened; that such attachments would result in an impairment of their assets; that, although both defendants were solvent, they owed large debts and had not sufficient quick assets to meet their obligations in the ordinary course of business; that, through preservation of their assets and continuation of their businesses and efficient management thereof, they would remain solvent; that the receivership was necessary for that purpose; that, by prearrangement between the plaintiff and the defendants, the defendants consented to the appointment of a receiver; and that full disclosure of all the facts was made to the court and no fraud nor collusion was practiced by the parties. There was nothing to show that the four corporations were not genuine and separate entities, each carrying on its own distinct
business. A receiver of both defendants was appointed.
(1) The circumstances were not such that the corporate entities should be disregarded and the plaintiff and the defendants treated as identical;
(2) The prevalent general financial and industrial depression was a factor to be given weight in determining whether the case was a suitable one for the appointment of a receiver;
(3) The mere fact that the parties cooperated in procuring the appointment of a receiver for a proper purpose did not show fraud in the proceedings;
(4) The facts warranted the appointment of a receiver.
A creditor of the defendants, who intervened to oppose the appointment of a receiver in the proceedings above described, had no superior advantage in opposing it by virtue of the fact that he had an attachment on the defendants' property at the time of the appointment, especially where the decree of appointment preserved the validity of his lien.
The jurisdiction of the court to entertain the proceedings above described was not impaired by the fact that the intervener's attachment was upon process which had issued from the District Court of the United States.
There was no merit in an appeal in a suit in equity from the denial of a motion by the appellant to strike out of the trial judge's findings a recital that "by consent of the parties" certain statements by counsel were considered as though they "had been received as evidence," where the judge, in denying the motion, stated that use of such statements to aid in making his findings was in accordance with an understanding between the parties and himself at the hearing.
BILL IN EQUITY, filed in the Superior Court on February 1, 1933, and afterwards amended, for the appointment of a receiver of the defendants.
A decree appointing temporary receivers was entered by order of Qua, J. Further proceedings, material facts found by Whiting, J., and decrees entered by his order, from which appeals were taken by interveners, are described in the opinion. The evidence at the hearing by Whiting, J., was reported.
G. S. Ryan, for the interveners.
J. J. Kaplan, (B.
A. Trustman & L.
B. Newman with him,) for the plaintiff.
Lee M. Friedman, (P. A. Atherton with him,) for the defendants.
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 petition to dissolve a decree appointing receivers, and continued the receiverships; the other (termed "order" but in effect an interlocutory decree) 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 cannot meet their liabilities as they mature; 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 and E. M. Loew 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...
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