Rogers v. Rogers Locomotive Co.

• Decision Date: 19 July 1901
• Citation: 62 N.J.E. 111,50 A. 10
• Parties: ROGERS et al. v. ROGERS LOCOMOTIVE CO. et al.
• Court: New Jersey Court of Chancery

50 A. 10

62 N.J.E. 111

ROGERS et al.

v. ROGERS LOCOMOTIVE CO. et al.

Court of Chancery of New Jersey.

July 19, 1901.

Petition by George H. Longbottom and others against the Rogers Locomotive Company and others to set aside the order confirming the receivers' sale. Application denied.

This is an application by a stockholder of a corporation to set aside an order of the court confirming a written agreement for sale of the plant and other property of the corporation made between the receivers of the corporation and Smith & Holran, as purchasers, for the sum of $002,000, to be paid or secured as provided by the contract The contract made on May 1, 1901, was by its terms subject to confirmation and approval by the court At the time and place fixed by the court for the hearing on the confirmation, May 14, 1901, counsel representing the International Power Company in open court made a bid of $055,000 for the property proposed to be sold, offering to deposit with the court $50,000 or $100,000 for the faithful performance of their offer, and to put in a bid on that day before the court. Mr. Longbottom, a stockholder of the company, holding 17 shares, and who was at this time in the employ of the power company, applied through the counsel of the power company, who also represented him, to have the action on the contract made by the receivers postponed for the purpose of inquiring into the offer of the power company. After hearing the receivers and such stockholders as desired or applied to be heard upon the question of approval of the contract notwithstanding this offer, the court directed the sale to be confirmed. The order confirming the sale was made on May 14. 1901. On June 20, 1901, application was made by the power company, on notice to the purchasers and receivers, for leave to file a petition in the cause to have the order confirming the sale set aside, and the receivers directed to accept their bid. This application was denied on June 24, 1901, for reasons given in a memorandum sent to counsel. 49 Atl. 833. Before the decision upon this application, and on June 22d, at 2 p. m. the present petition in the cause to set aside the order was filed by Longbottom, upon which an order to show cause was granted, returnable on June 29th. On the same day of filing this petition, and before the filing, according to the statements of counsel, an appeal from the order confirming the sale had been signed by or on behalf of Longbottom, and mailed to the clerk for filing, and notice of the appeal was served upon the solicitor of the purchasers on June 22, 1901. Upon the return of the rule, application was made by the purchasers to dismiss the petition because of the pendency of the appeal, and the petitioner thereupon withdrew the appeal by leave of the court, and over the objection of the counsel for the purchasers, and the application on the present petition was then brought on for hearing.

The substantial ground upon which the petition to set aside the order confirming the sale is based is that the receivers, or one of them, subsequent to the execution of the contract of May 1st, invited or induced the presentation of a higher bid from the representatives of the power company, and assured them that a bid of $050,000, if made by them at the time and place fixed for the hearing on the confirmation, would be accepted, unless a higher bid was then made, and that this bid of the power company at the time of the hearing was made pursuant to this suggestion; that the receivers failed to inform the court that this bid was made under these circumstances, and of their promise to accept the bid. It is also alleged that Jacob S. Rogers, the holder of a majority of the stock, who was present in court, desired the power company bid to be accepted, and requested his counsel, who was also counsel for the receivers, to so state, but that this statement was not made. It is claimed that" the confirmation of the contract of sale by the court was made without its being fully informed of the circumstances of the power company's bid, or of the attitude of Mr. Rogers towards the same, and of his opposition to the acceptance of Smith & Holran's bid. It is further alleged that the sale to Smith & Holran, on the terms of their bid, is inadequate, and, in view of the higher offer of the power company, should not be accepted; the offer being now made to pay the entire amount of the bid in cash, if necessary. Petitioner further alleges that the plant has depreciated; that it is not an adequate security for the bonds proposed to be issued,—$500,000 proposed to be issued; that the purchasers have paid only $25,000 of the $102,000 cash payment provided by the contract; and that the contract of sale has not yet been executed, although the purchasers have, since the confirmation of the contract of sale, and pursuant to its terms, been put into possession of the works, and are now operating the plant, under contracts for work which are charged to have been made before the confirmation, and to have been provisional in their character.

The answers of the receivers substantially deny that, after the execution of the contract with Smith & Holran, they, or either of them, encouraged or invited a further or higher bid from the power company or their representatives, or informed them that a bid of $650,000 would be accepted if presented by May 14th, and allege that the only statement made by them or their counsel to the power company or their representatives, after the execution of the Smith & Holran contract, was that, if any bid was subsequently received by them, it would be their duty to submit it to the court at the time of presenting the contract for confirmation, and they deny that the power company's bid was made in pursuance of any promise or suggestion from them that it would be accepted. As to the petitioner's objection to the confirmation, the receivers allege that before the execution of the Smith & Holran contract he entered into the employ of the power company, and has since continued in its service; that he is or was the owner of only 19 shares of the stock; and that his opposition to the confirmation and his present application are made in the interest of the power company. As to the status of Mr. Rogers, the owner of the majority of the stock (15,102 of the 27,500 shares), towards the Smith & Holran contract, the receivers say that the contract was made only after consultation with him, and on his express approval of all the terms of the written contract, which he had in his possession for a day before the execution, and in which terms were added on his suggestion; that on receiving his approval, and not until then, the receivers signed the contract. They deny that the court at the time of the sale was not informed that Rogers desired the highest bid to be accepted, and further say that immediately after the confirmation he was informed by them of the decision of the court and of all the proceedings. They deny the depreciation of the plant, or that it is an insufficient security for the $500,000 bonds, and say that, although the title has not yet passed to the purchasers, yet this has been delayed by reason of the character of the numerous papers and attendant contracts required by the contract of sale; that the purchasers have paid or deposited in the manner required by the contract the whole $102,000 required for the cash payments; and that the receivers entertain no doubt whatever as to the ability and intention of the purchasers to carry out the contract. In reference to the good faith on their part in executing the contract with Smith & Holran, and recommending it for approval, notwithstanding the offer of the power company, the receivers in their answers and affidavits set out the negotiations and interviews between themselves and the representatives of the power company previous to the execution of the Smith & Holran contract, and submit that they then believed, and were justified in believing, that the power company did not intend to purchase or bid for property on any basis at all acceptable, and that it was their duty to accept Smith & Holran's bid and execute the contract, in order to prevent great loss. The answer of Smith & Holran, the purchasers, sets up that the grounds now alleged by the petitioner for setting aside the order are the same grounds which were urged at the hearing on the application,...