South Baltimore Brick & Tile Co. v. Kirby
| Decision Date | 14 March 1899 |
| Citation | 42 A. 913,89 Md. 52 |
| Parties | SOUTH BALTIMORE BRICK & TILE CO. v. KIRBY. OWEN v. SAME. |
| Court | Maryland Court of Appeals |
Appeals from circuit court, Baltimore county, in equity; N. Charles Burke, Judge.
In proceedings against the South Baltimore Brick & Tile Company receivers were appointed and a sale of the property ordered. A sale was made to John E. Kirby, to which the company, and Wyatt Owen, its president, filed exceptions, and from an order overruling the exceptions and ratifying the sale they separately appeal. Reversed, and resale ordered.
Argued before MCSHERRY, C.J., and BRISCOE, PAGE, ROBERTS, PEARCE and SCHMUCKER, JJ.
Thomas R. Clendinen, for appellant South Baltimore Brick & Tile Co. Oscar L. Quinlan, for appellant Wyatt Owen. D. G. McIntosh and Thos. Foley Hisky, for appellees.
In this case are presented two appeals, in one record, from an order of the circuit court for Baltimore county ratifying a sale of a tract of land made by trustees and receivers appointed, by a decree of that court, for the sale of the property of the South Baltimore Tile & Brick Company, an insolvent corporation. The case was submitted for decree, without testimony, upon the following agreement: "It is agreed that the above case be submitted for decree, and that the above decree is a proper decree to be passed in this case." The court thereupon passed the decree agreed on appointing Stevenson A. Williams, John P. Horsey, and George M. Sharp "trustees to make sale, and receivers of said property and of said corporation," and directed that they should "sell the real estate and plant of said corporation, dividing the same in such manner as they should deem best, and make such terms as to payment as in their judgment may be most advantageous, and they shall give at least three weeks' notice thereof by advertising in a newspaper published in Baltimore county and in one published in Baltimore city." The debts of the corporation are from $60,000 to $70,000, and its property consists of six lots of land, near the middle branch of the Patapsco river, aggregating 83 1/2 acres; but the only lot here involved is lot No. 7, on Warners Point, opposite to Ferry Bar Bridge, in Baltimore city, and on the Shore Line Railway, containing 16 1/2 acres. It contains large deposits of fine clay for brickmaking, and a large plant for this business, which has been carried on there, but the plant has been neglected and is of little value. The lot is shown to be of great value for an excursion resort, the adjoining lot having been successfully used for that purpose for some time. It has also two large wharves, extending to navigable water, and is thus accessible both by rail and water. The trustees have never advertised any of the property as directed by the decree, but on the 2d of February, 1898, sold lot No. 7 at private sale to John E. Kirby for $18,000, of which $500 was paid in cash, $4,500 was to be paid on ratification of sale, and the balance to be secured by mortgage on the lot, payable in installments, in one, two, and three years, with interest at 5 per cent. from date of mortgage. On February 26, 1898, the receivers and trustees filed a "petition and report," setting forth that they believed it would be for the advantage of their estate if there could be a private sale of lot No. 7 in lieu of public auction, and that a public auction would not realize as much as a private sale; that they had diligently endeavored to sell said lot, employing brokers, and enlisting certain mortgagors of the property who were still liable upon covenants; that the best offer received for said lot was $18,000 from said Kirby, who states he will use it as a summer resort; that larger sums were at one time suggested, but no formal offer made beyond that of Kirby; that they believed the price fair and reasonable, and submit the affidavit to that effect of two experienced brokers; and they then "pray leave to make private sale without advertisement, and for authority to accept said offer, and, leave of the court being first had and obtained, to file this as their formal acceptance of said offer and report of sale to said John E. Kirby." On the same day, the court, without notice to any of the parties to the proceedings, passed an order accordingly, authorizing the sale made, to be reported for final ratification. On March 29, 1898, Wyatt Owen filed a petition showing that he was a stockholder in the defendant corporation, and praying to be made a party, in order that he might except to the sale, and the court passed an order accordingly. On the same day he filed exceptions to the sale reported. On April 9, 1898, Julia R. Warner and others, the mortgagors heretofore mentioned as liable on their covenants and parties to the decree, filed exceptions identical with those of Owen, and on April 21, 1898, the defendant corporation also filed exceptions. Testimony was taken, and the exceptions were all overruled, and the sale was ratified. From this order overruling these exceptions and ratifying the sale, Owen and the defendant corporation have both appealed, but the Warners have not appealed.
The exceptions of Owen may be condensed as follows: (1) That the private sale made was in violation of the terms of the decree; (2) that the price was inadequate, and much less than public auction would have realized; (3) that the chief value of the property consisted in fine clay for brickmaking, of which the general public was never informed by advertisement or otherwise; (4) that an offer of $20,000, on better terms, had been made by a responsible party since the attempted private sale.
The exceptions of the defendant corporation are in substance: (1) That, as the decree and its terms were fixed by consent, a private sale, without advertisement, is in violation, not only of the terms of the decree, but of the consent which fixed those terms; (2) that those who wished to bid on the property at public auction had no opportunity to do so; (3) that, even if private sale were proper, none but the reported purchaser had opportunity to make a private bid; (4) that the price was grossly inadequate; and (5) that the sale was not fairly made.
The appellees' first contention is that neither of the appellants has any interest in the proceeds of this sale, and therefore neither is entitled to maintain these exceptions. It cannot be doubted that ordinarily stockholders are represented by the corporation, or that receivers of corporations are, in ordinary cases, the proper persons to assent or defend the rights of the corporation, or of its stockholders and creditors. But this is not an ordinary case, since it is the conduct of the receivers themselves, in dealing with the property of the corporation, and of the stockholders, which is the ground of these exceptions. The corporation was originally a party, and, of course, a necessary party, to these proceedings. Owen was the president of the corporation, and its majority stockholder, when the receivers were appointed. The fact that the corporation is insolvent, and that no pecuniary interest can accrue, either to it or to Owen, from the proceeds of a resale or of this sale, cannot devest Owen, as president or as stockholder, of the interest which, as an honest man and a faithful officer, he should feel in realizing for its creditors the largest possible results. Beach, in his work on Receivers (page 371), says: "Stockholders or bondholders should not be allowed to intervene, except under circumstances which rarely, if ever, occur." The circumstances of this case are rare, and we think Owen was properly made a party, for the purpose of enabling him to except to this sale. The cases of Warfield v. Ross, 38 Md. 85, and Griffith v. Hammond, 45 Md. 85, relied on by the appellants, merely decide that persons whose interests in mortgaged property will not be affected by a sale thereof under a power, or under a decree to which they are not parties, cannot except to such sale; and the case of Glenn v. Williams, 60 Md. 116, simply states the general doctrine that, in ordinary suits against a corporation, stockholders are not proper parties. On the contrary, in Wagner v. Cohen, 6 Gill, 97, Cohen, who was a stockholder in the Holliday Street Theater, which had been sold under a decree, filed exceptions to the ratification of the sale, and also a petition to restrain the reported purchaser from using the theater while the exceptions were pending, and the court held on this petition that, though his interest as a stockholder was merged in the decree, he retained an interest in the proceeds of sale, and was entitled to institute that proceeding; and in the succeeding case of Cohen v. Wagner, 6 Gill, 236, the exceptions just mentioned were heard and determined without question by counsel or court. We shall not hesitate, therefore, to consider the case upon the merits.
The general principles which must control all such cases are too familiar to require consideration. We have only to apply them to the facts of this case with such sound and just discrimination as we may, though the task is not wholly free from difficulty. Much of the testimony we do not think it necessary to consider, nor do we regard the testimony of Mr. Haman and Mr. Owen, the chief witnesses, as in any serious conflict. The general exceptions to the testimony of Owen are not sustained by the production of any authority, and we can perceive no reason for its exclusion, nor of those portions of his testimony detailing interviews between himself and Judge Sharp and Mr. Williams, which were specially excepted to. These gentlemen, as receivers, are direct parties to the inquiry now under consideration, and could have testified had they thought it...
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