Stokes v. Williams
Decision Date | 10 August 1915 |
Docket Number | 1948. |
Citation | 226 F. 148 |
Parties | STOKES et al. v. WILLIAMS et al. |
Court | U.S. Court of Appeals — Third Circuit |
This is an appeal from a decree of the District Court of the United States for the District of New Jersey, authorizing the receivers of the Standard Plunger Elevator Company to accept an offer to purchase, at private sale, all the assets and rights of that corporation, including its choses in action, and ordering the sale of the same in pursuance with the terms of the offer. The appeal was taken by certain minority stockholders to protect rights which they conceived had been prejudiced by the decree and the sale made thereunder.
An irrepressible conflict between certain stockholders and officials had been waged for many years within the corporation and in the courts, culminating in the appointment of receivers.
On July 16, 1914, the receivers presented to the court a petition showing that they had received from a committee representing creditors of the corporation an offer to purchase all of its property, excepting accounts and bills receivable and cash on hand, and praying authority to accept the same. The amount of the bid was $250,000, and included the cancellation of damages to be assessed on two interlocutory decrees entered against the corporation in certain cases, which aggregated approximately $161,000. The purchase price of the offer, when thus estimated, was about $411,000. Bills receivable, certain percentages retained on contracts, and cash on hand aggregated about $144,000. These various sums, if in the hands of the receivers for distribution, made an approximate total of $550,000. The claims allowed amounted to about $411,000. The offer, however, provided that any excess of the purchase price, after paying all creditors and costs of administration, should be returned to the purchasers. The amount bid, therefore, was equal to the debts of the corporation and was sufficient to satisfy all creditors, but left nothing for distribution to stockholders. The tangible property of the corporation was appraised at $286,000, and its patents at $100,000.
Upon the presentation of the receivers' petition, an order was made, directing the creditors and stockholders to show cause on July 27, 1914, why the bid of the creditors' committee should not be accepted and the sale ordered. A copy of the order and a summary of the offer were mailed to each creditor and stockholder of record. Upon the return of the order, Mr. Craig, counsel for the minority stockholders and the appellants in this appeal, asked for a continuance until July 29th, in order to present to the court, in the form of affidavits, certain information which he contended would induce the court to reject the bid. The continuance was allowed, but with the object of losing nothing thereby, the bid was accepted provisionally; that is, by a nisi order, the court authorized the acceptance of the bid, unless, on or before July 30th, a better bid was received, or a creditor or stockholder should at that time show to the court that it would be inadvisable and not for the best interest of the trust to accept the offer and sell in the manner prayed by the receivers. On July 30th Mr. Craig presented to the court several affidavits in opposition to the petition of the receivers.
The objection of the appellants to the acceptance of the offer and the order of sale, as then presented and repeated in this appeal, arose out of a grievance against certain stockholders and directors of the corporation, principally Woodin and Hoyt, who were charged, first, with fraudulent conduct, whereby the value of the corporation's stock was destroyed, and second, with effecting a combination with the Otis Elevator Company in violation of the Anti-Trust Law, and was addressed to the point that the bid, which included the sale of the corporation's choses in action to those who were interested in not suing upon them, precluded the institution of actions to recover damages for such fraudulent and unlawful conduct.
'On the assumption that the terms of the offer might have this result,' the District Judge said, 'I submitted the copies of the affidavits to Mr. Wall, one of the receivers, with directions to examine the same and to report to the court on August 3d as to his conclusions, to which time the whole matter was continued. I have also examined all of the affidavits with the exception of a short affidavit by Mr. Stokes, a short affidavit by Mr. Clegg, and a copy of an affidavit by Mr. Craig. The contents of these latter affidavits were stated to me by Mr. Craig.
Committee. The stock issued and outstanding is as follows: First preferred $311,000; second preferred $321,000; common $1,200,000. Mr. Craig's clients hold no first preferred stock; they hold, as he states, about one-quarter of the second preferred stock and a minority interest in the common stock.
'I will therefore confirm the bid, unless Mr. Craig is willing to give the receivers a bond, with surety to be approved by them, in the sum of $400,000, conditioned that if the proceeds of another sale, when added to the...
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