Susser v. Cambria Chocolate Co.

• Decision Date: 08 March 1938
• Citation: 300 Mass. 1,13 N.E.2d 609
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: HARRY SUSSER v. CAMBRIA CHOCOLATE COMPANY & others.

300 Mass. 1

13 N.E.2d 609

HARRY SUSSER v. CAMBRIA CHOCOLATE COMPANY & others.

Supreme Judicial Court of Massachusetts, Suffolk.

March 8, 1938

November 1, 2 1937.

Present: FIELD LUMMUS, QUA, & DOLAN, JJ.

Corporation, Sale of assets. Mortgage, Of personal property: validity. Sale, In bulk.

The provisions of G.L. (Ter. Ed.) c. 156, Section 42, are not applicable to a mortgage by a corporation in which assets of a substantial value and the good will are not included.

BILL IN EQUITY filed in the Superior Court on April 26, 1934. The plaintiff appealed from a final decree dismissing the bill, entered after a hearing by order of F. T. Hammond, J.

S. Susser, for the plaintiff.

H. W. Cole, (J.

H. Ramsey with him,) for the defendants.

DOLAN, J. This is a suit in equity which was brought in the Superior Court, by a minority stockholder of the defendant Cambria Chocolate Company, a Massachusetts business corporation, to set aside a mortgage of its machinery, fixtures and equipment given to the defendant Nieschlag & Co., Inc. The judge filed a statement of findings, entered a decree dismissing the bill of complaint and the plaintiff appealed. The evidence is not reported.

In May, 1932, the Cambria company was engaged in the business of manufacturing chocolate coating. It had been purchasing cocoa beans, which made up nine tenths of the raw materials used in manufacturing its products, from the Nieschlag company. At that time the assets of the Cambria company consisted of land and a factory building on which a first mortgage was held by a stranger to this proceeding; machinery, fixtures, and equipment; stock in process, $1,108.23; finished goods, $22,717; raw materials, $2,703.06; packing materials, $3,254.93; cash, $1,284.90; and accounts receivable, $37,192.57, of which $35,765.47 was due from one customer. Its business had been adversely affected by the depression and it had almost no working capital. It owed the Nieschlag company about $11,000 and the latter was unwilling to extend further credit unless secured in some manner. The Cambria company was unable to obtain credit from any other source. On May 6, 1932, the Cambria company, with the approval of its directors, executed a written guaranty to the Nieschlag company, agreeing to make prompt payment of $25,000 to that company "and for a term of three years" for all cocoa beans previously sold or thereafter sold to it by that company. The Cambria company gave to the Nieschlag company a note for $25,000, payable in or within three years with interest at six per cent, and to secure its payment executed the mortgage above referred to and a trust agreement and a second mortgage of the real estate. The judge found that these transactions were never authorized by "a vote of `two thirds of each class of stock outstanding and entitled to vote' at a meeting of the stockholders of the Cambria Company." (See G.L. [Ter. Ed.] c. 156, Section 42.)

In February, 1933 the indebtedness of the Cambria company to the Nieschlag company had increased to $23,359.76 and the latter company refused to make further shipments of materials; and instructed the trustee under the trust agreement to sell all merchandise held by him as such trustee for its account, as was its right under the terms of the trust agreement. At that time the Cambria company substantially ceased doing business. On January 13, 1934, the first mortgage on the real estate, on which there was then due $67,500, was foreclosed by sale, and the property bid in for about $50,000. On the same day the Nieschlag company foreclosed its personal property mortgage by sale, and the property was bid in for it for $15,000. The judge found that the value of the personal property thus bid in did not exceed $15,000, either at the time the mortgage was given or at the time of its foreclosure. On the same day the Nieschlag company resold the personal property to the defendant trustees of the "Daggett Trust" upon a conditional sale at an agreed price which has since been paid in full. The sale was made in good faith and "without a preconceived plan." The judge stated: "Assuming that the mortgages and the [trust] agreement . . . amounted to a `sale' within the meaning of the statute, the raw materials on hand, the packing materials,...