Windmuller v. Spirits Distrib. Co.

• Decision Date: 25 March 1914
• Citation: 90 A. 249,83 N.J.Eq. 6
• Parties: WINDMULLER et al. v. SPIRITS DISTRIBUTING CO. et al.
• Court: New Jersey Court of Chancery

90 A. 249

83 N.J.Eq. 6

WINDMULLER et al.

v. SPIRITS DISTRIBUTING CO. et al.

Court of Chancery of New Jersey.

March 25, 1914.

Suit by Louis Windmuller and others against the Spirits Distributing Company and others, in which Nathan Bijur, a stockholder, petitioned for payment of a share on distribution of the assets of defendant corporation, which was voluntarily dissolved. On hearing on petition, affidavits, and answer. Decree as stated.

The Spirits Distributing Company, a corporation of this state, voluntarily dissolved by proceedings under the Corporation Act, and by decree in this suit, dated July 8, 1902, and the answering defendants, directors of the company at the time of the dissolution, together with James A. Webb and Wm. F. Harrity, since deceased, were continued as trustees on dissolution, under the statute (Corporation Act, Rev. 1896, § 56). By the same decree the trustees were authorized and directed to accept the offer of another corporation, the Distilling Company of America, for the purchase of assets of the dissolved corporation specified in the offer (including the good will, brands, trade-marks, and trade-names of the corporation), and the trustees were directed to convey these assets to the Distilling Company of America, "upon receiving the sum of $1,243,538.80 as the purchasing price thereof."

By the offer of purchase (as will appear by an examination of the same in the record), the purchaser had agreed to assume the payment of liabilities of the corporation amounting to $209,910.03, and it was further declared by the decree that, after deduction of this amount from the purchase price, the sum of $1,033,628.77 was left for actual distribution among the holders of the first preferred stock of the corporation at the rate of $82.69, for each share of the par value of $100. The decree established the holders of the first preferred stock at the time thereof (the whole number of such shares being 12,500), including among these stockholders the Distilling Company of America, the purchaser, which owned 11,966 shares, Mayer Arnold holding 54 shares for petitioner, and Walter H. Liebman 350 shares for petitioner, and Louis Windmuller 10 shares. The decree then further proceeded as a decree of distribution of assets, and directed that the trustees "forthwith make distribution of this sum of $1,033,628.77 among said first preferred stockholders," according to their respective holdings as established by the decree, with the further provision that "said payments, however, shall not be required to be made, except to such of the said stockholders as shall present their certificates of first preferred stock and permit the endorsement of the payment of said dividends to be made thereon." It was further provided by the decree that the Distilling Company of America, the purchaser of the assets, in making payment of the purchase money, might tender to the trustees, and the trustees might accept "on account of the purchase money, and so far as the same shall extend, the receipts of the Distilling Company for its distributive share of the amount for distribution, and in such case, the balance of the purchase price, after payment of the liabilities aforesaid, to be distributed to the holders of the first preferred stock other than the Distilling Company."

Pursuant to this decree, the trustees shortly after the decree and before July 21, 1902, conveyed the assets of the corporation to the Distilling Company; the conveyance being, as appears by the answer, of "the gross assets of the corporation subject to its liabilities," permitting the purchaser to pay the liabilities in such manner as might best preserve and conserve the assets sold. These liabilities have since been paid, as appears by the answer. The purchaser, as appears by its answer, did not elect to tender receipts for its distributive share of the amount for distribution on account of the purchase money, under the privilege given by the decree, but upon receiving the conveyance paid to the trustees the sum of $989,468.54, being the same amount the purchaser would have been entitled to receive in cash as its pro rata share had the whole purchase price been paid in cash. The conveyance of the assets was made by the trustees without requiring at the time the further payment to them of the balance of $44,160.23, which was the amount the other stockholders were entitled to receive of the entire purchase money. This partial payment in cash thus received by the trustees on the conveyance was not distributed pro rata among all the stockholders entitled, but was at once paid to the purchaser, as if entitled to receive from the trustees the whole of this price thus paid in cash, and not merely its proportionate share thereof. No security for the payment of the balance of the unpaid purchase money was required, nor does any express agreement appear to have been made by the trustees with the purchaser as to the time or manner of its payment, and the sole arrangement which seems to have been made by the trustees in reference to securing any further portion of the unpaid purchase money for the payment on these shares seems to have been made the one set out in the answer, viz., "that as and when these shares were presented in accordance with the decree, the trustees applied to the purchaser for the amount necessary to pay the holder, received the amount and paid to the holder, crediting the payment on account of the purchaser's bid." This was done as to the 130 shares not owned by petitioner and Windmuller.

Neither upon the conveyance of the assets nor upon the payment to the purchaser of the entire cash payment received was any agreement made that the purchaser should pay any interest on the unpaid purchase money, nor was any interest asked or paid on making the deferred payments aforesaid to pay on the 130 shares. On July 21, 1902, the trustees gave notice to Arnold and Liebman, as holders of record of the stock belonging to petitioner, to present their certificates of stock and receive the amount coming to them under the decree, a copy of which was inclosed. No formal notice seems to have been sent to the petitioner for whom, according to the decree, the Arnold and Liebman stock was held. Whether these notices were received by petitioner does not appear, but it appears by the petition that in March, 1912, Liebman and Arnold assigned to petitioner all the rights they might have by virtue of the order or decree of July 8, 1902, and petitioner, under the decree and these assignments, now claims that he was entitled to receive, as his distributive share under the decree on these 404 shares thus held for him, the sum of $33,406.76. And on March 19, 1912, he demanded this sum from the trustees, together with interest thereon, at the rate of 6 per cent with annual rests. Defendants by their answer tender themselves ready to pay to petitioner the amount for the payment of which they were liable under the decree, and say that the purchaser since July 21, 1902, has been, and on March 19, 1912, was able, ready, and willing to pay the petitioner's distributive share, but that they had not at the time of filing the answer (July 2, 1912) received from the purchaser any money applicable to the payment of petitioner's distributive share, nor had they received or earned, nor were they entitled to receive directly or indirectly, any interest on any money remaining owing from the purchaser on account of its bid. They further say that the purchaser never in any way promised or undertook to pay, and is not obligated legally or otherwise to fay to defendant any interest whatever on any money remaining unpaid by the purchaser on account of its bid. They deny any liability for interest on their part.

On the application of the petitioner, and upon the admissions of this answer, an order was made directing that the trustees pay forthwith to the petitioner the principal sum of his distributive shares, without prejudice to the question of liability for interest, and the only substantial question now to be decided is that of the liability of the trustees for payment of interest; petitioner claiming that the trustees are liable for 6 per cent. interest with annual rests, and the trustees claiming that there is no liability whatever.

In explanation of the delay of the petitioner from 1902 to 1912 in presenting his claim for a distributive share, nothing has been presented on the record of this application except an allegation in the answer that in September, 1905, the petitioner, as the holder of these shares of stock of the Spirits Distributing Company now in question, had filed a bill against a certain other corporation called the Standard Distilling & Distributing Company, which had guaranteed the dividends on the preferred stock in the Spirits Distributing Company. This suit against the Standard Company and its directors (five of whom were also the directors and trustees on dissolution of the Spirits Distributing Company) was for the purpose, among other things, of suspending the distribution of the assets of the Standard Company on its proceedings for dissolution,...