339 Mass. 280 | Mass. | 1959
This case comes here by an appeal and a report. The appeal is by the plaintiffs from a final decree of the Superior Court denying an injunction against the enforcement of a promissory note and the dissolution of a voting trust. The report is by a single justice of this court of the questions presented by six matters heard by him in proceedings pending the determination of the appeal. .
The Appeal.
The nature of the case brought here by the appeal can best be described by summarizing the pleadings. The plaintiffs in this suit in equity are Eastern Investment and Development Corp. (hereinafter called Eastern), a Pennsylvania corporation, Earl Belle, and Edward, Burton and Murray Talenfeld.. The individual plaintiffs were officers and directors of Eastern and were its sole stockholders at the time (November 13, 1957) the bill was filed. In substance it was alleged that Eastern entered into a written agreement, dated April 26, 1957, with the defendant A. A. Franks for the purchase from Franks of one million shares of the common stock of Cornucopia Gold Mines (hereinafter called Cornucopia), a Washington corporation, for the sum of
It was alleged that Franks orally represented to Eastern that he had certain obligations to Pilgrim which he was having difficulty in meeting and that in order to alleviate this difficulty the note should be made payable as follows: $45,000 on November 14, 1957, and $45,000 on May 14, 1958, with provision for acceleration of maturity if the maker defaulted on the first payment; that Franks informed Eastern that he would not seek to enforce payment on November 14, 1957, and that if Pilgrim, which was to be the holder of the note, insisted on payment on that date, he, Franks, would pay it and look to Eastern for reimbursement on or after May 14, 1958; that Pilgrim was informed by Franks of this supplementary agreement; that the representations made by Franks were false and made with the intent to deceive the plaintiffs, since he knew that Pilgrim would seek to enforce payment of the instalment due on November 14, 1957, and he had no intention of making any payment for Eastern on that date; that Eastern signed the promissory note in the form suggested by Franks in reliance upon his misrepresentations; and that Franks, on November 1,1957, notified Eastern that a payment of $45,000 would be due on November 14. It was further alleged that if Eastern did not pay $45,000 on November 14, 1957, it would be considered in default on the note, and Franks would withdraw the one million shares of Cornucopia stock from the voting
A temporary restraining order conforming to the prayers of the plaintiffs was granted, conditioned on the filing by the plaintiffs of surety bonds totaling $71,000.
Franks in his answer admitted the execution of the written agreement but denied the existence of any agreement not to enforce the payment of the November instalment due on the note. Included in Franks’s answer was a counterclaim alleging that Eastern had wilfully defaulted on the note, and asking that the plaintiffs be adjudged to have forfeited any rights to the shares in the voting trust. Pilgrim by its answer denied any knowledge of any arrangement between Eastern and Franks concerning the November instalment, and alleged that it was the holder in due course of the note. In a counterclaim Pilgrim asked that judgment be entered in its favor against Eastern in the full amount of the note, with interest, and that it be allowed to sell the stock held by it as collateral and to apply the proceeds toward the satisfaction of Eastern’s indebtedness.
The evidence is reported and the judge made findings of material facts. Facts found by us and by the judge include the following. The contents of the basic contract of sale dated as of April 26, 1957, are substantially as alleged in the bill. It appears from this contract that the two million shares of Cornucopia stock held by Franks prior to the sale constituted a majority of the common stock issued and outstanding. At the closing of negotiations, held in Boston on May 15, 1957, the promissory note was drafted in its final form and signed by Belle for Eastern. It contained a promise to pay the principal amount of $90,000 in instalments of $45,000 on November 14, 1957, and $45,000 on May 14, 1958. There was a provision for acceleration of maturity if Eastern should fail to pay “any installment.”
An agreement establishing the voting trust was also executed at the time of the closing. The voting trust was to continue for ten years, subject to Franks’s option to tender the shares held by the voting trustees to Eastern between May 14, 1960, and June 14, 1960, at a price of $250,000. Eastern was obligated to accept and pay for the stock if such a tender was made, in which event the voting trust would terminate. This agreement contained no provision for the termination of the voting trust upon a default on the $90,000 note.
Franks’s rights upon a default in the two blocks of stock to be placed in escrow became a matter of concern dining the closing negotiations and, as a result, the basic contract was amended. With respect to the six hundred thousand shares to be held as collateral for payment of the note the amendment provided that: “In the event . . . [Eastern] defaults in the payment of either installment due under said note . . . [Franks], and the escrow agent at the request of . . . [Franks], shall notify . . . [Eastern] of such default by registered mail and the escrow agent, subsequent to the expiration of a period of 10 days following the mailing of such notice shall sell the shares then held in escrow . . . unless said default is cured by . . . [Eastern] within said 10 day period.” The letter of instructions to Pilgrim as escrow agent executed at the same time contained an identical provision.
With respect to the one million shares to be placed in the voting trust, the amendment provided that upon a default in the payment of either instalment Franks, “in addition to his right to have the escrow agent sell the stock then held in escrow [as collateral] as above provided, shall have the further right to withdraw his certificates representing the . . . [one million shares] from the voting trustees and the voting
Considerable testimony was introduced in support of the case stated in the plaintiffs’ bill. In his report of material facts the judge found that “the plaintiffs failed to prove to me that any . . . collateral or dominating oral agreement was entered into between the defendant and Eastern” to the effect that payment of the November 14, 1957, instalment required by the note would not be sought. The judge then found that the first instalment was due and not paid, and that as a consequence Eastern was in default, and that the entire principal amount of the note was due. He ordered a final decree entered dismissing the bill. There was ample evidence to support these findings and they cannot be said to be plainly wrong. Indeed, the note has been paid during the pendency of this appeal, and the plaintiffs do not now attack that part of the final decree ordering the payment of the $90,000.
In passing upon the counterclaim of Franks, the judge found that Eastern, by reason of its having “wilfully defaulted in its agreement” had forfeited any rights it may have had in the continuation of the voting trust, and that under the terms of the contract, as amended, Franks had the right to withdraw the one million shares held by the trustees. He also ruled that in so far as any requirement of notification had been created by the escrow letter, Eastern’s conduct after November 1, 1957, relieved Franks and Pilgrim from giving such notice. The plaintiffs’ attack is directed at these rulings and at that portion of the decree which gives them effect.
The plaintiffs argue that the decree was erroneous because by failing to give effect to Eastern’s rights to notice upon
The second escrow agreement of May 15, under which the voting trust shares were deposited with Pilgrim, is the only document executed by the parties mentioning the notification procedure and the grace period. The basic contract of sale, dated as of April 26, 1957, allows Franks to withdraw the shares without notice immediately upon default. The form of escrow agreement attached to the basic contract contains no provisions for notice. The amendments to the contract, executed at the same time as the final escrow agreement, reaffirm Franks’s right of withdrawal without notice. The voting trust agreement itself, also executed at the time of the closing on May 15, is likewise silent on this question. Thus there is an irreconcilable conflict between the provisions of the escrow agreement and those of the basic contract and the amendments.
The parties to the escrow agreement were Pilgrim, Franks in his individual capacity, and Franks and the individual plaintiffs in their capacity as voting trustees. The parties to the basic contract and the amendments thereto were Franks and Eastern. There are cogent reasons for holding that the right of notification and the right to cure the default claimed by Eastern never became part of the contract between Eastern and Franks. But we will assume, without deciding, that they did.
Even under this assumption it cannot be said that the decree deprived Eastern of any right of substance. This is so because the plaintiffs in their bill unequivocally repudiated all liability for the $45,000 instalment due on November 14, 1957. This repudiation constituted a waiver by Eastern of the notice provision, if there was one which was legally operative, inserted for its benefit. See Bowen v. Farley, 256 Mass. 23, 26; Jackson & Co. (Inc.) v. Great Am. Indem. Co. 282 Mass. 337, 342. Furthermore, the plaintiffs obtained ex parte restraining orders preventing Franks from taking steps to exercise his right of withdrawal. Franks, by filing
The right of Franks to withdraw his shares from the voting trust was before the court because of his counterclaim and Eastern’s answer to it. In these circumstances the giving of notice would have been an empty ceremony. The “law does not require the doing of a useless act.” Loomer v. Dionne, 338 Mass. 348, 353. We recognize that the judge did not base his decision on the precise ground discussed above, although there is language in his findings pointing in that direction, but that is of no consequence; the correctness of the result is all that matters. See Weidman v. Weidman, 274 Mass. 118, 125.
The final decree is affirmed. The defendants are to have costs of this appeal.
The Repoet.
The final decree was entered in the Superior Court on January 22, 1958, and the plaintiffs duly claimed an appeal. Thereafter, the plaintiffs filed a petition in this court to suspend the operation of the decree pending the appeal. G. L. c. 214, § 22, as amended through St. 1948, c. 309. On February 12, 1958, a single justice of this court allowed the petition on the following terms: (1) Eastern was to pay the $90,000 note immediately; (2) the plaintiffs were to give to Franks a $100,000 surety company bond (one purpose of this bond was to assure payment of any loss Franks might suffer as a result of the suspension of the decree, if the decree should be affirmed by the full court); (3) a proxy to vote the shares in the voting trust was to be delivered to a trustee appointed by the court; and (4) Franks was to be allowed to exercise all rights of a stockholder, other than the right to vote, as
The order provided that this court “retains jurisdiction to make any other or further orders and decrees, including contempt decrees, to carry out and enforce the purpose and intent of this . . . [order] . . .” and concluded with the statement that “. . . this . . . [order] may be amended to require additional security from the plaintiffs as a condition for the further continuance of the suspension of the decree.” The $90,000 note was paid immediately and the bond, signed only by Eastern and a surety company, was filed.
On April 28, 1958, Franks filed a petition for contempt against the plaintiffs alleging that they had failed to comply with the provisions of the order of February 12, 1958, which forbade interference with Franks’s right to obtain information from Cornucopia. On May 12, 1958, Franks filed a motion in effect to revoke the suspension order of February 12, based on the withholding of information as to the affairs of Cornucopia. After hearings on the petition and the motion, another single justice of this court entered an order on May 26, 1958, appointing a master to make findings on certain matters, including (1) the details of the acquisition or proposed acquisition by Cornucopia of seven other corporations,
On July 1, 1958, Franks filed a motion to increase the plaintiffs’ bond, and on July 29 an order was issued by still another single justice of this court requiring the plaintiffs to furnish an additional surety company bond in the amount of $200,000. On August 4, counsel informed the justice that the Talenfelds did not “now wish a further continuance of the suspension on these new terms.”
Meanwhile, on July 16, Franks filed a motion for an order declaring that the plaintiffs were jointly and severally hable without limitation for any loss suffered by Franks as a result of the stay. This motion was denied without prejudice, but the denial was later vacated in order that the matter could be reported without decision.
On September 10, Franks filed a motion to broaden the scope of the order of reference to the master. At the same time the Talenfelds filed a motion to discharge the order of reference upon the allegation that a petition in bankruptcy had been filed against Cornucopia. The latter motion was allowed on October 17, and Franks duly claimed an appeal. Meanwhile, it was suggested to the court that Eastern had been adjudicated a bankrupt pursuant to an involuntary
On October 2, Franks filed a motion for a new order of reference to the master upon allegations that Belle and the Talenfelds had joined in a conspiracy to divert the assets of Eastern and Cornucopia to themselves by means of a number of fraudulent transactions.
The single justice reserved and reported without decision the following matters: (1) Franks’s motion for a further order establishing unlimited liability for losses suffered by him; (2) Franks’s second petition for contempt; (3) Franks’s motion to expand the scope of the order of reference to the master; and (4) Franks’s motion for a new order of reference to the master. The single justice also reported the questions presented by: (a) The order discharging the order of reference to the master; and (b) the order requiring the posting of an additional bond.
The Motion foe Further Order.
As stated above, Franks filed a motion for a further order to establish the joint and several liability of the plaintiffs (unlimited by the penal sum of the $100,000 surety bond) for any losses suffered by him as a result of the suspension of the decree.
We do not think that the single justice intended to report to this court the question of discretion as to whether or not this motion should be granted. Obviously, in a complex and fluid situation such as this one the single justice exercising day to day supervision over the proceedings is peculiarly fitted to pass upon the propriety of granting a motion of this character. We assume, therefore, that the sole question before us is whether the single justice had power to grant such a motion, although even under this assumption, it is difficult to see any life to this question at the present time. Speaking generally, we think that such power exists, provided that
The Order for the Additional Bond and the Petition for Contempt based upon it.
The single justice’s order of July 29, 1958, required the plaintiffs to post an additional surety bond in the amount of $200,000. This order was unconditional on its face. The petition for contempt filed by Franks on August 11, 1958, was apparently based on the notions that the order imposed an absolute obligation on the plaintiffs, and that the failure to comply was contumacious conduct on the part of the plaintiffs.
An absolute order requiring a party to give a bond, not imposed as a condition for the granting of some relief, would be most unusual and would present grave questions as to the power of the court to issue such an order. Therefore, we construe the order as one imposed as a condition upon the continuance of the stay. This construction is strengthened by the fact that the initial order contained the proviso that “this . . . [order] may be amended to require additional security from the plaintiffs as a condition for the further continuance of the suspension of the decree of January
A party ordered to furnish security as a condition for the grant of a stay sought by him has a choice. If he declines to furnish the security he is not entitled to a stay, but he ought not to be adjudged in contempt as a result of the exercise of that choice. Franks misconceived his remedy when he filed his petition for contempt. His remedy was to seek a revocation of the stay. This he did not do.
We recognize that under G. L. c. 214, § 19, upon entry of an appeal in this court all proceedings under the decree appealed from are automatically stayed.
The Motions on the Rule to the Master and the Order Discharging the Existing Rule.
These matters may be disposed of briefly. The issuance of an order of reference to a master and the terms of such an order are peculiarly within the province of the single justice. With regard to the justice’s action in discharging the order of reference, the record before us raises no question of law other than the possibility of an abuse of discretion. We find no such abuse. A radical change in circumstances removed the issues referred to the master from the case. This is also true with respect to the issues included in Franks’s motion to broaden the scope of the hearing.
However, the motion for a new order of reference does raise a substantial point. The petition seeking a decree
Conclusion.
It would appear from the foregoing discussion that few, if any, of the matters reported by the single justice now constitute live issues, with the exception of Franks’s first petition for contempt and the motion for an order of reference pertaining to it. The case is remanded to the county court for action on these matters not inconsistent with this opinion.
So ordered.
The plaintiffs had assumed control of Cornucopia following the closing on May 15, 1957.
Counsel for the plaintiffs withdrew their appearances for Belle and for Eastern on July 8. The single justice acknowledged the withdrawals on July 23, but ordered that the withdrawals did not terminate their appearance for the purpose of service of process.
The pertinent portion of § 19 reads, “When . . . appeals have been entered ... [in the Supreme Judicial Court] all proceedings under such decree shall be stayed.”