Rogers v. Rogers Locomotive Co.

62 N.J. Eq. 111 | New York Court of Chancery | 1901

Emery, V. C.

(after statement of the issues).

There is no claim in this petition, or in any of the affidavits, that the purchasers, Smith & Halloran, were in any way responsible for or connected with any representation made by the receivers or their counsel to the representatives of the power company, after the execution of their contract with the receivers on May 1st, 1901, or with any mistake or misapprehension on the part of the power company, as to the time when they could put in a bid. Manifestly, therefore, after the execution of their contract they could not be divested of any rights under the contract, by reason of any transactions between the receivers and the power company, to which they were strangers, and which were in derogation of their rights, if any, under the contract.

The only basis of airy claim to deprive them of the benefit of their contract, even if its approval were now the sole question before the court, must therefore be placed solely on the fact that subsequent to their contract, and before its confirmation, a higher bid than theirs was made for the property. On this question as to the effect a higher bid will or should have upon the confirmation by the court of a contract for sale, made at either public or private sale, and which must be confirmed, the rule in this state is, as I understand it, settled beyond dispute. As to public sales, the rule that a sale fairly made will not be disapproved merely because of an increased bid has long been applied. In Morrisse v. Inglis, 1 Dick. Ch. Rep. 306 (Errors and Appeals, 1889), over ten per cent, advance was offered; in Bethlehem Iron Co. v. Philadelphia and Seashore Railroad Co., 4 Dick. Ch. Rep. 356 (Chancellor McGill, 1892), twenty-one per cent, advance; and in Bliss v. New York Life Insurance Co., 6 Dick. Ch. Rep. 630 (Errors and Appeals), $1,000 in advance was offered. In each case the sale was confirmed notwithstanding the increased bid following the principle laid down in the first case, Morrissee v. Ingles, that the settled policy of. our law has been to encourage bidding and purchases at public sales, and that purchasers making Iona fide bids are to be protected in the advantages of a fair purchase (at pp. 808, 809). I do not understand that in the later decision, Rowan v. Congdon, 8 Dick. Ch. Rep. 385 (1895), relied on by the petitioner’s counsel, the court of errors at all qualified or overruled the rule of these previous cases. No such qualification was declared, and Rowan v. Congdon was in part based on proof of a misapprehension existing at the time of the sale, by reason of which a purchaser, who was willing to give one hundred and fifty per cent, advance at that time, was not then procured.

It is also the law of this court that for the same reason and upon the same principles, the rule is to be applied to private sales made by guardians and others under authority of the court of chancery. Leary's Case, 5 Dick. Ch. Rep. 383. The general settled rule, therefore, is that where the sale is made for a fair price and in good faith, and there is no irregularity, fraud, mistake or legal surprise, with which the purchaser is or ought to be chargeable, the subsequent offer by another bidder of a higher price is not of itself sufficient reason for refusing confirmation of a sale or of reopening the confirmation. Nearly all public and private sales by officers of the court now require confirmation, and to allow such sales to be opened by the mere increase of the bid at the time fixed for confirmation, would practically result in the subversion of the entire system of sale by officers, either public or private, and would make their first contract of sale merely the starting point for bids on the property, instead of a tona fide, genuine sale.

In the present case the increase offered was $53,000 in cash payment (less than temper cent.), the other terms of the contract not being proposed to be changed. The fact that the power company is now'said to be ready to pay the entire amount in cash cannot be considered as affecting the purchasers’ right, either under the contract or the confirmation. No such offer was made by it on May 14th, 1901, and at that time no objection was made by any stockholder to the amount to be secured by mortgage. So far as the rights of the purchasers to the protection of the order confirming the sale can be affected by any offer of another bidder, it must be an offer previous to, or at the time of, confirmation. For, manifestly, a different or more advantageous offer, made more than a month after the confirmation, and made after the opening and operation of the plant purchased, and after the purchasers’ rights under the contract have, by its terms, become vested, is practically an offer to buy the purchasers’ property, with the value, if any, since given to it by their purchase, and to buy it for the benefit of the new bidder and the stockholders.

There were special reasons in this case why the mere increase of the bid, by less than ten per cent., should not have deprived the purchasers of the benefit of the contract. It appears by the record in the case, the bill filed by Jacob S. Rogers and others, the answer filed by the petitioner, Longbottom, and others, by the circular letter of the receivers inviting bids, by the negotiations for sale and the contract finally made, that the resumption of the business formerly carried on by the company on an extensive scale, and its continued operation in the city of Paterson, was desired by all these parties and by the city of Paterson and by transportation companies interested in the continuance of the business. The receivers, availing themselves of this condition of affairs, were enabled to offer to purchasers certain privileges or advantages from the city and these companies connected with the operation of the plant. These privileges tended to attract purchasers, and were substantial benefits secured to the stockholders in the disposition of the property. Smith & Halloran, the purchasers in this case, made the granting of these privileges a condition of their bid, and, on their part, in consideration of making these conditions and for the purpose of enabling the receivers, or anyone else who should be delegated,- to undertake the work of obtaining them from the parties interested, agreed, as appears by their written proposals, that the new company tó be organized by them would, as quickly as possible, open and operate the works and keep them located in the city of Paterson. The contract finally made contained provisions for the conveyance or assurance of these privileges or rights on behalf of the city and the companies, and contained, also, a provision (sixth) that the new company should, as promptly as may be, open and operate the plant in the city of Paterson.

The final deposit of the amount of the cash payment ($102,000) was, by the contract (article 3), to be deposited by the purchasers when the receivers had obtained, among other things, the conveyances and assurances of the privileges and rights from these outside parties. The whole sum has, as appears by the answers and affidavits, been deposited as required by the contract, and, as I understand the contract and the affidavits of the purchasers and the receivers, the only thing remaining to be executed under the contract, before the conveyance is made to the new company, is the payment of $250,000 in cash, as its working capital, which is, by the contract, to be actually paid in before the transfer of title to the new company. This capital is subscribed, and the purchasers say they are able to complete the contract, and the receivers say the purchasers will be able to complete it. Whether the power company, on its part, would have been willing originally and before the Smith & Halloran contract to continue the operation of the plant in Paterson, is open to some question, in view of the affidavit of Mr. Pennington, counsel for the receivers, that, in his conversation with a representative of the power company, after the execution of the Smith & Halloran contract, he (Mr. Pennington) stated to him that it would be impossible to obtain the privileges from the city of Paterson for the power company, inasmuch as the representative of this company had stated that, in case that company became the purchaser, it would not undertake to run the works permanently in Paterson, or, at least, that part of Paterson.

The case shows, I think, that the stockholders in this case, by reason of these special privileges from outside parties, secured by or with the assistance of the receivers, on the faith of the special assurances of Smith & Halloran, by their letter and contract, have obtained, by the negotiation of this special and complicated contract, an advantage which the stockholders could not otherwise have secured, and have obtained a price which, as appears by the affidavits, is about fifty thousand dollars less than the price fixed by Rogers himself for a sale, before it went into the hands of the receivers, and is more than three times as large as the proposition or suggestion previously submitted verbally to the receivers by the power company, which proposition was not, apparently, based on the continuance of the operation of the plant. In view of these special circumstances relating to the negotiation and completion of the contract, the purchasers had an additional claim to the benefit of their contract, and neither they nor the receivers should be deprived of it by the mere increase of the bid made by the power company at the time of the presentment of the contract for confirmation. Hpon the case as now presented, and treating it in the most favorable light for petitioner, viz., as if the sole question were whether the contract should be approved, notwithstanding the offer made in open court by the power company, I conclude that the contract was one which should have been approved, and that, from that point of view, the application to set aside the order confirming the sale should be denied.

But the petitioner and the purchasers do not now stand in the same position as at the time of the order confirming the sale. Neither the petitioner nor any other stockholder has appealed from the order. In the meantime the purchasers have taken possession of the plant, pursuant to the express provision of the contract, and have commenced its operation by the new company, on a scale so extensive that the sale could not be set aside without an apparently enormous loss and injury to them and to the new company, to say nothing of the interference with the rights which may have since been secured by the new company from the city of Paterson and the transportation companies on the faith of the confirmation of the contract of sale and in order to carry out its provisions. The change in the situation of the purchasers and of the receivers since the confirmation, and the delay of the petitioner in making his application to set aside the order, are sufficient reasons for refusing to disturb the order.

It is principally because of the purchasers’ rights under the contract and its confirmation, and because they are not in any way connected with airy of the circumstances relied on in the petition as a reason for reopening the sale that I decline to disturb it, but it is only just and proper to, add that, in my judgment, the case shows that the receivers are not chargeable with any improper or inequitable dealing toward the power company in reference to the presentation of its bid, after the execution of the Smith & Halloran contract. Under the entire facts and circumstances of the case, as now disclosed, they were, in my opinion, justified at the time of making the contract, in believing that the power company did not intend to make a bid to them for the property and the charge that the subsequent increased bid of the power company was induced by them, on the assurance that it would be accepted if made, is not substantiated. As to the claim that the position of Mr. Rogers, the principal stockholder, was not fairly represented to the court by his counsel, who was also counsel for the receivers, this, even if true, is manifestly a matter which could not affect the purchasers and which could not in any event, and if Rogers himself now complained of it, operate farther than to induce the court now to consider whether his objection to the sale at the time would have been sufficient reason to refuse to affirm the contract. As I consider on the whole case that the contract was one which should have been approved and as it now appears (1) that the contract was made after consultation with Mr. Rogers, and with his express approval; (2) that he has not appealed from the order nor applied to set it aside, and (3) that'he has encouraged the purchasers in the carrying out of the contract since its execution, and has accepted a lease from the new company for a portion of the property to be conveyed to it under the contract, and (4) that he does not on his own behalf make any complaint of the action of his counsel, his present objection to the sale, presented by way of affidavit to the petition of Longbottom, cannot be considered as presenting any basis for action of the court to revoke the order.

The application to set aside the order confirming the sale must therefore be denied, and the contract, as confirmed, must stand, to be enforced both by the receivers and the purchasers.