Pewabic Mining Co. v. Mason, 145 U.S. 349 (1892)
U.S. Supreme CourtPewabic Mining Co. v. Mason, 145 U.S. 349 (1892)
Pewabic Mining Co. v. Mason
Nos. 1340, 1416
Argued March 16-17, 1892
Decided May 16, 1892
145 U.S. 349
When a sale of property is decreed by a court of equity as the result of a litigation, it is the policy of the law that it shall not be set aside for trifling causes or matters which the complaining party might have attended to.
When such a sale is attacked, the court will scrutinize all previous action of the parties during the litigation which may throw light upon or explain their action at the sale.
It cannot be tolerated that either party should designedly wait until the property has been struck off to the other and then open the bidding and defer the sale by an increased offer.
When a corporation owning real estate is wound up by reason of the expiration of the term for which it was incorporated, and its real estate is sold by decree of court under directions of a master, stockholders may purchase it, and there is no fraud on other stockholders if a part of the stockholders combine to purchase it for the benefit of an adjoining property owned by them.
Litigants prolonging litigation to the extent of their ability in a suit in equity seeking the sale of real estate, and prolonging their resistance by having the sale postponed after the decree, cannot complain if it takes place finally in a time of financial depression.
The court decreed in this case that the assets of the mining company should be sold at public vendue, that the debts of the company should be ascertained by a master as a basis for the bid, and that the sale should take place on the confirmation of his report. Held that it was not intended that the sale should be delayed till every claim arising since the commencement of the suit should have passed to final judgment, but that a mere statement of the amount should be presented as a basis for fixing an upset price.
No leave of court is necessary to enable a litigating stockholder to bid at such sale of the assets of the corporation under a decree in the suit in which he is a litigant.
The provisions in Equity Rule 83 respecting exceptions to a master's report do not apply to a report of a mere ministerial matter like a sale, but only to a report upon matters heard and determined by him.
The master's sale under the decree was advertised to take place in Michigan
on Saturday, January 24. Late in the evening of Friday, January 23, the master received from M. a telegram from Boston, in Massachusetts, stating that he was a holder of nearly 3,000 shares of stock, that he had just heard of the sale, that it was to take place on the Jewish Sabbath, that his Jewish friends wished to buy but would not attend on the Sabbath, and asking for a postponement. The sale took place on the 24th as announced, whereupon, on the 26th, M. again telegraphed protesting and making an offer in advance of the purchaser's bid. The master reported this in his report of the sale. The sale was confirmed. The day after the confirmation, M. asked leave to intervene and have the sale set aside. In the subsequent proceedings, no proof was offered that M. was a shareholder, and it appeared affirmatively that he had no financial responsibility. Held that if it had been planned, he could not have been more opportunely ignorant before the sale, or more accurately informed after the confirmation, and that his intervention was too late.
The Court stated the case as follows:
These cases spring out of the same litigation, and may be considered together. The preliminary facts are these: on April 4, 1853, the Pewabic Mining Company was organized as a corporation or mining copper, under the laws of the State of Michigan. The term of the corporation was for thirty years, and expired April 4, 1883. The capital stock at that time consisted of 40,000 shares of $25 each. Notwithstanding the termination of the life of the corporation, the directors then in office continued its business without change. On March 26, 1884, at a meeting of the stockholders, by a vote of 27,919 against 6,754 shares, the directors were authorized to dispose of the property at a sum not less than $50,000, and a sale was directed to be made to a new corporation, to be organized on the basis of 40,000 shares, the shares in the old to be exchanged in full payment for shares in the new, the stockholders in the old not electing to join the new to receive their pro rata interest in money. The present appellees were stockholders in the old corporation, owning 2,650 shares, and protested against these resolutions. A new corporation was organized, but before the transfer had been made, the appellees filed their bill in the Circuit Court of the United States for the Western District of Michigan, the purpose of which was to enjoin the proposed transfer of the property of
the old to the new corporation, and to have it sold at public auction, and the proceeds divided ratably among the stockholders. This bill was filed March 31, 1884. On final hearing, a decree was entered sustaining the prayer of the bill, and directing a sale of the property at public vendue, for cash, to the highest bidder, and referring the cause to Peter White as special master, with power to ascertain the assets and debts of the mining company, and directing that, after ascertaining and making report thereof to the court, he should proceed to sell the property at public vendue. 25 F. 882.
From that decree an appeal was taken, and thereafter this Court sustained the decree so far as it ordered a sale. In reference to the accounting before the master, it, however, directed that it should be widened so as to include the proceedings of the directors since the dissolution of the corporation. The opinion of this Court was announced January 13, 1890. 133 U. S. 133 U.S. 50. The mandate was issued February 6, and was filed in the circuit court on March 14, 1890. In the execution of the decree, a sale was made by the master on the 24th of January, 1891, more than a year after its affirmance by this Court, the purchasers being Thomas Henry Mason and William Hart Smith, two of the original plaintiffs, and the price paid being $710,000. The sale was confirmed, and to set aside the confirmation and to open the sale were the matters sought to be accomplished by the three appeals taken in these two cases.
The specification of errors in the Pewabic Mining Company case was as follows:
"1. That the court below erred in overruling the first exception taken by the appellant to the report of the sale of the special master, viz:"
"That the said sale mentioned in said report was made before the debts and assets of said defendants, the Pewabic Mining Company, were ascertained as provided for and required in the decree entered in said cause."
"2. That the court below erred in overruling the fifth exception taken by the appellant to the report of the sale of the special master, viz: 'Because said property was sold
for an inadequate price or sum, and for much less than it is worth.'"
"3. That, under the mandate of this court, nothing less than 'all the assets and property of the said Pewabic Mining Company' ' in one body' could be sold by said master, but that, by the order of the court confirming the sale, an exception was made therefrom of the claims against the directors, so that in fact all of said assets and property were not sold in one body."
"4. That in disregard of the rules governing the equity practice of the circuit courts of the United States, said report was confirmed within one month from the filing of the report in court."
"5. That promptly and without laches, and before any confirmation of said sale had been made as authorized by the rules governing practice, and before any confirmation whatever had become absolute, beyond the power of the said circuit court to set aside, bona fide and well assured offers of a price largely advanced beyond the highest bid at the reported sale were presented to this court in support of an application from the party so offering and of this appellant, for the setting aside of said reported sale and the ordering of another sale."
"6. That Thomas H. Mason and William Hart Smith, complainants in this case, bid at said auction, and that their bid, as the highest bid, was accepted by the special master, and the property exposed to sale was struck off to them as purchasers, when: (a) they had not obtained leave from the court to bid at said auction; (b) they had advised the court in the matter of the sale, and pressed forward the sale as parties interested only as sellers to obtain the highest price, and not at all as buyers interested to obtain the property for the lowest sum, and that therefore they had no right to bid; (c) before so bidding, they had concerted with the Quincy Mining Company a scheme to take the property (if bought) off their hands at a very large personal profit; and they did not disclose this fact to the court in any of their representations to the court in the matter of the sale, and they procured
affidavits from officers of the Quincy Company and presented them to the court, in which this fact was not disclosed; (d) neither did they disclose this fact of their having secured a sale of this property to the Quincy Mining Company at a large profit, to the master, their fellow stockholders, or the other bidders at said sale, nor allow the same then and there to be disclosed, but concealed the same; (e) on the other hand, while they had obtained this contract and agreement with the Quincy Mining Company, in accordance with which they were to buy this property for the purpose of transferring it to that company, they advised the court that said Quincy Mining Company would, at the auction ordered, bid as an independent bidder, in fair and free competition, and pressed forward the sale for this reason, that if deferred, the Quincy Company might not bid, concealing from the court this contract and agreement and all their relations with the Quincy Mining Company in this matter; (f) as a matter of fact, the scheme was carried out. The complainants were both buyers and sellers. They advised the court, made the sale, purchased the property, and resold it at an advance which they pocketed themselves for their own personal benefit and in fraud of the other stockholders."
"7. That as against a bid accepted under all these circumstances, the Pewabic Mining Company, having for a reasonable time an undoubted right to elect whether to ratify and enforce the sale and to demand and receive into its own assets the advance upon the sum bid, which was to be paid to the accepted bidders, or to have the accepted bid rejected and the bidding reopened, has exercised that right entirely within such reasonable time, and is not guilty of laches in the premises."
"8. That the advance price offered to be bid for the property sold, in case a new sale should be ordered, was large enough to induce and require the court to open the bidding and to order such resale, and that such order was amply secured and guaranteed, and was seasonably made for that purpose."
In Marcus' case, the following additional specifications were filed:
"1. Because, as a large stockholder and as making a bona fide offer of a great advance over the amount bid at the sale, he had a right to intervene."
"4. If the sale had not been confirmed prior to the filing of Marcus' petition, the bona fide offer of so large an advance price was proper ground for opening the sale and ordering a resale."
"5. Even if the sale had been confirmed prior to the filing of Marcus' petition, the action of the court at the same term in entertaining the petition and in directing order of notice to issue thereon suspended the operation of the order of confirmation."
"6. But even if the sale had been regularly confirmed and the decree of confirmation had become of full effect, under all the circumstances of this case, the sale should have been opened and a resale ordered."
"7. The petitioner, Marcus, has not been guilty of laches which should defeat the granting of his petition. "