Opinion
09-12-1924
In re NEW JERSEY REFRIGERATING CO.
J. Henry Harrison, of Newark, for receiver. Edward Maxson, of Summit, for Reilly Stevedoring Company, Inc., and Samuel Lesser. Perkins & Drewen, of Jersey City, for Thomas A. Lembeck and another, stockholders. Fisk & Fisk, of Jersey City, for Ida L. Bowen, stockholder. Merritt Lane, of Newark, for certain other stockholders.
(Syllabus by the Court.)
In the matter of the dissolution of the New Jersey Refrigerating Company. On petition for confirmation of receivers' sale. Sale confirmed, and claim for broker's commission referred to receivers.
See, also, 122 Atl. 832.
J. Henry Harrison, of Newark, for receiver.
Edward Maxson, of Summit, for Reilly Stevedoring Company, Inc., and Samuel Lesser.
Perkins & Drewen, of Jersey City, for Thomas A. Lembeck and another, stockholders.
Fisk & Fisk, of Jersey City, for Ida L. Bowen, stockholder.
Merritt Lane, of Newark, for certain other stockholders.
WALKER, Ch. On July 17, 1924, an order was made in the above-stated cause that Frank J. Bock and Edward H. Wright, receivers of the defendant corporation, be directed, subject to the approval of this court, to negotiate and enter into a contract for the sale of certain property of the defendant company (describing it). In pursuance of this order the receivers issued invitations for bids, and in response received sealed bids, one from the John J. Reilly Stevedoring Company, Inc., which appeared to the receivers to be the highest, and it was accepted and a contract entered into between them and the company, July 31, 1924, which contract recited that in consideration of $550,000 they agreed to sell to that company the property, describing it, $25,000 to be paid upon the execution of the agreement, $193,583 on the delivery of the deed, and the balance of $331,417, being the amount outstanding and unpaid on the mortgage, and subject to the lien thereof. The agreement contained a clause that settlement should be made 90 days after the approval by this court of the terms of the contract, and it contained this stipulation:
"It is hereby understood and agreed that Samuel Lesser is the broker who effected this sale, and said parties of the first part (the receivers)hereby agree to pay said broker a commission of five (5) per cent. for the sale of the plant and a commission of two and one-half (2 1/2) per cent. for the sale of the other parcels, or such other commission as may be approved by the court of chancery, if and when this sale is consummated and the purchase price paid."
And it contained this still further provision:
"And it is further agreed, that this agreement is made subject to the approval of the court of chancery of New Jersey and shall be consummated in accordance with the statutes in such case made and provided, and under the direction of the said court of chancery."
On August 19, 1924, an order to show cause why the receivers should not consummate the sale of the property included in the agreement of July 31st with the John J. Reilly Stevedoring Company, Inc., for the gross consideration of $550,000, and why the receivers should not be directed to pay the real estate broker who negotiated the sale the commissioners mentioned in the agreement, was returnable, having been served upon the stockholders of the defendant company and the Commercial Trust Company, the mortgagee trustee; and Charles T. Brown, in open court, having offered to pay the sum of $560,000, without brokerage, for the property, an order was entered that the agreement of sale of July 31, 1924, be not then consummated, and that no commissions be then allowed to the broker who effected said contract, and it was further ordered that the receivers advertise for sale at public auction on Thursday, August 28, 1924, the real estate and personal property referred to and more particularly described in the petition filed August 2, 1924, and the abovementioned order to show cause made thereon, and that they be directed, subject to the approval of this court, to enter into a contract with the purchaser at that sale and report the same for confirmation on Tuesday, September 2, 1924. And now, on the return of the last-mentioned order to show cause, the receivers, on notice to the parties interested, report that pursuant to the order of August 19, 1924, they offered the property for sale at public vendue, comprising the plant of the defendant company and other property therein described, and that Charles T. Brown then and there bidding the sum of $625,000 for the premises, and no one bidding so much or more for the same, the property was struck off and sold to him for that sum, he being the highest bidder therefor. The conditions of sale were that the property comprising the plant would be sold subject to the mortgage bond issue, on which there was then due approximately $332,000, that the successful bidder would be required to sign a contract, subject to the approval of this court, which contract was signed and annexed to their report.
The cash for the equity of redemption under the Reilly bid at private sale reported August 19, 1924, is $191,750, and that of the Brown bid, at public sale, reported September 2, 1924, is $293,000, making a difference of $101,250 in favor of the Brown bid, being over 52 per cent. excess.
On August 19, 1924, on the return of the order to show cause, and when the bid of the John J. Reilly Stevedoring Co., Inc., was reported, that concern was represented by a New York attorney, who was not associated with any solicitor of our state, and, having no audience in our courts, he could not be introduced pro hac vice. The order of that date calling for a resale at public vendue was not opposed by any one who had standing before the court.
The Reilly Stevedoring Company did not bid at the public sale, but was represented before the court on September 2, 1924, by counsel on the return of the order to show cause and the report of the receivers of the sale of August 28, 1924, and insisted that that company's bid reported on August 19, 1924, should be confirmed instead of the Brown bid reported on September 2, 1924.
Reliance for this position is principally rested upon the doctrine of Morrisse v. Inglis, 46 N. J. Eq. 306, 19 Atl. 16, Rogers v. Rogers Locomotive Co., 62 N. J. Eq. 111, 50 Atl. 10, and Bethlehem Iron Co. v. Phila. Seashore R. R. Co., 49 N. J. Eq. 356, 23 Atl. 1077, to the effect that mere inadequacy of a bid, if the sale is regular and made without fraud, and where no accident or mistake has intervened to prevent fair competition, will not warrant the court in setting it aside and ordering a resale and depriving the bona fide bidder of the advantage of his bid, because it is the policy of the law to encourage the attendance of bidders at judicial sales.
Counsel for the receivers contends that this case does not come within the rule laid down in the cases cited, because those cases refer only to public sales and not private ones, and because the difference in the price in this case is so far greater than those in the others. The excess offered in Morrisse v. Inglis was approximately 10 per cent.; in Rogers v. Rogers Locomotive Co., approximately 10 per cent.; and in Bethlehem Iron Co. v. Phila. Seashore R. R. Co., approximately 20 per cent.; while here it is approximately 52 per cent.
But in Porch v. Agnew Co., 66 N. J. Eq. 232, 57 Atl. 726, Vice Chancellor Grey had before him a sale of property which brought $33,000, when it appeared it was actually worth $60,000 to $100,000, and he ordered a resale, making it a condition that at least $60,000 should be bid at the subsequent sale as an upset price. This case was affirmedon the opinion of the vice chancellor, Porch v. Agnew Co., 67 N. J. Eq. 727, 63 Atl. 1119.
The case in hand is more nearly like that of Porch v. Agnew Co. than it is like Morrisse v. Inglis, Rogers v. Rogers Locomotive Co., or Bethlehem Iron Co. v. Phila. Seashore R. R. Co.; and the very great disparity in the bids, over 52 per cent., would incline me to the opinion that the Reilly Company's bid at private sale was so grossly inadequate, considering what must be the value of the plant, as to call for a denial of confirmation of the sale to Reilly, and, on the contrary, the confirmation of that to Brown, especially in view of the very great amount of disparity, namely, over $100,000.
Furthermore, the Reilly concern has not been diligent in its own behalf in that it did not protect its interests on August 19, 1924, by appearing and urging confirmation of the sale to, and agreement with it, as reported. Besides, its bid and contract was, by the agreement, expressly made subject to the approval of the court. Upon this phase of the matter I am of opinion that the bid of the Reilly Stevedoring Co., Inc., should be rejected, and that of Charles R. Brown confirmed, and the receivers ordered to make conveyance to him according to the terms of the contract between them and him, upon his complying with the terms of sale.
One other matter remains, that concerning the claim of Samuel Lesser for commissions for negotiating the sale to the Reilly Stevedoring Company, Inc. His counsel contends that he rendered laborious, time-consuming, and valuable service to the receivers in bringing about the offer and tentative sale to the Reilly concern, which ultimately resulted in benefit to the estate, citing Hey v. Codman, 39 N. J. Eq. 258, 268.
In Hill v. Hill, 79 N. J. Eq. 521, 82 Atl. 338, Judge Rellstab in the orphans' court, whose opinion is printed as an appendix to that of Pitney, Ordinary, at page 545, said, at page 546 (82 Atl. 339), that
"On a sale of the testator's land the intervention of a broker may or may not be necessary. If not necessary, the brokage paid will not be allowed, unless it can be shown that by employing a real estate agent the estate has been benefited in a pecuniary sense to at least the amount of the expense incurred by such employment."
And at page 547 (82 Atl. 339), that
"In passing upon such employment, the test on the question of compensating the agent out of the estate is, Was it necessary, or was it to the interest of the estate? If it was, the expenses thus incurred are allowed; if not, they will be disallowed. Upon this question the burden of proof is upon the accountants. For New Jersey cases on this subject, see 3 N. J. Dig. Ann. Div. Ex'rs & Adm'rs, § 92. And for cases in other states, see 7 Am. & Eng. Encycl. L. 431, 18 Cyc. 272, and cases noted in 64 L. R. A. 554."
And Chancellor Pitney, in his opinion in the Prerogative Court, at page 542 (82 Atl. 349) said that, upon the question of broker's commissions, he concurred in the views expressed by Judge Rellstab.
Receivers, like executors, are trustees; the same law generally and in similar circumstances applies equally to all of them. In this case, the receivers' circulars offered to pay a commission to real estate brokers who represented successful bidders, if and when the sale was consummated and the purchase price paid; and the contract of the receivers with the Reilly concern stipulated that Lesser was the broker who effected the sale, and the receivers agreed to pay him a certain commission named or such commission as might be approved by the court, if and when the sale was consummated and the purchase price paid. Mr. Lesser was not a party to that contract, but it was one made for his benefit, and on which it appears he is entitled to sue. Burt v. Brownstone Realty Co., 95 N. J. Law, 457, 112 Atl. 883. And the Supreme Court held in Klipper v. Schlossberg, 96 N. J. Law, 397, 115 Atl. 345, that unless a broker and his employer have stipulated to the contrary, the broker is entitled to his compensation upon the completing of the negotiations he undertook, irrespective of whether or not the contract negotiated is ever consummated, so long as the failure to carry it through to a successful completion is not due to any fault of the broker. It may be that the broker is entitled to be compensated in this case, but this question it is neither necessary nor proper now to decide. He should make his claim to the receivers in the usual way, whose duty it would then become to allow or disallow it. He will be given 10 days in which to file his claim with the receivers.
If he should be aggrieved by their determination, the claim being against a corporation which has been dissolved and is in process of being wound up, it seems that his remedy would be by suit at law, under P. L. 1921, p. 724, instead of by appeal to the chancellor, under Comp. Stat. p. 1649, § 78.
The sale to Brown will be confirmed; Lesser's claim for commissions in negotiating the Relly sale will be referred to the receivers. Order accordingly.