299 Mass. 130 | Mass. | 1937
By this bill in equity the plaintiff seeks (1) To compel the defendant corporation to account to the plaintiff for a balance alleged to be due him as his share of commissions for managerial services rendered under a contract with the corporation by the terms of which the commissions were to be calculated annually upon the net earnings of the corporation, without deduction for certain taxes, but after deducting eight per cent on the invested capital and surplus, and (2) To compel the individual defendants to pay to the plaintiff such sums as might be found due him in default of payment by the corporation, on the theory that the individual defendants, as officers of the corporation, had become liable for its debts and contracts under G. L. c. 156, §§ 36, 38, by making a false report of the condition of the corporation.
The cause was referred to a master to whose report the plaintiff filed many objections, most of which were directed against the refusal of the master to make rulings requested by the plaintiff. An interlocutory decree was entered "that the objections of the plaintiff, except in so far as they relate to rulings of law, other than incidental rulings of law be and hereby are overruled and said report be and hereby is confirmed, in so far as it finds facts.” The plaintiff did not appeal from this decree. There was no further interlocutory decree dealing with the master’s report, but
Where there is no appeal from an interlocutory decree wholly confirming a master’s report, an appeal from the final decree does not reopen objections to the report, unless it appears to the full court that the rulings to which objection was made erroneously affect the final decree, and if the final decree does not appear to have been so affected, the only questions remaining open are whether the final decree is within the scope of the pleadings and supported by the facts found. G. L. (Ter. Ed.) c. 214, § 27. Lyons v. Elston, 211 Mass. 478, 482. Fay v. Corbett, 233 Mass. 403, 409, 410. Ledoux v. Lariviere, 261 Mass. 242, 244. Carter v. Sullivan, 281 Mass. 217, 219, 220. Smith v. Knapp, 297 Mass. 466. Whatever may have been the purpose of entering an interlocutory decree in the unusual form hereinbefore quoted, inasmuch as no objection to a master’s report can ever be sustained unless the report itself discloses the error, Zuckernik v. Jordan Marsh Co. 290 Mass. 151, 155, no right of the plaintiff can have been infringed by the final decree if no error appearing on the face of the report has affected that decree, and if the decree is proper upon the facts found. With these principles in mind we prefer to examine the questions which have been argued without pausing to draw fine distinctions between rulings of the master which are "incidental” and those which are not.
The master found that "there is nothing due the complainant . . . under the allegations contained in the bill of complaint and that the accounts and books ... [of the corporation] so show and are substantially correct.” The plaintiff seeks to avoid the fatal effect upon his case of this conclusion by contending that certain subsidiary findings upon which the conclusion must rest are tainted with errors and that, if those errors are corrected, it will appear that there is a balance of net earnings of the corporation in which he is entitled to share: We shall deal with these contentions seriatim.
(1) No error of law appears in the master’s acceptance of rates of depreciation on real estate which he finds were
(2) For like reasons, in allocating items for repairs and alterations as between capital charges and ordinary expenses, an inference may well be drawn that the parties to the contract intended that net earnings should be calculated for the purposes of the contract in accordance with decisions and practices established by these parties themselves in their actual dealing with these same items.
(3) The master was not bound to rule that it was the duty of the corporation “to pay the stockholders of the corporation eight per cent on combined invested capital and surplus at the end of each year.” This eight per cent was merely an arbitrary deduction set up by the contract
(4) No error of law appears in the master’s finding that certain sums advanced to the corporation by the defendant Jerome R. George, Sr., constituted “invested capital” upon which, under the contract, the eight per cent was to be deducted. It was expected by the parties at the outset that George, Sr., would “in some manner, as appeared best to him and Arey & George,” furnish the corporation, which he controlled, sufficient capital to carry on the business. These advances were made for that purpose, were reasonably necessary therefor, and “were treated by all the parties . . . as invested capital” upon which the eight per cent deduction would be figured. No interest was paid upon these sums. They seem to have remained with the corporation, in varying amounts, during the period here involved. There was an understanding between George, Sr., and the corporation that stock should be issued for these sums, and ultimately, although after business relations with the plaintiff had ceased, stock was issued for the amount advanced. In view of these subsidiary findings, and without a report of the evidence, it is impossible for us to say as matter of law that these advances were not invested capital within the meaning of this particular contract as applied to the special circumstances of the defendant corporation. .Decisions defining “invested capital” under other circumstances are not controlling.
(5) The master was not required to rule that the premium upon stock which the corporation sold above par formed part of the “net earnings” upon which the commis
(6) If premiums on stock actually sold are not to be included in net earnings, it is plain that premiums which might have been realized upon stock which the corporation voted to issue but did not in fact sell, within the accounting period, cannot be so included.
It seems to us that one more finding of the master should be mentioned because of its possible bearing upon the several claims of the plaintiff, although none of the parties has based any argument upon it, and we have found no need to rely upon it. The master finds that after a discussion in 1927 certain changes were made in the bookkeeping, and the salaries of the plaintiff and of the defendant George, Jr., were increased, and that by entering into this arrangement the corporation and the individual parties “accepted it as squaring up to that date all obligations, if any, existing between the parties as to the profit and loss of the corporation and the amount to be paid to Arey & George, Jr. for services, either as salary, bonus or commission.”
As the plaintiff has failed to establish that the defendant corporation owes him a debt, the individual defendants are not hable as officers.
Decree affirmed with costs of appeal.