292 Mass. 169 | Mass. | 1935
This is a suit by minority stockholders of the Boston-Montana Mines Company (hereafter called the corporation), a business corporation organized under the
The bill was filed October 7, 1932. The defendants on October 19, 1933, were permitted to file an amendment to their answer previously filed. This amendment was in effect a plea setting up that, after consideration of a plan outlining the financial difficulties of the corporation and
This amendment rightly was allowed. Twombly v. Selectmen of Billerica, 262 Mass. 214, 216. There was set up in it matter in the nature of and proper for a plea. Eastman Marble Co. v. Vermont Marble Co. 236 Mass. 138, 148. Berenson v. French, 262 Mass. 247; 255. Reilly v. Selectmen of Blackstone, 266 Mass. 503, 507. The case was then referred to a master to hear the evidence and to determine the facts raised in the amendment to the answer, leaving the matter of liability under the bill to be determined after the disposition of the issues raised by the amendment to the answer.
The master, as shown by his report, found that the allegations of fact set forth in the amendment to the answer were established. He found, also, that the by-laws of the corporation in conformity to the laws of Montana provided that the directors should have the power to vote to transfer all the assets of the corporation. He found that the stockholders voted in favor of such transfer. The conveyance by the corporation to the National Boston Montana Mines Company (hereafter called the new corporation) described the various properties in great detail but did not purport to convey by description or reference any rights which the corporation may have had in the present litigation, but did convey “All and singular the real, personal and mixed property of Boston-Montana Mines Company, including
The single justice found the amended answer in the nature of a plea in bar and the facts as set forth in the master’s report good and sufficient and ordered that a final decree be entered dismissing the bill. From such final decree the plaintiffs appealed.
Both the corporation and the new corporation are alleged to be organized under the laws of Montana. Our attention has not been drawn to any provisions of the law .of that State governing the facts here disclosed. The case must be decided, therefore, according to the general principles of law as administered in this jurisdiction. O’Brien v. O’Brien, 246 Mass. 411, 420. Calnan v. Guaranty Security Cory. 271 Mass. 533, 543.
A suit in equity by minority stockholders in a representative capacity against directors for wrongs committed by them against the corporation is not in vindication of any personal rights. Such wrongs are adverse to the corporation and except through it have no relation to the stockholders. The interests of the corporation alone are immediately concerned. Damages must be paid to it if any are recovered. Bartlett v. New York, New Haven & Hartford Railroad, 221 Mass. 530, 531. Hayden v. Perfection Cooler Co. 227 Mass. 589, 590-591. Beaudette v. Graham, 267 Mass. 7, 11-12. Sagalyn v. Meekins, Packard & Wheat Inc. 290 Mass. 434. Directors of a business corporation are fiduciaries bound to the strictest good faith in managing its property. Their paramount duty is to the corporation, to which their personal interests are subordinate. They are required to act with reasonable intelligence although not responsible for mere errors of judgment or want of prudence. Brown v. Little, Brown & Co. (Inc.) 269 Mass. 102, 117. Beaudette v. Graham, 267 Mass. 7, 12. Stratis v. Andreson, 254 Mass. 536. Goodwin v. Agassiz, 283 Mass. 358. Albert E. Touchet, Inc. v.
It has been held in numerous cases in this Commonwealth that a claim of this nature, apart from statutory or other special authority, does not pass by assignment by the corporation. In order to be assignable, a cause of action against directors for tortious injury to the corporation must occasion damage to specific property. Rice v. Stone, 1 Allen, 566. It was said in United Zinc Co. v. Harwood, 216 Mass. 474, 479: "A mere right ... to litigate for a fraud perpetrated upon it [a corporation] and nothing more, was not assignable at law or in equity. ... It would not be of itself a saleable asset, or by the weight of authority an interest in property, to which the right to sue passes as incidental.” Authorities there are cited in support of these propositions. This principle rests on the underlying theory that it is against public policy to permit one to litigate for a naked fraud practised on the assignor, and that therefore a claim for an injury of that nature is not assignable. Mulready v. Pheeny, 252 Mass. 379, 382. American Woolen Co. v. Old Colony Trust Co. 263 Mass. 321, 324. Titcomb v. Bay State Grocery Co. 254 Mass. 599, 601. Bailey v. Powell, 239 Mass. 110, 113. Bethlehem Fabricators, Inc. v. H. D. Watts Co. 286 Mass. 556, 566-567. Piper v. Childs, 290 Mass. 560, 565-566.
The allegations of the present bill contain charges of fraudulent conduct as well as of other breaches of the fiduciary duty of the defendant directors. There are specific averments to the effect that the defendant directors have permitted one of their number to receive large sums of money unlawfully in the guise of expenses, and to handle and' use moneys of the corporation as his own, and that they have issued shares of capital stock in the corporation without any consideration or with improper consideration. These are averments of fraudulent conduct. Whatever may
We are constrained to add that the facts set up in the plea and found by the master cannot be adjudged to be a bar to the suit.
Final decree reversed. Case to stand for further hearing.