279 Mass. 87 | Mass. | 1932
This is a bill by a minority stockholder in the C. A. Briggs Company against the company, W. E. Briggs, a director of the corporation, and C. A. Briggs, its president, treasurer, a director and owner of all but two shares of its stock except the eighty shares owned by the plaintiff. The plaintiff and the individual defendants constitute the board of directors. The bill charged maladministration and misfeasance; refusal to declare and pay dividends although the corporation has a surplus and is in position to pay them; the payment of inordinate salaries to the individual defendants; arbitrary control exercised to compel minority stockholders to part with their stock at less than its real value; the issue to C. A. Briggs of a large number of shares at par value, when the actual value was greatly in excess of par, for salaries alleged to be due but, in fact, not legally due him. It was filed November 14, 1924. By a supplemental bill allowed July 17, 1929, the offences complained of were alleged to have continued. It prayed appointment of a receiver, an account by the individual defendants of moneys due from them to the corporation, the cancellation of certificates of stock not
After hearing on a master’s report, to which no exceptions were taken, the court decreed that C. A. Briggs was bound and he was ordered to return to the corporation six thousand one hundred twenty-five shares of its corporate stock illegally issued to him, and was bound and was ordered to pay to it stated sums with interest from stated dates (1) for money loaned without authority to the King Rubber Company, (2) for money received improperly as interest on amounts loaned by him to the corporation, (3) for the amount of a cash dividend received by him on the six thousand one hundred twenty-five shares illegally issued; and, further, that he was accountable to the corporation for $5,920 and for $3,720 improperly credited to him but in regard to which no relief was ordered because those amounts were credited as part of the sum received by it for the stock illegally issued. It decreed that C. A. Briggs was not now accountable on account of overdrawn salary. Furthermore it ordered payment of a sum taxed as between solicitor and client to be paid by the corporation to the plaintiff out of the amounts ordered to be paid by C. A. Briggs to the corporation. The decree was declared to be without prejudice to the assertion of a claim by C. A. Briggs for any indebtedness which might be found due to him from the corporation, and without prejudice to further proceedings for payment of a dividend after the financial condition of the corporation had been determined by compliance with the decree. The plaintiff appeals; but confines his objection to so much of the decree as deals with the matter of salary. The defendants appeal.
Neither master nor judge found any liability or wrongdoing on the part of W. A. Briggs. The decree does not mention him. His appeal is well taken. The bill should be dismissed as to him with his costs to be paid by the
There is no merit in the plaintiff’s appeal. The master found that a reasonable compensation for the services of C. A. Briggs to the corporation was $15,000 per year in the years from 1919 onward. In December, 1911, it was voted that as treasurer of the corporation he “be paid a salary of $14,000”; in December, 1912, it was voted “That the salary of C. A. Briggs be fixed at $17,000 per year”; in January, 1914, it was voted “That the salary of the Treasurer, Mr. Charles A. Briggs, be $7000 a year,” and in January, 1919, it was voted that he “shall receive a salary of $25,000 for the ensuing year, commencing January 1st, 1919.” The plaintiff presided at all these meetings. There were no other votes relating to C. A. Briggs’s salary. He was credited or he withdrew as salary each year the following sums: in 1919, 1920 and 1921, $25,000; in 1922, $20,000; in 1923, 1924 and 1925, $4,000; and in 1926, 1927 and 1928, $8,000, a total of $131,000. He was accustomed to fix his salary with reference to the profits of the year, and often did not draw his full salary. He had a running account with the company and so informed the plaintiff. He managed the business and made it successful. The judge ruled that if C. A. Briggs took the amounts actually paid or credited to him in each of the years as full payment he could not subsequently set off the difference between those amounts and a fair compensation for the years; but found and ruled that he did not accept the credits and payments as payments in full and “is now entitled to set-off against previous overdrafts the balance due him for the years 1923 to 1928, inclusive, on the basis of a fair salary of $15,000 per annum.” There was evidence stated in the report to support this as finding of fact. The vote of 1914 fixing a salary of $7,000 per year in terms related only to a salary as treasurer. The plaintiff apparently was then and till 1919 receiving a salary as president. Obviously that vote could be found not to be controlling in the years following 1919 as to the amount to be
The defendant C. A. Briggs’s appeal is based on several grounds.
There is no merit in the contention that the plaintiff must fail because he has not done all that he might to procure action by the corporation. Where the acts complained of are the acts of those in complete control of the corporation, a minority stockholder may bring such a bill as this to remedy them without first requesting action by the corporation. Hill v. Murphy, 212 Mass. 1. Brewer v. Boston Theatre, 104 Mass. 378. Dunphy v. Traveller Newspaper Association, 146 Mass. 495.
We find no error in the ruling that the burden rested upon C. A. Briggs to justify the payments or credits to him of $5,920 and $3,720, rather than upon the plaintiff to show them improper. In this proceeding C. A. Briggs stood in the position of one bound to account. The books of the company, kept under his supervision, charged him with those amounts. It was for him to establish his discharge from them. Little v. Phipps, 208 Mass. 331. Pappathanos v. Coakley, 263 Mass. 401, 408. This burden he did not sustain.
The ruling and finding with regard to loches must stand.
' Although until 1919 the plaintiff was both president and a director, and although at all times the books were open to his inspection and were honestly kept, the master found that he was not an accountant nor skilled as a business man. While it may well be that he could not excuse himself from responsibility to others for failure to inform himself with regard to the matters of which he complains, we think it is open to him on behalf of the corporation to in
The master found that the loan to the King Rubber Company was never entered on the books, was never authorized by any vote or action of the corporation, and proved to be a total loss which was charged off as merchandise. C. A. Briggs was interested personally in the King Rubber Company. A decree holding him responsible is sustained by the findings, even if it also be found that at the time he regarded the “loan [as] a good investment,” and although the law permits one business corporation to loan to another in appropriate circumstances.
There was no error in charging Briggs with the amounts paid to him as interest. Unless an agreement exists for payment of interest, an officer of a corporation cannot charge interest on amounts of his money allowed to remain with the corporation. Interest is not due as compensation for the use of money unless by agreement. Ratner v. Hill, 270 Mass. 249, 253-254. We cannot say the finding was wrong.
The order with reference to the issue of six thousand one hundred twenty-five shares to C. A. Briggs presents difficulty. In January, 1911, the directors, of whom the plaintiff was one, voted that indebtedness to creditors might be
The judge was right in refusing to order payment of a dividend by the corporation. What shall be done with the earnings of a corporation rests in the sound judgment of the directors. A court will not undertake to control this except in extraordinary circumstances. Fernald v. Frank Ridlon Co. 246 Mass. 64. Joslin v. Boston & Maine Railroad, 274 Mass. 551, and cases collected.
The defendants however were entitled here to a decision of the material issues properly brought before the court by the pleadings. Marshall v. Holbrook, 276 Mass. 341, 348. See 21 C. J. 661-662, for collection of cases. Compare French v. Brooke, 241 Mass. 315. C. A. Briggs has a right to a decree which shall settle the account here demanded. The plaintiff has had his day in court. He is not entitled to another opportunity to introduce evidence which was admissible here but was not produced. It appears that the corporation was indebted to C. A. Briggs according to its books in $61,251.77 in January, 1919, and that there is a credit due him for salary not drawn. It appears that he owes the corporation the items for which he is here found accountable. If there is a balance in his favor he is entitled to have it appear in the decree.
The decree must be modified. The paragraphs are affirmed which charge C. A. Briggs with indebtedness to the corporation in the amounts stated; order the return to the corporation of the six thousand one hundred twenty-five shares improperly issued to him; order the payment to the plaintiff of the amount taxed as costs between solicitor and client; and adjudging that C. A. Briggs is not accountable for salary overdrawn. An account of the indebtedness of C. A. Briggs to the corporation with all counter charges in his favor must be stated, a balance be
Ordered accordingly.