218 Mass. 546 | Mass. | 1914
This suit grows out of a plan for the purchase and consolidation of the old United States Worsted Company, the Lawrence Dye Works Company, and the Silesia Worsted Mills, Incorporated, which was issued by the individual defendants as a committee in October, 1912.
The plan begins by stating the condition of the three companies and the reasons which had led to the conclusion that it was desirable that they should be consolidated by passing into one ownership. The suit now before us has to do with the rights of an owner of preferred shares in the old United States Worsted Company, and the terms of the plan in that connection only will have to be stated at length.
The capital stock of the old United States Worsted Company was divided into preferred and common shares. In the proposed consolidation and purchase holders of preferred shares of the old company were entitled to an equal number of shares in the second preferred capital stock of the new company, and holders of common shares of the old company were entitled to subscribe for an equal number of common shares in the new company at $15 a share, and such subscribers were entitled to one sixteenth of a share in the second preferred capital stock of the new company for each common share in the new company subscribed for. .
The defendant the Old Colony Trust Company was named in the plan as depositary with whom the old shares were to be deposited and by whom the new shares were to be issued. On November 16, 1912, the plan was declared operative by the committee under a power given to them in the plan.
At the time that the proposed plan was issued one Charles M. Kahn was the holder of three hundred and twenty-three preferred shares and of one thousand eight hundred and fourteen
This letter was written under the advice of counsel whose standing and good faith in the matter are not questioned. Thereupon this suit was brought to compel the delivery of the certificate of deposit and to recover damages suffered by the plaintiff caused by the refusal to allow a transfer of the certificate of deposit.
The committee set up in their answer, as justifying their refusal to transfer the certificate of deposit to Mr. Kahn’s nominee, this clause in the plan under which the shares were deposited by Mr. Kahn: “Any depositor failing to pay any instalment of such subscription, as and when the same shall become due and payable, shall, in the absolute discretion of the Committee, its successors or assigns, forfeit all right and interest under this Plan and Agreement and any instalment or instalments theretofore paid.” The whole article of the plan, of which the paragraph set up in the answer of the individual defendants was a part, is set forth in full in the note below.
1. We are of opinion that the ruling of the single justice was right. The question depends upon the construction of article VI of the plan of consolidation and purchase already set forth in full in a note. The first paragraph of that article deals with all the stockholders of the United States Worsted Company, both common and preferred; it provides that if they assent to the provisions of the plan and wish to become entitled to the benefits of it, they must deposit their shares with the depositary. The next paragraph is in these words: “Such deposits shall be made in
Undoubtedly the last two paragraphs apply to deposits of both kinds of stock. The question which we have to decide is whether the paragraph next preceding the last two is a paragraph of the same kind, applying to deposits of both kinds of stock, or is a paragraph of the same kind as the two paragraphs next preceding it, which confessedly apply to the deposit of common stock only.
The main, contention of the individual defendants is that by the terms of the paragraph here in question, what the committee have a right to declare forfeited is not “all right and interest in respect of his common shares under this Plan and Agreement,” but it is “ all right and interest under this Plan and Agreement.” And they argue that there is nothing which will justify the court in cutting down the scope of the paragraph arrived at by giving to the words used their literal meaning. We do not think, however, that that is a true construction of this clause. If the con
2. At the argument before this court the individual defendants contended that independently of the forfeiture clause neither Kahn nor his transferee was entitled to the transfer of the three hundred and twenty-three second preferred shares of the new company except upon paying to the committee the $27,210 which he agreed to pay on account of the one thousand eight hundred and fourteen common shares which he deposited under the plan.
The grounds for this contention are that it is settled that where a person has depleted a trust fund, whether by breach of trust or by simply being indebted to it, he cannot withdraw his proportion of the depleted fund; but on the contrary that the trustee can insist upon the sum which otherwise he would be entitled to withdraw being applied to make good the depletion in the fund. For a good statement of the rule see Underhill on Trusts, (7th ed.) 509, where the cases are collected. See also Crocker v. Dillon, 133 Mass. 91, 102.
When the individual defendants refused to transfer to the plaintiff the certificate of deposit representing the three hundred and
Speaking with accuracy, there is no trust fund in the case at bar. Doubtless all subscriptions are held for the new corporation. So far as the assets of a corporation are trust funds there is a trust or quasi trust in the case at bar. We know of no case outside of a trust fund properly so called where the doctrine invoked by these defendants has been applied. The interest on which the plaintiff seeks to hold these defendants is not an equitable interest in a fund the legal title to which is in them. Kahn’s interests in the new second preferred shares is a legal right, arising out'óf a common law contract, to shares of stock, that is to say, to the whole property itself, not to an equitable interest in it. What these defendants are asking for is to have this doctrine applicable in case of an equitable interest in a trust fund (strictly speaking) extended so as to raise a lien on shares of stock to which Kahn is entitled under a common law contract. More than that, they ask that this lien be raised by implication where a provision is expressly made whereby Kahn’s obligation can be enforced, namely, the forfeiture of his subscription and all payments made under it.
We are of opinion that this doctrine should not be so extended and that the plaintiff is entitled to a decree directing the delivery to him of a certificate of deposit.
3. This brings us to the plaintiff’s right to damages for the depreciation in the value of his shares since the defendants’ wrongful refusal to deliver them.
The individual defendants have contended that they are not personally liable for these damages because, if not strictly trustees, they were acting in a capacity like that of trustees and they took the proper course in refusing to transfer the stock, leaving the plaintiff to bring a suit to assert his rights under the plan. And in this connection they rely on what was said by this court in Dimmock v. Bixby, 20 Pick. 368, 374, 375. The contention would have been a good one had these defendants refused a transfer until the plaintiff had established his right to the stock, and had left him to bring a suit to assert his rights. But that is just what these defendants did not do. In place of refusing to act until the court should pass upon the question, they undertook to decide the question themselves and asserted a right to forfeit the shares. They cannot now escape liability for their wrongful refusal to deliver the plaintiff’s property to the plaintiff because they need not have done so.
Next the committee have set up in defense of this claim for personal liability on their part the tenth article in the plan of consolidation and purchase which is set forth in full in the note.
The plaintiff in making this contention has overlooked the fact that the committee were common agents. They were agents not only of the plaintiff but of all other persons who deposited shares under the plan. All persons who deposited shares under
It is not necessary to discuss the liability of the trust company. Without going into the matter at length, it is plain that under the plan the depositary is not liable under circumstances where the committee are not liable.
It follows that the plaintiff is entitled to a decree for the delivery of the shares
So ordered.
"VI."
“Method of Deposit.”
"Stockholders of United States Worsted Company and The Lawrence Dye Works Company, who desire to assent to the provisions and to become entitled to the benefits hereof, must deposit their shares with the Depositary within the time limited by the Committee for such deposit or any extension thereof.
“Such deposits shall be made in the manner following, to wit:
“ (a) Any holder of the preferred stock of United States Worsted Company and The Lawrence Dye Works Company must deposit with the Depositary his certificate or certificates of stock, duly endorsed for transfer; and
“(b) Any holder of the common stock of United States Worsted Company must deposit with the Depositary his certificate or certificates of stock, duly endorsed for transfer, and must contemporaneously with such deposit execute and deliver to the Depositary a subscription agreement, obligating himself to pay to the Committee, its successors or assigns, fifteen dollars ($15) for each share of common stock of United States Worsted Company deposited by him.
“Such subscriptions shall be payable as and when called for by the Committee, its successors or assigns, and the form of such subscription agreements shall be such as the Committee may prescribe.
“Any depositor failing to pay any instalment of such subscription, as
“The Committee may limit the time for receiving deposits■ hereunder, and may, in their discretion, either generally or in special instances extend or renew the period or periods so fixed or limited for such further periods and upon such terms and conditions as they may see fit.
"Holders of stock not deposited within the periods fixed or limited therefor shall not be entitled to deposit the same or to become parties to this Plan and Agreement or to share in the benefits hereof, and shall acquire no rights hereunder, except upon obtaining the express consent of the Committee, who may withhold or give their consent in their absolute discretion, and upon such terms and conditions as they may see fit.”
Hammond, J.
“X.”
“Limitations upon Liability of Committee.”
“The Committee shall have sole control, discretion and management under this Plan and Agreement, and will endeavor to carry the same into effect, but the members of the Committee do not assume any individual responsibility for the execution of this Plan and Agreement or any part thereof, nor for the result of any steps taken or acts done for the purposes thereof, nor shall the members of the Committee be individually liable for any act or omission of any agent or employee selected by the Committee, or for any error of judgment or mistake of fact or law, or in any case except for their own individual wilful malfeasance or neglect; nor shall the members of the Committee be liable for the acts or defaults of the Depositary.”
After the filling of the bill, the certificates for the second preferred shares came into the hands of the committee to be delivered through the depositary to the holders of the certificates of deposit representing such shares, so that the rescript instead of ordering the depositary to transfer to the plaintiS the certificate of deposit to which he was entitled, ordered the delivery to him of a certificate for three hundred and twenty-three second preferred shares of the capital stock of the United States Worsted Company of Massachusetts.