2 Mass. App. Ct. 452 | Mass. App. Ct. | 1974
At the time of his death on July 17, 1960, Paul F. Bowser was the record owner of various securities representing substantial equity and debt positions in Bay State Harness Horse Racing and Breeding Association, Inc. (Bay State), which owns and operates a racetrack in Foxborough, and a substantial equity position in Norfolk County Concessionaires, Inc. (Norfolk), a corporation supplying food and drink at the track. Thomas J. Colbert was appointed as the executor of Bowser’s will by a decree of the Probate Court for Middlesex County entered on August 18, 1960. During the period from July 17 through August 8, 1961, fourteen separate petitions for the retention of assets (see G. L. c. 197, § 13)
On January 16, 1969, Colbert, as executor, filed a petition on the equity side of the court against all those who had filed petitions for the retention of assets, against Mary E. O’Neill (apparently in her capacity as executrix of the will of James J. O’Neill), and against Loew, seeking declaratory relief with respect to all the claims which had been asserted against the securities of Bay State and Norfolk standing in Bowser’s name. Separate petitions, similarly seeking declaratory relief with respect to their particular claims, were filed by four of the claimants. Loew was named or permitted to intervene as a respondent in those four petitions. All five petitions were heard together. The decrees (one of them as amended) entered by the judge determined, among other things, that the securities tabulated in the margin were the property of the claimants therein indicated.
The present claims to the equity securities in. Bay State and Norfolk all spring from written assignments of record interests standing in his name which Bowser made to various of his business associates and acquaintances during the period from December 12, 1947, through May 17, 1948. Some of the claims are derived directly from assignments originally executed by Bowser, while others rest on subsequent purchases of the interests of the original assignees. No question has been raised as to the validity of the original assignments as between Bowser and his assignees, or as to the validity of the subsequent purchases from the original assignees.
At the times of the original assignments Bowser’s interests in Bay State and Norfolk were represented by shares held by him of record in two separate voting trusts, one of which held all the outstanding stock of Bay State and the other of which held all the outstanding
The Hennessey and O’Neill claims for debentures of Bay State (note 2) rest on the testimony of Hennessey that both he and O’Neill had advanced to Bay State through Bowser separate sums of $5,400 each which had been used to purchase portions of the land on which Bay State’s track had subsequently been built, and that the total of $10,800 so advanced was reflected in a subordi
Other facts and evidence will appear in connection with our discussion of the various points argued by Loew in connection with his appeals.
THE RESTRICTIONS ON TRANSFERS OF THE EQUITY SECURITIES OF BAY STATE AND NORFOLK.
The articles of organization of Bay State and Norfolk both contain provisions (of unchallenged validity) which, unless waived by the directors in a particular instance, require any shareholder, including his heirs, assigns, executors, or administrators, who desires to sell or transfer his shares to offer them first to the corporation by written notice to the directors stating the selling price and naming an arbitrator. If the directors do not, within stated time limits, accept the offer of the shareholder or the price fixed by arbitrators, the holder is free to sell as he wishes. Substantially the same provisions were, by the terms of the Bay State and Norfolk voting trusts, made applicable to the shares of those trusts. Those provisions have not been observed with respect to any of the shares of Bay State or any of the shares of the Norfolk voting trust which are referred to in note 2.
1. We state first our opinion that the directors of Bay State have, by a vote adopted by them on January 18, 1968,
2. The shares of the Norfolk voting trust stand on a different footing. Bowser and Loew were the original and only two stockholder signatories to the agreement by which that trust was established and by which the provisions of Norfolk’s articles of organization regarding restrictions on the transfer of its stock were, with insubstantial changes, made applicable to the shares of the trust. Accordingly, Loew had a contractual right as against Bowser (or any assignee of his) to require compliance with the restrictions on transfer of shares of
However, it does not necessarily follow that Loew will never be in a position to invoke the Norfolk transfer restrictions. It appears from the evidence that he is now the president, a director, and the controlling stockholder of both Bay State and Norfolk. The attitude taken by him to date on the issue of the transferability of the equity securities of both corporations strongly suggests the advisability of further inquiry by the court below (by the taking of additional testimony if necessary) as to whether
THE DEBENTURE CLAIMS.
Colbert was appointed as the executor of Bowser’s will on August 18, 1960.
3. The first argument is grounded on the provisions of G. L. c. 197, §§ 13 and 14, and is to the effect that Hennessey’s claim for debentures is barred because he
4. Loew’s other argument is that there was no case before the Probate Court which authorized it to award debentures to O’Neill’s executrix. The argument appears to be that no petition for retention was filed with respect to the O’Neill claim for debentures within the one year period referred to in G. L. c. 197, § 13. It should be obvious from what has already been said that we are of the opinion that O’Neill’s executrix, like Hennessey, was not a creditor of Bowser’s estate within the meaning of § 13 and was not obliged to comply with the provisions of that section. The fact of the matter is that Colbert, as executor, did retain in his possession the debenture claimed in part by O’Neill’s executrix.
LACHES.
5. Each of Loews answers set up, and he continues to argue, a question of laches. The principal thrust of the argument is that, he was prejudiced by delay because none of the claimants to the equity securities asserted his claim during the interval between 1947 or 1948, when Bowser executed his original assignments, and 1961, when the petitions for retention of assets were filed. We are not impressed.
Each of the original assignees from Bowser appears to have been a business associate or other acquaintance of his who was specifically advised, of the fact that what was being assigned to him was then held by Loew as collateral security for an indebtedness which would not be liquidated in the near future. Each appears to have been content to rely on Bowser’s promise, set forth on the face of the assignment, to do all things necessary or required to effect a formal transfer to the assigned shares as soon as the pertinent indebtedness should be satisfied. None of that indebtedness was completely liquidated during Bowser’s lifetime. There was nothing whatsoever to suggest that Bowser ever repudiated any of the assignments or gave any of his assignees reason to suspect that he would not receive what had been promised him.
None of the claimants in these cases is in any way responsible for the change in Loew’s position which occurred when he chose in 1962 to purchase the interests of the residuary legatees under Bowser’s will. By that time each of the claims now in dispute was a matter of record in the Probate Court.
We regard the laches claim as frivolous.
THE ORDER THAT LOEW DEMAND PAYMENT OF THE LOAN SECURED BY THE PLEDGE OF THE NORFOLK SHARES.
We recite more of the details of the loan secured by the pledge of the Norfolk shares which are in dispute. In August of 1947 Bay State fell seriously in arrears on the payments due to the contractors engaged in the construction of the track in Foxborough. The contractors threatened to stop work, thereby endangering the opening of the track in time for a race meeting scheduled for September. Of all those associated with the venture only Loew appeared to possess the additional funds necessary to effect a resumption of the work. Following conferences among all concerned, the directors of Bay State voted to borrow not in excess of $200,000 from Norfolk, and the directors of Norfolk voted to borrow not in excess of that amount from Loew, who agreed to lend Norfolk up to that amount. Bay State gave Norfolk its demand note for $200,000, secured by what was then a
At the time of the trial of these cases in 1969
6. The judge, in an order forming a part of the decree entered on Colbert’s general petition (as executor), ordered Loew to make demand on Bay State and Norfolk for payment of the Norfolk note. The order ran against Loew as an individual, and not as an officer or director of either corporation; no order was entered against either corporation. Loew argues that the order against him constituted an abuse of discretion and an unwarranted interference in the internal affairs of both corporations.
Nor do we see any unwarranted interference in the internal affairs of either corporation. The order does not constitute a usurpation of the functions or discretion of the directors of either corporation. If it gives that appearance, it is only because Loew wears so many hats. If someone else owned the Norfolk note and made demand for its payment, Loew and his fellow directors
7. We think the orders against Loew should be modified in two respects. First, the order requiring him to deliver the certificates for 5,250 shares of the Norfolk voting trust to the executor (subject to the equitable pledge made by Bowser) is to be modified so as not to require the delivery of the certificates until the Norfolk note has been paid in full. Second, the order that Loew make demand on Bay State and Norfolk for payment of the Norfolk note is to be expanded by the inclusion therein of an unequivocal command (see United States Time Corp. v. G. E. M. of Boston, Inc. 345 Mass. 279, 282 [1963]) that Loew, at his expense, promptly institute and diligently prosecute to their conclusion such legal proceedings as may be necessary to secure payment of the note if it should not be paid within a reasonable time (as determined by the court and stated in the order) following the demands for payment.
8. The appeals of Bay State and Norfolk are dismissed. The pertinent decrees are to be modified in the respects required by part 7 of this opinion and, if necessary, by part 2 of this opinion. They are to be further modified, where necessary, by the substitution (for Colbert) of The First National Bank of Boston as the executor of the Bowser will and by the substitution of the personal representatives of such of the original parties as have died since the commencement of the present proceedings.
So ordered.
Claimant Shares of Bay State Debentures of Bay State Shares of Norfolk voting trust
Mary E. Sullivan, executrix of the will of Earle D. Sullivan 500 250
Elias M. Loew 250 750
Patrick J. Hennessey 750 $5,400 2,000
Thomas J. Colbert, individually 500 500
Mary E. O’Neill, executrix of the will of James J. O’Neill $5,400 1,250
Harvey B. Leggee 500
Bay State and Norfolk, which were named as parties respondent in the separate petitions filed by Sullivan, Colbert 1(individually) and O’Neill, joined Loew in the claims of appeal filed by him from the decrees entered on those petitions. As neither corporation has filed a brief in this court, or joined in the brief filed by Loew, the appeals of both will be dismissed for failure to comply with Rule 1:16 (1) of this court. 1 Mass. App. Ct. 891 (1972).
Loew himself falls into the latter category with respect to the securities set opposite his name in note 2.
The Bay State voting trust was terminated in 1968. Shares in the trust were exchanged for equal numbers of shares of the stock of Bay State, and a certificate for all the shares of Bay State which are referred to in note 2 was subsequently delivered to Colbert in his capacity as the executor of Bowser’s will. The status of the Norfolk voting trust will be discussed at a later point in this opinion.
This note was also secured by a second mortgage of Bay State’s real estate which was held by Loew.
Nothing in the evidence required the judge to accept Loew’s theory that the amounts in question had been paid by Hennessey and O’Neill in order to acquire the shares in Bay State which were discussed in the Colbert case (351 Mass. at 136, 138-142) and which were purchased by Bay State following the decision in that case.
One Frederick Meyer, the assignee from Bowser and the assignor to Hennessey of 500 shares of each of the voting trusts, somehow managed to have the assignments to him reflected on the books of both trusts. However, it does not appear that such entries were known to or authorized by the voting trustees of either trust.
Nothing contained in any of the decrees appealed from amounts to an order requiring that any shares be transferred on the books of Bay State or of the Norfolk voting trust. However, the problems have been argued at length in the briefs, and we proceed to deal with them in the hope of avoiding still further litigation.
“In the event it shall be finally determined in the Probate Court of Middlesex County that Thomas J. Colbert, Patrick J. Hennessey, and Mrs. Sullivan, or any of the foregoing persons, is the owner of 500 shares, 750 shares, and 500 shares, respectively, of this corporation, then the restrictions on the transfer of Voting Trust Certificates or the common capital stock of this corporation be and the same hereby are waived only to permit such shares to be registered in the name of the aforesaid persons ...” (emphasis supplied).
“Mr. Loew announced that under Paragraph Seventh of the Voting Trust Agreement dated July 29, 1947, the Voting Trust Agreement had terminated on July 28, 1967, all conditions precedent to such termination having been satisfied.” The minutes of the meetings of the directors and stockholders of Norfolk held since June 18, 1968, disclose that all concerned have subsequently proceeded on the assumption that the voting trust is no longer in existence.
As each share of the Norfolk voting trust became exchangeable for one share of Norfolk on the termination of that trust, we shall hereafter refer to the equity securities of Norfolk as if they were shares of Norfolk itself.
Loew seems to have had no difficulty in the past in routinely securing waivers whenever his personal interests or those of members of his family have been involved.
As no price would actually be paid by any of the persons determined to be entitled to those shares, no proposed selling price would have to be stated in any written notice which the executor might give to the directors of Norfolk.
We do not know from this record when Colbert gave bond for the performance of his duties.
As Loew says in his brief, “Hennessey . . . [is] looking not for cash but for debentures.”
Colbert had been Bowser’s personal counsel for many years and was obviously thoroughly familiar with his affairs as well as with those of both Bay State and Norfolk. See, again, the Colbert case, 351 Mass. at 135, 136-137, 143-147. It seems quite likely that
To the contrary, there was evidence of instances in which Bowser had passed on to his assignees the dividends which he had received on the underlying securities.
We do not have before us the inventory filed by Colbert as executor. There are indications in the original papers in the Colbert case (as to which see Flynn v. Brassard, 1 Mass. App. Ct. 678, 681 [1974]) that the equity securities now claimed may not even have been listed in the inventory as assets of the estate.
We are not told why the last of the records in these cases was not entered in this court until the end of 1973.
It,is not argued (see Lolos v. Berlin, 338 Mass. 10, 13-14 [1958]) that the court lacked the power to enter the order in question or that the order was otherwise erroneous as matter of law.
We need not pause to speculate whether Loew’s demanding or enforcing payment of the note might embroil him in a minority stockholder’s suit. Compare the Colbert case, 351 Mass. at 141.
Colbert, Hennessey and, perhaps, others.