244 Mass. 240 | Mass. | 1923
The plaintiff, a minority stockholder in the Holland System Hull Company (hereafter referred to as the Hull Company), brings this bill to compel the individual defendants and the Holland-System, Inc., to pay over to the Hull Company the sum of $15,000
The Holland-System, Inc., was organized and the individual defendants, Daniel E. and John F. Holland, have been respectively its president and treasurer; they have constituted a majority of its board of directors, and have owned ninety-eight per cent of its capital stock, the remaining shares being held by their nephew. The corporation was organized for the purpose of engaging in the liquor business and in real estate.
In 1913, as the result of a conversation between the plaintiff and Daniel E. Holland, the latter wrote to the plaintiff and offered to form a corporation with a capital of $15,000 for the purpose, among other things, of carrying on the liquor business at the Grand View Hotel, at Nantasket Beach in the town of Hull; the plaintiff and the defendants Daniel E. and John F. Holland should each own one third of the capital stock, and the plaintiff should manage the business at a salary of $30 a week. This offer was accepted in a letter written by the plaintiff dated March 25, 1913. On April 14, 1913, the plaintiff went to work at the hotel. Soon afterwards he gave the defendant Daniel E. Holland a check for $5,000 in payment for fifty shares of stock, and on July 2, 1913, received a certificate therefor issued by the Hull Company, a corporation organized under the laws of Massachusetts for the general purpose of carrying on the liquor business, its charter being dated June 30, 1913. The individual defendants each subscribed for and received a certificate for fifty shares of stock which, with the fifty shares issued to the plaintiff, made a total of one hundred and fifty shares and constituted the entire outstanding capital of the company. Daniel E. Holland was president and a director; John F. Holland was treasurer and a director; and the plaintiff was the clerk and a director. There was evidence that the corporate records were prepared and kept by an accountant named Lewis, who was in the employ of the Hollands, and that when they were required to be signed by the clerk were so signed by the plaintiff, generally without reading them.
The plaintiff managed the business from April, 1913, until July 14, 1917, when he resigned. During his management the business was profitable, and the plaintiff testified that he understood that the $15,000 capital had been paid in in cash and was on deposit in the bank to the credit of the Hull Company; that he did not examine the books but trusted Daniel E. and John F. Holland and the accountant Lewis; that his first knowledge that the amount of the capital stock had been paid to the Holland-System, Inc., was in 1919, when he learned that fact from his counsel in this case. The Hull Company, during the period the plaintiff acted as manager, paid to the Holland-System, Inc., a rental of $20 a week, which, the plaintiff testified, he understood was for the use of both the real estate and personal property; he further testified, that he did not learn the defendants claimed that the personal property had been purchased by the Hull Company until long after he ceased to be employed as manager; and the trial judge so found.
If, in view of the circumstance that the two individual defendants, who controlled both corporations, and are the only parties in interest except the plaintiff, application was required to be made to the corporation to take action with reference to the matters complained of in the bill, and refusal or neglect to take such action was necessary before this suit could be maintained by a minority stockholder, it appears that such application in writing was so made by the plaintiff on May 5, 1919, and no action having thereafter been taken by the corporation, this bill was filed on February 21, 1920. Peabody v. Flint, 6 Allen, 52. Almy v. Almy, Bigelow & Washburn, Inc. 235 Mass. 227. O’Brien v. O’Brien, 238 Mass. 403, 410. The trial judge made certain findings of fact and ordered a decree to be entered for the plaintiff in accordance with such findings.
The evidence was taken by a commissioner and is before us. We have examined it carefully and are of opinion that the findings cannot be said to be without evidence to support them. Undoubtedly subscriptions to the capital stock of a corporation may be paid for in cash or in property. If any part of such property is personal, G. L. c. 156, § 10, cl. (c) provides that it shall
While on the books of account of the Hull Company entries were made which purported to show that each of the three subscribers to the capital stock had paid into the treasury of the company $5,000, which had been used to buy the good will, furniture and fixtures of the hotel, that manifestly was not in accordance with the facts. It appears that no bill of sale or written lease was given to the Hull Company, and all taxes on the property real and personal were assessed to the Holland-System, Inc. The insurance premiums, repairs and all other bills of the Hull Company were paid by the Holland-System, Inc., and it was reimbursed therefor from the earnings of the Hull Company. All purchases of merchandise by the Hull Com-
The evidence warrants a finding that the plaintiff, although a director who attended all meetings of the stockholders and directors until he resigned, had little knowledge of the business transactions; that he trusted the individual defendants and the accountant Lewis, and that his time was fully occupied in the management of the business. The judge also found that the plaintiff did not examine the books of account of the corporation, but trusted to the individual defendants, and to Lewis who kept the books; that the records of the meetings of stockholders and directors, which were signed by the plaintiff as clerk, were prepared by Lewis and submitted to the plaintiff for his signature. The judge also found that until he had engaged counsel in 1919 the plaintiff did not know that claim was made by the individual defendants that the capital stock of the Hull Company had been used to purchase the good will, furniture and fixtures of the hotel; that this disposition of the capital was not discussed or voted upon at any meeting of the stockholders or directors; that no decision to that effect was ever reached at any meeting of the Hull Company, and that there is no vote of the stockholders or directors of the [Holland-System, Inc., authorizing! such sale. The judge further found that neither the Holland-System, Inc., nor the individual defendants has turned over to the Hull Company the amount of the subscriptions for capital stock, or any equivalent therefor, and that the Holland-System, Inc., has received from the plaintiff and from each of the individual defendants the sum of $5,000, which represents the amount of their subscriptions; that this transaction was carried out as a result of a decision of the individual defendants, but not while acting as directors at a directors’ meeting, which prevented the payment for the capital stock being made to the Hull Company.
The directors of a corporation occúpy a fiduciary relation toward the corporation and are bound to protect its interests;
Upon all the evidence the findings that neither the Holland-System, Inc., nor the individual defendants ever turned over to. the Hull Company the amount of the subscription for the capital stock or any equivalent therefor, was not erroneous, but was warranted and must stand. There is nothing to show that there was any ratification by the Hull Company of the acts of the individual defendants or of the Holland-System, Inc., in wrongfully appropriating the funds of the Hull Company, if such acts were capable of ratification. See Commercial Brewing Co. v. McCormick, 225 Mass. 504. The bill can be maintained by the plaintiff as a minority stockholder for the benefit of the Hull Company.
The allowance made to the plaintiff for counsel fees out of the fund, found due to the Hull Company from the other defendants, was within the discretion of the court. Davis v. Bay State League, 158 Mass. 434. Carlson v. Revere Beach County Fair & Musical Railway, 227 Mass. 291.
Decree affirmed.