193 Mass. 138 | Mass. | 1906
This is a bill brought by creditors of the Worcester Umbrella Company, a Massachusetts corporation, to enforce the alleged liability of three of its officers under R. L. c. 110, § 58, cl. 5,
It appears that a certificate of organization of the Umbrella Company was issued by the secretary of the Commonwealth on February 13, 1902. Before the organization of the corporation
On the adjournment of that meeting Jones and Howard the treasurer went to the First National Bank of Worcester. Jones borrowed of the bank $8,000, receiving from the bank a check for $8,000 which he handed to Howard as treasurer. Thereupon Howard handed him the check of the corporation for a like amount in exchange for an assignment of his stock in trade. The $8,000 check of the corporation was paid by Jones to the bank in payment of the loan to him. At the same time Howard borrowed of the bank $1,700, delivered to himself as treasurer the check which he received for that loan, and received from himself as treasurer a check on the same bank for $1,700, in exchange for an assignment of the stock in trade owned by himself and Sisson, which check he paid to the bank in payment of the loan to himself.
On March 8,1902, Duncan as president, Howard as treasurer, and Jones, being a majority of the directors, in compliance with B. L. c. 110, § 43, made oath to a certificate that “the whole amount of the capital stock of said corporation, namely, the sum of twenty thousand (20,000) dollars, has been paid in, in cash, and that the same has been invested, or voted by the corporation to be invested, as follows, viz.: In the purchase of material, supplies, machinery, stock and labor for the manufacture and sale of umbrellas,” etc.
There is no evidence in the commissioner’s report as to the value of the stock transferred to the corporation by Jones, or as to that transferred by Howard and Sisson.
The first defence set up by the defendants is that “ When an appeal irt equity from the decision of a single judge is heard by the whole court, on a report of all the evidence adduced at the original hearing, the decision of such judge, as to matters of fact, will not be reversed unless clearly erroneous,” and they cite in support of this Reed v. Reed, 114 Mass. 372; Montgomery v. Pickering, 116 Mass. 227, 230; Newton v. Baker, 125 Mass. 30, 32, 33; Brown v. Brown, 174 Mass. 197,198. That rule depends upon the fact that where the evidence is given orally and there is a conflict in the testimony, the judge who saw the witnesses has a better opportunity of deciding between them. Loud v. Barnes,
The questions of fact in the case at bar stand before this court on appeal as they stood before the judge of the Superior Court, except so far as they are covered by the oral testimony of the member of the bar, of which we shall speak hereafter.
The statements sworn to by the three officers of the Umbrella Company in the certificate of payment of the capital stock were not true in three particulars: (First) it was not true that the $8,000 subscribed by Jones and the $1,700 subscribed by Howard and Sisson were "paid for in cash; (second) it was not true that the $1,000 subscribed by Conrad was paid in cash; and (third) it was not true that all the capital stock was invested or voted by the corporation to be invested “in the purchase of material, supplies, machinery, stock and labor for the manufacture and sale of umbrellas,” etc., but to the amount of $1,000 the capital stock was then invested in a note of Conrad.
When we say that it is not true that Jones’s subscription for eighty shares and Howard and Sisson’s subscription for seventeen of the twenty subscribed for by them were not paid in cash, we do not forget what was decided in Breck v. Barney, 183 Mass.
The defendants’ next contention is that they acted under the advice of counsel in the payment of the capital stock and in swearing to this certificate. The testimony of the member of the bar is not explicit on this point. We adopt however the construction put upon it by the judge of the Superior Court, and interpret it to mean that he did advise them that in his opinion the shares subscribed for by Jones, Howard and Sisson had been paid for in cash. The plaintiffs have asked us to hold these defendants liable in spite of this advice. In making that contention they rely on Commonwealth v. Bradford, 9 Met. 268, and Commonwealth v. Connelly, 163 Mass. 539, 543, upon the testimony of both Howard and Jones in the bankruptcy court, (in which they said that $10,300 of the capital stock was paid for in
Conrad’s stock was not paid for in cash. R. L. c. 110, § 44, provides that “ no note or obligation given by a stockholder, whether secured by pledge or otherwise, shall be considered as payment of any part of the capital stock.” There is no more a payment in cash where the corporation receives cash one day and lends the cash received to the stockholder the next day than where it receives a note originally in payment of a stock subscription.
The member of the bar testified that he knew nothing whatever about the note from Conrad until after it was given, that he never was asked and never advised any one in reference to taking that note. That defence therefore fails so far as the Conrad note was concerned.
Did Jones, Howard and Duncan have knowledge of the fact that the $1,000 paid in by Conrad had been returned to him by way of a loan ?
Jones had knowledge of this. Both he and Conrad testified that he, Jones, made the promise that this should be done to induce him, Conrad, to subscribe to the stock; and that he, Jones, took part in carrying that promise into effect.
Howai’d knew this. In the first place, it was his duty under the by-laws to receive the note, and he in'fact signed the check
So far as the defendants Jones and Howard are concerned the case comes within Heard v. Pictorial Press, 182 Mass. 530.
The plaintiffs however have failed to fix knowledge of the' Conrad note upon Duncan. The only evidence tending to fix knowledge upon him is the fact that under the by-laws no loan can be made without action by the directors. The directors’ vote for the purchase of stock in trade from Jones and Howard and Sisson was in evidence. Ho vote by the directors for this loan was put in evidence. We cannot assume that one was passed; and if Duncan was in fact ignorant of the loan made by Jones and Howard, he cannot be held on the ground that he acted recklessly in making the oath under the doctrine of Nash v. Minnesota Title Ins. Co. 163 Mass. 574. There is no evidence of that fact.
The entry must be Decree affirmed as against the defendant trust company as it is the executor of the will of Duncan.
Decree as against the defendants Jones and Howard reversed. Decree for the plaintiffs against those defendants.
See now St. 1903, c. 437, § 34. The whole of R. L. c. 110 was repealed by St. 1903, c. 437, § 95, except so far as continued in accordance with § 96 of the same statute.