246 Mass. 411 | Mass. | 1923
After the decision of this court overruling the demurrer, reported in 238 Mass. 403, an amended bill and answers thereto were filed in the Superior Court. The suit was referred to a master to report the facts .and such questions of law as either party might request. Without a report of the evidence the master made and filed his report, with the objections of the plaintiff and defendants appended thereto. The plaintiff and defendants duly filed exceptions
The master states, in substance, the case of the plaintiff as alleged in his bill, the essence of the prayers for relief, the denial by all the defendants of any liability, the claim that any liability, if any ever existed, is barred by loches of the plaintiff, and the specific denial by John P. and Margaret O’Brien of allegations of fraud.
In substance, the master then finds the material facts which follow: In December, 1906, John P. O’Brien (hereinafter called John) organized The Otter River Board Company, for the purpose of buying, selling and manufacturing binder boards and kindred products, with a capital stock of $50,000 divided into five hundred shares of a par value of $100 each. The plaintiff, William O’Brien (hereinafter called William), and the wife of John (hereinafter called Margaret), at the request of John acted as incorporators to comply with the laws of Connecticut requiring three incorporators. John was elected president and treasurer; William was elected secretary; and John, William and Margaret were elected directors. John and Margaret continued to hold their respective offices until the organization of the Massachusetts corporation, hereinafter set forth; while William held the office of clerk and director until the annual meeting early in 1913, when another person was elected in his stead. About January 10, 1907, John conveyed to the corporation, for $20,000, payable in stock of the corporation at par, and subject to a mortgage of $10,000, which the corporation assumed and agreed to pay, a plant he had purchased for $10,000 at Otter River, in Templeton, Massachusetts; this plant formerly had been a woolen mill and then consisted of land, water privilege, and buildings. Two hundred shares were issued to John and ten shares each to William and Margaret. As regards the ten shares issued to William the master, upon facts recited, warrantably found “ that when said shares were issued it was the intention of
At the time of the fire the real estate was subject to a mortgage of $11,800. The sum of $10,800 was collected as insurance on the buildings and paid to the holder of the real estate mortgage, who thereupon discharged said mortgage, deducting $1,000. About $2,500 was collected in insurance on the machinery, and paid to a firm holding title to said machinery under a lease agreement, leaving still owing on said machinery $7,985. The master describes the real estate and finds that its value immediately after the fire “ did not exceed $10,000, and probably was very much less.” He finds that the machinery in value then did not exceed $2,000; that the cash and bills then receivable did not exceed $7,000, and that John was not indebted to the corporation. He further finds that “ it is difficult to put any value upon . . . [the] good will ” of the business, and states his reason for such conclusion. The total assets thus shown were approximately $19,000. The master specifically finds that the business of the corporation “ never had been a financial success, no dividends ever had been paid, and, for the greater part of the time, the corporation had had a hard struggle, financially; ” that after the fire there were no prospective purchasers for the plant and it was felt generally by the stockholders, then eight in number, that the corporation was insolvent and they would get nothing for their stock.
In this state of the financial affairs of the corporation, in the summer of 1913, John interested one Heselton in the business, with the result that John and Heselton agreed to put respectively $5,500 and $5,000 into a new corporation which was to be organized under the laws of Massachusetts to take over and continue the business of the Connecticut
On August 26, 1913, the Massachusetts corporation was organized with an authorized capital of $75,000, which was divided into seven hundred and fifty shares of a par value of $100 each. John P. O’Brien was elected president and treasurer, Heselton, clerk; and they, with said James H. O’Brien, Thomas F. Wallace and Daub, were the directors. All of them, with the exception of Heselton, were officers
The master finds that thereafter a meeting of the stockholders of the Connecticut corporation was duly called and held at said Windsor Locks; that a notice of this meeting was mailed to the plaintiff; and that before said meeting he (the plaintiff) had knowledge that said meeting was to be held; that at that meeting all the stockholders were present, except two, one of whom was the plaintiff, and that it was unanimously voted that the Connecticut corporation convey all its property of every kind and description to the Massachusetts corporation, upon consideration that said Massachusetts corporation assume and agree to pay all debts of said Connecticut corporation; and he further finds that there is no evidence of any agreement among the stockholders who attended this meeting regarding the vote to be passed thereat.
A conveyance of the real estate was made by the Connecticut corporation to the Massachusetts corporation by deed dated and acknowledged September 11, 1913, and recorded September 13, 1913. There was no evidencé before the master of a bill of sale of the personal property, but the Massachusetts corporation took possession thereof
“ Cash, 425 shares
“ Factory lot, factory water power at said Otter River, about eight acres, 150 shares
“ Machinery, 100 shares
“ Good Will, 50 shares
“ Services already rendered, 25 shares ”
The master found that said “ seven hundred and fifty shares had no reference whatever to the real value of the property, but were issued solely for organization purposes.”
The plaintiff duly filed an objection, and thereafter his exception based thereon, to “ the finding of the master that the consideration paid by the corporation was fair and adequate because under the circumstances disclosed in the report, the values fixed in the certificates of the organization of the Massachusetts corporation are binding upon the parties for the purposes of this case.” The plaintiff also objected and duly filed his exception to the finding “ that John P. O’Brien and Heselton signed and swore to. said certificate of organization without knowing its contents because said John P. O’Brien and Heselton are conclusively presumed to have known the contents of said certificate.” The plaintiff also objected and duly filed his exception to the finding that “ the consideration paid by the corporation was fair and adequate ” “ for the reason that for the. purposes
These four exceptions must be overruled. The plaintiff’s right in this case, in the absence of evidence of oppression or of fraud, rests upon his ability to prove that his interest as a shareholder in the assets of the Connecticut corporation had a property value, that is, that there would have been due to him something of pecuniary value had the assets and liabilities of that corporation been fairly and honestly adjusted and liquidated at the time the assets of that corporation were transferred by a majority of its stockholders to the Massachusetts corporation upon its assumption and payment of the debts of the Connecticut corporation. It is plain that the real assets — the assets in which the plaintiff had an interest proportionate to his share holdings •—• could neither be increased nor diminished by any affidavit of their value made by officers in another corporation for a purpose other than the determination of the distributive value of the assets of the Connecticut corporation among its stockholders. It is needless to consider what rights, if any, the affidavit gave to the Commonwealth or to creditors to attack it or to hold the affiants and the corporation estopped to deny the truth of its declarations.
The charge of the plaintiff that John P. O’Brien “ induced said company to issue the portion of stock thereof which, should- have been issued to the plaintiff, to himself, or to his wife, Margaret O’Brien, by fraudulently representing that he had acquired the plaintiff’s interest in said old company and was entitled to the plaintiff’s portion of the stock to be issued in the new company in exchange for the property of the old, and would account to the plaintiff for the same ” is not supported by the reported facts, nor by the master’s finding; he finding, in regard thereto, that “ John P. O’Brien did not represent at any time that he had acquired the plaintiff’s interest in the Connecticut corporation, was entitled to
The first exception, based on the first objection, is not argued and consequently is treated as waived.
A consideration of all the facts found by the master, and the inferences that may properly be drawn therefrom, lead to the conclusion that the Connecticut corporation was insolvent when its assets were transferred to the Massachusetts corporation; that the Massachusetts corporation paid out more than it had received from the Connecticut corporation in the payment of the debts of that corporation; and that no valuable interest of the plaintiff was transferred to the Massachusetts corporation with the transfer of the assets of the Connecticut corporation. In the absence of any evidence of a controlling Connecticut statute, it is the established law that a majority of the shareholders of an insolvent corporation may dispose of its property in cases which are free from unfairness, oppression and fraud. Treadwell v. Salisbury Manuf. Co. 7 Gray, 393, 404, 405. Callender, McAuslan & Troup Co. v. Flint, 187 Mass. 104. Compare G. L. c. 156, § 42. See cases collected in 14 C. J. § 1323.
These conclusions make it unnecessary to consider the defences of the statute of limitations and loches, as urged by the defendants.
It follows that interlocutory decrees should be entered overruling the plaintiff’s exceptions and aifirinmg the master’s report; and that after the filing of these decrees a final decree should be entered dismissing the bill, with costs.
Decrees accordingly.