305 Mass. 65 | Mass. | 1940
This is a bill for an accounting for money collected and received by the defendant in winding up the affairs of the C. H. Graham Furniture Co., a Massachusetts corporation, in which the plaintiff owned one third of the capital stock and the defendant all the remaining stock. The case was referred to a master, whose report was confirmed after the plaintiff’s motion to recommit had been denied and the exceptions of both parties had been overruled. Both parties appealed from a final decree establishing an indebtedness of the defendant to the plaintiff in a certain amount.
The plaintiff purchased one third of the capital stock of the C. H. Graham Furniture Co., hereinafter referred to as the furniture company, in 1919 for $8,000, one half of which he paid in cash and the balance of $4,000 by his note payable to the corporation. In March, 1921, the defendant purchased all of the outstanding stock of the furniture company other than that held by the plaintiff. A written agreement was then executed between the furniture company and the plaintiff which provided that, for a term of four years from April 1, 1921, the plaintiff should devote all his time to the active conduct of the furniture company in consideration of a salary at certain prescribed rates.' The company executed another agreement with the defendant, by which the defendant agreed to act as general manager during the same four-year period as that designated in the plaintiff’s agreement, and for which he was to receive compensation at the same rate as that paid to the plaintiff. The defendant was not required to devote his whole time to his duties of general manager but was required to devote only such time as he deemed necessary. Another agreement was made by which the plaintiff was not required to pay his note of $4,000 held by the furniture company except out of dividends declared upon his stock.
The parties decided in the spring of 1923 to discontinue
Taylor’s conducted the liquidation of the lease accounts for some time, and both the plaintiff and the defendant were active in their collections until the plaintiff went to New York in 1925. On these accounts $72,000 were collected up to January 1, 1927, and $1,682.98 thereafter until the collections ceased in 1936.
At the time the furniture company discontinued business it owed $77,000 for money borrowed; $22,000 of this sum
The defendant was acting as the treasurer and manager of the furniture company and was bound to act in good faith and with due regard to the interests of the company in the disbursement of its funds. Calkins v. Wire Hardware Co. 267 Mass. 52. American Agricultural Chemical Co. of Massachusetts v. Robertson, 273 Mass. 66, 83. Moreover, it could be found that the plaintiff and the defendant were acting as partners in the conduct of the company’s business and in the liquidation of its property even though they had adopted a corporate form as the instrumentality by which they should associate in the furtherance of their joint venture. Arnold v. Maxwell, 223 Mass. 47. Howe v. Chmielinski, 237 Mass. 532.
The first accounting given to the plaintiff, in 1927, was followed by various conferences between the parties in an effort to settle the indebtedness of the defendant. At the last conference, in April, 1933, it was agreed that the defendant would correct and adjust those matters that were in dispute when a new accounting would be made after the liquidation was completed. The settlement of the company’s affairs was finished in 1936. The master found that the defendant knew that the plaintiff "trusted him and relied upon him to do the right thing in the liquidation of the assets.” He properly found that a fiduciary relationship existed between the parties from the time they first became associated in the furniture company.
The defendant has charged and taken from the corporation $6,870.06 for interest on money loaned by him to the furniture company for which he held demand notes. We need not consider the plaintiff’s contention that the defendant under the terms of his agreement of employment with the corporation dated April 5, 1921, to which reference has already been made, was to furnish funds without interest. He urges that that was one of the purposes for which the defendant was to be paid the same compensation as the plaintiff. The agreement makes no mention of the matter and does not, at least expressly, put any such burden upon the defendant. The defendant stood in a fiduciary position not only toward the corporation but also toward the plaintiff, its remaining stockholder. The notes themselves made no provision for the payment of interest. The report of the master does not disclose that the furniture company had ever taken any formal action upon the payment of interest or that the plaintiff ever knew that the defendant claimed to be entitled to interest until it appeared upon the accounting which was shown to him in 1927; and he then immediately objected and questioned the right of the defendant to take corporate funds
The fact that the defendant charged and was paid interest by the company from the time he began to lend money to it does not bind the company, because the defendant, as treasurer, had no authority to make such payments, Sears v. Corr Manuf. Co. 242 Mass. 395; Young v. Titcomb, 268 Mass. 14, and as the knowledge of the treasurer in the unauthorized use of the corporate funds was for his individual benefit and could not be imputed to the corporation, Innerarity v. Merchants’ National Bank, 139 Mass. 332; Stetson Press, Inc. v. Bunsen Oil Burner Corp. 285 Mass. 291, the making of such interest payments would not amount to a ratification by the company. Cashin v. Corporation Finance Co. 251 Mass. 60. James F. Monaghan Inc. v. M. Lowenstein & Sons Inc. 290 Mass. 331.
The company was dissolved by an act of the Legislature in 1931. If it were in existence it would be the plain obligation of the defendant to reimburse the company to the amount of this discount and interest charges. Von Arnim v. American Tube Works, 188 Mass. 515. Dolphin v. A. C. Lewis Leather Co. 269 Mass. 132. But the affairs of the company have been closed; its creditors have all been paid; and the only other party in interest is the plaintiff, and he is entitled to receive his distributive share, or one third of the amount of these withdrawals. Cummington Realty Associates v. Whitten, 239 Mass. 313. Antoine v. James E. Nelson Co. 265 Mass. 214.
The plaintiff contends that he is entitled to one third of $8,000 included in the $28,000 that the defendant received from the Taylor note of $32,804.31.
At the close of the evidence before the master, the defendant urged that, if he was not entitled to charge interest, then he was entitled to compensation for services rendered in liquidating the furniture company, in accordance with his written contract of employment dated April 5, 1921, and terminating April 1, 1925. The plaintiff had an employment contract for the same term and at the same rate of compensation as that payable to the defendant. No compensation was paid to either party after May, 1923. The plaintiff never made any claim for further compensation. The defendant took no action relative to compensation until his accountant included an item in the accounting
The plaintiff and the defendant assisted in the liquidation of the furniture company. The plaintiff moved to New York in 1925 and left the completion of the work to the defendant, who promised to account to him when the liquidation was finished.
The parties occupied a position substantially similar to partners, and upon the facts reported by the master the defendant was not entitled to receive any compensation for the work done by him in winding up the affairs of the furniture company. No special circumstances are disclosed that make the case an exception to the general rule that a partner is not entitled to compensation for settling the business of the firm. Dunlap v. Watson, 124 Mass. 305. Hoag v. Alderman, 184 Mass. 217. Wiggins v. Brand, 202 Mass. 141. Magullion v. Magee, 241 Mass. 360.
The master finds that the discount and interest charges were received by the defendant in 1925. A fiduciary who has caused a loss through his unauthorized use of trust property must make good the impairment together with simple interest from the time the loss was incurred. The defendant must be charged with interest from January 1, 1926, as all of these payments had been received by that date. This rule is of general application. It has been applied to the misuse of corporate funds for his own benefit by the treasurer of a corporation. Ball v. Hopkins, 268 Mass. 260.
Exceptions to findings of the master are not to be sustained in the absence of a report of the evidence, where the subsidiary facts are not inconsistent with each other or with the general finding. Smith v. Knapp, 297 Mass. 466. There was no error in overruling exceptions based upon the refusal of the master to make further findings. Chase v. Chase, 271 Mass. 485. There was no abuse of discretion in denying the motion to recommit. Chamberlain v. Henry, 263 Mass. 63. There is nothing in the other contentions of the parties that requires further discussion.
The appeals of each party from the orders for the entry of an interlocutory decree and a final decree have no standing and must be dismissed. Appeals in equity are confined to interlocutory and final decrees. Gulesian v. Newton Trust Co. 302 Mass. 369, 372. The interlocutory decree confirming the master’s report is affirmed. The defendant has had in his possession since January 1, 1927, a balance of $596.44. A decree must be entered for the plaintiff for $3,274.15, being one third of the discount upon the Taylor note and the interest taken by the defendant for loans made to the furniture company, with interest at the rate of six per cent a year from January 1, 1926, to the date of the decree, and for one third of $596.44, with interest at said rate from November 23, 1936, the date of filing of the bill, to the date of the decree, together with costs.
Ordered accordingly.
Findings by the master, confirmed by the court, respecting the note of Taylor Furniture Co. to C. H. Graham Furniture Co., called by the master “Graham’s,” as bearing on this $8,000 retained by the defendant in his accounting, were as follows: “Shortly after the receipt by Graham’s of the note for $32,804.31, the defendant took this note over as his own property under the” stockholders’ vote of June 16, 1923, described in the opinion. “On said note . . . the defendant credited himself with interest [referred