273 Mass. 375 | Mass. | 1930
G. L. c. 156, § 47, requires a domestic business corporation to submit each year to the commissioner of corporations (for filing in the office of the State Secretary under § 48) a “report of condition,” “signed and sworn to by its president, treasurer and a majority of its directors,” including among other things a “statement of the assets and liabilities of the corporation as of the date of the end of its last fiscal year,” substantially in the form therein set forth. This form is a balance sheet showing, on one side, “Assets,” subdivided according to their nature, and, on the other, “Liabilities,” including indebtedness of different
This suit was brought in the Superior Court under G. L. c. 156, § 38, by a creditor of the defendant Eager Transportation Company, a domestic corporation, against that company, its president, its treasurer and its clerk, who were also its directors, to recover from the individual defendants the amount which the corporate defendant owed the plaintiff, on the ground that its reports of condition — “ certificates of condition ” — signed and sworn to by the individual defendants and filed in 1927, 1928 and 1929, respectively, were “ false ” in a “ material representation ” and that the individual defendants knew, or ought to have known, them to be false. The judge made findings and rulings and entered a final decree “ that there is due to the plaintiff from the defendant corporation the sum of $1^46.24 with costs ... for which the individual defendants are jointly and severally liable ” and that execution therefor issue. The defendants appealed.
In support of their appeal the defendants contend that the reports of condition were not “ false in any material representation,” and if “ false,” were not known to the individual defendants and could not be known to them “ on reasonable examination ” to be so.
The evidence is not reported. Copies of the reports of condition, found by the judge to be true copies thereof, are set out in the record. The report filed in 1927, which was typical, showed on the “ Assets ” side, “ Autos, trucks
The trial judge was right in his conclusion, based upon his subsidiary findings, which must stand since the evidence is not reported, that these reports of condition were “ false ” in a “ material representation.” We see no basis in the statute for the suggestion made by the defendants that the persons signing a report of condition, though liable for other false statements therein, are not liable for false statements of assets and liabilities. The statement of assets and liabilities required by the statute is an integral part of the report. It is plain, also, that the requirements of the statute are not satisfied by a statement which shows accurately the “ net condition of the company, as represented in the amount of profit and loss,” but is false in material details. The representations of the value of “ Autos, trucks and teams ” in the statements of assets and liabilities here in question were “ material ” and, standing alone, “ false.” Heard v. Pictorial Press, 182 Mass. 530, 532. The question is whether they were made true by any other items in the statements, and this question must be answered in the light of the purpose of the statutory requirement of a report, which is “ to give the public information of the character and condition of the corporation, so that those dealing with it may know the facts and its financial condition.” Empire Laboratories Inc. v. Golden Distributing Corp. 266 Mass. 418, 422. The representations were made true, if at all, by the items of “ Reserves ” on the “ Liabilities ” side of the statements. This item, in each case, represented principally the excess of the value of “ Autos, trucks and teams,” as stated in the report of condition, over their actual value. We are not called upon to determine whether this excess is properly described as a “ Reserve ” or to pass on the propriety in general of an accounting practice which purports to show a necessary de-. duction from assets by an addition to liabilities. A true
It is argued that the reports of condition were not “ false in any material representation,” since they represented the condition of the corporation as disclosed by the books. But they did not. The finding of the judge that the reports of condition “ were made out each year ... in accordance with the manner in which the books of the corporation were kept,” must be read with the finding that the “company on its books charged off from time to time depreciation on the various autos, trucks and teams, and the total amount of the depreciation was included each year as part of the item ‘ Reserves ’ on the liability side of the certificate of condition.” Obviously the books show that the “ Reserves ” represent principally necessary deductions from the value of the “ Autos, trucks and teams,” though summaries taken therefrom for the reports of condition do not. Moreover, though the outside auditor whose verification is required by § 49 in the case of some corporations by express provision is to state under oath that the “ report represents the true condition of the affairs of said corporation as disclosed by its books,” there is no express provision and no implication that the responsible officers
The finding that “the individual defendants knew, or on reasonable examination could have known,” that the representations of the value of the “Autos, trucks and teams” were false, was based, not on subsidiary findings, but on unreported evidence. We cannot say that it was not warranted. It is not inconsistent with the other findings. On the contrary they furnish some indication that if these defendants had made a reasonable examination of the books they could have known that the values reported for “Autos, trucks and teams” should have been reduced on account of depreciation. The good faith of the individual defendants does not relieve them from responsibility. Berkshire Coal & Grain Co. Inc. v. Wing, 261 Mass. 38.
Decree affirmed with costs against the individual defendants.