Beaudette v. Graham

• Decision Date: 29 March 1929
• Citation: 267 Mass. 7,165 N.E. 671
• Parties: BEAUDETTE et al. v. GRAHAM et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

267 Mass. 7

165 N.E. 671

BEAUDETTE et al.

v.GRAHAM et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 29, 1929.

Appeal from Superior Court, Suffolk County; Louis S. Cox, Judge.

Suit by Joseph Beaudette and others against George C. Graham and others. From the decree, defendants appeal. Affirmed.

R. T. Parke and G. A. Morin, both of Beston, for appellants.

W. H. Foster, of Boston, for appellees.

SANDERSON, J.

This bill in equity is brought in behalf of the defendant Beaudette & Graham Company (hereinafter called the company), to set aside an alleged illegal issue to the defendant Graham of seven hundred and fifty shares of the common stock of the company. Upon evidence reported the judge of the Superior Court found that the issue of this stock was illegal, and entered a decree ordering that Graham return to the company for cancellation a certificate of six hundred and seventy-five shares held by him; that he procure and surrender to it for cancellation seventy-five additional shares of common stock or, in the alternative, pay into the treasury $2,625, representing the fair value of the seventy-five shares; that he also pay the company $1,350, being the amount of dividends on six hundred and seventy-five shares received by him; that the company pay the plaintiffs $1,000 to reimburse them for reasonable expenses incurred in the employment of counsel to institute and prosecute the suit; and that the defendants pay costs.

[1][2] When the evidence is reported, it is the duty of the court to examine it, reach its own conclusion as to the facts, and decide the case according to its own judgment, giving due weight to the findings of the judge. But findings made by him after a hearing in which witnesses have testified orally before him will not be reversed unless plainly wrong. Cook v. Mosher, 243 Mass. 149, 152, 153, 137 N. E. 299;Weinstein v. Miller, 249 Mass. 516, 520, 144 N. E. 387.

The judge found that it would have been useless for the plaintiffs to apply to the company or its officers to institute suit against the defendant Graham. The plaintiff Joseph Beaudette owned one share of common stock of the company, and his wife, the plaintiff Ruth G. Beaudette, owned eighty-six shares of preferred and seven hundred and twenty-seven shares of the common stock given to her by her husband on May 11, 1927. The authorized capital stock of the company was seven hundred and fifty shares of preferred and one thousand seven hundred and fifty shares of the common, and Graham owned within sixty-five shares of enough to give him control of the company. At the meeting held February 8, 1926, the preferred stock was increased to one thousand five hundred shares and the common to two thousand five hundred shares, and the terms and manner of disposition of the additional stock were left to the board of directors as authorized by G. L. c. 156, § 41.

On February 19, 1926, the directors, who were the defendant Graham, being the president and general manager of the company, the defendant French, a brother-in-law of Graham who held two shares of common stock, and the defendant McClintock, an employee holding one share, unanimously voted to purchase Graham's rights in a contract dated February 18, 1926, between him and the Savage Arms Corporation of New York (hereinafter called the corporation), whereby Graham ‘acquired valuable and exclusive rights in the sale of ice cream cabinets manufactured by said corporation’; and in full payment therefor it was voted to issue to him seven hundred and fifty shares of common stock of the company, provided that Graham would relinquish and deliver to it on demand one share of such common stock for each two shares of unissued preferred stock when sold by it for cash. The contract referred to in this vote was in the form of a letter from the corporation to Graham, written at Graham's request, purporting to give him the selling rights in a certain territory and containing a provision for cancellation upon thirty days' notice by either party. This contract, so called, was assigned to the company by Graham, March 31, 1926, the corporation assenting thereto. The first electric cabinets manufactured by the corporation were sold in March or April, 1926. When the contract was obtained by Graham none of the freezing cabinets had been marketed and competitors were then selling similar machines. The seven hundred and fifty shares of common stock were issued to Graham, February 19, 1926. Graham reported to the stockholders at their meeting February 8, 1926, that about eighty-five per cent. of the company's business was in washing machines and most of this was with the corporation; that in 1925 the company sold more Savage washers than any other company in the country, and took about fifteen per cent. of the factory output of the corporation. In the years 1923 and 1924, the corporation was engaged in experimental work upon a freezing machine and Graham conducted experiments in adapting the machine for use in connection with ice cream cabinets; he had several interviews with different officers of the corporation and made some suggestions to the inventor in its employ; on some occasions when he made trips to Utica and New York City where he interviewed these officers on this subject the company paid his expenses, but on one trip to Connecticut to interview the inventor he paid his own expenses. The...