Blabon v. Hay

• Decision Date: 17 December 1929
• Citation: 269 Mass. 401,169 N.E. 268
• Parties: BLABON v. HAY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

269 Mass. 401

169 N.E. 268

BLABON

v.HAY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Dec. 17, 1929.

Appeal from Superior Court, Suffolk County; E. B. Bishop, Judge.

Bill by Edwin L. Blabon against Robert T. Hay and another.Dismissed, and plaintiff appeals.Affirmed.H. W. Ogden and E. J. Owens, both of Boston, for appellant.

R. Homans and R. S. Sughrue, both of Boston, for appellees.

SANDERSON, J.

This is a bill in equity in which the plaintiff seeks to charge the defendant Hay, and the defendant Blaney as executor of the will of John L. Lochhead, deceased, as constructive trustees, with the difference between what Hay and Lochhead paid the plaintiff for shares of stock in the Conveyancers Title Insurance Company, a Massachusetts corporation, and the price which they later received for the shares.Hay and Lochhead will be referred to as the defendants.The case was heard by a judge without a jury upon correspondence between the plaintiff and Hay, answers to interrogatories and oral evidence.

The plaintiff was the owner of forty-one shares of the capital stock of the company until February, 1927.Lochhead was then president of the corporation, and Hay a director and secretary.In January, 1926, the plaintiff, who lived in Pennsylvania, addressed a letter to the ‘Secretary, Conveyancers Title Ins. Co.,’ stating that he would like to sell his shares of stock if he could secure a satisfactory price, and asking to be advised what the market on the stock then was.In reply to that letter the defendant Hay wrote that he could place all of the stock at $100 per share, ‘and if you will send your certificate to any bank in Boston properly endorsed with directions, I will take care of the matter.’The letter also informed the plaintiff of a coming meeting of the directors at which it was expected the regular dividend would be declared.The next communication was from the plaintiff to Hay, dated February 19, 1927, in which reference was made to the plaintiff's letter of the previous year, and in it the plaintiff again stated that he would like to dispose of the stock if he could secure a satisfactory price, and asked for information by telegraph as to the price at which Hay could then dispose of the stock, stating that upon receipt of the information he would forward his stock with draft attached through a trust company.Hay replied by telegram, ‘Can sell stock for $4,100.’The plaintiff replied that he had received the telegram and would forward the stock with draft attached.Thereafter the stock, indorsed in blank, was duly forwarded through a bank, accompanied by a draft on ‘Robert T. Hay, Sect'y’ for $4,100 with instructions on the draft to deliver the stock only upon payment.A few days later Hay wrote the plaintiff for the cost of transfer stamps on the stock, and remittance therefore was made by letter in which the plaintiff referred to the ‘stock which you disposed of for me.’Lochhead took no part in these transactions.At the time when Hay received the letter of February 19, 1927, and sent the telegram he had no intention of buying the whole or any part of the stock for himself, and did not know to whom he could sell it, but felt confident that he could dispose of it at the price named.He got into communication with several of the directors, none of whom, except Lochhead, was interested in the purchase.Lochhead agreed to take twenty-one of the shares, and Hay, finding no other purchaser for the remainder, borrowed the money with which to buy the stock himself, and with the money obtained from Lochhead and the money borrowed he paid the plaintiff's draft.

The by-laws of the company provide in article 1 of chapter 7 that no shares of stock shall be sold by an owner until he had offered them in writing for sale to the corporation.Neither the plaintiff nor Hay offered the stock to the corporation.On February 24, 1927, Hay, following the usual practice, obtained the assent in writing to the transfer of the stock to himself and Lochhead, of a majority of the directors, excluding themselves.This transaction was formally ratified by the directors at a later meeting.The plaintiff did not know whether or not the stock was offered to the corporation by Hay and did not know to whom it had been sold until February, 1928.Lochhead, in purchasing the stock from Hay, was aware of the fact that the plaintiff had made inquiries of him as to the possibilities of sale and also knew that the shares received came from the plaintiff.

During 1927the plaintiff was not acquainted with the financial condition of the company or with the market, book or potential value of the stock except as he had been advised by Hay in the letters referred to, and from statements sent him from time to time by the company.The defendants during 1927 were familiar with the financial condition of the company and with the approximate market and book value of the stock, and knew that book values were affected by reason of the hazard of the company's insurance business, its comparatively small capital and reserves, the restrictions on the sale of the stock, and the difficulty of liquidating the company.In the autumn of 1924 an inquiry had been made to ascertain if a controlling interest in the corporation could be purchased, and the board of directors declined to entertain such a proposition.In November or December, 1927, offers were made for the stock provided a controlling interest could be obtained, and at a meeting of the directors held on February 7, 1928, they voted to approve the transfer of all shares sold in accordance with an offer of $251.67 per share and to waive all rights of the corporation under article 1 of chapter 7 of the by-laws; some time in February or March, 1928, more than a controlling interest in the stock of the corporation including that owned by the defendants was sold on the basis of this offer.The defendants knew of the inquiries made in 1924 concerning the sale of a controlling interest in the company, but they did not know and had no reason to anticipate that any such offer as that received in 1928 would be made.In buying the stock they felt that it was worth $100 per share and might at some time be worth more.The judge found not only that the price paid was the fair market value of the stock at the time, but that Hay acted throughout in good faith and had no intent or purpose to mislead, cheat or defraud the plaintiff, and that the same was true of Lochhead; that Hay did not expect to receive and did not receive any commission or compensation for his services; and that there was no evidence that the plaintiff expected to pay any compensation to Hay therefor.There was no misrepresentation or fraudulent concealment of facts which might affect the value of the stock or the willingness of the owner to sell.

The relationship between the parties was established in the first instance by the correspondence, and we must look to that to ascertain what Hay's undertaking was.The judge granted the defendant's request that Hay, in the sale of the plaintiff's share, was not acting as his agent for the purpose of making a sale or sales thereof.No prejudicial error appears in this ruling;...