Cutter v. Arlington Casket Co.

• Decision Date: 27 February 1926
• Citation: 151 N.E. 167,255 Mass. 52
• Parties: CUTTER v. ARLINGTON CASKET CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

255 Mass. 52

151 N.E. 167

CUTTER

v.ARLINGTON CASKET CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 27, 1926.

Appeal from Superior Court, Suffolk County; Philip J. O'Connell, Judge.

Suit in equity by Frank P. Cutter against the Arlington Casket Company and others for an injunction, cancellation of notes, and accounting. From interlocutory decree, vacating previous confirmation of the master's report and recommitting the case to the masster, and from interlocutory decree confirming the master's report and supplementary report, and from final decree based on findings of the master, and prayer for relief, defendant Mrs. Mary E. Booth, as executrix of the estate of John Booth, deceased, and defendant Maurice Kane appeal. Interlocutory decrees and final decree modified, and, as modified, affirmed.

F. L. Norton, of Boston, for appellants.

Geo. L. Dillaway, of Boston, for Gardner.

Coggan & Coggan and Allan Robinson, all of Boston, for appellees.

PIERCE, J.

This is a bill in equity, brought by a minority stockholder of the Arlington Casket Company, a manufacturing corporation, on behalf of himself, and such other stockholders as might join him, against the stockholder Maurice Kane and the executrix of a deceased stockholder, John Booth, alleging fraud of the individuals on the public who invested in the stock of the corporation. The corporation is made a party defendant. Later seven other persons were admitted as parties plaintiff. Maurice Kane died after the hearing before the master, and his administratrix was admitted to defend.

The bill prays that certain notes of the corporation and a mortgage upon the property of the corporation be declared null and void, delivered up, canceled and discharged. The bill further prays for an accounting and for the repayment to the corporation of moneys paid to the individual defendants and to a trust company upon notes of the corporation.

Upon the filing of the answers the case was referred to a master, who heard the parties and made report with the objections taken thereto. Exceptions founded upon the objections were duly filed. These exceptions were overruled and the report was confirmed without appeal by the defendants. Upon presentation of a proposed final decree the judge, on his own motion, entered an interlocutory decree vacating the previous confirmation of the master's report and recommitting it to the master for the purpose of finding the amount of money paid by the Arlington Cosket Company to John Booth, or the estate of John Booth, on account of the notes amounting to $8,400, referred to in the bill of complaint; also the amount of money paid to said Booth, or his estate, for interest on said notes and the dates of said payments of principal and interest; and also for the purpose of finding the amount of interest paid by said Arlington Casket Company to the Menotomy Trust Company for interest on the note of $4,000, referred to in the report, and the date of said payment. Both individual defendants appealed from this order.

The master after hearing made a supplemental report, to which objections were taken and exceptions duly filed, in substance, that the order of the court to which an appeal was taken was ‘improper, illegal, entered without authority of court and is not valid and binding upon said defendants.’ These exceptions were overruled and an interlocutory decree entered confirming the master's report and supplemental report. The individual defendants appealed from the interlocutory decree. Upon the coming in of a master's report the court in its discretion may overrule the exceptions thereto, confirm that report and recommit the case to the master for further report without request of parties, if the nature of the matter under consideration requires further investigation and finding of further facts not inconsistent with the confirmed report; for example, the statement of an account between persons found by the report to be partners or to stand in a fiduciary relation to each other. There is no reason why the court may not overrule exceptions to a report and recommit it for further findings of fact not covered by the original reference to the master. See in this connection Park v. Johnson, 7 Allen, 378:Eastern Bridge & Structural Co. v. Worcester Auditorium Co., 103 N. E. 913, 216 Mass. 426, 431;Daniels v. Daniels, 134 N. E. 235, 240 Mass. 380;Gadreault v. Sherman, 145 N. E. 49, 250 Mass. 145, 149. An appeal from such a recommittal cannot operate by relation to set up an appeal not duly taken from an interlocutory decree overruling exceptions and confirming a report. A final decree was entered based upon the findings of the master and the prayer for relief, to which the individual defendants entered an appeal. The case is before this court on all the appeals taken by the defendants.

As a bill brought by minority stockholders on behalf of the corporation the form is irregular and not commendable, it perhaps is sufficiently obvious that it was brought for the use and benefit of the corporation and sufficiently clear that it would have been futile to have sought relief through any action by the board of directors or the stockholders of the Arlington Casket Company. Brewer v. Boston Theater, 104 Mass. 378, 396;United Zinc Co. v. Harwood, 103 N. E. 1037, 216 Mass. 474, 476, Ann. Cas. 1915B, 948;O'Brien v. O'Brien, 131 N. E. 177, 238 Mass. 403. However, we are of opinion the motion of the plaintiff in open court for leave to amend the bill so as more specifically to ask for relief in behalf of the corporation should be and therefore is granted.

The material facts found by the master, with certain inferences of fact drawn therefrom relevant to the defendants Booth and Kane, are as follows: The Arlington Casket Company was organized in January, 1919, with Kane, John Booth, and Booth's two sons (Thomas and Edward), as incorporators. $20,000 capital stock was authorized of which $400 fully paid was issued at the date of the incorporation. Prior to that time Kane and Booth had been in the casket making business together, though not partners. They had tangible assets worth about $3,000, which Booth had paid for. At the first meeting of the directors, in January, 1919, John Booth offered to sell the company all his assets in the casket business, including good will, at a valuation of $20,000 put upon such property and good will by the board of directors, and the directors Kane, John Booth and Edward F. Booth accepted the offer. These assets, worth about $3,000, were transferred to the corporation; but the master does not find whether the price was ever paid or what, if anything, was done in place of payment. In March, 1919, the remaining $19,600 of the authorized capitalstock was issued to the four incorporators ostensibly for machinery, $1,000, merchandise, $8,600, bills receivable, $5,000, good will, $5,000. There is nothing in the report to the effect that this stock was issued in payment of the property and good will sold in January by Booth to the corporation, nor does it there appear in what proportion the stock was divided among the incorporators or why it should have been divided at all. The inference is that the incorporators divided among themselves the remaining stock of the par value of $19,600, without payment. Between the incorporation in January and April, 1919, with money obtained from John Booth, the corporation purchased material and machinery of the approximate value of $3,000 and in January, February, March and April, 1919, gave John Booth six demand notes aggregating $6,400, which sum, the master finds was ‘put in by John Booth.’ In July, 1920, the corporation reorganized. John Booth had then paid in to the corporation $8,400, Kane had put in $1,000, and $4,000 had been borrowed from the Menotomy trust Company, a total of $13,400. The money borrowed from the Menotomy Trust Company subsequently was repaid.

Respecting the money put into the corporation by John Booth and Kane, for which corporate notes were issued to Booth including the $4,000...