Duane v. Merchants' Legal Stamp Co.

• Decision Date: 28 June 1917
• Citation: 227 Mass. 466,116 N.E. 873
• Parties: DUANE et al. v. MERCHANTS' LEGAL STAMP CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

227 Mass. 466

116 N.E. 873

DUANE et al.

v.MERCHANTS' LEGAL STAMP CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 28, 1917.

Appeal from Superior Court, Suffolk County.

Bill by Harry B. Duane and another against the Merchants' Legal Stamp Company and others. From a decree sustaining defendants' demurrer, and dismissing the bill, plaintiffs appeal. Affirmed.Hurlburt, Jones & Hall, Boyd B. Jones, Philip N. Jones, and Carroll A. Wilson, all of Boston, for appellants.

A. M. Lyman, of Boston, for certain defendants.

G. W. Anderson, of Boston, for defendant Ferris.

RUGG, C. J.

This is a suit in equity to compel the defendant corporation to recognize the plaintiff as a stockholder and to permit him to share in dividends earned and to allow him to participate in the corporate management. The plaintiff Duane and the corporation which he represents are joined as plaintiffs and will be referred to hereafter as the plaintiff.

The bill sets out somewhat in detail the incorporation of the defendant corporation by ten stockholders, one of whom was the plaintiff, and each of whom represented another business, firm or corporation in which he was interested. It avers that the purpose of the organization of the defendant corporation by these retail merchants or their representatives was to deal in trading stamps and to supply the incorporators or the business enterprises with which they were identified with trading stamps; that the business of the corporation had been conducted by it since about 1907 through the execution of one form of contract called ‘A’ with each of the incorporators, of another form of contract called ‘B’ with each of the business concerns represented by the incorporators, and by a third form of contract called ‘C’ with other merchants who might desire to use its trading stamps. The bill further alleges that the dominant design and direct tendency of these several forms of contracts was to restrict and stifle competition in the trading stamp business in this commonwealth and to establish a monopoly therein by the defendant corporation, and to eliminate any effective rivalry with it by others in the trading stamp business, and that a monopoly in fact has been created so that approximately ninety per cent. of the business in Boston and vicinity, conducted by merchants using trading stamps, is controlled by the defendant corporation, and that ninety per cent. or more of trading stamps used in this commonwealth are furnished by it under its three different forms of contracts. It is averred, also, that on February 25, 1915, the decision was rendered in Merchants' Legal Stamp Co. v. Murphy, 220 Mass. 281, 107 N. E. 968, L. R. A. 1915D, 520, declaring in effect that contracts like ‘A,’ ‘B’ and ‘C’ were illegal as being contrary to St. 1908, c. 454, which prohibits transactions operative to choke competition and to restrain trade, and that that decision was speedily called to the attention of all parties to this suit, and that the plaintiff prior to July, 1915, repeatedly notified the defendant corporation, its directors and attorney, that contracts ‘A,’ ‘B’ and ‘C’ were illegal and demanded distribution of profits among the stockholders and in particular to the plaintiff in proportion to their holdings of stock and not otherwise, and that notwithstanding these facts, the defendant corporation has continued its illegal and monopolistic practices and since July 7, 1915, has paid to certain of its stockholders dividends of approximately $155,000, but has refused to pay any dividends to the plaintiff, although it has offered him a small sum as the surrender value of his stock in asserted accordance with the illegal provisions of contracts ‘A’ and ‘B’. There are further allegations to the effect that the defendant corporation has in cash on hand profits to a much greater amount than is necessary to pay to the plaintiff dividends equal to those paid to the other stockholders. There are prayers for an accounting of profits and distribution of his proportionate share to the plaintiff. Although there is a prayer that the defendant corporation be restrained from continuing to manage its affairs and from conducting its business in violation of the antimonopoly act, St. 1908, c. 454, the frame of the bill and the burden of the complaint is for relief against discrimination toward the plaintiff in the distribution of the profits thus alleged to have been made illegally. As a matter of construction it seems plain that the main purpose of the bill is to obtain for the plaintiff this money benefit by direct payment and by recognition as a shareholder, and the other allegations are incidental to that chief aim.

[2][4] Stripped of all subsidiary and ancillary matters, the real purpose of this bill is to procure through the aid of a court...