First Nat. Bank of Boston v. Slade

• Decision Date: 19 November 1979
• Citation: 399 N.E.2d 1047,379 Mass. 243
• Parties: The FIRST NATIONAL BANK OF BOSTON v. William A. SLADE, Jr.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1047

399 N.E.2d 1047

379 Mass. 243

The FIRST NATIONAL BANK OF BOSTON v. William A. SLADE, Jr.

Supreme Judicial Court of Massachusetts, Essex.

Argued Sept. 13, 1979.

Decided Nov. 19, 1979.

Gene K. Landy, Boston, for defendant.

Carl K. King, Boston, for plaintiff.

Before HENNESSEY, C. J., and QUIRICO, BRAUCHER, KAPLAN, WILKINS and ABRAMS, JJ.

WILKINS, Justice.

On May 24, 1976, the defendant executed a document guaranteeing the obligations of P. S. Thorsen Co. of Mass. (corporation) to the plaintiff (bank). In October, 1977, acting through Slade, its president and treasurer, the corporation executed an assignment for the benefit of creditors. The bank brought this action to collect from Slade, as guarantor, the corporation's unpaid obligations to it. Slade has defended the action principally on the ground that the bank as trustee of a voting trust, holding all the shares of common stock of the corporation, violated its fiduciary duty in collecting a portion of the corporation's debt to it as it did and that, therefore, Slade is not liable on his guaranty and the bank is liable to him for its breach of trust. Each party sought summary judgment in its favor and filed supporting affidavits. ¹ We granted Slade's application for direct appellate review of his appeal from a judgment in favor of the bank. ² We affirm the judgment.

Slade argues that he should have been given an opportunity to obtain discovery before the court acted on the bank's motion for summary judgment. He did not file an affidavit pursuant to Mass.R.Civ.P. 56(f), 365 Mass. 825 (1974), representing that "for reasons stated (he could not) present by affidavit facts essential to justify his opposition" and requesting a continuance to take depositions or to obtain material through discovery. Slade's failure to file such an affidavit or to explain his failure to do so is fatal to his argument. A. John Cohen Ins. Agency, Inc. v. Middlesex Ins. Co., --- Mass.App. ---, --- - --- ^a, 392 N.E.2d 862 (1979). Norfolk County Trust Co. v. Vichinsky, 5 Mass.App. 768, --- ^b, 359 N.E.2d 59 (1977). 10 C. A. Wright & A. R. Miller, Federal Practice and Procedure § 2740 at 723-724 (1973). 6 Moore's Federal Practice par. 56.22(2), at 1341-1342 (2d ed. 1979). Slade's informal request for a delay, set forth in his memorandum submitted to the Superior Court judge in support of summary judgment in his favor, may present no issue for appellate consideration. See 6 Moore, supra, par. 56.24 at 1439-1440. At most, it raises a question whether the trial judge abused his discretion in granting summary judgment when he did. 6 Moore, supra, par. 56.27(1) at 1559-1560. See First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 271, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). We perceive no abuse of discretion, particularly because Slade filed a motion for summary judgment in his favor and submitted supporting affidavits. The issue, therefore, is whether summary judgment was warranted on the affidavits filed and the allegations admitted in the pleadings.

In deciding whether the entry of summary judgment was proper on the ground that there was no "genuine issue as to any material fact" (Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974)), it is important to determine which party has the burden of establishing a contested question of fact in this case. Slade does not deny his execution of the guaranty, nor does he deny that by the terms of the guaranty he is obligated to the bank in the amount of the judgment. His claim is that the bank violated its fiduciary duty and thus both (a) relieved him of liability on the guaranty and (b) gave rise to an affirmative claim against the bank. As the party moving for summary judgment on his counterclaim, Slade has the burden of setting forth by affidavit specific facts warranting a judgment in his favor. We believe further that, where Slade has admitted liability according to the terms of the guaranty and seeks to defend on the basis of a claim that the bank violated its fiduciary duty to him, he must come forward with allegations of specific facts which support that defense. See Community Nat'l Bank v. Dawes, 369 Mass. 550, 558, 340 N.E.2d 877 (1976); A. John Cohen Ins. Agency, Inc. v. Middlesex Ins. Co., --- Mass.App. ---, --- ^c, 392 N.E.2d 862 (1979).

Although inferences may be drawn from underlying facts contained in material before the trial court, neither vague allegations and conclusory statements, nor assertions of inferences not based on underlying facts will suffice. See Farley v. Sprague, --- Mass. ---, --- ^d, 372 N.E.2d 1298 (1978); O'Brion, Russell & Co. v. LeMay, 370 Mass. 243, 245, 346 N.E.2d 861 (1976); Community Nat'l Bank v. Dawes, supra, 369 Mass. at 559, 340 N.E.2d 877. Thus we must consider whether Slade has demonstrated that there is a genuine, triable issue. If, as we conclude, the facts which Slade presented do not demonstrate a defense, entry of summary judgment for the bank was proper. ³

We summarize uncontroverted facts or, where controverted, the facts on which Slade relies. The corporation was formed in 1956 and succeeded to the business of a corporation which had been a customer of the bank for many years. The corporation's principal stockholder in the 1950's was William B. Wilkes. Wilkes personally indorsed the corporation's notes to the bank. In September, 1966, Wilkes, who was still the principal stockholder, and all the other stockholders created a voting trust with the bank as trustee to secure continuity of competent management. Slade signed the trust agreement individually and on behalf of the corporation as vice president. All the corporation's shares were transferred to the voting trust, and trust certificates were issued to each stockholder. During his life, Wilkes had an unrestricted proxy to vote all the stock of the corporation. The trust contained a provision requiring the corporation to purchase the interests of a deceased stockholder at a price established by the terms of the trust agreement. Payment of the purchase price was to be made by a down payment and a promissory note payable in instalments with the transferred certificate held as security for the debt and subject to return on a substantial default in the payment of any instalment. The trust provided for its termination only after the beneficial interests of William B. Wilkes and his wife, and their respective estates, had been sold and any indebtedness created by the sale of their interests in the trust satisfied.

When Wilkes died in 1971, the bank obtained full voting control of the corporation. The corporation entered into a six-year program of purchasing Wilkes's beneficial interest in the trust. In 1975, the corporation entered into a plan to purchase Mrs. Wilkes's shares. The bank acted as coexecutor for Mr. Wilkes's estate and as agent for Mrs. Wilkes. On the sale of the Wilkeses' stock, Slade would become the majority owner of the trust certificates, assuming that payment for the Wilkeses' shares was concluded. From 1971 through 1977, an attorney representing the bank served on the corporation's board of directors, and from mid-1976 through mid-1977 an officer of the bank also served on that board. The bank was well informed concerning the financial condition of the corporation.

In May, 1976, when the corporation had an unsecured loan of approximately $200,000 from the bank, it sustained a cash shortage caused by "a construction job which had gone sour." The bank agreed to loan an additional $150,000 on the condition that all the corporation's debt be secured by the corporation's receivables and that Slade, who was president and chief executive officer, guarantee the corporation's obligations to the bank. Slade and the bank knew that without new financing the corporation would be unable to meet its next payroll. Under the pressure of the circumstances, Slade signed the guaranty. A second loan agreement was executed in December, 1976, under which the bank obtained a security interest in the corporation's inventory in addition to its receivables.

In 1976 and in 1977 until June, the bank collected $30,000 due from the corporation in payment for the shares purchased from Mr. Wilkes's estate and from Mrs. Wilkes. In June, 1977, the bank directed that the corporation cease paying for the shares purchased from the Wilkeses. In the summer and fall of 1977, the bank collected $90,000 owed to it from funds of the corporation on deposit with the bank. The cash flow condition of the corporation became critical in 1977. Slade asserts broadly by affidavit that if "the bank had refrained from collecting the $90,000, (the corporation) could have survived as a business." His affidavits do not explain by specific facts how the corporation would have survived, after such a long period of increasing financial difficulty, if the bank had not collected $90,000 of the corporation's obligation to it. In October, 1977, the corporation executed an assignment for the benefit of its creditors. By the date of the filing of the complaint in this action, the corporation's debt to the bank had been reduced to approximately $96,500.

We have recognized that a trustee of a voting trust may use its power to vote the shares of a corporation to further its own interests, provided that, in doing so, the trustee does not act unfairly to the detriment of those to whom the trustee owes a duty. See Stone v. Massa, 351 Mass. 264, 276-277, 218 N.E.2d 583 (1966); Bullivant v. First Nat'l Bank, 246 Mass. 324, 333-334, 141 N.E. 41 (1923). As president, treasurer, and chief operating officer of the corporation, Slade can hardly argue that the bank violated any fiduciary duty it may have had to exercise judgment concerning the operation of the corporation's business. If the bank as trustee had any such duty, there is no claim that the bank acted or failed to act concerning the operation of the corporation in a negligent or improper way.

The bank, of course, had a...