Flint v. Codman

• Decision Date: 23 January 1924
• Citation: 142 N.E. 256,247 Mass. 463
• Parties: FLINT et al. v. CODMAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

247 Mass. 463

142 N.E. 256

FLINT et al.

v.CODMAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Jan. 23, 1924.

Exceptions from Supreme Judicial Court, Suffolk County.

Bill in equity by George M. Flint and others against Edmund D. Codman and others, wherein a small minority of shareholders in Lovejoy's Wharf Trust seek to enjoin a sale of the corpus of the trust by the trustees and a termination of the trust. Decree ordered dismissing the bill, and plaintiffs bring exceptions. Exceptions sustained.

D. J. Lyne, R. C. Evarts, and M. F. Hall, all of Boston, for plaintiffs.

J. P. Wright and F. King, both of Boston, for defendants Quincy Market Cold Storage & Warehouse Co. and others.

R. Homans, of Boston, and F. Adams, of Cambridge, for defendants Codman and others.

RUGG, C. J.

This is a suit in equity. The plaintiffs, a small minority of the shareholders in the Lovejoy's Wharf Trust, so called, seek to enjoin a sale of the corpus of the trust by the trustees, who are the individual defendants acting pursuant to a vote of the majority of the shareholders, to the three corporate defendants who collectively hold a majority of the shares, and to enjoin the termination of the trust. After a hearing, findings of fact and rulings of law were made and the entry of a decree ordered dismissing the bill. The plaintiffs' exceptions bring the case here.

Of the facts thus found, only those relevant to the controlling principles of law need to be stated. The individual defendants are trustees under a declaration of trust dated in 1902, to continue for a period of 20 years after the death of the last survivor of numerous named individuals unless sooner terminated. The purposes of the trust were to acquire real estate and wharf property within a designated area in Boston, to erect upon it buildings, to lease the same and to pay dividends to the shareholders. The trust was organized by the sale and issuance of 18,000 shares represented by transferable certificates, each share being of the par value of $100.

The real estate was purchased in the name of the trustees and was held by them under the terms of the declaration of trust. The trustees caused to be constructed expensive buildings on the real estate and have leased them or parts of them from time to time. Each of the three corporate defendants at the time of the events here in issue was a tenant of part of the real estate of the trust. Together they occupied the greater part of it. At some time prior to April, 1923, the three corporate defendants by arrangement with each other and acting through a common agent purchased in the open market without fraud or deception 9,083 shares, being a majority of all the shares of the trust. There was no evidence that the trustees conspired or combined with the corporate defendants in making these purchases of shares, or that there was anything wrong about these purchases if the corporate defendants were authorized by law to become shareholders in such an enterprise. The corporate defendants then requested the resignation of one of the trustees and the substitution of a nominee of their own in his place. This request was denied by the trustees. Then it was proposed that the three corporate defendants purchase all the real estate of the trust and that the trust be terminated. Negotiations were had between the trustees and the three corporate defendants looking to that end. Finally a tentative agreement was reached, that the property should be sold to the three corporate defendants for $2,748,837, payment to be in cash. This agreement was reduced to writing and signed by the trustees and the three corporate defendants, but it was made subject to the conditionthat the trustees should first receive from the shareholders under the declaration of trust authority necessary to make the conveyance, meeting for that purpose to be called forthwith.

The trustees have managed the property for about 20 years, are men of large experience in knowing the values of such properties and were as familiar with its real worth as any one. In making this agreement the trustees acted in good faith throughout. They have not been influenced in any degree by appraisals of the property made at the instigation of the corporate defendants. Their conduct has been based entirely upon their independent and honest judgment, unaffected in any particular by improper inducements and controlled solely by a desire to obtain as large a price for the property as possible. They have not either consciously or unconsciously been moved by any other considerations. The price agreed upon was not less than the fair market value of the property. To quote from the findings:

‘While a higher price possibly might be obtained, it did not appear that more could have been realized. If it was put up for sale at auction a higher or a lower bid might be obtained. * * * When the great value of this property is considered, it may fairly be assumed that a purchaser for cash could not readily be found; it did not appear at the hearing that any one is ready and willing to buy the property other than the corporate defendants, or that the trustees can obtain a higher price.’

A meeting of the shareholders of the trust was held on April 13, 1923, at which a vote was passed authorizing and directing the trustees to sell the entire real estate held by them as such trustees to the three corporate defendants in accordance with the terms of the agreement between them and the trustees. The total number of shares represented by shareholders present in person and by proxies and voted on this proposition was 16,970, of which 15,976 were in favor of and 994 against the sale. The 9,083 shares held by the corporate defendants were voted in favor of the sale. The defendant Codman voted by proxies running to himself and his cotrustee on 6,027 shares in favor of the sale. The plaintiffs were present at the meeting and voted on their shares in opposition to the sale and took other steps to indicate their opposition to the sale.

These facts have been found by the single justice who heard the case. They are all which are material to the grounds of this decision.

The case comes before us on a bill of exceptions and not by appeal. Hence only questions of law are presented. Dorr v. Tremont National Bank, 128 Mass. 349, 357. When a suit in equity comes to this court by a bill of exceptions and not by appeal, the only question of law as to findings of fact is whether there is evidence to support them. Such findings stand if they are warranted by the evidence. Requests for findings of fact, if proper under any circumstances, cannot successfully be made the basis for exceptions in such a case as the one at bar. The equity practice in this respect conforms to the practice in actions at law. Bills of exceptions in equity, as frequently has been pointed out, are not known in general chancery practice, and are a peculiarity of our practice. Pigeon's Case, 216 Mass. 51, 102 N. E. 932, Ann. Cas. 1915A, 737. See in this connection Davis v. Boston Elevated Railway Co., 235 Mass. 482, 494, 126 N. E. 841;Moss v. Colony Trust Co., 246 Mass. 139, 140 N. E. 803.

It is not necessary to narrate the evidence. It is too plain to require extended discussion that all the findings of fact which have been recited find support in the evidence. The finding that the trustees in agreeing to the sale were uninfluenced by any considerations except to obtain a fair price for the property cannot be said to be unwarranted. The testimony of the defendant Codman with the reasonable inferences which might have been drawn from it support the findings upon this point.

The testimony of the same witness was sufficient to support the findings that the trustees in the discharge of their duties exercised the skill and judgment due from them in their fiduciary relation.

Even if the rule applicable to appeals in equity with the report of the evidence were followed, no error is disclosed because the findings of the single justice based upon the hearing or oral testimony could not be set aside as plainly wrong. Lindsey v. Bird, 193 Mass. 200, 79 N. E. 263.

An important part of the declaration of trust touching the rights, powers, duties and obligations of the shareholders and trustees is found in a part of article 10. Its crucial words are these:

‘The trustees may call meetings of the shareholders at any time, and shall do so upon written request of the holders of one-twentieth of the shares...