Gladstone v. Murray Co.
| Decision Date | 29 September 1943 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | E. MAX GLADSTONE, administrator, v. THE MURRAY COMPANY& others. |
May 7, 1943.
Present: FIELD, C.
J., DONAHUE, QUA COX, & RONAN, JJ.
Fiduciary. Corporation, Officers and agents, Stockholder, Sale of stock.
Fraudulent Conveyance. Fraud. Executor and Administrator, Insolvent estate, Accounts. Insolvency. Probate Court, Decree, Costs.
The mere fact that one acting for himself and for a corporation in purchasing stock in the corporation from an administrator, with whom he dealt at arm's length, was an officer, director and stockholder of the corporation did not make him a fiduciary toward the seller.
A finding of the commission of a fraud upon creditors of a decedent's estate by one who, not being a fiduciary toward the administrator of the estate and dealing at arm's length with him, purchased from him corporate stock of the estate which had only a narrow market and as to whose value opinions might vary was not warranted by the mere fact that the purchase price was only half of the value which subsequently was placed upon the stock in judicial proceedings.
A proceeding in equity in a Probate Court, based on the ground that a decedent's estate was insolvent and that full payment of a judgment against the estate, in effect made by the administrator, was a fraud upon other creditors of the estate, failed where it appeared that the estate had not been adjudicated insolvent in the manner specified in G.
A decree in a proceeding in equity brought in a Probate Court by a succeeding administrator of an estate must stand on appeal by certain respondents so far as it ordered another of the respondents, the former administrator of the estate, to make payments to the petitioner because of that respondent's disposal of certain assets of the estate, where it appeared that that respondent did not appeal from the decree and that he had not seasonably asserted any right he might have had to have the subject matter of the proceeding determined in his accounting on the probate side of the court.
An administrator should receive in his accounting any sums to which he might be entitled for services and expenses in prosecuting a petition in equity to enforce alleged claims of the estate.
PETITION in equity filed in the Probate Court for the county of Plymouth on July 7, 1941.
The case was referred to a master, whose report was confirmed. Evidence was also heard and reported by Stone, J who entered the following final decree: The respondents Sawyer and The Murray Company appealed.
S. MacMillan, for the respondents Sawyer and another.
W. C. Rosen, (W.
H. Gilday with him,) for the petitioner.
This petition is brought by the administrator de bonis non with the will annexed of the estate of Milton E. Murray against The Murray Company, one Sawyer, and Sherman E. Murray, the former administrator with the will annexed of the estate.
Milton E. Murray had been the founder and president of The Murray Company, and at the time of his death on June 3, 1936, he owned forty-six shares of its stock. On October 29, 1938, Sherman E. Murray as administrator of the estate, sold forty-one of these shares to the respondent Sawyer for $50 a share, and on May 8, 1939, Murray sold the remaining five shares to the respondent The Murray Company, which was represented in the transaction by the respondent Sawyer. At the times of these sales Sawyer was the president, treasurer, and a director of the company and owned a majority of its stock. In July, 1937, before the sales of stock, the company, at the instance of Sawyer, had brought an action at law against Sherman E. Murray, administrator, in which the first count was to recover a sum of money alleged to have been collected in behalf of the company by the deceased in his lifetime and not turned over by him to the company and the second count was to recover the sum of $250 alleged to have been advanced by the company to a daughter of the deceased on the day following his death "for the purpose of paying the funeral expenses" of the deceased and alleged to have been spent by her for that purpose. On February 11, 1938, an agreement for judgment for The Murray Company was filed in that action, signed by Sherman E. Murray as administrator and by the attorneys for the company, in the sum of $886.91, which sum represented the aggregate of both claims of the company against the estate of the deceased. In carrying through the sale of the stock in the following October an arrangement was made between Sawyer and Sherman E. Murray, administrator, or their attorneys, whereby, in effect, the amount of an execution obtained on the judgment was applied in part payment of the selling price of the stock, and the administrator received the balance. In this way the company received full payment of its claim against the estate of Milton E. Murray. The trial judge, in his findings of fact on the present petition, found that at that time the estate was hopelessly insolvent, and that Sawyer knew that fact. A master appointed to ascertain the value of the stock found as a conclusion from subsidiary facts reported by him that it was worth $100 a share, twice the amount Sawyer paid for it.
The petition, as we construe it, sets out two causes of action, (1) that Sawyer, as an officer of The Murray Company, was a fiduciary toward Sherman E.Murray, the former administrator, a stockholder, and was guilty of a breach of his fiduciary obligation and also of a fraud upon the creditors of the estate in buying stock from Murray for himself and the company at a "grossly inadequate" price, and (2) that Sawyer (and through him The Murray Company) and Sherman E. Murray were guilty of a fraud upon the creditors of the insolvent estate in obtaining for the company payment in full of the sum due to it from the deceased by means of the action at law, the agreement for judgment, and the application of the amount of the execution against the price of the stock. Included in this second cause of action is an allegation that Count 2 in the declaration in the action at law "had no privity between the parties and was not a proper basis for a suit," and that this was known to the respondents.
The judge entered a final decree for the petitioner on both causes of action, and Sawyer and The Murray Company appeal. The evidence is reported.
Even if we accept the market value of the stock as found by the master, in our opinion no fraud has been established on the part of Sawyer or The Murray Company in purchasing the stock from the former administrator at less than that value. It is true that Sawyer, as an officer of the company, was a fiduciary toward the company and was bound in all his dealings with the company to place its interests above his own and to exercise the utmost good faith. But Sawyer was not dealing with the company in buying the stock that he bought for himself, and in buying the five shares that he bought for the company his duty was to the company for which he was acting and not to the seller of the stock. His position as an officer and stockholder of the company did not of itself create a fiduciary relation between himself and a single stockholder whose stock he might buy. Blabon v. Hay, 269 Mass 401, 407. Goodwin v. Agassiz, 283 Mass. 358 , 361. Faulkner v. Lowell Trust Co. 285 Mass. 375 , 378. See Lee v. Fisk, 222 Mass. 424 , 426. There was no evidence of further circumstances which could create such a relation. There was no evidence that Sawyer had induced or permitted the former administrator to rely upon Sawyer's peculiar knowledge or judgment as to the value of the stock, or that Sawyer had undertaken to advise the administrator, as in Reed v. A. E. Little Co. 256 Mass. 442 , 446, or that Sawyer had sought out the administrator "for the purpose of buying his shares without making disclosure of material facts within his peculiar knowledge and not within reach of the stockholder" (Goodwin v. Agassiz, 283 Mass. 358 , 363), or that Sawyer had in any way deceived the administrator by misrepresentation, or by what may be called active concealment, or by failing to reveal anything which he was in duty bound to reveal. See Swinton v. Whitinsville Savings Bank, 311 Mass. 677 . The former administrator himself had been for many years an employee of the company in a position to form some judgment of the value of the stock, and he could...
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