Hanrihan v. Hanrihan

• Decision Date: 04 May 1961
• Citation: 342 Mass. 559,174 N.E.2d 449
• Parties: Edmond L. HANRIHAN v. John J. HANRIHAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 449

174 N.E.2d 449

342 Mass. 559

Edmond L. HANRIHAN v. John J. HANRIHAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 8, 1961.

Decided May 4, 1961.

Arthur M. Gilman, Walter H. McLaughlin, Jr., Boston, for plaintiff.

Edward B. Hanify, Richard W. Southgate, Boston, for defendants.

Before WILKINS, C. J., and WHITTEMORE, CUTTER, KIRK, and SPIEGEL, JJ.

KIRK, Justice.

This is a bill in equity to compel the defendant, John J. Hanrihan to deliver to the plaintiff, Edmond L. Hanrihan, twenty-five shares of the common capital stock of the Albany Carpet Cleaning Company, hereinafter referred to as to corporation, and to require the corporation to record on its stock transfer books the transfer from John to Edmond.

The present defendants, who are John, the corporation, and the directors of the corporation, have appealed from interlocutory decrees overruling their demurrers and from a final decree granting to Edmond the relief prayed for.

The judge found the following facts: James E. Hanrihan, the founder of the carpet cleaning business, was the father of six children, including John and Edmond. Of the other four children, three were girls and one a younger boy. The father died intestate in 1914. Surviving him were his widow, who became the administratrix of his estate, and the six children. The assets of his estate were never distributed. In 1920, the widow died intestate, survived by the six children. Each child thus owned a one-sixth interest in the estates of the parents which consisted entirely of the carpet cleaning business. John, the oldest, was appointed administrator of his mother's estate, and carried on the business assisted by his brother Edmond and three uncles.

In 1924, the business was incorporated. The litigation centers upon the discussions and events leading up to the incorporation. A dispute arose between John and Edmond concerning the control of the planned corporation. Edmond said that they should have equal control of and equal rights in the corporation whereas John asserted that he should have a majority of the voting stock and be in control of the corporation because he was the oldest and had been more active in the business management of the enterprise whereas Edmond had devoted most of his time to shop operations. Their uncle Edmond L. Grimes acted as mediator throughout this period of controversy and undertook to establish a plan whereby all of the children would be treated fairly. It was agreed that each of the children would contribute to the corporation the one-sixth interest which each had in the parents' estates. The corporation was to issue two classes of stock, preferred and common. Only John and Edmond were to have the common voting stock. The other four children were to share equally all of the preferred stock, after allowing for a nominal share of preferred stock to each member of the board of directors. The core of controversy was the division of the common stock between John and Edmond. Among other things it was determined that a 'salary differential' had developed during the years John and Edmond had conducted the business whereby $5,000 more in back pay was owned to John than was owed to Edmond. Edmond L. Grimes proposed several plans of stock distribution (these proposals were printed on galley sheets by Grimes, a printer, and some of them are in evidence) which were rejected by John because they did not give him control of the corporation.

The judge found: 'Early in 1924 the negotiations reached a point which appeared to be satisfactory to all concerned, and Edmond L. Grimes drafted a proposal which was discussed and agreed upon by Edmond and John Hanrihan, and the uncle's attorney was then instructed to draft the necessary papers to incorporate the rug cleaning business.' On the basis of this written proposal and a collateral oral understanding which the judge established on conflicting testimony, the judge concluded that the agreement as to stock distribution was as follows: 'John * * * [would receive] fifty-two and one half per cent (52 1/2%) of the common stock amounting to five hundred twenty-five (525) shares, and Edmond * * * [would receive] forty-seven and one half per cent (47 1/2%) of the common stock--namely, four hundred seventy-five (475) shares. I find that it was the understanding that the five per cent (5%) common stock differential in favor of John would be voted by the Board of Directors, and when the back salary of Five Thousand Dollars ($5,000) had been fully paid to John this five per cent (5%) of the common stock would be equally divided between John and Edmond.' The articles of organization signed by Edmond while he was at Saranac, New York, for reasons of health show that John was issued 525 and Edmond 475 shares of common stock. The back salary differential was adjusted in 1927. The judge found 'that John and Edmond continued to run the corporation on an equal basis, both with respect to authority and salary, * * * until 1949 when John violated his agreement * * * to turn over one half of the fifty (50) shares of common stock * * * [and] to share eqally with Edmond and that attempts to adjust this dispute met with no success, whereupon Edmond commenced action in 1951.' The judge concluded that Edmond was not guilty of laches and was not barred by the statute of limitations.

At this point it is important to give a resume of the history of this protracted litigation. In the original bill in equity, filed July 9, 1951, the plaintiffs were Edmond and his younger brother James; and the defendants were John, the corporation, the directors, and the three sisters. By amendment, filed and allowed in January, 1952, the three sisters joined Edmond and James as plaintiffs. Following a hearing on the merits, the judge on March 18, 1954, made findings of fact in which he concluded, in substance, that, because of a breach of trust by John as administrator of his mother's estate, John, Edmond and the corporation were constructive trustees for the benefit of the other four children of the assets of their parents' estates which the four children had contributed to the corporation. On July 1, 1955, a motion for rehearing, restricted to the issues of laches and the statute of limitations, was allowed. After rehearing, revised findings by the judge were filed October 23, 1956. He reiterated his finding that John had violated his fiduciary duty to the three sisters and the young brother James but ruled that they were barred by laches and the statute of limitations. He made the findings, hereinbefore referred to, regarding Edmond's claim against John. On September 30, 1957, a decree with prejudice, assented to by all of the parties, was entered dismissing the bill as to the three sisters and the younger brother 'in so far as it affects in any way * * * or asserts any rights or claims by, for or in behalf of them.' In explicit terms on the face of the decree they irrevocably waived all rights of appeal. We construe this decree as a formal renunciation by the brother and sisters of any and all interest in the subject matter of the litigation before us. We regard it as a complete and final withdrawal by them from the field of controversy, leaving only John and Edmond as the contestants and the ownership of twenty-five shares or two and one half per cent of the common stock as the sole bone of contention between them. We think that is what John and Edmond intended by assenting to the decree. Our view in this respect is confirmed by the fact that the matter designated for printing relates only to the question of ownership of the twenty-five shares. In consequence we shall consider only the findings of the judge which relate to that issue.

The purpose of designations is to achieve an abbreviated record which is to be treated as a report of all the evidence. Cohen v. Santoianni, 330 Mass. 187, 190, 112 N.E.2d 267. See City of Everett v. Capitol Motor Transp. Co. Inc., 330 Mass. 417, 420, 114 N.E.2d 547. So treated, our duty is to examine the evidence and decide the case according to our own judgment, accepting the findings of the trial judge, whether based wholly or partly upon oral testimony, as true, unless they are shown to be plainly wrong, and finding for ourselves such other and additional facts as we deem to be justified by the evidence. Berry v. Kyes, 304 Mass. 56, 57-58, 22 N.E.2d 622; Carroll v. Markey, 321 Mass. 87, 88, 71 N.E.2d 756; LeBlanc v. Molloy, 335 Mass. 636, 637, 141 N.E.2d 519. We cannot say that the judge was plaintly wrong in his finding as to the agreement for stock distribution. It must therefore stand.

The parol evidence rule did not bar consideration of evidence other than the proposals printed on galley sheets and the incorporation papers. 'Parol evidence rightly was received in this suit in equity to show the real nature of the transaction between the parties.' McCarthy v. Fitzgerald, 296 Mass. 181, 183, 5 N.E.2d 36, 37. There was no indication that the parties intended to be bound by the statements in the galley sheets and the incorporation papers; parol evidence therefore was admissible to determine whether there was an agreement, and whether a particular writing had been assented to as a complete and accurate integration of that agreement. The judge was not wrong in finding that none of the writings represented the actual agreement. The evidence disclosed a series of negotiations which culminated...