Hanson v. Bradley
| Decision Date | 20 September 1937 |
| Parties | HANSON v. BRADLEY et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
HANSON
v.
BRADLEY et al.
Supreme Judicial Court of Massachusetts, Suffolk.
Sept. 20, 1937.
Reservation and Report from Superior Court, Suffolk County; Greenhalge, Judge.
Suit in equity by Edward B. Hanson against Florence S. Bradley, the Bennington Corporation, and others. A master's report was confirmed in part, and the judge reserved and reported the case without decision.
Bill dismissed as to all defendants except the Bennington Corporation and entry of a decree for plaintiff against such corporation directed.
P. E. Troy and T. W. Lawless, both of Boston, for plaintiff.
W. Powers, A. J. Lloyd, W. White, and D. Needham, all of Boston, for defendants.
[10 N.E.2d 260]
LUMMUS, Justice.
The plaintiff contracted with the defendant Bennington Corporation on July 23, 1934, to manage the Copley Square Hotel in Boston for three years, and is entitled to damages for his discharge on February 28, 1936. He contends that a second real estate mortgage on the hotel for $270,000, and a chattel mortgage on its contents for $50,000, held by the defendant Florence S. Bradley and foreclosed by her, are invalid as against his claim.
In the spring of 1934 four men, Breed, Hodder, Freeze and Holm, found that they could buy a run down and closed hotel in Boston called the Copley Square Hotel for $150,000, and that the grantor would take back a mortgage for the whole purchase price. Breed had long been the financial agent of the defendant Florence S. Bradley of Bennington, Vermont. The defendant Thornton is her son. All three are trustees of the Florence Sartori trust, of which Thornton and his children are beneficiaries. Breed, acting for the four promoters, interested his co-trustees, and the defendant Bradley as an individual, in advancing money for the hotel enterprise. He told them ‘that he would protect their investments by a mortgage, and give them stock in the corporation, to be formed, as a bonus.’
On July 11, 1934, the four promoters formed a Massachusetts corporation called Bennington Corporation, to buy, mortgage and operate a hotel and restaurant. Its capital stock was one thousand shares of common stock without par value, which was to be paid for in full in cash. The four promoters took one share each at ten cents a share. On November 1, 1934, one hundred shares were issued to Thornton and forty shares to the trustees of the Florence Sartori trust; and ninety-nine shares were issued to Thelma D. Hodder, one hundred nineteen shares to Marjorie L. Breed, and ninety-eight shares to Framingham Centre Associates, the three last named being represented by the four promoters or some of them. All this stock was issued at ten cents a share. After that issue, the four promoters still held or controlled a majority of the stock. But on May 8, 1935, after a vote of authority by the directors, all the rest of the one thousand shares was distributed among various persons at the same price, and after that distribution Thornton and his wife, the defendant Bradley, and the trustees of the Florence Sartori trust, held in the aggregate five hundred fifteen shares, a majority of the stock.
About August 3, 1934, the corporation bought the hotel for $150,000 from one Rowell, giving him a purchase money mortgage for the entire price. The corporation had already, on July 23, 1934, engaged the plaintiff to be manager of the hotel by a written contract. His term of employment was three years and his salary $6,000 a year, plus a bonus out of profits and certain living expenses for himself and his family.
As soon as the hotel was bought, the corporation began to repair it and put it into condition for business. On August 17, 1934, the corporation borrowed $1,000 from the Framingham Centre Associates, a voluntary association composed of three of the four promoters, who held as trustees for their wives, and gave the note of the corporation for the loan. On October 15, 1934, the corporation borrowed $2,000 from the defendant Bradley, and gave her therefor its demand note without interest. Up to that time, the only directors were the four promoters; but on October 29, 1934, Thornton was elected a director and vice-president.
The repairs and equipment required more money. The corporation received $10,000 from Thornton, who appears to have acted for the Florence Sartori trust, for he indorsed to the trust the note which the corporation gave him for the loan on November 1, 1934. A second mortgage on the hotel was given to Thornton to secure the loan of $10,000, and Thornton assigned it to the trust. The giving of this note and mortgage was ratified unanimously by the stockholders on November 1, 1934.
On the same day, November 1, 1934, after a general discussion of future advances to the corporation, the stockholders voted unanimously ‘that for all future advances made to the corporation by Mrs. Bradley and/or by the trustees of the Florence Sartori trust, this corporation shall give its demand note, with or without interest as may be agreed upon, for the amount of such advances, and shall, upon the request of the lenders, give to H. C. Thornton a mortgage on the hotel property to secure the total amount of such advances on the date of such request.’
On December 18, 1934, the defendant Bradley lent $8,000 to the corporation,
[10 N.E.2d 261]
and surrendered her note for $2,000 dated October 15, 1934, receiving in exchange from Breed, the treasurer, the corporation's note for $10,000. This action of the treasurer was ratified by the stockholders on January 7, 1935. In the winter and spring of 1935, before May 1, the corporation borrowed $10,500 from the Florence Sartori trust and $5,500 from the defendant Bradley, and the stockholders ratified this action. Thus, on May 1, 1935, the corporation had received as loans from the defendant Bradley $15,500 and from the Florence Sartori trust $20,500, part of which was secured by mortgage.
Shortly before May 8, 1935, Breed, Hodder and Freeze (Holm having ceased to be a director), together with Rowell (the first mortgage, who became treasurer and a director on May 8, 1935), met the defendants Thornton and Bradley and discussed ‘the Copley Square venture and the affairs of...
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