Harvey-watts Co. v. Worcester Umbrella Co.

• Decision Date: 20 October 1906
• Parties: HARVEY--WATTS CO. et al. v. WORCESTER UMBRELLA CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

193 Mass. 138

78 N.E. 886

HARVEY--WATTS CO. et al. v. WORCESTER UMBRELLA CO. et al.

Supreme Judicial Court of Massachusetts, Worcester.

October 20, 1906

COUNSEL

Wm. Reed Bigelow, for plaintiffs.

E. H Vaughan, Henry F. Harris, and Jay Clark, Jr., for defendants Worcester Umbrella Co. and A. H. Howard.

Smith Gage & Dresser, for defendant Worcester Trust Co.

OPINION

LORING, J.

This is a bill brought by creditors of the Worcester Umbrella Company, a Massachusetts corporation, to enforce the alleged liability of three of its officers under Rev. Laws, c. 110, § 58, cl. 5, for signing a false certificate that the capital stock of the corporation was paid in in cash and invested, or voted to be invested, in the purchase of material, supplies, machinery, stock and labor. The case comes before us on an appeal from a decree dismissing the bill. The evidence at the hearing was taken by a commissioner, and special findings were made in the superior court.

It appears that a certificate of organization of the Umbrella Company was issued by the Secretary of the Commonwealth on February 13, 1902. Before the organization of the corporation the defendant Jones had been carrying on the business of manufacturing umbrellas, under the name of the Jones Umbrella Company, and the defendant, Howard, together with one Sisson, apparently had been carrying on practically the same business under the name of Howard & Sisson. For 'some three or four months' before February 13th, to use the words of the defendant Jones, the project of these two firms organizing a corporation to take their stock in trade had been under discussion; and as a result the corporation in question, with a capital stock of $20,000 was organized. The defendant Howard was elected treasurer, Jones general manager, and Duncan (the executor of whose will is the other defendant) president, and they respectively held these offices until after the matters here complained of. They also were and continued to be directors. On February 28th (15 days after the organization was complete), a meeting of the directors of the corporation took place, all the directors, including Howard, Jones and Duncan being present. Whether these three were all the directors did not appear. It was then voted to buy 'the stock of goods of the Jones Umbrella Company owned by Joseph A. Jones,' for $8,000; and 'the same as to stock of the Worcester Umbrella Company, a copartnership consisting of A. W. Howard and W. B. Sisson, for the sum of $1,700. The above stated amounts are the same as originally agreed when making up the corporation of Worcester Umbrella Company of February 13, 1902.'

On the adjournment of that meeting Jones and Howard the treasurer went to the First National Bank of Worcester. Jones borrowed of the bank $8,000, receiving from the bank a check for $8,000 which he handed to Howard as treasurer. Thereupon Howard handed him the check of the corporation for a like amount in exchange for an assignment of his stock in trade. The $8,000 check of the corporation was paid by Jones to the bank in payment of the loan to him. At the same time Howard borrowed of the bank $1,700, delivered to himself as treasurer the check which he received for that loan, and received from himself as treasurer a check on the same bank for $1,700, in exchange for an assignment of the stock in trade owned by himself and Sisson, which check he paid to the bank in payment of the loan to himself.

It further appeared that the defendant Jones had induced one Conrad to subscribe to 10 shares of the stock on the ground that he or Howard would arrange it so that the payment for them could be made by Conrad's giving a note to the company for the amount. In pursuance of this agreement Conrad, on the same February 28th, borrowed $1,000 from the same First National Bank of Worcester and gave the check which he received for it to Jones; on the next day he gave Jones or Howard his note for $1,000, payable to the Umbrella company on or before January 1, 1903, with interest at 5 per cent. and received from the company $1,000 which he used in paying the loan made to him by the bank. Conrad's note was discounted at the bank to meet the check used by the company in paying Conrad the $1,000 lent by it to him. It appeared that no certificate was issued to Conrad for his share until his note to the corporation was paid in full, namely, on January 8, 1905.

On March 8, 1902, Duncan as president. Howard as treasurer, and Jones, being a majority of the directors in compliance with Rev. Laws, c. 110, § 43, made oath to a certificate that 'the whole amount of the capital stock of said corporation, namely, the sum of twenty thousand (20,000) dollars has been paid in, in cash, and that the same has been invested, or voted by the corporation to be invested, as follows, viz.: In the purchase of material supplies, machinery, stock and labor for the manufacture and sale of umbrellas, etc.'

There is no evidence in the commissioner's report as to the value of the stock transferred to the corporation by Jones, or as to that transferred by Howard and Sisson.

The first defense set up by the defendants is that 'when an appeal in equity from the decision of a single judge is heard by the whole court, on a report of all the evidence adduced at the original hearing, the decision of such judge, as to matters of fact, will not be reversed unless clearly erroneous,' and they cite in support of this Reed v. Reed, 114 Mass. 372; Montgomery v. Pickering, 116 Mass. 230; Newton v. Baker, 125 Mass. 32, 33; Brown v. Brown, 174 Mass. 198, 54 N.E. 532, 75 Am. St. Rep. 292. That rule depends upon the fact that where the evidence is given orally and there is a conflict in the testimony, the judge who saw the witnesses has a better opportunity of deciding between them. Dickinson v. Todd, 172 Mass. 183, 184, 51 N.E. 976; Shapira v. D'Arcy, 180 Mass. 377, 379, 62 N.E. 412; Skehill v. Abbott, 184 Mass. 145, 147, 68 N.E. 37; and Colbert v. Moore, 185 Mass. 227, 228, 70 N.E. 42. It is to be confined to such cases and does not apply to cases where the evidence is documentary and the appellant court stands where the judge who heard the case stood in respect to the inferences of fact to be drawn from the evidence. See in this connection Poland v. Beal (Mass.) 78 N.E. 728. In the case at bar, the evidence before the superior court introduced by the plaintiff consisted of an agreement of counsel as to the indebtedness due to the plaintiffs, the written agreement of association of the umbrella company, interrogatories to the defendant Howard and his answers, interrogatories to the defendant Jones and his answers, the several checks, the deposition of Conrad, the by-laws of the umbrella company and certified copies of the payment of the capital stock of two other corporations signed by Jones and Howard respectively, among other persons. The evidence introduced by the defendant consisted of the oral testimony of a member of the bar.

The questions of fact in the case at bar stand before this court on appeal as they stood before the judge of the superior court, except so far as they are covered by the oral testimony of the member of the bar, of which we shall speak hereafter.

The facts sworn to by the three officers of the umbrella company in the certificate of payment of the capital stock were not true in three particulars: (1) it was not true that the $8,000 subscribed by Jones and the $1,700 subscribed by Howard and Sisson were paid for in cash: (2) it was not true that the $1,000 subscribed by...