Hill v. Hall

• Decision Date: 05 March 1906
• Citation: 191 Mass. 253,77 N.E. 831
• Parties: HILL v. HALL et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

191 Mass. 253

77 N.E. 831

HILL v. HALL et al.

Supreme Judicial Court of Massachusetts, Suffolk.

March 5, 1906

COUNSEL

Edward I. Baker and Herbert R. Morse, for plaintiff.

G. W Anderson, for defendants.

OPINION

SHELDON, J.

This is a bill in equity brought against two members of the bar to recover money claimed to have been wrongfully obtained by them from the plaintiff, their client. The case was heard before a single justice of this court; and the evidence was taken by a commissioner. The justice filed a statement of his findings, and ordered a decree for the plaintiff. The defendants have appealed from this decree, and the case comes before us on the commissioner's report of the evidence. The statement of the findings of the single justice is also before us, in the same way as stated in Cohen v. Nagle (Suffolk, Jan. 2, 1906) 76 N.E. 276. The justice found for the defendants so far as the bill proceeds on the making of false and fraudulent representations of fact which could support an action of fraud and deceit at law, in case of parties rightfully dealing with each other at arm's length, and further found that the facts which gave rise to this litigation are as follows:

In January, 1904, the plaintiff was employed by the defendants to act for a client of theirs in taking account of stock in a partnership in a jewelry store in Hanover street, which was being would up; their client being one of two partners. This work was finished on Saturday, January 16th, and for this he received $65 on Wednesday, January 20th, being at the rate of $5 per day. At or about this time the plaintiff told the defendants that he had been out of work for over two years, and that he wanted work. He said that he had been employed for five years as a clerk in the Boston & Bangor Steamship Company, and for two years as purchasing agent in the purchase of food for the boat under the superintendent, receiving as purchasing agent, and for the last year or two as clerk, $1,500 a year; that he lost his place when his father, W. H. Hill, a member of the banking firm of Richardson, Hill & Co., sold the controlling interest in that steamship company. The defendants are members of the bar, having offices together. There was a common outside door, and an outside room in which the stenographer sat, who did work for each, but each had a separate private office. The defendants at this time were interested in the Rockland. South Thomaston & Owl's Head Railway. This was a corporation organized under the general laws of the state of Maine in 1902, with a capital stock then fixed at $150,000. Under date of October 1, 1903, it had executed a mortgage upon its property and franchises, then owned and thereafter to be acquired, to secure an issue of $175,000 of 5 per cent. bonds. All the shares in its capital stock not issued to qualify directors, all its bonds and all its cash, namely, cash delivered from stock issued to qualify directors not spent, had been issued and transferred to one William E. Hingston, a man of straw, in consideration of a contract by said Hingston to construct and equip the road. This contract was assigned by Hingston to a corporaton called the Coast Line Construction Company, and was assumed by that company.

Apparently it was the original intention that the Coast Line Construction Company should secure the building of the road by letting out the work to contractors, as the railway company would have done had no assignment of its stocks and bonds been made to the construction company. But, in fact, contracts for those purposes were made to a large extent in the name of the railway company, because the contruction company had no credit, and the railway company did have a credit. Contracts so made were then assigned by the railway company to the construction company, and were assumed by it. This contract with Hingston, assigned to and assumed by the construction company, was resorted to as a devise for issuing the stock as fully paid and nonassessable stock. As the construction company by this device became the holder of all the stock of the railway company, the persons really interested in the scheme were the holders of stock in the construction company. On February 5, 1904, certificates No. 9 for one share, and No. 10 for six shares of stock in the construction company were issued to the defendant Dalton and the defendant Hall, respectively. The wife of the defendant Hall owned 100 shares in the construction company. These certificates were signed by the plaintiff, Hill, as vice president and by the defendant Dalton as treasurer, and were marked 'Canceled' when put in evidence at the hearing. The defendant Dalton was the treasurer and one of the directors of the construction company, and treasurer of the railway company. Beyond this nothing appeared as to the organization of the construction company, the amount of its capital stock, how it was paid for, to whom it was issued, or by whom it was held in January and February, 1904. The defendants were interested in it, and it did not appear that any one else was interested in it except the wife of the defendant Hall. The defendants seemed to have full control of it without consultation with others. So far as the plaintiff was concerned, and so far as the plaintiff's dealings with it or its securities were concerned, the defendants, and no one else, acted for the construction company. No further findings were made upon this question, because the plaintiff did not, at the hearing, make the fact that the defendants were the construction company a part of his case, although he contended for that in a written argument submitted to the single justice, and has argued before us that the evidence shows this to be the fact.

All that the railway company had in January and February, 1904, was its charter as a corporation under the general laws of Maine; a location of a railway from the town line of Rockland to South Thomaston, with a branch to Crescent Beach and Owl's Head; two acres given to it by South Thomaston; and an exemption from taxation for five years. All that the Coast Line Construction Company had was the stock and bonds of the railway company, with the following exceptions: It had sold $10,000 par value of the bonds of the railway company, $6,000 at 80, and $4,000 at 90 making $8,400 in all. How this $8,400 had been expended did not appear. The defendants Dalton and Hall had advanced, before these bonds were sold, the necessary money to pay engineers' expenses and traveling expenses beginning in July, 1903; no one else had advanced any money to the enterprise, and at the time of the trial they had not been repaid those advances. It had at that time two bank accounts; one in the Federal Trust Company, and one in the First National Bank in Boston, standing in the name of the defendant Dalton as trustee; the accounts being put in his name in order to protect them from attachment. On February 1, 1904, there was to the credit of these trustee accounts in the Federal Trust Company and in the First National Bank, $77.39 and $6,75, respectively. After the bonds of the railway company were issued, in October or November, 1903, one Borhek was busy in putting them on the market in the neighborhood of Rockland. He spent three weeks in working through the district of Rockland and the country for 20 miles around it. Then he came back to Boston, made up a report, had it printed, and mailed a copy of it to every taxpayer in Knox county, in which Rockland is situated. He then returned to Maine to follow up prospective customers, and remained there for that purpose until Christmas. Some time in January, and before the habeas corpus proceeding hereinafter spoken of was begun and the question of the plaintiff's right to the person of his son came up, it was suggested that the plaintiff might sell some of the railway company's bonds, and that from his familiarity with Rockland through his connection with the Boston & Bangor Steamship Company, whose steamers touch at that port, he could be useful in transportation matters; and it was tentatively proposed that he should go to Maine when the road was put in operation, and take charge of such matters for the railway company as its secretary. There were allotted to the plaintiff by the defendant Dalton $40,000 par value of the bonds, to be sold by him on these terms: For the bonds sold, the Coast Line Construction Company was to receive $35,000, and the plaintiff was to keep all he got over that sum, and was to have $4,000 par value of stock. In execution of this arrangement seven notes for $5,000 each, payable to the plaintiff, were signed by the plaintiff, indorsed by him, and handed to the defendant Dalton, who kept them until February 24, 1904. There was no sale of the bonds to the plaintiff; the notes were not delivered by the plaintiff as his obligation, were not founded on a valid consideration, but were written out as a statement of the money to be paid by the plaintiff if the bonds were sold, in which event alone was he to make any payment for them, or have any right to them or any of them, beyond the right to sell them as aforesaid; and the notes never became a legal obligation. These notes and the bonds were then taken by the defendant Dalton and kept by him. Prior to this time, the defendants had stated to the plaintiff that the road had a very valuable franchise; that the bonds were selling at 90 or 92; that it was bonded for only $17,000 a mile, while the Camden Street Railway, with which it was connected, had a bond issue of $35,000 to a mile, and was paying good dividends; that the Thomaston & Owl's Head Railway's bond issue would be much less than that per mile, and that would insure paying a good dividend. The plaintiff also had been...