Hooker, Corser & Mitchell Co. v. Hooker

• Decision Date: 28 November 1914
• Citation: 92 A. 443,88 Vt. 335
• Court: Vermont Supreme Court
• Parties: HOOKER, CORSER & MITCHELL CO. v. HOOKER et al.

92 A. 443

88 Vt. 335

HOOKER, CORSER & MITCHELL CO.

v. HOOKER et al.

Supreme Court of Vermont. Windham.

Nov. 28, 1914.

[Copyrighted material omitted.]

Appeal in Chancery, Windham County; Fred M. Butler, Chancellor.

Suit by the Hooker, Corser & Mitchell Company against James F. Hooker and others. Heard on the pleadings, master's report, and defendants' exceptions thereto. Decree for the orator, and defendants appeal. Modified and affirmed.

Argued before ROWELL, C. J., and MUNSON, WATSON, HASELTON, and POWERS, JJ.

Barber & Barber, of Brattleboro, W. B. C. Stickney, of Rutland, and C. Menzies Miller, of Brattleboro, for appellants.

Clarke C. Fitts and Robert C. Bacon, both of Brattleboro, for appellee.

POWERS, J. On November 1, 1902, the defendants and W. H. Proctor succeeded to the business of Hooker, Corser & Mitchell, who had been manufacturing overalls and workmen's garments at Brattleboro. On that day they entered into a written contract, wherein it was provided that a corporation should be formed to carry on the business, to be known as the Hooker, Corser & Mitchell Company, and that Corser, Proctor, and Whittaker should devote their exclusive attention to the business and the running and management of the same. Pursuant to this agreement, a corporation was formed with a capital stock of $120,000, divided into 1,200 shares of $100 each. Of this stock, Whittaker took 400 shares, Hooker, 350, Proctor, 300, and Corser, 150. The ownership of the stock stood in this way until the defendants retired from the concern, as hereinafter related, except that one of Hooker's shares stood for a time in the name of Robert C. Bacon, and two of his shares were, at some time prior to January 4, 1909, transferred to his wife, Maud E. Hooker, and stood in her name at the time of the transfer to Proctor hereinafter referred to. The corporation had no by-laws, and was operated and managed according to the contract above referred to, each of the four parties being directors, until January 16, 1909. The business was highly successful. There was, however, considerable friction between the defendants and Proctor, which finally culminated, in the fall of 1908, in a determination of the defendants to oust Proctor from the control and management of the business. They realized that the contract of November 1, 1902, might be an obstacle to their plans, and Corser and Whittaker went to Holyoke, Mass., and took counsel of W. H. Brooks, a leading lawyer of that city. Brooks advised them that the contract was not binding, and pursuant to his advice, an agreement was drawn up providing for an annual meeting of the corporation to be held on January 16, 1909, for the purpose of adopting by-laws, electing officers, and ratifying the previous acts of the corporation. The consultation with Brooks was concealed from Proctor, and he never authorized his employment. When the agreement providing for an annual meeting was presented to Proctor for signature, the defendants informed him that by-laws were needed for the more perfect organization of the corporation. In fact there was no call for such by-laws, and this move was one step in the defendants' secret plan to oust Proctor from the management. He signed the agreement, apparently without suspicion of the sinister purpose lurking behind it, and attended the meeting; he read the by-laws before their adoption, and made no objection to them; but he did not understand that the adoption of them—and they were innocent enough so far as appearances went— would in any way affect the contract of November 1, 1902. Brooks attended this annual meeting, ostensibly as a stranger to all but Hooker, who went through the formality of introducing him to Corser and Whittaker. though they were the very ones who had consulted him about the business then in hand. The by-laws were adopted, and an election of directors pursuant thereto was immediately held. The defendants and Mrs. Hooker received all the votes cast except Proctor's and were, of course, elected. Thereupon, a notice signed by the defendants was handed to Proctor, informing him that the contract of November 1, 1902, was abrogated. Proctor soon realized what had happened and consulted a lawyer. On February 18, 1909, he brought a bill in chancery against the defendants, Mrs. Hooker, and the corporation, wherein he asked that the contract of November 1, 1902, be enforced, and as an alternative that a receiver be appointed to liquidate the company. A temporary injunction was granted, restraining the defendants therein from interfering with Proctor's participation in the management of the business. The defendants employed counsel to defend the suit so brought, and, when their bills came in, paid them out of the treasury of the company; they also paid Brooks, for his services in assisting them to oust Proctor as above stated, out of the treasury of the company, although all such bills (except perhaps some very small item) were for services personal to the defendants. Proctor knew that some sum had been paid from the treasury to Brooks, and all the payments specified appeared on the books, but he did not in fact know about them any further than is stated.

For several years prior to 1909, the officers of the company had been looking about for a suitable place in which to start a branch factory; the business having outgrown the Brattleboro plant. In the spring of that year, the Schenectady Board of Trade learned of this, and on April 12th Wesley E. Cole, their secretary, came to Brattleboro, met the defendants at the factory of the company, and conferred with them regarding the establishment of a branch at Schenectady. Proctor was pointed out to Cole, but the defendants did not introduce him, and one of them told Cole that Proctor was not an agreeable companion, and advised him to have nothing to do with him. Hooker also told Cole that if Proctor bought their stock, the defendants were going to start a factory themselves, and if they bought Proctor's stock, they were to start a branch factory anyway. On April 17th, at Cole's solicitation, the defendants, together with two of the company's employes, Hobart and Dion, visited Schenectady, and looked over the situation there. Their expenses were paid out of the treasury of the company. After their return, Corser wrote them for the price of a certain lot on Dock street. This was May 4th. Correspondence with Cole was kept up until a deal was consummated. On April 21st, Cole came to Brattleboro again. He then priced the Dock street site to the defendants at $20,000. This they refused to pay, but made the proposition that if the Schenectady people wanted the industry enough to give $5,000 toward the lot, they would pay the balance and build there. On May 11th Cole came to Brattleboro yet again, met the defendants, Hobart and Dion, and the deal was closed. The defendants were to take the Dock street lot, and pay $15,000 of the price; the rest was to be raised by the Schenectady Board of Trade; the latter was to guarantee tax exemption for five years. The defendants then paid over the $15,000, using their private funds therefor, and took the title to the lot in their own names. All the foregoing negotiations and dealings were kept secret from Proctor. In acquiring the Dock street site, the defendants intended to use it for a factory themselves if Proctor bought them out, and to turn it over to the company if they bought him out. Afterwards the defendants organized the Mohawk Overall Company, and conveyed this site to it; that company built a factory on it, started the manufacture of overalls similar to those made by the orator, and is still running it The defendants control the Mohawk Company and own substantially all of its stock. Proctor saw that something was going on, and sent a lawyer out to Schenectady to investigate. Just what he discovered does not appear, but it was enough so that on May 26, 1909, he filed a supplemental bill in the suit already brought, charging that the defendants were seeking to start a new plant there, had purchased the land, and were planning to take the trade and employes of the orator so as to injure himself and the company. On these allegations, Proctor obtained a temporary injunction restraining the defendants from continuing with the Schenectady matter and from hiring away any of the company's employes, and from using any of the company's trade-names, trade lists, etc. A motion was filed to dissolve this injunction, and a hearing thereon set at Rutland on May 28. All the parties and their counsel met there that day, and as a result of the negotiations then had, an agreement was drawn up and signed by Proctor and the defendants. By the terms thereof a give or take option on the capital stock of the orator was given Proctor at $175 per share, and he was to elect whether he would buy or sell on or before June 12th. It was also stipulated therein that the chancery litigation was to be thereby settled. At this time, defendants' counsel made statements from which Proctor might understand, and he did in fact understand when he signed the agreement, that the Schenectady deal was made for the benefit of the orator. As early as June 8th the defendants became satisfied that Proctor was going to buy their stock under the Rutland agreement, and he gave them formal notice to that effect June 10th. He carried this intention into effect and actually took a transfer of the stock of the defendants and Mrs. Hooker on June 14, 1909.

When the orator corporation was formed, there were several Corser patents which had been used by the old concern, and an agreement was entered into between the defendant Corser, as executor of the estate of B. G. Corser, in whose name the patents stood, and the other new owners, whereby these patents, which included a certain buckle patent, might be used by them, or such corporation as they might form, for $300 per year. The orator used the buckle patent and paid the...