Hurley v. Boston R. Holding Co.

• Citation: 315 Mass. 591,54 N.E.2d 183
• Parties: HURLEY v. BOSTON R. HOLDING CO.
• Decision Date: 01 March 1944
• Court: United States State Supreme Judicial Court of Massachusetts

315 Mass. 591
54 N.E.2d 183

HURLEY
v.
BOSTON R. HOLDING CO.

Supreme Judicial Court of Massachusetts, Suffolk.

March 1, 1944.

Suit by Helen J. Hurley against Boston Railroad Holding Company to require redemption of public preferred shares and payment of accumulated dividends thereon and appointment of a receiver. From an interlocutory decree sustaining demurrer to amended bill and a final decree dismissing the amended bill, plaintiff appeals.

Interlocutory decree affirmed, and final decree affirmed.

[54 N.E.2d 186]

Appeal from Superior Court, Suffolk County; Swift, Judge.

Before FIELD, C. J., and DONAHUE, LUMMUS, QUA, DOLAN, and RONAN, JJ.

J. G. Crane, of Boston, for plaintiff.

J. Garfield, of Boston, for defendant.

J. B. Ely, of Boston, amicus curiae.

FIELD, Chief Justice.

This is a suit in equity brought in the Superior Court against Boston Railroad Holding Company, a corporation organized under the laws of the Commonwealth hereinafter referred to as the defendant. The plaintiff alleges in her bill, as amended, that she is the owner of ‘twenty-five shares of the Public Preferred’ stock of the defendant and that the defendant ‘has defaulted in the payment thereon of dividends since January 10, 1938, and by reason of such default in the payment of dividends' the defendant owes the plaintiff ‘the amount of the par value of her share[s], to wit:-Twenty Five Hundred ($2500.00) Dollars, plus accumulated dividends thereon, down to the date of any decree herein.’ The plaintiff alleges that she ‘brings this suit as an owner of Public Preferred shares of the * * * [defendant], for herself and for such other owners of the Public Preferred shares of the * * * [defendant] as may join this suit as parties plaintiff.’ No other person, however, has so joined. Other allegations of the bill, as amended, will be referred to later. The prayers of the bill, as amended, in addition to a prayer for general relief, are: (a) that the court decree that the defendant owes to the plaintiff the sum of $2,500, the par value of the so-called public preferred stock of the defendant owned by the plaintiff, ‘plus the sum of the accumulated and unpaid dividends thereon,’ (b) that the court reach and apply to the payment of these sums due to the plaintiff from the defendant so much of the shares of stock of any class of the Boston and Maine Railroad owned by the defendant as may be necessary to discharge the obligation of the defendant to the plaintiff, (c) that the court adjudge that the plaintiff or plaintiffs as holders of the public preferred stock of the defendant have as security for payment of the full amount of the par value of their preferred stock and accumulated dividends thereon all stock of the Boston and Maine Railroad ‘owned by the * * * [defendant],’ and (d) that a receiver or receivers be appointed to administer the affairs of the defendant subject to the orders of the court.

The defendant demurred to the bill, as amended, on the ground that the facts contained therein ‘are insufficient in law and in equity to enable the * * * [plaintiff] to maintain her suit.’ An interlocutory decree was entered sustaining the demurrer and later a final decree was entered dismissing the bill with costs. From each of these decrees the plaintiff appealed to this court.

The bill, as amended, contains the following allegations-some of which obviously are allegations of law. The authorized and outstanding capital stock of the defendant consists of thirty-one thousand sixty-five seventy-two thousand nine hundred thirty-nine value of $100 per share, and two hundred seventy-two thousand nine hundred thirty-nine shares of preferred stock, having a par value of $100 per share. The voting power of the defendant is vested solely in its common stock. The stipulated dividend on the preferred stock of the defendant is four per cent per annum, payable semiannually, the established dividend dates being January 10 and July 10 of each year, and the ‘owners of such preferred stock are entitled to be paid such stipulated dividend, but, in the event of the default in the payment of any stipulated dividend from whatever cause, * * * [the defendant] is liable to the owners of its preferred stock to the amount of the par value of their preferred stock and accumulated and unpaid

[54 N.E.2d 187]

dividends thereon.’ All the common stock of the defendant is owned by the trustees in bankruptcy of the New York, New Haven and Hartford Railroad Company, hereinafter referred to as the ‘New Haven.’ Two hundred forty-seven thousand seven hundred fifty-nine shares of the preferred stock of the defendant are owned by the New Haven. Twenty-four thousand one hundred fifty shares of the preferred stock of the defendant are distributed among and owned by various members of the public. The stock distributed among and owned by various members of the public will be referred to hereinafter as ‘Public Preferred.’ ‘By virtue of a decree of the District Court of the United States of America, for the Southern District of New York, under the date of October 17, 1914, as modified on June 4, 1923 in the case of the United States of America vs. New York, New Haven & Hartford Railroad, et als, the Public Preferred is entitled to priority in liquidation over all other Preferred Stock of the * * * [defendant] and a legend to that effect was required to be and was stamped upon the Certificate of * * * [the plaintiff] and all Certificates representing the Public Preferred of the * * * [defendant].’ ‘The payment of the semiannual dividends on the Public Preferred of * * * [the defendant] and, in the event of default by * * * [the defendant] in the payment of said semiannual dividends, the payment of the entire amount of the par value of the Public Preferred and accumulated dividends thereon is required by law to be, and is, guaranteed by the New Haven.’ Although ‘formally requested to do so, the New Haven has refused since January 10, 1938, to honor its guarantee of the dividends on the preferred stock of the * * * [defendant].’ The assets of the defendant consist entirely of shares of stock of various classes in the Boston and Maine Railroad. The ‘market value of such assets is entirely inadequate to meet the sums due to the owners of the Public Preferred for the par value of their preferred stock and accumulated dividends thereon and * * * the * * * [defendant] is therefore grossly insolvent.’ The defendant ‘does not now owe any debts which were in existence at the date of the stockholders meeting at which said preferred stock was first authorized.’ Under ‘the provisions of Law pertaining thereto, in the event of the default by the * * * [defendant] from whatever cause in the payment of any semiannual dividend on the Public Preferred stock of the * * * [defendant], the owners of such Public Preferred stock are entitled to the payment of the par value of the stock owned by them, plus accumulated dividends thereon and * * * the pertinent provisions of law further provide that the Public Preferred stock of the * * * [defendant] to the amount of the par value thereof and all accrued and unpaid dividends thereon, constitute a charge and lien upon, and are secured by, all stock of the Boston & Maine Railroad owned by the * * * [defendant].’

The defendant was organized under St.1909, c. 519. The preferred stock owned by the plaintiff was issued by the defendant under the authority of St.1910, c. 639. These two statutes contain the terms and conditions upon which the preferred stock of the defendant was issued and by which the rights of the parties are to be ascertained. These statutes are to be interpreted together and in the light of the prior existing law.

In Codman v. New York, N. H. & H. R. Co., 253 Mass. 144, 149, 148 N.E. 467, 469, the court said that the ‘acquisition of the stock of the Boston & Maine Railroad by the defendant [New York, New Haven and Hartford Railroad] in 1906 was ultra vires the defendant,’ citing Attorney General v. New York, N. H. & H. R. Co., 198 Mass. 413, 84 N.E. 737, a case that arose under St.1906, c. 463, Part II, § 57, containing the following provision which was a re-enactment of the statute that had been in force since 1874 (198 Mass. at pages 415, 416, 84 N.E. at page 738): ‘A railroad corporation, unless authorized by the general court or by the provisions of the following five sections, shall not directly or indirectly subscribe for, take or hold the stock or bonds of or guarantee the bonds or dividends of any other corporation.’ General Laws (Ter.Ed.) c. 160, § 71, originally enacted by St.1907, c. 585, §§ 1, 2, provides in part that ‘No corporation owning, leasing or operating a railroad wholly or partly in the commonwealth, nor any person or corporation acting in its interest shall, directly or indirectly, acquire, or attempt to acquire by purchase, exchange of shares, or in any other way, any shares of the capital stock of any domestic railroad company not lawfully leased, owned or operated by it prior to May first, nineteen hundred and seven, except under specific authority provided by law.’ It may well be that §§

[54 N.E.2d 188]

1 and 2 of said c. 585 were enacted with reference to the ownership of stock in the Boston and Maine Railroad by the New Haven. However, after the passage of St.1907, c. 585, §§ 1, 2, St.1909, c. 519, was passed and ‘constituted in substance and effect specific authority to the [New Haven] to deal with its stock in the Boston & Maine Railroad.’ Codman v. New York, N. H. & H. R. Co., 253 Mass. 144, 150, 148 N.E. 467, 469.

Statute 1909, c. 519, § 1, created a corporation by the name of the Boston Railroad Holding Company ‘for the sole purpose of acquiring and holding the whole or any part of the capital stock, bonds and other evidences of indebtedness of the Boston and Maine Railroad, and of voting upon all certificates of stock so acquired and held, and of receiving and collecting dividends and interest upon said stock, bonds and...