Hushion v. McBride

• Decision Date: 09 November 1936
• Parties: HUSHION v. McBRIDE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

296 Mass. 4

4 N.E.2d 443

HUSHION v. McBRIDE et al.

Supreme Judicial Court of Massachusetts, Worcester.

November 9, 1936

Suit in equity by William J. Hushion against James E. McBride and others. From sundry orders and decrees, defendants appeal.

Affirmed.

Appeal from Superior Court, Worcester County Broadhurst, Judge.

F. P Ryan, of Worcester, for appellants.

J. C. McDonald, of Worcester, for appellee.

LUMMUS, Justice.

The individual defendants James E. McBride and Margaret A. McBride, hereinafter called simply the defendants, are husband and wife. He is financially irresponsible. In 1933 they promoted a distilling corporation. The master finds: ‘ All the cash which ever went into the enterprise was the money of Margaret A. McBride, invested by her in part for the purpose of making her husband, James E. McBride, the executive of an industry, and in part as an investment for pecuniary returns. By virtue of the fact that the McBrides were furnishing all the money, they controlled the whole promotion of the enterprise, including the doings of the promoters or so-called ‘ syndicate.’ They also overwhelmingly controlled the corporation afterwards organized. * * * All the capital for this enterprise, from its beginning, has been furnished by the defendant, Margaret A. McBride. * * * I find that whatever the defendant James E. McBride did at the meetings of the promoters and throughout the entire course of the events involved in this suit was done with the authority of his wife, the defendant Margaret A. McBride, and whatever she did was done with the authority of her husband; that all that was done by both or either was done as a common undertaking between them.'

Real estate in Clinton, Massachusetts, was acquired by James E. McBride early in the promotion, placed in the name of a straw holder, and subsequently turned over to the corporation to be used as a distillery. The plaintiff held an option to buy for $20,000 an overdue corporate mortgage upon which about $24,000 was due, covering a distillery, land, buildings and machinery in Canada. He turned this option over to James E. McBride, prior to August 23, 1933, as his contribution, in addition to his continuing services, towards the promotion. It was hoped that at a foreclosure sale the entire property in Canada could be bought for the amount of the mortgage.

It was orally agreed that the plaintiff, for his option and his services, should receive fifteen per cent of the capital stock of the proposed corporation. On October 7, 1933, James E. McBride signed and delivered to the plaintiff a writing stating that the plaintiff ‘ is to share to the extent of 15% in company we propose forming.’ Two days later, at the suggestion of an attorney, James E. McBride signed and delivered to the plaintiff another writing stating that ‘ you [the plaintiff] are to have a 15 per cent. interest in all the assets of a Syndicate in which I have a controlling interest. * * * It is further understood that the syndicate will cause to be incorporated a distillery company * * * and when the said assets are transferred to the said Company * * * you shall be entitled to a 15 per cent interest in its * * * capital stock in exchange for your share of the above mentioned assets.'

James E. McBride bought the Canadian property at foreclosure sale for $43,000, which left a surplus of about $19,000 for the mortgagor. The machinery and equipment of the Canadian plant, worth if new about $135,000, together with a considerable stock of whisky, were removed to Clinton. Shares in the new Corporation to the number of eighty-two thousand, two hundred twenty-three, were issued to Margaret A. McBride, for the Clinton and Canadian properties turned over to the corporation. In addition, twenty-one thousand, six hundred forty-four shares were issued to her for cash, two thousand shares were issued to one Speirs for services, and nineteen thousand shares were issued to ‘ James E. McBride, Trustee’ for the services of the promoters. The master finds that the enterprise is speculative, and that it is impossible to place a value upon the shares.

The plaintiff sought specific performance by the transfer to him by the defendants of fifteen thousand, five hundred eighty shares. An amendment to the bill was allowed after the master had reported, and the defendants appealed.

The defendants also appealed from the overruling of a demurrer to the amended bill. Subject to the appeal of the defendants, a final decree was entered, with costs against both defendants, ordering the defendant Margaret A. McBride to transfer to the plaintiff twelve thousand, three hundred thirty-three shares, which is fifteen per cent of the eighty-two thousand, two hundred twenty-three shares issued to Margaret A. McBride for the Clinton and Canadian properties acquired by James E. McBride as a part of the promotion and subsequently turned over to the corporation.

The defendants contend that the writings signed by James E. McBride in October, 1933, did not bind them or either of them personally. But the wholly unformed corporation could not be bound by a pre-natal contract. Abbott v. Hapgood, 150 Mass. 248, 252, 22 N.E. 907,5 L.R.A. 586, 15 Am.St.Rep. 193; Colpitts v. L. C. Fisher Co., 289 Mass. 232, 233, 193 N.E. 833, and cases cited. The defendants dominated the situation. They had taken from the plaintiff the option which he held, and had left him with no means of obtaining stock directly from the proposed corporation. The natural conclusion is that individual liability was intended. Mansfield v. Lang (Mass.) 200 N.E. 110.

But the defendants say that the corporation which was formed is not the corporation in which the plaintiff was promised in interest of fifteen per cent. It is true that about September 17, 1933, the promoters expected that the cash capital ‘ at first to be invested was to be in the sum of $50,000., of which the McBrides were to furnish $25,000.’ and one Soulliere $25,000. But Soulliere was soon after eliminated, and it became apparent that a larger cash investment was necessary. These changes occurred before James E. McBride signed the writings in October, 1933. No proposal to change the share or rights of the plaintiff was thereafter made. The contention of the defendants, if sound, would deprive the plaintiff of his valuable option as well as his valuable services, without compensation. We think that under his contract the plaintiff has a right to share in the corporation which was subsequently formed, the defendant Clinton Distilleries Corporation. The case differs from Maine v. Butler, 130 Mass. 196, where the plan expressly called for a cash investment of only $10,000, and that plan was illegal.

The defendants contend that the judge had no right to allow an amendment to the bill, after the report of the master had been filed, for the purpose of making the allegations conform to the facts found after full hearing. But that is a proper and common purpose. Bourbeau v. Whittaker, 265 Mass. 396, 400, 164 N.E. 453; Blume v. Oil-O-Chron, Inc., 287 Mass. 52, 54, 191 N.E. 131; Giles v. Giles (Mass.) 200 N.E. 378; Lane v. J. W. Lavery & Son, Inc. (Mass.) 1 N.E.(2d) 378. If there ever existed any doubt that the amended bill states the same cause of suit that the plaintiff intended to present in the first place, it was resolved by the decision allowing the amendment, and nothing in the record discloses any error of law or fact in that decision. G.L.(Ter.Ed.) c. 231, §§ 51, 144. See, also, section 138; Bucholz v. Green Bros. Co. (Mass.) 195 N.E. 318.

We see no cause for sustaining the demurrer to the amended bill. If as ...