In re Allen-Foster-Willett Co.

• Decision Date: 27 June 1917
• Citation: 227 Mass. 551,116 N.E. 875
• Parties: In re ALLEN-FOSTER-WILLETT CO. (WILLETT AND MANUFACTURERS' NAT. BANK, Interveners.)
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

227 Mass. 551

116 N.E. 875

In re ALLEN-FOSTER-WILLETT CO. (WILLETT AND MANUFACTURERS' NAT. BANK, Interveners.)

Supreme Judicial Court of Massachusetts, Suffolk.

June 27, 1917.

Report from Superior Court, Suffolk County; Frederick Lawton, Judge.

In the matter of Allen-Foster-Willett Company. On objections to receiver's report by John H. Willett and another. Decree allowing report, and case reported. Decree affirmed.

The principal objection was that all, or nearly all, the debts allowed by the receivers had been bought up at a discount by Frederick Allen or Charles H. Foster, or both, directors of the company, and that therefore the receivers should not pay on account of said claims any amount in excess of the sum paid therefor by Allen or Foster.Parsons, Bowen & Moore and H. Ashley Bowen, all of Lynn, for intervener John H. Willett.

Augustus B. Tolman, of Lynn, for intervener Manufacturers' Nat. Bank.

Lee M. Friedman, of Boston, for receivers of Allen-Foster-Willett Co.

BRALEY, J.

It is undoubtedly true as contended by the interveners that directors of a corporation act in the discharge of the duties of their office in a fiduciary capacity. A director is not permitted to serve two masters; his personal pecuniary interests in whatever form they may arise are, as between himself and the company subordinate to his paramount obligations as trustee, to the faithful performance of which he is strictly accountable in a court of equity. Hayes v. Hall, 188 Mass. 510, 511, 74 N. E. 935;Quinn v. Burton, 195 Mass. 277, 279, 81 N. E. 257;American Circular Loom Co. v. Wilson, 198 Mass. 182, 206, 207, 84 N. E. 133,126 Am. St. Rep. 409;United Zinc Companies v. Harwood, 216 Mass. 474, 476, 103 N. E. 1037, Ann. Cas. 1915B, 948, and cases there collated.

[2] Obviously, Allen, while a director of the company charged with the duty of conserving its monetary welfare for the benefit of all concerned, could not lawfully buy at a discount claims against it, and after wards collect their full value, or participate upon this basis in any distribution of corporate assets by way of dividends if the company became insolvent. But having been a domestic manufacturing corporation, the company by the decree of dissolution is within St. 1903, c. 437, § 51, which provides that, ‘A corporation so dissolved shall be held to be extinct in all respects as if its corporate existence had expired by the limitation of its charter.’ Or as phrased in R. L. c. 109, § 52, of which St. 1903, c. 437, § 51, is a recodification, ‘as if its corporate existence had expired by its own limitation.’ The corporation having thus ceased to exist creditors and stockholders would have to assert whatever rights they had against its property in a court of equity, if it were not for section 52. Thornton v. Marginal Freight Ry. Co., 123 Mass. 32, 34. By this section, however, the corporation is continued ‘as a body corporate for three years after the time when it would have been so dissolved, for the purpose of prosecuting and defending suits by or against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its capital stock, but not for the purpose of continuing the business for which it was established.’ If upon dissolution the assets had been marshaled and liquidation had been effected through ...