Massa v. Stone

• Decision Date: 07 May 1963
• Parties: Joseph V. MASSA v. Judah M. STONE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 217

190 N.E.2d 217

346 Mass. 67

Joseph V. MASSA v. Judah M. STONE.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 6, 1963.

Decided May 7, 1963.

John D. Dwyer, Boston, for petitioner.

Philip J. Woodward, Boston (Arthur T. Wasserman and Julius Thannhauser, Boston, with him), for respondent.

Edward H. Bennett, Jr., and Philip H. Suter, Boston, for the successor trustee, amicus curiae.

Before WILKINS, C. J., and SPALDING, WHITTEMORE, CUTTER, and KIRK, JJ.

CUTTER, Justice.

This is a petition by Joseph Massa, a beneficiary of a voting trust, to remove Mr. Judah Stone, an attorney, as one of the voting trustees. A probate judge '[d]ismissed after full hearing' a plea to the jurisdiction, a plea in abatement, a plea in bar, and a motion that the court decline jurisdiction. From these decrees Mr. Stone appealed. Mr. Stone then filed an answer. A decree was entered removing Mr. Stone as voting trustee. Mr. Stone appealed from this decree and also (with a cotrustee) appealed from a decree denying his motion to dismiss a petition for the appointment of a successor trustee, No appeal was taken from a decree appointing a successor trustee. The evidence at the hearing of the removal petition on the merits is reported. Reports of material facts were filed with respect to the decrees removing Mr. Stone as trustee and denying the motion to dismiss the petition for the appointment of a new trustee. The facts are stated principally on the basis of these reports. ¹

In 1937, Joseph Massa's father, Raimond Massa, started to make silver picture frames and small silver items. One Brown and Raimond Massa's two sons joined the business, which was incorporated as Raimond, Inc. Brown told Raimond Massa that one Dewey Stone (whose niece had married Mr. Judah Stone) would make much needed loans to Raimond, Inc. without interest. Two such loans were repaid.

In 1955, Dewey Stone, through Brown, agreed to make an addition loan which Raimond Massa understood was to be without interest. The loan was on the condition that Mr. Judah Stone be brought into the business and given one third of the stock. This was done and Mr. Stone became treasurer, clerk, and a director of Raimond, Inc. In 1956, one Leonard Florence was brought into the business at Dewey Stone's direction and was given twenty-five shares of common stock.

In June of 1956, Brown and Raimond Massa each held twenty shares, Louis and Joseph Massa (Raimond's two sons) each held five shares, and Mr. Judah Stone and Florence each held twenty-five shares. All of this stock was put in a voting trust of which Raimond Massa, Mr. Judah Stone, and Florence were the trustees. This voting trust provided, among other things, that '[a]ll questions * * * shall be determined by a decision of a majority of' the voting trustees and 'shall include the vote of * * * Judah M. Stone in every instance in order to be valid.' ²

Mr. Judah Stone and Florence conducted the financial and sales end of the business. The Massas worked in the plant until April 9, 1957. On that day Dewey Stone sent for the three Massas and told them 'that he was going to call his loans to' Raimond, Inc. These loans then amounted to over $80,000. He 'had acquired * * * Brown's stock * * * [so] that he * * * owned seventy per cent of the stock.' He 'demanded that the Massas arrange to pay * * * [Raimond, Inc.'s] debt * * * or surrender their stock * * *. [I]f he was paid he would surrender his stock to them for $1.' Raimond Massa claimed that there was sufficient silver 'inventory to pay the loan; and the Massas declined to surrender their stock.' Dewey Stone then told them that, to save payment of their salaries, they were 'off the payroll.' From then on 'the Massas were effectively locked out of the business.'

By April, 1960, sales by Raimond, Inc. had risen from about $69,000 in 1955 to about $408,000. Business was improving. The balance sheet at April 30, 1960, showed an operating profit of nearly $36,000 for the first three quarters of the then current fiscal year. Dewey Stone proposed by a letter of April 16, 1960, to buy the corporate assets by assuming and paying the corporate liabilities which then exceeded the assets. Mr. Judah Stone and Florence voted to accept the proposal. ³ Raimond Massa voted against it. The vote was not carried out because of a then outstanding injunction in a suit in the Superior Court brought by Raimond Massa against Mr. Judah Stone.

On July 26, 1960, at a special meeting of the directors (at which Raimond Massa was not present), 'it was voted to pay Dewey Stone a sum equal to 6% per annum on all the money he had * * * [lent to] the corporation * * * and also to compensate him for the use of his collateral and for his guarantee of the credit of the corporation and for his services as financial adviser. * * * As a result of the * * * indebtedness [thus] incurred * * * the profit for the first three quarters was transformed into a deficit of some $23,000.00 for the fiscal year which ended July 31, 1960.'

At a meeting of stockholders called for December 29, 1960, and postponed to January 11, 1961 (when Mr. Judah Stone and Florence were present), a somewhat different proposal by Dewey Stone was considered. ⁴ No notice of this new proposal was given to the Massas. Mr. Judah Stone and Florence, 'a majority of the voting trustees * * * voted to accept the new proposal. The assets were * * * transferred to a [new] corporation organized by Dewey Stone,' who is its sole stockholder. Florence and Mr. Judah Stone are officers and directors of this corporation.

In January, 1958, Mr. Judah Stone at Dewey Stone's direction opened a corporate checking account in a Brockton bank and certified (on a printed form apparently furnished by the bank) that the directors had authorized this action and that Dewey Stone's secretary, Mrs. Chapin, had been elected assistant treasurer of the corporation and authorized to draw checks on the account. No formal meeting for such action had then been held although the action had been informally discussed by Mr. Stone and Florence and was later ratified by them. No notice of the existence of the account was given to the Massas. Mrs. Chapin at Dewey Stone's direction deposited in this account more than $100,000.

The funds deposited in this account were supplied by Dewey Stone and he received demand notes of the corporation signed by Mr. Judah Stone, its treasurer, for these amounts. 'The funds so deposited were used by Dewey Stone to speculate in common stocks' as he saw fit. ⁵ The securities purchased were held by Dewey Stone 'in street form. In several instances * * * he [later] had the securities transferred to himself [at cost]; and * * * [Mrs.] Chapin credited the corporation with the cost price against the money * * * [lent] by him.' These 'speculations netted the corporation some $7,000.' The judge on the evidence was unable to find '[w]hat Dewey Stone * * * profited or lost from these transactions.'

The judge concluded that 'early in 1957 it was Dewey Stone's intention to force the Massas from the corporation * * * [but] that he did not * * * intend to force the liquidation of the corporation by calling his loans; [and] that at least as early as February 1960 it was his purpose to acquire the assets and transfer them to a business' of which he, Florence, and Mr. Judah Stone would be the principal beneficiaries. 'In fulfilling this purpose he received the complete coperation of [Mr.] Judah Stone who * * * was Dewey Stone's willing creature * * *. At no time did [Mr.] Judah Stone attempt to exercise independent judgment or take the responsible action required of him as an officer, director and voting trustee.'

1. Mr. Judah Stone's plea in bar presents the issue whether this petition is barred by the dismissal of a prior suit against him brought by Raimond Massa in the Superior Court. The allegations of the plea ⁶ are largely conclusory. Cf. Willett v. Webster, 337 Mass. 98, 101-103, 148 N.E.2d 267. The record shows merely that the plea was '[d]ismissed after full hearing.' See Moran v. Manning, 306 Mass. 404, 408, 28 N.E.2d 478; Lyon v. Sharpe, 317 Mass. 283, 284, 57 N.E.2d 910; O'Donoghue v. Manning, 331 Mass. 23, 24, 116 N.E.2d 693. There is no report of material facts or of evidence and, if there was a hearing on the truth of the facts alleged in the plea, the decree imports the finding of every fact essential to its proper entry. See Bodman v. Martha's Vineyard Nat. Bank, 330 Mass. 125, 126, 111 N.E.2d 670; Zottu v. Electronic Heating Corp., 334 Mass. 442, 446, 135 N.E.2d 920. See also Wasserman v. Locatelli, 343 Mass. 82, 83, 175 N.E.2d 914. Even if the hearing was only upon the legal sufficiency of the plea (see Palmer v. Motley, 323 Mass. 129, 136-137, 80 N.E.2d 460), the facts (as opposed to conclusory matter, see fn. 6, supra) alleged in the plea would not establish that as matter of law the prior proceeding precluded the present petition. The plea shows that the prior bill was by Raimond Massa whereas this petition is by Joseph Massa, who in his petition 'represents that he is a beneficiary of' the voting trust, as he undoubtedly was by reason of his ownership of five shares or voting trust certificates. See Restatement: Judgments, § 80, comment 1. See also Turner v. Morson, 316 Mass. 678, 688-689, 57 N.E.2d 18, and Scott, Trusts (2d ed.) § 216.2, stating the principle that consent of one beneficiary of a trust to a breach of trust does not bar other beneficiaries from seeking relief against the trustee. It is not averred in the plea that Joseph Massa had control of the suit brought by his father or that his father purported to represent him or that Raimond Massa controls this proceeding. See Pioneer Insulation & Modernizing Corp. v. Lynn, 331 Mass. 560, 563-564, 120 N.E.2d 913; Restatement: Judgments, § 84. See also McCarthy v. Daggett, Mass., 183 N.E.2d 502 ^a. Cf. Elliott v. Hayden, 104 Mass. 180, 182; Weld v. Clarke, ...