McDonald v. Place

• Decision Date: 20 May 1914
• Parties: MCDONALD v. PLACE.
• Court: Vermont Supreme Court

90 A. 948

88 Vt. 80

MCDONALD

v. PLACE.

Supreme Court of Vermont. Washington.

May 20, 1914.

Exceptions from Washington County Court; Fred M. Butler, Judge.

Assumpsit by John W. McDonald against Frank L. Place. From a judgment for defendant, plaintiff excepts. Affirmed.

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

Richard A. Hoar, of Barre, and George W. Wing, of Montpelier, for plaintiff. S. Hollister Jackson, of Barre, and Warren R. Austin, of St. Albans, for defendant.

HASELTON, J. This is an action of general assumpsit, brought by the plaintiff as receiver of the Sutherland Granite Company. The general issue was filed, and the case was referred. Upon consideration of the referee's report, judgment was rendered for the defendant to recover his costs. The plaintiff had an exception to this judgment.

The Sutherland Granite Company is a corporation organized by voluntary association, its articles of association having been filed in the office of the Secretary of State January 28, 1909. Its office and place of business was to be at Waterbury, and its articles of association were filed for record in the office of the town clerk of Waterbury on the date of their filing in the office of the Secretary of State. See P. S. 4289. Its articles provided for a capital stock of $50,000, divided into 500 shares of $100 each. The corporation thus formed purchased and took over the granite business and property of the firm of Sutherland & Carroll, and assumed its obligations, and paid therefor by an issue of stock to the amount of 170 shares, representing $17,000, which was the paid-up capital of the corporation as certified. See P. S. 4305. Seventeen thousand dollars was, however, an excessive valuation of the property and assets so purchased.

The "records" of the corporation show that the capital stock was increased from $17,000 to $30,000, the additional stock of 130 shares being taken out in the name of the company. But this is not a true record. All that there was to this was that the directors, or some of them, talked among themselves that, in order to keep their indebtedness within the limit prescribed by law, they would be obliged to make the additional Issue, and determined to make it but abandoned the scheme, though Mr. Sutherland made up and pasted into the record book a fictitious record of a meeting that was never held, at which action making the contemplated increase appeared to have been taken. The referee rightly treats of the increase as proposed, or attempted, and not actual.

The records of the company are in several particulars grossly wrong or fictitious, and there are no exceptions relating to the findings that they are so, nor to the findings as to the true facts regarding the matters touched upon by the spurious "records"; nor are there any exceptions relating to the course pursued and the findings made by the referee in any respect. The referee was the late H. Charles Royce, Esq., and the thoroughness and clearness of his report are such that the case presented to us is easily understood.

Some items of the plaintiff's specification are disposed of by the referee by the finding that they represented obligations assumed by the Sutherland Granite Company, of which the plaintiff is receiver, and that they represented no liability of the defendant to the company. Under the report, the amount for which the defendant is liable in this action, if liable at all, is $3,250, together with certain interest.

Some facts need to be stated for the determination of this question of liability or non-liability, a question which the referee submitted to the court. At the outset one share only of the 170 shares was issued to the defendant, and this one share was issued to him solely for the purpose of qualifying him as a director. See P. S. 4300. Afterwards the defendant purchased the stock of one Slocum, and in the arrangement by which such purchase was made, and in consequence of subsequent transactions, the defendant became indebted to the company in the sum named by the master.

Thereafter the defendant negotiated with Joseph Frontini, and the sons of Joseph, John and Antonio, for the sale to them of his stock and that of W. E. Sutherland, which the defendant undertook to obtain for the Frontinis. The defendant and Sutherland then owned nearly all of the stock of the company, all but a few shares, and the purchase of the Frontinis was to buy up the company by acquiring practically all of its capital stock. These negotiations were carried out, and the Frontinis acquired the defendant's stock and Sutherland's stock, all but one share, which Sutherland retained by the wish of the Frontinis.

We here briefly notice that Mr. Sutherland made up a fictitious record of action by the company, apparently relating to the proposed or attempted issue of 130 shares of stock, and filled out and issued to the Frontinis a certificate for 297 shares of the capital stock of the Sutherland Granite Company, though the figures at the top of the certificate were for 291 shares, and though the number of shares named in either way was wrong on any theory. It is unnecessary to detail all the pretended records and proceedings, since they had no particular relation to the actual facts, a statement of which we resume.

By the original contract with the Frontinis they were to pay cash for the stock of the defendant and Sutherland, and were to have a week in which to raise the money. At the end of the week the arrangement was changed, and, with the arrangement so changed and carried out, the defendant was paid by a check of the company for $1,250, by the surrender to him of his note for $1,000, held by the company, and by the issue to the defendant of a series of the company's notes aggregating $1,000. Having thus taken his pay for his stock from the company, the defendant became indebted to the company in the sum of $3,250, and the question is whether that indebtedness was discharged before the bringing of the suit. At the time of the transaction the Frontinis represented to the defendant that they would take...