New England Oil Refining Co. v. Canada Mexico Oil Co., Ltd.
| Decision Date | 12 January 1931 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | NEW ENGLAND OIL REFINING COMPANY v. CANADA MEXICO OIL COMPANY, LTD. & others. |
May 13, 14, 1930.
Present: RUGG, C.
J., CROSBY CARROLL, & SANDERSON, JJ.
Equity Pleading and Practice, "Special master," Receiver, Parties Appearance, Answer, Waiver of informalities, Decree. Equity Jurisdiction, Receiver, To reach and apply equitable assets. Constitutional Law, Due process of law.
A suit in equity was brought by a partnership, in behalf of and for the benefit of a corporation, against certain persons, as trustees under a declaration of trust, to establish a debt of the trustees to the corporation. While such suit was pending a creditor of the corporation brought a suit against the corporation, the partnership and the trustees under G.L.c 214, Section 3, cl. 7, to establish his debt and to reach and apply in satisfaction thereof such indebtedness of the trustees to the corporation, and the defendants appeared and answered. In the second suit interlocutory decrees were entered, from which no appeal was taken, enjoining the partnership and the corporation from receiving any portion of the judgment debt owed by the trustees, and enjoining the trustees from paying, discharging or assigning any portion thereof, except that the partnership might collect the amount thereof and pay it to counsel for the plaintiffs in the first suit, who was appointed a "special master" for that purpose and who should hold it subject to further order of the court.
Thereafter a final decree was entered in the first suit establishing a debt due from the trustees and directing them to pay the amount thereof to the "special master," to be held by him subject to order of the court, such decree further providing that it should "not affect the liability, if any, of any one for moneys of the trust used in improper or ultra vires transactions, and is without prejudice to the rights, if any, of the plaintiffs or the special master to enforce such liabilities in other or further proceedings." Subsequently the
"special master" filed a report in the second suit stating in substance that there were then no remaining tangible assets of the trust in the hands of the trustees, but that certain individuals, who had been or then were trustees, by breaches of trust had wasted and dissipated such assets; and seeking authority to institute and prosecute to final judgment appropriate proceedings to recover from those individuals the amounts of the trust funds expended or lost in the transactions alleged to have been ultra vires the trust and a breach of the trust. After a hearing, the judge found that the trustees were unfit to be entrusted with the prosecution of the claims described by the "special master," and that the corporation admitted that it owed to its creditor, the plaintiff in the second suit, a substantial part of the debt alleged by him to be due. An interlocutory decree was entered in the second suit confirming the report of the "special master"; authorizing him to institute and prosecute proceedings at law or in equity against the individuals named by him "to recover from them or any of them individually and personally any funds of the . . . trustees that were expended and lost in or by reason of the transactions" described by him in his report, such proceedings to be in the name of the trustees, or of the corporation, or of the partnership, or in his own name as
"special master"; directing the trustees to assign to the "special master" all the trust's rights against such individuals on the grounds stated in the report; and enjoining the trustees from interfering with such proceedings. The second suit then was reported to this court. No evidence nor statement of counsel at the hearing was reported. Held, that
(1) The facts stated in the report of the "special master" and in the findings of the judge must be accepted as true;
(2) The individuals against whom actions and suits were authorized by the decree reported were not parties to the second suit in their capacity as individuals, and the mere authorizing of the proceedings to be brought against them was no adjudication against them as individuals;
(3) Such individuals therefore had no such interest in the matter covered by the judge's report as made them necessary parties to the second suit or entitled them to be heard by the judge, and the trustees had no right to interpose objections in behalf of other persons, or in behalf of themselves as individuals, who were not parties;
(4) The trustees having answered without a plea in abatement, there was no merit in a contention that all of them were not joined: general appearance and answer to the merits gave jurisdiction and were a waiver of all precedent informalities;
(5) The "special master," although so designated, must be deemed to be a receiver, and his appointment was appropriate in a proceeding of this nature;
(6) The report of the "special master" was not the interjection of a new party into the suit, seeking additional relief in the guise of that report without amendment to the pleadings, nor was it a pleading; it was merely an appropriate means of conveying information for use of the court;
(7) It appearing that the corporation owed its creditor, the plaintiff in the second suit, at least a substantial part of the amount claimed, and that the corporation was owed a debt by the trustees which was in the form of a judgment standing in the name of the partnership, the court had jurisdiction of the suit under G.L.c.
214, Section 3, cl. 7, to reach and enforce such judgment debt due the corporation and to apply it toward satisfaction of the debt owed to the plaintiff by the corporation; and it was further within the general equity jurisdiction of the court, in order to enforce such judgment debt, to reach assets of the trustees represented by the claims against themselves as individuals; and the method of procedure adopted by the judge in the interlocutory decree, looking toward that end, was within the discretionary power of the court;
(8) It was plain from the report of the "special master" and the findings of the judge that there was ample ground for the conclusion that the trustees as such were unfit to prosecute the claims set forth in the special report against themselves as individuals;
(9) Possible defences, under the provisions of the declaration of trust, of the individuals who were to be defendants in the proceedings which the "special master" was authorized to institute, were not germane to the second suit before this court on the report: every defence open under the law would be available to the trustees as individuals if and when they should be brought into court as defendants pursuant to authority granted to the "special master" in the decree;
(10) No constitutional right of the trustees was infringed by the decree reported.
BILL IN EQUITY, filed in the Superior Court on November 4, 1926, and described in the opinion.
Proceedings in the Superior Court are described in the opinion. Bishop, J., ordered the entry of the interlocutory decree of December 24, 1929, and thereupon reported the suit for determination by this court.
J. Noble, "special master." W.G. Thompson, for receiver of New England Oil Refining Company.
J.G. Palfrey, for Canada Mexico Oil Company, Ltd. E.F. McClennen, for Boston Mexican Petroleum Trustees.
This suit was brought on November 4, 1926, to establish a debt amounting to about $141,000 alleged to be due to the plaintiff from the first named defendant, hereafter called the Canada Company, and to reach and apply in payment thereof an indebtedness due to the Canada Company from the other defendants. Concerning that indebtedness, it is alleged and appears that the defendants composing the firm of Cochrane, Harper and Company, hereafter called Cochrane, on June 30, 1922, brought suit against the remaining defendants as the Boston Mexican Petroleum Trustees under a written declaration of trust hereafter called the Trustees. That suit has been before this court three times and is reported under the name Cochrane v. Forbes in 257 Mass. 135 , 265 Mass. 249 , and 267 Mass. 417 . It is alleged in the present bill and not denied in the answers that that suit by Cochrane was brought in behalf and for the benefit of the Canada Company, and that the latter company has no assets which can be attached in an action at law. It was said in 257 Mass. at page 145: "The suit is brought by the plaintiffs in their own behalf and in behalf of and as trustees for the Canada Company." So far as material, that must be assumed to be true for the purposes of the present decision. By that suit a very large indebtedness to Cochrane from the Trustees was sought to be established. By interlocutory decrees of November, 1926, in the present suit, Cochrane and the Canada Company were enjoined from receiving, collecting, assigning or discharging any amount of or any right to their claims against the Trustees, and the Trustees were enjoined from paying, discharging or assigning any amount of or rights touching said claims. By interlocutory decree of March 18, 1927, those earlier decrees were modified to the extent of permitting Cochrane in the suit against the Trustees to recover any sums due and to collect the same, collection and payment to be to John Noble, appointed special master to that end by the court, who was to hold the same after deduction of expenses of that suit subject to the further order of the court. Doubtless "receiver" would have been the correct designation of the officer so appointed by the court, especially in view of powers subsequently conferred upon him, but the term used does not affect the substance of...
To continue reading
Request your trial