Regional Land Corp. v. McLaughlin

• Decision Date: 05 June 1956
• Citation: 334 Mass. 276,135 N.E.2d 24
• Parties: REGIONAL LAND CORPORATION v. George A. McLAUGHLIN and another.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 24

135 N.E.2d 24

334 Mass. 276

REGIONAL LAND CORPORATION v. George A. McLAUGHLIN and another.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 10, 1956.

Decided June 5, 1956.

Joseph B. Abrams, Boston (Robert T. Abrams, Boston, with him), for plaintiff.

George A. McLaughlin, Boston (Charles S. McLaughlin, Boston, with him), for defendants.

Before QUA, C. J., and RONAN, SPALDING, COUNIHAN, and WHITTEMORE, JJ.

QUA, Chief Justice.

This case comes to us by report after the sustaining of a demurrer to the declaration. It is an action at law in two counts in which the allegations are exactly alike except that the first count is stated to be in contract and alleges breach of contractual obligations and the second count is stated to be in tort and alleges breach of fiduciary obligations.

Both counts allege that in 1950 the defendant George A. McLaughlin held two qualifying shares out of a total of fifty-two shares of the stock of the plaintiff and was one of three directors; that one of these qualifying shares was held for the benefit of one Fantasia, who was the owner of twenty-five of the remaining fifty shares; that the other qualifying share was held for the benefit of one Kepnes, who owned the remaining twenty-five shares; that George A. McLaughlin and his brother Walter H. McLaughlin, the other defendant, were the only attorneys for the plaintiff and were under a contractual (second count, fiduciary) relationship to the plaintiff to act for its best interests, and to disclose all relevant matters and all material facts; that in breach of this obligation the defendants embarked upon a course of conduct for their own selfish benefit and to the disadvantage of the plaintiff; that the plaintiff owned certain real estate which the defendant George A. McLaughlin represented to the other two directors, Fantasia and Kepnes, that he desired to purchase for himself; that these two directors at first refused to sell; that thereafter 'the defendants concentrated their efforts on the director Fantasia,' using various arguments to induce him to agree to a sale, one of them being that a sale could be put through by means of a legal device which would prevent any tax liability accruing to the plaintiff or to Fantasia personally; that the defendant George A. McLaughlin 'harassed and applied pressure on the director Fantasia to such an extent that he caused the latter to join with him in an alleged vote of the corporation' at a meeting held while Kepnes was sick in Florida and the defendants knew he could not be present; that this vote, in which it was necessary for George A. McLaughlin to join, was to the effect that a deed of certain lots owned by the plaintiff be given to Fantasia and that George A. McLaughlin as clerk of the corporation be authorized to execute the deed; that the by-laws required deeds to be signed by the treasurer (Kepnes) and countersigned by the president (Fantasia); that knowing who these officers were and that Kepnes would have opposed the action if he had been present, George A. McLaughlin drew up the vote and signed the deed; that 'the defendants' knew that the vote was illegal and of no effect; and that as part of the same transfer of the land the defendants caused deeds from Fantasia to the Regional Restaurant, Inc., and from the latter to Walter H. McLaughlin to be drawn, executed, and recorded. Notwithstanding the foregoing allegation that the vote was illegal and of no effect, the declaration goes on to assert that record title thus came to be vested in the defendant Walter H. McLaughlin, acting for both defendants, 'and the land was thus acquired from the plaintiff corporation at a sum greatly below the fair market value thereof'; that subsequently the plaintiff discovered that the money to effectuate the purchase of this land by the defendants 'had not come out of their pockets' but 'had been obtained' from a trust fund of which Walter H. McLaughlin was trustee, but that fact had not been disclosed to the plaintiff or to Fantasia; and that the defendants acted for their own selfish benefit with full knowledge that George A. McLaughlin wad breaching his contractual (fiduciary) obligation as attorney and director.

It may be well to pause for a moment at this point to take an inventory of just what bare facts have thus far been alleged as distinguished from conclusions and characterizations of fact or law. Succinctly stated, these facts seem to be that while the defendants were attorneys for the plaintiff, and while the defendant George A. McLaughlin was one of three stockholders and directors, the defendants with the assistance of another stockholder and director and in the absence of the third stockholder and director who they knew would oppose the transfer, secured a defective title ¹ to certain land of the plaintiff for much less than the land was worth. It is true that the declaration alleges that George A. McLaughlin harassed and applied pressure to Fantasia, so that he joined in the vote to sell; but of what the harassment and pressure consisted does not appear. It is not shown to have amounted to duress. No false representations are alleged. So far as appears Fantasia may have been genuinely convinced that the sale was for the best interests of the corporation. The 'legal device,' whatever it was, to prevent tax liability accruing to the plaintiff or to Fantasia does not appear to have been harmful or unlawful. It...