Spiegel v. Beacon Participations
| Citation | 297 Mass. 398,8 N.E.2d 895 |
| Court | United States State Supreme Judicial Court of Massachusetts |
| Decision Date | 10 June 1937 |
| Parties | EDWARD SPIEGEL v. BEACON PARTICIPATIONS, INC., & others. |
September 9, 10 1935; May 29, 1937.
Present: RUGG, C.
Corporation Officers and agents, Dividend, Purchase by corporation of its own stock. Negligence, Of director. Equity Pleading and Practice, Master: report of evidence; Appeal; Findings by judge. Damages, For breach of contract. Value. Words "Bad faith."
Although the rule to a master in a suit in equity did not direct him to report the evidence in full, where he caused a transcript thereof to be made and the Judge who heard the case on his report certified that, in passing upon exceptions to the report and motions relating thereto it was necessary for him "to read all" the evidence, this court denied a motion that the evidence be expunged from the printed record on appeal from the final decree and considered it, so far as necessary in deciding issues presented by the appeal.
A judge hearing a suit in equity at various stages has power, at a later stage, to alter or amend a decision made on the same evidence at an earlier stage, and, upon an appeal to this court, his final finding must be accepted as his ultimate conclusion.
Certain inconsistencies and imperfections in findings and rulings by a trial judge at various stages in hearings of a suit in equity did not show that his attitude was such as to render inapplicable the general rule that upon an appeal in equity with a report of the evidence findings by the trial judge on evidence wholly or partly oral will not be reversed unless plainly wrong.
Statement by RUGG, C.J., of the standard of duty for directors of business corporations.
Discussion by RUGG, C.J., of elements warranting a finding of bad faith on the part of directors of a business corporation.
That there was an interlocking directorate between a trust company and two affiliated corporations did not alone warrant a finding of bad faith on the part of the directory of one affiliate in a transaction benefiting the trust company if the organic articles of that corporation expressly authorized interlocking directorships.
Evidence did not warrant a finding by a judge who heard a minority stockholder's suit that directors of an investment corporation, an affiliate of a bank of which they also were directors, were guilty of bad faith in purchasing from the bank without recourse to it a certain large demand note of another affiliate of doubtful worth, and in not seasonably requiring its payment, and such finding was plainly wrong; but his finding of negligence of the directors in the transaction was warranted although the transaction was not illegal, and a decree giving the corporation relief was warranted.
In complicated circumstances, a finding by a master of the value in 1933 of shares of stock of a corporation owning real estate for which there was no market, where it appeared that the value found was based on intrinsic worth, disclosed no error of law.
In a minority stockholder's suit to charge directors of a corporation with culpable negligence in the purchase of a certain note, where it appeared that the transaction never was avoided but that the corporation later sold the note, damages should be assessed by charging the defendants with the amount the corporation paid for the note and interest thereon to the time it was sold and crediting them with the value of what was received in the sale of it, interest to be charged on the balance from the date of the sale to the date of the final decree.
A director of a corporation who knew the facts relating to an improper purchase of a note by the corporation and approved it was liable for negligence in the purchase although he was not present when authority for the purchase was voted; but directors afterwards elected were improperly held liable in the absence of evidence warranting findings that they could have prevented loss to the corporation by proper action on their part and of the extent of the loss resulting from their failure to act, if they did so fail.
A finding was not warranted that directors of an investment corporation acted in bad faith in making investments of corporate funds under an arrangement with a brokerage corporation controlled by two of them whereby the investment corporation wholly financed a joint stock account and there was an equal division of profits and losses; but a finding was warranted that such conduct of the directors was a breach of their fiduciary duty and negligent, and they properly were held liable in a minority stockholder's suit for the entire resultant net loss computed after the closing of the joint account and as of the date of a final hearing on the facts.
In a minority stockholder's suit, directors of a corporation were improperly charged with sums voted by them as dividends and paid out of capital instead of from profits where it appeared that rights of creditors were not prejudiced thereby.
Directors of an investment corporation having preferred and common stock were improperly held liable, in a suit by a minority stockholder, for causing the corporation to purchase out of capital in the open market at a fair price over half of its preferred stock to be held in its treasury and not retired, where it appeared that the organic articles of the corporation permitted it to purchase its own stock, that no harm resulted to its creditors, that the corporation was not deprived of funds needed for its business operations, and that remaining preferred stockholders were benefited thereby; a finding by the trial judge that such purchases caused a loss to the remaining preferred stockholders was plainly wrong; and ground for liability was not shown even if the purpose of the purchases was to benefit one who held all the common stock.
BILL IN EQUITY, filed in the Superior Court on September 26, 1932. The suit was heard at various stages by J. J. Burns, J., and, after his resignation, a final decree was entered in accordance with his findings, rulings and order by direction of Whiting, J. The final decree was in substance as follows:
I. A. The defendants Charles F.
Adams, Charles R. Gow, Charles B. Jopp, Frank B. Lawler, Gardner Poole, William P. Hart and Arthur T. Lyman be and the said defendants hereby are ordered to pay as damages to Beacon Participations, Inc., the sum of $461,166.66, together with interest thereon from July 25, 1933, to the date of entry of this decree, amounting to $33,972.61, a total of $495,139.27, and upon the payment of said total sum of $495,139.27 and such interest as may have accrued upon said sum from the date of entry of this decree, the ten shares of stock of Beacon Building Corporation now held by Beacon Participations, Inc., shall be turned over to the aforesaid defendants.
B. That the defendant Allan H.
Sturges be and the said defendant hereby is ordered to pay as damages to Beacon Participations, Inc., the sum of $58,896.63, with interest thereon from September 26, 1932, to the date of entry of this decree, amounting to $7,273.73, a total of $66,170.36.
C. That the defendant George S.
Mumford be and the said defendant hereby is ordered to pay as damages to Beacon Participations, Inc., the sum of $30,631.65, plus interest thereon from September 25, 1932, to the date of entry of this decree, amounting to $3,788.11, a total of $34,419.76.
II. That within twenty days of the date of entry of this decree the defendants Charles R. Gow, Charles B. Jopp, Frank B. Lawler, Gardner Poole, William P. Hart, Arthur T. Lyman and Allan H. Sturges he and the said defendants hereby are ordered to pay as damages to Beacon Participations, Inc., in addition to the damages heretofore assessed, the sum of $145,037.82, plus interest thereon from
July 25, 1932, to the date of entry of this decree, amounting to $19,386.72, a total of $164,424.54; and that upon the payment of said total sum of $164,424.54 and such interest as may have accrued upon said sum from the date of entry of this decree, the directors so paying shall receive the securities now held by Beacon Participations, Inc., in the so called joint account.
III. That within twenty days of the date of entry of this decree:
A. The defendants Charles R.
Gow, Charles B. Jopp, Frank B. Lawler, Gardner Poole, William P. Hart and Arthur T. Lyman be and the said defendants hereby are ordered to pay as damages, in addition to the damages heretofore assessed against them, to Beacon Participations, Inc., the sum of $283,547.80, together with interest thereon from September 26, 1932, to the date of entry of this decree, amounting to $35,018.15, a total of $318,565.95.
B. That the defendant Charles F.
Adams be and the said defendant hereby is ordered to pay as damages, in addition to the damages heretofore assessed against him, to Beacon Participations, Inc., the sum of $37,942.71, together with interest thereon from September 26, 1932, to the date of entry of this decree, amounting to $4,685.92, a total of $42,627.63 [sic].
C. That the defendant Allan H.
Sturges be and the said defendant hereby is ordered to pay as damages, in addition to the damages heretofore assessed against him, to Beacon Participations, Inc., the sum of $245,605.09, together with interest thereon from September 26, 1932, to the date of entry of this decree, amounting to $30,209.43, a total of $275,814.52.
D. That the defendant George S.
Mumford be and the said defendant hereby is ordered to pay as damages, in addition to the damages heretofore assessed against him, to Beacon Participations, Inc., the sum of $81,746.54, together with interest thereon from September 26, 1932, to the date of entry of this decree,...
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