Stewart v. Joyce

• Decision Date: 27 February 1909
• Citation: 87 N.E. 613,201 Mass. 301
• Parties: STEWART v. JOYCE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

201 Mass. 301

87 N.E. 613

STEWART v. JOYCE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

February 27, 1909

COUNSEL

Hayes Williams & Baker and Henry T. Richardson, for complainant.

Boyd B Jones and F. P. Cabot, for certain defendants.

Louis D. Brandeis, Edward F. McClennen, and Austen T. Wright, for respondents Gillette, Holloway, and Heilborn.

OPINION

BRALEY J.

In equity the defense of laches may be raised by demurrer if upon its face the bill shows the demand is stale, and no sufficient reasons for the delay are specifically stated, or it may be pleaded or set up in the answer. If raised by the pleadings, the plaintiff being informed of the defense may have the opportunity to amend by showing if he can that his delay was excusable. Sawyer v. Cook, 188 Mass. 163 168, 74 N.E. 356, and cases cited; Sunter v. Sunter, 190 Mass. 449, 77 N.E. 497. But if not thus raised the court at the trial in its discretion may deny relief, where upon the evidence it clearly appears that with knowledge of the facts, the plaintiff's failure to assert his claim has continued for such an unreasonable time that it would be inequitable for the court to aid him. Phillips v Rogers, 12 Metc. 405, 411; Snow v. Boston Blank Book Manufacturing Co., 153 Mass. 456, 26 N.E. 1116; Sawyer v. Cook, 188 Mass. 163, 168, 74 N.E. 356; Sullivan v. Portland & Kennebec Railroad Co., 94 U.S. 806, 24 L.Ed. 324; Willard v. Wood, 164 U.S. 502, 504, 17 S.Ct. 176, 41 L.Ed. 531. The defendants failed either to demur, or to raise this issue in their answer, and it was not before the master to whom the case was referred. After his report was filed it was too late for the defendants as a matter of right to ask the court of its own motion to dismiss the bill. Pingree v. Coffin, 78 Mass. 288, 323; Webb. v. Fuller, 83 Me. 405, 22 A. 384. But even if this defense were open, upon the facts reported by him it cannot be said that the plaintiff has unreasonably delayed the prosecution of his suit. Hill v. Mayor of Boston, 193 Mass. 569, 574, 79 N.E. 825. The order not having required a report of the evidence, his findings of fact must be treated as final, and it having been conceded that the defendant Gillette cannot be held, the only question is whether upon the report the plaintiff is entitled to a decree against the remaining defendants, or either of them. East Tennessee Land Co. v. Leeson, 183 Mass. 37, 66 N.E. 427. The plaintiff was the owner of 4,177 shares of the capital stock of the Gillette Safety Razor Company, and alleges that through the fraud and misrepresentations of the defendants he was induced to sell to them all but 500 shares at a price much below their value. During the period covered by the transactions all of the remaining defendants with the exception of Curren were directors of the corporation, while Heilborn also was its treasurer. The alleged misrepresentations consisted of oral statements made by Heilborn, who alone dealt directly with the plaintiff, and a letter with an estimated statement of assets and liabilities sent by him as treasurer to the stockholders pursuant to a vote of the directors, in which the financial condition of the company is found to have been erroneously set forth.

The master specifically finds that of the oral representations alleged in the bill the plaintiff failed to prove any except 'that Heilborn was endeavoring to purchase some of the stock of the company, including the plaintiff's stock, so that he would be enabled to retain his position with the company, and had a friend, not one of the defendants, willing to back him, and 'that Heilborn had not paid over 80 cents a share, and had bought as low as 40 cents.' The full import of this finding appears when considered in connection with the other findings, that the defendants, who by reason of their controlling interest were known as 'insiders,' were seeking to buy at as low a price as possible outstanding stock held in small amounts by a number of stockholders, including the plaintiff, and that the plaintiff previously had told Heilborn he would sell to him, but would not sell to 'insiders.' It having been further found that at the time he was buying for the purpose of selling or transferring the stock to them, this representation not only was false, but was properly held to be material, and the defendants' first exception must be overruled. The misrepresentations as to the selling price of the stock were also actionable. Kilgore v. Bruce, 166 Mass. 136, 138, 44 N.E. 108; Gurney v. Tenney, 197 Mass. 457, 84 N.E. 428. But as the master further found that in selling the plaintiff did not rely upon these misrepresentations, the plaintiff has not shown that he has been misled by the deceit. Matthews v. Bliss, 22 Pick. 48, 53; Lee. v. Tarplin, 183 Mass. 52, 66 N.E. 431.

At the time of the negotiations the plaintiff is found to have relied upon the letter or statement sent out by the directors June 23, 1904, and to have believed its contents as to the company's financial standing. A large part of the report is devoted to the truth or falsity of the statements contained in this letter. The master's conclusion, based on evidence not before us, is that the debts did not exceed the quick assets, and that the company, although somewhat in the experimental stage as to a successful development of the patent, was solvent. In making this finding he includes in the quick assets the balance of a loan due from the defendant Joyce to the company. But as Joyce is not shown either to have been insolvent, or to have refused to make further advancements. the defendants' second exception is not tenable. Poland v. Beal, 192 Mass. 559, 564, 78 N.E 728. Heilborn, however, not only knew of the contents of this statement, but had prepared it. We have then this situation. This defendant, who was the treasurer, and a director, had sent to the plaintiff as a stockholder a statement purporting to set forth the company's actual financial condition. If this exhibit was taken at its face value, the future success of the company was very doubtful. Having gone thus far, he approaches the plaintiff, for the purpose of buying his stock. At the date of the sale, July 8, 1904, or when the option to buy was given, which resulted in a transfer of the shares shortly after, there had been, moreover, an improvement in the company's outlook, caused by larger sales and increased efficiency of the machinery by the use of small grinders which were working successfully. This substantial change for the better was known to Heilborn, but not to the plaintiff, to whom he did not disclose the fact, nor even intimate that any improvement had taken place. The plaintiff, as the master finds, believing and relying upon the representations contained in the statement, and acting in complete ignorance of the existing state of affairs, was induced to sell his stock at much less than its fair market value. At the time of the purchase the defendant was buying for the purpose of selling to 'insiders' at an advance, which he immediately did, and received the profit. The...