Tapper v. Boston Chamber of Commerce

• Decision Date: 28 February 1920
• Parties: TAPPER et al. v. BOSTON CHAMBER OF COMMERCE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

235 Mass. 209

126 N.E. 464

TAPPER et al.

v.BOSTON CHAMBER OF COMMERCE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Feb. 28, 1920.

Appeal from Superior Court, Suffolk County.

Suit by Albert K. Tapper and others against the Boston Chamber of Commerce and others. From decree dismissing the bill, plaintiffs appeal. Affirmed.Harvey H. Pratt, of Boston, for appellants.

Dunbar, Nutter & McClennen, of Boston (George R. Nutter and Hugh W. Babb, both of Boston, of counsel), for appellees.

PIERCE, J.

This is a suit in equity brought by the plaintiffs, each a certificate owning and holding member of the Boston Chamber of Commerce, a corporation, for themselves and such others as may be similarly situated and entitled who may be admitted to join as plaintiffs, against the Boston Chamber of Commerce, the officers and the board of directors of that corporation, and the board of trustees elected by the directors of the corporation to administer a trust fund created by the board of directors under the authority of St. 1914, c. 82. The bill alleges the following facts:

The Boston Chamber of Commerce and the Boston Merchants' Association were authorized to unite and form one corporation under the name of the Boston Chamber of Commerce; and thereafter became such by the authority of St. 1909, c. 251. The Boston Chamber of Commerce owned real estate, the Boston Merchants' Association owned no real property. Under the charter, the members of the old Chamber of Commerce each held a certificate entitling the holder to a proportional share in the real estate and other property of the corporation. The charter, also, provided for another class of members than those holding certificates; and further provided that--

‘Such members shall be liable only for the same annual dues as are levied upon certificate holding members, and shall have no interest in the real estate, or other property of the new corporation; they shall, however, have equal voting power with the certificate holding members except in matters affecting the management of the property, real or personal owned by said corporation, but shall have equal rights with certificate holding members to use and enjoy the same; and they shall also have all other rights and privileges of certificate holding members, save as aforesaid. * * *’

The by-laws of the corporation provide that the board of directors shall consist of twenty-three members elected at annual meetings ‘as hereinafter provided.’ Certain individual defendants, eight in number, were chosen as members of the board of directors, and none of them was an owner or certificate holder when the acts and things were done that the plaintiffs complain of.

The charter provided that--

The ‘new corporation shall consist of not more than two thousand individual certificate holding members * * * and such number of other members as may be fixed by the by-laws. * * * Certificates shall have a par value of two hundred dollars. * * * No person shall be the permanent holder of more than one certificate, but the corporation by appropriate by-laws may provide for the temporary holding by individual members of not more than five certificates, but members holding more than one certificate shall be entitled to but one vote and shall not be obliged to pay dues on more than one certificate standing in their name; provided, however, that upon and after the first transfer of any such surplus certificates to any person other than the executor, administrator or trustee of the temporary holder thereof, each of such certificates so transferred shall be liable for all regular assessments.’

The charter also provided that each certificate holder of the old Chamber of Commerce should be entitled to receive a certificate of membership in the new corporation; and that the members of the Boston Merchants' Association should be entitled to become certificate holding members upon certain conditions.

At the time of the incorporation of the defendant corporation, certain individual members for the purpose of complying with the provisions of the new charter and that it might become operative, temporarily subscribed for and purchased six hundred and fifty certificates of membership in the corporation in excess of those which they might severally hold under the charter. These certificates of membership were denominated and called ‘excess certificates.’ These ‘excess certificates' so subscribed for and purchased were held, in whole or in large part, by said individual members for a period of approximately four years. In the year 1914, in order that those owners who had purchased the ‘excess certificates' for a specific and temporary purpose only might be reimbursed for this outlay and the ‘excess certificates' taken off ‘their hands,’ the then directors petitioned for legislation enabling the corporation to establish a trust fund by means of which the ‘excess certificates' might be purchased from the individual holders. Later, by St. 1914, c. 82 (now embodied in section 21 of the original act), the board of directors were empowered to establish a trust, and a board of administration of the trust to consist of three trustees who should be elected and who should hold office for the term and purposes therein set forth. Section 21 reads as follows:

‘The board of directors of the new corporation shall have the power and is hereby authorized to establish from the available funds or property of the corporation a trust fund for the general benefit of the corporation. This fund shall be administered by a board of three trustees elected by the board of directors as hereinafter provided. Upon the establishment of the said trust fund the directors shall elect one trustee for the term of one year, one trustee for the term of two years, and one trustee for the term of three years, to hold office until their successors are elected and qualified. Each year thereafter the directors shall elect one trustee for the term of three years, to hold office until his successor is elected and qualified. If any vacancy occurs in said board of trustees by resignation or otherwise, the board of directors at any regular or special meeting, may elect trustees to fill unexpired terms, but in the meantime the remaining trustee or trustees, if any, shall exercise all the powers of the board of trustees. The money or property appropriated for this fund shall be used to purchase the outstanding certificates of the new corporation, or, under the direction of the board of directors, may be invested in other ways. The trustees of the trust fund so created are empowered to receive gifts and bequests and to add the same to the fund. The income from the fund shall be paid annually or oftener into the general treasury of the chamber, and shall be treated in the same way as money coming from the payment of membership dues. The trustees of the said fund shall have the power to hold an unlimited number of the certificates of the corporation, and to vote the same and to receive dividends or interest upon the same, any provision of this charter or of the general law to the contrary notwithstanding. The trustees shall have power under the direction of the board of directors to change investments and to sell any property held by them in the trust fund, and to reinvest the proceeds, and to reissue the certificates of membership in the new corporation held by them, and to reinvest the proceeds thereof, and any purchaser of such certificates shall have the same rights, privileges and duties as if the said certificates were issued to him originally by the new corporation. In the event of liquidation, dissolution or distribution of the property of the new corporation, the trustees of the trust fund herein created shall receive their proportionate share of the sum or sums distributed among the certificate holders, based on the number of certificates held by them.’

Pursuant to said statute and power the board of trustees purchased all ‘excess certificates' and placed them in the trust fund.

On December 18, 1918, the defendant directors passed the following vote:

‘Voted to instruct the trustees of the trust fund to buy additional certificates of membership in the Chamber, at a price not in excess of $100 per certificate, out of the income of the trust fund.’

Notwithstanding the fact that there were no outstanding ‘excess certificates' the defendant trustees, acting under the supposed authority of the above vote, ‘have bargained for and are about to complete the purchase of a large number of certificates of membership in said corporation.’ The vote was passed and the appropriations made by a board of directors of the corporation, of which eight are members ineligible to vote upon matters affecting the management of the property of the corporation. On March 1, 1918, the corporation, in consideration that the certificate holders would arbitrate certain differences existing between the corporation and them, agreed that the trustees of the trust fund under section 21 of the charter...