Tapper v. Boston Chamber of Commerce

• Decision Date: 23 May 1924
• Citation: 249 Mass. 235,144 N.E. 89
• Parties: TAPPER et al. v. BOSTON CHAMBER OF COMMERCE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

249 Mass. 235

144 N.E. 89

TAPPER et al.

v.BOSTON CHAMBER OF COMMERCE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

May 23, 1924.

Report from Superior Court, Suffolk County; Philip J. O'Connell, Judge.

Bill by Albert K. Tapper and others, as holders of certificates of membership, against the Boston Chamber of Commerce, its President and Directors, other officers, and other members, to enjoin certain action at meeting. On report. Bill dismissed.H. H. Pratt, of Boston, for plaintiffs.

R. G. Dodge and J. S. Stone, both of Boston, for defendants.

CROSBY, J.

This is a bill by five holders of certificates of membership in the defendant corporation, alleging that it is brought for themselves, and others similarly situated and entitled to join therein, against the defendant corporation, its president and directors, and certain other officers, the trustees of its trust fund, and certain individuals, members of the corporation other than certificate holders. It is alleged that the membership of the corporation consists of two classes, certificate-holding members and noncertificate-holding members; that its officers have called meetings of the members of each class at which certain action is to be taken and votes passed; that such acts and votes would be illegal and contrary to the interests of the plaintiffs. The prayers of the bill are that the defendants be enjoined and restrained from such action. The case is before this court upon a report from the superior court under G. L. c. 231, § 111, which contains the pleadings and an agreed statement of facts.

1. The defendant corporation and the Boston Merchants' Association were existing corporations in 1909. In that year they were authorized by St. 1909, c. 251, to unite as one corporation. Section 6 of this statute provides for the issuance of not more than 2,000 individual certificates of membership, the certificates to be of the par value of $200 each, and bear interest at the rate of 4 per cent.; each member being entitled to hold but one certificate, except for temporary purposes. Section 12 provides for another class of members, other than those holding certificates, the number to be fixed by the by-laws. Members of both classes are to be liable for the same dues; but the noncertificate-holding members are to have no interest in the real estate or other property of the corporation, but are to have equal voting powers except in matters affecting the management of the property; they are entitled to all other rights and privileges of certificate-holding members except that they are not allowed the trading privileges and facilities of the corporation.

Section 13, as amended by Sp. St. 1919, c. 196, § 1, provides as follows:

‘The new corporation by concurrent vote of a two-thirds majority of both certificate holding and other members present in person or by proxy and voting at separate meetings called for this specific purpose, notice of which meetings shall be mailed to each member not more than fifteen or less than ten days in advance, shall have the right, upon the payment of the sum of two hundred dollars and accrued interest to each certificate holder to cancel and retire all outstanding certificate holding memberships, upon such terms and conditions as shall be determined by said two-thirds majority vote. In the event of the exercise of such right of cancellation there shall be thenceforth but one form of membership in said corporation, and each member, whether previously a certificate holding or other member, shall receive a certificate representing the same individual interest in all the property rights and privileges of the new corporation. * * *’

By St. 1914, c. 82, a new section (21) was added to the charter (St. 1909, c. 251). This section provides in part that:

‘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 new corporation. This fund shall be administered by a board of three trustees elected by the board of directors as hereinafter provided. * * * 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 and 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.’

Section 21 was construed in the case of Tapper v. Boston Chamber of Commerce, 235 Mass. 209, 219, 126 N. E. 464, 468, and the court held that the statute ‘conferred authority upon the trustees to acquire under the direction of the board of directors and hold in the fund certificates of membership however classified, * * * and that by reason of the power given to vote the certificates it is the duty of the trustees to vote them so far as they are a part of the trust fund ‘for the general benefit of the new corporation’ as provided by section 21.

The record shows that the trustees have acquired outright 901 certificates, and by assignments (under which the original holders are to receive a 4 per cent. bond of the par value of $200 secured by a mortgage on the real estate of the corporate defendant) 771 certificates, leaving out of the total number of 2,000 only 328.

It is agreed that:

‘Continuously after said decision of Tapper v. Boston Chamber of Commerce the directors of the defendant corporation have considered plans to complete the retirement of the certificates of membership and the proposed exchange of second mortgage bonds therefor. The directors of the defendant corporation have considered the retirement and cancellation of the certificates of membership to be for the advantage of said corporation because they consider that the rights which some of the owners of certificates of membership have asserted from time to time would interfere with the right of any members who did not hold certificates to take part in any matter relating to the policy of the defendant corporation when the decision involved any expenditure whatever and because they believe that it has been found undesirable for a corporation like the defendant corporation to have different classes of members with different right and prerogatives, tending to prevent unity of action and wholehearted co-operation most desirable for such an institution. The plaintiffs rebut this contention.’

It appears that, in April, 1923, notices of a special meeting to be held on May 3, 1923, ‘for the purpose of determining whether all outstanding certificates of membership shall be canceled, and if so upon what terms and conditions,’ were sent to the holders of certificates of membership. At the same time similar notices of a special meeting on May 4 were sent to members who were not certificate holders.

[1] It is agreed that the trustees propose, if not prevented by this suit, to vote all the certificates owned by them, whether by assignment or otherwise, in favor of canceling and retiring all certificates of membership upon the payment from the treasury of the corporation of the sum of $200 and accrued interest to each holder; it being intended that thereafter there shall be but one form of...