United Oil Co. v. Eager Transp. Co.

• Decision Date: 29 November 1930
• Citation: 273 Mass. 375,173 N.E. 692
• Parties: UNITED OIL CO., Inc., v. EAGER TRANSP. CO. et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

273 Mass. 375

173 N.E. 692

UNITED OIL CO., Inc.,

v.EAGER TRANSP. CO. et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Nov. 29, 1930.

Appeal from Superior Court, Suffolk County; W. D. Gray, Judge.

Action by the United Oil Company, Inc., against the Eager Transportation Company and others. From a decree for plaintiff, defendants appeal.

Affirmed.

F. W. Fisher, of Boston, for appellants.

N. Golden, of Boston, for appellee.

FIELD, J.

G. L. c. 156, § 47, requires a domestic business corporation to submit each year to the commissioner of corporations (for filing in the office of the state secretary under section 48) a ‘report of condition, * * * signed and sworn to by its president, treasurer and a majority of its directors,’ including among other things a ‘statement of the assets and liabilities of the corporation as of the date of the end of its last fiscal year,’ substantially in the form therein set forth. This form is a balance sheet showing, on one side, ‘assets,’ subdivided according to their nature, and, on the other, ‘liabilities,’ including indebtedness of different kinds, ‘capital stock,’ ‘reserve’ and ‘surplus,’ the statement being balanced by a ‘profit and loss' item on the proper side. Section 36 provides that the ‘president, treasurer and directors * * * shall be jointly and severally liable for all the debts and contracts of the corporation contracted or entered into while they are officers thereof * * * if any statement or report required by this chapter is made by them which is false in any material representation and which they know, or on reasonable examination could have known, to be false,’ but ‘only the officers signing such statement or report shall be so liable.’ Section 38 authorizes creditors to enforce the liability so imposed by a bill in equity.

This suit was brought in the superior court under G. L. c. 156, § 38, by a creditor of the defendant Eager Transportation Company, a domestic corporation, against that company, its president, its treasurer and its clerk, who were also its directors, to recover from the individual defendants the amount which the corporate defendant owed the plaintiff, on the ground that its reports of condition-‘certificates of condition’-signed and sworn to by the individual defendants and filed in 1927, 1928 and 1929, respectively, were ‘false’ in a ‘material representation’ and that the individual defendants knew, or ought to have known, them to be false. The judge made findings and rulings and entered a final decree ‘that there is due to the plaintiff from the defendant corporation the sum of $1246.24 with costs * * * for which the individual defendants are jointly and severally liable’ and that execution therefor issue. The defendants appealed.

In support of their appeal the defendants contend that the reports of condition were not ‘false in any material representation,’ and if ‘false,’ were not known to the individual defendants and could not be known to them ‘on reasonable examination’ to be so.

The evidence is not reported. Copies of the reports of condition found by the judge to be true copies thereof, are set out in the record. The report filed in 1927, which was typical, showed on the ‘assets' side, ‘Autos, trucks and teams [$]14,735 * * * Accounts receivable [$]1,990.30 Cash [$]24.28 * * * Good will [$]16,312.78 Profit and loss [$]18,998.14 Total $52,060.50,’ and on the ‘liabilities' side, ‘Capital stock * * * $25,000 * * * Accounts payable [$]12,327.33 Notes payable [$]900 Reserves [$]13,833.17 * * * Total $52,060.50.’ The judge also made the following ‘findings and rulings' material to the defendants' contention: ‘In each certificate of condition was the item of assets, ‘autos, trucks and teams,’ carried at a valuation of $14,735 in the first two years, and at a valuation of $8,735 in the third year. These amounts were, in fact, the total original purchase price of the vehicles on hand in each of the three years. They had all been in use for approximately ten years and were, in fact, worth approximately $1,000 in each of said years. The company on its books charged off from time to time depreciation on the various autos, trucks and teams, and the total amount of the depreciation was included each year as part of the item, ‘reserves' on the liability side of the certificate of condition. The only other item included in ‘reserves' was a small amount for bad debts, which in each year amounted to approximately $300. The difference between the value of the auto, trucks and teams in each year, as stated in the certificate of condition, and the amount of the reserves less the small amount of bad debts, represented in each year the true value of the autos, trucks and teams. The result is that the net condition of the company, as represented in the amount of profit and loss as shown each year on the certificate of condition, was accurately stated, at least so far as that net condition was affected by the valuation of the autors, trucks and teams in the certificate of condition. The certificates were made out each year by an accountant employed by the defendant corporation and were...