Whitney v. Whitney

• Decision Date: 01 March 1938
• Citation: 13 N.E.2d 401,299 Mass. 547
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: WALTER F. WHITNEY v. FRED A. WHITNEY & another.

299 Mass. 547

13 N.E.2d 401

WALTER F. WHITNEY v. FRED A. WHITNEY & another.

Supreme Judicial Court of Massachusetts, Worcester.

March 1, 1938

September 27, 1937.

Present: RUGG, C.

J., FIELD, DONAHUE & QUA, JJ.

Res Judicata. Equity Pleading and Practice, Demurrer. Equity Jurisdiction Suit by minority stockholder.

The entry of a decree dismissing a minority stockholder's bill in equity after a decree sustaining a demurrer on the ground of multifariousness, with leave to the plaintiff to amend of which the plaintiff refused to avail himself, was an effectual bar as res judicata to a new bill by the same plaintiff against the same defendants of the character suggested by the court in giving his leave to amend in the previous suit.

The plaintiff in a minority stockholder's suit, although he is prosecuting the litigation, not for his own benefit but for that of the corporation, is the master of the litigation and is subject to the ordinary rules of equity practice.

BILL IN EQUITY filed in the Superior Court on January 26, 1937. A plea in bar was sustained and a final decree dismissing the bill was entered by order of Burns, J. The plaintiff appealed.

A. T. Handverger, for the plaintiff. G. H. Mason, for the defendants.

RUGG, C.J. This suit in equity was brought by the plaintiff in behalf of himself and all other stockholders of the defendant corporation (hereafter called the corporation) who may decide to join herein and become parties plaintiff. There are allegations in the bill setting forth numerous acts of wrongdoing and faithlessness, in connection with the organization and management of the corporation, by the individual defendant, who was a director, the treasurer and general manager of the corporation. These allegations comprise, among other matters, payment of excessive salaries to himself, the spending of a large part of his time in undertakings disconnected with the business of the corporation, misappropriation and misspending of funds of the corporation, the issuance of incorrect and misleading statements of the financial condition of the corporation, the causing to be declared, at a time when the corporation was in no condition to declare such a dividend, a dividend of forty per cent to repay his defalcations, and forcing the corporation to borrow $15,000 to that end. The defendants filed a demurrer, an answer and a plea in bar. After a hearing, the plea in bar was sustained and a decree entered dismissing the bill with costs. The appeal of the plaintiff brings the case here.

The plea in bar was in substance this: In January, 1935, the plaintiff brought a suit in equity against the defendants. A demurrer to that bill was sustained. Subsequently, three successive amended bills of complaint were filed in that suit, to each of which demurrers by the defendants were sustained.

At the hearing on the demurrer to the last amended bill the trial judge offered the plaintiff an opportunity to amend the bill by striking out allegations based on the improper division of the capital stock of the corporation. The plaintiff refused to amend the bill in accordance with that suggestion. That demurrer was sustained by an interlocutory decree and a final decree was entered dismissing the bill. On appeal by the plaintiff both these decrees were affirmed. Whitney v. Whitney, 296 Mass. 13 . Prior to decree after rescript, the plaintiff filed a motion for leave to file an amended bill, which conformed to the suggestion of the trial judge and which was identical with the bill of complaint in the case at bar. That motion was denied. Final decree after rescript was entered in January, 1937. Further averments of the plea are that "All the allegations contained in the plaintiff's present bill had been included in the amended bill of complaint filed in the prior proceedings, the sustaining of a demurrer to which was affirmed" on appeal, by this court. "The present bill alleges the same cause of actions and seeks the same relief as were alleged and prayed for in the prior proceedings. Wherefore the defendants say that the final decree in the prior proceedings between the same parties rendered the matter res judicata as to every issue which was or might have been litigated in that action and estops the plaintiff from contesting the matter further, and the defendants plead the said adjudication in bar to the plaintiff's bill and ask that the same be dismissed and for their costs."

It appears from Whitney v. Whitney, 296 Mass. 13 , that the demurrer was sustained on the ground of multifariousness in that it was alleged in that bill that the individual defendant had, without right, used the credit, funds and property of the corporation for his own private purposes; and it was also alleged that the individual defendant had, without right, issued shares of stock in the corporation, which belonged to the plaintiff, to the individual defendant, thus making an improper division of the capital stock to the harm of the plaintiff and to the advantage of the individual defendant. The main point argued in the case at bar is whether the final decree in the prior proceeding is a bar to the present suit.

The defence of res judicata may be raised by a plea in equity. Eastman Marble Co. v. Vermont Marble Co. 236 Mass. 138 , 148. Franklin v. North Weymouth Cooperative Bank, 283 Mass. 275 , 279. Mutual Life Ins. Co. v. Royal, 291 Mass. 487 , 491.

In the case at bar there is no finding of facts. There is no report of...