Abele v. S. A. Meagher Co.

Braley, J. It appears that the corporation was organized as a family concern to take over and conduct the business formerly carried on by the defendant Francis T. Meagher, the bankrupt, of whom the plaintiff is trustee. Its capital consisted of five hundred shares of common stock of the par value of $10 each, which has all been issued, añd no controversy arises over the validity of the issuance of two hundred shares to Francis, which are now in the possession of the plaintiff. But, the judge having found that the issue of the remaining three hundred shares to the defendant Katherine A. Meagher or her appointees upon the payment by her of $1,000 in satisfaction of her subscription for the full amount at par “was wholly unjustifiable, and that three hundred shares ought not to have been issued to her or her appointees,” the plaintiff seeks to have these shares returned to the corporation [429] for cancellation, and asks that he may be decreed to be the sole stockholder. It should be borne in mind that no question of the right of a trustee in bankruptcy to reach property fraudulently conveyed by the bankrupt is before us. If under Callahan v. Israel, 186 Mass. 383, the plaintiff can bring suit without first obtaining permission of the bankruptcy court, yet in the case at bar he stands on the footing of a minority stockholder asserting alleged rights of the corporation, which is powerless to act, because under the bylaws its administrative machinery is controlled by a hostile board of officers, to whom an application for the calling of a special meeting of the stockholders to take action would be futile. If however the relief asked for were deemed appropriate, the corporation under the findings of fact, which are conclusive as the evidence has not been reported, would not be entitled to a return of the three hundred shares, for no offer to rescind, or to refund the amount paid, is alleged in the bill, and the judge finds that such an offer has never been made. Corey v. Independent Ice Co. 226 Mass. 391, 394. Nor is there a finding that the value of the stock held by the plaintiff is depreciated, or that the necessary working capital was impaired by the failure of Mrs. Meagher to pay in cash the remainder of her subscription. It is also expressly found, that the transaction of which the plaintiff complains in behalf of the company took place some seventeen months before the date of adjudication, when all the incorporators and stockholders, including the bankrupt, with full knowledge of the circumstances, assented to the issue of the stock. No attempt or intention to mislead or defraud the public by placing valueless stock on the market is shown, or even suggested, and being owners in common of all the capital stock they could as between themselves distribute it in the proportions appearing in the record. Lorillard v. Clyde, 86 N. Y. 384. Flinn v. Bagley, 7 Fed. Rep. 785. Scovil v. Thayer, 105 U. S. 143, 153. What, if any remedy, the plaintiff may have against the president, treasurer and directors who by St. 1903, c. 437, § 14, are made jointly and severally liable “for actual damages caused to him by such issue,” namely, the issuance of stock which has not been fully paid for, is a question not before us. Manifestly the bankrupt could not have maintained the present [430] suit, and, under the circumstances here disclosed and notwithstanding the amendment of 1910 to § 47a (2) of the bankruptcy act, the plaintiff as his trustee is not clothed with any superior equities or rights. Bennett v. Aetna Ins. Co. 201 Mass. 554, 556. Security Warehousing Co. v. Hand, 206 U. S. 415, 423. The decree dismissing the bill should be affirmed with costs of the appeal. Ordered accordingly.