Star Brewing Co. v. Flynn

Pierce, J. This is a suit in equity commenced by a writ of trustee process, and is here on an appeal from a final decree. The bill seeks to establish a debt as between the plaintiff and the defendant Flynn, and to have applied to the satisfaction of that debt certain indefinite and unenumerated merchandise which the bill charges Flynn transferred to the defendant Hotel Osborne, Incorporated, when that corporation was organized. The bill also seeks to reach and have applied to the indebtedness when established all shares of stock in the defendant corporation standing in the name of Flynn. The bill nowhere charges that the defendant Flynn has transferred to the defendant corporation any property in fraud of his creditors, or that the defendant corporation has received of the defendant Flynn any property of Flynn without consideration or with knowledge or in aid of any fraudulent purpose. The trustee nanjed in the writ answered “no funds,” and we assume was discharged. An answer was filed by Flynn setting up the illegality of the consideration of each note. At his request four issues covering his contentions as to the illegality of the considerations were framed and submitted to a jury. The jury found each issue against him. The defendant Hotel Osborne, Incorporated, then answered the bill. The plaintiff filed a replication. A commissioner was appointed to take the evidence. The case . was heard by a judge of the Superior Court, who entered a decree in favor of the plaintiff against both defendants, without making [216] any findings of fact. No rulings of law were requested and a single exception only was taken, that being to the exclusion of evidence. “The entry of the decree implies a finding of every fact essential to the right entry of that decree permitted by the evidence” and the pleading. “It is for this court to review the evidence and decide the case on its own judgment, both as to facts as well as law. But under the familiar rule, where oral testimony has been heard, the finding of the trial judge as to facts, either expressly made or necessarily implied by his disposition of the case, will not be reversed unless plainly wrong.” Glazier v. Everett, 224 Mass. 184. From October 12, 1917, until August 22, 1918, the defendant Flynn was proprietor of the Hotel Osborne, and there carried on a liquor business under a license issued by the license commissioner of the city of Boston to him and to his bar tender, McPartland. On August 22, 1918, the business theretofore carried on by Flynn under the name of Hotel Osborne, was incorporated under the name or style of Hotel Osborne, Incorporated. The defendant Hotel Osborne, Incorporated, was organized with a capital of $5,000, divided into one hundred shares of common stock. Fourteen shares of stock were issued of which the defendant Flynn owns one share, John McCarthy owns one, John McPartland owns one, and Josephine Flynn, wife of the defendant, eleven. The defendant Flynn became president and treasurer of the corporation, and so far as the record discloses has continued in these offices. In payment of their stock, Flynn put in $100 in cash; Mrs. Flynn put in over $100 in cash, and some furniture consisting of a few chairs, a table and a stove; McCarthy and McPartland were allotted their stock in payment of services rendered. Four or five months before the corporation was organized Flynn purchased on the instalment plan furniture for the Hotel Osborne, at a cost price of four or five hundred dollars. At the organization of the corporation he had paid on account of this purchase $50. As the proprietor of the Hotel Osborne he owed an attorney about $3,000 for getting his liquor license, and in general accounts he owed seven or eight thousand more. He did not surrender his license; he ceased, with the organization of the corporation, to sell liquor under it but allowed the corporation to do so, and it continued so to do until the passage of the Volstead act. The license had an assignable value of $4,000. The defend [217] ant corporation assumed the debts of Flynn, and since its incorporation has paid the attorney’s bill. After the organization the corporation made three or four thousand dollars, after paying for remodelling the hotel four or five thousand dollars and after paying the attorney’s fee of $3,000. Upon the foregoing evidence the judge rightly established the indebtedness of Flynn to the plaintiff, found Flynn owned stock in the defendant corporation, and rightly decreed that said stock should be sold and the proceeds applied to the extinguishment of that debt if Flynn should neglect or refuse to pay to the plaintiff the entire sum adjudged due or any part thereof, with the costs of this suit. It should not have been decreed that the defendant Flynn and the defendant Hotel Osborne, Incorporated, should “make and deliver a written conveyance of said property [[standing in the name of the corporation] to the purchaser at said sale.” The mere fact that Flynn had conveyed all his property to the corporation when organized and owned the entire stock and a controlling interest in the defendant corporation would not make the personal property or other assets of the corporation subject to the payment of his debts, or justify an order that the corporation should join in a conveyance of all the defendant’s right, title and interest, legal or equitable, in the personal property standing in the name of the defendant corporation. In the absence of a fraudulent purpose in the organization of a corporation, it is settled law in this Commonwealth that the ownership of all the stock and the absolute control of the affairs of a corporation do not make that corporation and that individual owner identical. Nor do such ownership and control make the property of the corporation subject to the payment of the stockholders’ debts. Marsch v. Southern New England Railroad, 230 Mass. 483, and cases cited. It follows that the decree as to the defendant Flynn must be modified to conform to this opinion; and as to the defendant corporation, be dismissed with costs. Decree accordingly * Footnotes [*] The rescript read as follows: “Ordered, That the Clerk of said Court in said County make the following entry under said case in the docket of said Court, viz.: “The parts of the decree establishing the debt of James F. Flynn to the [218] plaintiff with interest and costs, execution to issue therefor;' the part of the decree appointing a special master to sell the interest of Flynn, legal and equitable in and to certain stock of the Hotel Osborne, Incorporated, in the contingency Flynn shall not pay to the plaintiff the aforesaid debt, interest and costs, within twenty days from the date of the decree, are affirmed with the further costs of this court. “The part of the decree which in the like contingency of refusal or neglect to pay the debt empowers and directs the master to sell in the manner provided the interest, legal and equitable of the said Flynn in the goods, chattels, furniture and fixtures standing in the name of the Hotel Osborne, Incorporated, as also the order that Flynn and the Hotel Osborne, Incorporated, shall make and deliver a written conveyance of said property to the purchaser at said sale are reversed. “And the decree must be further modified by the dismissal of the bill against the Hotel Osborne, Incorporated, with costs.”