Bonner v. Chapin National Bank

Crosby, J. The bill recites that the plaintiff is a stockholder in the Atlas Trust Company, and brings this bill on his own behalf and in behalf of such other stockholders as may prove to have similar rights against the Chapin National Bank, the Atlas National Bank, the Atlas Trust Company, all of Springfield in the county of Hampden, and against certain directors of the last named company. It is well settled that the jurisdiction of a court of equity over suits brought by stockholders against the officers of a corporation, for wrongs committed by them against the corporation, cannot be maintained to enforce personal rights, as it is the interests of the corporation alone which are to be enforced and for whose exclusive benefit damages if recovered must be paid. The bill must allege specifically that suit is brought for the benefit of the corporation. Hayden v. Perfection Cooler Co. 227 Mass. 589, and cases cited. As there is no such allegation in this bill, and there are no prayers based upon the bill so framed, it is defective. Leave — 406 — is granted to make an amendment to perfect the bill in this respect, St. 1913, c. 716, § 3, and the case is considered on the assumption that such amendment will be made. A demurrer to the original bill was sustained; after the allowance of an amendment, a demurrer to the amended bill was filed and a decree entered overruling the demurrer. The case has been reported to this court. The allegations of the amended bill well pleaded are to be taken as admitted by the demurrer. It is alleged that at some time before December 1, 1923, certain interests connected with the board of directors of the Chapin National Bank acquired a control of the capital stock of the Atlas Trust Company for the purpose of an ultimate consolidation of that bank with the trust company; that certain persons at the suggestion of said interests caused a stockholders’ meeting of the trust company to be held on or about December 2, 1923, at which meeting steps were proposed to convert the trust company into a national bank, to be known as the Atlas National Bank of Springfield, preliminary to the consolidation of the trust company with the Chapin National Bank, that thereafter a call for a stockholders’ meeting of the trust company was purported to be sent out designating as the place of meeting the banking rooms of the trust company on December 22, 1923, at three o’clock in the afternoon; that it was then and there voted to authorize the directors to convert the company into a national bank to be known as the Atlas National Bank of Springfield for the purpose of carrying out the plan of ultimate merger with the Chapin National Bank. It is further alleged that some time before December 18, 1923, certain persons connected with the Chapin National Bank applied to the comptroller of the currency for permission to organize a national bank under the name of the Atlas National Bank of Springfield to be located at Springfield; that on that date the permission of the comptroller was obtained; that for the purpose of ratifying such merger, a meeting of the stockholders of the trust company was called to be held on February 1, 1924, that at this meeting the plaintiff was represented by an agent who then learned that, by reason of the — 407 — concerted action of certain persons connected with the board of directors of the banks named as defendants, each stockholder in the trust company was required to accept either $75 per share for his stock in cash, or one share of common stock of the Chapin National Bank for two shares of stock held by him in the trust company; that it was agreed between the directors of the bank and the trust company that the latter should pledge to deliver to the bank $300,000 in assets over'all liabilities; that there were issued and outstanding three thousand shares of the capital stock of the trust company, making the actual value of each share $100 as against $75 per share which was offered to the holders in cash. It is also alleged, in substance, that at the meeting last above referred to, an agreement was entered into between persons connected with the directors of the bank and of the trust company by which $63,670.10 of the assets of the trust company (apart from the $300,000 which had been turned over to the bank) were segregated, to be paid over upon certain shares and divided between the bank and certain assenting stockholders of the trust company who appeared at the time to have been connected with the merger plan; that at that time the value of the common stock of the trust company agreed to be turned over to the Chapin National Bank, plus the amount so segregated, showed a book value of each share to be at least $120 as against the sum of $75 per share which the defendants proposed to pay the plaintiff and other stockholders not assenting to the merger. There are allegations that the plaintiff and other stockholders at the meeting held on February 1, 1924, objected to the plan and voted against it, but that the merger was authorized by a vote of more than two thirds of the outstanding stock; that on February 5,1924, the comptroller of the currency was notified of the action taken and authorized the merger; that the agreement above recited was for the purpose of bringing about a personal profit to the assenting stockholders and directors of the trust company in excess of that to be received by other stockholders; that before December 1,1923, certain persons connected either as stockholders or directors of the bank and the trust company, — 408 — collusively agreed to obtain control of a majority of the stock of the trust company to carry out the merger, and to accomplish that result offered larger amounts per share for the holdings of some stockholders than were offered to the stockholders in general. The bill contains other allegations which it is unnecessary to consider in. detail'. The directors of the Atlas Trust Company occupied a position of trust toward its stockholders-and could not lawfully obtain an undue advantage, or enrich themselves at the expense of the corporation or its stockholders who did not assent to the merger; nor could they legally segregate or set apart any portion of the assets of the company to be turned over to them or to others for their personal benefit at the expense of the corporation or any of its stockholders. The segregation and setting apart of more than $60,000 of the assets of the trust company to be divided" among stockholders assenting to the merger plan was fraudulent and illegal and a breach of trust on the part of the directors for which the corporation is entitled to equitable relief. The bill sets forth a series of material acts participated in by the defendants acting together for a common purpose to defraud the plaintiff and others similarly situated, and is not multifarious. Accordingly the fourth ground of the demurrer cannot be sustained. Ginn v. Almy, 212 Mass. 486. Raynes v. Sharp, 238 Mass. 20. The allegations, that the defendant directors and the defendant banking institutions acted severally and in collusion with others for the purpose of diverting the funds and property of the trust company in the manner described, are certain and definite, and being admitted by the demurrer, constitute a fraud upon the corporation and its stockholders, relief for which exists in equity. It follows that the first and the seventeenth grounds of the demurrer must be overruled. Von Arnim v. American Tube Works, 188 Mass. 515. United Zinc Co. v. Harwood, 216 Mass. 474, 476. Raynes v. Sharp, supra. Hayden v. Perfection Cooler Co., supra. Guay v. Holland System Hull Co. 244 Mass. 240, 247. Clair v. Colmes, 245 Mass. 281. The third ground of demurrer is without merit, and is — 409 — overruled, as it does not appear from the face of the bill that the plaintiff has a complete and adequate remedy at law. . The averments made and the relief sought plainly show that an action at law will not afford the Atlas Trust Company and its stockholders that relief to which they are entitled, but that the matter of complaint is a more fit subject for a bill in equity. It is alleged that soon after the acts of the defendants described in the bill were committed, namely, on February 7, 1924, the plaintiff instructed his counsel to institute this suit; that about four days later, at the request of counsel for the defendants, the plaintiff deferred filing the bill pending a conference between counsel which was held on or about March 27, 1924, at which no adjustment was made. It appears that the bill was filed on March 29, 1924. This recital makes it obvious that the plaintiff acted with reasonable diligence. Almy v. Almy, Bigelow & Washburn, Inc. 235 Mass. 227. Monahan v. Harvard Brewing Co. 241 Mass. 286, 291. The demurrer cannot be sustained for want of necessary parties. Although “certain interests” and “certain persons” are referred to in the bill, no relief is sought against them; they are described merely as participants in the alleged scheme entered into by the defendants to defraud the trust company. Nor does it appear that the comptroller of the currency or the Atlas Realty Company should have been joined: no relief is sought against them. Bay State Gas Co. v. Lawson, 188 Mass. 502. Von Arnim v. American Tube Works, supra. The objections that certain allegations are made without any averment as to the plaintiff’s knowledge of the facts stated, or that he is informed of the facts and believes them to be true, cannot be sustained. The plaintiff made oath that the statements in the bill were true, except those made on information and belief and those he believes to be true. The defendants further contend that it does not appear from the allegations of the bill as arpended that upon notice and request of the plaintiff the directors of the Atlas Trust Company have refused to take action with reference to the — 410 — matters referred to in the bill. It is well settled that where it is plain that such an application to a corporation for relief would be useless and ineffectual the law does not require it to be made. The allegations of fraud, collusion and conspiracy entered into by the directors, by which it is charged that a wrong has been committed, show that they are, in the nature of the case, incapable of representing the corporation in any action or proceeding growing out of their wrongful and fraudulent conduct for which relief is sought. To require application to be made to them to act as a condition precedent to maintaining a bill would be futile. This ground of demurrer for the reasons stated is overruled. Brewer v. Boston Theatre, 104 Mass. 378. Blair v. Telegram Newspaper Co. 172 Mass. 201. Almy v. Almy, Bigelow & Washburn, Inc., supra. The demurrer must be sustained unless the amendment hereinbefore referred to is made; if so made, the demurrer is overruled. Ordered accordingly.