Source: http://masscases.com/cases/sjc/294/294mass196.html
Timestamp: 2019-04-19 04:17:26+00:00

Document:
SAMUEL G. ROSENBERG vs. SAMUEL GARFINKEL & others.
Equity Pleading and Practice, Master: exceptions to report, recommittal. Contract, Consideration, Validity. Fraud. Corporation, Transfer of shares.
An exception to a master's report in a suit in equity, not founded on error shown by the report itself, properly was overruled.
The remedy of a party in a suit in equity aggrieved by a failure of a master to find further facts than those stated in his report is by a motion to recommit the report, not by exception to the report.
Recommittal of a suit in equity to a master for further findings is discretionary with the trial judge.
had a substantial operating deficit, if the report did not purport to state all the facts explanatory of the financial condition of the corporation as shown by such findings.
In a suit in equity to charge the defendant with the value of shares alleged to have been assigned to him by the plaintiff to the plaintiff's use, a general finding by a master, on evidence not reported, that the assignment was absolute, upon consideration and obtained without fraud, not being inconsistent with other findings, was final.
A promise to pay the debts of a corporation if it should not pay them was good consideration for an assignment of shares of its stock by a stockholder to the promisor, though ultimately the corporation became able to pay them.
BILL IN EQUITY, filed in the Superior Court on November 16, 1934.
The suit was referred to a master. A motion to recommit the report was denied, exceptions to the report were overruled, and the report was confirmed by an interlocutory decree, entered by order of Weed, J., by whose order a final decree dismissing the bill was entered. The plaintiff appealed.
H. Kahn, for the plaintiff.
W. E. Sisk, R. L. Sisk, & C. J. Goldman, for the defendants.
voted to issue additional shares of stock for cash, to be paid by one Gallant, and that thereafter the additional capital was invested in the corporation, but the defendant, though requested by the plaintiff, refused to transfer to the plaintiff the stock which belonged to him, and that the defendant converted to his own use this stock and the accrued earnings thereof. The plaintiff prays that the value of the stock transferred by him to the defendant be ascertained, that the defendant be ordered to pay to the plaintiff the value thereof and the earnings of such stock, and that an accounting of the profits of such stock be had and the defendant be ordered to pay the amount thereof to the plaintiff.
The case was referred to a master who made a report. He was not required to report the evidence. The plaintiff filed objections to this report - which are deemed to be exceptions - and a motion to recommit the report to the master "for the purpose of his making subsidiary findings of facts upon which his final finding is based." An interlocutory decree was entered overruling the exceptions, denying the motion to recommit and confirming the report. Thereafter a final decree was entered dismissing the bill. The plaintiff appealed from the interlocutory decree and from the final decree.
purport to state all the facts explanatory of the financial situation of the corporation as shown by these findings. Nothing, however, in the report takes the case out of the ordinary rule that recommittal of a master's report is discretionary with the trial judge. New Method Die & Cut-Out Co. Inc. v. Milton Bradley Co. 289 Mass. 277, 287. There was, therefore, no error in confirming the master's report.
2. The final decree was right on the facts found by the master. Material allegations of the bill were not sustained. And the plaintiff on the facts found is not entitled to any equitable relief which is within the scope of the bill.
stockholders, including the plaintiff . . . assigned their stock to the defendant, executed releases to the Harold Shoe Mfg. Company and received from the defendant a written guaranty . . . [in the form shown by the report] that he would pay all obligations of the corporation appearing on its books."
The master found "as a fact that, at that time, all of the stockholders, including the plaintiff, were informed and understood that they were relinquishing all their interest in the Harold Shoe Mfg. Company," and further found "that it did not become necessary for the defendant to pay any obligations of the Harold Shoe Mfg. Company. He had, however, regarded the obligations of the Harold Shoe Mfg. Company as personal obligations, and on several occasions he personally indorsed notes of the Harold Shoe Mfg. Company. When, on May 12, 1930, he gave to each of the other stockholders the written guaranty aforementioned, he assumed an obligation, which he was not bound to assume, to pay the debts of the Harold Shoe Mfg. Company." The master also found that on May 12, 1930, as indicated by statements of the assets and liabilities of the corporation, signed by the defendant and purporting to state its actual condition, "the corporation was solvent, even for purposes of liquidation, but that there was a substantial operating deficit." The plaintiff "was the inside man, acting as general superintendent in charge of production." It is the natural inference from the findings that the plaintiff was employed by the corporation from the time it began business until it was liquidated. There are further findings in respect to the conduct of the affairs of the corporation after May 12, 1930, including the issuing of capital stock from time to time until it was liquidated in 1933, when "sufficient assets remained to redeem the common stock at $150 a share."
of the corporation was clearly wrong," and (b) that there was "no consideration for the transfer of the stock, and . . . it was obtained by fraud and misrepresentation on the part of the defendant."
The subsidiary findings do not show that the master's conclusion was wrong. The history of the corporation after the transfer of stock and its apparent success do not prove that the transfer was not made as found. And the solvency of the corporation at the time of the transfer has no such effect. It is vain to speculate as to the adequacy of the reasons which led the plaintiff, a director, stockholder and employee of the corporation, to transfer his stock therein in exchange solely for the defendant's "written guaranty that he would pay all outstanding obligations of the corporation, appearing on its books." Whether or not the plaintiff exercised sound judgment in doing so the subsidiary findings show no such unlikelihood that he would make the transfer for this consideration as to control the finding that he actually made it.
debts or that it would not seem to a reasonable man that there was such a possibility. In these circumstances it is not shown that the promise itself was not sufficient consideration. Hubbard v. Coolidge, 1 Met. 84, 92-94. Seagrave v. Clark, 177 Mass. 93. Am. Law Inst. Restatement: Contracts, § 84 (f). Compare Cabot v. Haskins, 3 Pick. 83, 93.
not - that though the statements of assets and liabilities were true of the corporation as a going concern, shrinkage incident to liquidation was likely to result in a substantial deficit. See Page v. Bent, 2 Met. 371, 374; Commissioner of Banks v. Pitocchelli, 276 Mass. 201, 205.

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