Case Name: Henry F. Miller Stores Company vs. Roseland, Incorporated
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1927-05-24
Citations: 260 Mass. 145
Docket Number: 
Parties: Henry F. Miller Stores Company vs. Roseland, Incorporated.
Judges: Present: Rtjgg, C.J., Pierce, Carroll, Wait, & Sanderson, JJ.
Reporter: Massachusetts Reports
Volume: 260
Pages: 145–150

Head Matter:
Henry F. Miller Stores Company vs. Roseland, Incorporated.
Suffolk.
March 17, 1927
May 24, 1927.
Present: Rtjgg, C.J., Pierce, Carroll, Wait, & Sanderson, JJ.
R. B. Heavens, (M. L. Orlov with him,) for the receiver.
H. R. Bygrave, for the intervenor.

Opinion:
Carroll, J.
These proceedings arise under an intervening petition to foreclose certain mortgages upon property held by the receiver appointed by the Superior Court. The case was sent to a master. A decree was entered for Frank D. McKendall, the petitioner. The receiver appealed.
The first mortgage was to secure a note given by Roseland, Incorporated, to the Cosmopolitan Trust Company of Providence, Rhode Island, in the sum of $35,000. The second mortgage in the sum of $30,000 was to secure a note issued by Roseland, Incorporated, to Frank D. McKendall. The third mortgage in the sum of $5,000 was to secure a note to John J. Nichols. The three mortgages were dated November 28, 1923. The first and third mortgages were assigned to the petitioner.
Roseland, Incorporated, a Massachusetts corporation, was organized September 4, 1923. John J. Nichols had substantially complete ownership of the common stock of the corporation. He also controlled the H. O. Rogers Silver Company; aside from one or two fictitious stockholders, "there were no other parties in real interest in the H. O. Rogers Silver Company." In 1921 Nichols began the erection of an amusement establishment which later became the property of Roseland, Incorporated. The master found that the money used by Nichols to erect the Roseland structure was procured by him either from the H. O. Rogers Silver Company or by means of its credit. In 1923, a part of the banking business of this company was done with the Cosmopolitan Trust Company of Rhode Island, and, while the work of building Roseland was in progress, Nichols endeavored to finance the proposition by "the use of bad checks" and overdrew the H. O. Rogers Silver Company's account in the Cosmopolitan Trust Company to the extent of $73,000. In November, 1923, the bank commissioner of Rhode Island took charge of the affairs of the Cosmopolitan Trust Company and discovered the extent to which the H. O. Rogers Silver Company had overdrawn its account. McKendall at the time was president of the trust company and probably knew, or should have known, of the transactions, and on November 27, he agreed to assume responsibility for the overdrafts, and Nichols agreed to furnish whatever security he could. The following day two of the mortgages were authorized at a meeting of the stockholders of Roseland, Incorporated. The Roseland building was constructed on land owned by Nichols. On September 23, 1923, Nichols transferred the title to the land to the Rose-land corporation and the financing of the corporation continued to be done through the H. O. Rogers Silver Company account.
On November 28, Roseland, Incorporated, had no creditors "except such a claim as the H. O. Rogers Silver Company may have had against it as a result of the use of its credit and money." The indebtedness of Roseland, Incorporated, to other creditors was incurred after the mortgages were delivered. On November 28, at a meeting of the stockholders of Roseland, Incorporated, all the stockholders being present, it was voted to borrow $35,000 and to execute a note therefor, secured by a mortgage on its property. It was also voted at this meeting to borrow $30,000 and to deliver a note therefor, secured by a second mortgage on its property. The two mortgages were then executed and delivered. On the same date a mortgage previously authorized was issued to Nichols for the purchase price of a lot of land adjoining the property then held by Roseland, Incorporated. To secure McKendall for taking up the H. O. Rogers Silver Company's bad checks, in addition to the first and second mortgages Nichols turned over to him a $5,000 mortgage. On December 12, 1923, Nichols, Roseland, Incorporated, and the H. O. Rogers Silver Company made an agreement in writing with McKendall by which McKendall was to make good the money due the trust company; Nichols in return agreed to liquidate the advances made by McKendall. The master found that McKendall has in every way complied with his part of the agreement; that the trust company transferred to him the mortgages given to it; that he holds the mortgages for a good and valid consideration paid by him; that the mortgages were given by Roseland, Incorporated, by authority of its votes, in order to borrow money to pay the indebtedness of the corporation. The master further found that the mortgages were given to pay the debt incurred for the money advanced by the H. O. Rogers Silver Company; that the $5,000 mortgage was to secure a loan of September 15, 1923, by Nichols to the corporation; that the three mortgages were given for no other purpose than to meet the outstanding indebtedness of Roseland, Incorporated.
On these findings of the master we perceive no reason which prevents the petitioner from foreclosing his mortgages. They were founded on a good and valid consideration. Roseland, Incorporated, was the real debtor. By means of the Cosmopolitan Trust Company and the H. O. Rogers Silver Company, the land was purchased and the buildings erected. Nichols used the money he received from the bank to build the structures and conveyed the entire property to the corporation. It continued to be financed through Nichols and the trust company after its organization. The decree for the petitioner, therefore, was right.
There is nothing in the subsidiary findings to contradict the finding that there was a valid consideration for the mortgages. The finding, "Whether this indebtedness of Roseland, Incorporated, was incurred subsequent to the date of its incorporation cannot be said with any certainty, as the erection of Roseland extended over a substantial period prior to the incorporation of Roseland, Inc.," was not enough to contradict the finding that there was a consideration for the mortgages.
The transaction was not ultra vires the Roseland company. It owed a debt. It could secure its creditor. There was nothing beyond its chartered power in securing the mortgagee for the advances made. The agreement was not an accommodation one. It was founded on a consideration.
Decree affirmed.