Bradley v. Borden

Pierce, J.

This case by consent of the parties was referred to the master without objection to or appeal from the terms of the order, which read, “And now it is ordered that the above-entitled cause be referred to Walter F. Frederick, Esquire, as master, to hear the parties and their evidence, to find the facts, decide the case, and report thereon to the court.”

The rule in the cross bill read, “In the above entitled cause it is ordered that the cross bill and pleadings therein be referred to Walter F. Frederick, Esq., as master, to hear the parties and their evidence, to find the facts, and report the same to the court.”

As regards the first rule, the master in his report states: “The scope of the rule has been questioned by the parties, and I have interpreted the same to direct me to determine matters of law as well as matters of fact, and to make such findings as would have been made by a justice of this court had the case been heard by the court.”

Upon the coming in of the report the plaintiffs moved to recommit

“ (a) Because the master has not interpreted correctly the rule to him as master, and also has exceeded the powers delegated to him under said rule.
“ (b) Because the master has neither authority to determine matters of law nor ‘to make such findings as would have been made by a justice of this court had the case been heard by the court.’
“ (c) Because the master should have heard the parties and their evidence and reported the facts to the court, and should not and is not justified in making rulings of law.
“ (d) Because the .master has exceeded his authority as such in making rulings of law.
“ (e) Because the master’s report should be reformed or recon*586structed, omitting all rulings of law made by him, because he had no authority or right to make such rulings of law.”

This motion was denied and the plaintiffs appealed.

The same question of law in identical language is presented by objections and exceptions duly taken and filed.

The plaintiffs argue that “A master has no jurisdictional authority to make rulings of law, even if the court attempts to clothe him with such authority” and cites New England Foundation Co. v. Reed, 209 Mass. 556, Adams v. Young, 200 Mass. 588, 590, Clark v. Seagraves, 186 Mass. 430, 435. In no one of these cases did the rule direct the master to do more than to hear the parties, to take the evidence and to report his findings of fact. They are authority for the position that the power of the master as well as its limitation is to be found in the terms of the rule and consequently that a direction to hear evidence and report facts excludes by necessary implication the right to make rulings of law. The court with or without the consent of parties has authority to have the assistance of a master in the determination of any question of law or of fact necessary or useful to the decision of any pending issue. The right to have the opinion of a master upon conclusions of fact arrived at upon consideration of offered and received evidence necessarily carries with it the right to know upon what theory of law the master acted in arriving at any conclusion of fact or of law to the end that the court may be enabled to determine whether the report shall be accepted or rejected or the whole matter of reference be recommitted to the same or to another master for further hearing upon direction as to the law to be followed. The report of rulings of law is advisory, while findings of fact in the absence of a report of all the material evidence have the weight of a special verdict of a jury. The direction to report findings of fact and rulings of law is not uncommon and the right of the court so to order has, so far as appears by any decision, hitherto stood unquestioned in this Commonwealth. See Moore v. Dick, 187 Mass. 207; Warfield v. Adams, 215 Mass. 506. Cases like Clark v. Seagraves, 186 Mass. 430, and Hittinger Fruit Co. v. Cambridge, 218 Mass. 220, where the direction in substance was to “report such facts and questions of law as either party may request,” are distinguishable because of the limitation of the master’s authority contained in the rule. Without consent of parties the court has *587no authority to refer the entire decision of the whole case, but with consent such has long been the practice in equity and at law. Kimberly v. Arms, 129 U. S. 512. Davis v. Schwartz, 155 U. S. 631, 636. Gardner v. Boston, 120 Mass. 266. Electric Supply & Maintenance Co. v. Conway Electric Light & Power Co. 186 Mass. 449, 451.

The master’s statement that the rule conferred authority “to make such findings as would have been made by a justice of this court” is inaccurate when taken apart from its connection with other parts of the rule, but so read and limited is in essence true.

In any event, no harm resulted and the question of the degree of the judicial function of the master does not require decision.

The question of jurisdiction under the facts is not open; the refusal to recommit as a matter of discretion or as a matter of law was correct and should be affirmed, and the exceptions overruled.

The plaintiffs contend that the clause in paragraph [3] of the agreement reading, “and also for the purpose of purchasing remaining stock of said Butte Central Copper Company;” should be read in connection with and as a part of the clause that directly follows it, first striking out the semicolon, and then inserting before the word “of” the copulative word "and,” or inserting before the word “providing” either the word “thereby” or “thus” after striking out the semicolon and the word “of.” Thus amended the combined clauses would read, "and also for the purpose of purchasing remaining stock of said Butte Central Copper Company” “and of,” "thereby” or "thus” “providing additional working capital for continuing and developing the business of said Butte Central Copper Company and of developing the property owned and controlled by said company, or which may be at any time acquired by it.”

The plaintiffs also assert that there was no “remaining stock” after the acquisition of all the treasury stock (one hundred and twenty-five thousand shares) of the company. This construction would leave the clause without force, and would limit the words to description of stock owned by the company after it had disposed of all that it had — a manifest absurdity. The words “remaining stock” under the circumstance should be read remaining outstanding stock, and so read can be given effect and are consistent with the gift or sale of the Davidson stock to the *588company (five thousand shares) which was needed to make the holding of the syndicate fifty-two per cent of the capital stock of the Butte Central Copper Company.

Should the clauses be combined and interpreted as the plaintiffs argue ought to be done, the words “additional working capital” naturally would mean the cash paid to the copper company by the syndicate for the one hundred and thirty thousand shares of its stock.

The circumstances existing at the time of the mating of the agreement do not require the expunging of the punctuation or the addition of words to the agreement to make certain the intention of the parties to it.

As stated in the paragraphs of the agreement numbered by the master [2] and [3] the syndicate was formed for three purposes:

(a) “For the purpose of acquiring from said International Underwriting Company their rights in 52 per cent, of the capital stock of the Butte Central Copper Company under a contract held by the International Underwriting Company for the purchase of the stock.”

(b) “And also for the purpose of purchasing remaining stock of said Butte Central Copper Company.”

(c) “Of providing additional working capital for continuing and developing the business of said Butte Central Copper Company and of developing the property owned and controlled by said company, or which may be at any time acquired by it.”

That something more than mere stock control of the Butte Central Copper Company was contemplated by the syndicate subscribers is made clear by the provision for a board of managers of “not more than fifteen” with officers, executive committee and power to expend money and make contracts; as also by the provision [8] that “nothing contained in this agreement or otherwise shall constitute the subscribers partners with or agents for one another, or with or for the syndicate managers, or render them liable to contribute in any event more than their individual subscription; ” as also by the provision [11], that “The syndicate managers shall have the sole direction and management and the entire conduct of the transaction and business of the syndicate; they are authorized to vote and act in respect of all stocks *589held by it, and to do any and all things by them in their sole and absolute discretion deemed proper, necessary or expedient to carry out the purposes of this agreement;” as also by paragraph [15] “. . . No action shall be taken by said syndicate managers except at meetings duly called and held pursuant to rules adopted by the managers, and copies of said rules, as adopted, shall be mailed to each syndicate subscriber.”

Among the rules adopted was Article IV, which provided for an executive committee and defined its powers: Section 2. “(a) If, as contemplated in the syndicate agreement, the syndicate acquires an interest in the majority of the stock of the Butte Central Copper Company, the executive committee shall have power to act in an advisory capacity with the officers of that company as to any and all matters connected with the administration of the company and the transaction and development of its ordinary and regular business. (b) The committee shall have power, without authorization of the managers, to incur and direct the payment of expenses and disbursements for all such investigations and examinations by counsel, accountants or other experts and for such incidental expenses as it may deem necessary.”

The words “to do any and all things by them in their sole and absolute discretion deemed proper, necessary or expedient to carry out the purposes of this agreement ” conferred upon the managers the highest possible power. This discretion and authority, always supposing that there is no mala fides with regard to its exercise, is without any check or control from any superior tribunal. Gisborne v. Gisborne, 2 App. Cas. 300. Tempest v. Camoys, 21 Ch. D. 571.

The plaintiffs’ exception number twenty-five, is founded upon their contention that the syndicate managers were not authorized or justified in paying one Creden $750 for expert service. It appears that Creden had prepared and submitted to the copper company a partial report of the “values of the ore bodies;” that it was the opinion of the managers that “it would be in the interests of the syndicate and would greatly aid in the carrying out of the purposes of the syndicate” to have such report made complete. Accordingly, the managers directed the employment of Creden, and paid for his services when rendered to the syndicate.

*590Manifestly such information was valuable and necessary to a proper and complete understanding of the business of the copper company and especially to the executive committee, whose business it was “to act in an advisory capacity with the officers of the [copper] company as to all matters connected with the administration of the company.”

We are of opinion that the employment of Creden was within the scope of the duties and powers imposed and conferred upon the syndicate managers, and the exception must be overruled.

The plaintiffs’ exceptions twenty-nine, thirty, thirty-one and forty-one require consideration of the managers’ vote to transfer shares of stock to McConnell and to Clinton.

The vote to set aside twenty-five hundred shares of stock, to be delivered to the McConnells at the termination of the syndicate agreement in recognition of faithful past service rendered to the copper company and to the syndicate would have been a commendable recognition of a moral obligation in the syndicate or in the company, but so far as any evidence discloses would have no direct relation to the “purposes” of the syndicate or in any manner contribute to the success of the business of the company or syndicate. It follows that the vote of the managers was without authority and was void.

The vote whereby an option was granted to Robert L. Clinton to purchase at any time before the termination of the syndicate agreement five thousand shares of stock at an agreed price was stated to be upon the consideration of present service and future service to be rendered. There was no legal obligation to pay for such services as Clinton had voluntarily rendered in the past and no binding agreement upon him to render any in the future. This vote was also without authority, and was void.

On March 2, 1912, the secretary of the syndicate managers, sent out notices of a meeting of the managers called for March 9, 1912, which stated that the meeting was called for the purpose, among others, of “ 3. Considering and taking action on ways and means of aiding the Butte Central Copper Company to procure additional funds required to install the proposed mill at the mine.”

At a meeting of all the syndicate managers, held on December 2, 1911, it was “Voted that the Syndicate hereby approves and recommends the installation of a suitable concentrating mill at *591the Ophir Mine, if all the Directors of the Butte Central Copper Company shall determine that such installation is necessary for the best interests of the Company.” This vote of. the syndicate managers presumably was taken upon a favorable “completed” report of the expert Creden and upon another report of some “competent mining engineer” as such was directed to be obtained by the vote of the syndicate managers passed June 14, 1910, and was received and paid for subsequent to October 27, 1910.

At the annual stockholders’ meeting of the Butte Central Copper Company, held on February 14, 1912, the board of directors, then elected, were authorized to issue income bonds limited to the amount of $150,000 in the aggregate to provide funds for the installing of a mill for the treatment of ores at the mine, if in their judgment it appeared to be for the best interest of the company.

At the meeting of the syndicate managers held on March 9, 1912, pursuant to the notice of March 2, 1912, after the secretary had made a statement of the action of the stockholders of the Butte Central Copper Company at its annual meeting held on February 14, 1912, and had read its vote and resolution, the syndicate managers “Voted, that the issue by the Butte Central Copper Company of $150,000, of income bonds, to provide funds for installing a suitable mill for the treatment of ores at the Ophir Mine, as set forth in the said resolution read to this meeting be and is hereby approved and recommended, such action being in accordance with and necessary for the carrying out of the purposes of the syndicate agreement.”

“The secretary then stated that, in their endeavors to negotiate a sale of the said income bonds of the Butte Central Copper Company, the officers of that company had reported that, owing to the nature of the security behind the bonds, it would be impossible to sell the same at 80 per cent of their face value, the minimum price fixed thereon as necessary to provide the required amount, unless there was included in such sale 20,500 shares of stock of the said company to be delivered fro rata with said bonds, and also that a provision be made for placing the remainder of said stock owned by the syndicate in trust for a period of three years, or until such time as the said income bonds shall be redeemed by the said company; and that the president of the company had asked the syndicate to provide the said stock *592and to place the remainder of said stock in trust as above stated.”

Following this statement it was "Voted, that in order to carry out the purposes of the Syndicate Agreement of providing additional working capital for continuing and developing the business of the Butte Central Copper Company, 20,500 shares of the stock of said company owned by the Syndicate be forthwith transferred and delivered to the treasurer of the said Company to be sold in connection with the $150,000 income bonds issued by the Butte Central Copper Company, and that the remaining 109,500 shares of said stock owned by the Syndicate be placed in trust under an agreement whereby the same shall be voted as directed by the Syndicate Managers for a period of three years from the fifteenth day of March, 1912, or until such time within said period as the said income bonds shall be paid and redeemed by the said Company; and also, Further Voted, that the Executive Committee of the Syndicate be and is hereby authorized and directed to have prepared a trust agreement that will meet the above stated requirements and submit the same for approval at the next meeting of the Syndicate Managers.”

The plaintiffs, in support of their exceptions nine, eleven, twelve, twenty, twenty-eight and nineteen, twenty-one, twenty-two, twenty-three, twenty-four and thirty-nine vigorously and earnestly contend that the last vote was illegal, in that proper notice was not given of the proposed action and that the vote and all action thereunder was “without consideration to the syndicate, and solely for the purpose of enabling the copper company to sell its issue of bonds,” and was in direct and palpable violation of [10] of the agreement which reads: “Unless the object of the syndicate shall be sooner attained as determined by the syndicate managers in their discretion, the syndicate shall remain in force for a period of three years from the date hereof.”

We are of the opinion that the notice of March 2, 1912, was sufficient in view of the vote of December 2, 1911, to apprise the individual managers of the purpose of the meeting called for March 9, 1912. Should that meeting vote to procure additional funds required to install the proposed mill at the mine, it was then within the power of the board of managers to determine and provide ways and means to effectuate that result.

*593In determining whether the vote of March 9, 1912, was in furtherance of the business of the syndicate, we have first of all to take into account the undisputed fact, that the object of acquiring at least a majority of the stock of the Butte Central Copper Company was to enable the syndicate board of managers, through the voting power of the copper company stock, to determine, direct and control the management and policy of the business of the copper company. This is made certain, if evidence were needed, by the vote of the managers wherein they recommended to the copper company the installation of the concentrating mill at the Ophir mine, and the action thereon of the copper company at its annual meeting.

It appears by the master’s report, that in December, 1911, and up to and including March 9, 1912, the copper “company had no money in its treasury, and there was little or no money in the treasury of the syndicate.” The business of the company was not successful and it was imperative that money be raised by some means to carry on the work of development if the shares of the company were not to become very much reduced in value, or of no value. Confronted by this situation, and by the fact that the bonds would not sell at a price to produce $150,000 unless there was included in such sale a bonus of shares of stock of the company and an agreement to place the remainder of stock in a voting trust for a period of three years, the syndicate board of managers passed the second vote of March 9, 1912. Thereafter bonds were issued by the company and fifteen thousand twenty-nine shares of stock were delivered upon the order of the managers to the purchaser of the bonds.

At the time of the delivery of the above named shares of stock, all the shares of stock of the syndicate were in the possession of the First National Bank of Boston on deposit, and thereafter the remaining shares of stock were so retained in its custody to the day of the filing of the bill in this suit.

We are of the opinion that the raising of money, to maintain the value of the shares of stock of the syndicate through the development of the property of the copper company, was business of the syndicate within the terms of the agreement, and that the action of the board of managers in the determination of the ways and means of so doing was not, so far as appears by any evidence *594in the record, taken in bad faith, in wilful negligence, outside the plan and scope of the agreement or in abuse of “their sole and absolute discretion.”

The plaintiffs emphatically contend that they were entitled to receive “the possession, enjoyment and complete right of disposition of copper company stock in October, 1912, with its attendant benefits,” and that therefore the agreement that placed the syndicate stock in a voting trust for a period of three years after the termination of the syndicate was outside the plan of the agreement, illegal and void.

The argument is founded upon a misconception of the terms of that agreement, which nowhere provides for a distribution pro rata in specie of stock, but does provide that “the affairs of the Syndicate shall be wound up by the Syndicate Managers and the net proceeds in cash or securities, including all dividends and interest received, shall be distributed pro rata among the Subscribers not in default.”

• It appears as a fact, that the managers, upon careful consideration, determined that the placing of the stock in trust was necessary to the protection of the syndicate interest in the copper company, and we cannot say that their judgment was wrong, ill-advised, exercised in bad faith or in wilful negligence. There was no evidence that any demand ever was made upon the syndicate managers for an accounting or that they ever refused to make an accounting, and the master further finds “that a reasonable time for winding up the affairs of the syndicate, after the time when it terminated by the terms of the agreement, was one month after October 20, 1912.” As this suit was brought before the expiration of a reasonable time for the winding up of the affairs of the syndicate, it follows that the defendants were not then in default and that the law upon the facts raised no obligation to account. See 2 Harvard Law Review, 241 et seq.

It is not necessary to discuss the obligations of the depository and of the transfer agent had the board of syndicate managers acted illegally or in bad faith. See Dreyfus v. Old Colony Trust Co. 218 Mass. 546.

We have carefully considered all the exceptions and find no reversible error. A decree must be entered (1) overruling the exceptions and confirming the master’s report; (2) perpetually *595enjoining the defendants from transferring to Samuel McConnell and Fred McConnell twenty-five hundred shares of the Butte Central Copper Company as voted by the syndicate managers June 14, 1910; (3) perpetually enjoining the defendants from transferring to Robert L. Clinton five thousand shares of the Butte Central Copper Company as voted by the syndicate managers June 14, 1910; (4) dismissing the cross bills.

Decree accordingly.