Abington Nat. Bank v. Ashwood Homes, Inc.

• Decision Date: 21 March 1985
• Citation: 19 Mass.App.Ct. 503,475 N.E.2d 1230
• Parties: ABINGTON NATIONAL BANK v. ASHWOOD HOMES, INC., et al. 1
• Court: Appeals Court of Massachusetts

Page 1230

475 N.E.2d 1230

19 Mass.App.Ct. 503

ABINGTON NATIONAL BANK v. ASHWOOD HOMES, INC., et al. ¹

Appeals Court of Massachusetts Plymouth.

Argued Oct. 26, 1984.

Decided March 21, 1985.

Henry A. Goodman, Canton, for defendants.

Michael C. Gilleran, Roxbury, (Thomas R. Mullen, Boston, with him), for plaintiff.

Before PERRETTA, KAPLAN and WARNER, JJ.

PERRETTA, Justice.

By reason of a promissory note and security agreement, the plaintiff, Abington National Bank (bank), had an interest in the equipment and inventory of the Farmers Butcher Shop, Inc. of Brockton (Farmers), which conducted its business on premises leased from the defendants (collectively referred to as Ashwood). Farmers' business faltered, and it became in default of its obligations to the bank under the terms of the promissory note as well as to Ashwood under the rent provisions of the lease. After Farmers ceased doing business, a dispute arose between the bank and Ashwood concerning removal of Farmers' equipment from Ashwood's premises. The bank brought an action against Ashwood for conversion, claiming that Ashwood refused to allow the bank to take possession of its collateral, and Ashwood counterclaimed that the bank had refused to remove Farmers' equipment. Ashwood sought reimbursement for loss of rent and expenses incurred in removing and storing the bank's collateral. The jury found for the bank, but, because of confusing and erroneous jury instructions, we reverse.

1. The Facts.

We recite the facts as they appear from the selected exhibits and portions of testimony reproduced in the record appendix. Farmers closed its doors to the public on December 31, 1976, except for a three-day period for a closeout sale the following month. The equipment and inventory were not thereafter removed from the premises by Farmers because its president believed that there would be an auction sale by the bank of its collateral in accordance with the terms of the security agreement. ²

When Farmers failed to pay its rent to Ashwood, Ashwood's rights under the lease (par. 19) were as follows: "[T]he Lessor shall have the right to re-enter the demised premises, repossess said premises, evict the Lessee ... remove the property of the Lessee ... and in the discretion of the Lessor relet the demised premises." Ashwood changed the locks to the premises on or about April 21, 1977. Anything which may have transpired between Farmers and the bank after the closeout sale in January is not revealed on the record before us.

Notwithstanding the change of locks, Ashwood allowed the bank's auctioneer on the premises, some time in the spring of 1977, to appraise the bank's collateral. The bank, however, throughout the spring and summer of that year, made no move to take possession of the equipment which had remained on Ashwood's premises.

In September, Ashwood wanted to ready its property for smaller stores that had indicated a desire to occupy the premises. On September 16, 1977, Ashwood's attorney wrote to the bank's attorney, giving notice that the bank was to remove the equipment and that should it fail to do so, Ashwood would remove and store the equipment at the bank's expense. The final sentence of the letter reads: "In order to remove said equipment my client has requested a $5,000.00 cash bond be placed in escrow in order to guarantee compensation for any damages caused by the removal of said equipment."

When neither the bank nor its attorney responded to that letter, Ashwood's attorney, on October 19, 1977, wrote directly to the bank, explaining that renovations of the premises had to be completed so that the property could be rented. ³ Ashwood's attorney stated that Ashwood could wait no longer "[d]ue to loss of rent," and "[t]herefore, all equipment and material will be sold in order to pay for the removal and storage of same."

To this letter the bank responded within eight days, writing that "an immediate action" for conversion would be brought against Ashwood if it were to sell any of the bank's collateral. Some six weeks later, the bank sent a second letter to Ashwood's attorney, advising that Ashwood "certainly" had no claims against the bank and demanding that all of its collateral "be delivered up to ... the auctioneer who will sell it at public auction." Action against Ashwood would be brought unless the bank should receive "assurances," within five days, "that the equipment in question will be released to the auctioneer."

It does not appear in the record appendix whether Ashwood in fact gave the demanded "assurances." What is certain, however, is that on January 9, 1978, Ashwood's attorney again wrote to the bank's attorney, asking permission to sell the bank's collateral in Ashwood's possession and place any sale proceeds in escrow "pending the outcome of this matter." We have no information before us which reveals what, if anything, happened between Ashwood and the bank from the time of the January letter until the bank brought the present action on October 11, 1978.

2. Motions Under Mass.R.Civ.P. 50(a) and (b).

Ashwood's requests for directed verdicts and judgments notwithstanding the verdicts, Mass.R.Civ.P. 50(a) and (b), 365 Mass. 814-815 (1974), relate only to the bank's action for conversion and were based upon two grounds.

a. Evidence of an outstanding debt. The bank holds the promissory note and security agreement, under which it claims a right to possession, by way of an assignment which came about in the following manner. Farmers borrowed money from the Farmers Butcher Shop, Inc. of Abington (Farmers of Abington) and in so doing executed the promissory note and security agreement in question. Farmers of Abington had obtained the money from the bank, assigning to it the note and agreement as security for the debt.

Ashwood argues that to prevail in its action for conversion, the bank was required, but failed, to prove that Farmers' debt to Farmers of Abington was still outstanding. Ashwood cites no authority for this proposition, but we need go further than to say that even were Ashwood correct on the law, the bank's supplemental appendix reveals testimony sufficient to overcome Ashwood's claim.

b. Evidence of demand and refusal. Relying upon Atlantic Fin. Corp. v. Galvam, 311 Mass. 49, 50-51, 39 N.E.2d 951 (1942), wherein it is stated, "A demand is a necessary preliminary to an action for conversion where the defendant's possession is not wrongful in its inception and demand and refusal are required to put him in the position of a wrongdoer," Ashwood contends that there is no evidence to show that the bank demanded possession of its collateral and that Ashwood refused to surrender it.

Although we are tempted to agree with Ashwood that there has been no showing that Ashwood refused to accede to a demand by the bank, we nonetheless conclude that, upon proper instructions, a jury could have inferred from the correspondence between the bank and Ashwood that the requisite demand and refusal had been made.

3. The Jury Instructions.

The judge began his instructions on conversion with a correct definition of that tort: "One who intentionally or wrongfully exercises acts of ownership, control or dominion over personal property to which he has no right of possession at the time is liable for the tort of conversion." See generally Nolan, Tort Law § 35 (1979). From the elements of conversion follows the basic question that was to be determined by the jury: What, if anything, did Ashwood do to prevent the bank from taking possession of its collateral?

In answering this question, the jury's attention properly could be directed, as it was, to two acts by Ashwood: (1) the changing of the locks, and (2) the request for a $5,000.00 cash bond. On the issue of the locks, the jury should have been instructed, in some appropriate language, that the act of changing the locks does not, in and of itself, constitute a conversion, and that they must consider whether that act, considered with all the evidence, prevented the bank from removing its...