C. J. Hogan, Inc. v. Atlantic Corp.

• Decision Date: 02 March 1955
• Citation: 124 N.E.2d 905,332 Mass. 322
• Parties: C. J. HOGAN, Inc. v. ATLANTIC CORPORATION et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 905

124 N.E.2d 905

332 Mass. 322

C. J. HOGAN, Inc. v. ATLANTIC CORPORATION et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 8 and Dec. 27, 1954.

Decided March 2, 1955.

Maurice H. Kramer, Boston, for plaintiff.

Maurice Tobey, Boston, for defendants.

Before QUA, C. J., and LUMMUS, WILKINS, WILLIAMS and COUNIHAN, JJ.

WILKINS, Justice.

The plaintiff, engaged in the trucking business, brings this bill in equity against Atlantic Corporation (hereinafter called the defendant), engaged in the finance business, and Rubin Epstein, its treasurer, seeking, among other things, the cancellation of promissory notes and the discharge of mortgages of personal property. The defendant's answer contains a counterclaim for the payment of certain of the promissory notes. From a decree hereinafter described the plaintiff appealed. The evidence is reported.

The judge made a report of the material facts found by him which we summarize. The plaintiff delivered to the defendant four promissory notes, payable to the defendant or order, secured by mortgages of personal property. Their dates and principal amounts are: May 2, 1946, $20,000; September 18, 1946, $3,366; January 2, 1947, $4,800; and May 9, 1947, $2,400. The notes bear interest at the rate of two per cent per month after maturity. On May 26, 1949, the director of internal revenue of the United States of America in this district filed tax liens against the plaintiff for $12,603.65 with penalties, interest, and costs. The plaintiff applied to the defendant for a new loan. After a dispute as to the amount due on the notes they compromised the amount of principal as of May 3, 1952, at $7,621.86, payable on demand, and the amount of interest at $3,000, 'payable at the time that C. J. Hogan, Inc., would sell its New York transportation and carriers license certificates and permits.' They also agreed that the defendant would lend the plaintiff $23,200 to be applied as follows: $7,621.86 to discharge the indebtedness for principal; $4,700 for finance charges in connection with the new loan and mortgage; and $10,878.14 to discharge the tax liens. The defendant agreed, upon recording the discharge of the tax liens, to surrender the notes and to deliver discharges of the mortgages given in 1946 and 1947.

On May 3, 1952, the plaintiff executed and delivered to the defendant a note for $23,200, a mortgage of personal property securing the note, and assignment of all the capital stock of the plaintiff, and an assignment of certificates and permits issued to the plaintiff by the interstate commerce commission and the departments of public utilities of Massachusetts, Rhode Island, and Connecticut. The note was payable in 104 weekly instalments of $225 and bore interest at the rate of two per cent per month after maturity. The mortgage was duly recorded.

From May 16, 1952, to July 28, 1952, the plaintiff paid the defendant on account of the new note eleven instalments of $225 each, totaling $2,475. Early in July, 1952, an assistant attorney general of the Commonwealth on behalf of the division of employment security offered to accept $9,500 in full settlement of the plaintiff's tax indebtedness to the Commonwealth, and the chief field deputy in the office of the director of internal revenue offered to accept $1,180.09 in settlement of the plaintiff's tax indebtedness to the United States of America. These officials also promised the defendant discharges of the liens after payment of these sums.

In order to obtain discharge of a lien, a taxpayer must first pay the director of internal revenue who will then send the Commonwealth ninety per cent. The plaintiff unsuccessfully tried to induce the defendant to make payment upon that basis. The defendant insisted upon other conditions for its protection. In July, 1952, the total indebtedness covered by tax liens could have been settled for $10,680.09. The defendant wrongfully refused to apply $10,878.14 or such part thereof as was necessary to discharge the tax liens.

There is due the defendant the sum of $7,621.86 and interest thereon at the rate of two per cent monthly from May 3, 1952, to August 14, 1953, amounting to $2,337.37.

There is due the plaintiff the sum of $2,475 with interest thereon at the rate of two per cent monthly from August 28, 1952, to August 14, 1953, 'as damages suffered by it.'

The final decree, as amended, as of October 2, 1953, ordered: (1) There is due from the plaintiff to the defendant $7,621.86 with interest thereon from May 3, 1952, at the rate of two per cent a month, amounting to $2,510.13, making a total of $10,131.99. (2) The plaintiff is indebted to the defendant in the sum of $3,000 for accumulated interest, this sum to become payable upon the sale by the plaintiff of its New York transportation and carriers license certificates and permits, the defendant in the meantime to retain all collateral held by it as security for this sum. (3) From the total amount due from the plaintiff to the defendant under (1) and (2) the plaintiff is entitled to a credit of $2,475 and interest thereon at the rate of two per cent monthly from August 28, 1952 amounting to $627, the total being $3,102. (4) The net amount due the defendant under (1) and (3) is $7,029.99 which the plaintiff shall pay within twenty-one days. Upon payment the defendant is to discharge the mortgages referred to in the bill of complaint, and to deliver up the mortgage notes and other security, but not the security referred to in (2). (5) For twenty-one days following entry of the decree no foreclosure proceedings shall be commenced. (6) The bill is dismissed as against the defendant Epstein.

We have experienced great difficulty in trying to understand some of the plaintiff's contentions. We have endeavored to consider them all. Should we not refer to any point, it will be because we think that discussion is not merited.

1. The judge was not plainly wrong in finding that the amount of the plaintiff's indebteness on the prior notes, which was in dispute, Clark v. Gemwell, 125 Mass. 428, 431, was compromised at $7,621.86 principal and $3,000 interest. The plaintiff's argument to the contrary is based in part upon computations made by an incorrect bookkeeping method. A general payment should be applied first to the amount of interest and any balance to the amount of principal. Blair v. Travelers Ins. Co., 291 Mass. 432, 438-439, 197 N.E. 60. The rate of interest, tow per cent monthly, established in the notes, prevails until the date of the decree. Brannan v. Hursell, 112 Mass. 63, 69, 71; Union Institution for Savings v. City of Boston, 129 Mass. 82, 86, 96; Pierce v. Boston Five Cents Savings Bank, 129 Mass. 425, 434; Bowers v. Hammond, 139 Mass. 360, 361, 31 N.E. 729; Lamprey v. Mason, 148 Mass. 231, 234-235, 19 N.E. 350.

2. The argument is made by the plaintiff that there was error in failing to hold void the $23,200 note and mortgage of May 3, 1952, and other security for the note. The ground of this contention, in part at least, seems to be that there was something 'fraudulent and unwholesome' about the defendant's failure to discharge the tax lien. The judge made no such finding, and we are unable to perceive how one in justice could be made. The decree in effect provides for the cancellation of this note and mortgage. On the findings, cancellation must rest on the ground that the contract of loan was not performed. The decree gives the plaintiff all to which it is entitled in this respect.

3. Another ground of alleged error advanced by the plaintiff is that the judge failed to order the discharge forthwith of the prior notes and mortgages. This seems to be in substance a demand for a decree, not favored in equity, Eno Systems, Inc. v. Eno, 311 Mass. 334, 338, 41 N.E.2d 17, providing for forfeiture of the property in these notes and mortgages to which the defendant was entitled before the later transaction failed of performance. This contention is completely without merit. Merely because the defendant was found not to have performed the loan agreement did not render it an outlaw as to the previous notes which the plaintiff did not pay and which it is ordered to pay in this suit.

4. The plaintiff objects that the defendant was not described as a converter of the $2,475 in the findings and in the decree. If we understand the contention, the plaintiff seeks an allowance of interest following a supposed demand and refusal. The decree actually awards this sum of $2,475 with interest at two per cent monthly from August 28, 1952, to...