Garsoon v. American Diesel Engine Corp.

• Decision Date: 27 January 1942
• Citation: 39 N.E.2d 566,310 Mass. 618
• Parties: GARSOON v. AMERICAN DIESEL ENGINE CORPORATION et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

310 Mass. 618

39 N.E.2d 566

GARSOON

v.AMERICAN DIESEL ENGINE CORPORATION et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Jan. 27, 1942.

Appeal from Superior Court, Middlesex County; Hanify, Judge.

Suit by Murray W. Garsson against the American Diesel Engine Corporation and others for the establishment of a debt owing by the defendants to plaintiff and for the application in payment of the debt of various patents and patent rights of the defendants. Decree for the plaintiff and the defendants appeal.

Decree modified and as so modified, affirmed.

Before FIELD, C. J., and DONAHUE, COX, and RONAN, JJ.

H. G. Crockett, Jr., and J. W. Andres, both of Boston, for defendants.

E. F. McClennen and E. Williamson, both of Boston, for plaintiff.

COX, Justice.

The defendants are American Diesel Engine Corporation, a Massachusetts corporation hereinafter referred to as the corporation, Duplex Diesel Co., Inc., a Massachusetts corporation, and John J. McCarthy of Malden. An agreement under seal was entered into between the three defendants and the plaintiff on September 8, 1939, for the settlement, without litigation, of claims of the plaintiff against the defendants. The defendants agreed to cause all ‘McCarthy Diesel Engine patents' to be vested in the corporation, either as owner or as exclusive licensee, there to remain until the obligations of the defendants to the plaintiff were paid in full. The corporate defendants agreed to pay the plaintiff $25,000 within thirty days. The corporation agreed to give the plaintiff, within thirty days, its interest bearing note, dated September 8, 1939, for $23,000, ‘payable semi-annually commencing June 1, 1940 from its net earnings as computed in accordance with accepted accounting principles and before the payment of dividends on any class of stock,’ and after December 31, 1941, any balance was to be due and payable on demand. In consideration of the foregoing agreements, the plaintiff gave the defendants a general release of all demands.

The defendants made no payment and gave no note as agreed. By the bill, which was filed on October 18, 1939, the plaintiff asked for the establishment of his debt, amounting in all to $48,000, with interest from October 9, 1939, and for the application in payment of his debt of various patents and patent rights of the defendants, which were the subject matter of the agreement between the parties.

1. The defendants appealed from the final decree granting the plaintiff relief. There was an order that the testimony be reported, G.L. (Ter.Ed.) c. 214, § 24. The defendants, however, in writing, waived their rights under this order and therein stated that for the purposes of appeal, they rely upon the pleadings and ‘the documentary evidence.’ ‘Exhibit 1’ is printed in the record and purports to be a memorandum of agreement made on August 11, 1939, between McCarthy and the corporation relative to certain patents. There is no report of the evidence, and no statement of findings of fact was made by the trial judge. The only question presented on this state of the record is whether the decree properly could have been entered on the pleadings. The entry of the decree imports a finding of every fact essential thereto. Novick v. Novick, 299 Mass. 15, 11 N.E.2d 481. See Romanausky v. Skutulas, 258 Mass. 190, 194, 154 N.E. 856;Abeloff v. Peacard, 272 Mass. 56, 59, 171 N.E. 14;Yoffa v. National Shawmut Bank of Boston, 288 Mass. 422, 426, 193 N.E. 22.

2. The defendants contend that there was error in establishing the debt of the corporation in the sum of $49,000. They concede that there is an indebtedness of $25,000. The answer to this contention depends upon whether the failure of the corporation to give its note to the plaintiff, as promised, amounts to the creation of a ‘debt’ within the meaning of G.L. (Ter.Ed.) c. 214, § 3(7), by virtue of which, among other things, jurisdiction in equity is given over suits by creditors to reach and apply, in payment of a ‘debt,’ certain property and interests of the debtor. The first step in a proceeding of this character is the establishment of an indebtedness of the defendants to the plaintiff, and, in essence, this is an action at common law. Stockbridge v. Mixer, 215 Mass. 415, 418, 102 N.E. 646. Upon the failure of the corporation to deliver the note, the plaintiff's remedy is for a breach of the contract, Loring v. Gurney, 5 Pick. 15;Hunneman v. Inhabitants of Grafton, 10 Metc. 454, 459, and the amount of his damages is involved. It has been held that where goods are sold to be paid for by a note that is not given, the vendor is entitled to recover as damages the whole value of the goods, unless, perhaps, there should be a rebate of interest during the time of stipulated credit. ‘The damages are the price of the goods.’ Stephenson v. Repp, 47 Ohio St. 551, 554, 555, 25 N.E. 803,10 L.R.A. 620. In a case where the defendant promised to give the plaintiff his note for $100 in exchange for the plaintiff's withdrawal of an action against him and failed to give the note, it was held that the plaintiff was entitled to recover the actual damages sustained, ‘one hundred dollars, which the defendant promised to pay.’ Stoddard v. Mix, 14 Conn. 12, 24. Thomas Mfg. Co. v. Watson, 85 Maine, 300, 301, 27 A. 176. In some cases it has been said that in an action for a breach of an agreement to execute and deliver a promissory note, the amount for which the note was to be given will be the prima facie measure of the damages. Standard Lumber Co. v. Deer Park Lumber Co., 104 Wash. 84, 98, 175 P. 578.Wasser v. Western Land Securities Co., 97 Minn. 460, 466, 107 N.W. 160. See Kennedy v. Hudson, 224 Ala. 17, 21, 138 So. 282;Bowman v. Branson, 111 Mo. 343, 362, 19 S.W. 634.

In the case of Woodbury v. Sparrell Print, 187 Mass. 426, 428, 429, 73 N.E. 547, it was said that the word ‘debt,’ as appearing in the statute that was the predecessor of G.L.(Ter.Ed.) c. 214 § 3(7), was used in its broad sense, and it was held that a claim for loss of rent under a covenant in a lease was a debt within the meaning of the statute. After the decision in that case and the amendment of the statute in question in another particular, it was held in the case of H. G. Kilbourne Co. v. Standard Stamp Affixer Co., 216 Mass. 118, 103 N.E. 469, that the word ‘debt’ in the statute as amended did not include all actions founded upon a contractual liability, but included only debts as distinguished from mere claims for damages. In that case the Woodbury case is considered at length, and it is said that there is nothing in that decision or in the reasoning of the opinion to warrant the extension of the statute to the breach of an executory contract involving wholly unliquidated damages. It was said, however, that the word ‘debt,’ as appearing in the statute, is to be construed broadly rather than narrowly, and that it may comprehend not only liquidated demands where there is an express or implied promise to pay or an absolute duty raised by law to discharge, but also an agreement for the payment of money which will require some calculation or determination of extraneous facts before its exact amount can be asscertained, provided the debtor has made a distinct and binding promise to pay. Stone, Timlow & Co., Inc., v. Stryker, 230 Mass. 67, 72, 119 N.E. 655.

In the case at bar there was no express promise to pay. On the contrary, the promise was to give a note. We think that in an action for failure to keep such a promise, the damages would be the amount of the note. In the agreement of the parties the plaintiff released and discharged the defendants from all claims. We think that, by this agreement, it was within the contemplation of the parties that the plaintiff was to receive $48,000 for his release, to be paid, it is true, in two particular ways, $25,000 in cash and $23,000 by a note. There is an implication that the corporation, when it promised to give the note, must have expected that it would have to pay $23,000. It was said in Stoddard v. Mix, 14 Conn. 12, 14, hereinbefore referred to, that the plaintiff could have no other action than upon the special contract, and that at some time he was entitled to recover the actual damage sustained, ‘one hundred dollars [the amount of the note that was to be given], which the defendant promised to pay.’ In the case of Kimpton v. Bronson, 45 Barb.,N.Y., 618, 625, cited with approval in the Kilbourne case, it is said that the word ‘debt’ has been differently defined, owing to the subject matter of the statutes in which it has been used. ‘Ordinarily, it imports a sum of money arising upon a contract express or implied. * * * In its more general sense it is defined to be that which is due from one person to another, whether money, goods or services; that which one person is bound to pay or perform to another.’

The general rule stated in the Kilbourne case has been referred to and followed. See Stone, Timlow & Co., Inc., v. Stryker, 230 Mass. 67, 72, 119 N.E. 655;Williamson v. Williamson, 246 Mass. 270, 273, 140 N.E. 799;Bethlehem Fabricators, Inc., v. H. D. Watts Co., 286 Mass. 556, 563, 190 N.E. 828, 93 A.L.R....