Genesco, Inc. v. Koufman

Decision Date28 May 1981
Citation418 N.E.2d 625,11 Mass.App.Ct. 986
PartiesGENESCO, INC. v. Manuel M. KOUFMAN et al. 1
CourtAppeals Court of Massachusetts

William H. Baker, Boston, for plaintiff.

Richard M. Zinner, Boston, for defendants.

Before HALE, C. J., and CUTTER and PERRETTA, JJ.


This case grows out of a bill for declaratory and other relief filed by Genesco, Inc. (Genesco), on August 31, 1970. From the pleadings and documents filed at various times in the course of these protracted proceedings, the following paragraphs (numbered to facilitate cross-references) state relevant facts which appear to have been established.

1. On May 24, 1962, Kleven Shoe Sales Co., Inc. (Kleven), to which Genesco is a successor, leased from Koufman (for a term of twenty-five years) land in North Brookfield on which Koufman undertook to erect a building for Kleven. On July 25, 1962, Koufman assigned the lease (hereafter the 1962 lease) to the National Shawmut Bank of Boston, as security for a first mortgage on the North Brookfield property. The bank, on December 10, 1962, assigned the mortgage and the 1962 lease to the Prudential Insurance Company (Prudential, see note 1). On November 26, 1963, Koufman conveyed his interest in the North Brookfield property and in the 1962 lease to Northeast Properties, Inc. (Northeast), of which he was president and treasurer. On April 7, 1969, Northeast assigned its interest in the 1962 lease to Atlas Capital Corporation (Atlas) to secure a second mortgage of that date. In the event of a default on the second mortgage, Atlas was given broad power to operate and repair the leased property from the rents. The building on the premises had been completed about December 10, 1962.

2. Genesco claims that, prior to November 8, 1963, and continuing through 1969, the roof, outside walls, and foundations of the new building deteriorated. Notice of the need of repairs was given to Koufman on August 1, 1968, and at various times thereafter. Despite the provisions of the 1962 lease requiring essentially that the lessor make structural repairs, Koufman and Northeast failed to make the repairs. Genesco notified Koufman and Northeast that, if the repairs were not made, Genesco would make them and seek reimbursement from Koufman. Genesco then hired its own contractor and the repairs were made at a cost of $17,879.99. Genesco demanded reimbursement, which Koufman refused. By March 25, 1971, Genesco's expenditures for repairs had risen to $39,250.64.

3. Genesco then filed (August 31, 1970) the proceeding, already mentioned, seeking among other things (a) to have Koufman or Northeast ordered to reimburse Genesco for the repairs and to make other repairs, and (b) permission to withhold rent until a sufficient sum had been accumulated to cover the repair costs.

4. In April, 1969, almost immediately after Atlas had received its second mortgage on the North Brookfield property and the assignment (subject to Prudential's prior security interest) of the lessor's interest in the 1962 lease, Atlas gave notice to Kleven and Genesco (assented to by Northeast and Koufman) that "all rents and other payments" under the 1962 lease were to be paid to Atlas. Pursuant to this notice, Genesco, until March, 1971, paid its rent of $10,500 a month to Atlas. From April to November, 1971, Genesco (claiming that it had been constructively evicted by reason of the want of repair) did withhold $2,200 from each monthly rent payment. It continued, however, to send to Atlas $8,300 each month "for use and occupancy," to be transmitted to Prudential as first mortgagee.

5. Atlas, under its second mortgage note, dated April 7, 1969, and due in five years, was entitled to be paid by Northeast $2,209.80 in each month except April. In April of 1970-1973, Atlas (each year) was to be paid $10,792.20, apparently made up of the regular monthly payment of $2,209.80 plus $8,582.40 as a special annual "balloon" payment. Because the total monthly rent paid by Genesco to Atlas was only $10,500 (of which about $8,300 was paid by Atlas to Prudential on the first mortgage), to meet the April balloon payment of $8,582.40 each year, Northeast (or Koufman) obviously would have to pay that sum to Atlas from sources other than the rent.

6. Atlas did not receive its April, 1970, "balloon" payment, but made then no effort to foreclose its second mortgage on the North Brookfield property while it was still receiving its share ($2,209.80) of the basic monthly rental. In April, 1971, however, Genesco began to withhold $2,200 from its monthly payments of rent. On July 19, 1971, Atlas made entry as a step in foreclosing it second mortgage. At the foreclosure sale, Atlas bought in the North Brookfield property for $25,000. At some time Genesco did move out of the North Brookfield property claiming constructive eviction, and later did sublease the property.

7. On November 20, 1972, Genesco, Atlas, and Prudential made a settlement of controversies which had arisen among them. It was agreed, among other matters, (1) that prior to March 21, 1971, Genesco had spent $39,250.64 for repairs to the building, (2) that Genesco would waive all claims of constructive eviction, and (3) that Genesco would assign to Atlas "all of its right, title, and interest in all claims which it has against ... Koufman and/or (sic) Northeast ... on account of all matters alleged" in the present case. This assignment was made on November 20, 1972. On November 28, 1972, Genesco sent to Atlas a check for the balance ($4,749.36) of the withheld rents above the repair cost ($39,250.64).

8. Koufman and Northeast on December 18, 1970, filed answers denying liability essentially on the grounds (1) that blasting near the property by the town of North Brookfield had caused the damages which necessitated repairs, and (2) that Genesco and its insurers should assume responsibility for these. Northeast also included a counterclaim asserting that Genesco was liable to it for damage to the building. The case thereafter lay dormant until September 30, 1976, when it was dismissed with prejudice for want of prosecution. Upon Northeast's motion, the judgment of dismissal was vacated on October 25, 1976. Northeast then obtained leave on March 7, 1977, to add two counterclaims (a) for the rent withheld on and after April, 1971, and (b) for the loss of Northeast's equity because of Atlas's foreclosure. Genesco at the same time was allowed to amend its complaint to assert (against Koufman) claims for breach of warranty, and (against both Koufman and Northeast) claims for negligent design and construction. A further motion to amend their answer and counterclaims was filed by Northeast and Koufman on November 28, 1978, after the case had been placed on the trial list on several occasions. The proposed further amendment would have alleged in effect that Genesco, knowing of the terms of both mortgages, withheld rent to induce one or both mortgagees to foreclose. This conduct was asserted to be an intentional interference with contractual relations. This motion to amend was denied on March 23, 1979.

9. Motions for summary judgment (by Koufman and Northeast) on the amended Genesco complaint against them, and (by Genesco) on the amended counterclaims against...

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