Irving Levitt Co., Inc. v. Sudbury Management Associates, Inc.

• Decision Date: 28 November 1984
• Citation: 471 N.E.2d 387,19 Mass.App.Ct. 12
• Parties: IRVING LEVITT CO., INC. v. SUDBURY MANAGEMENT ASSOCIATES, INC.; John L. Trevisani et al. 1 interveners.
• Court: Appeals Court of Massachusetts

Page 387

471 N.E.2d 387

19 Mass.App.Ct. 12

IRVING LEVITT CO., INC. v. SUDBURY MANAGEMENT ASSOCIATES, INC.; John L. Trevisani et al. ¹ interveners.

Appeals Court of Massachusetts Suffolk.

Argued Sept. 19, 1984.

Decided Nov. 28, 1984.

Linda A. Serafini, Boston, for Sudbury Management Associates, Inc., & others.

Laurence A. Mills, Boston, for Irving Levitt Co., Inc.

Before DREBEN, KAPLAN and FINE, JJ.

KAPLAN, Justice.

This litigation began in 1978 as an action in Superior Court by Irving Levitt Co., Inc. (Levitt), a meat supplier, against Sudbury Management Associates, Inc. (Sudbury), owner of a restaurant, to collect upon a promissory note made by Sudbury in favor of Levitt, and to recover the price of merchandise sold by Levitt to Sudbury. The latter's answer to the amended complaint set up a number of defenses. The action took its course with discovery and other matters. In May, 1980, Levitt applied for attachment of real property allegedly owned beneficially by Sudbury although standing formally in the name of "Sudbury Associates," a partnership consisting of three members of the Trevisani family. Upon supporting and opposing affidavits, a writ of attachment for the amount of $66,000 issued in June, 1980, and was served and placed on record the following month.

Further time passed inconclusively, and at last, in October, 1980, Levitt moved to force the case to trial. The motion was granted and the action was ordered to the jury calendar for December, 1980 (Sudbury having previously demanded a jury). Evidently Sudbury failed to appear for trial as required. A judge of the Superior Court declared Sudbury in default and on January 23, 1981, entered a "special" judgment against it pursuant to G.L. c. 235, § 24, as amended by St. 1975, c. 377, § 121 (quoted in part in the margin). ² This judgment reflected the fact that on December 19, 1980, Sudbury had filed a voluntary petition in bankruptcy (for "reorganization" under chapter 11). The judgment recited, following the wording of § 24, that an attachment had issued more than four months before the bankruptcy and that, except for the bankruptcy, Levitt would be entitled to judgment for the amount claimed; wherefore judgment now entered for that amount, $49,704, against Sudbury, together with interest and costs.

Later in January, 1981, Sudbury filed a suggestion of bankruptcy with a demand that the action be continued pending the bankruptcy. This was met by Levitt's motion to strike the suggestion, which was denied. Sudbury then moved in April, 1981, to vacate the special judgment on the ground that the intervening bankruptcy deprived the Superior Court of jurisdiction to enter it, citing Mass.R.Civ.P. 12(h)(3), 365 Mass. 757 (preservation of defense of lack of subject matter jurisdiction), and 60(b)(4), 365 Mass. 829 (1974) (relief from void judgment).

The motion to vacate remained pending, not acted upon, until September, 1983. In the meantime Sudbury had "removed" the action to the bankruptcy court pursuant to 28 U.S.C. § 1478(a) (Supp.II 1978). ³ It was not until January, 1983, that the bankruptcy judge remanded the action to the Superior Court "for prosecution and determination." ⁴ In September, 1983, a judge of the Superior Court, acting upon the deferred motion to vacate the special judgment, denied it. This denial is before us on appeal by Sudbury. ⁵

It remains to take up the attachment. In August, 1981, the partnership "Sudbury Associates" moved to intervene in the Superior Court action for the purpose of moving to vacate the attachment; the partnership was claiming that the real property was not beneficially owned by Sudbury but rather was owned beneficially as well as nominally by the partnership, and that there was no substance in any claim by Levitt that the property had been put in the name of the partnership as a means of impeding recourse to it by creditors of Sudbury. Intervention was allowed. After the remand, the motion to vacate the attachment was heard and denied, also in September, 1983, and this, too, is sought to be reviewed here.

1. The judge erred in denying Sudbury's motion to vacate the special judgment against it. Upon the filing of Sudbury's petition in bankruptcy, Levitt's action was stayed automatically by force of the explicit, sweeping provisions of § 362 of the Bankruptcy Code of 1978, 11 U.S.C. § 362 (Supp.II 1978). ⁶ See In Re Smith Corset Shops, Inc., 696 F.2d 971, 976 (1st Cir.1982); Ellison v. Northwest Eng. Co., 707 F.2d 1310 (11th Cir.1983); United Northwest Federal Cred. Union v. Arens, 233 Kan. 514 (1983). Compare Marine Midland Bank v. Herriott, 10 Mass.App. 743, 746-747, 412 N.E.2d 908 (1980), with Association of St. Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 448-449 (3d Cir.1982). The Superior Court was deprived of power to go further; thereafter it lacked subject matter jurisdiction, and the judgment it entered was "void." See In Re Smith Corset Shops, Inc., supra, citing Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (1940). Sudbury applied seasonably under rule 60(b)(4) to vacate the judgment for that reason. ⁷

The fact that the judgment involved was "special" under G.L. c. 235, § 24, makes no difference; the automatic stay forbade its making and entry. A § 24 judgment would fix the amount of the debt owed to Levitt and allow Levitt to proceed as far as it was entitled against the attached property, any balance to be provable ordinarily in the bankruptcy. There are, indeed, plenty of cases in the courts of this Commonwealth in which judgments were obtained by creditors notwithstanding their debtors' bankruptcies, but the background must be understood. Under the bankruptcy act of 1898, the filing of a petition in bankruptcy had the effect of an automatic stay of certain litigations against the prospective bankrupt, but only until the adjudication in bankruptcy. For a period thereafter, a State court was not barred from proceeding with an action against the bankrupt, the result, where suitable, finding its place ultimately in the bankruptcy as a provable claim. Whether to go forward with the action or desist from it was discretionary with the State court, subject, no doubt, to the power of the bankruptcy court, for sufficient reason, to impose a post-adjudication stay. See the text of § 11(a) of the Bankruptcy Act of 1898, 11 U.S.C. § 29(a) (1976), describing the automatic stay. ⁸ It was within the discretionary leeway after adjudication that our courts applied the predecessor of G.L. c. 235, § 24, or the cognate § 25 dealing with instances where bond had been given to dissolve attachment. For the practice, see the opinion of Brewster, J., in Manufacturer's Fin. Corp. v. Vye-Neill Co., 46 F.2d 146, 147-148 (D.Mass.1930), aff'd, 62 F.2d 625, 628 (1st Cir.), cert. denied sub nom. Kane v. Manufacturers' Fin. Corp., 289 U.S. 738, 53 S.Ct. 657, 77 L.Ed. 1486 (1933); and Rosenthal v. Nove, 175 Mass. 559, 56 N.E. 884 (1900); Feigenspan v. McDonnell, 201 Mass. 341, 346, 87 N.E. 624 (1909); Rogers v. Abbot, 206 Mass. 270, 92 N.E. 472 (1910); Smith v. Miller, 226 Mass. 187, 188, 115 N.E. 243 (1917); Berry Clothing Co. v. Shopnick, 249 Mass. 459, 144 N.E. 392 (1924). ⁹

The present bankruptcy law, as indicated, has no such tolerance for the State courts; the automatic stay takes hold from the time the petition is filed, and persists. This, however, need not nullify a statute like G.L. c. 235, § 24, for it would have been in order for a creditor in Levitt's position, if so advised, to apply to the bankruptcy court to lift the automatic stay pro tanto. ¹⁰ It did not do so; on the contrary, the bankrupt caused the action to be removed to the bankruptcy court.

With the action remanded, and the special judgment vacated as we shall require, the matter may be resumed in Superior Court on the merits. ¹¹

2. The order denying the application to vacate the attachment, and thereby continuing it, does not have the finality required for an appeal. See W.T. Grant Co. v. Haines, 531 F.2d 671, 678 (2d Cir.1976), and cases cited; Brastex Corp. v. Allen Intl., Inc. 702 F.2d 326, 329-330 (2d Cir.1983); Weiss v. Balaban, 315 Mass. 390, 393, 53 N.E.2d 83 (1944). Cf. Orlov v. MacNeil Bros., 335 Mass. 768, 141 N.E.2d 280 (1957). Upon the vacation of the special judgment, the attachment continues in its provisional status and remains under the control of the court. See In Re Posner, 700 F.2d 1243, 1245 (9th Cir.1983). As far as appears, the question of the ownership of the property attached has not been pursued in the Superior Court action beyond the submission of conflicting affidavits.

In conclusion, we observe that there has been mention by the parties of happenings in the bankruptcy court that might have a bearing on the outcome of the action or of the proceedings on the attachment. We take no notice of any such transactions. If relevant they should be brought to the attention of the Superior Court.

The action, which for all the world looked like a simple collection case on a promissory note and a bill for merchandise, has now lasted more than six years. It is an example of how the system allows a determined fox to contrive to keep ahead of the hounds. Perhaps this serves some social purpose. However the time is ripe and overripe for disposition, and in that connection we cast a quizzical eye at several defenses interposed by the counsel who wrote the answer to the amended complaint. ¹² It may be, and we prefer to assume, that counsel were faithful to their public obligation under Mass.R.Civ.P. 11(a), 365 Mass. 753 (1974). Yet we think it appropriate to remind current counsel that the obligation continues through the action.

The special judgment is vacated. The appeal from the order denying vacation of the attachment is dismissed.

So ordered.

1 Olga Trevisani and Robert A. Trevisani; the three comprising a partnership called "Sudbury Associates."

2 "If a plaintiff would be...