Kagan v. Levenson

• Decision Date: 04 May 1956
• Citation: 334 Mass. 100,134 N.E.2d 415
• Parties: , 62 A.L.R.2d 704 Sidney J. KAGAN, trustee in bankruptcy, v. Benjamin B. LEVENSON and others.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 415

134 N.E.2d 415

334 Mass. 100, 62 A.L.R.2d 704

Sidney J. KAGAN, trustee in bankruptcy, v. Benjamin B. LEVENSON and others.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 7, 8, 1956.

Decided May 4, 1956.

Bernard P. Rome, Julius Thannhauser, Boston, for plaintiff.

Morris Michelson, Boston, Abraham Zintz, Cambridge, for defendant Rodriques.

Before QUA, C. J., and RONAN, SPALDING, COUNIHAN and WHITTEMORE, JJ.

SPALDING, Justice.

This is a suit by the trustee in bankruptcy of Boston-New York Transportation Co., Inc., hereinafter called the company, to recover the sum of $18,000 from the defendant Levenson. This sum represents the balance remaining from the proceeds of a sale (prior to the bankruptcy) of the assets of the company to the Quinn Freight Lines, Inc., for $125,000. Jesuino Rodriques and his wife Maria who were also parties defendant included a counterclaim in their answer under which they asserted a claim to the $18,000 by reason of an alleged chattel mortgage held by them on the property of the company. The judge made findings of fact and the evidence is reported.

The relevant facts are these. The company, a Massachusetts corporation, was engaged in the trucking business. Its president was Paul Olivier, and Manuel Cabral was its treasurer. Both Olivier, and Cabral were directors, as were also Jesuino Rodriques, Alfred Santos, and Frank Santos. Of the 100 shares of stock issued by the Company Jesuino Rodriques owned 22 shares. On July 26, 1950, an agreement was executed under which the company agreed to sell its assets to Quinn Freight Lines, Inc., for $125,000. This agreement was approved by the interstate commerce commission on January 7, 1952. The negotiations for the sale had been conducted by the defendant Levenson who had been counsel for the company. The proceeds of the sale were turned over to Levenson 'for disposition for payment of bills of the company which might have been chargeable to the * * * [purchaser].' As of April 1, 1952, Levenson had paid out all of the $125,000 except $18,000 which he held as a stakeholder to await the determination of the conflicting claims against the fund. After the present suit was commenced he paid the money into court and a decree was entered dismissing the bill as to him.

The present controversy is between the company's trustee in bankruptcy and the defendants Jesuino and Maria Rodriques who, as stated above, assert a claim to the fund by reason of an alleged chattel mortgage in their favor. The facts with respect to this aspect of the case will be stated later in the opinion. The judge found that the fund belonged to the plaintiff and a decree was entered ordering the clerk of court to pay the fund to the plaintiff, and it was further ordered that the counterclaim of Jesuino and Maria Rodriques be dismissed. Jesuino and Maria, who will hereinafter be called the defendants, appealed.

The defendants argue that the statute of limitations, which was pleaded, bars the plaintiff's suit. Section 11 of the bankruptcy act, U.S.C. (1952 ed.) Title 11, § 29, sub. e [11 U.S.C.A. § 29, sub. e] provides that a 'receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy.' The company was adjudicated a bankrupt on April 22, 1952, and the present suit was commenced in November, 1954, more than two years later. It is obvious from the wording of the statute just quoted that where a cause of action is grounded on State law the State statute of limitations applies, and it has been so held. Austrian v. Williams, 2 Cir., 198 F.2d 697; MacLeod v. Kapp, D.C.S.D.N.Y., 81 F.Supp. 512. Compare Herget v. Central National Bank & Trust Co., 324 U.S. 4, 65 S.Ct. 505, 89 L.Ed. 656.

This brings us to the question of the nature of the plaintiff's claim. The defendants take the position that the plaintiff's claim is in essence one for conversion and hence sounds in tort. If that contention is correct then the present suit would be barred because not commenced within two years from the date of adjudication. The present suit, of course, is grounded on State law, but the plaintiff would not be entitled to any period extending beyond the two year period fixed by § 11 of the bankruptcy act because under our statute of limitations an action of tort is barred unless commenced within two years. G.L.(Ter.Ed.) c. 260, § 2A, inserted by St.1948, c. 274, § 2. This statute would apply in equity as well as at law. Ballentine v. Eaton, 297 Mass. 389, 394, 8 N.E.2d 808. But if the suit is founded on a claim sounding in contract it would not be barred for six years and the present suit would be seasonable. G.L.(Ter.Ed.) c. 260, § 2, as appearing in St.1948, c. 274, § 1.

We are of opinion, as was the trial judge, that the suit here is based on a claim sounding in contract. In essence the claim is one for money had and received. The usual form of action to recover from another money which in equity and good conscience he is not entitled to keep is in contract. Vieira v. Menino, 322 Mass. 165, 168, 76 N.E.2d 177. Sherman v. Werby, 280 Mass. 157, 160, 182 N.E. 109; Nelson v. Piper, 213 Mass. 531, 533, 100 N.E. 749; Wiley v. Connelly, 179 Mass. 360, 365, 60 N.E. 784. The defendant Levenson was in the position of a stakeholder and he held the fund in question only to pay it to the person rightfully entitled to it. He was in no sense a converter. It follows that the plaintiff's claim is not barred.

The defendants under their counterclaim assert a right to the $18,000 paid into court by Levenson on the ground that this arose from the sale of the company's assets on which they held a chattel mortgage. A chattel mortgage running to the defendants dated June 14, 1949, and purporting to have been executed by the company by Paul Olivier as president and Manuel Cabral as treasurer, was introduced in evidence. It was recorded on June 20, 1949, in the clerk's office of the city of Chelsea where the company had its principal place of business. The consideration stated in the mortgage was $15,000. No mortgage note was introduced. Notwithstanding the amount stated in the mortgage the defendants are seeking the entire amounts of the fund, $18,000. It is their contention that they lent from time to time sums aggregating $17,100 and the balance represents an interest charge of $900; the judge found that the defendant Maria never gave any consideration to the company. He also found that the only loan to the company by Jesuino was one for $2,000 on March 3, 1949. On this finding, which is amply supported by the evidence, Jesuino would be entitled to a lien against the fund only to the extent of the debt, $2,000. Hannan v. Hannan, 123 Mass. 441; Saunders v. Dunn, 175 Mass. 164, 55 N.E. 893; Am.Law of Property, § 16.69. Tiffany on Real Property, 3d Ed., § 1401.

But another finding of the trial judge cuts deeper and justifies his ultimate conclusion that the defendants are not entitled to any portion of the fund. The judge found that neither Olivier nor Cabral had authority to execute either the mortgage or any note in connection therewith on behalf of the company. This finding cannot be said to be plainly wrong and is fatal to the defendants' counterclaim.

There was oral testimony by Cabral that there had been a vote of the company authorizing the giving of the mortgage to the defendants. However, no official record of such a vote was produced and in fact during a previous examination of Cabral in connection with the bankruptcy proceedings of the company he stated that he did not know whether there was a vote or not. It is true that the authority to execute the mortgage need not be established by a formal vote of the company. The execution of the mortgage by its president and treasurer 'with the knowledge and concurrence of the directors, or with their subsequent and long continued acquiescence, may properly be regarded as the act of the corporation.' Sherman v. Fitch, 98 Mass. 59, 64. But nothing less than that would suffice. It is not within the implied powers of an officer of a business corporation to execute and deliver a mortgage of a substantial portion of its property. ¹ Horowitz v. S. Slater & Sons, Inc., 265 Mass. 143, 147, 164 N.E. 72; England v. Dearborn, 141 Mass. 590, 592, 6 N.E. 837; Selden Truck Corp. v. Selden Truck Service Co., 257 Mass. 58, 62, 153 N.E. 259; De La Vergne Refrigerating Machine Co. v. German Savings Institution, 175 U.S. 40, 53, 20 S.Ct. 20, 44 L.Ed. 65; Maryland Finance Corp. v. Duvall, 4 Cir., 284 F. 764, 766-767. Whether or not there...