Knowlton v. Fourth-Atlantic Nat. Bank

• Decision Date: 30 June 1928
• Citation: 264 Mass. 181,162 N.E. 356
• Parties: KNOWLTON v. FOURTH-ATLANTIC NAT. BANK et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

264 Mass. 181

162 N.E. 356

KNOWLTON

v.FOURTH-ATLANTIC NAT. BANK et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 30, 1928.

Report from Superior Court, Suffolk County; J. D. McLaughlin, Judge.

Suit by one Chamberlain, for whom on his death was substituted his executrix Jessie A. Knowlton, against the Fourth-Atlantic National Bank and others. To review an interlocutory decree overruling exceptions of all parties and confirming referee's report, defendants appeal. Affirmed in part, and in part reversed, and bill dismissed as to all defendants other than defendant named, and, as to that defendant, case remanded.R. B. Owen, and E. R. Anderson, both of Boston, for plaintiff.

H. R. Bailey and E. B. Church, both of Boston, for defendant Fourth-Atlantic Nat. Bank.

M. F. Weston, of Boston, for other defendants.

PIERCE, J.

The original plaintiff, now deceased, in substance alleges in his bill that in September, 1915, he was the owner of upwards of four million gladioli bulbs of great value; that if they were properly grown and intelligently handled they should have sold at that time at a fair sale for more than $20,000; that under proper handling, growing and harvesting they should have multiplied so that at the time of the filing of the bill (October 31, 1921) if no part of the original stock had been sold, there should have been on hand at least seven million bulbs of all varieties.

The bill further states, in substance, that in December, 1915, the plaintiff was indebted to the defendant, the Fourth-Atlantic National Bank; that in that month the bank made a demand upon him for the sum due, about $2,000; that the bank and the plaintiff then made an agreement by which the bank was to bring a friendly action at law based on the indebtedness of the plaintiff to the bank, which the plaintiff would not contest; that by the terms of the agreement the sheriff was to seize the gladioli bulbs on execution and sell them at auction to the bank or its agent, the defendant Breck; the agent was to take the bulbs, have them properly cultivated at his nurseries, sell and dispose of the surplus or increase in the bulbs for the benefit of the bank; and the bank would advance money to the plaintiff to harvest and care for the bulbs and would make to the plaintiff for three years an allowance of money sufficient to give him a comfortable living; and the agent would return the bulbs to the plaintiff after the bank had received payment of its loan, and interest. It is further alleged that the friendly suit was brought, and the sheriff seized the bulbs and in due time sold them on execution to the defendant Breck for a sum far below their actual value; that the agreement has not been complied with by the bank or by the agents of the bank; and that certain false representations were made by the defendant Breck which induced the plaintiff to execute a bill of sale of a portion of the bulbs.

The plaintiff prays for an injunction; for the declaration of a trust; that Breck, the Breck corporation and the nursery company be compelled to account; for an order that the defendant Breck pay to the bank the amount due the bank as of January 1, 1919; and for a return of the remaining bulbs.

The answers of the four defendants embrace the defences of laches, ultra vires, statute of frauds, res adjudicata, and that the alleged agreement was in fraud of other creditors of the plaintiff. A supplemental bill was filed June 13, 1924, to cover the period from October 31, 1921, to that date. Nothingfurther about this supplemental bill appears in the record and it is deemed to be waived.

The case was referred to a master who filed a report on July 5, 1924, and two supplemental reports; such exceptions as were taken thereto were overruled and the reports were confirmed. On January 18, 1926, two interlocutory decrees were entered. The first ordered a recommittal for a corrected statement of the account against the defendant bank, in accordance with the rulings set forth in the order on exceptions to the master's report, and a direction to the master that interest may be aded on the balance in whosoever's favor it may be from the date of the filing of the bill to the date of the filing of the report.

The material facts found by the master are in substance as follows: The plaintiff, who was an expert in the growth and cultivation of gladioli bulbs, in 1915 had accumulated a considerable stock of them. The Fourth-Atlantic National Bank was authorized to operate a general banking business in Boston in accordance with the banking laws of the United States; it held a note of the plaintiff for $1,800, which, when it became due on May 15, 1915, the plaintiff was unable to pay. Other creditors of the plaintiff were L. P. Hollander and Company for $1,500, John C. Paige and Company for $325, and several farmers for an aggregate of $650. His assets consisted of a horse, a carriage, garden equipment and the bulbs. The fair value of the bulbs was $20,000 although this amount could not have been obtained on a bulk sale. As a result of conferences with the defendant bank concerning his financial condition, an oral contract was entered into on some day between July 4, 1915, and July 20, 1915, by the plaintiff and the defendant Breck acting as the agent of the bank, as follows:

‘The bank was to cause a friendly suit to be brought against Chamberlain on his note held by the bank, which suit was not to be contested; an attachment of the growing crop of bulbs at Wellesley was to be made on the writ; pending a sale of the bulbs on the execution Chamberlain was to be kept in charge of the bulbs and their cultivation and harvesting, under the sheriff, the bank advancing the costs of cultivation and harvesting including Chamberlain'sliving expenses and rent of the farm; after the bulbs were harvested they were to be sold on execution and were to be purchased by Breck or one of his companies for him, as agent for the bank, and the purchaser was to continue the planting, cultivation, harvesting and marketing of the bulbs under Chamberlain's direction until such time as the proceeds from the sale of the bulbs should liquidate the debt to the bank and reimburse it for such advances as it, directly or through Breck and his companies, might have made on account of the plan. When the bank had been paid and reimbursed, the bulbs remaining were to go back to Chamberlain. Chamberlain was to be given, during the time necessary to liquidate the debt and advances, compensation at such rate as should be necessary for his living expenses. No amount was fixed for this item at the time the contract was made. * * * ($18 per week was later fixed as the amount.) There was no time fixed as to the duration of this arrangement, but it was understood that it would take more than one year and probably three to liquidate the debt and advances to be made.’

The defendant Breck corporation was not a party to the agreement between Chamberlain and the bank, either as principal or as agent, and did not act as such in its performance. The nursery company was not a party to this agreement; it acted as agent for the bank in planting, cultivating, harvesting, advertising and selling the bulbs with Chamberlain's assent. Breck was not, as an individual, a party to this agreement; he acted at all times either as the agent for the bank or for the nursery company in its capacity as agent for the bank.

It did not appear that any endeavor was made to join the other creditors of Chamberlain in the plan. It was, however, explained to the Hollander and Paige companies and their approvals obtained. There was no evidence that the plaintiff submitted the plan to his other small creditors, nor does it appear that they were pressing him for payment. Neither the plaintiff nor the bank intended to hinder, delay, or defraud the other creditors, but on the contrary both were animated by proper motives.

In pursuance of the agreement the suit was brought and the bulbs were attached. Judgment was entered on December 27, 1915, with the consent of the plaintiff's counsel. After the attachment the plaintiff was nominally in charge for the sheriff. With the assistance of an employee furnished by the nursery company the plaintiff continued to cultivate the bulbs and later harvested them in the usual manner and stored them. Sometime about November 20, the nursery company sent to Wellesley and took away a substantial portion of the bulbs to its nursery in Lexington; and again, on December 10 and 13, more bulbs were taken to Lexington. The sheriff's return charges him with the sale of bulbs aggregating $1,956.39. There was no evidence that Breck or the nursery company paid the sheriff any money for these bulbs; and no evidence of any other bulbs being similarly disposed of. Sometime after the first lot had gone to Lexington the plaintiff, at the request of Breck, signed an agreement which had been prepared by the bank's attorney, giving the sheriff permission to sell eight hundred and ten thousand bulbs to the nursery company for the sum of $1,290.41. Breck explained the necessity for this agreement to be that the attorney feared that the act of the sheriff in letting the bulbs go might affect the validity of the attachment and this agreement would protect the sheriff. This agreement was in furtherance of the plan under which the parties were acting and the representations made by Breck to the plaintiff in respect thereto were made in good faith. The remaining bulbs were sold on January 6, 1916, at an auction conducted by the sheriff, Breck, acting for the bank, purchased them for $750.

Shortly after the auction the plaintiff went to work regularly at the nursery of the Breck-Robinson Company in Lexington. From April, 1916, until the end of 1916, when he ceased to work at Lexington, he was paid $18 a week; after this date he made no demand for further payments and none were made to him.

The planting season of 1916 was...