Lawless v. Melone

• Decision Date: 11 March 1966
• Citation: 350 Mass. 440,214 N.E.2d 881
• Parties: John J. LAWLESS v. Vincent MELONE et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 881

214 N.E.2d 881

350 Mass. 440

John J. LAWLESS v.Vincent MELONE et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Feb. 8, 1966.

Decided March 11, 1966.

Arthur Brogna, Boston, for defendants.

Jerome Preston, Jr., Boston (David L. Weltman, Boston, with him) for plaintiff.

Before WILKINS, C. J., and WHITTEMORE, CUTTER, SPIEGEL, and REARDON, JJ.

CUTTER, Justice.

Lawless sought specific performance of an alleged agreement (1) that he and Melone, as joint venturers, would cause the other defendant, San Angelo Wool Processing Company(Processing), a Texas corporation, to be formed; (2) that Lawless and Melone would each own one half of Processing's capital stock; (3) that Lawless would contribute his services in setting up a wool scouring plant in San Angelo Texas; (4) that Melone would perform certain services; and (5) that various other joint activities would take place.In the alternative Lawless seeks damages for the fair value of services allegedly performed by him.

Processing, by stipulation, submitted to the jurisdiction of the Superior Court.A judge of that court, after receiving extensive oral testimony and written evidence, made findings.He concluded in effect (1)'that there was a joint undertaking' of which there had been a breach; (2) that, in the circumstances, specific performance would not be fair; and (3) that Lawless had suffered $61,500 damages by reason of the breach and that $61,500 was the fair value (on the basis of a claim in quantum meruit) of the services performed for the defendants by Lawless.A final decree required that Melone and Processing 'jointly and severally' pay to Lawless this sum with interest from July 1, 1962.The defendants appealed.The evidence is reported.

1.The evidence concerning whether there was a joint venture was conflicting and confusing.The evidence showed prolonged exploration, in which Lawless participated, by Melone and others concerning the possibility of establishing a wool scouring plant in a sheep growing area of Texas.It was obviously the expectation that this plant would prove to be profitable because it would reduce transportation costs and be used conveniently by persons in the Lawless performed substantial services.These included preparing studies of the operation; several trips to Texas; searches for a suitable second-hand scouring train; discussing financing with the Small Business Administration (SBA) and with San Angelo Industries, Inc.(Industries), a local development corporation; watching the dismantling and reassembly of a used wool scouring train; and various other matters.Lawless's testimony, concerning his negotiations and arrangements with Melone, some of the correspondence, and the extent of Lawless's services, in the aggregate, justified the judge's conclusion that there was a joint venture.¹That conclusion necessarily rested largely on oral testimony concerning which questions of credibility were presented.We cannot say that the conclusion that a joint venture existed, reached by the judge, who had opportunity to hear and observe the witnesses, was erroneous.

2.It was undisputed that Melone had neither paid any compensation to Lawless nor issued shares of Processing's capital stock to him.If in fact there was an agreement for a joint venture, Melone had clearly failed to perform that agreement.

3.We think that the trial judge correctly concluded that specific performance should not now be ordered of the joint undertaking which he had found to exist.There was evidence, and the judge found, that after the new plant had been established in July, 1962, Melone had expanded wool trading activities at Processing's San Angelo plant and that there had been a severe cut in the scouring operation.Lawless and Melone had been engaged in litigation with each other and to have each of them own one half of the capital stock in a small corporation would be likely to result in an unsatisfactory and probably unworkable arrangement.Further issues of stock in 1964 to Melone have complicated the situation.Consideration of alternative relief thus was appropriate.

4.Lawless asserts that breach of the joint undertaking occurred in July, 1962, when Lawless unsuccessfully requested Melone to give him Processing stock.The judge was warranted in finding that the joint enterprise of establishing the plant had been 'accomplished by the summer of 1962' and that 'Malone then sought an escape' from transferring stock to Lawless.

The judge then proceeded to determine 'the value of the assets of * * * Processing * * * in July, 1962.'He found (1) that this value was $164,000; (2) that Melone had contributed $34,000 to Processing's capital, plus organizational expenses of $9,000; (3) that Lawless was obligated to pay half of these contributions, less Lawless's unreimbursed expenses of $1,000; and (4) that from any interest to which Lawless is entitled, there must be deducted $20,500.The judge awarded Lawless $82,000 (one half of $164,000) less $20,500, or a net amount of $61,500.²

Under the finding (fn. 1) of a joint venture, Lawless was to receive a one-half interest in Processing, presumably to be represented by one half its capital stock (the normal method of sharing control of a corporation).The value of such a stock interest, of course, would reflect the effect of Processing's heavy indebtedness as well as the value of its assets.Lawless replied 'Yes' when he was asked (a) whether the transaction with Melone was 'a joint venture' and (b) if it were true that he (Lawless 'never expected and would not accept one cent for * * * [his] time and efforts by way of fee.'³The theory thus advanced was that the measure of damages was the fair market value in July, 1962, of one half the capital stock of Processing, giving due weight to all elements then existing, speculative or otherwise, affecting such value.This value the trial judge seems to have determined on the basis of what he regarded as Processing's asset value.

We are not convinced that there was proper evidential basis for finding that in July, 1962,...