Lebowitz v. McPike

• Decision Date: 05 May 1964
• Court: Connecticut Supreme Court
• Parties: Morris LEBOWITZ v. Martin J. McPIKE et al. Supreme Court of Errors of Connecticut

Page 469

201 A.2d 469

151 Conn. 566

Morris LEBOWITZ v. Martin J. McPIKE et al.

Supreme Court of Errors of Connecticut.

May 5, 1964.

Roslyn Z. P. Montlick, New Haven, for appellants-appellees (defendants).

John J. Hunt, Bridgeport, with whom, on the brief, were Ralph J. Lockwood and John F. James, Bridgeport, for appellee-appellant (plaintiff).

Before KING, C. J., MURPHY, ALCORN and COMLEY, JJ., and COTTER, Superior Court Judge.

MURPHY, Justice.

On April 1, 1961, the two defendants executed their joint and several promissory note in the amount of $26,000, payable to the order of the plaintiff on July 15, 1961, with interest together with costs of collection, including reasonable attorneys' fees, in the event the note was not paid at maturity. The defendants defaulted in payment at maturity, and the plaintiff instituted suit on the note by service on the defendants on August 24, 1961. The court, on December 7, 1962, rendered judgment for the plaintiff to recover damages of $26,000 and interest at 6 percent from August 24, 1961. The defendants have appealed. The plaintiff has filed a cross appeal, claiming that he is entitled to interest at the rate specified in the note from the date on which it was made until the date of judgment. The judgment did not include any allowance for attorneys' fees, since no evidence was introduced concerning them.

The findings of fact are not subject to correction. They disclose the successful attempt of the defendant Martin J. McPike to obtain capital with which to equip and operate a laundromat in Stratford so that it could be sold at a profit to both his benefactor and himself. The enterprise did not justify McPike's expectations, and when he was unable to meet his commitments this lawsuit followed. The plaintiff invested $20,000 on September 7, 1960, which was to return $26,000 to him on April 1, 1961, and when it did not the note in suit was executed. The court concluded that the money which the plaintiff provided to finance McPike's idea was not, as claimed by the defendants, a usurious loan, camouflaged to evade the statutes on usury, but was the purchase price of 200 shares of stock in a corporation organized specifically for the purpose of carrying out McPike's business venture.

In September, 1960, McPike was a distributor of laundromat equipment. He acquired a likely location in Stratford for a laundromat which he wanted to equip, operate and then sell at a profit. He needed financing and contacted Ralph J. Lockwood, an attorney in Bridgeport, who interested the plaintiff in McPike's proposed venture. McPike represented that for $20,000 he could purchase needed equipment which, at retail, would cost $26,000, and that the laundromat, after becoming established, could be sold for from $35,000 to $40,000. Under the provisions of a written agreement executed on September 7, 1960, by McPike, his wife Neddy, who is the other defendant, and the plaintiff, the Stratford Laundry Corporation was to be formed. The defendants were to be officers and directors and Lockwood a director. The plaintiff was to be the sole stockholder; he was to have 200 shares of stock, for which he agreed to pay $20,000. The defendants agreed to purchase that stock for $26,000 not later than April 1, 1961. The plaintiff deposited $20,000 to the account of the corporation in a Bridgeport bank, the laundromat was equipped for business, and, thereafter, the defendants participated in its operation while they sought prospects to whom it might be sold. Since the business did not prosper and the prospective buyers did not materialize, the defendants were in no position to buy the plaintiff's stock on April 1, 1961, and they requested more time in which to find a purchaser. As a result, a new agreement, superseding that of September 7, 1960, was entered into by the parties. Under it, the plaintiff sold his stock to the defendants for $26,000 and took in payment the defendants' promissory note for $26,000, payable to the order of the plaintiff on July 15, 1961, with interest at 12 percent a year. Other provisions of the agreement need not be recited here. Upon these facts the court came to its conclusion and rendered judgment.

There can be little doubt that at the outset McPike was seeking a loan. That fact does not, ipso facto, prove that the money furnished by the plaintiff was a loan. Both McPike and his wife are well educated. While there may be much truth in what they had to say about their reliance on Lockwood's representations to them, it would be little short of incredible if they did not understand the two agreements they signed. Whether a transaction in the form of a sale of property with an agreement of purchase is really a sale or a loan depends on the intention of the parties, and that is a question of fact for the trier to determine. Whalley Motors, Inc. v. Kesselman, 145 Conn. 342, 346, 143 A.2d 158; Mutual Protective Corporation v. Palatnick, 118 Conn. 1, 4, 169 A. 917; Douglass v. Boulevard Co., 91 Conn. 601, 604...