Makino, U.S.A., Inc. v. Metlife Capital Credit Corp.

• Decision Date: 30 March 1988
• Docket Number: No. 86-1240,86-1240
• Citation: 518 N.E.2d 519,25 Mass.App.Ct. 302
• Parties: MAKINO, U.S.A., INC. v. METLIFE CAPITAL CREDIT CORPORATION, et al. 1
• Court: Appeals Court of Massachusetts

Page 519

518 N.E.2d 519

25 Mass.App.Ct. 302

MAKINO, U.S.A., INC. v. METLIFE CAPITAL CREDIT CORPORATION, et al. ¹

No. 86-1240.

Appeals Court of Massachusetts Middlesex.

Argued Oct. 9, 1987.

Decided Jan. 21, 1988.

Further Appellate Review Denied March 30, 1988

Brian W. LeClair (Robert C. Cadle, Boston, with him), for Metlife Capital Credit Corp. Joseph D. Steinfield (Frances S. Cohen, Boston, with him), for plaintiff.

Before ARMSTRONG, DREBEN and KASS, JJ.

KASS, Justice.

On January 20, 1981, Makino, U.S.A., Inc., a distributor for its Japanese parent, delivered a "machining center"--it made parts for other machines--to Richard C. Moran, who operated a machine shop in Everett. The purchase price was $187,223. Moran, the buyer, paid for the Makino machine through financing arrangements with Litton Industries Credit Corporation (Litton). ² Litton disbursed the actual dollars not to Moran or Makino, but to Kensington Associates, Inc. (Kensington), a dealer for Makino. Kensington never remitted to Makino, thus setting the stage for the dispute between Makino and Litton, one between relative innocents in that Kensington or its sole stockholder, William J. Terry, pocketed the money. Neither Kensington nor Terry, apparently, can satisfy a judgment (see note 3, below).

On the basic common law claims, a jury returned a verdict for Makino against Litton of $186,653, i.e., Litton's conduct had engineered delivery of the machine and misdelivery of the funds. A judge of the Superior Court, dealing with aspects of Makino's complaint made under G.L. c. 93A, doubled the damages and awarded attorney's fees of $244,000. After prejudgment interest and costs were added, the judgment entered against Litton came to $715,440.09. Litton appeals. ³

It is readily apparent that the c. 93A components constitute the major portion of Makino's judgment. A primary question to be resolved, therefore, is whether a c. 93A claim can lie under the facts presented. We state those facts, based on the trial judge's findings, with occasional supplementation from undisputed portions of the record.

Moran became interested in the Makino MC-60 machine at a trade show in Chicago. In response to a business card he had left as an expression of that interest, Moran heard from a Makino dealer located in Peabody. That dealer was Kensington, operating through its president and sole stockholder, Terry. Hard upon Terry's visit to Moran's shop there followed an unsolicited call from Richard Hughes, the manager of Litton's Boston area office. Hughes turned up on Moran's doorstep to explore prospects for having Litton finance Moran's acquisition of the Makino machine.

Litton offered to give an equipment lease or to advance money to have Moran buy the machine in return for a note and a security agreement. Moran preferred the latter, i.e., an outright purchase, so that he might reap an investment tax credit. Indeed, Moran wanted to take the credit beginning in 1980, although the machine could not be delivered until some time in January, 1981. This was a problem that Hughes thought they could "work around."

The solution contrived was to have Moran sign and deliver to Hughes on December 4, 1980: (1) a promissory note for $166,223, the amount borrowed; (2) a security agreement giving Litton a security interest in the machine; (3) a Uniform Commercial Code financing statement; (4) a "pay proceeds letter" which directed Litton to pay the proceeds of the loan plus $21,000 of "front money" advanced by Moran to Kensington; and (5) an "acceptance certificate" that acknowledged the machinery had "in fact been received" by Moran. That same day Moran signed a purchase order for the machine, directed to Kensington, which stated the machine was "wanted" on January 12, 1981. Moran and Hughes recognized that the simultaneous order and receipt of a large machine with a $187,223 price tag was likely to tax even a willing suspension of disbelief. The pay proceeds letter and acceptance certificate were, therefore, dated December 22, 1980. If the papers were less palpably false, the idea seemed to be, they would be more credible.

Moran suffered a pang of doubt. The machine had to come from Japan. What if the ship should sink? Hughes reassured Moran that the check would not be cashed nor the papers released until the machine was delivered to Everett and installed. Hughes found his promise inexpedient and promptly sent Moran's $21,000 check to Litton's regional office in Stamford, Connecticut, and the check, as promptly, bounced because Moran had seen no need to cover it immediately.

On December 22, 1980, before the machine arrived in the United States, and, indeed, before Makino had approved Moran's purchase order, Hughes surrendered Moran's financing documents to Terry, who had come to Hughes's house for the purpose. Hughes further accommodated Terry by telephoning Litton's regional office in Connecticut and directing that the loan proceeds be paid to Terry upon receipt of the financing documents. Terry drove to Stamford the next day, delivered the papers and received Litton's check for $187,223.

Up to this point the actual vendor was relegated to the periphery. Not until a week later, on December 30, 1980, did Terry travel to Chicago and present Moran's purchase order to Makino at the latter's office. Makino declined to accept the purchase order because it ran to Kensington as vendor. There had been too many instances of failure by Kensington to remit sale proceeds. Makino insisted upon a purchase order from Litton running directly to it. Terry solved the purchase order problem in part by pasting a Makino label over Kensington's name on the purchase order and resubmitting it. Suffice it to say, Terry did not inform Makino that the money had already passed into his hands.

Makino's vice-president, Hiromi Osumi, attempted to reach Hughes (whose name he had obtained from Terry's secretary). Osumi's secretary placed calls to Hughes on January 13th at 10:55 A.M. and 12:17 P.M. Hughes returned the call to Osumi at 2:09 P.M. but Hughes first called Terry twice, at 11:45 A.M. and at 2:01 P.M. The later call lasted for six minutes. In the ensuing telephone conversation with Osumi, Hughes said he understood Makino was the vendor and assured Osumi that Litton would pay Makino directly for the machine to be shipped to Moran. Hughes withheld from Osumi the critical information that Terry had received the cash for the machine weeks before. Telephone calls by Hughes to Makino made on January 14th and 20th reinforced: (1) the cover up about where the cash supplied by Litton had come to roost and (2) the proposition that Litton would pay Makino. Throughout this period Hughes kept Terry informed about his conversations with Osumi. There were to be no embarrassing slips.

On January 20, 1981, the machine arrived at Moran's shop. Osumi put a call in to Hughes. Once again Hughes took the precaution of first talking to Terry before calling Osumi back. In that conversation Hughes confirmed that Litton would pay Makino when Moran signed an acceptance certificate signifying completion of installation. That was doubly misleading: first, as to where the loan funds were and, second, in failing to disclose that Litton had been in possession of an acceptance certificate for almost two months.

In February, 1981, as Makino pressed for payment, the facts of the affair unravelled.

1. Availability of relief under c. 93A. An action under G.L. c. 93A does not lie--and did not lie when the salient events occurred--unless the actions or transactions claimed to violate c. 93A occurred "primarily and substantially within the commonwealth." G.L. c. 93A, § 3(1)(b), as appearing in St.1967, c. 813, § 1, and see G.L. c. 93A, § 11, as amended by St.1986, c. 363, § 4. ⁴ See Burnham v. Mark IV Homes, Inc., 387 Mass. 575, 580, 441 N.E.2d 1027 (1982); Bushkin Associates, Inc. v. Raytheon Co., 393 Mass. 622, 637-639, 473 N.E.2d 662 (1985); Goldstein Oil Co. v. C.K. Smith Co., 20 Mass.App.Ct. 243, 246, 479 N.E.2d 728 (1985).

Litton urges that the only acts by Hughes (we consider later whether Litton is bound by Hughes's conduct) which were deceptive were his statements on January 13, 1981, over the telephone from Wakefield (where Litton's area office was located) to Makino in Chicago. Were that all, the case would stand close to Bushkin Associates, Inc. v. Raytheon Co., 393 Mass. at 638, 473 N.E.2d 662, in which a Raytheon officer, sitting in Massachusetts, allegedly made false statements in a telephone conversation to Bushkin in New York. Those statements caused Bushkin to provide business information useful to Raytheon. The unfair or deceptive statements were received and acted upon in New York and Bushkin's loss, if any, was incurred in New York. In such circumstances, the court held, the defendant had met its burden of showing that acts violative of the statute had not occurred primarily or substantially in Massachusetts. Ibid. By analogy, Litton argues, Makino incurred a loss when, on the basis of Hughes's misrepresentations, it acted outside Massachusetts by shipping the machine to Moran.

It reads too much into the Bushkin opinion to have it stand for the proposition that the place of injury or loss determines whether actions or transactions occurred primarily and substantially within the Commonwealth. Rather, the decision in Bushkin flowed from the scantiness of activity in Massachusetts, including sustaining of the loss. As we observed in Goldstein Oil Co. v. C.K. Smith Co., 20 Mass.App.Ct. at 249 n. 7, 479 N.E.2d 728, if the place of injury were the only test, practically no case involving a Massachusetts plaintiff would be exempt from c. 93A status, no matter how negligible the defendants' business activity in this State. Such a result would effectively nullify the words "primarily and substantially within the Commonwealth," which imply some process of measuring and weighing. Accordingly, the court...