Manganaro Drywall, Inc. v. Penn-Simon Const. Co.

• Decision Date: 12 June 1970
• Docket Number: PENN-SIMON
• Parties: MANGANARO DRYWALL, INC. v.CONSTRUCTION COMPANY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 182

260 N.E.2d 182

357 Mass. 653

MANGANARO DRYWALL, INC. v. PENN-SIMON CONSTRUCTION COMPANY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued April 10, 1970.

Decided June 12, 1970.

Morris Michelson, Boston, for defendants.

Joseph M. Corwin and Sally A. Corwin, Boston, for plaintiff.

Before WILKINS, C.J., and SPALDING, CUTTER, REARDON and QUIRICO, JJ.

QUIRICO, Justice.

This is an appeal from an order allowing a motion for judgment on undisputed facts under G.L. c. 231, § 59, as amended through St.1965, c. 491, § 1.

On April 16, 1968, Manganaro Drywall, Inc. (plaintiff), and Penn-Simon Construction Company (defendant) entered into a written contract under which the plaintiff was to perform certain work and furnish certain materials in connection with several buildings being constructed by the defendant. Transamerica Insurance Company (surety) was the surety on a performance and payment bond given by the defendant as security for the defendant's performance of its contract to build the buildings in question and to 'pay all persons who have contracts directly with Principal (defendant) for labor or materials furnished' in the construction of such buildings.

The plaintiff completed performance of its contract by September 1, 1968, and it claimed that a balance of $81,117.36 was due it by the defendant as of that date. On January 15, 1969, the plaintiff and the defendant entered into a written agreement which first recited that the defendant requested the plaintiff to reduce its claim to $78,117.36, to grant the defendant additional time to pay that amount, to waive interest thereon, and to refrain from suing the defendant or the surety to collect the balance. The agreement then provided (a) that the agreed balance was $78,117.36; (b) that it was due and owing on September 1, 1968, for work theretofore properly performed by the plaintiff; (c) that the defendant would pay the agreed balance in instalments of $10,000 on January 20, a like instalment on the fifteenth day of each month from February through July inclusive, and a final instalment of $8,117.36 on August 15, 1969; (d) that the plaintiff would refrain from demanding or suing for the balance 'as long as payments are made in accordance with' the agreed instalment payment schedule; and (e) that '(i)f Penn Simon fails to make any payment to Manganaro as set forth in paragraph 2 (reciting instalment payment schedule), the agreement of Manganaro to refrain from making demand or filing suit against Penn Simon and its surety will cease and the $78,117.36 or any unpaid portion thereof, plus interest on $78,117.36 at the rate of 6% per annum from September 1, 1968, will become immediately due and payable to Manganaro' ¹ (emphasis supplied).

The defendant made payments of $10,000 each under the agreement on or about January 24, February 25, March 28 and April 25, 1969; but it failed to pay the balance of $38,117.36. On June 26, 1969, the plaintiff started an action in contract against the defendant and its surety to recover under the written agreements of April 16, 1968, and January 15, 1969. Count 1 was against the defendant, and count 3 was against the defendant and its surety. Each count sought recovery of the $38,117 total of the four unpaid instalments plus interest on the sum of $78,117 from September 1, 1968. ² The defendant and its surety filed identical answers consisting of a general denial plus pleas of payment and of the statute of limitations.

Thereafter on September 10, 1969, the plaintiff filed a motion alleging that there was no genuine issue of fact but only questions of law in the action and requesting the immediate entry of judgment pursuant to G.L. c. 231, § 59. The motion was accompanied by an affidavit of the plaintiff's president alleging the facts summarized above and further alleging that the defendant owed the plaintiff 'the sum of $38,117.36, plus interest on $78,117.36, at 6% from September 1, 1968,' that '(t)he interest on $78,117.36 from September 1, 1968, through August 31, 1969, is $4,687.04,' and that '(t)he daily interest rate on $78,117.36 at 6% for the period after August 31, 1969, is $13.02.'

The defendant seasonably filed an affidavit signed by its counsel objecting to the motion for judgment on the ground that the 'alleged agreement between the parties hereto * * * (is) unconscionable and void as contrary to public policy' because 'although * * * defendant made payments of $40,000 to the plaintiff before the alleged default on the 15th day of May, 1969 installment, plaintiff now seeks * * * to recover interest on the total amount of the original indebtedness of $78,117.36 retroactive to September 1, 1968 completely ignoring in the computation the payments totaling $40,000.' The defendant's affidavit does not contradict the facts alleged in the plaintiff's affidavit. It demonstrates clearly that the case involves 'no genuine issue of material fact but only (a) question of law.' G.L. c. 231, § 59.

The only question of law thus presented to the trial court was whether the provision of the contract for retroactive interest on the entire sum of $78,117.36 in the event of the defendant's failure to pay any instalment when due was 'unconscionable and void as contrary to public policy.' The trial court decided this question against the defendant by allowing the motion for judgment as to counts 1 and 3. On the record which was before him and is now before us, the ruling was correct.

When the parties signed their compromise agreement of January 15, 1969, containing the now disputed interest provision, the defendant admittedly had owed the plaintiff $78,117.36 since September 1, 1968, and the plaintiff contended that the correct amount was $81,117.36. The plaintiff was entitled to sue the defendant and its surety therefor immediately, and it was entitled to interest from September 1, 1968, on whatever principal amount was due. The defendant sought a reduction in the amount of the claim, protection against legal proceedings, and time within which to pay the principal amount due without interest. The plaintiff agreed to all of these requests in return for which the defendant agreed to pay the principal amount in eight monthly instalments. If it had made the instalment payments as agreed, it would have paid no interest to the plaintiff. But the agreement by which ...