Matz v. Miami Club Restaurant, 24481.

• Decision Date: 05 October 1937
• Docket Number: No. 24481.,24481.
• Citation: 108 S.W.2d 975
• Court: Missouri Court of Appeals
• Parties: MATZ v. MIAMI CLUB RESTAURANT et al. (MANEWAL BREAD & BAKING CO. et al., Interveners).

108 S.W.2d 975

MATZ v. MIAMI CLUB RESTAURANT et al. (MANEWAL BREAD & BAKING CO. et al., Interveners).

No. 24481.

St. Louis Court of Appeals. Missouri.

October 5, 1937.

Rehearing Denied October 19, 1937.

Appeal from St. Louis Circuit Court; James F. Green, Judge.

"Not to be published in State Reports."

Suit in equity by Joseph Matz against the Miami Club Restaurant and others, wherein the Manewal Bread & Baking Company and others filed intervening petitions. From a judgment for plaintiff, defendants appeal.

Affirmed.

Anthony Canzoneri and William R. Schneider, both of St. Louis, for appellants.

Sylvan Agatstein, of St. Louis, for respondent.

SUTTON, Commissioner.

In April, 1926, a partnership composed of defendants Frank Merlo and Modesto Fabbri engaged in the restaurant business on North Grand avenue in the city of St. Louis under the name of Miami Club Restaurant. The restaurant equipment, furniture, and fixtures were installed at an original cost of approximately $30,000, of which $10,000 was paid in cash and a promissory note for the balance of $20,000 was secured by a purchase-money chattel mortgage upon the furniture and equipment. This note, paid in installments, was fully paid and discharged in January, 1931, and the chattel mortgage released. This left the property free of mortgage lien. In 1926 the partnership employed one Salvatore Avellone, a public accountant, to "install a system of bookkeeping for their business and to thereafter take care of it." Avellone had charge of the books and records of the business, devoting about one day a week to the work. In 1931 and the first half of 1932 creditors were urgently pressing demands against the partnership. Avellone says that some time in 1931 Fabbri asked him "if I did not think it was wise to have a mortgage on the place to protect it in case something would happen," and that he (Avellone) advised Fabbri "to consult a lawyer." On January 5, 1932, the partners executed a chattel mortgage to defendant Moretta upon the restaurant furniture, equipment and fixtures, originally purchased in 1926 and described in the purchase money chattel mortgage discharged in January, 1931. This mortgage purported to secure the partners' promissory note to Moretta "of even date for the sum of $15,000, due and payable two years from date and bearing six per cent interest from date." The original note was not produced at the trial, and Moretta said it had been lost or destroyed. Moretta testified that "Mr. Fabbri is my second cousin through his wife, and Mr. Merlo is my first cousin." Moretta, Fabbri, and Merlo claim that the $15,000 note and chattel mortgage to Moretta was to secure him for various large sums of money which he had advanced, in cash, to Fabbri and Merlo, mostly in 1926, and for which he took their notes, and as security for indorsing certain rent notes; and that when this $15,000 note was executed Moretta surrendered the several notes which he held, none of which could be produced, having been lost or destroyed. Avellone says other notes executed by the partnership were shown on the books as liabilities, but that the execution of this note was not reported to him, was not therefore shown on the books, and that he did not learn of same until some time in October, 1932. In July, 1932, a corporation was organized under the name of Miami Club Restaurant with a capital stock of $30,000 divided into 3,000 shares at a par value of $10 each. The articles of incorporation show the stock subscription and ownership as being Fabbri and Merlo each 1,499 shares and Avellone 2 shares. The incorporation agreement states that "the whole amount" of the capital stock has been "actually paid up in money and property." This was done by placing an arbitrary value of $30,000 on the assets of the partnership and transferring same to the corporation at that value. Nothing is stated or noted as to the $15,000 chattel mortgage or other liabilities.

The assets of the partnership thus constituted the capital of the corporation, and included all the property described in the chattel mortgage given to Moretta in January of that year. It seems that a new set of books was installed in the name of the corporation. The restaurant business continued as before and was carried on under the management and control of Fabbri and Merlo, who drew fixed salaries. Avellone, who had charge of the incorporation for the partners, stated that at the time he had no knowledge of the chattel mortgage to Moretta. But the insistence of creditors was renewed and continued and some of the debts of both the partnership and the corporation remained unpaid. In November, 1933, approximately two months before the maturity of the $15,000 note, as described in Moretta's chattel mortgage, Moretta, "to protect myself" foreclosed. At the foreclosure sale he purchased the property at a bid of $9,000. Fabbri stated that the property described in the chattel mortgage and taken over by Moretta on foreclosure included all the property and equipment owned and used by the then Miami Club Restaurant, a corporation, in carrying on a restaurant business except "a few plates and silver" the value of which would not "exceed $350 or $400 at the very most." This omitted property was turned over to Moretta to apply on the deficiency. The restaurant business was not interrupted and following the foreclosure continued and was conducted at the same place, in the same manner, and "to all appearances" as before, with Fabbri and Merlo in charge and drawing the same salaries. However, the name of the restaurant was now changed to Miami Club Café. On the day the foreclosure was made Moretta told Avellone that he (Moretta) was "now boss of the place and wanted" Avellone "to put in a new bookkeeping system for him." Avellone testified that "when I had the books ready I wrote in the front cover `Miami Club Café, Alex Moretta, Proprietor,' and when Moretta saw that he objected to it. He said, `What did you do that for'"; that Moretta showed "the book to Fabbri and they talked about that name appearing there"; that Moretta "wanted the name indicating he was proprietor erased from the books," but finally agreed "to have it remain"; and that Moretta, on one occasion, "told me that he was not the owner." Either late in 1933 or very early in 1934 a corporation was organized under the name of New Miami Café. Moretta testified: "I organized the corporation. My wife, my boy and I are the stockholders. The capital stock is $10,000"; and "the whole corporation is mine." The capital stock was paid up by transferring to the New Miami Café, a corporation, all the furniture, fixtures, and equipment of the Miami Club Café, ownership of which was claimed by Moretta individually and which he purportedly had acquired through the foreclosure in November, 1933. The assets of this last corporation, the New Miami Café, therefore included, and for the most part were composed of, the restaurant furniture, fixtures, and equipment originally purchased and installed by the partnership of Fabbri and Merlo, in 1926, upon which they gave the chattel mortgage to Moretta under date of January 5, 1932, later transferred to the Miami Club Restaurant, a corporation (organized by them in July, 1932), and ownership of which purportedly passed to Moretta individually by the foreclosure in November, 1933. As the New Miami Café the restaurant was conducted, as previously and continuously it had been, under the management of Fabbri and Merlo. The organization of the new corporation, the New Miami Café, completed, Moretta had the corporation execute a chattel mortgage on all of the property to him individually, purporting to secure an indebtedness to him in the amount of $5,000. In his testimony at this trial Fabbri stated that at that time "I don't think everything in there (the restaurant equipment and fixtures) would bring over $3,500 or $4,000."

Matz, the plaintiff herein, was employed in this restaurant for five years. When he quit the employment, the restaurant was eighteen weeks in arrears on his wages for 1932, during which time the restaurant was being operated by the Miami Club Restaurant, a corporation. Matz brought suit in a justice of the peace court against the "Miami Club Restaurant" for these unpaid wages, and, in January, 1934, had judgment in the sum of $261.85. He was unable to obtain satisfaction of the judgment by levy on account of the claims of ownership of the property made by Moretta and Moretta's corporation, the New Miami Café.

In June, 1934, this suit in equity, in the nature of a creditor's bill, was instituted by plaintiff, in the circuit court of the city of St. Louis, in his own behalf "and for all creditors similarly situated who may join herein." The defendants named are Miami Club Restaurant, a corporation, New Miami Café, a corporation, Alex Moretta, Frank Merlo, and Modesto Fabbri. The bill charges, in effect, that the chattel mortgage to Moretta was, without consideration, a fraudulent conveyance and void as to creditors; and that Moretta, Fabbri, and Merlo conspired together to fraudulently manipulate the restaurant property and assets in an effort to conceal the true ownership thereof and defeat creditors both existing and subsequent. The bill seeks to have the restaurant "property and assets or such part as is sufficient thereto" subjected and "applied to the payment of this judgment (for $261.85) and to the payment of claims of other creditors who will join herein," and prays the appointment of a receiver to take charge and possession of said property and assets, and that the chattel mortgage to Moretta and all subsequent transfers of said property and assets be declared null and void as to plaintiff and other creditors, and that said...