McLaughlin v. New England Tel. & Tel. Co.

• Decision Date: 06 March 1963
• Citation: 345 Mass. 555,188 N.E.2d 552
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: George A. McLAUGHLIN et al., trustees in bankruptcy, v. NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY et al.

Page 552

188 N.E.2d 552

345 Mass. 555

George A. McLAUGHLIN et al., trustees in bankruptcy, v. NEW ENGLAND TELEPHONE AND TELEGRAPH COMPANY et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 7, 1962.

Decided March 6, 1963.

M. Arthur Gordon, Boston (Julius Thanhauser, Boston, with him), Daniel B. Bickford, Asst. U. S. Atty., for plaintiffs.

Jules E. Angoff, Boston (Walter J. Hurley, Boston, with him), for United States Trust Co.

John C. Kane, Boston, for New England Telephone & Telegraph Co.

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

CUTTER, Justice.

This is a bill in equity, filed by the trustees in bankruptcy (the bankruptcy trustees) of Charles A. Mogavero Co., Inc. (Mogavero), for declaratory relief concerning a fund of $63,758.44 paid into court by the telephone company (Telephone). The fund is claimed by the bankruptcy trustees and by United States Trust Company (the bank) under purported assignments to it by Mogavero. An involuntary petition in bankruptcy was filed against Mogavero on January 24, 1958, upon which Mogavero was adjudicated a bankrupt. An interlocutory decree, entered by consent on October 17, 1960, directed Telephone to pay the fund into court. The parties filed a statement of agreed facts. ¹ By the final decree it was ordered that the whole fund be paid to the bankruptcy trustees. The bank appealed.

Mogavero from 1955 through 1957 made five construction contracts ² with Telephone. Two contracts were on a lump sum basis. Three were on a cost plus a fixed fee (CPFF) basis. Each contract provided (art. 33 of the general conditions), 'Neither party * * * shall assign the contract * * * without the written consent of the other, nor shall the contractor assign any moneys due or to become due to him hereunder, without the previous written consent of' Telephone.

During the period May 31 to September 18, 1957, Mogavero borrowed substantial sums from the bank, and gave to the bank demand collateral notes, which bore the personal endorsement of the treasurer of Mogavero. As of September 18, 1957, $70,000 remained due from Mogavero to the bank.

Mogavero executed and delivered to the bank instruments on 'accounts receivable assignment forms of the bank' simultaneously with some of the notes. Each such assignment purported to assign certain accounts described on the reverse of each instrument, where, under the title 'Accounts Assigned,' appear (a) the dates of the accounts assigned, (b) the name of Telephone as the debtor (with, in each case, usually a somewhat blind reference to the particular contract), (c) the amount of each account, and (d) at the bottom of the sheet, a statement of the 'loan against this schedule.' These assignments extended from May 28 through September 11, 1957, and the aggregate amount attempted to be assigned by these instruments was in excess of $100,000.

On September 24, 1957, the bank wrote to Telephone that it held 'assignments of [the] contracts and all receivables arising thereunder' and requested Telephone to 'make all payments to' it. Mogavero wrote to Telephone that the 'monies due us' on the contracts 'have been assigned to the' bank, and authorized payments direct to the bank. Telephone replied refusing consent and calling attention to art. 33 of each contract. Telephone never consented to any assignment unless the interlocutory decree of October 17, 1960, 'is by implication an assent.'

Mogavero, upon receiving checks from Telephone, delivered them to the bank to apply to Mogavero's debt. Telephone 'had no notice or knowledge of this practice.' There is no other evidence, than that summarized above, of what sums were due from Telephone to Mogavero as of the dates of the purported assignments, respectively, which (as already noted) purported to assign specified accounts then due. 'In no instance * * * was there an architect's certificate for payment of any part of the sum remaining unpaid' under any of the five contracts. Such a certificate was contemplated by arts. 24, 25, and 26 of the general conditions of each lump sum contract. ³ Comparable provisions for architect's certificates were contained in each CPFF contract. ⁴

The trial judge in his order for a decree ruled that the bank and Mogavero were bound by art. 33 of the general conditions of the contracts with Telephone, and that Telephone 'did not waive the provisions of' art. 33 by assenting to the interlocutory decree of October 17, 1960. He stated that he was 'not satisfied' (a) that at the time of the bankruptcy petition there were due from Telephone to Mogavero the sums of money Mogavero had attempted to assign to the bank, or (b) 'that, at the time various assignments were attempted by * * * Mogavero * * * to the' bank, the sums so assigned 'were due from * * * Telephone * * * to Mogavero.'

The bank contends that it is entitled to the fund by virtue of Mogavero's assignments to it. The bankruptcy trustees contend, among other things, (a) that the assignments were invalid because of art. 33, (b) that, when the assignments were made, there were no accounts in existence to be assigned, and (c) that no assignments of future accounts, or of money of become due, were made. ⁵

1. Mogavero by each assignment purported to assign to the bank 'the claims, or the accounts receivable, * * * contracts, and * * * other choses in action * * * collectively referred to as 'the accounts' * * * described in' the assignment form. It also warranted, among other things, that the account represented 'a bona fide sale,' that the account assigned was 'owing to' Mogavero, that there existed no offset thereto, and that any check, due on the accounts, which should 'come to' Mogavero would be accepted as the bank's property 'and be immediately transferred to the * * * [bank] in the same form in which * * * received.'

We find in the assignment forms and in the collateral note forms no sufficient indication of any intention to assign either (a) the contracts themselves, or (b) money to become due in the future under the contracts, except, perhaps, money later payable because of the specific items mentioned in the schedule, where the items are described very briefly and ambiguously. We interpret each assignment as covering only the payment for the particular work performed or other items furnished, referred to in the schedule on that assignment, stated to be due under a specified contract, as of a particular date, and in a specific amount. If a broader assignment had been intended, appropriately broad, explicit, descriptive language should have been used in the schedules. There is thus no occasion for us to consider what the situation would have been if the assignments adequately had referred to money due, or to become due, under a particular contract or contracts. Cf. Claycraft Co. v. John Bowen Co., 287 Mass. 255, 257, 191 N.E. 403, 404 ('money due and to become due' under a particular contract); Great Am. Indem. Co. v. Allied Freightways, Inc., 325 Mass. 568, 570-571, 91 N.E.2d 823; Manchester Natl. Bank v. Roche, 186 F.2d 827, 829 et seq. (1st Cir.); Pomeroy, Equity Jurisprudence (5th ed.) § 1283.

The facts vary somewhat from contract to contract. See fn. 2, supra.

(a) 245 State Street, Boston, and 10 Ware Street, Cambridge. Work on these CPFF contracts was completed on June 1, 1957. The only money paid into court, allocable to the State Street contract, was $668.36, the unpaid balance of Mogavero's fixed fee. This was listed on an assignment dated August 9, 1957, along with $937.92, which probably is an overstatement of the fixed fee balance ($920.22) on the Cambridge contract, in fact the only money later paid into court on that contract. The $937.92 item had previously been listed on an assignment dated May 28, 1957. The record does not disclose any offset to these amounts, or that any more was due ⁶ on these contracts respectively. The assignment of August 9, 1957, we regard as intended to transfer, so far as Mogavero could, all Mogavero's rights to payment of the $668.36 unpaid balance on the State Street contract, and as unaffected by Mogavero's attempted assignment (see fn. 6, supra) on August 30, 1957, of $4,500. We infer that the assignments of May 28, 1957, and August 9, 1957, of $937.92 refer to the $920.22 balance of fixed fee on the Cambridge contract, which Telephone later paid into court, although no invoice or other document identifies the item.

(b) East Boston. The work on this lump sum contract had been completed as of September 17, 1957, but the record does not show how much earlier. There was then unpaid $2,087.51 of the contract price. On May 28, 1957, Mogavero purported to assign $1,920 as due under this contract, but without further identification by invoice or otherwise. In the absence of indication of any dispute about what had been earned upon this contract, we infer that the assignment of May 28, 1957, was intended to transfer to the bank a security interest in $1,920 of the slightly larger amount remaining unpaid under the East Boston contract.

(c) 175 Adams Street, Dorchester. There are 'no items which * * * Mogavero * * * had failed to perform' under this CPFF contract. The record does now show when work was finished. Telephone has paid into court $16,801.42 on account of this contract. Of this sum $11,368.51 represents 'work, labor, and materials of Mogavero's subcontractors who have not been paid.' $3,544.21 represents work by Mogavero. $1,888.70 is the unpaid portion of the fixed fee.

Mogavero was not entitled, on the date of any purported assignment of amounts payable under this contract, to any part of the $11,368.51 for work and materials of Mogavero's still unpaid subcontractors. Telephone's obligation (see fn. 4, supra) was only to 'reimburse' Mogavero. The bank has not shown that any assignment to it of an amount under the Dorchester contract was adequately identified as then owing or that it was an item for which any...