Medlinsky v. Premium Cut Beef Co.

• Decision Date: 14 September 1944
• Citation: Medlinsky v. Premium Cut Beef Co., 317 Mass. 25, 57 N.E.2d 31 (Mass. 1944)
• Parties: MEDLINSKY et al. v. PREMIUM CUT BEEF CO. et al.
• Court: Supreme Judicial Court of Massachusetts

317 Mass. 25

57 N.E.2d 31

MEDLINSKY et al.

v.PREMIUM CUT BEEF CO. et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Sept. 14, 1944.

Suit by Edward Medlinsky, administrator of the estate of William Karp, and others, against the Premium Cut Beef Company and another, seeking the cancellation of a certificate of title to a parcel of registered land. Decree ordering defendant named to cancel certificate of title upon the payment of a certain sum found to be due it from plaintiff administrator, and plaintiffs appeal.

Affirmed in part, and in part reversed for further proceedings in accordance with opinion.Appeal from Superior Court, Middlesex County; Swift and Good, Judges.

Before FIELD, C. J., and LUMMUS, DOLAN, and RONAN, JJ.

R. B. Walsh, of Lowell, for plaintiffs.

M. G. Rogers and A. Barlofsky, both of Lowell, for defendants.

RONAN, Justice.

This is an appeal by the plaintiffs from a final decree ordering the corporate defendant to cancel a certificate of title to a parcel of registered land upon the payment of a certain sum found to be due it from the plaintiff administrator of the estate of William Karp and also ordering the said administrator to pay a further sum for money lent by the defendant company to William Karp.

All the individual parties to this suit, other than Medlinsky, are the children of Lizzie Karp and William Karp. The premises in question were owned for many years by William Karp, although the title was in the name of his wife, Lizzie Karp. The city of Lowell, having acquired title through tax foreclosure proceedings, sold them in November, 1939, for $900 to Medlinsky who purchased them in behalf of William Karp with funds that Karp had obtained from the Premium Cut Beef Company. William Karp, hereinafter called Karp, was apprehensive that his creditors might attach the property if he took title in his own name. The Premium Cut Beef Company and the Lowell Beef Company, a corporation owned and controlled by Karp, occupied the first floor of the premises. The books of both companies were kept by Karp's daughter under his supervision. The capital stock of the Premium Cut Beef Company, hereinafter called the company, consisted of twenty shares, twelve of which were owned by Karp, four by his wife and four by his son, the defendant Maurice Karp, hereinafter called Maurice. In October, 1939, all the stock was transferred in trust to the plaintiff Edward Karp. In accordance with the terms of the trust all stockholders had the right to vote and to become officers of the company, and upon the death of certain stockholders their stock was to be transferred to others. All stock certificates after they were made out in the names of various stockholders were retained by the company and kept in the stock book. Karp had invested $3,000 in the company and Maurice had invested $1,100. Both received weekly wages. Karp was paid $10 each week. Neither received any other compensation from the company. No dividends were declared. The earnings of the company were deposited in a bank in the name of Maurice and amounted to $10,000 in 1940. No mention of this account appeared in the company's books. Extensive repairs were made upon the property during the first four months of 1940 and were paid for by funds withdrawn from this account by Maurice at the request of Karp. Early in 1940, Maurice suggested to his father that, in view of the large sums the company was expending for repairs, it was unsafe to have the title remain in the name of Medlinsky and that the latter should execute a deed to the company. Maurice told his father that it would make no difference to the latter. Karp was agreeable to having the company named as grantee as he deemed it unsafe on account of this creditors to take title in his own name and thought that the interest of his wife and himself in the company would give him adequate protection if the deed ran to the company. Medlinsky executed a deed purporting to convey the premises to the company. Karp soon thereafter made up his mind not to record this deed but Maurice, although he knew this, took the deed and had it recorded on May 29, 1940, without the knowledge or consent of his father. Notwithstanding the demand of Karp that the property be reconveyed to Medlinsky, when in November, 1940, he learned of the transfer, no conveyance was made and the company now holds the certificate of title. The company ceased paying rent to Karp in 1940, and has since managed the property as its own.

In addition to the facts already recited, which appear from the master's report, the master also found that Karp believed he could expend the funds of the company as he saw fit; that throughout the life of the company and up to the time of his death in August, 1941, Karp looked upon the company ‘and exercised control over it as if it was his own busines'; and that Maurice knew this and made no objection to the expenditure of the funds for repairs of the property. The report further shows that the company lent Karp $1,500 and that this sum appeared upon the books of the company as a loan payable by Karp. The plaintiffs appealed from a decree confirming the report and overruling their exceptions thereto.

The defendants were permitted to amend their answer by alleging that Medlinsky purchased the property for the company, and by setting up by way of counterclaim that, if title was not properly in the company, then the company was induced to expend its funds in repairs by the promise of Karp to convey the property to it and that it was entitled to reimbursement. The plaintiffs appealed from orders, which we consider as interlocutory decrees, Wallin v. Smolensky, 303 Mass. 39, 20 N.E.2d 406;City of Boston v. Santosuosso, 308 Mass. 202, 31 N.E.2d 572, allowing the amendment and denying their motion to strike it out. The allowance of the amendment came within the broad power conferred upon the judge by the statue, G.L.(Ter.Ed.) c. 231, § 51, which has always been liberally construed so as to enable a party to sustain the cause of action for which the proceeding was intended to be brought or to enable him to set up a legal defence. Ames v. Beal, 284 Mass. 56, 187 N.E. 99;Bucholz v. Green Bros. Co., 290 Mass. 350, 195 N.E. 318;Smith v. Miles, 296 Mass. 126, 5 N.E.2d 12. The plaintiffs were not entitled as matter of law to have their motion to strike out entertained under rule 29 of the Superior Court (1932). See Marsch v. Southern New England R. Corporation, 230 Mass. 483, 491, 120 N.E. 120;MacLennan v. MacLennan, 311 Mass. 709, 713, 42 N.E.2d 838. If, as the counterclaim alleged, the company was induced to pay for the repairs by the promise of Karp to convey the property in consideration of such payments and Karp refused to perform after the payments were made, then there was a failure o consideration which would entitle the company to reimbursement. Cochrane v. Forbes, 257 Mass. 135, 153 N.E. 566;Goshein v. Chavenson, 261 Mass. 403, 158 N.E. 789;Buckman v. American Express Co., 262 Mass. 299, 159 N.E. 629. The claim upon the pleadings arose out of the same transaction as that upon which the bill was based. Stuart v. Sargent, 283 Mass. 536, 186 N.E. 649;Colella v. Essex County Acceptance Corp., 288 Mass. 221, 192 N.E. 622;Anderson v. Connolly, 310 Mass. 5, 36 N.E.2d 404.

The defendants had the burden of proving the counterclaim which rested upon the ground that the money was expended in accordance with an ‘understanding, promise and agreement’ between Karp and the company that, in consideration of the payments to be made by the company, the premises would become the property of the company. The master found that no express promise or contract to reimburse the company or to convey the property to it was made. The allegations of the counterclaim were not restricted to an express contract but they were broad enough to include an implied contract to convey the property. Butler v. Butler, 225 Mass. 22, 113 N.E. 577;Kelly v. First Citizens Bankers Corp., 316 Mass. 520, 55 N.E.2d 779;Lufkin v. Harvey, 125 Minn. 458, 147 N.W. 444;Anderson v. Estate of Akins, 99 Neb. 630, 157 N.W. 334;Colloty v. Schuman, 76 N.J.L. 502,47 Vroom 502,70 A. 190;Producers' Supply Co. v. Shirley, 69 Okl. 117, 170 P. 504;Andrew v. Brecker, 229 Wis. 526, 282 N.W. 609. The master apparently construed the answer as setting forth a counterclaim resting entirely upon an express contract, since he made no ultimate finding on the issue whether there was an implied contract to convey the property and a failure to do so which would result in an implied obligation upon Karp to reimburse the company. It was the duty of the master to determine that issue which we think was open under the pleadings. The judge considered that there was enough in the report to warrant an inference of such an implied obligation. None of the findings of the master was directed to this issue. The control of the company's funds by Karp was considered by the master only as bearing upon the existence of an intention of Karp to put the title to the property in the name of the company. The absence of an express promise to convey the property or to reimburse the company for the expenditures would not negative the existence of an implied promise to do so. Manilla v. Houghton, 154 Mass. 465, 467, 28 N.E. 784;Walker v. Russell, 240 Mass. 386, 134 N.E. 388;Humes v. Barron, 263 Mass. 583, 161 N.E. 592;Therrien v. Leblance, 282 Mass. 328, 185 N.E. 15;Donahue v. Dal, Inc., 314 Mass. 460, 50 N.E.2d 207, and the absence of an intention to reimburse the company would not bar the company from recovering the payments if they were not intended as a gift to Karp and if the company expected to be paid therefor either in property or in money and Karp knew or ought to have known of this expectation of the company at the time the funds were expended in the improvement of his property. ‘Of course it does not matter whether the defendant expected to pay for the services or not, the...