Muchnick v. Bay State Harness Horse Racing & Breeding Ass'n, Inc.

• Decision Date: 03 January 1961
• Citation: 341 Mass. 578,171 N.E.2d 163
• Parties: Isadore H. Y. MUCHNICK et al. v. BAY STATE HARNESS HORSE RACING AND BREEDING ASSOCIATION, INC.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 163

171 N.E.2d 163

341 Mass. 578

Isadore H. Y. MUCHNICK et al. v. BAY STATE HARNESS HORSE RACING AND BREEDING ASSOCIATION, INC.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 6, 1960.

Decided Jan. 3, 1961.

Lawrence H. Adler, Watertown, for plaintiff.

Gerald Gillerman, Cambridge (Marshall L. Tutun, Chelsea, with him), for defendant.

Before WILKINS, C. J., and SPALDING, WILLIAMS, WHITTEMORE, and CUTTER, JJ.

WILKINS, Chief Justice.

In this action of contract in two counts, each by a different plaintiff to recover upon an 'unsecured debenture,' the judge sustained a demurrer and, staying further proceedings, reported his ruling to this court. G.L. c. 231, § 111.

Count 1 alleges that the defendant for a consideration executed and delivered to the plaintiff Muchnick an 'unsecured debenture' in the principal sum of $12,500, the due date of which is June 1, 1954; and that after maturity the plaintiff demanded payment, which was not made. Count 2 alleges that the plaintiff George B. Rittenberg is the owner of the same debenture, and that it was originally issued to Muchnick and by him assigned to the plaintiff Rittenberg, who is the registered owner, and who after maturity demanded payment, which was not made.

The debenture, bearing the identification 'No. 10,' is a lengthy document filling three pages in the printed record. It is entitled 'Unsecured Debenture Due June 1, 1954 Subordinated as Set Forth Below,' and is dated at Boston June 26, 1958. We quote pertinent provisions. The defendant 'promises to pay to Isadore H. Y. Muchnick assignee by mesne assignments of an interest in original debenture No. 2, or registered assigns' at the office of the company 'on June 1, 1954, except as hereinafter provided' the sum of $12,500 without interest. 'This debenture is one of a series of debentures originally issued August 19, 1947, aggregating $233,300 all of which are issued without priority or preference one over the other, and are being issued, received and held subject to the terms, conditions and provisions hereinafter contained.' The debenture is redeemable at any time before maturity at the option of the defendant. 'Except with the consent in writing of the registered owners of all outstanding debentures issued for said $233,300, the company shall not redeem or retire any of its debentures except on a pro rata basis among the registered owners of all of said outstanding debentures. This debenture is issued * * * upon the condition that it is subject and subordinate to bank obligations of the company as maker, endorser, or guarantor, now or at any time hereafter outstanding, and to the prior payment in full of principal and interest on the following notes of the company. (a) A note of $400,000 to Elias M. Lowe [sic] dated July 16, 1947. (b) A note of $100,000 to Julius L. Shack dated July 16, 1947. Said notes * * * are secured by a first mortgage of $500,000 on the land and buildings of the company situated in Foxboro, Norfolk County, Massachusetts. (c) A note dated August 18, 1947, for $200,000 payable to Norfolk County Concessionaires, Inc., and assigned to Elias M. Loew, said note being secured by a second mortgage on the said land and buildings of the company in said Foxboro. (d) A note for $50,000 and two notes for $25,000 each, all dated August 18, 1947, payable to Paul F. Bowser * * * said three notes being secured by a third mortgage of $100,000 on said land and buildings of the company in said Foxboro. This debenture is also subject and subordinate to all unpaid debts incurred by the company for operating expenses, whether represented by open account, negotiable or non-negotiable promissory notes, secured or unsecured, or other form of writing.'

There were two identical grounds of demurrer to each count. The first ground quoted from paragraphs 4 and 5 and set forth that the court 'fails to allege either the performance or excuse from performance of all of the aforesaid conditions to which payment of the debenture is expressly made subject, namely, the prior payment in full of bank obligations, three mortgage notes of the defendant in the total face amount of $800,000, and all unpaid debts incurred by the defendant for operating expenses.' The second ground set up legal insufficiency.

The principal question is whether the language, read as a whole, merely gives certain creditors of the defendant a preference in the order of payment or whether there are words which create a condition precedent to the right of a plaintiff to maintain his action. If prior payment of any of the designated obligations is a condition precedent, its performance or the reason for nonperformance should have been alleged in the declaration, G.L. c. 231, § 7, Twelfth, and the demurrer was rightly sustained. See Mirachnick v. Kaplan, 294 Mass. 208, 1 N.E.2d 40.

The debenture is in a form peculiar to itself. Although it is dated more than four years later, its title gives a due date of June 1, 1954, 'Subordinated as Set Forth Below.' We are unable to attribute great significance to the difference in dates. 'No. 10' is one of a series 'originally issued August 19, 1947.' We cannot be sure whether there was a new edition of a form of debenture due June 1, 1954, or whether 'No. 10' was individually prepared in its entirety on June 26, 1958. We reject the contentions that the retention of the date of June 1, 1954, was an acknowledgment that an overdue instrument was issued on June 26, 1958, and that the only need to retain a past 'due' date was for the purpose of computing interest from a maturity date which had gone by. No explanation is suggested why, on that hypothesis, the provision for redemption before maturity (paragraph 3) was retained. Certainly a more cumbersome method of stating a simple arithmetical fact could hardly be imagined. A much more reasonable inference is that all the debentures in the series were to be kept uniform so far as possible. They were 'issued without priority or preference one over the other' (paragraph 2). The defendant,...