New England Factors v. Genstil
| Decision Date | 28 November 1947 |
| Citation | 322 Mass. 36,76 N.E.2d 151 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | NEW ENGLAND FACTORS, INC. v. HARMAND E. GENSTIL & another. |
May 7, 1947.
Present: LUMMUS DOLAN, RONAN, & SPALDING, JJ.
Interest. Evidence Extrinsic affecting writings.
Contract, What constitutes, Assumption of liability of another. Equity Pleading and Practice, Master: findings; Decree.
In a suit in equity where an issue was whether the defendant was under obligation to pay the plaintiff certain compensation in addition to the amounts stated in notes and trust receipts which contained no mention of such compensation, a conclusion of a master, that it was "the intention of . . . [the] parties that compensation be paid to the plaintiff . . . and that it was understood and agreed . . . that such compensation should be at" a certain rate, must stand on an appeal by the defendant from a decree ordering payment of such compensation, where the conclusion was not based solely on nor inconsistent with reported subsidiary findings not showing when or in what circumstances the agreement for such compensation was made, and might have been based on unreported evidence showing that the notes and trust receipts did not constitute the entire contract between the parties but were supplemented by the agreement for compensation as part of the entire contract, or that the agreement for compensation was a valid modification of the contract contained in the notes and trust receipts: no violation was shown of the rule of substantive law that a contract in writing, intended to be complete in itself, cannot be varied or added to by parol evidence of antecedent or contemporaneous negotiations. Enforcement of an oral agreement by a borrower of money to pay the lender
"compensation" at a rate greater than six per cent per annum was not precluded by G. L. (Ter. Ed.) c. 107, Section 3, where the
"compensation" included both interest and genuine service charges and the proportions thereof did not appear. An oral agreement by a borrower of money to pay to the lender a certain
"bonus," which in fact was nothing more than mere compensation for the loan, was unenforceable under G. L. (Ter. Ed.) c. 107 Section 3, to the extent that the "bonus" exceeded six per cent per annum.
An assumption by a corporation of liabilities to a certain creditor of a former partnership, which had included one who organized the corporation, was not shown by the mere facts that upon dissolution of the partnership the organizer acquired its assets and assumed its liabilities and thereupon organized the corporation, became its president and treasurer and a director and owner of substantially all its stock, and shortly thereafter, with the assent of the creditor, transferred all the former partnership assets to the corporation, following which the creditor transferred his account with the partnership into the name of the corporation and regularly sent to it periodic statements of the account.
It was unnecessary and improper to include, in a final decree in a suit in equity ordering the payment of a debt with interest and certain charges, a provision "reserving to the court the right to enter a decree hereafter recalculating the . . . [charges] and the amounts of interest."
BILL IN EQUITY, filed in the Superior Court on July 27, 1945. The suit was heard by Dillon, J., on a master's report.
A. L. Brown, for the defendants. Lee M. Friedman, (I. H. Y. Muchnick with him,) for the plaintiff.
By this bill in equity the plaintiff seeks an accounting and the recovery of certain sums of money alleged to be due to it from the defendants. The case was heard by a master under the usual rule, [1] and his report was confirmed by an interlocutory decree. An interlocutory decree was also entered dismissing the bill as to two of the defendants, Fred Theise, 2d, and Russell Theise. [2] The case comes here on the appeals of the defendants Harmand E. Genstil and Genstil Fabric Corporation (hereinafter called the defendants) from a final decree ordering them to pay certain sums to the plaintiff with interest.
Facts found by the master which are material to these appeals may be summarized as follows: The plaintiff is a Massachusetts corporation engaged principally in the business of factoring and lending money for business purposes. The defendants Fred Theise, 2d and Russell Theise, as partners, were engaged in the fabric business in Boston under the name of Theise Brothers Co., and began to transact business with the plaintiff sometime in 1940. In February, 1942, the defendant Harmand E. Genstil (hereinafter called Genstil) joined the firm of Theise Brothers Co. At that time the partnership owed the plaintiff nothing.
The new partnership, which continued to do business with the plaintiff, transacted it in three ways. In some transactions the partnership would borrow money from the plaintiff by pledging accounts receivable; in others the money borrowed would be secured by trust receipts; and sometimes the plaintiff would guarantee to the partnership's vendors the payment for certain merchandise which they had sold to the partnership, obtaining, as security, trust receipts for the merchandise thus acquired.
Just prior to October 1, 1943, the partnership owed the plaintiff the sum of $7,779.63, secured by accounts receivable. In addition, the plaintiff held several notes of the partnership in varying amounts "against trust receipts." On October 1, 1943, the plaintiff desired to merge these notes and trust receipts into one note and one trust receipt. Accordingly on that date a note in the sum of $34,086.39 payable to the plaintiff was executed by the partnership and delivered to the plaintiff. Accompanying the note, and as security therefor, was a trust receipt of the partnership covering certain merchandise listed thereon.
On November 5, 1943, the plaintiff made a further loan to the partnership in the sum of $4,493.55 which was evidenced by a note of the partnership and secured by its trust receipt covering certain merchandise. Neither this note nor the trust receipt executed in connection therewith, nor the note for $34,086.39 nor the trust receipt accompanying it contained any provision for compensation to be paid to the plaintiff with respect to these transactions. The master found, however, that it was "the intention of all parties that compensation be paid to the plaintiff in connection with such transactions and that it was understood and agreed . . . that such compensation should be at the rate of 1/30 of 1 1/2% per day on all indebtedness outstanding from the partnership to the plaintiff from day to day." From time to time between October 1, 1943, and May 31, 1945, the plaintiff gave certain credits for repayments of principal made on account of the indebtedness discussed above. And during this period the plaintiff made charges on the account regularly at the rate of one and one half per cent per month on the balance of principal due each month. [1]
The master found that on May 31, 1945, the defendant Genstil owed the plaintiff the sum of $20,838.50 with respect to the transactions described above. He also found that the partnership had agreed to pay to the plaintiff the sum of $10,000 as a commission or bonus for $80,000 loaned by the latter to the partnership to enable it to finance a sale of merchandise to Sears, Roebuck & Co. and that a balance of $6,400 remained unpaid. He further found that the plaintiff was entitled to $5,000 for legal expenses incurred in connection with the present litigation. (The facts relating to the last two items will be set forth more fully hereafter.) A final decree was entered ordering the defendants Genstil and Genstil Fabric Corporation to pay to the plaintiff the sum of $20,838.50 together with a service charge of one thirtieth of one and one half per cent of that amount for every day after June 1, 1945 (which at the time of the entry of the decree amounted to $5,949.39), plus $6,400 with interest in the amount of $548.27 from the date suit was commenced, plus $5,000, the aggregate of which amounts was $38,736.16, and "reserving to the court the right to enter a decree hereafter recalculating the service charge and the amounts of interest."
1. The defendants contend that they have been improperly charged with interest at the rate of one and one half per cent per month on the balances remaining unpaid on the notes for $34,086.39 and $4,493.55. They argue that since neither the notes nor the trust receipts contain any provision for the payment of interest none was payable. They also argue that even if the payment of interest was agreed upon it could not, in view of G. L. (Ter. Ed.) c. 107, Section 3, be at a greater rate than six per cent per annum, inasmuch as the agreement to pay it was not in writing. In either case, it is contended, the amount which they have been ordered to pay to the plaintiff is excessive.
The Ratner v. Hill, 270 Mass. 249 253-254. Daniels v. Briggs, 279 Mass. 87 , 93. But the master, as we have indicated, found that there was an agreement to pay compensation in connection with the various transactions at the rate charged. The defendants argue, however that such a finding does violence to the parol evidence rule, since neither the notes nor the trust receipts contained any provision relating to compensation either as service charges or as interest. But before that rule comes into operation "the court must be sure that it has before it a written contract...
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New England Factors, Inc. v. Genstil
...322 Mass. 3676 N.E.2d 151NEW ENGLAND FACTORS, Inc.v.GENSTIL et al.Supreme Judicial Court of Massachusetts, Suffolk.Nov. 28, Bill in equity by New England Factors, Inc., against Harmand E. Genstil and another for an accounting and recovery of certain sums of money alleged to be due the plain......