Perkins v. Becker's Conservatories, Inc.

• Decision Date: 21 June 1945
• Citation: 318 Mass. 407,61 N.E.2d 833
• Parties: PERKINS v. BECKER'S CONSERVATORIES Inc., et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

318 Mass. 407

61 N.E.2d 833

PERKINS

v.BECKER'S CONSERVATORIES Inc., et al.

Supreme Judicial Court of Massachusetts, Suffolk.

June 21, 1945.

Suit by Edward I. Perkins, trustee in bankruptcy of Karl F. Becker, against Becker's Conservatories, Inc., and others to set aside as fraudulent certain transfers of assets and for an accounting. Decree granting limited relief and plaintiff appeals.

Reversed and remanded.Appeal from Superior Court, Suffolk County; O'Connell, Judge.

Before FIELD, C. J., and LUMMUS, QUA, RONAN, and WILKINS, JJ.

R. H. Klainer, of Boston, for plaintiff.

W. I. Schell, of Boston, for defendant.

WILKINS, Justice.

This is a bill in equity by the trustee in bankruptcy of Karl F. Becker against Becker's Conservatories, Inc., Karl F. Becker, and his mother, Sarah H. Becker, to set aside, as fraudulent, transfers of assets relating to the bankrupt's florist business, conducted under the name of Becker's Conservatories, alleged to have been made pursuant to a conspiracy among the defendants, and for an accounting. The case was heard by a judge, who on February 10, 1944, filed voluntary findings of fact. Later the case was referred to a master, who filed a report of additional findings which was confirmed. From a final decree entered on February 2, 1945, granting limited relief the plaintiff appealed. On February 7, 1945, the judge adopted his voluntary findings as a report of ‘the material facts found by him.’ G.L. (Ter.Ed.) c. 214, § 23; Acacia Mutual Life Ins. Co. v. Feinberg, 318 Mass. 246, 61 N.E.2d 122. The case is here without a report of the testimony.

The report of material facts contains the following: The corporate defendant was organized on February 1, 1943. Prior thereto the bankrupt for many years was manager and later owner of a florist business which had long been conducted by his grandfather and his father. On February 1, 1943, the bankrupt entered into a written agreement with the corporation acting through the defendant Sarah H. Becker as president. By this and other instruments the bankrupt, who was indebted to creditors of the florist business and to creditors of an unsuccessful apartment house venture, in exchange for a promise by the corporation to assume the obligations of ‘the florist business only,’ transferred to the corporation ‘the business of Becker's Conservatories, including such assets as it actually possessed, including [accounts receivable,] good will, merchandise, motor vehicles and such articles as could be found to be personalty * * * with intent to exclude certain of the then existing creditors, and as against the rights of such creditors.’ The bankrupt and his mother ‘in joining in the effort to keep the business going, but under a corporate name, clearly had the definite purpose of putting these [assets] as far as legally possible beyond the reach of creditors' of the bankrupt. It ‘was the dominant purpose of Mrs. Sarah H. Becker, in having a corporation formed, to make certain that no creditor of the conservatory business should suffer a loss by reason of mismanagement by her son, or becoming involved in the apartment house venture; * * * she acted in good faith, as instanced by her loans to her son,’ which aggregated $21,443. The adjudication of bankruptcy was on August 5, 1943, and the mother was not listed as a creditor. (The answers allege, although there is no such finding, that the indebtedness of the bankrupt was $23,000 to florist creditors-apparently chiefly the mother-and $8,000 to apartment house creditors.) The florist business was conducted on real estate owned by the mother, to whom the bankrupt before the bankruptcy paid $100 monthly in addition to the municipal taxes and maintenance expenses. The ‘evidence as a whole discloses a preference as against the rights of other creditors was created by Karl F. Becker conveying such assets as he possessed to the corporation. When [the conveyance was] entered into Mrs. Sarah H. Becker (mother) and her son were actuated solely to keep the florist business as a ‘going business.’ If liquidated at that time it had little or any value which would have benefited general creditors of Karl F. Becker. Nevertheless, such assets as did exist were equitably assets to which all creditors had rights * * * [There] was no concealed purpose to defraud, but there was an open, avowed purpose of perpetuating the florist business, under a corporate direction, and in relation to such continuance of business to utilize and enjoy assets above found to be the property of the bankrupt estate. Because of such conclusions, as warranted by the facts, a preference was established, and the conveyances, as such, are not free from being reached and applied because conveyed more than four months prior to the adjudication of bankruptcy.' ‘The ‘good will’ * * * existed solely around the use of the family name of Becker and was valueless.' Because ‘the ‘good will’ had no value, there is no reason to order conveyance of same to the plaintiff.' ‘Because the corporation acted in good faith in assuming the ‘bills payable,’ I find it is equitably entitled to a set-off of the total amount paid as against the total amount, if any, of ‘bills receivable’ paid to the corporation.' The accounts receivable totaled $1,520.89, and the accounts payable $1,228.38. (The master found that the former had been collected, and the latter paid, in full, and that exclusive of two motor vehicles, the personal property transferred by the bankrupt to the corporation had a value of $225.) The personalty or ‘fixtures' are ‘assets of the bankrupt estate.’ ‘The motor vehicles * * * are assets of the bankrupt estate and the plaintiff is entitled to have same conveyed to him.’

The final decree provided that (1) the corporation is indebted to the plaintiff for $292.51 for accounts receivable, $225 for ‘fixtures,’ and $5 for merchandise, a total of $522.51; (2) ‘as to the two motor vehicles * * * the plaintiff has received payment in the sum of $225, being the value agreed upon between the plaintiff and the defendant Becker's Conservatories, Inc. and * * * [they are] declared to be the property of the Becker's Conservatories, Inc.’; (3) execution should issue against the corporation for $522.51; and (4) the bill of complaint should be dismissed against the individual defendants.

Since the case is here on report of material facts under the statute, no findings not expressly made can be implied from the decree, but this court may draw proper inferences from the facts expressly found. Distasio v. Surrette Storage Battery Co., 316 Mass. 133, 135, 54 N.E.2d 928.

The findings clearly show that the bankrupt made, and the corporation with full knowledge accepted, transfers of the assets of the florist business-which were all the assets the bankrupt had-for the express purpose of excluding all creditors whose claims did not arise from that business. This was a conveyance in actual fraud of such creditors without regard to the nature or amount of the consideration. Wadsworth v. Williams, 100 Mass. 126, 130, 131;Banca Italiana Di Sconto v. Bailey, 260 Mass. 151, 160, 157 N.E. 40;R. E. McDonald & Co. v. Finkovitch, 270 Mass. 362, 367, 170 N.E. 112;Albert Richards Co. Inc. v. Mayfair, Inc., 287 Mass. 280, 290, 191 N.E. 430;Merchants Discount Co. v. Esther Abelson, Inc., 297 Mass. 517, 519, 520, 9 N.E.2d 528;Joseph P. Manning Co. v. Shinopoulos, 317 Mass. 97, 99, 56 N.E.2d 869; G.L.(Ter.Ed.) c. 109A, § 7. At the instance of the trustee in bankruptcy it will be set aside. Bailey v. Wood, 211 Mass. 37, 41, 97 N.E. 902, Ann.Cas.1913A, 950;Powers v. Heggie, 268 Mass. 233, 241, 167 N.E. 314;Mason v. Wylde, 308 Mass. 268, 275, 32 N.E.2d 615;Thomas E. Hogan, Inc. v. Berman, 310 Mass. 259, 261, 37 N.E.2d 742. See 11 U.S.C.A. § 110, sub. a (4); section 107, sub. d (2); d (6); e. See Putnam v. Southworth, 197 Mass. 270, 83 N.E. 887. The judge's conclusions that the corporate defendant and its president, the defendant Sarah H. Becker, acted in good faith are at variance with the subsidiary findings and must be disregarded. The result is not affected by the erroneous description of the transaction as a ‘preference.’ See Barishefsky v. Cohen, 299 Mass. 360, 362, 12 N.E.2d 832;Mason v. Wylde, 308 Mass. 268, 283, 32 N.E.2d 615. The corporate defendant was not a creditor of the bankrupt. It came into being as a device to receive the fraudulent conveyance. Schurman v. Improved Plastic-Slate Roofing Co., 233 Mass. 499, 124 N.E. 250. See Sampsell v. Imperial Paper & Color Corp., 313 U.S. 215, 61 S.Ct. 904, 85 L.Ed. 1293.

The question remains as to the relief to be given. So far as possible all the property fraudulently transferred must be returned. The provisions of the final decree respecting the personal property or ‘fixtures' not only are unsupported by, but are contrary to, the findings, and cannot stand. Carilli Construction Co. v. John Basile & Co. Inc., 317 Mass. 726, 730, 59 N.E.2d 706. An inconsistency is presented by the finding (adopted February 7, 1945, as part of the report of material facts) that the motor vehicles are assets of the bankrupt estate and by the recital in the final decree (entered on February 2, 1945) that the plaintiff has been paid for the motor vehicles, which now belong to the corporate defendant. The plaintiff contends that he is entitled to them. On this state of the record we think that the best way of ensuring the right result is to have the case further heard, if the parties do not agree in this respect. The plaintiff is entitled to the value of the stock of merchandise, which has been sold. Hubbell v. Currier, 10 Allen, 333, 337.Walworth Co. v. Locke Stevens & Sanitas, Inc., 300 Mass. 557, 559, 16 N.E.2d 1, and cases cited. Buffum v. Peter Barceloux Co., 289 U.S. 227, 236, 53 S.Ct. 539, 77 L.Ed. 1140; Glenn on Fraudulent Conveyances, Rev.Ed., § 239. See 24 Am.Jur., Fraudulent Conveyances, § 128. The same is true of the bills receivable, all of...