Refrigeration Discount Corp. v. Catino

• Decision Date: 27 May 1953
• Parties: REFRIGERATION DISCOUNT CORP. v. CATINO et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 790

112 N.E.2d 790

330 Mass. 230

REFRIGERATION DISCOUNT CORP. v. CATINO et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Feb. 2, 3, 1953.

Decided May 27, 1953.

David Gorfinkle, Boston, for plaintiff.

Richard A. Kaye, Boston, for defendant Chase.

Before QUA, C. J., and RONAN, WILKINS, SPALDING and WILLIAMS, JJ.

RONAN, Justice.

This is an action of tort to recover damages for the alleged conversation of certain personal property belonging to the plaintiff. The case is here on the plaintiff's exceptions to the direction of verdicts for the defendants.

The plaintiff was engaged in the business of financing retail dealers of electrical refrigerators, washing machines, gas dryers, television sets, and other similar appliances. The C. & C. Appliance Company was such a dealer. The plaintiff paid The Eastern Company, a distributor, for nine lots of goods which were then shipped by the distributor between March 5, 1948, and June 29, 1948, to the dealer, the C. & C. Appliance Company, a corporation. The plaintiff received from the dealer on each shipment a promissory notepayable to the plaintiff in three months and a trust receipt. The notes were in the ordinary form and referred to the trust receipt numbers. The trust receipt identified each article by a number and set forth the release price for each article. The release price was the amount due the plaintiff after deducting the down payment made by the dealer at the time the plaintiff purchased the appliance from the distributor. It was agreed that the release price was the fair value of the article. One Kelley, the plaintiff's representative, on July 12, 1948, called at the dealer's store and found that some of the articles included in the trust receipts were missing and complained to the defendant Catino that these articles should not have been sold unless the plaintiff had first been paid for them. Catino replied that business was poor and promised to remit funds to the plaintiff in about a week, and promised not to sell any more of the trust receipt goods until the dealer had paid the amounts due. Kelley again visited the store in August, 1948, and found that more of the goods had been sold.

There was evidence that Catino notified Kelley that the goods in the store were about to be attached and that Kelley had better remove the plaintiff's merchandise. Kelley had the goods removed and checked up what he had taken from the total shipments. The plaintiff then brought this action for conversion for the merchandise not returned. The dealer made an assignment for the benefit of its creditors on September 23, 1948.

It could be found that the plaintiff did not lose its security interest in the appliances by taking the notes. The promissory note and the trust receipt given by the dealer on each lot of merchandise must be construed together in the setting in which they were employed in order to ascertain the intent of the parties. Skilton v. R. H. Long Cadillac La Salle Co., 265 Mass. 595, 597, 164 N.E. 652; Baker v. James, 280 Mass. 43, 46-47, 181 N.E. 861; Bigelow v. Lawyers Mortgage Investment Corp. of Boston, 320 Mass. 254, 260-261, 68 N.E.2d 920; Hurwitz v. Carpenzano, 329 Mass. 702, 703, 110 N.E.2d 367. These instruments were the means adopted to enable the dealer to obtain a loan of credit from the plaintiff so that the dealer might obtain articles for sale in its store and at the same time to give the plaintiff a security interest in the articles supplied for the advances which it had made in purchasing the goods from the distributor until it received payment from the dealer of the release price for each article for which the dealer had secured a purchaser.

A jury could find that the plaintiff in accepting the dealer's notes did not intend to waive its security interest, Reed v. Upton, 10 Pick. 522; Cotton v. Atlas National Bank, 145 Mass. 43, 45, 12 N.E. 850; Davidson v. Stewart, 200 Mass. 393, 86 N.E. 779; Rosenberg v. Robbins, 289 Mass. 402, 410, 194 N.E. 291; and there was nothing in the trust receipts which deprived the plaintiff of its security interest in the merchandise. William W. Bierce, Ltd. v. Hutchines, 205 U.S. 340, 27 S.Ct. 524, 51 L.Ed. 828; Bailey v. Baker Ice Machine Co., 239 U.S. 268, 36 S.Ct. 50, 60 L.Ed. 275; Houck v. General Motors Acceptance Corp., D.C., 44 F.2d 410, 412; General Motors Acceptance Corp. v. Kline, 9 Cir., 78 F.2d 618; Chichester v. Commercial Credit Co., 37 Cal.App.2d 439, 99 P.2d 1083.

The failure of Kelley to demand and repossess the plaintiff's goods on July 12, 1948, when he learned that the goods were being sold without making any payments to the plaintiff, does not in itself bar the maintenance of this action against the defendants. Neither was the plaintiff precluded from recovery merely because it was unable to distinguish the appliances sold prior to July 12, 1948, from those subsequently sold. The plaintiff is not suing to enforce any rights in the proceeds from those sales. See G.L. (Ter.Ed.) c. 255A, § 10. In so far as waiver is urged by the defendants, if it could be said to be of any materiality, it was at most a question of fact. In passing it may be noted that there was evidence of a voluntary surrender of the dealer's interest in the goods taken by Kelley. C. 255A, § 6, cl. 4. Whatever remedies an entruster may have against a trustee who has broken the terms of the contract in accordance with which goods had been delivered to him, we see nothing contained in G.L. (Ter.Ed.) c. 255A, inserted by St.1936, c. 264, the Uniform Trust Receipts Act, which indicates any intent to prevent the entruster from maintaining an action in tort for conversion, in appropriate instances, like the present, where all the elements of such a cause of action exist.

The dealer in giving the trust receipts expressly acknowledged that the merchandise was held by it 'for the purpose of storing said property,' but the dealer also agreed 'not to sell, loan, deliver, pledge, mortgage, or otherwise dispose of said appliances to any other person until after payment of amounts shown in Release Price column above.' It is plain that both parties knew that the merchandise was furnished to the dealer for the purpose of display and sale in the dealer's store in accordance with a method well known in the trade as 'floor planning.' Associates Discount Corp. v. Haynes Garage, Inc., 304 Mass. 526, 527, 24 N.E.2d 685. The dealer had the power of sale as to any of the articles in the trust receipts provided it first paid the plaintiff the release price designated in the trust receipt. ¹ This is not an instance where the dealer having the right to sell deviates in some detail in carrying out the sales, as by selling for a less price than authorized by the owner, by selling on credit instead of for cash, by taking inadequate security for the purchase price, or in some other particular, Dufresne v. Hutchinson, 3 Taunt. 117; Industrial & General Trust, Ltd. v. Tod, 170 N.Y. 233, 63 N.E. 285; Minneapolis Trust Co. v. Mather, 181 N.Y. 205, 73 N.E. 987; but it is rather an instance where as between the parties to the transaction the payment of the release price was a condition precedent to the right to sell an article covered by a trust receipt. By the terms of the trust receipts, the time for the payment of the release price to the plaintiff arrived before the dealer sold the goods to its retail customer. The dealer, however, never made any payments to the plaintiff but continued disposing of the plaintiff's property in violation of the terms of the trust receipts. It was said in United Shoe Machinery Co. v. Holt, 185 Mass. 97, 101, 69 N.E. 1056, 1057, after pointing out that actual possession or an immediate right to possession was necessary to maintain an action of trover, 'but where a bailee misuses the subject of the bailment, as he does in case of an absolute sale transferring the whole property, the bailment is ended, and the general owner has immediate right of possession, on which he can maintain trover.' Carter v. Kingman, 103 Mass. 517; Greenall v. Hersum, 220 Mass. 278, 107 N.E. 941; Lancaster v. Stanetsky, 221 Mass. 312, 314, 108 N.E. 1060; Lawyers' Mortgage Investment Corp. of Boston v. Paramount Laundries, Inc., 287 Mass. 357, 360-361, 191 N.E. 398; Geguzis v. Brockton Standard Shoe Co., 291 Mass. 368, 371, 197 N.E. 51; Restatement: Torts, § 223(e), comment f, § 232, comment b.

All these trust receipt goods which were sold by the dealer were sold by the defendant Catino or under his immediate supervision. Catino was the president, a director, and the general manager of the dealer and acted knowingly in violation of the terms of the trust receipts. He presumably knew the contents of these receipts which he had duly executed in behalf of the dealer. It was agreed that the release price of none of the articles sold was ever transmitted to the plaintiff. It could be found that the disposal of the articles by Catino constituted a conversion of the plaintiff's property for which he could be held personally liable even though he was acting as the dealer's general manager and for its benefit. Joyce v. Sage Bros. Co., 206 Mass. 9, 91 N.E. 996; Somerville National Bank v. Hornblower, 293 Mass. 363, 368, 199 N.E. 918, 104 A.L.R. 1107; Syeds v. Hay, 4 T.R. 260; Laverty v. Snethen, 68 N.Y. 522; Comley v. Dazian, 114 N.Y. 161, 21 N.E. 135; General Motors Acceptance Corp. v. Thompson, 70 N.D. 99, 292 N.W. 85; Mechem, Agency, 2d Ed., §§ 1252-1256; Fletcher, Cyc. Corporations, § 1140; Restatement: Agency, § 349; Note, 152 A.L.R. 696. See, Kennedy v. Shain, 288 Mass. 458, 192 N.E. 924.

The remaining question is the liability of the defendant Chase. All parties engaged in committing a conversion of the goods of another may be held jointly or severally for the wrong. McAvoy v. Wright, 137 Mass. 207; Parker v. Taylor, 180 Mass. 258, 62 N.E. 370; Jacobs v. Anderson, 244 Mass. 125, 138 N.E. 314. Chase was the treasurer...