Salvucci v. Sheehan

• Decision Date: 06 December 1965
• Citation: Salvucci v. Sheehan, 349 Mass. 659, 212 N.E.2d 243 (Mass. 1965)
• Parties: Joseph F. SALVUCCI v. Gerard S. SHEEHAN, individually and as trustee.
• Court: Supreme Judicial Court of Massachusetts

Page 243

212 N.E.2d 243

349 Mass. 659

Joseph F. SALVUCCI v. Gerard S. SHEEHAN, individually and as trustee.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Oct. 13, 1965.

Decided Dec. 6, 1965.

Bernard Kaplan, Boston, for plaintiff.

Arthur A. Karp, Boston, for defendant.

Before SPALDING, WHITTEMORE, CUTTER, KIRK, SPIEGEL and REARDON, JJ.

SPALDING, Justice.

This is a bill to reach and apply in payment of a debt property alleged to have been fraudulently conveyed. G.L. (Ter.Ed.), c. 214, § 3(9). The defendant's demurrer was sustained. The final decree dismissed the bill. The plaintiff appeals.

The bill alleges the following: On May 30, 1963, the plaintiff and the individual defendant signed a written agreement by which the plaintiff was to construct six buildings on land owned by the defendant. Included in the agreement was an arbitration clause which reads: 'Any disagreement arising out of this contract or from the breach thereof shall be submitted to arbitration, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other.'

The plaintiff has finished four buildings, and has started construction on the remaining two. The defendant has failed to pay $47,440 of scheduled payments and further sums totaling $21,088 for additional work requested by the defendant. On January 10, 1964, the defendant, without consideration, conveyed the land and buildings from himself individually to himself as trustee of the Duv-Sean Realty Trust. The defendant has placed several mortgages on the property, and intends to complete the construction himself, thus subjecting the property to other liens and encumbrances. If under the terms of the arbitration agreement the plaintiff's claim must be submitted to arbitration before an action at law may be brought for its recovery, the plaintiff 'will be unable to secure the payment of any award which he may obtain by * * * [the] arbitration.'

The bill includes a prayer that the defendant, as an individual and as trustee, be temporarily restrained and enjoined from conveying or encumbering the property, and from employing any person or entering into any agreement that would cause a lien to be created on the property; also, that in the event of an arbitration award, or verdict or findings, in favor of the plaintiff, a master be appointed to sell the property.

The defendant assigned as grounds for his demurrer that the court was without jurisdiction of the subject matter of the suit, and that the plaintiff had a full, complete and adequate remedy at law. The defendant's position is that the bill, which in effect seeks an equitable attachment of the defendant's real estate, having been brought prior to any submission to arbitration and not being predicated upon an arbitration award, violates the provisions of the arbitration clause in the agreement.

The demurrer ought not to have been sustained.

Special equity jurisdiction is given to the Superior Court over suits to reach and apply in payment of a debt property fraudulently conveyed by a debtor. G.L.(Ter.Ed.) c. 214, § 3(9). If no arbitration clause was involved there would be no question that the plaintiff had stated sufficient facts to entitle him to relief under this section, and it is immaterial that the plaintiff might have an adequate remedy at law. Sztramski v. Spinale, 332 Mass. 500, 503, 126 N.E.2d 118.

The subject of commercial arbitration is governed by G.L. c. 251, as appearing in St.1960, c. 374, § 1, which is based on the Uniform Arbitration Act. ¹ The issue presented in the case at bar appears to be one of first impression both here and in other jurisdictions where the Uniform Arbitration Act is in effect. Section 1 of c. 251 provides that written agreements to submit controversies to arbitration shall be 'valid, enforceable and irrevocable.' As noted above, the parties have contracted to submit disagreements to arbitration and have made the decision of the arbitrators a condition precedent to any right of legal action. We are of opinion that this provision, taken in the context of the arbitratioin act, is not inconsistent with the equitable attachment process of G.L. (Ter.Ed.) c. 214, § 3(9).

A bill to reach and apply property fraudulently conveyed combines in one proceeding matters both of law and equity. The first is the establishment of an indebtedness by the defendant to the plaintiff. The second is the equitable process for collecting the debt out of the property fraudulently conveyed. In short 'a bill to reach and apply is essentially a proceeding at law supplemented by an equitable attachment.' Bressler v. Averbuck, 322 Mass. 139, 141, 76 N.E.2d 146, 148. Stockbridge v. Mixer, 215 Mass. 415, 418, 102 N.E. 646. Where such an attachment is sought pending the determination of the substantive issues it is the practice to issue of temporary injuction whereby the property is taken into the control of the court and is charged with an equity for the security of the plaintiff. Snyder v. Smith, 185 Mass. 58, 61-62, 69 N.E. 1089. McCarthy v. Rogers, 295 Mass. 245, 247, 3 N.E.2d 787. This, in essence, is the relief that the plaintiff requests. The bill, fairly construed, indicates that he is not seeking to deprive the arbitrators of jurisdiction over the issues of law. We see no reason why the Superior...