319 Mass. 390 | Mass. | 1946
The trustee in bankruptcy of the Superior Printing Company, Inc., brought this bill in equity to set aside certain conveyances alleged to be in fraud of the creditors of the company. An amendment to the bill alleged that the bankrupt on May 23, 1942, pledged certain merchandise as collateral security for the payment of its note for $9,100 payable to the defendant New Bedford Acceptance Corporation; that the pledge constituted a personal property mortgage; that this mortgage was not recorded as required by G. L. (Ter. Ed.) c. 255, § 1; that the bankrupt on May 25, 1942, made an assignment for the benefit of its creditors to the defendant Da Rocha, who acted in behalf of all the defendants; that Da Rocha on June 1, 1942, sold all the assets of the Superior Printing Company, Inc., to a new corporation known as the Superior Printers, Inc.; and that this latter corporation received from Wesco Water Paints Inc. for which this pledged merchandise was manufactured the sum of $7,100 which it turned over to the New Bedford Acceptance Corporation, “which took the same on account of and in trust for the plaintiff.” The bill as amended prayed that the New Bedford Acceptance Corporation be ordered to account for and pay to the plaintiff the said money received by it from the Superior Printers, Inc.. The defendant New Bedford Acceptance Corporation, hereinafter called the acceptance corporation, appealed from a final decree ordering it to pay the plaintiff $2,973.27 and dismissing the bill as to all the other defendants. The plaintiff appealed on the ground that the judge should have ordered the acceptance corporation to pay a larger amount, and that he should not have dismissed the bill against all the other defendants.
The evidence is reported, and the judge made a report of the material facts. The facts found by the judge and those which we ourselves find, Lowell Bar Association v. Loeb, 315 Mass. 176, may be summarized as follows: The defendant Costa, a printer, together with the defendant Garston,
The old corporation on May 25, 1942, made an assignment for the benefit of creditors to the defendant Da Rocha, an employee of and a straw for the acceptance corporation. A meeting of the creditors was held on May 29, 1942, at which an offer of ten per cent was made to the unsecured creditors. The amount then owed to the unsecured creditors was $5,266.11. These creditors refused to accept the offer. The Superior Printers, Inc., hereinafter called the new corporation, was formed on June 1, 1942. The assignee, Da Rocha, on the same day sold all the assets of the old corporation to the new corporation for $625. This sum was lent by the acceptance corporation to the new corporation. This latter corporation assumed the liabilities of the old corporation to the secured creditors, took over the plant and equipment of the old corporation,
The Wesco Waterpaints Inc., hereinafter called Wesco, began in 1941 to have some of the printing of color cards, wrappers and labels done by the old corporation. This work was done upon orders from Wesco, and the paper stock except one small lot was furnished by the old corporation. When the paper was printed, it was packed and put to one side to await a shipping order from Wesco. Bills were sent to Wesco as the goods were shipped, and Wesco agreed to pay for any goods that it did not direct to be shipped within a year after they had been printed. Wesco, after the old corporation ceased to do business, continued without any interruption to do business with the new corporation in the same manner as it did with the old corporation. It paid the new corporation for all paper that the old corporation had printed but had not delivered, and thereafter in all respects Wesco continued as if the old corporation had never existed.
The principal contentions of the acceptance corporation are (1) that the relations between the old corporation and Wesco were such as to create only a claim in favor of the old corporation against Wesco for labor and materials, or in the alternative (2) that in any event title to the finished printing done by the old corporation for Wesco passed to Wesco as soon as the work was done and while the goods were still in the possession of the old corporation; that after title passed the old corporation had only claims against Wesco for the agreed price; and that according to either alternative these money claims were accounts receivable of the old corporation which it could and did validly pledge to the acceptance corporation even though the instrument of pledge was not recorded. We assume, as have the parties, that an instrument pledging accounts receivable is valid against third parties, and that such a pledge does not come within G. L. (Ter. Ed.) c. 255, § 1. See Taylor v.
Wesco did not become liable to pay for the goods until they had been shipped and billed to it, except that it became liable to pay for goods that had been printed for a year and had not been ordered shipped. The amount that would become due when the goods were shipped was not an account receivable when the goods were printed and stored. National Bank of Newport v. National Herkimer County Bank, 225 U. S. 178, 184. Haverfield Co. v. Evatt, 143 Ohio St. 58. Sadler v. Pure Oil Co. Inc. 172 S. C. 220, 222. See In re Worth Lighting & Fixture Co. Inc. 292 Fed. 769, 771; In re Bernard & Katz, Inc. 38 Fed. (2d) 40.
As the old corporation had title to and possession of the goods pledged with its note of May 23, 1942, the pledge constituted a personal property mortgage, which to be valid against others than the parties thereto was required to be recorded in accordance with G. L. (Ter. Ed.) c. 255, § 1. Connecticut Valley Onion Co. v. Pielock, 281 Mass. 287. Peabody Gas & Oil Co. v. Standard Oil Co. of New York, 284 Mass. 87. The effect to be given to this unrecorded mortgage, in so far as it concerns the rights of the plaintiff, is governed by the law of this Commonwealth. Thompson v. Fairbanks, 196 U. S. 516. Knapp v. Milwaukee Trust Co. 216 U. S. 545. Under our law the trustee in bankruptcy
A chattel mortgage unless recorded as prescribed by G. L. (Ter. Ed.) c. 255, § 1, is not valid except as against the parties. Da Rocha, the common law assignee, was not a party to the mortgage, Chick v. Nute, 176 Mass. 57, and by him all the assets of the old corporation had been transferred to the new corporation before the petition in bankruptcy was filed against the old corporation. The new corporation, even if it knew of the prior unrecorded mortgage to the acceptance corporation, by a fair and legitimate purchase could acquire a full and complete title to the mortgaged goods that the plaintiff as representing the creditors of the old corporation could not impeach. It was said in Bingham v. Jordan, 1 Allen, 373, 374, “Without registration or delivery, a mortgage of personal property has no validity against a purchaser from the mortgagor, even with notice of the mortgage. . . . The debtor could therefore have sold this property, and have given a perfect title to a purchaser.” Travis v. Bishop, 13 Met. 304. Connecticut Valley Onion Co. v. Pielock, 281 Mass. 287, 290. But it is open to the plaintiff to challenge the validity of the transfer of the mortgaged goods to the new corporation as in fraud of creditors of the old corporation. In re Finlay, 104 Fed. 675. In re Knight, 125 Fed. 35. Faulkner v. Kaplon, 203 Fed. 114. Prall v. Rush, 51 S. D. 638.
The judge was right in finding that as against the plaintiff the acceptance corporation got no title to the goods pledged with the note. While the judge found that the plaintiff was entitled to these goods or their proceeds, he made no finding that the transfer of the goods from the old to the new corporation was made with intent to defraud, hinder or delay the creditors of the old corporation. All the evidence is reported, and all questions of law, fact and discre
. The acceptance corporation dominated the entire situation. Garston was influential in both the acceptance corporation and the old corporation. Da Rocha exercised no independent judgment. He- had no appraisal made. He did whatever the attorneys for the acceptance corporation instructed him to do. He purported to sell all the assets of the old corporation to the new corporation for $625. This amount was determined without any regard to the value of the assets of the old corporation, but was decided upon as the amount necessary to pay ten per cent to the unsecured creditors of the old corporation. Although those creditors refused to accept this amount, it was subsequently lent to the new corporation by the acceptance corporation. The judge reports that no evidence was offered as to what became of this sum. The new corporation assumed the liabilities of the secured creditors of the old corporation. The inevitable result of this transfer of all the assets of the old to the new corporation was to defraud, hinder and delay the unsecured creditors, and it is plain that the transfer was made for that purpose. It may be that, if the transfer had not been made, these creditors would have had difficulty in satisfying their claims against the old corporation on account of the encumbrances upon its property. It is to be noted that soon after the transfer the acceptance corporation took a mortgage for $15,000 from the new corporation in payment of two existing mortgages and $2,650 paid to the new corporation. The proper conclusion from these facts is that the transfer of assets from the old to the new corporation was made with the actual intent to defraud, hinder and delay the unsecured creditors of the old corporation, that it was a fraudulent conveyance both at common law and under the statute, and that the goods pledged with the note of May 23, 1942, were included in this conveyance. G. L. (Ter. Ed.) c. 109A, § 7. Kimball v. Thompson, 4
The judge found the acceptance corporation liable only for the amount necessary to pay the unsecured creditors of the old corporation after deducting the amounts paid to them from time to time by the new corporation. In this there was error. Both the old and new corporations were parties to a fraudulent conveyance as against the plaintiff. Neither was entitled to be credited in this proceeding with payments made by the new corporation to creditors of the old corporation. The acceptance corporation, which was an active participant in the entire transaction, has no better standing and is not entitled to any credits on account of those payments. Manufacturers National Bank v. Simon Manuf. Co. 233 Mass. 85. R. E. McDonald Co. v. Finkovitch, 270 Mass. 362. In the next place, the trustee in bankruptcy was entitled to have the pledge of the printed stock to the acceptance corporation set aside and to recover the goods included in the pledge or their value from "whomever may hold or have received it." U. S. C. (1940 ed.) Title 11, § 110 (e) (2). Mason v. Wylde, 308 Mass. 268, 275. Thomas E. Hogan, Inc. v. Berman, 310 Mass. 259, 261. That the amount recovered might exceed the amount necessary to satisfy the claims of these creditors did not justify the Superior Court in determining the amount owed to them and limiting the damages to that amount. The disposition of the surplus, if any, was a matter to be settled by the Federal court having jurisdiction over the administration of the estate of the bankrupt. Wellman v. North, 264 Mass. 469. McCrory v. Donald, 119 Miss. 256. Cunningham v. Mitchell, 126 Wash. 294.
The “inventory” of goods pledged with the note of $9,100, dated May 23, 1942, appears to amount to $7,191.62; and as payments were made by Wesco to the new corporation for goods shipped from this inventory, corresponding amounts were paid by the new corporation to the acceptance corporation. The balance on this note has been reduced to $1,500, but some of the payments made on account
The plaintiff finally contends that other defendants besides the acceptance corporation should also have been found liable. The bill as amended does not seek damages from the other defendants for any breach of duty owed by them to the old corporation, see Putnam v. Handy, 247 Mass. 406; Manning v. Campbell, 264 Mass. 386, but, in so far as the pledge of the inventory of .the goods is concerned, is limited to an accounting by the acceptance corporation for the proceeds from the sale of the "inventory.” No part of these proceeds was received by any of the other defendants for their own use. All of the proceeds have been traced to the acceptance corporation. In these circumstances there was no error in refusing to find any of the defendants other than the acceptance cprporation liable on this accounting. Pratt v. Tuttle, 136 Mass. 233. Perkins v. Becker’s Conservatories, Inc. 318 Mass. 407, 414, 415.
The final decree is modified by striking out $2,973.27 and substituting therefor $5,300. The decree should also provide for interest from the time payments up to this last mentioned amount were received by the acceptance corporation on account of goods sold to Wesco from the inventory of May, 1942. The decree as so modified is affirmed with costs against the defendant acceptance corporation.
So ordered.