By Miscellaneous Case No. 113825, which was filed in the Land Court on June 11, 1984, Plaintiff Niki Fields seeks a declaration that a chattel mortgage on the equipment and personal property used in connection with the operation of the South Side Car Wash ("South Side" or "Car Wash"), located at 1015 Main Street in Brockton, which mortgage was given to the Rockland Trust Company ("Rockland Trust") by Patrick J. Stapleton ("Stapleton") as security for a promissory note in the amount of $35,000.00, was of no effect, inasmuch as the personal property described therein is part of the real estate and that the rights of all parties relative thereto should be determined accordingly.
On April 16, 1985, Stapleton and South Side filed a motion to intervene in Miscellaneous Case No. 113825 as Party-Plaintifs, which motion was allowed on May 2, 1985.
On April 7, 1986, Rockland Trust filed an amended answer and counterclaim to the complaint, seeking therein the entry of a judgment against Niki Fields in the amount of $35,000.00, plus interest from June 1, 1984, costs and attorneys' fees, all arising out of her removal, or authorization of the removal, of the aforesaid equipment and personal property from the Car Wash premises.
On July 25, 1984, Victor G. Fields, Trustee of the M & S Realty Trust (at times referred to herein as "Fields"), [Note 1] commenced Miscellaneous Case No. 115118 in the Plymouth Couty Superior Court, the case then being docketed as Civil Action No. 84-19503. As filed, this action contained four (4) counts for relief.
By Count I, Fields seeks to recover on a note in the amount of $149,000.00, which note was given to him in September of 1981 by the South Side Car Wash, Inc. and Stapleton, as consideration for Fields' transfer of the Car Wash, and its related equipment, to them. By this Count, Fields also seeks to recover the real estate taxes, water use charges and sewer use charges which were not paid during the time that South Side owned and operated the Car Wash, as well as interest, costs and attorneys' fees. By Count IV, Fields seeks damages, pursuant to G.L. c. 93A, §2, for the unfair and deceptive business practices of Stapleton and South Side. Count II, which sets forth an action to reach and apply the assets of the J.R. Realty Trust, and Count III, which sets forth an action to set aside certain fraudulent conveyances alleged to have been made by Stapleton and South Side, have been waived by the Plaintiff Fields and, accordingly, are not at issue herein.
The Defendants South Side and Stapleton filed counterclaims to Fields' complaint on August 6, 1984, alleging therein fraud, negligent misrepresentation, breach of warranty and unfair and deceptive business practices on the part of Fields.
On or about October 30, 1984, Civil Action No. 84-19503 (Miscellaneous Case No. 115118) was transferred to the Land Court. Thereafter, on May 2, 1985, Miscellaneous Case No. 115119 was consolidated for trial with Miscellaneous Case No. 113825.
On October 28, 1985, the Court allowed Fields' motion to add Shannon Farms, Inc. as a Party-Defendant in Miscellaneous Case No. 115118 and to amend the complaint filed therein by adding two (2) additional counts for relief. By an Order entered on December 8, 1987, however, Shannon Farms' motion for summary judgment was allowed, thereby dismissing these counts.
By an Order of Assignment dated March 6, 1986, I was designated as a Superior Court Justice for the purpose of hearing all claims and counterclaims brought pursuant to G.L. c. 93A.
On October 13, 1987, the Court allowed a motion of the Defendants Stapleton and South Side to amend their answer and counterclaims, so as to add a claim for a judgment in the amount of $30,000.00 against Niki Fields, said claim arising out of her alleged failure to pay any monies to Rockland Trust in conjunction with the sale to her of the Car Wash, which sale was subject to the aforesaid mortgage and security agreemen with Rockland Trust.
The matters proceeded to trial on May 25, 1989 and March 13 and April 12 of 1990, at which times the Court appointed a stenographer to record and transcribe the testimony. Five (5) witnesses testified and twenty-seven (27) exhibits were accepted into evidence. All of the exhibits are incorporated herein for purposes of any appeal.
On all of the evidence, I find the following facts:
1. In 1970, Victor Fields purchased a parcel of vacant land located at 1015 Main Street in Brockton ("Locus"). Shortly thereafter, Fields purchased certain car washing equipment and, in accordance with the specifications of the equipment manufacturer, constructed a steel and brick building on the property. This building houses the Car Wash at issue herein (See Exhibit No. 13).
2. As the Car Wash was originally designed, vehicles would enter the rear of the building, be sprayed with water from pipes installed in the ceiling and be pulled along a motorized conveyor belt, the frame of which was bolted into the cement floor. As they moved along this conveyor belt, the vehicles would be scrubbed and cleansed by overhead and side brushes, waxed and then blown dry by a forced air blower system.
3. Fields was involved in the operation of the Car Wash from 1970 to about 1981. During this time, the original car wash equipment was utilized, but frequently required maintenance, repair and even, as to some parts, complete replacement.
4. At some time in the summer of 1981, Fields, Stapleton and Earl Beaubien, a real estate broker, met and discussed a sale of the Car Wash. This meeting transpired at Locus. Inasmuch as Stapleton had no prior experience in the car washing business, he viewed the premises with Fields and Beaubien and inquired about the existing equipment. At this time, Stapleton observed that both the interior and exterior of the subject building were in need of repair and that, for the existing car washing equipment to be fully operational, it would require repair, and in some instances, total replacement (See Exhibit Nos. 12 and 13). Stapleton was also informed that there were gasoline tanks on the property, but inasmuch as they had not been used in several years, and presumably the license therefor had been revoked, it would be necessary to reapply for a license for their use on the premises.
5. Following Stapleton's first visit to Locus, he and Fields commenced negotiations for the sale of the property. Stapleton was represented by legal counsel at this time.
6. On August 15, 1981, Fields and Stapleton, on behalf of South Side Car Wash, Inc., signed a Purchase and Sale Agreement ("Agreement") (Exhibit No. 1) for the land and building located at 1015 Main Street, Brockton. By the terms of the Agreement, Stapleton would pay Fields the sum of $150,000.00, with $100,000.00 being paid as consideration for the sale of the real estate and $50,000.00 being paid as consideration for the sale of the equipment and personal property. The Agreement also contained the following provisions:
6. In consideration herein buyer agrees to update the real estate and make whatever repairs and structural repairs as might be necessary and shall renovate the interior of the building and shall repair or replace all equipment as is reasonably necessary to restore the said car wash in good operating condition.
7. Buyer hereby acknowledges that the real estate and equipment are in need of substantial repairs and renovations.
7. Inasmuch as the parties agreed to divide the purchase price for the Car Wash between personalty and realty, Fields drafted a "Bill of Sale" (Exhibit No. 2 ) memorializing the sale, transfer and delivery of the Car Wash equipment and personal property to South Side, for the sum of $50,000.00. This document, dated September 17, 1981, enumerates the goods and chattels which are the subject of this sale.
8. On September 17, 1981, Fields, as Trustee, conveyed the land and buildings located on Locus to South Side Car Wash, Inc., a corporation in which Stapleton is the President, Treasurer and sole shareholder. The stated consideration for this transfer was $100,000.00. This conveyance is evidenced by deed recorded at Book 5058, Page 118 in the Plymouth County Registry of Deeds (Exhibit No. 3).
9. As payment for the sale of the Car Wash, South Side and Stapleton, individually, executed a note to Fields in the amount of $149,000.00, to be paid over a ten (10) year period commencing on March 15, 1982 ("Fields Note") (Exhibit No. 4). Interest on the Fields Note was set at the rate of 12% per annum. On this same day, South Side granted Fields a mortgage, with a power of sale contained therein, on Locus and the buildings situated thereon ("Fields Note Mortgage") (Exhibit No. 5).
10. Before opening the Car Wash for business in late 1981, Stapleton or South Side repaired the roof, windows and doors of the building, replaced, and/or upgraded certain parts of the car washing equipment, installed a new electrical system and purchased new office furniture and supplies. In order to finance the repair and replacement of the car washing equipment, Stapleton applied for a loan from the Rockland Trust, with which bank he had had prior business dealings. This loan application was accompanied by a copy of Stapleton's financial statement (Exhibit No. 18).
11. On October 2, 1981, South Side executed a $35,000.00 demand note to Rockland Trust ("Rockland Trust Note") (Exhibit No. 15), which note was personally guaranteed by Stapleton. As security for the advancement of these funds, Rockland Trust was granted a security interest in the following items ("Rockland Trust Mortgage") (See Exhibit No. 14):
All goods, wares, merchandise, accounts receivable, stock-in-trade, inventory, furniture & fixtures, machinery & equipment, and personal property of every name, nature and description, now or hereafter owned by the debtor and used in connection with his business located at 1015 Main Street, Brockton, Massachusetts.
12. On October 6 and 8 of 1981, respectively, Rockland Trust recorded UCC Financing Statements, with reference to the aforementioned collateral, with the Office of the Brockton City Clerk and the Massachusetts Secretary of State (See Exhibit No. 14).
13. Some time after obtaining the loan from Rockland Trust, Stapleton caused the gasoline tanks to be removed from Locus.
14. As of early 1983, Stapleton was in arrears on the Fields Note. Accordingly, on January 4, 1983, Fields and Stapleton agreed that, in consideration of Fields' forestalling foreclosure proceedings on the Fields Note Mortgage, the payment terms of the Fields Note would be amended ("Amended Fields Note") (Exhibit No. 6). One particular term of the Amended Fields Note was that, in the event of a default on payments by Stapleton, the agreement to forestall foreclosure would be null and void.
15. Despite the language of the Amended Fields Note, Stapleton made payments to Fields totalling only $17,654.00 from April of 1982 to September of 1983.
16. Stapleton's last payment on the Rockland Trust Note was made on May 4, 1983, thereby leaving this note, like the Amended Fields Note, in arrears. Rockland Trust took no steps to foreclose on the Rockland Trust Mortgage at this time.
17. In early December of 1983, Fields commenced proceedings in the Land Court to foreclose on the Fields Note Mortgage (See Exhibit No. 7).
18. In early December of 1983, Stapleton closed the Car Wash. This event was not made known to Fields until some time thereafter, when he was called to the premises and discovered that the car washing equipment had froze, certain water pipes had burst and the Car Wash business itself had ceased operation.
19. On December 30, 1983, South Side conveyed the land and buildings located at 1015 Main Street to Niki Fields. This reconveyance, which appears to have been made for nominal consideration, is evidenced by a deed recorded at Book 5548, Page 284 in the Plymouth County Registry of Deeds (Exhibit No. 11). Fields requested that this transfer be made to his wife, inasmuch as he held the aforementioned mortgage ("Fields Note Mortgage") on the premises.
20. On January 4, 1984, the Fields' and Stapleton executed a "Bill of Sale" purporting to sell to Niki Fields, for nominal consideration, certain enumerated goods and chattels, as well as all other personalty presently upon the subject premises and used in the operation of the Car Wash ("Bill of Sale") (Exhibit No. 10). This document also provided that such sale was "subject to a mortgage or security agreement held by Rockland Trust Company ["Rockland Trust Mortgage"], and Niki Fields hereby acknowledges said fact". Although there is insufficient evidence in the record from which to determine whether or not either Fields was to assume responsibility for the payment of the Rockland Trust Note at this time, it appears that Stapleton and South Side, pursuant to a judgment on the Note, have been making certain payments thereon to Rockland Trust.
21. In view of the evidence in the record before the Court, the lack of any written memoranda and the nominal consideraion which Fields gave to Stapleton for the transfers of the realty and personalty at 1015 Main Street, I find that, by these transactions, the parties thereto intended that the indebtedness between them be extinguished.
22. From January of 1984 to mid-1985, Niki Fields rented the Car Wash to a tenant. During this time, the car washing equipment, which had been installed on the premises by Stapleton in 1981, was used in the operation of the business. It is not clear, however, what, if any, repairs or renovations were made to the premises or equipment subsequent to this transfer.
23. By letter dated May 4, 1984 ("Rockland Trust Demand Letter") (Exhibit No. 16), Rockland Trust demanded payment from Fields in the amount of $35,000.00, plus past due interest at 3% over the Bank's base rate, as satisfaction of the Rockland Trust Mortgage (See Findings No. 9 and 14).
24. Fields, purportedly acting as the agent of his wife, responded to the Rockland Trust Demand Letter by letter dated May 14, 1984 (Exhibit No. 17), wherein he denied that Rockland Trust had any interest in the Car Wash premises and that, accordingly, he would oppose any attempt by Rockland Trust to remove the equipment or personalty therefrom. After receiving this reply, Rockland Trust pursued no discernable course of action to secure or protect its security interest in the collateral.
25. On June 11, 1984, Niki Fields commenced Miscellaneous case No. 113825.
26. By deed dated November 4, 1985, recorded at Book 6405, Page 71 (Exhibit No. 20), Niki Fields conveyed Locus, and the buildings situated thereon, to George and Christopher Kordis, Trustees of the G & C Realty Trust, for the sum of $210,000.00. The equipment and personal property, which had, up until that date, been used in connection with the operation of the Car Wash, was not included in this sale.
27. Following the sale of the 1015 Main Street property to the G & C Realty, the Fields' caused the car washing equipment to be removed from the premises, cut up into pieces and sent to a junk yard.
A. Miscellaneous Case No. 113825
The Plaintiff Niki Fields contends that the chattel mortgage taken by Rockland Trust as security for the $35,000.00 note, which was executed by Stapleton on October 2, 1981, is of no effect, inasmuch as the personal property described therein is part of the real estate. Niki Fields brings this action based on her subsequent purchase of said equipment, which sale was made subject to Rockland Trust's chattel mortgage ("Rockland Trust Mortgage"). Conversely, Rockland Trust asserts that these items have retained their character as personalty and that, inasmuch as Niki Fields has caused the same to be removed from the subject premises, she is liable for conversion and, accordingly, owes Rockland Trust the fair market value of the property at the time of this wrongful act.
To assert its rights as the holder of an enforceable security interest in the collateral named in the October 2, 1981 Secuity Agreement (hereinafter referred to at times as "the Agreement"), Rockland Trust must establish the following in accordance with G.L. c. 106, §9-203 (1):
a) that the collateral is in the possession of the secured party pursuant to agreement, or that the debtor has signed a security agreement which contains a description of the collateral . . .;
b) that value has been given;
c) that the debtor has rights in the collateral.
On October 2, 1981, Rockland Trust lent South Side the sum of $35,000.00, thereby satisfying the requirement of G.L. c. 106, §9-203 (1) (b) that value be given in exchange for the collateral. These funds were advanced to South Side for purposes of financing the purchase and installation of certain car washing equipment and other personal property for use in connection with the Car Wash. In exchange therefor, South Side executed a commercial demand note to Rockland Trust, said note being personally guaranteed by Stapleton. As evidenced by the subject Agreement, the note was secured, in accordance with G.L. c. 106, §9-203 (1) (c), by all of the car washing equipment and other personalty "now or hereafter owned by the debtor and used in connection with his business located at 1015 Main Street, Brockton, Massachusetts (emphasis added)". I find this description of the collateral (See Finding No. 11) to be consistent with the language of G.L. c. 106, §9-110, which provides that, for purposes of Article 9, a description of personalty is sufficient if it reasonably identifies the subject goods. In addition, I find that the Agreement itself fulfills the requirement of G.L. c. 106, §9-203 (1) (a), inasmuch as it bears what purports to be the signature of Stapleton.
In view of the foregoing, I thus find that all of the requisite events of §9-203 (1) transpired on October 2, 1981 and that, accordingly, pursuant to G.L. c. 106, §9-203 (2), Rockland Trust's security interest in the subject collateral attached, and became enforceable against Stapleton, on that date.
The evidence further reveals that, on October 6 and 8 of 1981, respectively, Rockland Trust filed UCC Financing Statements relative to the subject collateral with the Office of the Brockton City Clerk and with the Massachusetts Secretary of State. Inasmuch as a financing statement must be filed in order to perfect a security interest in personal property which is left in the possession of the debtor, G.L. c. 106. §9-302; Prime Business Co. v. Drinkwater, 350 Mass. 642 , 644 (1966), I find that Rockland Trust's security interest was perfected upon the filing of these statements.
Having found that Rockland Trust is the holder of a valid and enforceable security interest in the car washing equipment and personalty located at the 1015 Main Street premises, it is next necessary to determine whether or not such property became incorporated into the real estate, thereby losing its character as personal property.
It is the rule of this Commonwealth that the conversion of chattels from personalty to realty by reason of annexation depends, as between owner and mortgagee, on the intent of the owner when he puts the chattels in place. Grinnell Company, Inc. v. Gardner Trust Company, 268 Mass. 385 , 388 (1934); Bay State York Company v. Marvix, Inc., 331 Mass. 407 , 411 (1954). The controlling factor in making this determination is not the owner's undisclosed purpose, but his intent as objectively manifested by his acts and implied from what is external and visible. Id. An intent to make the chattel part of the realty may be established where such chattel is so affixed to the realty that its identity is lost, or where it cannot be removed without material injury to the realty or to itself. Mathey v. Charlestown Five Cents Savings Bank, 290 Mass. 510 , 513 (1935); Nadien v. Bazata, 303 Mass. 496 , 499 (1939); Gar Wood Industries, Inc. v. Colonial Homes, Inc., 305 Mass. 41 , 50 (1940). In making this determination, consideration must be given to the nature of the chattel, its apparent object, effect and mode of annexation to the realty. Bay State York Company at 411 citing Southbridge Savings Bank v. Mason, 147 Mass. 500 , 502 (1888).
The evidence reveals that Fields purchased the original car washing equipment and personal property in 1970. Following such purchase, Fields erected a building on Locus and installed the equipment and other personalty therein. This equipment was annexed to the building by lag bolts and screws. Until approximately 1981, the Car Wash was operated by Fields' agents. During this time, Fields frequently found it necessary to repair, and even replace, certain parts of the car washing equipment. On September 17, 1981, the property, including the Car Wash building and all of the equipment and personalty therein, were sold to Stapleton, who repaired and replaced certain parts of the existing car washing equipment, with funds advanced by Rockland Trust, prior to opening the premises for business. Thereafter, in late 1983, the realty, personalty and equipment were sold to Niki Fields, subject to the chattel mortgage, and in 1985, the realty was sold and the then existing car washing equipment and personalty were removed and junked.
The foregoing evidence reveals that, during Fields' and Stapleton's respective ownerships of the Car Wash, at least certain parts of the car washing equipment could be detached from the premises with little effort (i.e. parts could be removed from the premises by merely detaching the lag bolts and/or screws). In addition, I find sufficient evidence in the record to give rise to the inference that neither Fields nor Stapleton ever intended for the equipment and personal property to be incorporated into the realty and, accordingly, rule that, the chattels listed in the Rockland Trust Mortgage remain items of personal property and did not become fixtures.
Inasmuch as Niki Fields became a purchaser of the subject collateral in December of 1983, Rockland Trust's Security Agreement is effective against her. See G.L. c. 106, §§9-203 and 9-306 (2). Accordingly, as the note secured by the collateral was in default as of May 4, 1984, Rockland Trust's right to take possession of the same arose, and was in fact exercised, at that time. See G.L. c. 106, §9-503. However, Victor Fields, acting as the agent of Niki Fields, refused to comply with such a demand (See Finding No. 24), despite his having control over the collateral (See Findings No. 22 and 28) and thus the apparent ability to so comply. Marshall Vessels, Inc. v. Wright, 331 Mass. 487 , 489 (1954). I find that Fields' written refusal to comply with this demand, combined with the continued use of the car washing equipment and personal property thereafter by a tenant of Niki Fields, as well as the Fields' subsequent authorization of the removal and destruction of the car washing equipment, are acts sufficient to establish conversion. Accordingly, I rule that Rockland Trust is entitled to the fair market value of the collateral at the time of its conversion, which I find here to be May 14, 1984, the date of Fields' letter refusing to turn over the collateral to Rockland Trust. See G.E. Lothrop Theatres Co. v. The Edison Electric Illuminating Co. of Boston, 290 Mass. 189 , 194 (1935); Joy Stevens v. Plymouth Finishing Co., 355 Mass. 390 , 394 (1969); Clapp v. Haynes, 11 Mass. App. Ct. 895 , 897 (1980).
In view of the fact that, in December of 1983, the car washing equipment had froze, certain water pipes on the premises had burst and the business itself had ceased to operate, I find it unlikely that the Car Wash was in full and efficient operating capacity from that time until its sale in 1985 and that, accordingly, the value of the collateral held by Rockland Trust was in a state of decline. I thus accord little weight to the testimony offered by Stapleton that, as of late 1983, the car washing equipment and other personalty had a value of between $25,000.00 and $30,000.00 and, noting the absence of any other evidence, expert or otherwise, as to the value thereof, award Rockland Trust the sum of $10,000.00 on its counterclaim against Niki Fields, said sum to be paid to Rockland Trust within ninety (90) days from the date of the entry of a final judgment herein, after all appeals have been resolved.
B. Miscellaneous Case No. 115118
By this action, Victor Fields, as Trustee, seeks to recover, from Stapleton and South Side, the interest due on the Fields Note for the period extending from March 15, 1982 to December 30, 1983. Fields also seeks to recover those real estate taxes, water use charges and sewer use charges which were not paid during Stapleton and South Side's ownership of the Car Wash. Fields further seeks to recover damages for unfair and deceptive business practices. In response to this complaint, the Defendants, Stapleton and South Side, assert counterclaims against Fields for fraud, negligent misrepresentation, breach of warranty and unfair and deceptive business practices.
The evidence establishes that, on September 17, 1981, Fields sold South Side the real estate and personal property located at 1015 Main Street in Brockton. In order to finance this purchase, South Side and Stapleton executed a $149,000.00 promissory note to Fields, which note was secured by a mortgage on the Car Wash premises. Upon this note's falling into arrears, the parties thereto agreed to amend the payment terms thereof and an amended note was drafted accordingly. The terms of the amended note notwithstanding, the note to Fields again fell into arrears and foreclosure proceedings on the secured property were commenced. Shortly thereafter, it was agreed that Fields would repurchase the realty and personalty from South Side. These repurchases were made in the name of Niki Fields, the wife of Victor Fields, and were for nominal consideration. Further, insofar as the sale of the personal property used in the operation of the Car Wash to Niki Fields was made "subject to a mortgage or security agreement held by Rockland Trust Company . . .", and there was no assumption and agreement on her part to pay the mortgage debt, Stapleton remained liable to Rockland Trust for payment of such debt. See Franklin v. North Weymouth Cooperative Bank, 283 Mass. 275 , 282 (1933); Brown v. Kaplan, 302 Mass. 510 , 512 (1939); MacRae v. Pope, 311 Mass. 500 , 505 (1942). I find this evidence to indicate an agreement on the part of the parties to have the resale and reconveyance operate as extinguishments of any indebtedness between them, including any outstanding real estate taxes, water use charges or sewer use charges, or any indebtedness on the Rockland Trust Note. In so ruling, I note that any monies which Fields may now claim are due him from Stapleton and/or South Side relative to the Car Wash premises may well have been received by him out of the proceeds of the sale of such real estate to the G & C Realty Trust.
In consideration of all of the foregoing, the counterclaims which the Defendants Stapleton and South Side have asserted against Fields are hereby dismissed.
All parties hereto have filed requests for findings of fact and rulings of law, which I have considered. Certain of these requests have been incorporated herein. I have taken no action with respect to the remainder, inasmuch as I have made my own findings and rulings as to those facts and rules of law which I deem pertinent hereto.
[Note 1] Victor G. Fields is the husband of Niki Fields.