Caines v. Sawyer

• Decision Date: 08 April 1924
• Citation: 248 Mass. 368,143 N.E. 326
• Parties: CAINES v. SAWYER et al. (three cases).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

248 Mass. 368

143 N.E. 326

CAINES

v.SAWYER et al. (three cases).

Supreme Judicial Court of Massachusetts, Suffolk.

April 8, 1924.

Appeals from Superior Court, Suffolk County; F. T. Hammond, Judge.

Three bills in equity by Richard J. R. Caines against Charlotte L. Sawyer, otherwise known as Charlotte Loud, and another, to establish plaintiff's rights in shares of stock, and to enjoin collection of notes. From final decrees dismissing the bills and sustaining exceptions to master's report, and from an order recommitting the report, plaintiff appeals. Affirmed.

The individual defendant in her answer denied that she ever held the stock in trust for plaintiff, and that stock owned by her in the corporation was exchanged for new stock on reorganization.Dunbar, Nutter & McClennen, of Boston (J. B. Studley, Edw. E. Ginsburg, and Park Carpenter, all of Boston, of counsel), for appellant.

Carver & Carver, of Boston, for appellee.

CROSBY, J.

These are three bills in equity, the first to establish the plaintiff's rights in two hundred shares of stock of the corporate defendant and for other relief based upon the existence of such rights; and the second and third to enjoin the collection of two notes, one for $1,200 and one for $1,000, made by the plaintiff, as to which he contends that by reason of his alleged rights in the stock described in the first bill he has an equitable defence. The cases were referred to a master who made a report; and, certain exceptions of the defendant to that report having been sustained, it was recommitted to the master ‘to find and report all the facts not already reported and embodied as findings in his report relating to the issue to the defendant Sawyer of the two hundred shares of common stock of the defendant corporation at the time of the reorganization thereof, and all other facts which relate to the question of the ownership of said stock.’ The master thereafter filed a supplemental report, and the case was then heard by a judge of the superior court who filed a ‘Memorandum and Order for Decrees.’ The evidence before the master is not reported. The cases are before this court upon the appeal of the plaintiff in each case from the final decree dismissing the bill, the plaintiff's appeal from the decree sustaining certain exceptions of the defendant, and from the order recommitting the report.

In dealing with the inferences of fact drawn by the single justice from the master's report, this court stands with reference to the facts found and the power to draw inferences as did the single justice, and is not bound by the findings made by him as all the facts are to be found in the report. Harvey-Watts Co. v. Worcester Umbrella Co., 193 Mass. 138, 78 N. E. 886;Mansfield v. Wiles, 221 Mass. 75, 84, 108 N. E. 901;Glover v. Waltham Laundry Co., 235 Mass. 330, 334, 127 N. E. 420.

It appears from the master's report that, in 1907, the plaintiff organized the defendant corporation under the laws of the state of Maine with a capital stock of $10,000, consisting of four hundred shares of the par value of $25 each, for the purpose of conducting the business of teaching physical culture, which business he had established in Boston. In that year, the defendant Sawyer-then the wife of one Loud-entered the employ of the corporation as clerk, and later was also an instructor. In December of the same year she purchased eight shares of stock in the corporation from the plaintiff, and was elected a director and clerk. Soon after her employment by the defendant corporation she separated from her husband, and the plaintiff separated from his wife; the plaintiff and the defendant Sawyer began living in the same apartment and continued living together in various places in and about Boston until the fall of 1916, when they became involved in a quarrel and did not thereafter live together.

On or about October 7, 1908, a certificate of two hundred and one shares of the defendant corporation, standing in the name of the plaintiff and consisting of a majority and a controlling interest, was transferred by him to the defendant Sawyer; although this certificate was not transferred on the books of the corporation until the reorganization in 1912, it remained in her possession and she dealt with it as owner. The plaintiff contends, and the master found, that the two hundred and one shares were transferred to her for the purpose of preventing the plaintiff's wife reaching it in legal proceedings, and that the defendant Sawyer agreed to return it to him after he had secured a divorce from his wife. Upon this question the master made the following finding:

‘In the course of her cross-examination as a witness, the defendant Sawyer stated she does not claim that there was a gift of the stock to her, but stands upon her contention that she purchased the 201 shares and paid for them in October, 1908. The pleadings do not raise any issue of a gift of the stock by the plaintiff to her and there was no evidence that anything was said between them, at any time, relative to a gift thereof. From all of the evidence I find that, at the time of the transfer of the 201 shares of stock, the defendant Sawyer did not pay for them and further find that the certificates were indorsed over to her because the plaintiff feared that his wife might attempt to reach them under some legal process and that the defendant Sawyer agreed to return them to him after he had secured a divorce from his wife.’

This finding is not consistent with the other findings of the master or with those made by the court. The plaintiff contends that by reason of these findings a resulting trust was created in his favor which he is entitled to enforce. There is no doubt that the transfer was a fraud upon the plaintiff's wife. Livermore v. Boutelle, 11 Gray, 217, 71 Am. Dec. 708;Chase v. Chase, 105 Mass. 385;Doane v. Doane, 238 Mass. 106, 130 N. E. 484. It is plain that the express agreement to return the stock cannot be enforced because it discloses upon its face the fraudulent character of the transaction. Lufkin v. Jakeman, 188 Mass. 528, 532, 74 N. E. 933;Verne v. Shute, 232 Mass. 397, 122 N. E. 315;Dunne v. Cunningham, 234 Mass. 332, 125 N. E. 560. Upon the facts disclosed in the present case the plaintiff cannot have a resulting trust established in his favor, nor is he entitled to any form of equitable relief. The decision in Lufkin v. Jakeman is not applicable to a case of this kind where the plaintiff is obliged to rely upon his fraudulent scheme to defraud his wife to obtain the relief which he seeks.

A court of equity will not lend its aid to relieve a party from the consequences of his fraud but will leave him where his...