Berenson v. Nirenstein

• Decision Date: 26 July 1950
• Citation: 93 N.E.2d 610,326 Mass. 285
• Parties: , 20 A.L.R.2d 1136 BERENSON v. NIRENSTEIN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 610

93 N.E.2d 610

326 Mass. 285, 20 A.L.R.2d 1136

BERENSON v. NIRENSTEIN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 9, 1950.

Decided July 26, 1950.

H. B. Ehrmann, Boston, for plaintiff.

F. M. Kingsbury, Springfield, for defendant Nirenstein.

Before QUA, C. J., and LUMMUS, RONAN, WILKINS and COUNIHAN, JJ.

QUA, Chief Justice.

Material allegations of the amended bill may be summarized as follows: The plaintiff lives in Newton and does business in Boston. The defendant Nirenstein lives and does business in Springfield. In January, 1949, Nirenstein called on the plaintiff in Boston, stated that all the shares of Bowles Lunch, Inc., which had its principal business in Springfield, could be purchased, and offered 'to act as agent and broker for the plaintiff in seeking to buy' these shares. The plaintiff expressed interest. Nirenstein handed to the plaintiff detailed audits of Bowles Lunch, Inc., and 'represented that he was peculiarly in a position to negotiate a purchase of these shares of stock on behalf of the plaintiff because of his knowledge of the situation and his acquaintance with the parties' in Springfield. The plaintiff then 'retained the defendant [Nirenstein] as his broker and agent to effect a purchase of the shares of stock at an agreed commission of Five Dollars ($5.00) per share, to be paid by the plaintiff to the defendant [Nirenstein] at the time when such purchase was consummated, and the defendant [Nirenstein] agreed to act as such broker and agent on behalf of the plaintiff and to use his best efforts to purchase said shares of stock for him.' After further conferences and some negotiations by Nirenstein, the plaintiff authorized that defendant to make a firm offer of $70 a share for four thousand seven hundred four shares held by certain trustees. Thereafter Nirenstein, while still representing to the plaintiff that he was acting in the plaintiff's behalf, entered into a written agreement with the trustees for the purchase of the shares himself at $70 a share.

There are further allegations to the effect that the defendant Bowles, with knowledge of the defendant Nirenstein's fiduciary obligations to the plaintiff, induced Nirenstein to break them, to the profit of Bowles, who has acquired some of the assets of the corporation; and that after the bringing of this suit, and after the plaintiff in reliance upon an oral agreement for the settlement of the entire case had permitted a restraining order to be dissolved, the defendant Nirenstein repudiated the settlement, completed his purchase of the stock and started to liquidate the corporation. The prayers are for injunctive relief, that Nirenstein be held as trustee of the purchase agreement and the stock, that Nirenstein and Bowles be required to account for profits or damages, and that the stock be reached and applied in satisfaction of what is found due.

The trial judge sustained demurrers to the bill and stated, not without considerable justification, that he did so in reliance upon Salter v. Beal, 321 Mass. 105, 71 N.E.2d 872, and the cases there cited.

In Salter v. Beal the defendant had been employed by the plaintiff to appraise certain machinery which the plaintiff contemplated buying, and had bought the machinery for himself. This court held that no fiduciary obligation was shown. We do not intend to cast doubt upon the correctness of that decision on the facts. But we reached our conclusion in that case largely, though not wholly, because of a line of cases which appeared to be 'authority for the proposition that a mere engagement to buy in behalf of another without more is not deemed in this Commonwealth to create a fiduciary relation.' 321 Mass. at page 108, 71 N.E.2d page 873. For convenience, we repeat the citations of these cases in the footnote. ¹ On the other hand, it is established by a long line of decisions here and elsewhere that the relation of principal and broker is a fiduciary one involving trust and confidence. ² And a fiduciary is ordinarily chargeable as constructive trustee for the benefit of one rightfully entitled to property acquired by the fiduciary in breach of trust. Restatement: Restitution, §§ 190, 194.

So far as we are aware this is the first time when possible conflict between these two lines of cases has been squarely brought to the attention of this court by the issues and the argument in any case, and it has become necessary to consider them in relation to each other. The fiduciary obligation toward his principal of one who is acting in the full sense as a broker in the sale or purchase of property rests upon fundamental principles of business morality and honor which are of the highest public interest, and which it is the bounden duty of courts to preserve unimpaired. We do not believe that in deciding the cases listed in the first footnote the court had in mind a case where the full relation of principal and broker existed. That the court at one time thought a constructive trust might arise in such a case seems apparent from the reasoning of Chief Justice Knowlton in Clark v. Delano, 205 Mass. 224, 91 N.E. 299, 29 L.R.A.,N.S., 595. It may be significant that in all of the cases in the first list, so far as appears, the relation between the parties was substantially different from that ordinarily obtaining between principal and broker, and in none of them is the principal and broker relation mentioned. Even if this is not a wholly satisfactory distinction, we are nevertheless impelled to the conclusion that at least where, by the conduct of the parties, the full relation of...