Boston Five Cents Sav. Bank v. Brooks

• Decision Date: 20 May 1941
• Citation: 34 N.E.2d 435,309 Mass. 52
• Parties: BOSTON FIVE CENTS SAVINGS BANK v. ELVA M. BROOKS.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

309 Mass. 52

34 N.E.2d 435

BOSTON FIVE CENTS SAVINGS BANK v. ELVA M. BROOKS.

Supreme Judicial Court of Massachusetts, Suffolk.

May 20, 1941

January 7, 1941.

Present: FIELD, C.

J., DONAHUE LUMMUS, COX, & RONAN, JJ.

Bills and Notes Validity, Fraud. Agency, Double employment, Agent's knowledge, Evidence, Of fraud, Relevancy and materiality Competency. Estoppel.

On the issue whether a real estate mortgage note of a woman to a bank, upon which it brought an action against her, was procured by fraud, evidence was admissible that she had become the straw holder of the real estate at a sale in foreclosure of a mortgage held by the bank upon representations by its attorney, after inquiry by her, in substance that doing so "meant nothing"; that five months later she signed the note in suit and accompanying documents, which she did not read although she had opportunity to do so, relying on representations by the attorney, in response to her then inquiry, that doing so would not put her under any obligations and that, if the real owner was unable to "pay for the property the bank would take the property, and that was all there was to it"; that she did not then learn the real character of such documents and would not have executed them had she not relied on the attorney's statements; and that she never received any benefit from the transaction: although there was no direct representation that the instrument was not a promissory note, findings were warranted that, because of fraud of the bank's attorney, she reasonably understood that what she signed did not contain a promise to pay, and that the note was invalid.

The mere fact, that the maker of a note was led to execute it through fraud of one acting both for the maker and the payee and for the benefit of the payee, did not charge the maker with knowledge of the fraud.

A party to a contract whose agent procured it from the other party through fraudulent misrepresentation could not rely on the contract and at the same time disavow the fraudulent means by which it was procured.

CONTRACT. Writ in the Municipal Court of the City of Boston dated June 3, 1939.

On removal to the Superior Court, the action was tried before O'Connell, J. The plaintiff requested the following rulings, which were refused:

"5. That as a matter of law all evidence referring to an alleged agreement, made prior to, or simultaneous with, the execution of the note, between the plaintiff and the defendant that she will never be called upon to pay the note referred to in the plaintiff's declaration must be excluded under the parol evidence rule.

"6. That as a matter of law all evidence referring to an alleged agreement, made prior to, or simultaneous with, the execution of the note, between an officer and/or attorney for the plaintiff and the defendant that she will never be called upon to pay the note referred to in the plaintiff's declaration must be excluded under the parol evidence rule."

"9. That as a matter of law even if the evidence should show the existence of an agreement, made prior to, or simultaneous with, the execution of the note, between the plaintiff and the defendant that she will never be called upon to pay the note referred to in the plaintiff's declaration the plaintiff can recover.

"10. That as a matter of law even if the evidence should show the existence of an agreement, made prior to, or simultaneous with, the execution of the note, between an officer and/or attorney for the plaintiff and the defendant that she will never be called upon to pay the note referred to in the plaintiff's declaration the plaintiff can recover.

"11. That as a matter of law even if the evidence should show that the attorney for the plaintiff made an agreement, prior to, or simultaneous with, the execution of the note, to the effect that she will never be called upon to pay the note referred to in the plaintiff's declaration, such agreement was beyond the scope of his authority and the plaintiff can recover."

"16. That upon the evidence the defendant has not sustained her burden of proving such fraud, and the plaintiff can recover.

"17. That as a matter of law even if the evidence should show the existence of an agreement made prior to, or simultaneous with, the execution of the note, between an officer and/or attorney for the plaintiff and the defendant that she will never be called upon to pay the note referred to in the plaintiff's declaration, such agreement does not constitute fraud and the plaintiff can recover."

H. Alpern, for the plaintiff.

L.

S. Nicholson, (K.

W. Brown with him,) for the defendant.

RONAN, J. This is an action by the payee against the maker of a promissory note secured by a mortgage upon certain real estate. The defence is that the execution of the note was procured by fraud. The jury found that the execution and delivery of the note were obtained by false or fraudulent representations concerning the effect and purpose of the note which were made by an attorney, now deceased, while action as agent of the plaintiff, within the scope of his employment. The jury returned a verdict for the defendant. The plaintiff excepted to the admission of evidence, to the denial of its motion for a directed verdict, to the refusal to grant seven requests for instructions, and to portions of the charge.

The correctness of the ruling denying the motion for a directed verdict must be determined by considering the evidence in its aspect most favorable to the defendant. There is no error unless the evidence, as matter of law, is insufficient to warrant a verdict against the party moving for the direction of a verdict. Salem Trust Co. v. Deery, 289 Mass. 431 . Mansfield v. Lang, 293 Mass. 386 . Western &amp Atlantic Railroad v. Hughes, 278 U.S. 496.

The jury taking that view of the evidence could find the facts which we now narrate. The defendant became the straw holder of the title to real estate on July 2, 1925, at the request of one Mrs. Stevens who was the actual owner, through a foreclosure sale by the plaintiff of a mortgage which it then had upon this property. She attended the foreclosure sale, at the request of Mrs. Stevens, where she met the attorney and asked him if she would get involved by permitting the title to be put in her name. He told her that taking title as a straw "meant nothing"; that "the bank took care of everything"; and that she "had nothing to do with it except they used . . . [her] name." This attorney was not only counsel for the bank but he was a member of its board of investment and one of its trustees.

Mrs. Stevens decided in December, 1925, to erect a building, and plans and specifications were prepared and submitted to the plaintiff for the purpose of securing a new mortgage. The defendant went to the office of the attorney where a promissory note, a mortgage, an application for a mortgage and an agreement relating to the construction of the building were apparently ready for her signature. She asked him if the signing of these papers would put her under any obligations. He said it would not; that she was simply protecting Mrs. Stevens so that if the latter was unable to "pay for the property the bank would take the property, and that was all there was to it." She then signed the papers. She did not read them although she had an opportunity to do so. She did not then learn what she had signed. She would not have executed the papers if she had not relied upon his statements. She afterwards signed an order on the bank to pay the attorney his fee and also an order to pay the architect; she signed two orders for the architect showing that payments were due, an order to the bank to pay money due under the mortgage to Mrs. Stevens, and signed an extension of the mortgage. She testified that she never received any money from the plaintiff or from Mrs. Stevens and that she never received any rent or benefit from the real estate. The bank paid out the full amount of the mortgage.

One party cannot enforce a contract against another whose signature he has procured by fraud or fraudulent representations, which induced the signer reasonably to believe and understand that the instrument was substantially different from what it really was. Freedley v. French, 154 Mass. 339. Bliss v. New York Central & Hudson River Railroad, 160 Mass. 447. Barry v. Mutual Life Ins. Co. 211 Mass. 306 . Rocci v. Massachusetts Accident Co. 222 Mass. 336 . Brown v. Grow, 249 Mass. 495 . Barrett v. Conragan, 302 Mass. 33 .

There was no direct representation that the instrument was not a promissory note. Deception need not be direct to come within reach of the law. Declarations and conduct calculated to mislead and which in fact do mislead one who is acting reasonably are enough to constitute fraud. Trambly v. Ricard, 130 Mass. 259 , 261. O'Donnell v. Clinton, 145 Mass. 461 , 462. Larsson v. Metropolitan Stock Exchange, 200 Mass. 367 , 370. It is enough if the representation of the plaintiff's attorney was reasonably understood as an affirmation that none of the instruments contained a promise to pay. Burns v. Lane, 138 Mass. 350 . Windram v. French, 151 Mass. 547 . Burns v. Dockray, 156 Mass. 135 . Rollins v. Quimby, 200 Mass. 162 . Kerr v. Shurtleff, 218 Mass. 167 . Hermanson v. Seppala, 255 Mass. 607 , 609. Lyman v. Romboli, 293 Mass. 373 .

The parties were not represented otherwise than by a common agent, and if on account of the conduct of the agent one of the parties has been defrauded then the other party cannot acquire any advantage which had its origin in such fraud. Atlantic Bank v. Merchants' Bank, 10 Gray, 532. Atlantic Cotton Mills v. Indian Orchard Mills, 147 Mass. 268 . Newell v. Hadley, 206 Mass. 335 . Metropolitan Trust Co. v. Federal Trust Co. 232 Mass. 363....