Cardullo v. Landau

• Decision Date: 01 May 1952
• Citation: 329 Mass. 5,105 N.E.2d 843
• Parties: CARDULLO v. LANDAU et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 843

105 N.E.2d 843

329 Mass. 5

CARDULLO v. LANDAU et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Oct. 4, 1951.

Decided May 1, 1952.

B. Wall, Boston, for plaintiff.

C. W. Spencer, Boston (A. Vitagliano, Boston, with him), for defendant Landau.

Before QUA, C. J., and WILKINS, SPALDING, WILLIAMS and COUNIHAN, JJ.

SPALDING, Justice.

The plaintiff brings this suit to recover a secret profit alleged to have been made by the defendant Landau, hereinafter called the defendant, in violation of a duty of fidelity and good faith owed to the plaintiff, and to reach and apply Landau's shares in Landau, Inc., G.L. (Ter.Ed.) c. 214, § 3(8). The plaintiff also seeks to recover on the basis of deceit.

The case comes here on the defendant's appeals from an interlocutory decree overruling his demurrer and from a final decree in favor of the plaintiff. The evidence is reported. The judge voluntarily made brief findings of fact which obviously are not the equivalent of a report of all the material facts. See Birnbaum v. Pamoukis, 301 Mass. 559, 561-562, 17 N.E.2d 885. The entry of the decree for the plaintiff, however, imports a finding of every fact essential to sustain it within the scope of the pleadings and supported by the evidence. Warner v. Selectmen of Amherst, 326 Mass. 435, 436, 95 N.E.2d 180.

Facts found by the judge and those found by us include the following: In June, 1945, the defendant induced the plaintiff to leave his employment and to take the position of manager of the restaurant of Wursthaus, Inc., on the representation that he (the plaintiff) would have the opportunity of purchasing a one-half interest in the corporation, the payments for such interest to be made from the profits thereof. The defendant, as part of this arrangement, purchased the 70 outstanding shares of the capital stock of Wursthaus, Inc., hereinafter called the corporation, and put 30 shares in the plaintiff's name, 30 in the name of his bookkeeper, and 10 in the name of his attorney. The shares standing in the plaintiff's name were indorsed in blank by him and left with the defendant. At first the plaintiff was paid a salary of $75 a week and this was later increased to $100; he also was paid a bonus.

The business thrived and the defendant, although requested by the plaintiff to do so, was reluctant to allow the plaintiff to acquire a half interest in the business. The plaintiff brought suit to compel performance of the agreement. On November 6, 1946, the plaintiff and the defendant by a written agreement adjusted their differences. By the settlement the plaintiff received 5 additional shares of Wursthaus, Inc., so that he then had 35 shares and an interest in the corporation equal to that of the defendant. Upon the defendant's representation that the 70 shares had cost him $48,000 the plaintiff paid to the defendant the sum of $27,674.20 ¹ for his 35 shares. In fact the shares had cost the defendant $41,782.95. The plaintiff did not learn of this until some time in May, 1948. In November, 1947, the defendant brought a suit against the plaintiff based on alleged irregularities in the plaintiff's conduct of the business. In December, 1947, a settlement was arrived at whereby the defendant sold his 35 shares of stock in the corporation to the plaintiff for $48,750. The plaintiff, in acquiring these shares, did not rely on the defendant's prior representation as to what the shares had cost him. In conjunction with this settlement the plaintiff delivered to the defendant a general release of all claims and demands on January 12, 1948.

The judge found that the plaintiff was entitled to recover the sum of $2,492.93 'which includes a return of the interest charged on the difference between the $24,000 and one half of the cost as found by me.' A decree was entered accordingly.

Since, as will appear presently, the defendant is entitled to prevail on the merits, a discussion of the demurrer would be academic. It will suffice to say that we think it was rightly overruled.

The decree below can stand only if the evidence would support a finding that the relationship of the parties was of a fiduciary nature and that the defendant made a secret profit at the expense of the plaintiff. The plaintiff's proof does not go far enough to permit recovery for deceit. We assume that the defendant's representation as to what he had paid for the shares would be actionable if the other elements required by the law of deceit were present. Kabatchnick v. Hanover-Elm Building Corp. 328 Mass. ----, 103 N.E.2d 692. But here the plaintiff failed to show that he sustained any damage, proof of which was essential to recovery for deceit. Connelly v. Bartlett, 286 Mass. 311, 315, 190 N.E. 799; Pearl v. William Filene's Sons Co., 317 Mass. 529, 532, 58 N.E.2d 825; Du Bois v. Atlantic Corp., 322 Mass. 512, 520-521, 78 N.E.2d 185; Kilroy v. Barron, 326 Mass. 464, 465-466, 95 N.E.2d 190. For aught that appears the shares may have been worth what the plaintiff paid for them. Moreover, as stated above, the plaintiff in January, 1948, released the defendant from all claims and demands. In the absence of a fiduciary relationship existing at that time this release, which is very comprehensive, would bar recovery by the plaintiff. The trial judge made no express findings on the issue of fiduciary relationship, but he must have impliedly found that such relationship existed. The question therefore narrows down to whether this implied finding is supported by the evidence. We think that it was not.

If the relationship of the parties here was of a fiduciary nature it must be, as the plaintiff contends, because they were either partners or joint adventurers. No other basis for such a relationship is urged, and the evidence affords none. If the parties were either partners or coadventurers they owed to each other the utmost good faith and loyalty. Arnold v. Maxwell, 223 Mass. 47, 49-50, 111 N.E. 687; Flint v. Codman, 247 Mass. 463, 471, 142 N.E. 256; Mendelsohn v. Leather Mfg. Corp., 326 Mass. 226, 233, ...