Cook v. Kelley

• Decision Date: 07 June 1967
• Citation: 227 N.E.2d 330,352 Mass. 628
• Parties: Howard W. COOK v. George W. KELLEY et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 330

227 N.E.2d 330

352 Mass. 628

Howard W. COOK v. George W. KELLEY et al.

Supreme Judicial Court of Massachusetts, Bristol.

Argued March 8, 1967.

Decided June 7, 1967.

Joseph J. Hurley, Boston, for defendant Kelley.

Francis X. Carroll, Boston, for plaintff.

Before WILKINS, C.J., and WHITTEMORE, CUTTER, SPIEGEL, and REARDON, JJ.

SPIEGEL, Justice.

This is a bill in equity to rescind the sale of a newspaper on the grounds of mutual mistake or fraud. The defendant Kelley filed a counterclaim for the unpaid balance of the purchase price. The case was referred to a master. The plaintiff and the defendant Kelley both objected to the master's report. An interlocutory decree was entered overruling their objections (treated as exceptions) and confirming the report. A final decree was entered granting rescission, ordering the defendant Kelley to repay the amount he received, less a certain credit, and dismissing the counterclaim. ¹ The plaintiff and the defendant Kelley appealed from the interlocutory and final decrees.

We state the material facts found by the master. Kelley 'was the owner of a tabloid newspaper called 'Otis Notice. " It was printed weekly at The North Attleborough Chronicle Company, of which Kelley was a stockholder. 'The Otis Notice was * * * circulated amongst the families of the Air Force personnel serving at the Otis Air Force Base in Falmouth * * *. Kelley procured advertising for said newspaper on his own and all the profits from the advertising were his. The news items in the paper were collected by * * * Air Force personnel.'

Kelley began publishing the newspaper in November, 1956. By December, 1960, the circulation was six thousand five hundred and Kelley's annual profit was 'at least $20,000."

During the first year Kelley operated under a written contract with the Otis Air Force Base. In succeeding years he 'operated without any written contract and no objection was made by anybody concerned to the fact that he was so operating.' The written contract was terminable by either party on sixty days notice, or without notice by the Air Force where it 'determines that an emergency exists or that the exigencies of the service demanded such action.'

From the contract, which was an exhibit referred to in the master's report and is a part of the record on appeal, it appears that the Otis Notice was to 'be an unofficial newspaper published in the interest of personnel of Otis Air Force Base, for the purpose of providing news and information of particular interest to such personnel.' Kelley was referred to as 'the Publisher.' The Air Force was to furnish all news copy and photographs and editorials and 'the Publisher agrees to use only * * * (that material) furnished by' the Air Force. The minimum size of the paper was set by the contract, as well as limitations on the amount and type of advertising. The Publisher was required to state in the paper and in its business dealings that the paper was not an official Air Force publication.

The plaintiff entered into negotiations with Kelley in the fall of 1960 'for the sale of the publishing rights to the Otis Notice.' A letter of intent was drawn on January 26, 1961, by Kelley's attorney in which 'Kelley agreed to incorporate the Otis Notice and * * * (the plaintiff) agreed to pay him $40,600.00 for the said corporation.' The letter was signed by Kelley and assented to in writing by the plaintiff. 'The corporation was formed and then the final agreement was signed' on February 15, 1961. Ninety of the one hundred shares of the new corporation were distributed to the plaintiff and Kelley retained the remaining ten shares until payment in full by the plaintiff. Payment of $25,000 was to be made by check and a note for $15,250, ² payable at $100 a week for three years, was to be given by the corporation and guaranteed by the plaintiff. The plaintiff's shares were assigned to Kelley as security for the payment of the note.

The plaintiff consulted with his attorney in Rhode Island before the final papers were signed.

On June 23, 1961, the plaintiff received a letter from the Air Force which stated that 'we have decided to terminate publishing 'The Otis Notice' * * * as of July 31, 1961.' The reason given was the remoteness of the publishing facilities from the base which resulted in undue expense and insufficient ability of the Air Force to 'properly edit and supervise the publication.'

'Neither Kelley nor the corporation owned any physical assets, and it was understood by both parties that what was represented by the shares of stock were the publishing rights and the good will of the newspaper business of the Otis Notice as it had been built up by Kelley, and transferred by him to * * * (the plaintiff) at the time of the sale.'

'(T)here * * * has been $1,400.00 paid on the principal of the note, leaving a balance of $13,850.'

'At the time of the execution of the agreement and the various documents connected with the sale, both parties believed that the publishing rights were going to last three years, although * * * (Kelley's attorney) had informed * * * (the plaintiff) that there was no guarantee on the part of Kelley that * * * (the plaintiff) would be able to continue the publication of the newspaper for any specific period of time.'

From the foregoing subsidiary findings the master concluded 'that there was no fraud on the part of Kelley, but that there was a belief on the part of both, later found out to be mistaken, that the publication rights would last three years * * * (and) that the plaintiff is entitled to have returned to him the sum of $26,400.00 * * * minus * * * $6,000.00 which he received while operating the newspaper, and that the * * * note * * * should be cancelled * * *; that both parties believed that the corporation owned...