Cranwell v. Oglesby

• Decision Date: 29 December 1937
• Citation: 12 N.E.2d 81,299 Mass. 148
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: EDWARD H. CRANWELL v. WOODSON R. OGLESBY & another.

299 Mass. 148

12 N.E.2d 81

EDWARD H. CRANWELL v. WOODSON R. OGLESBY & another.

Supreme Judicial Court of Massachusetts, Berkshire.

December 29, 1937

September 21, 1937.

Present: FIELD DONAHUE, LUMMUS, & QUA, JJ.

Fiduciary.

The existence merely of a close business friendship did not constitute a fiduciary relationship between a financier and a real estate promoter requiring the promoter, in transactions involving several mortgages and deeds and a lease in which the financier knew that the promoter and his wife had an interest, to disclose to the financier that a discharge of a mortgage and the giving of a new mortgage to him left free from the new mortgage property to which the wife had title and which had been subject to the financier's former mortgage; and the financier was not entitled merely because of such nondisclosure to maintain a suit in equity to subject the wife's property to the new mortgage.

BILL IN EQUITY filed in the Superior Court on August 10, 1934. From a final decree entered by order of Burns, J., the plaintiff appealed.

W. A. Heaphy, for the plaintiff. John S. Stone, for the defendant Kate Oglesby.

F. de L.

Cunningham, for the defendant Woodson R. Oglesby.

LUMMUS, J. The plaintiff is a man of wealth living in the city of New York. The defendants are husband and wife, formerly of Yonkers, New York. The husband, hereinafter called Oglesby, is a member of the bar of the State of New York, but his principal business has been the development for profit of real estate, including country clubs of the usual social and sporting type. He and the plaintiff have been close business friends since 1912 but they have had little social intimacy.

One Cole, prior to 1928, had acquired several contiguous estates in Lenox containing in the aggregate 821.21 acres. One of these estates, comprising 84.25 acres, was known as

Blantyre. Title to all the estates was in a corporation controlled by Cole, known as Lenox Investment Company, subject to a mortgage for $450,000, which was divided into a senior interest of $200,000 held for a corporation called Prudence-Bonds Corporation, and a junior interest of $250,000, held by another corporation controlled by Cole, known as Howard Cole and Company, Incorporated.

In July, 1928, Oglesby acquired title to all the estates held by Lenox Investment Company, subject to the mortgage for $450,000, and soon afterward acquired the junior interest in that mortgage. In August, 1928, Oglesby conveyed to a corporation formed by him, called Wyndhurst Holding Corporation, the greater part of the estates acquired by him, but not Blantyre. Nothing was said in the deed about the mortgage for $450,000. A purchase money mortgage for $200,000 was given back to Oglesby. Oglesby formed a corporation called The Berkshires Hunt & Country Club, Inc., hereinafter called the club, which he financed to a considerable extent and tried for some years to put on its feet as a social and sporting club. The golf course used by the club, which had been constructed before Oglesby bought the estates, was located in part upon Blantyre.

Blantyre was conveyed by Oglesby to his wife in August, 1928, and in the deed he purported to covenant with her to relieve Blantyre from the burden of the mortgage for $450,000. This conveyance was made as consideration for real estate in Yonkers owned by the wife which she had conveyed to Howard Cole & Company, Incorporated, as part of the consideration for the transfer to Oglesby of the junior interest in the $450,000 mortgage. At the time when Oglesby conveyed Blantyre to his wife he was not insolvent, and did not intend or expect to become so. But he did have in mind "securing a home and a refuge through Mrs. Oglesby's loyalty, if the future did bring to him financial storm and stress as actually happened.

"

The club was not a success. The holder of the $200,000 senior interest of the Prudence-Bonds Corporation (then reduced to about $175,000 including interest due) in the underlying $450,000 mortgage, began foreclosure proceedings in August, 1930. Oglesby appealed to the plaintiff for help. The plaintiff said he would buy that senior interest, if Oglesby would prepare the necessary papers. An assignment of that senior interest was made to, and paid for by, the plaintiff, in November, 1930. Obviously the plaintiff then had Blantyre, as well as the other estates, as his security. But the plaintiff was not told and did not know just what the mortgage covered, and he made no investigation. If he had examined the papers given to him, including insurance policies, he would have seen that Mrs. Oglesby was said to be the owner of Blantyre, subject to the mortgage. But he made no examination.

The club needed further financing. It was proposed that the entire underlying mortgage of $450,000 and the second mortgage for $200,000 given to Oglesby be discharged; that the plaintiff accept for his senior interest and for further advances a new first mortgage from Wyndhurst Holding Corporation for $210,000; and that Oglesby accept for his junior interest and his second mortgage a new second mortgage for $360,000. Blantyre was not to be included, for it was not owned by the Wyndhurst Holding Corporation, the stock of which was held by the club. Instead, leases were to be made by Mrs. Oglesby to the Wyndhurst Holding Corporation, conveying the right to use certain parts of the golf course until December 1, 1933, and other parts as long as a golf course should be maintained.

This plan was carried out on December 13, 1930. The description in the mortgage from ...