Exch. Realty Co. v. Bines

• Decision Date: 05 January 1939
• Citation: 302 Mass. 93,18 N.E.2d 425
• Parties: EXCHANGE REALTY CO. et al. v. BINES et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

302 Mass. 93

18 N.E.2d 425

EXCHANGE REALTY CO. et al.

v.BINES et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Jan. 5, 1939.

Suit by the Exchange Realty Company and another against Solomon Bines and another to rescind a contract, and for return of a check wherein the named defendant sought specific performance of the contract and an assessment of damages against the other plaintiff. Decree for defendants and plaintiffs appeal.

Modified, and affirmed as modified.Appeal from Superior Court, Suffolk County; J. W. Morton, judge.

H. N. Hartstone and W. Hartstone, both of Boston, for appellants.

H. H. Davis, of Boston, for appellees.

RONAN, Justice.

This is a bill in equity brought by the Exchange Realty Company and Sher to rescind a contract, entered into by the company with the defendant Bines for the purchase and sale of real estate, in Stoneham, on the ground of fraud, and for an order requiring the defendant Hartstone to return to Sher a check which the latter had entrusted to him. The defendant Bines denied any fraud and sought specific performance of the contract and an assessment of damages against Sher.

The case was heard in the Superior Court. The judge found that the contract was in full force and effect; that the plaintiffs were not entitled to a rescission of the contract; that Bines was entitled to specific performance; and that Sher should pay the amount of the check and also should pay sufficient money to enable the company to purchase the property. A final decree was entered in accordance with these findings, and appeals therefrom by both plaintiffs bring the case here.

The evidence is reported. It is the duty of this court to consider all the evidence and to reach its own conclusions, giving appropriate weight to the findings upon oral evidence made by the trial judge, which are not to be reversed unless plainly wrong. Johnson v. O'Lalor, 279 Mass. 10, 180 N.E. 525;Markiewicus v. Methuen, Mass., 16 N.E.2d 32.

The negotiations for the purchase of the property were conducted entirely by Sher and Bines and all details of the transaction were agreed upon between them. Sher was unwilling to become a party to any written contract and it was finally arranged that a corporation, which was at times used by Sher's attorney as a straw or nominal party, should act in that capacity. Bines refused to sign the contract until he had settled with his brokers the amount of commission he was to pay. The parties then agreed that the contract should be executed in duplicate and held by Hartstone, together with a check made by Sher and payable to Bines for $1,000, which was the amount to be paid upon the execution of the contract; and that, when Hartstone was notified within a certain time that Bines had settled the amount of the commission, he was to deliver one of the duplicates and the check to Bines and was to deliver the other duplicate to Sher; otherwise the written contract was to be cancelled and the check was to be returned to Sher. It was in these circumstances that the contract was executed, together with the check, and delivered to Hartstone. On the next day, a Friday, Bines telephoned Hartstone at his summer residence that the commission had been settled, and he requested the check and the written contract. Hartstone promised to deliver them to him when he arrived at his Boston office on Saturday morning. But Sher, on Friday morning, notified Hartstone's secretary that the income had been misrepresented and to inform Hartstone not to deliver any papers to Bines. When Bines met Hartstone on Saturday morning to get the contract and check, he was informed of Sher's contention and Hartstone declined to deliver any papers to Bines. Hartstone still holds these written instruments.

The plaintiffs contend that no binding agreement was made because, while Hartstone was holding the papers and before Bines had notified him that the matter of commission had been settled and the delivery of the papers was in order, Sher had informed Harstone's secretary that he would not perform the contract because the rentals were not as represented by Bines. The written instruments were delivered and held by Hartstone pending the performance of the condition by Bines, and, although Hartstone was Sher's attorney, he was not holding the papers as such, Elastic Tip Co. v. Graham, 185 Mass. 597, 71 N.E. 117, but was holding them as a custodian, Hubby v. Hubby, 5 Cush. 516,52 Am.Dec. 742, strictly in accordance with the agreement of the parties, none of whom reserved any power of revocation. Fairbanks v. Metcalf, 8 Mass. 230;Wilson v. Jones, 280 Mass. 488, 493, 182 N.E. 917.

While the contract did not become operative until Bines settled with his brokers and so notified Hartstone, Roberston v. Rowell, 158 Mass. 94, 32 N.E. 898,35 Am.St.Rep. 466;Levene v. Crowell, 243 Mass. 441, 138 N.E. 9;Liberty Trust Co. v. Price, 259 Mass. 596, 156 N.E. 749; Am.Law Inst.Restatement: Contracts, § 101, yet, pending the receipt of such notice, neither of the parties had a right to withdraw, as the oral agreement was based upon sufficient consideration and determined the manner in which the papers were to be delivered. Kenyon v. Suburban Realty Corp., 244 Mass. 571, 577, 139 N.E. 172;Spring v. Leahy, 254 Mass. 614, 150 N.E. 843, 43 A.L.R. 1203;Zimetbaum v. Berenson, 267 Mass. 250, 166 N.E. 719; Am.Law Inst.Restatement: Contracts, s. 103. The contention of the plaintiffs that, until the time for delivery of the instruments had arrived, their conduct amounted only to a revocable offer, is untenable. The plaintiffs' position would be sound if the evidence showed that they had entered into a unilateral agreement with Bines concerning the delivery of the papers, Lincoln v. Gay, 164 Mass. 537, 42 N.E. 95,49 Am.Rep. 480;Des Rivieres v. Sullivan, 247 Mass. 443, 142 N.E. 111;Elliott v. Kazajian, 255 Mass. 459, 152 N.E. 351, but upon the evidence it is plain that the parties had entered into a bilateral agreement which, upon the performance by Bines, brought into full force and effect the written contract of purchase and sale. Lennox v. Murphy, 171 Mass. 370, 50 N.E. 644;Lascelles v. Clark, 204 Mass. 362, 90 N.E. 875;Heller v. Pope, 250 N.Y. 132, 164 N.E. 881; Williston, Contracts (Rev. ed.) § 47. There is nothing in the cases relied upon by the plaintiffs to show that there was no consideration for the oral agreement in accordance with which the papers were held by Hartstone. It could be found to have been based upon the promise made by the plaintiffs to Bines in consideration of which he then signed the written contract rather than leave it unsigned until after he had seen his brokers relative to their commission. The oral agreement was ancillary to and closely connected with the written contract. There is nothing in the contention that Bines could avoid the written contract by refusing to settle with the brokers. He adjusted the commission within a few hours after he executed the contract. In the next place, he was bound to exercise good faith in making reasonable efforts to come to an agreement with his brokers. Blanchard v. Blackstone, 102 Mass. 343;Eastern Massachusetts Street Railway Co. v. Union Street Railway Co., 269 Mass. 329, 168 N.E. 781.

Even if all that the plaintiffs had done in prescribing the terms and conditions under which the papers were to be delivered by Hartstone merely amounted to an offer, yet the judge found that Hartstone had received notice from Bines that the condition under which the papers were held had been performed before he learned from his secretary that Sher did not intend full performance of the contract. Notice earlier on the same day by Sher to Hartstone's secretary was ineffectual, because the judge found that she was not authorized to receive it in behalf of Hartstone. Her knowledge could not be imputed to Hartstone, and he could not be held to have had constructive knowledge of Sher's contention when he promised to deliver the written contract and check to Bines. Stetson Press, Inc., v. Bunsen Oil Burner Corp., 285 Mass. 291, 189 N.E. 103;Wurm v. Allen Cadillac Co., Mass., 17 N.E.2d 305. The judge was right in finding lack of authority in the secretary to accept Sher's notice in behalf of Hartstone. Record v. Littlefield, 218 Mass. 483, 106 N.E. 142;Industrial Bankers of Massachusetts, Inc., v. Reid, Murdoch & Co., Mass., 8 N.E.2d 19.

The plaintiffs next contend that the written contract should be rescinded on the ground that Bines made material misrepresentations concerning the income. The amount of rentals may be a material inducement in purchasing property and, if found to be falsely stated, an action at law for damages will lie, Mignault v. Goldman, 234 Mass. 205, 125 N.E. 189,Forman v. Hamilburg, Mass., 14 N.E.2d 137, or a suit at equity for rescission of the contract may be maintained. Stevens v. Mulcahy, 261 Mass. 116, 158 N.E. 344;Rudnick v. Rudnick, 281 Mass. 205, 183 N.E. 348.

The judge found that the amount of rent paid...