Fitch v. Ingalls
| Decision Date | 31 March 1930 |
| Citation | 271 Mass. 121 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | WARREN FITCH v. GEORGE M. INGALLS & others. |
January 9, 10 1930.
Present: RUGG, C.
J., CROSBY CARROLL, SANDERSON, & FIELD, JJ.
Equity Jurisdiction, Rescission, To relieve from results of fraud Damages. Damages, In suit in equity. Equity Pleading and Practice, Appeal. Evidence, Presumptions and burden of proof.
At the hearing of a suit in equity for relief from fraud alleged to have been practiced by the defendant upon the plaintiff as one of a syndicate, which included the defendant, in inducing the plaintiff to invest money in the promotion by the syndicate of Florida land by falsely representing to him that the defendant was coming into the syndicate upon an equal basis with the other members, whereas the defendant knew he was to receive and did receive a commission for procuring the money from the plaintiff and other members of the syndicate, there was evidence that the defendant made to the plaintiff the representation alleged and that he was paid a sum of money as commission by the seller of the land. There was evidence that the defendant was in close relations with the seller of the land; he testified that the money he so received was a present, and afterwards said it was a commission, and so far as appeared, he never disclosed to any of his associates that it had been received by him until he testified at the trial. There was no evidence as to the precise time when the plaintiff first learned that the defendant had received the commission. A second payment by the plaintiff was made on September 28,
1925. The defendant testified that late in October, 1925, he had received a letter from the seller accompanied by a statement showing him "what was due to me on the commission." His attention being called to the fact that the previous day he had testified "it was a present," he stated "Well, I thought it was until that time when that statement come." Asked, "which do you say now that this money that was paid to you -- do you say it was something due to you," he answered, "I say it was part of a commission, yes." There also was evidence showing that from the outset the defendant performed the functions usually discharged by a broker acting for compensation, and that he concealed from the plaintiff and the other members of the syndicate that such a commission had been received by him. The judge found that from the beginning the defendant knew he was to receive some compensation although unaware of its exact amount, and that his representation to the plaintiff that he was to become a member of the syndicate on an equal basis with the others was false. Held, that
(1) While mere disbelief of testimony respecting facts is not proof of facts of an opposite nature, the judge was warranted in believing that the defendant knew he was to receive a commission, and in disbelieving his testimony as to the time when such knowledge was acquired;
(2) Upon the entire evidence and the fair inferences which could be drawn therefrom, the judge was justified in finding that the defendant's representation was false.
In the suit above described, it further appeared that, before bringing suit, the plaintiff and the other members of the syndicate excepting the defendant and the seller had repudiated the syndicate agreement; that just previous to repudiation they were owners of undivided interests in the land purchased; that the plaintiff did not tender to the defendant an assignment of the plaintiff's interest in the property under the syndicate agreement and declaration of trust at the time it was repudiated by him; that the agreement provided that, in the event of a repudiation by a member of the syndicate, his interest should vest in the remaining members. The judge ruled as matter of law that the plaintiff and defendant were joint adventurers; that the defendant owed to the plaintiff the duties of a fiduciary; that the defendant's employment as a broker was inconsistent with, and in violation of, his fiduciary duty and was a material fraud for which he was liable; that the plaintiff was entitled to recover as damages the loss which he had sustained rather than a share of the profit obtained by the defendant resulting from his fraud; and that there could not be a rescission, because the plaintiff had neither made nor tendered to the defendant an assignment of his interest in the property under the syndicate agreement, and that such a tender made in the bill came too late. Upon appeals by both parties, it was held, that
(1) The defendant's relation to his associates was one of trust and confidence; he was bound in his dealings with them to act with absolute good faith, and a violation of that duty constituted fraud entitling the plaintiff to relief;
(2) The plaintiff was not limited to the recovery of a share of the secret profit received by the defendant but was entitled to damages incurred by reason of the defendant's fraud;
(3) The mere repudiation by the plaintiff of the agreement was inadequate to support a contention that a tender of restitution was unnecessary in order to effect a rescission;
(4) The duty of restitution resting upon the plaintiff was neither discharged nor executed by the chance that the operation of the provision of the syndicate agreement as to repudiation resulted in placing the interest of the plaintiff in the defendant and the seller;
(5) The ruling that there could be no recovery on the ground of rescission was correct;
(6) The rulings were correct and the final decree based thereon was affirmed.
BILL IN EQUITY, filed in the Superior Court on December 14, 1926, and afterwards amended. The substance of the bill is described in the opinion.
In the Superior Court, the suit was heard by Macleod, J., a stenographer having been appointed under the provisions of G.L.c. 214, Section 24, as amended, and Equity Rule 29 (1926). It appeared that the plaintiff's second payment of $10,800 was made to the defendant on September 28, 1925. Other material facts found by the judge are stated in the opinion.
A final decree was entered directing the defendant Ingalls to pay to the plaintiff the sum of $5,900 and costs. Both parties appealed.
M.C. Taylor, for the plaintiff. T.F. Callaham, for the defendant George M. Ingalls.
This is a bill in equity to reach and apply certain corporate stock in satisfaction of a claim based upon the alleged fraud of the defendant Ingalls. Robert E. Erskine and Robert S Erskine were made parties defendant in the bill, but by an interlocutory decree entered January 10, 1927, the bill was dismissed as to them. Thereafter a stenographer was appointed to take the evidence. The trial judge filed "Findings and Rulings," and in accordance therewith a final decree was entered for the plaintiff in the sum of $5,900. Both parties appealed from the final decree.
It appears from the findings of the trial judge that for several years before 1921 the defendant Ingalls, who will hereafter be referred to as the defendant, was a wholesale dealer in fish, in Boston, and was active in many organizations connected with that trade. He sold his business in 1921 and thereafter spent each winter in Florida and made investments in real estate there. In some of these transactions the firm of R.E. and R.S. Erskine of Lake Worth, Florida, acted as his broker. With the members of this firm, who were father and son, the defendant was also socially intimate.
In the spring of 1925 the defendant returned to Boston and made several visits to his old associates at the Fish Pier and discussed with them the profits which investors in Florida real estate were reputed to be making. Several of his former associates expressed the desire to invest if a suitable opportunity offered. On or about August 8, 1925,
Robert S. Erskine, the junior member of the firm, obtained from one Watson a written option for the purchase of a tract of land in Florida containing about fifty-five acres, having an ocean frontage of three thousand, three hundred and fifty feet, at $75 per front foot. He telegraphed his father, who was in Boston, informing him of the option and offering the land for sale at $85 per front foot, representing a total of $284,750. On receipt of this telegram Robert E. Erskine showed it to the defendant and the latter showed it to his associates at the Fish Pier and conferred with them in regard to the purchase of the property. After some negotiations a syndicate of ten persons was organized including the defendant, the Erskines and seven others including the plaintiff. A "Syndicate Agreement and Declaration of Trust," providing for the purchase of the property for $284,750, of which $117,250 was payable in cash, was signed by all the members of the syndicate and by R.S. Erskine as trustee. The price agreed upon for a sale of the property was on a basis of $85 a front foot.
Before the execution of the syndicate agreement and in contemplation thereof, each member, except the Erskines, made an initial deposit of $1,000 as a "binder" and subsequently made a payment of $10,800. These sums were all given to the defendant, who handed them to the Erskines. At the same time the defendant tendered to R.E. Erskine as his share of the second payment a certified check for $10,800. Erskine returned the check to the defendant stating that there would be something coming to him out of the commission on the sale of the property. The defendant's commission as finally determined and received by him was $11,829.68, a sum slightly in excess of his share of the "binder" together with his share of the first payment.
In October, 1925 the property was conveyed by Watson to R.S. Erskine pursuant to the terms of the option which the...
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