Kannavos v. Annino

• Decision Date: 09 May 1969
• Citation: 247 N.E.2d 708,356 Mass. 42
• Parties: Apostolos C. KANNAVOS et al. v. Carrie L. ANNINO et al., Trustees 1 (and a companion case).
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 708

247 N.E.2d 708

356 Mass. 42

Apostolos C. KANNAVOS et al. v. Carrie L. ANNINO et al., Trustees ¹ (and a companion case).

Supreme Judicial Court of Massachusetts, Hampden.

Argued April 10, 1969.

Decided May 9, 1969.

Alfred W. Bettigole, Springfield, for defendants.

Socrates Geanacopoulos, Springfield, for plaintiffs.

Before WILKINS, C.J., and SPALDING, CUTTER, KIRK and SPIEGEL, JJ.

CUTTER, Justice.

These bills in equity are brought by the vendees of real estate, fixtures, and personal property in Ingersoll Grove, Springfield, against the vendors, to rescind the purchases made in 1965. The amended bills alleged that the vendees bought in reliance on the vendors' fraudulent misrepresentations and concealment of material facts. Demurrers to the amended bills were overruled. The facts are stated on the basis of a confirmed master's report. By final decree rescission of the purchases was ordered. The vendors appealed.

Kannavos and his wife acquired 11 Ingersoll Grove from the vendors (who are the trustees of Annino Realty Trust) on June 28, 1965. Kannavos and Bellas bought 71--73 and 79 Ingersoll Grove from the vendors on July 12, 1965. The situation as to each purchase is substantially the same. ²

Mrs. Annino (who at all pertinent times 'was authorized to act and did act on behalf of * * * Annino Realty Trust') had bought the Ingersoll Grove properties in 1961 and 1962. At that time there was a single family house on each property. Each house was, under the Springfield zoning ordinance, in a Residence A district, where multi-family uses are prohibited. This zoning has remained in effect at all times since 1961. Despite the zoning provisions, Mrs. Annino converted each single family house into a multi-family apartment building. ³ Each was furnished and rented as a multi-family dwelling. All the work of conversion was done 'without obtaining any building permit,' as each trustee of the realty trust knew. Each trustee also knew that the use of the buildings for multi-family purposes was in violation of the zoning ordinance.

In 1965 Kenneth F. Foote was retained as real estate broker 'to try to sell the properties.' He caused advertisements, of which the following is an example, to appear in Springfield newspapers: 'Income gross $9,600 yr. in lg. single house, converted to 8 lovely, completely furn. (includ. TV and china) apts. 8 baths, ideal for couple to live free with excellent income. By apt. only. Foote Realty.' Each advertisement clearly advertised, in some form of words, the particular property as being income property of multi-family use.

Kannavos, a self-employed hairdresser, about thirty-eight years old, ⁴ read one advertisement. He 'wanted to acquire some income real estate.' He got in touch with Foote, who showed him the 11 Ingersoll Grove property and gave him income and expense figures obtained from Mrs. Annino. Kannavos executed a purchase agreement to buy 11 Ingersoll Grove. The vendees had no lawyer representing them with respect to the negotiations, the agreement, or the final closing. An attorney representing a mortgagee, under a mortgage obtained by the vendees, drew and recorded the papers used at the closing, at which the vendors were also represented by an attorney 'to check the adjustments.'

'No statements were made by the * * * (verdors), by * * * Foote * * * (or by either attorney) at any time during the negotiations or closing, to the * * * (vendees) with respect to zoning or building permits. The * * * (vendees) made no inquiry of the' vendors, Foote, or the vendors' 'attorney at any time before or during the closing with respect to zoning or building permits. All statements made by the' vendors, Foote, or the vendors' attorney to the vendees 'were substantially true and the * * * (vendees) do not complain of any spoken misrepresentation.'

Mrs. Annino and Foote both represented to the vendees 'that the property * * * consisted of eight * * * furnished apartments which were being rented to the public for multi-family purposes. They knew that Kannavos' reason for buying the property was to rent the apartments to the public. * * * Kannavos had no prior experience with real estate. He was unaware of any zoning or building permit violation and would not have purchased the property if he had known of any such violation.'

The sale of the other properties (71--73 and 79 Ingersoll Grove) occurred in substantially similar circumstances. Discussion of other property owned by the vendors stated shortly before Kannavos acquired 11 Ingersoll Grove. The vendees saw an advertisement of the houses at 71--73 and 79 Ingersoll Grove in July, 1965, and then went to see them. Mrs. Annino and Foote 'represented to . . . Kannavos and Bellas, that the property (71--73 and 79 Ingersoll Grove) was rented as multi-dwelling property and that Bellas and Kannavos could continue to operate it as multi-dwelling property. The * * * (vendees) continued to operate the buildings as multi-dwelling property up to and including the date of the hearing. The operation showed a profit * * *.' The vendors represented to Bellas that '71--73 (and) 79 Ingersoll Grove would be a good investment for him as rental multi-family real estate.'

'By * * * registered letters dated July 26, 1965 * * * the city * * * notified Bellas and Kannavos with respect to * * * 79 Ingersoll Grove that the property was being used for multi-family purposes in violation of the building code and zoning ordinance * * * that the wiring was illegal and should be corrected by a licensed electrician with a valid building permit * * * and that the plumbing was in violation of the building code and should be corrected by a licensed plumber with a valid building permit * * *. By three registered letters of July 26, 1965 with respect to * * * 71--73 Ingersoll Grove, Bellas and Kannavos were notified by the Building Commissioner * * * of the same violations of zoning, wiring, and plumbing.'

The two groups of vendees 'had no actual knowledge of the zoning or building code violations until * * * notified' by the city authorities. The vendees promptly through their attorney 'notified the * * * (vendors) of the rescission of' each sale.

'Each property is worth substantially less if operated only as a single family dwelling instead of (as) a multi-family dwelling.' The city has started civil proceedings 'to abate the use of each property as (a) multi-family' dwelling.

From his subsidiary findings summarized above the master concluded, among other things, that the vendors made no actual spoken misrepresentations; that they 'intentionally withheld' from the vendees that the operation of the buildings 'was in violation of the zoning ordinance'; that the vendors 'represented * * * that the buildings * * * were being used as multi-family dwellings and * * * in each case that the * * * (vendees) could continue' so to operate them; and that the vendees 'would not have bought the real estate if * * * (they) had known of the violations of the zoning ordinance, or the building code.' He also concluded that the vendees 'relied upon representations of the * * * (vendors) and the appearances of the real estate in that it was being used for multi-family purposes' and that they 'made no independent inquiry concerning any violation of the zoning ordinance or building code.' ⁵

From the master's subsidiary findings, we draw our own conclusions. See Samia v. Central Oil Co., 339 Mass. 101, 122, 158 N.E.2d 469; Corrigan v. O'Brien, 353 Mass. 341, 345--346, 231 N.E.2d 554. These subsidiary findings are amplified in minor respects by the master's conclusions just summarized which expressly are based upon his subsidiary findings.

1. We assume that, if the vendors had been wholly silent and had made no references whatsoever to the use of the Ingersoll Grove houses, they could not have been found to have made any misrepresentation. See Swinton v. Whitinsville Sav. Bank, 311 Mass. 677, 678--679, 42 N.E.2d 808, 141 A.L.R. 965, ⁶ where this court affirmed an order sustaining a demurrer to a declaration in an action of tort brought by a purchaser of a house. The seller knew that the house was infested with termites and remained silent. This court (per Qua, J. at p. 678) said, 'There is no allegation of any false statement or representation, or of the uttering of a half truth which may be tantamount to a falsehood. There is no intimation that the defendant by any means prevented the plaintiff from acquiring information as to the condition of the house. There is nothing to show any fiduciary relation between the parties, or that the plaintiff stood in a position of confidence toward or dependence upon the defendant. So far as appears the parties made a business deal at arm's length. The charge is concealment and nothing more; and it is concealment in the simple sense of mere failure to reveal, with nothing to show any peculiar duty to speak.' The court (p. 679) indicated that it was applying a long standing 'rule of nonliability for bare nondisclosure' (emphasis supplied).

As in the Swinton case, the parties here were dealing at arm's length, the vendees were in no way prevented from acquiring information, and the vendors stood in no fiduciary relationship to the vendees. In two aspects, however, the present cases differ from the Swinton case: viz. (a) The vendees themselves could have found out about the zoning violations by inquiry through public records, whereas in the Swinton case the purchaser would have probably discovered the presence of termites only by retaining expert investigators; and (b) there was something more here than the 'bare nondisclosure' of the seller in the Swinton case.

(a) We deal first with the affirmative actions by the vendors, their conduct, advertising, and statements. Was enough said and done by the vendors so that they were bound to disclose more to avoid deception of the vendees and reliance by them upon a half truth? In other...