McCray v. Weinberg

• Decision Date: 12 January 1976
• Citation: 4 Mass.App.Ct. 13,340 N.E.2d 518
• Parties: Esther McCRAY et al. 1 v. Jerome WEINBERG et al. 2
• Court: Appeals Court of Massachusetts

Page 518

340 N.E.2d 518

4 Mass.App.Ct. 13

Esther McCRAY et al. ¹

v. Jerome WEINBERG et al. ²

Appeals Court of Massachusetts, Suffolk.

Argued Nov. 17, 1975.

Decided Jan. 12, 1976.

Arnold E. Cohen, Boston, for plaintiffs.

Avram G. Hammer, Boston, for defendants.

Before HALE, C.J., and KEVILLE and ARMSTRONG, JJ.

HALE, Chief Justice.

This action was commenced as a bill in equity by which the plaintiffs sought to invalidate: (1) the 1972 foreclosure of a mortgage on their home and (2) the mortgage itself and the note secured by it which the plaintiffs had executed on April 7, 1966. The case was referred to a master, whose report was confirmed by the court, no objections having been made to it. A judge of the Superior Court adopted the master's report and entered judgment dismissing the action. The plaintiffs have appealed from that judgment.

The individual defendant (Weinberg) is an attorney at law and the owner of fifty-two per cent of the stock of the corporate defendant (Merit). The plaintiffs contend that Mr. Weinberg was their attorney and that he breached his fiduciary duty to them by advising them in a manner detrimental to their best interests and beneficial to those of Merit.

In his subsidiary findings the master determined that on three separate occasions between 1962 and 1964 Weinberg acted as attorney for the plaintiffs. The matters included an eminent domain proceeding, a small tort claim, and the acquisition of the full title to the plaintiffs' home. The last of those matters was concluded on March 2, 1964.

Jolly, the male plaintiff, had operated a trucking business for thirty years prior to April, 1966. While his formal education was limited to grade school, he was intelligent and was an experienced and knowledgeable businessman who kept his own pbusiness books of account.

The master further found that over a period of years beginning in the late 1950's Jolly borrowed money on a number of occasions for various purposes from both Merit and Weinberg. Between April 14 and November 18, 1965, the plaintiffs obtained five separate loans, the first loan being in the amount of $1,000 and the last (November 18) being in the amount of $3,100. Each successive loan refinanced the total outstanding prior indebtedness, so that the only amount owed by the plaintiffs on November 18 was $3,100. Each of the last three loans bore interest at the rate of one and one-half per cent per month and was secured by a second mortgage on the plaintiffs' home.

On or about April 1, 1966, the plaintiffs owed Merit a balance of $3078.11 on the November 18 loan. At that time the plaintiffs requested a new loan from Weinberg to refinance the old one and to provide additional funds to build a new porch for their home. Weinberg at first declined to make the loan and informed Jolly that he had gone as far as he could go. Later, Weinberg agreed to make the loan on the condition that the first mortgage be paid off.

Merit loaned the plaintiffs $5000 on April 7, 1966, taking as security for the note a mortgage on the plaintiffs' home. The note provided for payments in monthly installments of $105.09 each, with interest at the rate of one and one-half per cent per month. ³ A tax reserve account was established into which the plaintiffs agreed to pay $48 a month in addition to the monthly payments of interest and principal due on the note. Weinberg explained all of the terms of the loan to the plaintiffs who understood them. The plaintiffs signed the note voluntarily, without any influence or misrepresentation on the part of Weinberg.

Beginning in June, 1966 the plaintiffs fell behind in their payments on both the mortgage note and the tax payment account. As a result almost all of the payments thereafter received were applied to interest, with little reduction in the principal amount. By October of 1972 the plaintiffs had made total payments of $6,824.42. The loan balance stood at $4,528.15, and Weinberg had paid $3,846.07 on behalf of Merit to satisfy a city of Boston tax lien. The mortgage was foreclosed by sale. Weinberg, acting on behalf of Merit, made the sole bid of $1,000. Merit has waived all claims to the resulting deficiency.

The master also made 'general findings of fact.' In them he found that during the fifteen years in which Weinberg did business with the plaintiffs he was employed as an attorney on only the three occasions, not on a continuing or steady basis; that for a period of more than two years prior to April 7, 1966, Weinberg had furnished no legal services or advice to the plaintiffs; that in connection with the April 7, 1966, loan Weinberg was acting as attorney for Merit; that in making the loan Weinberg had not furnished legal services to the plaintiffs; and that no attorneyclient relationship existed between the plaintiffs and Weinberg with respect to that transaction. The master also found that the interests of Weinberg and Merit were virtually the same and that the relationship between Weinberg and Merit on the one hand and the plaintiffs on the other was basically that of lender and borrower.

1. We agree with the plaintiffs' contention that we should disregard those findings of the master to the effect that no attorney-client relationship existed between Weinberg and the plaintiffs for the reason that the defendants had admitted the fact of such relationship in their answer ⁴, and that they were bound by that admission. See G.L. c. 231 § 87; Wasserman v. Tonelli, 343 Mass. 253, 257, 178 N.E.2d 477 (1961), and cases cited. CIARLETTA V. COMMISSIONER OF CORPS. & TAXN., --- MASS.APP. --- , 326 N.E.2D 353 (1975)^A. We construe the defendant's answer to the last paragraph of the allegations in the plaintiffs' bill ⁵ not as a denial of the existence of the attorney-client relationship but rather as a denial of the allegations (1) that Weinberg had acted as the plaintiffs' attorney in the various loan transactions and (2) that he had advised them in a manner detrimental to their interest.

As no objection was made to the master's report and as the subsidiary findings of the master which we have summarized above are otherwise within the scope of the pleadings, they are conclusive between the parties (Jones v. Gingras, --- Mass.App. ---, --- ^b, 331 N.E.2d 819 (1975)), and we consider the remaining contentions of the plaintiffs in the light of those findings.

2. The plaintiffs pose their next contention in the form of a question: '(D) id respondent breach the fiduciary duty which attaches to this relationship in lending money to the petitioners at a one and one-half per...