J., DONAHUE, QUA
COX, & RONAN, JJ.
Fiduciary. Fraud.
Contract, Validity.
Equity Pleading and Practice, Findings by judge.
Upon a voluntary
report by the trial judge "of all material facts upon
which the order for decree is based" in a suit in
equity, no further findings were to be implied.
In a suit in equity
to rescind a certain transaction between the defendant and
the plaintiff, a widow, a finding of a fiduciary relation
between the parties was not justified where the
plaintiff's testimony showed that she was not without
business intelligence and that she had been accustomed
generally to make the final decisions in matters respecting
her securities, although previous to such transaction the
defendant had procured her account for a stockbroking firm of
which he was an
employee and with which she had dealt for some time, and she
had confidence in his honesty and ability.
A contract in
writing between a defendant and a woman of considerable
business intelligence, toward whom he was not a fiduciary
signed by her under a recital that she understood its terms
"fully" and in signing did not rely "upon
anything not expressed therein," and plainly stating
that a transaction whereby he was to receive
"moneys" from her and in fact did receive the
proceeds of sales of securities of hers, was a loan to him to
be evidenced by a note, which he gave her and which she
subsequently in writing "ratified and confirmed" as
such, could not be avoided by her, nor could the defendant be
held accountable for such proceeds, which he had used for his
own benefit, merely because negotiations with her a short
time before the contract was signed looked toward an
arrangement whereby he would take her securities and deal
with them on the market for her account, paying her interest
periodically, and she might have thought that such was the
nature of the transaction finally effected.
BILL IN EQUITY
filed in the Superior Court on September 14, 1939, and
afterwards amended.
The suit was heard
by Morton, J., and final decree was entered by order of
Broadhurst, J.
J. C. Johnston, for
the defendants.
E. C. Park, (C.
C. Worth with him,)
for the plaintiff.
COX, J. The
plaintiff in this bill in equity seeks to rescind a
transaction with the defendant Luce, hereinafter referred to
as the defendant, and to have him account for property that
he received from her in that transaction on the ground that
she was fraudulently induced by him to enter into it. She
prays, among other things, that the "document,"
hereinafter referred to, signed by her on January 13, 1939
be decreed to be null and void. The evidence is reported, and
the trial judge made a voluntary report of material facts.
The defendant appealed from the final decree by which the
note, hereinafter referred to, and the "contract or
other arrangement between the parties arising from the letter
of January 12, 1939 are declared void," and other relief
was given to the plaintiff. In the circumstances, it is for
this court to review fact as well as law, but weight must be
given to the judge's findings, and one question to be
decided is whether it can rightly be said that the findings
made by the judge who saw the witnesses and heard them
testify are plainly wrong. Boston v. Santosuosso,
307 Mass. 302 ,
331, 332, and cases cited. The report is "of all
material facts upon which the order for decree is
based." In the circumstances, there is no room for any
implication of findings beyond those contained in the
judge's report. Birnbaum v. Pamoukis, 301 Mass.
559 , 561-562.
The report is as
follows: "This is a bill in equity seeking the
cancellation of a note given by the defendant to the
plaintiff and an accounting between the parties, arising out
of transactions hereinafter referred to. The plaintiff is a
widow, her husband having died in 1933 and leaving her with
considerable personal property consisting of securities, and
from 1933 on the plaintiff did considerable business with
brokers in the purchase and sales of securities. The
defendant was formerly a customers' man, so-called, for
J. H. Goddard & Company, dealer and broker in investment
securities, and by some way, which did not appear in
evidence, the defendant knew of the plaintiff and called upon
her in March of 1937, secured her confidence and was allowed
by her to act as broker in various transactions relative to
the securities then owned by the plaintiff. These dealings
and transactions went on until the latter part of 1938, when
the defendant suggested to the plaintiff that he could deal
more efficiently with the securities and could take advantage
of a possible rise in the market value thereof if the same
were placed in his name so that he could deal with them from
time to time without conferring with the plaintiff. He first
suggested that a corporation be formed to handle the business
relative to the securities; this the plaintiff refused to do
but did finally agree to turn over to the defendant such
securities as were then available having approximately a
market value of $17,000. The defendant suggested that the
arrangements should be reduced to writing, and to that end he
consulted counsel who drafted a letter addressed to the
plaintiff and signed by the defendant, a copy of which
appears in the bill and bears a date of January 12, 1939. The
original was sent to the plaintiff by mail and on the next
day, January 13, 1939, she signed the postscript thereto
setting forth that she
had read the letter and understood fully its terms. On the
same day she turned over to the defendant securities at an
approximate market value of $17,000.00. After the securities
were delivered to the defendant he sold the same within two
or three days through the brokerage office of J. P. Marto
& Company, checks for the proceeds thereof being made out
by J. P. Marto & Company in the name of the plaintiff.
These checks were delivered to the plaintiff by the defendant
and she then endorsed the same so that the defendant could
cash them, the proceeds of the sale of the securities
amounted to $16,401. On February 1, 1939 the defendant
delivered to the plaintiff his unsecured note of that date in
the principal sum of $16,401, providing for the payment of
principal in three years with interest at the rate of six per
cent. The defendant then traded therein on margin with
Spencer Trask & Company, investment brokers in Boston,
and lost in such transactions, $2,877. Of the proceeds of the
securities there was approximately $1,000 on a checking
account in a bank, which is under attachment in this suit. Of
the balance of the proceeds of the securities the defendant
has spent the entire amount thereof in living expenses. If
material, I find that the plaintiff, notwithstanding her
acceptance of the letter of January 12th by signing the
postscript thereto, did not understand nor intend to deliver
the securities referred to to the defendant to do with as he
pleased. She understood the arrangement was to the effect
that the defendant would take the securities, deal with them
on the market, confer with her monthly as to the status of
her account, pay her interest monthly at the rate of six per
cent and, at the end of three years upon her demand, would
return such securities to her as the defendant had purchased
for her account. I make this finding in view of that sentence
in the letter, as follows: `It is my intention, as you know,
to use the monies received from you in return for my note in
the purchase and sale of stock.' The defendant paid the
plaintiff interest monthly at the rate of six per cent;
payments of interest since the suit was brought were made by
check and have not been cashed by the plaintiff as the
account upon which the checks were drawn was attached in this
action. I find that, at the time the arrangement was made
between the defendant and plaintiff, as above set forth, the
defendant intended to use the proceeds of the securities for
his own benefit. I find that the plaintiff was a woman of
little or no business experience notwithstanding the fact
that for two or three years prior to her dealings with the
defendant she had her brokers act for her in the purchase and
sale of securities. It was obvious that she did not know the
difference between the proceeds of a coupon and a dividend,
and in general had to rely upon the advice of others in all
business matters. This the defendant well knew, and he also
knew that she had great confidence in his honesty, business
ability, his skill and experience in investments, that she
trusted him, that he had influence with her in advising her
as to investments, that he was friendly to her and interested
in helping her. He expected and invited her to have absolute
confidence in him and gave her to understand that she might
safely apply to him for advice and counsel as to investments.
The defendant also knew that the plaintiff, in relying upon
him as she did, as hereinbefore set forth, sought no
independent legal or other advice from another. These facts,
together with the further fact that at the time the plaintiff
signed the postscript to the letter of January 12th the
defendant had the secret intention of converting the
securities turned over to him or the proceeds thereof to his
own use, make applicable to the situation thus disclosed the
principle set forth in Israel v. Sommer, 292 Mass.
113 , and in consequence thereof a decree may be entered
declaring void the note given by the defendant to the
plaintiff, the contract or other arrangement between the
parties arising from the letter of January 12, 1939,
declaring that the...
