Ries v. Rome

• Decision Date: 14 April 1958
• Citation: 149 N.E.2d 366,337 Mass. 376
• Parties: Marshall A. RIES et al., trustees, v. Ellis ROME et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 366

149 N.E.2d 366

337 Mass. 376

Marshall A. RIES et al., trustees, v. Ellis ROME et al.

Supreme Judicial Court of Massachusetts, Plymouth.

Argued Feb. 3, 1958.

Decided April 14, 1958.

Joseph Schneider, Boston, for plaintiffs.

Edward J. Barshak, Boston, for defendants.

Before WILKINS, C. J., and SPALDING, WILLIAMS, COUNIHAN and CUTTER, JJ.

CUTTER, Justice.

This bill in equity originally sought the imposition of a constructive trust in the plaintiffs' favor upon certain real estate owned by the defendants, one Rome and his wife, on the ground that it had been purchased by them in violation of a fiduciary duty owed by them to the plaintiffs. The bill was later twice amended (a) to allege that the plaintiffs communicated to the defendants certain confidential views about real estate development and that the defendant Ellis Rome agreed to act as their broker in acquiring suitable land, and (b) to ask, in the alternative, money damages. The judge refused to allow a further amendment of the bill asserting that the defendants were constructive trustees of the land because they knowingly participated in an alleged breach of a supposed fiduciary obligation to the plaintiffs on the part of one Murdock, broker for the vendor from whom the defendants purchased the land.

The case was referred to a master. In compliance with Rule 90 of the Superior Court (1954) the master with his report filed summaries of evidence underlying specified findings to which the defendants had filed objections. The defendants have appealed from interlocutory decrees overruling a demurrer to the bill and confirming the master's report and, for the purpose of preserving their earlier claims of appeal, have also appealed from the final decree dismissing the bill. See Foot v. Bauman, 333 Mass. 214, 219, 129 N.E.2d 916, 55 A.L.R.2d 1139. The plaintiffs appeal from the final decree and, by a bill of exceptions, present an exception to the denial of their motion for leave further to amend their bill.

The master found the following principal subsidiary facts. The plaintiffs were experienced real estate developers. The defendants conduct a real estate business representing 'customers as general brokers and on occasions' buying for their own account. Where they coperated with a broker having an exclusive agency on particular property, it was the practice for the latter broker 'to divide the commission' with them if they sent a purchaser to him. 'Whenever this occurred the exclusive broker took over the customer and the forwarding * * * broker had no further direct dealings with the customer.'

Early in January, 1955, the plaintiffs told the defendants that they wanted to buy land near Hanover for a housing development. During the next two months the defendants caused to be shown to the plaintiffs various parcels including a glass factory property, owned by certain corporations but controlled by a husband and wife through stock ownership, so that the couple for the purposes of this case can be regarded in practical effect as the owners. Murdock had been given 'an exclusive agency for the sale of [the] land and business.' The plaintiffs met with Murdock to discuss the property and told him that they had been referred to him by Rome. Murdock mentioned a price of $50,000 but 'thought that an offer of $40,000 * * * might be acceptable to the owners.' Murdock had been given 'no definite sales price but simply an authority to receive * * * and submit * * * offers to the owners for their consideration.'

During March and April, 1955, the plaintiffs spent most of their time examining the glass factory's business. Murdock facilitated the plaintiffs' investigation in various ways and conferred with the plaintiffs frequently. At these meetings the plaintiffs 'confided in him the results of their investigation * * * into the company's affairs and what must be done to make it a successful business.' They found little value in it as then operated, but felt that the land and factory building were 'worth purchasing * * * at a far less price than was quoted * * * by Murdock.'

On May 2, 1955, the plaintiffs made to Murdock an offer of $10,000 for all the factory assets 'excluding bills payable and accounts receivable.' On May 3 they gave to Murdock a deposit check of $1,000, to his order, on the back of which were indorsed a summary of the offer and the statement, 'Subject to agreements of Purchase and Sale satisfactory to both buyer and seller.' On May 4 Murdock told one plaintiff by telephone that the offer 'had been accepted by the owners.' On May 6 the plaintiffs and Murdock examined a purchase agreement prepared for the signatures of the president and clerk of the corporations which in fact owned the building and with a 'last blank line * * * for signing by the plaintiffs.' The plaintiffs 'stated that they would take one of the agreements to their own lawyer and have him look over * * * and approve it. * * * The meeting closed with the common understanding * * * that the property was to be held for the plaintiffs and would be given to them just as soon as the plaintiffs returned the agreements duly signed and paid the balance of the consideration.'

On May 9 Murdock told one plaintiff by telephone that the 'property had been sold to another party' but declined 'to give * * * information * * * as to who the purchaser was.' The deposit check was returned. 'Actually, there was no other agreed purchaser * * * on May 9 when Murdock telephoned.' On May 10 at a real estate board meeting, Murdock purported to tell Rome that he 'had an offer of $10,000 for the factory, which I have lost,' and Rome answered, 'I will buy it.' On the morning of May 11, 1955, Rome gave Murdock a deposit check for 1,000, and, on the same day, Rome signed as buyer the same agreement which had been prepared for the plaintiffs' signatures. This purchase was eventually completed for $10,000. The value of the assets sold was found to be $23,500 in May and June, 1955.

'Upon the foregoing subsidiary facts,' the master made 'ultimate conclusions of material facts,' which, so far as here relevant, are stated below: 1. 'The plaintiffs, as principal, never hired the named brokers [the Romes and Murdock] * * * to buy the property.' 2. There was with respect to 'the purchase and sale of property * * * no fiduciary relationship * * * between the plaintiffs and the defendants.' 3. On May 5 'the owners had accepted [the] plaintiffs' offer * * * and there remained nothing further to be done except for the parties to sign a written * * * agreement * * * satisfactory of both the agreed buyers and sellers.' 4. A 'fiduciary relationship did exist between Murdock and the plaintiffs.' Although 'Murdock was not employed by the plaintiffs to buy the property for them * * * he did accept valuable information confidentially conveyed to him by the plaintiffs, and in violation of such confidential relationship, in concert with [the] defendants * * * he * * * abused such confidence to the unjust enrichment of both himself and [the] defendants * * * and to the prejudice of the plaintiffs.' The plaintiffs communicated to Murdock the results of their investigations 'largely to justify why their offer * * * was so low in comparison with Murdock's original quotation.' 5. Realizing that the low offer meant only a 'modest commission' which 'would have to be shared' with the defendants, Murdock 'intentionally * * * decided to prevent a sale * * * to the plaintiffs.' 6. When Murdock on May 9 told one of the plaintiffs that the 'owners had * * * agreed to sell * * * to another * * * no such * * * sale had been * * * even contemplated by the owners.' 7. '[A]fter acceptance of the plaintiffs' offer * * * Murdock communicated with [the] defendants * * * and told them of the * * * offer and its acceptance * * * and disclosed to the Romes information which he had confidentially received from the plaintiffs' and obtained the defendants' agreement to purchase on the same terms, the defendants waiving any commission, so that Murdock would receive the whole commission. On May 11, when they signed the agreement, the defendants knew that the plaintiffs 'were the named buyers * * * in that agreement.' 8. With 'full knowledge of Murdock's breach of a fiduciary obligation owed by him to the plaintiffs, [the] defendants * * * actively participated in such breach, and by reason thereof the plaintiffs were prevented from completing their purchase of the property to their * * * loss.'

1. The substantial question raised by these conclusions is whether there were subsidiary findings, so far as justified by the evidence summarized in accordance with Rule 90, which in turn justified the master's conclusion that Murdock owed a fiduciary obligation to the plaintiffs. It is the duty of the trial court, and of this court upon appeal from the final decree, to see that the final decree is such as the law requires upon the subsidiary facts found by the master and the proper inferences therefrom. Foot v. Bauman, 333 Mass. 214, 219, 129 N.E.2d 916, 55 A.L.R.2d 1139.

The evidence in support of the finding that the plaintiffs 'confided' the results of their investigations to Murdock was testimony by one plaintiff, (a) giving a detailed account of the investigations of the factory's business; (b) 'that [the] plaintiffs bought eighty contiguous acres * * * in connection with plans for future * * * expansion'; and (c) that 'all of this information * * * [was] communicated by the plaintiffs...