Shikes v. Gabelnick
| Decision Date | 25 November 1930 |
| Citation | 273 Mass. 201 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | DAVID SHIKES & another v. ZEENA GABELNICK & others. ZEENA GABELNICK & another v. DAVID SHIKES & others. |
September 10, 1930.
Present: RUGG, C.
J., CROSBY, PIERCE CARROLL, SANDERSON, & FIELD, JJ.
Contract Rescission, Performance and breach, Validity. Equity Pleading and Practice, Appeal, Findings by judge. Equity Jurisdiction Rescission, Specific performance, Plaintiff's clean hands.
False statements made previous to a sale of property by the seller to the buyer, to the effect that the seller had received certain offers for the property, are not actionable by the buyer.
Although false representations, made by one party to a contract for the sale of land to the other party, but not relied upon by the second party in entering into the contract, are not sufficient to entitle the second party to rescind the contract and do not bar the first party from recovering damages for breach thereof, they require a court of equity to refuse to grant to the first party relief by way of specific performance of the contract. Following Brockton Olympia Realty Co. v.
Upon appeal from a final decree entered in a suit in equity for specific performance of a contract for the sale of real estate, where the evidence was taken by a stenographer appointed under G.L.c. 214,
Section 24; Equity Rule 29 (1926), the question, whether a sound judicial discretion resting on established principles of equity requires the granting or refusal of relief by way of specific performance, is for this court.
TWO BILLS IN EQUITY, filed in the Superior Court on June 22, 1928, and July 5, 1928, respectively, and described in the opinion.
The plaintiffs in the first bill, which was amended, were David Shikes and Philip B. Long, copartners. The defendants were Sarah H. Shikes, Frances M. Long and Bessie Gabelnick, wives respectively of David Shikes, Philip B. Long and Zeena Gabelnick and "joined only as nominal" parties; Marx Spitz; and Zeena Gabelnick. The plaintiffs in the second suit were Zeena and Bessie Gabelnick. The defendants were David and Sarah H. Shikes, Philip B. and Frances M. Long, and Marx Spitz.
The suits were heard together by Qua, J., a stenographer having been appointed under G.L.c. 214, Section 24; Equity Rule 29 (1926). Material findings by the judge, and a final decree entered in each suit by his order, are described in the opinion. The plaintiffs appealed in the first suit. All the defendants, except Spitz, appealed in the second suit.
The cases were argued on March 31, 1930, before Rugg, C.J., Crosby, Pierce, Carroll, & Field, JJ., and on September 10, 1930, were submitted on briefs on reargument, to all the Justices excepting Wait, J.
F.W. Knowlton, (A.A. Silton & B. Potter with him,) for Shikes and another.
A.W. Rockwood, for Gabelnick and others.
These two suits in equity were tried together in the Superior Court. Number 31968 was brought by Shikes and Long, a copartnership, hereinafter spoken of as the sellers, against Gabelnick, hereinafter referred to as the buyer, and Spitz, a real estate broker. The bill asked for the cancellation and rescission of an agreement for the exchange of real estate and of a contract with Spitz for a broker's commission. This agreement for the exchange of the properties is dated May 1, 1928. Number 32034 was a suit brought by the buyer against the sellers for specific performance of the same agreement. The evidence is reported. In number 31968 a decree was entered dismissing the bill against all the defendants except Spitz. As to Spitz the sellers were ordered to pay him a commission of $1,500. The sellers appealed. In number 32034 specific performance of the agreement was ordered, and a commission was directed to be paid to Spitz. The sellers appealed.
The buyer owned property on Lowell Street, Boston; the sellers were the owners of real estate in Medford. The agreement in question related to the exchange of these properties between the sellers and the buyer. The judge found that the buyer made false representations to the sellers, saying, in effect, that the occupant of the adjoining store, number 16 Lowell Street, was paying a yearly rental of $6,000; that he had to pay a bonus of $15,000 "to get the key"; that he spent $7,000 for fixtures. The facts as found by the judge were that one Omansky had in July, 1925, taken a lease of number 16 Lowell Street to begin in February, 1926, at a total rent of $67,000, of which $15,000 was paid before the term began, $5,000 was to be paid each year for eight years, and $6,000 each year for the remaining two years of the term; that $5,000 was spent on fixtures, furnishings and repairs; that on November 28, 1927, Omansky's firm made an assignment in bankruptcy; that a corporation was formed and bought the fixtures for $1,209.14; that the creditors took a new lease for the unexpired term agreeing to pay $5,000 a year up to the last two years and $6,000 a year for the remaining two years; that the creditors of Omansky "put the new corporation in as a subtenant to the creditors at a rent of $10,000 per year"; that when the representations were made the corporation was a tenant of the creditors and Omansky was in charge of the store. It was found that the rent of $10,000 bore no relation to the fair rental value of the property, that probably the rent was fixed at this sum in order to enable the creditors "in appearance at least, to recoup themselves for their losses through the failure of the store." The judge did not find that these representations concerning the store number 16 Lowell Street were known to Gabelnick to be false. It was found that he did not intend to deceive, but that he made these representations as of his own knowledge.
It was further found that the buyer said to the sellers that he was doing a gross business of $250,000 a year. This representation it was found was false. Gabelnick knew it was false and made it with intent to deceive. It was also found that the buyer stated to the sellers that he had been offered $6,000 a year for the Lowell Street property and a bonus of $25,000 for a lease of the store, and had been offered $60,000 for the property as a whole. These statements were false, and were made as of his own knowledge intending to deceive the sellers. These particular representations, it was ruled, following Commonwealth v. Quinn, 222 Mass. 504, 512, were not actionable. The judge further found that the sellers did not rely on any of the false representations and were not induced by them to enter into the agreement.
The cases were heard by a judge of the Superior Court. His findings are not to be reversed unless upon a review of the evidence we are satisfied that he was plainly wrong. He saw the witnesses; he could judge of their truthfulness. The sellers were experienced operators in Boston real estate, and, as found, were intelligent, shrewd and capable business men. It was found that, if they really relied on his statements, they could have investigated for themselves and would not have had difficulty in discovering their falsity. The sellers stated that they relied on the representations made by the buyer. But the judge was not required to believe this testimony. He could have found, as he did, that they did not believe the Lowell Street property was worth $60,000, and that they were willing to take it as they saw it because of the price they were to receive for the Medford property. On a review of all the testimony, we see no reason for setting aside the decision of the judge that the sellers did not rely on the false representations of the buyer. Sandler v. Silk, 269 Mass. 562 , 566, 567. Levin v. Bernstein, 269 Mass. 542 , 543. R.E. McDonald Co. v. Finkovitch, 270 Mass. 362 , 366. The judge was right in ruling that the buyer's statements concerning offers he had received for his property were not actionable. Commonwealth v. Quinn, 222 Mass. 504.
In number 32034 specific performance was decreed of the exchange of the properties according to the agreement of May 1, 1928. It is contended that notwithstanding the false and fraudulent statements made by Gabelnick, these misrepresentations were not relied on by the sellers, that therefore the decree ordering specific performance was right.
It has been held in a number of decisions outside of this Commonwealth that misrepresentations to be a defence to a bill in equity for specific performance must have been relied on, that no damage is suffered when fraudulent statements are not relied on that fraud without damage is no defence to the suit in equity and no defence to the prayer for specific performance. But in this Commonwealth it has been held that where misrepresentations have not been relied on, the party making the false statements is not entitled to specific...
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