Webb v. Johnston

• Decision Date: 14 September 1923
• Parties: WEBB et ux. v. JOHNSTON et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

246 Mass. 229

140 N.E. 814

WEBB et ux.

v.JOHNSTON et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Sept. 14, 1923.

Appeal from Supreme Judicial Court, Suffolk County.

Suit by John W. Webb and wife against George W. Johnston and others to rescind exchange of properties, or in the alternative for damages, because of false and fraudulent representations on the part of some or all of the defendants. From an interlocutory decree overruling exceptions to the master's report, and confirming the report, and from a final decree dismissing the bill, as against all the defendants except the defendant John J. Keenan, plaintiffs appeal. affirmed.

Plaintiffs conveyed certain property, inculding all the shares of stock in an incorporated garage, to certain of the defendants in exchange for two apartment houses. The defendant Keenan, as broker, negotiated the exchange. As found by the master, Keenan called plaintiff's attention to the two apartment houses, and to induce them to agree to an exchange falsely represented that they were owned by an elderly man of wealth, who valued them highly and had expended large sums of money in putting them in firstclass condition, and had refused an offer of $200,000 for them, but was willing to make a substantial financial sacrifice in order to obtain plaintiffs' garage for his son; that he (Keenan) was in touch with a man by the name of Montgomery, who was much interested in the apartment houses and eager to buy them, but was not interested in the garage property, and that if the exchange was made the apartment houses could be promptly turned over to Montgomery; and he thereby induced plaintiffs to believe that approximately $185,000 could be obtained for the property from Montgomery. The master also found that no false representations were made by the other defendants or any one representing them. Plaintiffs' exceptions to the master's report were overruled, and the report was confirmed.

Loring, Coolidge, Noble & Boyd, of Boston, for appellants.

George L. Mayberry and Lowell A. Mayberry, both of Boston, for appellees.

RUGG, C. J.

This is a suit in equity for the rescission of an exchange of real estate, and in the alternative for damages on the ground of fraud and deceit practiced on the plaintiffs by the defendants. The case was referred to a master under an order requiring him to find and report the facts without report of the evidence. The plaintiffs have appealed from an interlocutory decree overruling their exceptions to and confirming the master's report and from a final decree awarding substantial damages against the defendant Keenan and dismissing the bill as to other defendants.

Since the evidence is not reported, the facts found by the master must be accepted as true unless on the face of his report they are mutualy inconsistent or contradictory and plainly wrong. Glover v. Waltham Laundry Co., 235 Mass. 330, 334, 127 N. E. 420.

It has been found and is not now open to question that the plaintiffs were cheated out of considerable property in the exchange of real estate by the fraudulent misrepresentations made to them by Keenan. The case hinges on the question whether the defendants Frederick E. and George W. Johnston, hereafter for convenience called the Johnstons, are responsible as principals for the fraud perpetrated on the plaintiffs by Keenan. On this point the general finding was that the-

‘defendant Keenan was at no time employed by the defendants George W. and Frederick E. Johnston as agent or broker for them either in connection with the Brookline property or otherwise. At no time did they authorize him to make any statements, concealments, or representations with reference to the character, condition, previous history, ownership, or any other facts relating to that property, except such representations as were contained in the statement obtained by him at their office.’

The main contention of the plaintiffs is that this finding cannot stand in view of other specific facts found by the master. Keenan conceived the idea of getting the plaintiffs to exchange property belonging to them for two apartment houses in Brookline owned by the Johnstons but standing in the name of their straw man named Wilson. Keenan procured from the office of the Johnstons, who were real estate dealers operating in and about Boston, a typewritten statement (such as they commonly gave out concerning property they had for sale to anybody who asked) showing the actual gross income and the estimate or approximate expenses of their Brookline property. Keenan made the misrepresentations as to the Brookline property to the plaintiffs, who finally, on March 4, 1921, authorized him to see upon what terms the exchange could be made. Keennan procured them to sign a form of agreement as to the terms of exchange. On the morning of March 5, 1921, Keenan showed to the Johnstons the agreement signed by the plaintiffs and suggested to them the advisability of the proposed exchange. This was the first time the Johnstons had had called to their attention a proposition for such an exchange. Apparently they had never thought of it themselves and therefore had never known of the plaintiffs' property. After some discussion with Keenan they examined the property of the plaintiffs, made to Keenan a counter proposition, to which Keenan procured the assent of the plaintiffs. During the final of several interviews between Keenan and the Johnstons on March 5, 1921, the former said:

‘Of course you know that I am a broker in this matter. I will expect a commission from you as well as from Webb if this sale goes through.’

The reply was:

‘Of course, provided it goes through, we will pay you a commission.’

The misrepresentations to the plaintiffs by Keenan had all been made prior to this conversation between him and the Johnstons. Agreements for the exchange were signed in duplicate by both parties on March 5, 1921. The plaintiffs were wholly ignorant of the agreement of the Johnstons to pay a commission to Keenan, did not know that the Johnstons owned the Brookline apartment houses but supposed they were actually owned by the straw man, Wilson, and were ignorant of the fraud practiced upon them by Keenan. Keenan collected a large commission from the plaintiffs and was paid another large commission by the Johnstons.

It is a rule of the Boston Real Estate Exchange and the practice among real estate brokers that a broker who brings about an exchange shall be entitled to a full commission from each party to the transaction. Keenan and the Johnstons were familiar with this...