Equity Jurisdiction, To relieve from results of fraud. Deceit. Conspiracy. Equity Pleading and Practice, Master.
A bill in equity against a builder and certain trustees alleged in substance that the defendants had conspired and jointly by false representations and fraud had induced the plaintiff to enter into a contract to furnish work and materials for the construction of a building on land represented to belong to the builder and to carry out such contract, that the land did not then belong to the builder but later was acquired by him subject to a construction mortgage to the defendant trustees of such a nature as, under circumstances stated in the bill, to make it practically impossible for the plaintiff to enforce his contract. The prayer of the bill was that the mortgage be declared void, that the land be sold and that the plaintiff be satisfied from the proceeds. A master to whom the suit was referred found in substance that the builder had negotiated with the owner for the purchase of the land with a view to building a block of houses thereon, and, before the terms of purchase were concluded, had induced the plaintiff by false representations to begin work on the lot, a written contract as to the work having been made between the plaintiff and the defendant builder. The plaintiff had no direct dealings with the defendant trustees and made no inquiries of them and received no information from them directly or indirectly. More than fifteen days after the making of the contract with the plaintiff the builder through deceit practised upon the owner, in which the managing trustee participated, procured a conveyance of the land to him and at the same time executed to the trustees a construction mortgage of such a nature as to make it "not only possible but probable at the outset" that the builder would be unable to proceed and that the plaintiff would be unable to enforce performance of his contract. The managing trustee maintained the relation of mortgagee to the enterprise and had no other active interest regarding it. All joint action between the builder and the other defendants ended with the execution of the mortgage. The managing trustee did not intend the builder to fail and did not have the equivalent of actual knowledge of his operations. The builder did fail and the plaintiff suffered a loss. Held, that on such facts the trustees were not liable for the misrepresentations of the builder and that the suit could not be maintained for the purposes for which it was brought.
Where in a suit in equity it is sought to fix upon several defendants liability for damages resulting from deceit and fraud actively practised upon the plaintiff by one only of the defendants on the ground that all of the defendants conspired in the deceit and fraud, passive observation of the conduct or readiness to profit by a failure in duty of the actively fraudulent defendant is not enough to make his co-defendants liable in the absence of some relation on their part of agent, copartner or confederate toward him.
It is the sole duty of a master, to whom a suit in equity has been referred under the ordinary rule, to find and report the facts, and he is not required to make general rulings of law as to the effect of such findings.
Where a master, to whom a suit in equity was referred, in his report finds facts from which it appears that the suit cannot be maintained, the suit will be dismissed although the report also contains rulings by the master to the effect that upon the facts reported the suit should be maintained.
RUGG, J.
This is a suit in equity by which the plaintiff seeks to hold the several defendants on the ground of a conspiracy to defraud it, for work performed and materials furnished in the construction of apartment houses. The gist of a civil action of this sort is not the conspiracy, but the deceit or fraud causing damage to the plaintiff, the combination being charged merely for the purpose of fixing joint liability on the defendants. May v. Wood, 172 Mass. 11, and cases cited at page 13. Gurney v. Tenney, 197 Mass. 457, 465.
The material facts are these: The defendant Conner conceived the idea of building a block of houses in Brookline, and had negotiations for the purchase of land for this purpose with one Stearns, the owner. Before the terms of this purchase were concluded Conner, by misrepresentation as to his financial standing, induced the plaintiff to commence work on the lot, and a written contract between the plaintiff and the defendant Conner was signed for concrete piling on December 24, 1908. It is for performance of this contract that the plaintiff seeks to hold the other defendants. The plaintiff does not allege any communication between it and the other defendants. It made no inquiries of them, and received no information from them, directly or indirectly. At the time it began work, and when the contract was signed, Conner did not own the land. On January 9, 1909, Conner procured, through deceit, as the master found, as to his financial resources, in which the defendant W.W. Reed participated, the conveyance of the land from Stearns to himself and at the same time executed to Reed and his associates a first mortgage. Conner was without money, and as a stranger he had sought Reed for the purpose of placing this mortgage, from the proceeds of which he hoped to be able to build the houses. The money on the mortgage was to be advanced in instalments, and a part of it was to be used toward the purchase price of the land in a way which, as to Stearns, the master has found was fraudulent. But he also has found that Conner was not the agent of Reed, and that although Conner was without experience, skill or efficiency in this kind of business, and the plan of getting title and application of advancements on the mortgage were such as to make it "not only possible but probable at the outset" that Conner would not be likely to be able to proceed, yet he also found that Reed maintained the relation of mortgagee, and had no other active intent about the matter; that the joint action between Reed and Conner ended with the execution of the mortgage from Conner to Reed and his associates, and that Reed did not intend to cause Conner to fail, and did not have the equivalent of actual knowledge as to the result of Conner's operations.
This does not go quite to the extent of making Reed and his associates liable for the false representations of Conner, or for a conspiracy with him to defraud. It does not show a connection sufficiently close between Reed and Conner to constitute them joint adventurers, or to establish the relationship of principal and agent. This is not a case where the master has found that the real design of the defendant mortgagees was to put forward the nominal owner of the land for the purpose of procuring its improvement through the labor and materials of others, either consciously intending or as reasonable men bound to anticipate the result that through the failure of the nominal owner, all that was done would enure to their benefit. He does not find that the elaborate agreement between Conner and Reed for the advancement of the money ostensibly by way of mortgage, although lacking nothing in legal form, was in truth a mere pretense to mask the real purpose of ultimately defrauding all who might add value to the property described in the mortgage. Nor does he find that Reed and his associates used Conner as their tool, either with or without his knowledge and consent, in a scheme which they had made their own to the end that they might defraud. Findings like these would call for the application of different principles of law. But in this case the plan originated with Conner. The contract, by the performance of which the plaintiff has suffered damage, was made before the defendants other than Conner had any connection with the matter. The mortgage was a genuine one. The defendant mortgagees were able and ready to carry out their part of the mortgage contract with Conner and to advance him the money from time to time as required by it. While Conner was wholly incompetent, he regarded himself as the responsible head, and was treated as such by the other defendants. When the relation between the parties is not such as to impose some duty, passive observation of the conduct or readiness to profit by the failure of one for whom no legal responsibility exists as agent, copartner, confederate or otherwise, does not constitute a basis for civil liability as a joint participator. This case is distinguishable in its facts from Light v. Jacobs, 183 Mass. 206, and In re Friedman, 164 Fed. Rep. 131, 134, especially relied upon by the plaintiff.
The master undertook, as a part of his report, to make rulings of law. His only duty was to find the facts, and he was not required to make general rulings of law as to the effect of these findings. Clark v. Seagraves, 186 Mass. 430, 435. Adams v. Young, 200 Mass. 588, 590. The facts which he has reported do not warrant the ruling that the defendants are responsible in damages to the plaintiff. The first and second exceptions of the defendant Reed and of the defendants trustees and the fifth exception of the defendant Conner to the master's report should be sustained.
It does not appear to be necessary to discuss the question whether the finding of the master was warranted, that the deed from Stearns to Conner was procured by the deceit of the latter in which Reed participated.
Decree dismissing the bill affirmed.