New England Foundation Co. v. Reed

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 *561concluded 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 hable 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 *562the 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 *563defendant 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 lili affirmed.