310 Mass. 239 | Mass. | 1941
This is a bill in equity seeking to recover the sum of $171,615.32 of the defendant Benjamin Rudnick under a written contract executed by him on November 10, 1931; to establish the indebtedness of the defendant Baer in said sum, as the balance due upon a mortgage note in the principal sum of $463,000 payable to the plaintiff, hereinafter called the bank, made by her on said date; and to reach her alleged right of indemnification and exoneration as agent of Rudnick in satisfaction of her liability upon the said note. After a trial in the Superior Court, the judge made a report of the material facts and ordered the entry of a decree dismissing the bill as against Rudnick and ordering Baer to pay the balance due on the mortgage note amounting to $171,615.32 with interest. The parties then stipulated that the case be reported to this court and that the defendant Baer should have the right to contend that she was not liable on the mortgage note, and that the plaintiff should have the right to argue that Baer had a right to be exonerated and indemnified by Rudnick and that it is entitled to reach and apply this right in satisfaction of her indebtedness on the mortgage note. The judge then reported the case to this court upon the pleadings, transcript of evidence, the report of material facts and the stipulation of the parties.
We have examined the report of the evidence and the findings of material facts. Many of the salient facts are not in dispute. The bank held a second mortgage in the sum of $110,000 upon certain premises in Boston. The note secured by this mortgage was indorsed by Joseph F. Rudnick and one Kaye, two relatives of the defendant Rud-nick. This mortgage was subject to a first mortgage upon which the sum of $323,000 was unpaid. The bank foreclosed its second mortgage on November 3, 1931, taking title in the name of a subsidiary corporation. The defendant Rudnick, after a series of conferences with the bank, entered into a contract with it on November 10, 1931. The contract in an introductory paragraph recited that Rudnick
Title was conveyed to Baer, who delivered a note for $463,000 to the bank and a mortgage which recited that it was to secure the performance of the contract. She conveyed the premises on November 18, 1931, to Pilgrim Apartments Inc. in accordance with an offer made to it on November 10, 1931, by Rudnick. This corporation was incorporated by the bank’s attorneys and their fees for this work were apparently included in the amount for which the mortgage was given. Ten shares of stock were issued by this corporation, one to Baer, two to two other persons, the three of them being nominees of Morris Rudnick, and the remaining seven shares were held by the defendant Rudnick in trust for Kaye and Joseph Rudnick who had been prior owners of the property. The defendant Rudnick was designated by the corporation as general manager of the property for the term of five years. The note secured by the original second mortgage to the bank, which was indorsed by Kaye and Joseph Rudnick, was surrendered by the bank and the defendant Rudnick began to carry out the contract of November 10, 1931. The first mortgage was foreclosed in September, 1935, and title was conveyed to Pilgrim Real Estate, Inc., another corporation which
The bank contends that the defendant Rudnick, by virtue of the contract, became bound to pay the amount that it had invested in and expended on the property and for the payment of which the mortgage was given by Baer. This contract was carefully prepared by the attorneys for the bank, who were apparently familiar with all the details of the transaction and there is nothing upon the face of the contract nor in the evidence tending to show that it did not fully and accurately set forth the agreement into which the parties had entered. The bank makes no contention to the contrary but it argues that by the terms of the contract Rudnick became its debtor to pay it the amount it had invested. It, however, points to no provision by which such an obligation is in direct terms imposed upon him. The absence of such a provision becomes significant in view of the presence of various other provisions relating to the collection of the rents, their deposit and application, the procuring of bills of sales of personal property upon the property and the management of the property, in reference to all of which Rudnick had assumed a personal obligation to perform in accordance with the terms of the contract. But if there is no express promise to pay, then it is contended that the contract clearly imports a promise by Rud-nick to pay the bank the amount of its investment. In this respect reliance is placed upon the provisions requiring Rudnick or his nominee to execute and deliver the note and mortgage for $463,000; the payment of interest on this amount; the undertaking of the bank to advance further sums; the waiver by the bank of an accounting for certain past rents and the promise of Rudnick to pay the bank the rents collected between the time of entry under its original second mortgage and the date of the contract; the use by Rudnick of the accumulated surplus of rents when the amount exceeded $4,500; the prompt performance of cer
It is the contention of the plaintiff that Baer was more than a mere straw, and that she had undertaken an obliga-tian different from that usually assumed by a straw as an agent of Budnick. It points to the last paragraph of the contract wherein Baer, for a valuable consideration paid by the bank and Budnick, covenanted with both that she would observe such terms of the contract as were to be performed by the owner. The contract did not impose any obligation upon subsequent owners as such to pay the mortgage note and, consequently, this paragraph did not in any way affect any relation between Baer and Budnick on account of the execution of the note and mortgage by her. The purpose of the parties in inserting this paragraph was to insure performance of certain items of the contract by subsequent owners. This is still clearer if the circumstances attending the execution of the contract are considered. At that time the parties to the contract contemplated the formation of a new corporation which was to take a conveyance of the property from Baer. Such a conveyance was in fact made in about a week after the contract was signed, and this corporation held the property until the foreclosure of the first mortgage in September, 1935. This provision of the contract negatives any claim that the bank was dealing with Budnick as the owner of the property and, in the next place, it is consistent with the tenor of the entire contract that the parties did not intend that Budnick should be bound either directly or indirectly to pay the mortgage note. The natural meaning of the terms of the contract, when applied to the situation to which they relate, shows the absence of any intent by the parties that Bud-nick should be personally liable for the payment of the mortgage note. Clark v. State Street Trust Co. 270 Mass. 140. Sullivan v. Massachusetts Catholic Order of Foresters, 302 Mass. 246. Redden v. Ramsey, 309 Mass. 225.
The judge upon the reported evidence was not plainly wrong in failing to find that Baer, in executing and delivering the note and mortgage, was acting for the accommodation of the bank or that they were delivered upon a condition that was not performed or in finding, as he did, that she was liable for the balance due on the note. Perlmutter v. Holsberg, 282 Mass. 421. Tanners National Bank of Woburn v. Dean, 283 Mass. 151. Waltham Trust Co. v. Cincotta, 293 Mass. 272. Leonard v. Woodward, 305 Mass. 332.
The bank cannot enforce the promissory note given by Baer against Rudnick because he was not a party to it. G. L. (Ter. Ed.) c. 107, § 40. Bank of British North America v. Hooper, 5 Gray, 567. Agricultural National Bank of Pittsfield v. Great American Indemnity Co. 287 Mass. 414. But it contends that, Baer having been found liable upon the note which she made and delivered within the scope of her employment as an agent of Rudnick, it is entitled to reach and apply in satisfaction of the indebtedness of Baer her right to indemnification and exoneration by Rudnick. An agent who has incurred a liability or sustained a loss in properly executing the instructions of his principal has a right to look to the latter to exonerate him from such liability or reimburse him for the loss. Greene v. Goddard, 9 Met. 212. Durant v. Burt, 98 Mass. 161. Stegemann v. Kelley, 267 Mass. 450. Williams v. Commercial Trust Co. 276 Mass. 508. The person to whom the agent has incurred a liability in the proper execution of his agency can reach the right of the agent to be exonerated by his principal in
The principle upon which the bank relies is applicable where one, who has been required to pay a debt for which he was secondarily liable, can compel its payment by the primary debtor. It contends that as between Baer and Rudnick the latter was bound to pay the balance due on the mortgage note. There was no evidence of any express agreement between them that he would exonerate her from any liability or indemnify her for any damage sustained. Where the specific terms of an agency are not disclosed by the evidence, then the existence of such an obligation upon the part of the principal depends upon the purpose for which the agent is appointed, the nature of the work which he is to undertake, and what risks in the performance of his duties may be fairly understood, in the light of established business practices, to be assumed by the agent. If it appears that all the parties to the transaction knew that the intervention of the agent was entirely for the purpose of avoiding personal liability upon one of the parties, then it is difficult to see how such an agent could have a valid claim against his principal to be exonerated from liability, or how a third person, who has entered into a written contract with such an agent and the principal for the transfer of a parcel of real estate and accepts the note of such agent although the contract does not bind the principal to pay it, can successfully claim that the agent or straw was not primarily, but only secondarily, liable on the note and seek to reach and apply the right of the straw to compel payment of the note by the principal. It has been recently said, in a case where recovery was sought for the balance due upon a mortgage note executed by a straw, that a straw is usually financially irresponsible and does not ordinarily expect to be exonerated or indemnified, that the party conducting business by means of a straw does not expect to incur any personal liability out of the transaction, and that this is understood by all the parties concerned in the transaction. Deitrick v. Ulin, 33 Fed. Sup. 1001. Underwood v. Patrick, 94 Fed. 468. State v. Reynolds, 245 S. W. 1065.
There was no error in ordering a decree against Baer for the amount due on the note and in ordering the bill dismissed against Rudnick; and a decree is to be entered in accordance with such order, bringing the amount due from Baer up to the date of the new decree.
Ordered accordingly.
This provision in the contract comprised the last numbered paragraph, was the only one mentioning Baer by name, and was as follows: “21. I, Martha Baer, nominee of Benjamin Rudnick and holder of record title to the property referred to in the within agreement, in consideration of One Dollar and other valuable consideration to me paid by Central Trust Company and Benjamin Rudnick do hereby for myself, my heirs, executors, administrators and assigns covenant and agree to observe all the terms, conditions, covenants and agreements to be observed by the owner of the premises as fully and effectually as if I were named specifically in each such term, condition, covenant or agreement.” — Reporter.