Court Opinion

ID: 9292315
Source: CourtListenerOpinion
Date Created: 2022-11-29 17:11:38.980838+00
Date Added: 2024-06-11T17:13:12.304800
License: Public Domain

DeGuglielmo, J.
dissenting: In my judgment, the final decision of this matter rests squarely upon whether there was a duty on the defendant to notify the plaintiff of his changed financial circumstances. In the determination of this issue, I must differ with my colleagues.
In its decision, the majority glosses over what, to me, is an important factual ingredient. There must be added to the facts enumerated in the majority decision that the plaintiff and defendant had, in the past, done business on a “cash in advance” basis, or with an arrangement whereby a third party would either guarantee payment or would pay the plaintiff directly. (Report, p. 4)
*155Although the trial justice’s finding of fact that defendant made a truthful representation as to his financial condition must stand, [Chadwick v. Desroches, 333 Mass. 756; Mills v. Bell, 33 Mass. App. Dec. 167; Russo v. M.T.A., 21 Mass. App. Dec. 103,] it must ever be kept in mind that this credit representation was made only once and then before any credit change and before any work was performed by the plaintiff. This court, therefore, may draw reasonable inferences from the events which occurred subsequent to the defendant’s representation and determine their effect or the relationship between the parties.
It is obvious that the defendant knew he was in such financial trouble that it affected his credit as early as July 8, 1970. At this time, the plaintiff had not yet performed any portion of its obligation under the contract. It is also significant to me that the filing of the bankruptcy petition was delayed until the defendant had obtained the full benefit of his contract with the plaintiff. Factually, I would interpret this course of action by the defendant as a calculated fraud perpetrated by the defendant upon the plaintiff.
Despite this interpretation by me, however, I am bound by the trial justice’s finding of fact. See Chadwick v. Desroches, 333 Mass. 756; Mills v. Bell, Mass. App. Dec. 167; Russo v. M.T.A., 21 Mass. App. Dec. 103. The plaintiff has no remedy unless the defendant had an *156obligation to notify the plaintiff of his changed credit status. This issue was raised by the plaintiff in its requests for rulings #16 and #17 as follows:
16. Defendant had a duty to inform the plaintiff of his impending bankruptcy.
17. That during the progress of the plaintiff’s work for the defendant the defendant had a duty to inform the plaintiff of his impending bankruptcy.
Both requests were denied by the trial justice with the notation:
‘ ‘ Denied. See my finding of fact. ’ ’
In denying these requests the trial justice appears to follow the philosophy that “mere silence is not equivalent to fraudulent representation.” To this general philosophy I agree. My disagreement arises from the conclusion that there is more than mere silence in the case at bar.
First, we must analyze the contract clause between the parties and seek to interpret the effect of that clause, reading, “If credit conditions become unsatisfactory at any time prior to our completion of the work hereunder, we request.”
Secondly, we must determine whether this is truly a case of “mere silence”.
Thirdly, is there any obligation incumbent upon the defendant to notify plaintiff of changed credit?
*157An examination of the contract would compel the inescapable factual conclusion that it was drafted by the plaintiff. The contract, therefore, must be interpreted against the party who draws it, if ambiguous or uncertain language is used. Bowser v. Chalifour, 334 Mass. 348; Massachusetts Turnpike Authority v. Perini, 349 Mass. 448.
It has been argued that if the parties intended in their contract a specific obligation of disclosure, the plaintiff should have put that requirement in its contract. Although this was not done, it does not mean that the entire interpretation of the contract must be scrapped. A contract must be construed to give it effect as a rational business instrument and in a manner which will carry out intention of the parties. McMahon v. Monarch Life, 345 Mass. 261.
The words of a contract must be given effective interpretation, if at all possible, in the context of the relationship of the parties. Berkal v. M. DeMatteo Constr. Co., 327 Mass. 329; New England Foundation v. Commonwealth, 327 Mass. 587; Stop & Shop v. Ganem, 347 Mass. 697.
Unless the contractual provision for additional security in event of changed credit conditions is interpreted so as to regard the original statements by the defendant as continuing representations, it would appear to be useless verbiage. See Yorke v. Taylor, 332 Mass. 368, 374, “A false though innocent representa*158tian of a fact made of one’s own knowledge may be the basis of liability.”
The only reasonable manner in which the plaintiff in these circumstances could be made aware of the changed credit condition was by disclosure by the defendant. It is a matter of common knowledge that except in extraordinary circumstances the fluctuations of the financial condition of a party are known only by the party himself. The obligation to disclose does not come from any requirement of the Bankruptcy Act but from a philosophical legal determination by the Courts of this Commonwealth.
In all the cases cited by the majority, the determination by the majority rests squarely on the proposition that the mere silence alone, and nothing more, relieves the defendant of liability. Those cases are distinguishable from the case at bar. Swinton v. Whitinsville Savings Bank, 311 Mass. 677, 678. In the Swinton case, the defendant made no representation at any time and the Supreme Judicial Court said, on page 678,
‘ t There is no allegation of any false statement or representation or uttering of a half truth which may be tantamount to a falsehood. There was no intimation that the defendant by any means prevented the plaintiff from acquiring information as to the house. There is nothing ■ to show any fiduciary relationship between the parties— or that the plaintiff stood *159in a position of confidence towards or dependence upon the defendant .... it is concealment in the simple sense of mere failure to reveal with nothing to show any peculiar duty to speak.”
In Kannavos v. Annino, 356 Mass. 42, we find a case more closely similar to the case at bar. Here, the defendant intentionally withheld information of building code violation. The court said, inter alla, page 48,
Although there may be no duty imposed upon one party to a transaction to speak for the information of the other .... if he does speak with reference to a given point of infomation, voluntarily or at the other’s request, he is bound to speak honestly and to divulge all material facts bearing upon the points that lie within his knowledge. Fragmentary information may be as misleading .... as active misrepretionable as whole lies. ’ ’
The objection to the application of the Kannavos case to the case at bar may be that representation and/or half-truths were made during the negotiation of the relationship. Its answer lies in the decision of whether the representation and its effect ceased upon its being made or whether the representation continues during the entire life of the contract. See to same effect, Maxwell v. Ratcliffe, 356 Mass. 560. Wade v. Ford Motor Co., 341 Mass. 596 is not con*160trolling because an examination of Wade shows no act of representation by the defendant.
In the light of the foregoing we must determine whether this is truly a case of “mere silence”.
Factually, the defendant made representations upon which the plaintiff, for the first time in its relationship with the defendant, agreed to give credit to the defendant. Prior to the defendant’s representations, the defendant was on “cash and carry” or third party guaranty basis. In making his representations the defendant intended that the plaintiff continue to act upon it.
By his consultation with a bankruptcy attorney, it becomes evident that changed credit conditions occurred. This conclusion is buttressed by the fact that the defendant waited until he had obtained all the benefits of his contract with the plaintiff before filing his bankruptcy petition.
The question is squarely raised, “Under these circumstances, was there a duty on the part of the defendant to disclose his changed credit?”
Restatement of Torts, $ 472, says
“ (1) There is no privilege of non-disclosure by a party who
(a) has previously made a" misrepresentation, either innocently or without any intention or expectation that it would induce conduct and subsequently before *161a transaction has been induced thereby is aware of the facts and intends or expects that conduct will be induced by the mistake, or
(b) knows that the other party is acting under a mistake as to undisclosed material facts, and the mistake if mutual would render voidable a transaction caused by relying thereon . . .
‘ ‘ (2) Where non-disclosure is not privileged it has the effect of material misrepresentation.”
To the same effect, Williston on Contracts, Yol. 5, § 1497, says
“And one who, after making an innocent misrepresentation, discovers the truth yet thereafter silently allows another to act on the misrepresentation is guilty of fraud. The consequence is the same though the original representation was true when made. And there is a duty on the maker to disclose the falsity of misrepresentation which when made was not made for the purpose of its being acted upon if he subsequently ascertains that the other party is about to act in reliance upon it in a transaction with him. In effect he is continuing the representation with knowledge of its falsity.”
Having reached a conclusion that by his actions the defendant has perpetrated a fraud, his discharge in bankruptcy is no defense in *162the case at bar. [See cases cited by majority in this decision, as to effect of fraud in matter of discharge under U.S. Bankruptcy Act].
Peter P. Davis of Boston for the Plaintiff
I conclude, therefore, that the trial justice was in error in denying plaintiff’s requests for rulings number 16 and 17.
I find no other error in the rulings of the trial justice.
I would enter a finding for the plaintiff in the amount of Two Thousand Two and 50/100ths ($2,002.50) dollars together with interest from July 21,1970.