319 East 72nd Street Corp. v. George W. Warnecke & Co. , 244 N.Y.S.2d 604 ( 1963 )

Memorandum by the court.

Judgment entered on July 2, 1963 affirmed, on the law and on the facts, with costs. Appellant points to nothing in the testimony or in law sufficient to impugn the well-considered and comprehensive opinion of the trial court or the propriety of the remedy ordered. Deceit, it is plain, corrupted Warnecke’s course from the outset. Espying an opportunity to gain the property for himself, and a substantial brokerage fee in the bargain, and to himself construct the building plaintiffs had planned to erect, he misled plaintiffs into believing he had fruitlessly approached Travelers for a mortgage loan in order to pave the way for the next step in his design. To conceal his personal interest and his scheme to raise a mortgage loan and build upon plaintiffs’ land, it was essential that he appear as broker, and that it he understood he was acting as plaintiffs’ broker accords with the weight of the evidence. In that capacity he owed a fiduciary’s loyalty to plaintiffs and his departure from it justifies the decree. But even were his fiduciary status in doubt the decree is inevitable. Infecting Wamecke’s maneuvers was far more than a deviation from “the punctilio of an honor the most sensitive” demanded of a fiduciary (Meinhard v. Salmon, 249 N. Y. 458, 464). Salmon, though held liable as a fiduciary, was absolved of “ a conscious purpose to defraud” (p. 467). Warnecke, whether or not a fiduciary, may not be so absolved. He was aware that plaintiffs would not have sold to him or to anyone on the terms they did, had they known the truth about the Travelers situation, the truth about his own interest. He inveigled them not merely by secrecy but by affirmative misrepresentation. In this context whether he acted as plaintiffs’ broker is of small moment. His pretense that he was a broker at all was a material fraud, and the result of his deceptions was that the property came into his hands subject to a constructive trust for plaintiffs’ benefit (Katzman v. Ætna Life Ins. Co., 309 N. Y. 197; Fur & Wool Trading Co. v. George I. Fox, Inc., 245 N. Y. 215; Falk v. Hoffman, 233 N. Y. 199; American Sugar Refining Co. v. Fancher, 145 N. Y. 552, 558; Restatement, Restitution, § 166; 4 Pomeroy’s Equity Jurisprudence [5th ed.], § 1053; 1 Bogert, Trusts & Trustees [2d ed.], § 44; 89 C. J. S., Trusts, § 139; 4 Powell, Real Property, pars. 593, 594). The mode of restitution directed by the trial court provides Warnecke with all the protection to which a conscious wrongdoer is fairly entitled (Restatement, Restitution, § 158, Comment d). Not controlling, yet not to be overlooked in this regard, is that Warnecke even took over the very building plans plaintiffs had caused to be prepared.