Kozdras v. Land/Vest Properties, Inc. , 382 Mass. 34 ( 1980 )

Abrams, J.

The defendants (Associates) appeal from a judgment entered by a judge of the Superior Court ordering them to convey to the plaintiffs, Frank Kozdras and Bertha C. Kozdras, husband and wife as joint tenants, certain land in North Andover presently included in a certificate of title issued to the Associates pursuant to a decree by the Land Court. The Associates concede that the land had been owned by the plaintiffs prior to registration but claim that as a result of the registration proceedings any claim that the plaintiffs had to the land had been extinguished. The Associates argue that the evidence was insufficient to prove that they acted fraudulently. They therefore contend that the plaintiffs are not entitled to any relief, and that the judge should have entered a judgment for the defendants.

After a jury-waived trial limited to the issue of fraud,³ the judge entered findings and rulings which, in substance, concluded that the plaintiffs had proved fraud in the registration proceedings. The judge found that in the petition to register the land the Associates made statements “which are contrary to fact yet susceptible of accurate knowledge. These statements were made as of defendants’ own knowledge, but without such knowledge. They are technical and/or constructive fraud.” The judge, relying on our decision in State St. Bank & Trust Co. v. Beale, 353 Mass. 103 (1967), entered a judgment ordering a reconveyance of the land by the Associates to the Kozdrases. The Associates appealed from that judgment to the Appeals Court, and we caused the appeal to be transferred to this court on our own initiative, acting pursuant to G. L. c. 211 A, § 10 (A). We conclude that the judge’s findings are amply supported by the record. We therefore affirm the judgment.

We summarize the facts as they appear in the findings of the judge and in the record before us. On September 25, 1970, the Associates purchased some unimproved land by a deed which described the land conveyed as follows: “Three certain parcels of land on Salem Street and both sides of South Bradford Street, as shown on Sheets 1, 2 and 3 on a plan of land entitled: ‘Plan of Land Owned by Fuller Farm Trust, Located in North Andover, Mass., Dated January, 1970. Charles E. Cyr, Civil Engineer’ said plan being recorded in the said [North Essex] Registry of Deeds as Plan No. 6148, and containing collectively 195.9 acres more or less, according to said plan.”

At the time of the purchase the Associates through their counsel knew that the seller had deeds for only 34 of the 93.3 acres depicted on sheet 3 (the relevant portion of the Cyr plan). Counsel also knew that the assessor’s records showed the seller as the owner of only 32.6 acres in the deeded area.⁴ The official plan on file in the assessor’s office accurately depicted the location of the Kozdrases’ land.

On December 31, 1970, the Associates filed a petition in the Land Court to have their title to the land “registered and confirmed” under G. L. c. 185. In that petition they described each of the three parcels in detail by metes and bounds, with the names of the supposed abutting owners, all as shown on the plan referred to in their deed.

The plan filed by the Associates (the Cyr plan) had been prepared by a private civil engineering firm hired by the seller of the three parcels. This plan did not conform to the official assessor’s plan. A rough sketch of the parcel, which differed from the Cyr plan, was brought to the assessor’s office for certification of the names of the adjoining owners. The Kozdras plot was shown on the rough sketch as an abutting parcel. The assessor checked the plan submitted by the Associates to see if all the abutters were listed on the plan, then signed it.⁵ The Cyr plan, however, included twelve acres owned by the Kozdrases in the parcel to be registered. This was the map that was filed by the Associates with the petition for registration. See G. L. c. 185, § 33.⁶

The petition for registration described the parcel shown on the plan (sheet 3) filed with the Land Court as bound “Northerly and Northwesterly by land now or formerly of Frank Kozdras, 1113.75 feet.” By statute, the Associates were required to state in their petition “the names and addresses of the adjoining owners and occupants, if known; and if not known, [to] state what search has been made to find them.” G. L. c. 185, § 28, as amended by St. 1971, c. 423, § 3. The list which the Associates filed included the name and address of Frank Kozdras. The Associates also listed a mortgage and two easements which affected the parcel but made no reference to the ownership of any right, title or interest in the land by the Kozdrases.

The Land Court, as required by G. L. c. 185, § 37, referred the petition for registration to one of its title examiners to “search the records and investigate all facts stated in the petition, or otherwise brought to his notice, and [to] file in the case a report thereon, concluding with a certificate of his opinion upon the title.” The same statute provided that “[i]f the opinion of the examiner is adverse to the petitioner, he shall be allowed by the court a reasonable time in which to elect to proceed further or to withdraw his petition. The election shall be made in writing . . . .”⁷ The report of the examiner which was filed with the recorder is not a part of the record before us. However, it must have been adverse to the Associates in some respect because the Associates filed an election, under G. L. c. 185, § 37, to proceed further with the petition.

As a result of the Associates’ election, notice of the proceedings was published. G. L. c. 185, § 38.⁸ Additionally, the Land Court had a copy of the notice sent by registered mail to Frank Kozdras, as required by G. L. c. 185, § 39. The notice, as published, and as mailed to and received by Frank Kozdras,⁹ contained virtually the same description of land which was contained in the petition filed by the Associates, and listed Kozdras as an owner of abutting land. This was the only notice received by the Kozdrases. They had no notice that their land was actually included in the plan that was filed and used to identify the parcel being registered.¹⁰ The notice gave no indication that the Cyr plan differed from the plan in the assessor’s office. Nothing in the plan filed or the notice sent gave any indication of the fact that the Associates knew that their seller had deeds for less than 34 of the 93.3 acres shown on the relevant section (sheet 3) of the Cyr plan.

The notice sent made reference only to the Cyr plan as filed with the petition in the Land Court. It also stated that any person who desired “to make any objection or defense to said petition” had to file a written appearance and answer with the Land Court on or before August 23, 1971, and that “[ujnless an appearance is so filed by or for you, your default will be recorded, the said petition will be taken as confessed and you will be forever barred from contesting said petition or any decree entered thereon.”

Frank Kozdras took his notice to an attorney who advised him that since he was an abutter, he did not have to do anything with regard to the registration of the land or concern himself further with it. Frank Kozdras, therefore, filed no appearance in the Land Court proceedings, which culminated with the entry of a decree on May 24, 1973, for the confirmation and registration of title of the Associates in and to the land involved in the petition.

Two years later, in 1975, the Kozdrases learned for the first time that the petition by the Associates for the confirmation and registration of title, the description of the land covered thereby, and the Cyr plan filed with the petition, had included 12 acres of land actually owned by them. On November 19, 1975, the Kozdrases commenced the present proceeding by a complaint which concluded in part that the Associates “knew or had reason to know that part of the land which they were seeking to register belonged to the plaintiffs [the Kozdrases], or that the plaintiffs claimed an interest therein”; that the Associates’ Land Court petition “did not disclose that they knew that the plaintiffs claimed an interest in said land sought to be registered”; and that the Associates “were under a duty to disclose in said petition all adverse interests claimed in said lands, whether they be legitimate or otherwise.”

The Associates filed a motion for summary judgment on the issue of the Superior Court jurisdiction “to entertain the action.” After the motion for summary judgment was heard, the motion judge limited the plaintiffs to the issue of fraud. See note 3, supra. The matter was tried before a judge of the Superior Court, jury waived, and the judge made the following findings. “The petition for registration contains statements which are not true. The certificate concerning adjoining owners is not true. The sketch with the certificate concerning adjoining owners is not true.

“The Land Court Plan filed by defendants is erroneous. It does not show the land and its ownership as it really is in fact.

“Twelve acres belong to the plaintiffs. In this trial before me defendants made no real denial of this. They now know it is so. The testimony of the Title Examiner engaged by the plaintiffs clearly shows that the land belongs to the plaintiffs. An analysis of the Assessor’s Plans shows that the land belongs to the plaintiffs.

“There is no intentional wrongdoing. But statements were made by the defendants through their agents in the petition to register the land as above set forth which are contrary to fact yet susceptible of accurate knowledge. These statements were made as of defendants’ own knowledge, but without such knowledge. They are technical and/or constructive fraud.

“Plaintiffs relied on the statements in notice which resulted from statements in Land Court petition. The defendants have land to which they have no right or justifiable claim. The untrue statements, which amount to technical fraud, lulled the plaintiffs into inaction. These statements remain active and important throughout registration. They materially affect the outcome. When one listens to the Title Examiner testify and studies her plan, it seems incredible that this could have happened. What is said here is not read in any way as any reflection on the Land Court. The Land Court was put in the same position as were the plaintiffs.” The trial judge concluded that the conduct of the Associates required them to reconvey the land to its rightful owners.

The record before the judge and before us reveals that there are no bona fide purchasers involved with the registered land, and that these proceedings are solely between the Associates who registered the land and the plaintiffs who in fact owned the land.

The issue raised by this appeal is whether the foregoing facts support a conclusion that the Associates acted “with such wilful disregard of the facts as to be tantamount to fraud.” State St. Bank & Trust Co. v. Beale, 353 Mass. 103, 104 (1967). In the State St. Bank case, we concluded that the plaintiff was entitled to restitution where the defendant had failed to notify the plaintiff and the Land Court of the plaintiffs ownership interest in the land being registered, and where false affidavits were filed in the Land Court. We said that “the affiant, who was familiar with the actual facts, made the affidavit either with intent to defraud the Land Court or with such wilful disregard of the facts as to be tantamount to fraud.” Id. In holding that G. L. c. 185 does not bar an equitable remedy in cases involving fraud, we noted that there was no legislative policy against the traditional remedy of restitution as between the person fraudulently registering the land and the preregistration owner. We therefore followed the general rule that the land title registration system does not permit an imperfect title to be perfected by fraud. See, e.g., Rock Run Iron Co. v. Miller, 156 Ga. 136, 141 (1923); In re Sanborn, 57 Haw. 585, 591-592 (1977); Chicago Title & Trust Co. v. Darley, 363 Ill. 197, 203-204 (1936); Boart v. Martin, 99 Minn. 197, 206-213 (1906); Kirk v. Mullen, 100 Or. 563, 574 (1921).

While the facts in the case at bar are not so egregious¹¹ as the facts in the State St. Rank case, we agree with the judge that the statements made by the defendants in their petition were “contrary to fact yet susceptible of accurate knowledge,” and that the Associates’ disregard of the facts as shown by the official records brings this case within the ambit of our language in State St. Rank & Trust Co., supra. The evidence is sufficient to show that the Associates made false statements, and the evidence is overwhelming that the Associates acted in reckless disregard of the actual facts. At no time did the Associates disclose to the Land Court or to the Kozdrases that the Cyr plan did not conform to the official plan on file in the assessor’s office. The statements as to the location of the Kozdrases’ land were erroneous. The Kozdrases relied on the false statements, and, as a result, the Kozdrases’ property was registered to the Associates.

Further, the Associates knew before purchasing the land that receipts for taxes levied against the Fuller Farm Trust indicated ownership of fewer acres than were shown on the Cyr plan. The record does not indicate that they disclosed this fact to the Land Court. The Associates should also have been aware from their own records that, following the registration, they were being assessed taxes on fewer acres than they had registered. The record does not disclose whether the Associates corrected this error with the taxing authorities.¹²

It is the general rule that “[i]f a statement of fact which is susceptible of actual knowledge is made as of one’s own knowledge and is false, it may be the basis for an action of deceit without proof of an actual intent to deceive.” Pietrazak v. McDermott, 341 Mass. 107, 110 (1960). See McMahon v. M & D Builders, Inc., 360 Mass. 54 (1971); Maxwell v. Radcliffe, 356 Mass. 560 (1969). We adhered to that rule in State St. Bank & Trust Co., supra, and held that statements made in wilful disregard of the facts, if proved, would be sufficient to require a registrant to reconvey to the preregistration owner land registered as a result of such false statements. We conclude that the Associates had actual knowledge of a discrepancy between the assessor’s plan and the plan filed by them, see note 4, supra. In spite of this discrepancy, the Associates disregarded facts susceptible of actual knowledge. Thus, the plan filed by the Associates was false. Such wilful disregard of the actual facts is fraud. See State St. Bank ir Trust Co., supra at 104. Therefore, the Associates must reconvey to the Kozdrases the land which the Kozdrases formerly owned.

The Associates contend that to order reconveyance in these circumstances would undermine the Land Registration Act. We do not agree. The Massachusetts registration statute is a direct descendant of the Australian Torrens System. McQuesten v. Commonwealth, 198 Mass. 172, 177 (1908). Sir Robert Torrens modeled his statute on the procedures used by the British Ships Registry in recording ownership interests in ships. B. Schick & I. Plotkin, Torrens in the United States 17 (1978). The intent of the statute was to simplify land transfer and to provide bona fide purchasers with conclusiveness of title. See Boart v. Martin, supra at 205. In 1891 the potential benefits of the Torrens system were articulated by Governor William E. Russell in his inaugural address. St. 1891, at 1110, 1130. The need addressed by the Governor was reform of the existing land transfer system. In a special message to the Legislature, Governor Russell suggested that the proposed system would ensure that “transfers can be made quickly, easily and at small expense; and, further, there is absolute security in the possession of the premises bought, resulting from the indefeasibility given to the certificate of title issued by the state” (emphasis supplied). St. 1891, at 1147.

The Torrens system was deemed advantageous since “[t]he difficulty with the old system is that no one can be absolutely certain whether he is buying a good title or a bad one. . . . The great purpose of the Torrens System is to rid land titles of this peril, for with its disappearance disappears all the expense, trouble and delay that attend running the title back through previous transfers.” Hurd, Exposition of the Torrens System of Registration of Title, in The Torrens System of Registration and Transfer of the Title to Real Estate 88-89 (Yeakle ed. 1894).

A report published in Massachusetts just after the new land registration act was passed expressed hope that the system would provide an answer to the problem, “arising as far back in our history as the time when our ancestors first settled on the shores of Massachusetts Bay, providing a safe and practicable method ‘for avoyding all fraudulent conveyances, & that every man may know what estate or interest other men may have in any houses, lands, or other hereditaments they are to deal in.’” C. Rackemann, The Land Registration Act of Massachusetts xviii, xix (1898), quoting from 1 Records of the Governor and Company of the Massachusetts Bay in New England, 1640, at 306 (Shurtleff ed. 1853).

It is clear from the history of the Torrens system that the underlying purpose of title registration is to protect the transferee of a registered title. There are no transferees or bona fide purchasers involved in this case. Thus, our decision today does not threaten the integrity of the Massachusetts land registration system. “The purpose of land registration is to provide a means by which title to land may be readily and reliably ascertained. . . . But these benefits of the registration system are intended primarily for those who act in good faith. It is not a purpose of the system to afford those who deal with registered land in bad faith any greater protection than they would have in similar dealings with unregistered land.” State St. Bank & Trust Co. v. Beale, 353 Mass. 103, 107 (1967).

A petitioner in the Land Court who fails to disclose a major discrepancy between the plan submitted and official records may not profit from such nondisclosure. There is no integrity in a system which permits petitioners to submit their own plans to the Land Court knowing they are in variance with official records and then reap benefits at the expense of those who rely on the integrity of the submitted plan.

We emphasize again that in this case there are no bona fide purchasers of registered land to be protected and no evidence of any change in position by the Associates.¹³ There was, therefore, no error in requiring the Associates to convey the Kozdrases’ land back to them. “Since the remedy of restitution operates only against the person who has committed the fraud, our holding does not run counter to the land registration act’s purpose of furnishing good faith purchasers with a ready and reliable means of ascertaining title to land.” State St. Bank & Trust Co., supra.

The Land Registration Act is a system of conveyancing, not a means for defrauding rightful owners of their property. The Torrens System merely permits correction of defective official record titles. It does not permit registrants to ignore official records which are not defective. Restitution in this case leaves the Land Court judgment intact, and merely requires the Associates to give back to the plaintiffs land which had been owned by them since 1954.

Judgment affirmed.

3 In their complaint the plaintiffs among other claims also challenged the constitutionality of G. L. c. 185, § 45, and the failure of the Associates to comply with several sections of G. L. c. 185. The Associates filed a motion for summary judgment and the motion judge (who was not the trial judge) ruled that the decree of registration “may not be collaterally attacked here in the Superior Court.” See Bell v. Eames, 310 Mass. 642, 645 (1942). He also ruled that G. L. c. 185 is constitutional, and that “there were no violations of any constitutional rights of the plaintiffs in connection with any aspect of the Land Court proceedings.” See Tyler v. Court of Registration, 175 Mass. 71, appeal dismissed, 179 U.S. 405 (1900). The motion judge left open “only two possible issues, namely, the issue of fraud so far as it might create a constructive trust under the doctrine of State Street [Bank &]Trust Co. v. Beale, 353 Mass. 103 (1967), or give rise to an action of tort for damages under G. L. c. 185, § 45.” He ordered “that further proceedings in this case shall therefore be limited to the question of fraud just mentioned.”

4 A letter from the Associates’ counsel to the seller’s counsel dated July 7, 1970, states in part: “I would like to know if you are able to justify the area of 93.3 acres shown as Section C on Sheet 3 of the plan by Charles E. Cyr dated January, 1970 (recorded as Plan 6148). It seems to me that your tide is based on die deed from William M. Johnson et al to Abijah P. Fuller dated March 15,1869, Book 94, Page 78, describing a 9 acre parcel, and the deed from Sarah Carleton to Abijah P. Fuller dated January 10,1888, Book 94, Page 75, describing a 25-acre parcel, thus making a total of 34 acres. I believe the assessors show this area as comprising only 32.6 acres. My clients naturally expect that they are acquiring 93.3 acres and I presume that Mr. Cyr had some basis for placing the boundary lines where he did. I would appreciate it if you could explain this discrepancy.”

The discrepancy was never explained, but the seller added the following clause to the purchase and sale agreement: “Acreage based on tax rolls for the Town of North Andover is what is to be quitclaimed. The excess above that figure is not to be quitclaimed but shall be understood as between the parties to be whatever right, title and interest the first party may own at the time of transfer.”

5 The rough sketch was not checked by the assessor for accuracy of boundary lines. The boundaries of the Kozdras plot as shown on the sketch, while not accurate, were not so different from the assessor’s records as to put him on notice of the discrepancy.

6 The record before us indicates that at no time during the registration proceedings did the Associates file the plan on file in the assessor’s office. The record also indicates that at no time did the Associates reveal to the Land Court that they knew that the assessor’s plan showed that their seller owned by deed only 32.6 acres with respect to the plan as depicted on sheet 3.

7 The section was amended by St. 1977, c. 151, § 1, by eliminating the requirement that an election be made.

8 At that time, G. L. c. 185, § 38, provided in part that “if the petitioner, after an adverse opinion of the examiner, elects to proceed further, the recorder shall, immediately upon the . . . filing of the petitioner’s election . . . cause notice of the filing of the petition to be published in a newspaper published in the district where any portion of the land lies.”

9 Since the plaintiff Bertha Kozdras does not rest her claim on the failure of Associates to send her notice, and since she did not appeal from the order of the motion judge, we express no view on the failure to send her notice. No reason appears for this lapse by the Associates.

10 There is little difference between giving no notice to the rightful owners and giving notice falsely listing them as abutters rather than as persons having an interest in the land in question.

11 In their complaint, the plaintiffs alleged that a representative of one or more of the defendants attempted to purchase their property in 1969 or 1970, and failed. At trial the plaintiffs did not produce any evidence to that effect. They also admitted that they had no reason to believe that the Associates “had done anything which was intentional on their part, knowingly to deny [the Kozdrases] the ownership of [their] property.” The judge concluded that there was “no intentional wrongdoing” and limited his consideration of the facts to statements made in wilful disregard of the actual facts.

12 In fact, the Kozdrases were assessed by the town for taxes on the land from the time of their purchase in 1954 through 1976.

13 The Associates could have suggested (but did not) to the judge that in the event he found for the plaintiffs, damages would be a more appropriate remedy. Since land is unique, and the Associates failed to show any special circumstances warranting damages, reconveyance is the more appropriate remedy.