Bonin v. Chestnut Hill Towers Realty Corp.

466 N.E.2d 90, 392 Mass. 58

• Court: Massachusetts Supreme Judicial Court
• Decided: May 23, 1984
• Status: Published

Opinions

Lynch, J.

A Superior Court jury awarded the plaintiffs a total of $600,000 on count one of their complaint, based on express contract, to recover a real estate brokerage commission allegedly due for their services to the defendants. The jury found for the defendants on the second count, on which the plaintiffs had sought recovery in quantum meruit. The judge denied the defendants’ motions for a directed verdict, made at the close of all the evidence, and for judgment notwithstanding the verdict on count one. Mass. R. Civ. P. 50 (b), 365 Mass. 814 (1974). The Appeals Court reversed, ordering judgment on count one to enter for the defendants. Bonin v. Chestnut Hill Towers Realty Co., 14 Mass. App. Ct. 63 (1982). We granted the plaintiffs’ application for further appellate review. We reach the same result.

In reviewing the denial of a motion for judgment notwithstanding the verdict, as well as for a directed verdict, the standard to be employed is whether “the evidence, construed against the moving party, justifies] a verdict against him.” D’Annolfo v. Stoneham Hous. Auth., 375 Mass. 650, 657 (1978). See Alholm v. Wareham, 371 Mass. 621, 627 (1976). Considering the evidence in the light most favorable to the plaintiffs, the jury could have found these facts: In 1976, Chestnut Hill Towers Realty Corp. (Chestnut Hill Towers), a limited partnership comprised of Joseph Carabetta and Carabetta Enterprises, Inc., owned land in Newton on which a multi-unit apartment complex (the property) was in the early stages of construction. Joseph Carabetta, an experienced developer and chief executive officer of Carabetta Enterprises, Inc., was approached by Star through the efforts of Star’s employee, Angela Bonin. At a meeting among Bonin, Carabetta, and Star’s president, Leonard Abramson, held on January 18, 1977, Carabetta gave permission to Star, which specialized in investment property, to list the property for sale. Carabetta said that he required a net return of $3,000,000 over the existing mortgage of $18,881,000. Abramson requested a commission of $600,000 and Carabetta agreed.³ As a result, Star listed the property for sale at a price of $22,500,000.

Abramson quickly talked to a client of his, Paul Slater, about possible purchase of the property. Slater owned several sizable properties. At a preliminary meeting on January 20, among Abramson, Bonin, and two associates of Slater, it was disclosed to Star that one George Katz would attend a planned meeting between the principals. Katz, an associate and friend of Slater, was also a syndicator and partner of the firm Private Investment Placements (PIP).⁴ Abramson and Bonin responded that Star was “authorized to sell the property,” and that Katz should be reminded of this “to make sure that we were all headed in the same direction.”⁵

On January 27, the meeting was held in Slater’s office with Slater, Katz, and two other associates, and Abramson and Bonin in attendance. Michael Fiondella, Carabetta’s accountant, represented Carabetta. According to Bonin, Katz opened the meeting by saying, “[W]e don’t want to buy your property, we want to syndicate it.” Fiondella immediately protested that he had been brought to the meeting under false pretenses by Bonin, and Bonin told Katz “that he had been told that he was there to discuss an acquisition or purchase of the property, not syndication.” The meeting continued for a time, during which Fiondella allowed Katz to examine some financial data about the property. At the end of the meeting, the participants exchanged business cards, and Fiondella asked with whom he should get in touch if it became necessary. Slater and Katz told Fiondella he could “get in touch with any of us.” Slater testified, in essence, that he had no further dealings involving the property after that date.

That evening Katz, who was to leave shortly for a month’s trip, telephoned Bonin at the home of a mutual friend. She upbraided him for having raised the subject of syndication at the meeting “when he had been asked not to do that. ” According to Bonin, Katz was enthusiastic about the property and asked her to be in touch with him and with an associate to find other projects for him to syndicate. Subsequently she showed other property to that associate, and she estimated that she spoke with Katz by telephone about eight or ten times over the next four months. In these conversations they spoke of the Chestnut Hill Towers property and several other properties. Katz never asked her to “supply any more information” with respect to Chestnut Hill Towers, after the initial meeting. On May 23, she telephoned to tell Katz of Abramson’s death, and Katz told her that “they weren’t going to do the Chestnut Hill Towers project.” Bonin did not talk to Katz again for many months.

Bonin testified to the attempts of other brokers at Star as well as to her own attempts to interest prospective buyers in the property. On behalf of one such prospect, Bonin received tax projections from Fiondella on March 9, 1977, together with a transmittal letter which stated, “It is our understanding that any sale by CEI [Carabetta Enterprises, Inc.] will be a 100% sale with no guarantees by CEI.” On April 16, 1977, Fiondella wrote to Bonin asking for the return of the tax projections and notifying her that the property was no longer for sale “unless otherwise authorized in writing” by Carabetta. Bonin immediately talked with Carabetta, who told her that Fiondella was probably prompted to write because he was close to effecting a syndication of the property. Bonin testified that she persuaded Carabetta to allow Star to continue working as long as he did not have another deal. She then wrote Fiondella, promising to “comply with [Carabetta’s] guidelines.” On April 29, she wrote to Carabetta stating that Star believed “we have what we’ve been seeking ... a cash buyer who will meet your terms; who is not interested in any kind of syndication; who is not a builder; who needs great tax shelter” (emphasis in original). Star’s efforts continued through October; proposals by two of Star’s clients were described by the plaintiffs as offers to syndicate and by the defendants as offers to purchase and then to syndicate the property. None of these negotiations bore fruit.

On November 16, 1977, Katz’s Firm, PIP, was given an exclusive agency to “use [its] best efforts to sell limited partnership interests” in the partnership. By the terms of the agreement, Carabetta and Carabetta Enterprises, Inc., would remain as general partners jointly holding a 1 % interest in the partnership. The net proceeds of the offering were to be not less than $2,950,012. PIP received a gross fee of $299,988. Katz and his partner in PIP became special limited partners. Katz testified that several persons had spoken to him during the summer of 1977 with respect to syndication of the property.⁶ Among them was an accountant for one Robert Tracy, who at that time was Carabetta’s exclusive agent to syndicate the project. Tracy’s accountant mailed Katz information about the project on July 19. On August 16, Katz sent Carabetta a mailgram stating, “I believe we can give you three million dollars as investment in Chestnut Hill Towers, contingent upon mutually-agreeable conditions.” There was evidence from Carabetta’s pretrial deposition, repudiated by him at trial, from which the jury could have found that Katz and Fiondella began dealing with each other in April. Upon learning, at the end of November or first of December, that Katz was syndicating the property, Bonin wrote to him claiming to have brought the property to his attention. Both Katz and Carabetta rebuffed her attempts to press her claim with them.

The defendants argue that the plaintiffs’ evidence is insufficient as a matter of law to show that Carabetta authorized Star, either by their original agreement or by a waiver of its terms, to effect a syndication of the property, or to show that Star and Bonin were the predominating, efficient cause of the syndication which ultimately took place. They further contend that, as there was never any agreement with the plaintiffs with respect to syndication, there could be no agreement to pay them $600,000 in the event that a syndication occurred. The defendants urge that, because of the fundamental difference between a syndication (sale of shares or securities in a limited partnership) and a sale of real property (conveyance of property by deed), it was error to submit to the jury the question whether the plaintiffs had earned a commission in this case. The plaintiffs counter that the evidence warranted findings that Carabetta listed the property with Star for an agreed commission of $600,000, that the agreement to pay a commission was not conditioned on Star’s producing a buyer who would take title to the property,⁷ that the plaintiffs were the efficient, predominoting cause of the syndication, and that Carabetta and Katz dealt secretly with one another in order to avoid paying the agreed commission to the plaintiffs. We consider those contentions in turn.

1. The original agreement. The parties do not dispute that after a meeting held on January 18, 1977, among Abramson, Bonin, and Carabetta, the property was listed by Star at an asking price of $22,500,000. Despite some disparity in the testimony of the parties, there was ample evidence from which the jury could conclude that Carabetta authorized Star to list the property. There was also sufficient evidence that Star’s potential commission was fixed by the parties at $600,000. This included Carabetta’s own testimony that he told Abramson and Bonin that he required a net profit of $3,000,000. On conflicting evidence, it was open to the jury to find both the existence of the oral agreement and the agreed upon commission. See McEvoy v. Ginsberg, 345 Mass. 733, 736 (1963). With respect to the nature and extent of the plaintiffs’ authority under the agreement, however, we do not reach the same conclusion. The testimony of all the parties was in accord that, at the time of the January 27 meeting at which Star brought the property to the attention of Katz, the plaintiffs were limited to producing a buyer who would take a conveyance of the property, and not a prospect whose objective was a syndication for the defendants. The plaintiffs themselves assert that Katz attended the meeting as “part of a team of prospective purchasers produced by Star.” We are not persuaded by the plaintiffs’ argument that the terms of the agreement were intended, not to limit the plaintiffs’ ability to earn a commission, but only to convey to them that Carabetta was already working with syndicators he had obtained through his own efforts. The fact that the defendants were amenable to syndication through other avenues is irrelevant to the terms of the express agreement they reached with Star. It is well settled that an owner may condition his liability to pay a broker’s commission on his producing a purchaser who meets the terms he has specified. See Gaynor v. Laverdure, 362 Mass. 828, 835 (1973). Here, the evidence requires a finding that the original agreement specified that Star should confine itself to seeking a straight purchaser for the property. In view of this specification, and of Bonin’s testimony that she sought before and during the January 27 meeting to avoid any mention of syndication, the jury would not have been warranted, as plaintiffs suggest, in finding that Carabetta’s “initial statements to Star concerning syndicators [were] merely advisory.” Thus, it was not open to the jury to conclude that the plaintiffs had fulfilled their obligation under their express contract to produce a buyer by introducing Katz, ultimately the syndicator, to the property on January 27. See Tristram’s Landing, Inc. v. Wait, 367 Mass. 622, 629 (1975) (hereafter a real estate broker will be entitled, under his agreement, to a commission from the seller when, inter alla, “he produces a purchaser ready, willing and able to buy on the terms fixed by the owner”) (emphasis added); Id. at 629. Holton v. Shepard, 291 Mass. 513, 516 (1935) (“There must be evidence in the record to support a finding that the plaintiff performed [the] agreement in order to entitle him to go to the jury”).

Nor do we view the distinction between a sale by conveyance of the property and a sale of limited partnership interests in the partnership as formal or artificial in this case. The jury could have found, as the plaintiffs argue, that Carabetta was indifferent whether he received the $3,000,000 profit from a sale or a syndication of the project. But it does not follow that such indifference existed with respect to the limitation against syndication by the plaintiffs, nor is a finding of indifference toward that limitation warranted by the evidence. This is not a situation in which the seller’s version of a critical term of the brokerage agreement was contradicted by the broker’s testimony. Contrast Johnstone v. Cochrane, 231 Mass. 472, 476 (1919) (where the sale of corporate property to purchaser who was produced by the plaintiff was for $250,000, of which $160,000 was paid in cash and $90,000 in preferred stock of a new corporation, and the defendant seller contended that the plaintiff broker was authorized to produce a buyer for $250,000 cash, broker’s testimony did not show his authority was so limited, and part of his testimony negatived that contention). Nor is the case before us one in which the prospective customer was produced by the broker in conformity with the brokerage agreement, and ultimately the transaction, while different in form, conformed in substance to the terms of the agreement. Contrast Morad v. Haddad, 329 Mass. 730, 735 (1953) (“transfer of stock by [the seller] effected the sale of the corporate property for which [the broker] had been employed to find a customer. . . . The sale of all the stock of the corporation was in legal effect a sale of all of its assets, and the mere fact that the parties found it more convenient to transfer all of the stock rather than to make a conveyance of its assets does not change the substance of the transaction”). In the case before us the right to pursue a syndication was reserved at the outset by the owner to himself, and was withheld from the plaintiffs. The syndication which eventuated was not contemplated by the original brokerage agreement. Hence, in considering the plaintiffs’ express contract claim, the jury could not properly have found otherwise. Holton v. Shepard, supra. See also Creed v. Apog, 6 Mass. App. Ct. 365, 374 (1978), modified on other grounds, 377 Mass. 522 (1979).

2. Waiver. In the absence of evidence that Carabetta waived the original contract limitation, the plaintiffs could not have been found to be the efficient cause of the ultimate transaction,⁸ and could not have been found to have earned a commission unless the jury could find that the defendants dealt in bad faith. See Kacavas v. Diamond, 303 Mass. 88, 92-93 (1939); Creed v. Apog, supra 371-374; Restatement (Second) of Agency §§ 448, 454 (1958).

On the evidence most favorable to the plaintiffs, the jury could have found that as early as the evening of January 27, in the same conversation in which she rebuked Katz for having mentioned syndication to Fiondella earlier in the day, Bonin did not discourage him from considering the property in terms of syndication.⁹ This conversation was followed by eight or ten more conversations, the last one taking place on May 23. Even if the jury were to infer that the substance of the discussions was the prospect of Katz syndicating the property, the conduct of Bonin and Katz was not evidence that the restriction on Star’s authority had been relaxed by the defendants. Such evidence could have come, in this case, either by Carabetta’s express directions to Bonin at their meeting on April 16 at the construction site, or by the conduct of the defendants in entertaining nonbuyer prospects produced by Star.

Bonin’s testimony of the April 16 meeting does not make out a waiver. She knew during that month that other syndicators were on the construction site,¹⁰ and when Carabetta told her the project might be close to a syndication, she assumed, and Carabetta agreed, that Star could “still work on it” as long as Carabetta did not have a final deal. She testified that at that meeting she was authorized to continue working on the project for someone that seemed to be a possible buyer. Bonin’s letters to Fiondella and to Carabetta, promising to comply with Carabetta’s “guidelines” and referring to a prospect for a cash sale who was not interested in syndication, as “what we’ve been seeking,” were within two weeks of the April 16 meeting. This evidence did not show that any modification of the original listing agreement was either sought or granted at the April meeting.

The dissent relies upon testimony of one Allen, another of Star’s brokers, as providing evidence of a waiver in April, 1977. Allen testified that Stem was interested in doing a syndication and having Carabetta remain as a general partner. There was no evidence that this interest of Stem’s was ever communicated to the defendants. Clearly, an “interest” of a possible purchaser expressed only to the plaintiff is not evidence that the defendants waived an express provision of the contract between the plaintiffs and the defendants. From Allen’s testimony, the jury could have found that Stem told Carabetta that he was willing to set aside $800,000 that would be Carabetta’s if the costs of completing the project did not exceed a stated amount and that Carabetta said he would think about it. This offer was not an offer to syndicate,¹¹ but a device to keep Carabetta involved in the project until construction was completed in order to achieve a desired final cost. Even if the offer had been an offer to syndicate in the commonly understood sense, it is doubtful if a finding of waiver could be based upon Carabetta’s statement that he would think about it, followed by his rejection of the offer. It should also be pointed out that the interpretation placed upon this testimony by the dissent is at odds with Bonin’s own letter to Carabetta written at the end of April wherein she acknowledges that the restriction on syndication was still in effect.

In July, Star produced the first of a series of proposals from two customers, Kosow and Simon, who it contends were prospective syndicators. These proposals were the subject of eight exhibits at trial. There was some evidence that the defendants negotiated with both prospects. The Appeals Court determined that “[n]either Kosow nor Simon . . . proposed to sell limited partnership interests for Carabetta or the [pjartnership; rather each proposed to buy the property conditioned on his ability thereafter to syndicate the property for his own account.” S.C., 14 Mass. App. Ct., supra at 70. Even if the jury could conclude, on conflicting evidence, that these negotiations were evidence that the defendants broadened Star’s authority under their agreement, the plaintiffs would have to show that Katz was procured through their efforts. Assuming that the jury could have found that the plaintiffs’ authority was expanded as a result of these negotiations, the plaintiffs produced no evidence of further attempts to interest Katz in the property through the time of actual syndication in December. Instead they rely on their introduction of Katz in January as a potential buyer, and on the telephone conversations between Bonin and Katz which ceased in May when Katz communicated his lack of interest in the project. At the conclusion of the January meeting, the defendants could have accepted Katz as a syndicator and would have owed the plaintiffs nothing on the contract. The events of July, occurring after all Bonin’s contact with Katz had ceased could, therefore, have no effect on the plaintiffs’ right to a commission arising out of a syndication by Katz. If the contract was changed in July to permit the plaintiffs to seek syndicators and they made no further efforts to interest Katz in the transaction, the plaintiffs could not be the efficient or effective means of bringing about a syndication. Kacavas v. Diamond, 303 Mass. 88, 92 (1939).¹²

3. Bad faith. Employing the same reasoning, we think that the jury would not have been warranted in finding that the defendants dealt secretly with Katz in order to avoid paying a commission to the plaintiffs. In Kacavas v. Diamond, supra, we said that liability to pay a commission may exist where ‘“unethical conduct of the employer . . . results in preventing full performance by the broker although the benefit which the employer sought from the broker’s exertion is obtained by him.’. . . Unethical conduct or bad faith. . . ‘means a purpose on the part of the defendants] to obtain without payment a profit from the plaintiff’s exertions. ’. . . Bad faith exists where the employer revokes the broker’s authority or makes the sale through other means when the broker has performed all he has undertaken, or is plainly or evidently approaching success in his undertaking” (citations omitted) Id. at 92-93. Here, the jury could have found that Carabetta knew in January, 1977, that his own syndicators were not having success in moving the project, and they could have found that the first contact between Katz and the defendants did not occur in August, but as early as April, 1977. Even assuming that Bonin was also attempting to recruit Katz as a syndicator during this period, her authorization at that time was limited to finding a purchaser, while Carabetta was free under the agreement with Star to pursue a syndicator. Thus it cannot be said that the defendants’ actions prevented full performance by the plaintiffs, or sought to obtain, without payment, the benefit of the efforts for which they were employed. Even if the jury believed that Fiondella’s April memo withdrawing the property from the market, and Katz’s purported indemnification agreement with Carabetta, executed after Bonin claimed a commission, showed that the defendants believed they were liable to the plaintiffs, a finding of bad faith was not warranted. Here, the contract was not revoked, and the plaintiffs continued to bring prospects to the defendants. There was no showing that the defendants prevented the plaintiffs from performing under their contract to produce a buyer for the property. In the absence of any liability arising under the contract, the question of bad faith in connection with an express contract claim could not succeed. Cf. Siegel v. Lowe, 327 Mass. 154, 155 (1951) (Evidence that owner withdrew property from the market could have been found to be designed “to avail himself of the services [of the broker who introduced the buyer] without paying him”); Kinchla v. Welsh, 8 Mass. App. Ct. 367, 371 (1979); Creed v. Apog, 6 Mass. App. Ct. 365, 375 (1978). See Palmer v. Cherney, 270 Mass. 551, 556-557 (1930) (In circumstances showing that broker never produced a customer ready, willing, and able to purchase on terms authorized by the owners, statements of the owners that they would have been willing to pay commission if brokers had treated them properly “would not make them chargeable therefor in the absence of any evidence showing a legal liability”).

The dissent’s incantation of the virtues of having questions of fact decided by juries is quite wide of the mark. Rather than trenching upon any long established line of demarcation between the role of judge and jury, we have simply applied the time tested and universally approved formula for discerning when a party with the burden of proof has failed in his obligation to introduce enough evidence to permit a jury to find in his favor. “In a civil case, as to motions for a directed verdict or for judgment notwithstanding the verdict, if the judge, without weighing the credibility of the witnesses or otherwise considering the weight of the evidence, considers the evidence in the light most favorable to the party against whom the motion is directed and determines that the jury could reasonably find just one way, the judge should allow the motion .... O’Shaughnessy v. Besse, 7 Mass. App. [Ct.] 727 (1979). Adams v. Herbert, 345 Mass. 588 (1963). Cf. Abraham v. Woburn, [10 Mass. App. Ct. 416 (1980)].” P.J. Liacos, Massachusetts Evidence 46 (5th Ed. 1981). We have demonstrated above that a reasonable jury would have no option but to conclude that the plaintiffs’ contract was limited to producing buyers for the property and that this limitation was never waived at any time material to the events in question.

Because we conclude that a verdict should have been directed for the defendants on the plaintiffs’ claims in express contract, it is unnecessary to reach the other arguments made by the parties. The judgment on count one is reversed, and a judgment is to be entered thereon for the defendants.

So ordered.

3 Bonin testified that Carabetta said, “$600,000 is okay with me. You can get a million dollars as long as I get what I want. I don’t care what you ask for as commission.” She further testified that she and Star wanted their commission “immediately upon sale,” and that Carabetta would accept $1,000,000 at the time of sale and the $2,000,000 balance in equal payments over a three-year period.

4 In a syndication of real estate, investors are solicited to purchase shares and thus become limited partners in the partnership holding the property.

5 At trial, Bonin testified as follows:

Defendant’s counsel: “As of the conclusion of that [January 18 meeting, it is true, is it not, that Mr. Carabetta had hired Star Realty only to sell his property, not to syndicate?”

The witness: “That’s right.” «

Defendant’s counsel: “And you then said [to Slater’s associates]: ‘Make sure [Katz] knows that this is a sale. There’s no syndication here. ’ That is what you told them, isn’t it, back on January 20th?”

The witness: “Or words to that effect; yes.”

Defendant’s counsel: “In your originad discussions, Mrs. Bonin, you and Mr. Abramson and Mr. Carabetta were talking about a straight purchase. That’s clear, is it not?”

The witness: “Originally."

Defendant’s counsel: “Originally. By ‘originally’ you mean back [in] January of 1977?”

The witness: “Yes.”

Carabetta testified that he was accustomed to syndicating real estate projects, that he had used syndicators in New York, Connecticut, and Massachusetts, and that by January, 1977, his firm had contacted several syndicators in connection with this property.

6 One of the persons who contacted Katz was an attorney for a client of Star. Katz declined the offer to join this client’s team as a syndicator of the property.

7 In their argument to this court, the plaintiffs further contend that if any restriction on Star’s authority to produce a syndicator rather than a buyer in the conventional sense ever existed, the jury could have concluded that the agreement was amended by Carabetta’s subsequent conduct. The plaintiffs cite evidence of offers by one Kosow and one Simon, clients of Star, involving possible syndication of the property. In their brief to the Appeals Court, the plaintiffs made reference to “their efforts . . . through September of 1977 including the production of two syndicators, Simon and Kosow.” The defendants, and not the plaintiffs, briefed to the Appeals Court the question whether these offers to syndicate showed a waiver of any restriction in the original brokerage agreement. As this evidence could have been considered by the jury on this basis, the Appeals Court properly considered it on the question of tile sufficiency of the plaintiffs’ evidence. See Raunela v. Hertz Corp., 361 Mass. 341, 343 (1972), quoting Kelly v. Railway Exp. Agency, Inc., 315 Mass. 301, 302 (1943) (test to determine whether a verdict should be directed is whether “anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff”). We have reviewed evidence pertinent to yet another client of Star, one Roger Stem, which is raised by the plaintiffs for the first time on this appeal, on the same principle.

8 We make no intimation of what would constitute the “efficient cause” entitling the broker to his commission in the case of an agreement between the owner and the broker that syndication of the property is the object.

9 Bonin’s sole testimony which could be given this effect was: “I think I said something like: ‘You don’t need any other project. This is the best thing you are going to find.’ or ‘You ought to put all your eggs in this basket because this is the best project you are going to get,’ or something like that.”

10 Bonin testified that she knew that Tracy, among others, was working on syndication at that time, and that she met with him in October to commiserate about their respective failures to close a deal on the property.

11 See ante at note 4.

12 The plaintiffs’ contention, that the Kosow and Simon proposals demonstrate that they were not barred from procuring syndicators under the original agreement, fails by virtue of our conclusion in part 1 of this opinion. Supra at 64-66. Since the terms of the original contract were clear the July events might demonstrate that the restriction against syndicators had been waived for the future but could not be understood as varying the terms that existed in January. The further contention that Fiondella’s conduct at the end of the January 27 meeting was a “personal” acceptance of Katz as Star’s customer for syndication purposes, and signified that the defendants and Slater’s team would now deal directly with no further negotiations required by Star, must fail for the same reason.