Brown v. Gerstein

• Citation: 460 N.E.2d 1043,17 Mass.App.Ct. 558
• Parties: Richard P. BROWN et al. 1 v. Barry H. GERSTEIN et al. 2
• Decision Date: 03 May 1984
• Court: Appeals Court of Massachusetts

Page 1043

460 N.E.2d 1043

17 Mass.App.Ct. 558

Richard P. BROWN et al. ¹ v. Barry H. GERSTEIN et al. ²

Appeals Court of Massachusetts Essex.

Argued Dec. 14, 1983.

Decided March 5, 1984.

Further Appellate Review Denied

May 3, 1984.

John D. Dwyer, Boston, for plaintiffs.

Erik Lund, Boston, for defendants.

Before BROWN, GREANEY and WARNER, JJ.

GREANEY, Justice.

The plaintiffs' amended complaint sought to recover damages from the defendants, both lawyers, on allegations (1) that Gerstein had committed malpractice in representing them in connection with a suit to restrain a mortgage foreclosure; (2) that his conduct also violated G.L. c. 93A; and (3) that Weiner, who practiced law with Gerstein, was derivatively liable for Gerstein's actions as his "partner by estoppel." The common law claims were tried to a jury; the c. 93A claim to the judge. See Nei v. Burley, 388 Mass. 307, 311-315, 446 N.E.2d 674 (1983). At the conclusion of the plaintiffs' case the judge allowed a motion filed by the defendants on the c. 93A claim captioned "Motion for Directed Verdict." ³ The jury returned a verdict in the amount of $15,000 for the plaintiffs, which the judge set aside on the defendants' motion for judgment notwithstanding the verdict. Mass.R.Civ.P. 50(b), 365 Mass. 814-815 (1974). The plaintiffs have appealed from the judgment entered for the defendants. We reverse the judgment for Gerstein and order a new trial as hereinafter set out. We affirm the judgment for Weiner.

In deciding whether the judge acted properly in entering judgment notwithstanding the verdict on the common law claims, we apply the standard applicable to a motion for directed verdict. D'Annolfo v. Stoneham Housing Authy., 375 Mass. 650, 657, 378 N.E.2d 971 (1978). Moran Travel Bureau, Inc. v. Clair, 12 Mass.App. 864, ----, Mass.App.Ct.Adv.Sh. (1981) 1075, 1076, 421 N.E.2d 103. This test focuses on 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." Raunela v. Hertz Corp., 361 Mass. 341, 343, 280 N.E.2d 179 (1972), quoting from Kelly v. Railway Exp. Agency, Inc., 315 Mass. 301, 302, 52 N.E.2d 411 (1943). Miles v. Edward O. Tabor, M.D. Inc., 387 Mass. 783, 785-786, 443 N.E.2d 1302 (1982).

Viewing the evidence in this light, we conclude that the jury could have found the following. ⁴ In 1975, the plaintiffs owned a parcel of commercial property in Wenham which they had purchased in 1967. The parcel contained a building, a major part of which was leased to Richdale Dairy Stores, Inc., for the operation of a convenience store, and the balance of which was rented to a second store under a tenancy at will. In the summer of 1974, the mortgagee on the property, Danvers Savings Bank (bank), claimed a default in the mortgage, an assertion which the plaintiffs contested. They consulted Gerstein, and, at Gerstein's request wrote a letter detailing to him their dispute with the bank. ⁵ In January, 1975, the plaintiffs formally retained Gerstein "to bring suit against the ... bank for breach of contract" based on the bank's alleged mishandling of their loan. ⁶ Gerstein advised the plaintiffs "not to have anything to do with the [bank because] ... he would handle everything."

By letter dated April 18, 1975, the bank notified the plaintiffs that its board of investment had voted to commence foreclosure, that future payments on the loan would not be accepted, and that the plaintiffs would be liable for any deficiency resulting after foreclosure. Gerstein assured the plaintiffs "not to worry about [the notice] ... [t]hat he would take care of everything [a]nd that he was drawing up papers to file against the bank."

Shortly after June 13, 1975, the plaintiffs received from the bank's attorneys a copy of the order of notice issued by the Superior Court on the bank's complaint to foreclose the mortgage. Gerstein also received a copy of this notice and again assured the plaintiffs "not to worry ... that it [the foreclosure] wouldn't happen [because] he would take care of everything."

On July 30, 1975, the plaintiffs received written notice advising them that a foreclosure sale would be held on or after September 3, 1975, and that they would be liable for any resulting deficiency. The Browns promptly brought this notice to Gerstein's attention. Gerstein advised them that an amended complaint was being prepared, ⁷ and made no mention of any problems.

On August 1, 1975, the plaintiffs signed and swore to an amended complaint. This complaint alleged that the bank was solely responsible for the mortgage default, and that it had improperly refused to allow the plaintiffs to cure the default. The complaint sought preliminary injunctive relief to enjoin the foreclosure as well as an accounting and damages. Gerstein told the plaintiffs that he would file the complaint in the Superior Court. Shortly thereafter he advised the plaintiffs that he had in fact filed the complaint and that "there would be no foreclosure." The plaintiffs relied on these assurances. Gerstein never filed the complaint. He did not tell the plaintiffs that it had not been filed or that neither a temporary restraining order nor an injunction would be applied for.

On August 15, 1975, the plaintiffs received a copy of the bank's legal advertisement of the foreclosure sale which had been published in a local newspaper. This notice set the foreclosure sale at 2:00 P.M. on September 3, 1975. The notice was immediately brought to Gerstein's attention. Gerstein advised the Browns that "everything was being held in abeyance" and "that there would be no foreclosure." On August 28, 1975, Richard Brown met Gerstein. He again told Brown that "there wasn't going to be any auction sale and that he (Gerstein) might ... have a customer for the property." These representations were false. ⁸ The property was sold to a third party at foreclosure auction on September 3, 1975, for $62,000 without the plaintiffs' knowledge.

When the plaintiffs discovered that the property had been sold they confronted Gerstein, who then told them that he had had a "deal" with the bank's attorney, see note 8 supra, and that this lawyer had "double-crossed him". Gerstein recommended that the plaintiffs file an immediate suit against the bank and its counsel and assured the Browns that he would appear as a witness on their behalf at the trial. To this end, Gerstein directed the plaintiffs to another lawyer in his office. This lawyer prepared yet another complaint against the bank. This complaint, seeking damages, accused the bank of bad faith and repeated the substance of the amended complaint with one difference; it contained an assertion that at the time of the foreclosure sale "the plaintiffs were ... financially unable to purchase the property." ⁹ The plaintiffs reviewed the complaint and swore to its contents. The attorney, however, declined to represent the plaintiffs after receiving information from the bank's counsel which made it doubtful that the plaintiffs could prevail at trial. As a result, the complaint was never filed and the lawyer terminated his relationship with the plaintiffs after telling them that he had returned their file to Gerstein.

There was testimony that Gerstein never advised the plaintiffs of options to prevent foreclosure. ¹⁰ The judge excluded testimony, preserved by a proper offer of proof, that had the Browns known that Gerstein had not filed the complaint and that the foreclosure sale would take place, they would have sought to avoid the sale by: (1) engaging another attorney to file suit and seek an injunction on a different theory of law, ¹¹ (2) curing the default by paying the arrearage, ¹² (3) attempting to sell the property or to refinance the debt with another lender, (4) attending the foreclosure sale with the required deposit either to purchase the property or to bid it up to full market value, or (5) discharging the mortgage by paying the entire indebtedness. There was further testimony that the plaintiffs had funds, independent of borrowing, which could have been used for these purposes. These funds were contained in two trusts for the benefit of Ann Brown. The first was a personal trust containing about $30,000, the terms of which permitted payments of principal to Ann Brown in the sole discretion of the trustees. The second was a testamentary trust, containing about $70,000. Ann Brown could obtain principal from the latter trust "as she deem[ed] advisable." The annual income from the testamentary trust averaged $4,000. In addition to the assets of the trusts, there was testimony that the plaintiffs had substantial equity in their home.

A few other facts are relevant to the discussion of the common law claims. The measure of damages was stipulated to be the difference between the $62,000 paid by the buyer at the foreclosure sale and the fair market value of the premises. There was evidence which would have warranted a finding that, on September 3, 1975, the premises had a fair market value of at least $100,000. The judge considered the common law malpractice claims as solely limited to Gerstein's negligence in failing to file the amended complaint. On this hypothesis, the judge instructed the jury that the plaintiffs could recover only if they found that an injunction could have been obtained on the facts alleged in the amended complaint, declining to put to the jury the question whether Gerstein was liable for deceit.

1. We first consider the common law claims of malpractice. It is conceded that an attorney-client relationship existed between Gerstein and the Browns and that Gerstein was negligent in failing to file the amended complaint. We are satisfied that the judge properly rejected the plaintiffs' claim that the foreclosure would have been enjoined for the reasons stated in his memorandum on the motion for judgment n.o.v. In that...