Bump v. Robbins

• Decision Date: 11 June 1987
• Citation: 509 N.E.2d 12,24 Mass.App.Ct. 296
• Parties: Barbara M. BUMP et al. 1 v. Robert ROBBINS et al. 2
• Court: Appeals Court of Massachusetts

Page 12

509 N.E.2d 12

24 Mass.App.Ct. 296

Barbara M. BUMP et al. ¹ v. Robert ROBBINS et al. ²

Appeals Court of Massachusetts,

Plymouth.

Argued March 11, 1987.

Decided June 11, 1987.

Jane S. Schacter, Boston, for Robert Robbins.

Carmine W. DiAdamo, Lawrence, for Microwave Research Corp.

Wm. Shaw McDermott and Mitchell J. Sikora, Jr., Boston, for plaintiffs.

Carl R. Croce, Boston, for LRC, Inc., was present but did not argue.

Before GRANT, KAPLAN and FINE, JJ.

FINE, Justice.

After a bifurcated trial in the Superior Court of common law contract and tort claims before a jury, and, four years later G.L. c. 93A claims before the judge who had presided over the jury trial, judgment entered awarding money damages to Morrison M. Bump, a business broker, against all three defendants, LRC, Inc. (LRC), Robert Robbins, its president and principal shareholder, and Microwave Research Corp. (MRC). Bump's claims arose out of the following circumstances: a series of communications, oral and written, between Bump and Robbins which, Bump alleges, resulted in the formation of an exclusive brokerage agreement for the sale of LRC; the sale by Robbins of his LRC stock to MRC without any assistance from Bump but after Bump had undertaken efforts to sell LRC to another party; and the failure of Robbins, LRC, or MRC to pay Bump a commission. Bump based his claims on the alleged exclusive brokerage contract, quantum meruit, interference with advantageous contractual relations, and G.L. c. 93A, § 11. In addition, he sought recovery against MRC on the theory that MRC was responsible for any liability imposed against LRC because MRC was an undisclosed principal of Robbins and LRC or because a "de facto merger" had occurred between LRC and MRC.

We hold that directed verdicts, sought at the appropriate times by all three defendants on all the common law claims, should have been allowed. We hold further that the judge's decision in favor of Bump against both LRC and MRC on the G.L. c. 93A claims is supported by the record. It is necessary for us to remand the G.L. c. 93A portion of the case, however, for a determination of damages.

A. The Jury Trial.

Only Bump presented evidence at the jury trial. It consisted of the following. On July 24, 1975, Bump wrote to Robbins offering his services as a broker for the sale of LRC, a New Hampshire company which produced microelectronic products. Bump indicated in his letter that any brokerage fees would be charged to the buyer, but he asked Robbins to agree to negotiate payment of the fees with any prospective purchaser. Robbins responded on July 30, 1975, by sending Bump literature about the company and expressing interest in talking further. Bump immediately acknowledged receipt of Robbins' letter. In mid-August, 1975, Bump travelled from his home in Massachusetts to meet Robbins at LRC headquarters in New Hampshire. They discussed LRC's financial status and a proposed selling price in the range of $1,000,000 to $1,500,000. They reached no agreement, however, as to Bump's services. Robbins indicated that he would not consider hiring Bump until after LRC's 1975 audit.

Bump became ill during the fall of 1975, and there was no further contact between Bump and Robbins until January 13, 1976, when Bump wrote to Robbins inquiring about LRC's 1975 audit and requesting brochures about the company. On January 22, 1976, Bump responded to a blind newspaper advertisement expressing interest in the acquisition of electronics firms. D. David Cohen, an attorney in New York and the source of the advertisement, in turn communicated with Bump. On January 29, 1976, Bump informed Robbins about this possible lead. Bump and Robbins met at LRC on February 10, 1976. After discussing the history and financial outlook of LRC, Robbins, on behalf of LRC, authorized Bump to pursue his contacts with potential buyers. They clarified Bump's fee schedule (five percent on the first million dollars of the sale price, two and one-half percent on the second, and one percent on anything above that amount) and they discussed other matters, including the need to formalize their understanding. The next day Bump sent Robbins a letter "as confirmation of [their] discussion." After cordialities, the letter stated: "I am enclosing a second copy of this letter. It is my hope that you will sign this second copy and return it to me for my records--as confirmation of our discussion and understandings developed yesterday." The letter then summarized the matters previously discussed: Robbins' objective that LRC be acquired; the agreement that Bump would represent LRC as a business broker; and their understanding about payment of fees. Bump stated what his responsibilities would be: "I will seek buyers, both direct and through other brokers and third persons with whom I work. I will share my fees with them. You will have advance approval of the names of all buyers I approach, and also of written descriptive materials I use, regarding LRC. I will keep you informed of my activities through phone calls, memos, and copies of letters, where applicable." Bump then added several provisions which he acknowledged he and Robbins had not discussed, but which he included "in the hope" that Robbins would approve. Included among those provisions were the following:

"As you approve each name of a buyer to be approached, you will protect me in the matter of fees for a period of two years from such date. This means that should you make a deal with such a buyer, either direct or through another broker or 'third person' during that two years, I am protected. By 'making a deal', I mean a preliminary agreement within the time period, even if final papers don't pass until later.

"During the period we work together, you will turn all inquiries that come to you direct or through other 'third persons' over to me for handling, in cooperation with you.

"Either of us may cancel this agreement or understanding by notifying the other, with sixty days notice. Such cancellation would not relieve either of us from responsibility that clearly goes beyond the matter of representation in seeking a merger partner for you...."

At the end of the letter, after the word "agreed", there was a blank space for Robbins to insert his signature, and also a reply-o-gram. Robbins never signed or returned the letter or reply-o-gram, and the letter was not later discussed.

The only subsequent contacts between Bump and Robbins in the period from January through April of 1976 were: 1) Bump prepared a "profile" of LRC which he sent to Robbins, and Robbins approved it; 2) Bump had a telephone conversation with Robbins during which Bump told Robbins about Vernitron, the potential buyer represented by Mr. Cohen, and Robbins expressed enthusiastic interest in the possibility of a sale to Vernitron; and 3) Bump forwarded correspondence to Robbins about his contacts during March with Vernitron and its interest in LRC. At no time did Robbins discourage these efforts.

Bump was in contact with Mr. Cohen and Vernitron throughout the period from January through April, 1976. Vernitron informed Bump on March 17, 1976, that "the situation would not (emphasis original) be of current interest to Vernitron" unless LRC met certain conditions. Continued interest was expressed in the acquisition, however, and Cohen asked Bump to arrange a visit in May to LRC. When Bump called LRC to arrange the visit on April 22, 1976, he learned for the first time that LRC might no longer be for sale. Bump thereupon ceased his efforts with Vernitron.

In fact, commencing in early 1975, Robbins had been involved in negotiations about the possible merger of LRC and MRC, a Massachusetts company engaged in the business of producing microwave components. The negotiations continued into the early months of 1976 on an almost daily basis. On June 24, 1975, MRC's board of directors authorized the purchase of 80% of LRC stock. Robbins owned 80% of the stock; his wife owned the remainder. On July 1, 1975, the LRC directors consented to a transfer of 80% of the company's stock to MRC. MRC and Robbins signed a "Preliminary Agreement" which, although dated July 2, 1975, for tax purposes, ³ was actually signed in March or April, 1976. It provided for the transfer of 80% of LRC stock to MRC for $1.00. About the same time, MRC assented to an employment agreement between Robbins and LRC providing for an annual salary of $35,000 for ten years, guaranteed by MRC, and other benefits. Theodore S. Raphael, Bump's accountant, testified that, although the named consideration was only $1.00, Robbins actually received benefits from MRC worth $395,397 in exchange for his stock. In addition, various mutual business arrangements were made by LRC and MRC in 1975 and 1976, including the leasing of LRC space by MRC in 1975. Bump was rebuffed in his efforts to have Robbins or MRC pay him a commission on the sale of Robbins' stock to MRC.

Directed verdict motions were made by all parties and, except for a claim based on quantum meruit, ⁴ the motions were denied. ⁵ The case was presented to the jury on special questions which were answered as follows: "1. Did Robert Robbins enter into a brokerage agreement with Morrison M. Bump? Answer: Yes. 2. Was Morrison M. Bump exclusively entitled to a commission on any sale of stock, acquisition or merger of LRC, Inc. regardless of whether or not he procured a buyer ready, willing and able to purchase? Answer: Yes. 3. What amount in money, if any, is Morrison M. Bump entitled to as a commission? Answer: zero. 4. Was Morrison M. Bump prevented from performing the brokerage agreement by reason of actions which constituted acts of bad faith by Robert Robbins? Answer: Yes. 5. Please state the amount of money, if any, owed Morrison M. Bump by reason of the revocation in bad faith by Robert Robbins of the brokerage agreement. Answer: $15,000. 6. Did LRC, Inc. enter into an exclusive brokerage agreement with ...