DeWolfe v. Hingham Ctr., Ltd.

• Decision Date: 11 April 2013
• Docket Number: SJC–11168.
• Citation: 985 N.E.2d 1187,464 Mass. 795
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Daniel DeWOLFE v. HINGHAM CENTRE, LTD., & others.

464 Mass. 795

985 N.E.2d 1187

Daniel DeWOLFE

v.HINGHAM CENTRE, LTD., & others.¹

SJC–11168.

Supreme Judicial Court of Massachusetts, Plymouth.

Submitted Dec. 3, 2012.

Decided April 11, 2013.

Terrance J. Hamilton (Andrew T. Imbriglio, Boston, with him) for the defendants.

Lawrence J. Rose, Stoughton, for the plaintiff.

Diane C. Tillotson & Shana E. Maldonado, Boston, for Massachusetts Association of Realtors & another, amici curiae, submitted a brief.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

LENK, J.

This case arises from certain incorrect representations that a real estate broker made to prospective buyers about the zoning classification of a listed property. The plaintiff purchased the property after having received the incorrect information and was thereafter unable to use the property as he had intended. We are called upon to decide whether, in the circumstances, a broker has a duty to investigate before making representations as to the zoning classification of a property. We are also called upon to decide whether an exculpatory clause concerning warranties and representations, contained in a standard form purchase and sale agreement, precludes the buyer from relying on the broker's prior written representations as to zoning classification.

We conclude that a broker has a duty to exercise reasonable care in making representations as to a property's zoning designation. Where, as here, the misrepresentations were based on information provided by the seller, the question turns on whether it was reasonable in the circumstances to rely upon such information, a question to be determined by the trier of fact. We further conclude that the exculpatory clause in the purchase and sale agreement does not preclude the buyer's reliance on prior written representations. Because the defendants have not satisfied their burden of establishing an entitlement to judgment as a matter of law, see Mass. R. Civ. P. 56(c), as amended, 436 Mass. 1404 (2002), we vacate the judgment.²

1. Background. The following facts are undisputed. M. Eileen Richards was a licensed real estate broker employed by the real estate agency Hingham Centre, Ltd. (Hingham Centre). In August, 2004, Paul D. Tribuna (Tribuna) and Lauren N. Tribuna, the owners of a property located at 461 Washington Street in Norwell (property), retained Richards and Hingham Centre to list the property and broker it for sale. Tribuna told Richards either that the property was zoned “Residential Business B” or that it was zoned “Business B.” ³ “Residential Business B” is not a zoning designation in Norwell. Richards, who had experience listing and brokering for sale properties in Norwell, was not aware of any prior business use of the property, and although she saw businesses located across the street, she observed only houses and not businesses adjoining the property on either side. Richards subsequently advertised the property in at least two newspapers as being zoned “Business B.”

DeWolfe is a professional hairdresser. In 2000, he began looking for a location for a six-station hair salon. DeWolfe saw one of the advertisements for the property that Richards had placed, and telephoned Hingham Centre to arrange a viewing. His first visit to the property was brief, and Richards was not present. He arranged for a second viewing, during which Richards was present. At this viewing, DeWolfe told Richards that he was considering the property as a possible location for a six-station hair salon. DeWolfe saw a copy of the multiple listing service (MLS) listing for the property that Richards had prepared. The listing stated that the property was “zoned Business B.” ⁴ Additionally, DeWolfe saw a copy of the relevant section of the Norwell zoning ordinance, which Richards had placed at the property with the phrase “Business B” handwritten at the top of the page. The ordinance lists “hairdresser” as a permissible use of properties zoned “Business B.”

On October 9, 2004, DeWolfe made a written offer to purchase the property. On October 29, 2004, DeWolfe and the Tribunas executed a standard form purchase and sale agreement, which was provided by Richards and Hingham Centre.⁵ Paragraph 25 of the agreement, captioned “Warranties and Representations,” states:

“The BUYER acknowledges that the BUYER has not been influenced to enter into this transaction nor has he relied upon any warranties or representations not set forth or incorporated in this agreement or previously made in writing, except for the following additional warranties and representations, if any, made by either the SELLER or the Broker(s): NONE.”

On December 13, 2004, the Tribunas conveyed the deed to the property to DeWolfe. In January or February of 2005, DeWolfe learned that the property was zoned “Residential B” rather than “Business B,” and that a six-station hair salon was not among the permitted uses of the premises.⁶

In 2006, DeWolfe filed this action against Richards and Hingham Centre, alleging misrepresentation and violation of G.L. c. 93A, § 2.⁷ His amended complaint alleges that “the Tribunas made material representations to Richards ... that the property was zoned ‘Business B,’ ” and that Richards's “representation[s] regarding the zoning of the property were known by [the Tribunas] and by ... Richards to be false, or should have [been] known by [them] to be false.” ⁸

Richards and Hingham Centre moved for summary judgment. A Superior Court judge granted the defendants' motion,⁹ and DeWolfe appealed. The Appeals Court vacated the judgment and remanded the case for further proceedings. DeWolfe v. Hingham Centre, Ltd., 80 Mass.App.Ct. 765, 956 N.E.2d 1228 (2011). We allowed the defendants' petition for further appellate review.

2. Standard of review. “We review a grant of summary judgment de novo to determine ‘whether, viewing the evidence in the light most favorable to the nonmoving party, all material facts have been established and the moving party is entitled to a judgment as a matter of law.’ ” Juliano v. Simpson, 461 Mass. 527, 529–530, 962 N.E.2d 175 (2012), quoting Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117, 120, 571 N.E.2d 357 (1991). Because our review is de novo, we accord no deference to the decision of the motion judge. Federal Nat'l Mtge. Ass'n v. Hendricks, 463 Mass. 635, 637, 977 N.E.2d 552 (2012). The moving parties, here the defendants, have the burden of establishing that there is no genuine issue as to any material fact and that they are entitled to judgment as a matter of law. Dias v. Brigham Med. Assocs., Inc., 438 Mass. 317, 319, 780 N.E.2d 447 (2002).

3. Discussion. To prove the tort of negligent misrepresentation, a plaintiff must establish that the defendant, (1) in the course of her business, or in a transaction in which she had a pecuniary interest, (2) supplied false information for the guidance of others (3) in their business transactions, (4) causing and resulting in pecuniary loss to those others (5) by their justifiable reliance on the information, and that she (6) failed to exercise reasonable care or competence in obtaining or communicating the information. See Gossels v. Fleet Nat'l Bank, 453 Mass. 366, 371–372, 902 N.E.2d 370 (2009), citing Nycal Corp. v. KPMG Peat Marwick LLP, 426 Mass. 491, 495–496, 688 N.E.2d 1368 (1998); Restatement (Second) of Torts § 552 (1977).

The defendants claim that they are entitled to judgment as a matter of law because a real estate broker has no duty to confirm the zoning status of a property that the broker lists and brokers for sale. The defendants claim as well that, even if Richards had a duty to investigate the zoning designation of the property before making representations concerning it, the warranties and representations clause in the purchase and sale agreement relieves them of any liability.¹⁰

a. Duty of broker. Pursuant to the common-law doctrine of negligent misrepresentation, a real estate broker, like any person engaged “in the course of his business,” may be liable for failing to exercise reasonable care in making representations to prospective buyers. See Gossels v. Fleet Nat'l Bank, supra at 372, 902 N.E.2d 370;Maxwell v. Ratcliffe, 356 Mass. 560, 562–563, 254 N.E.2d 250 (1969). While a broker ordinarily may rely on information provided by the seller in making representations about a property, a broker is not insulated from all liability merely by virtue of such reliance. See Hoffman v. Connall, 108 Wash.2d 69, 77, 736 P.2d 242 (1987) ( “A real estate broker must take reasonable steps to avoid disseminating false information to buyers”). The critical question is whether the broker “failed to exercise reasonable care or competence in obtaining or communicating the information.” Gossels v. Fleet Nat'l Bank, supra. See Fernandes v. Rodrigue, 38 Mass.App.Ct. 926, 928, 646 N.E.2d 414 (1995) (broker may rely on “information reasonably thought to be reliable”). Where it is reasonable in the circumstances for a broker to rely on information provided by the seller, the broker will not be liable for conveying such information to prospective buyers without conducting further investigation. See, e.g., Quinlan v. Clasby, 71 Mass.App.Ct. 97, 103, 879 N.E.2d 703 (2008).

By contrast, where it is unreasonable in the circumstances for a broker to rely on information provided by the seller, the broker has a duty to investigate further before conveying such information to prospective buyers. See Restatement (Third) of Agency § 7.01 comment d (2006) (“In some situations, an agent may have a duty to inquire further when provided with information by the principal or by a coagent. The agent's duty of inquiry may stem from ... circumstances that make it unreasonable to rely on the information provided without further inquiry”). Cf. Maxwell v. Ratcliffe, supra (brokers liable for deceit in misrepresenting cellar as dry, where listing, of which brokers did or should have had knowledge, noted periodic...