Sullivan v. Five Acres Realty Trust

• Decision Date: 12 March 2020
• Docket Number: SJC-12934
• Citation: 166 N.E.3d 463,487 Mass. 64
• Court: Appeals Court of Massachusetts
• Parties: Constance M. SULLIVAN & another v. FIVE ACRES REALTY TRUST & others.

487 Mass. 64

166 N.E.3d 463

Constance M. SULLIVAN & another¹

v.FIVE ACRES REALTY TRUST & others.²

SJC-12934

Appeals Court of Massachusetts, Norfolk..

Argued November 4, 2020.

Decided March 12, 2020.

Joel Lewin, for the defendants.

Peter B. McGlynn, for the plaintiffs.

Deborah Schrieber, for American Society of Trial Consultants, Inc., amicus curiae, submitted a brief.

Present: Budd, C.J., Gaziano, Lowy, Cypher, & Kafker, JJ.

CYPHER, J.

In 2013, the plaintiffs, Constance M. Sullivan and Edward T. Sullivan, Jr., purchased a piece of real property in Dover (Dover property) from defendants Giuseppe, Rosalie, and Maria Gagliardi,³ as trustees of the Five Acres Realty Trust.⁴ The plaintiffs thereafter discovered various defects in the Dover property and commenced this action in 2014 against Giuseppe, Rosalie, their daughter Maria, Five Acres Realty Trust, and J.F. Contracting Co., Inc. (J.F. Contracting), a masonry contracting business owned by Giuseppe.⁵ The plaintiffs alleged breach of the implied warranty of habitability, fraud and misrepresentation, defective and deficient renovation work, and violations of the Massachusetts consumer protection act, G. L. c. 93A. A judge in the Superior Court (motion judge) granted the defendants’ motion for summary judgment on the fraud and misrepresentation and the defective and deficient renovation work claims. After trial, the jury found in favor of the plaintiffs on the warranty of habitability and the G. L. c. 93A claims, awarding the plaintiffs $250,000 on the warranty of habitability claim and $211,153.38 on the c. 93A claim.⁶

The defendants appeal from the trial judge's denial of their motions for directed verdict or judgment notwithstanding the verdict, and for a new trial or to alter or amend the damages. The plaintiffs appeal from the motion judge's grant of summary judgment in favor of the defendants on the fraud and misrepresentation claim and the from the trial judge's denial of an award of jury consultant fees under G. L. c. 93A. We conclude that the motion for directed verdict or the motion for judgment notwithstanding the verdict should have been allowed on the G. L. c. 93A and the warranty of habitability claims, the motion judge properly granted summary judgment in favor of the defendants on the fraud and misrepresentation claim, and jury consultant fees are not recoverable under G. L. c. 93A. Because we vacate the awards of damages on the G. L. c. 93A and warranty of habitability claims, we need not reach the arguments related to those awards.⁷

Background. 1. The Gagliardis. Giuseppe was a licensed construction supervisor who owned J.F. Contracting, which he started in 1985. J.F. Contracting performed primarily residential construction. Rosalie managed the books for J.F. Contracting and for the apartment rentals she and Giuseppe operated.

Rosalie and Giuseppe had a history of purchasing, renovating, refinancing, and renting properties. In 1974, they purchased their first property, which during the 1980s and 1990s they renovated and converted to a two-family property. They mortgaged the first property and used the proceeds to purchase a second property, into which they moved after living at the first property for about twelve years. They have rented out the first property since moving from it. They also renovated and converted the second property to a duplex apartment and received rental income from it until they sold it to their daughter in 2004. In 1988, Rosalie and Giuseppe refinanced the second property and used the proceeds to purchase a third property, which they renovated and have since rented out. In 1997, they used proceeds obtained from refinancing the second property to purchase a commercial property.

In 2002, they purchased the Dover property with proceeds from refinancing the first and third properties. At that point they had lived at the second property for about fifteen years. In 2009, they purchased a property in Weston with proceeds from mortgaging the Dover property. They rented out the Weston property for several years, until they eventually moved in after selling the Dover property.

2. Renovation work. The Dover property was built in 1986. Rosalie and Giuseppe, through the trust, were the sixth purchasers of the home, in 2002. Before selling the Dover property to the plaintiffs, Rosalie and Giuseppe lived there for eleven years. During that time, Rosalie and Giuseppe completed several renovations to the home for which they did not obtain building permits or certificates of occupancy. The work included renovating and enlarging the kitchen, transforming a screened-in porch into a "Tuscan-style room," and installing a brick pizza oven. Giuseppe completed some of the renovation work himself, and contractors completed the other work. The renovation work began in 2006 and took three to four years to complete; however, the exact completion date is unknown because Rosalie shredded the renovation documents.

3. Plaintiffs’ purchase of Dover property. Rosalie and Giuseppe listed the Dover property for sale in 2011. In 2012, the plaintiffs conducted a preclosing inspection of the Dover property, during which Rosalie and Giuseppe showed the plaintiffs the renovations to the property. When showing the plaintiffs the work in person, Rosalie and Giuseppe did not disclose that the renovations never were inspected or approved for occupancy.

The plaintiffs purchased the Dover property in 2013, and thereafter discovered structural and other deficiencies relating to the home, such as that the ceilings in the kitchen and Tuscan-style room were in danger of collapsing, and that the defendants had never obtained required permits and certificates of occupancy for the home.

The plaintiffs were informed that it would be more cost effective to raze the Tuscan-style room and rebuild it, which could cost approximately $211,000.

4. Prior proceedings. After discovering the defects, the plaintiffs contacted the Gagliardis’ real estate broker to learn who performed the renovation work, but Rosalie and Giuseppe refused to provide the requested information.

In 2014, the plaintiffs sent the defendants a demand letter pursuant to G. L. c. 93A, § 9. The defendants did not identify the individuals who performed the renovation work, and the defendants stated in response to the demand letter that they did not perform renovations that would affect the home's structural integrity, nor did they know of any building code violations. The defendants also claimed in their response that a factual and legal investigation into the plaintiffs’ allegations had been undertaken, but they later admitted that they never investigated the property. The defendants did not respond with a settlement offer.

The plaintiffs thereafter commenced this action, alleging breach of the implied warranty of habitability, fraud and misrepresentation, defective and deficient renovation work, and violations of G. L. c. 93A. The defendants moved for summary judgment on all claims, which the plaintiffs opposed. The motion judge granted summary judgment in favor of the defendants on the fraud and misrepresentation claim and the defective and deficient renovation work claim.

Following a trial, the jury found in favor of the plaintiffs on the implied warranty of habitability and the G. L. c. 93A claims. On both claims the jury awarded damages jointly and severally against Giuseppe and Rosalie, individually, and Giuseppe, Rosalie, and Maria as trustees of Five Acres Realty Trust. Damages on the implied warranty of habitability claim were $250,000, plus statutory and prejudgment interest, and damages on the c. 93A claim were $211,153.38, plus statutory and prejudgment interest. The jury also awarded double damages against Rosalie and Giuseppe, individually, in the amount of $211,153.38, as the jury found that the defendants acted willfully and knowingly and that the response to the c. 93A demand letter was made in bad faith. The plaintiffs moved for attorney's fees and costs pursuant to G. L. c. 93A, § 9 (4), and the trial judge awarded $425,727.76 in attorney's fees and $35,222.19 in costs, but he denied recovery for costs associated with a jury consultant used by the plaintiffs.

The defendants had moved for a directed verdict on both claims at the close of the plaintiffs’ case and again at the close of all the evidence, and the trial judge denied both motions. The defendants also moved for judgment notwithstanding the verdict on both claims and filed a motion for a new trial or, in the alternative, for remittitur or to alter or amend the judgment with respect to damages. The plaintiffs opposed the motions and moved to alter or amend the judgment, which the defendants opposed. The trial judge denied all motions. The parties filed timely notices of appeal, and the case now is before us on transfer from the Appeals Court on our own motion.

Discussion. 1. Motions for directed verdict and judgment notwithstanding verdict. In reviewing a denial of a defendant's motion for a directed verdict or for judgment notwithstanding the verdict, we view the evidence in the light most favorable to the plaintiff. Miga v. Holyoke, 398 Mass. 343, 348 & n.6, 497 N.E.2d 1 (1986). "The verdict will be upheld if it may be determined that ‘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.’ " McAvoy v. Shufrin, 401 Mass. 593, 596, 518 N.E.2d 513 (1988), quoting Miga, supra at 348, 497 N.E.2d 1.

a. Chapter 93A. The defendants argue that the evidence was insufficient to establish that the sale of the property took place in the course of trade or commerce. We agree.

General Laws c. 93A, § 2 (a ), prohibits unfair or deceptive acts or practices "in the conduct of any trade or commerce." The statute is intended to apply to individuals acting in a business context and is therefore not applicable "where the transaction is strictly...