Szalla v. Locke

• Decision Date: 08 December 1995
• Citation: 421 Mass. 448,657 N.E.2d 1267
• Parties: Eugene SZALLA v. Simeon LOCKE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1267

657 N.E.2d 1267

421 Mass. 448

Eugene SZALLA v. Simeon LOCKE.

Supreme Judicial Court of Massachusetts Essex.

Argued Sept. 14, 1995.

Decided Dec. 8, 1995.

Thomas G. Hoffman, Boston, for the defendant.

Wendy Sibbison, Greenfield, for the plaintiff.

Before LIACOS, C.J., and WILKINS, LYNCH and O'CONNOR, JJ.

LYNCH, Justice.

This action arises from the failure of a business venture between the plaintiff, Eugene Szalla, and the defendant, Simeon Locke. The plaintiff brought this action in the Superior Court, alleging breach of contract, breach of partnership agreement, deceit, quantum meruit, and unfair or deceptive trade practices under G.L. c. 93A (1994 ed.). After trial a jury returned verdicts in favor of the plaintiff for deceit, breach of partnership, and quantum meruit. The trial judge ruled for the plaintiff on the G.L. c. 93A, § 11, claims and awarded reasonable attorney's fees and costs. The Appeals Court affirmed, 37 Mass.App.Ct. 346 (1994), and we granted the defendant's application for further appellate review.

We summarize the facts as found by the trial judge. The defendant, a full-time physician, purchased the Highlands Nursery (Highlands) in Boxford in 1965. He conducted a wholesale and retail nursery business there for four years, with the help of his wife and a field hand. He made a profit in only one year. The retail sales were discontinued in 1970, although the wholesale nursery business continued. ¹ In 1986, the defendant and a neighbor, Rick Haywood, undertook to open a retail business. The defendant paid for one-half the cost of materials to construct a retail greenhouse and the parties were to divide any profits equally. The business operated from 1986, until early July, 1987, at which time it was abandoned. The retail greenhouse operation was dormant from July through September, 1987. The plants died and the greenhouse deteriorated.

In the middle of September, 1987, the defendant and his wife discussed with the plaintiff their going into the nursery business. The defendant stated that he did not want an employee; he wanted a partner in the business. The plaintiff was very enthusiastic about the idea and four or five days later he went to the defendant's house and told him that he wanted to join him in a retail nursery business.

The plaintiff began drawing designs for the proposed greenhouse and from October, 1987, through January, 1988, the parties had numerous meetings and discussions concerning the development of the business. The terms of the business arrangement were that the enterprise would be known as "Boxford Gardens at Highlands Nursery" (Boxford Gardens). Highlands would pay all costs of renovation of the greenhouse, the attached shed, and the garden area. The plaintiff was to keep expenses as low as possible and be responsible for all of the labor. Until Boxford Gardens generated income, Highlands would pay the cost of its inventory and operating expenses. Highlands was to absorb all Boxford Gardens's losses until there was income and profits, which were to be shared equally. Although both partners would make all major policy decisions, the plaintiff was to be in charge of the day-to-day operation of the business.

The business was to open as of April 1, 1988, for the Easter weekend and be open seven days a week from April through December. There was no discussion regarding termination of the agreement; however, the defendant was to give the plaintiff a right of first refusal to buy the business should the defendant or his wife retire or die. In January, 1988, the plaintiff and the defendant viewed their association as set, and met with a tax accountant. They also filled out an application for an employer identification number in which they indicated to the Internal Revenue Service that their business was a partnership.

On March 26, the defendant became insistent that the nursery open for business on schedule. At that time, the renovations were almost complete, although some work remained to be done. The plaintiff complained that he was tired and sore and could not concentrate on finishing the renovations if he also had to attend to customers. The defendant lost his temper with the plaintiff and told him to "stop behaving like a little girl." This upset the plaintiff considerably and at that point the plaintiff felt that the defendant had ended their association. The plaintiff asked whether he could keep his keys until Sunday. The defendant said "of course." Both parties understood that the association was over at that point.

After many additional hours of work by the defendant and his wife, Boxford Gardens opened for the Easter weekend. Boxford Gardens made a profit in 1988 of approximately $1,500. In July, 1988, the defendant sent the plaintiff a check for $500 for "design work."

1. General Laws c. 93A. The relevant inquiry here is whether the parties' activities associated with the development of a business constituted "trade or commerce" pursuant to c. 93A. The parties agreed that the plaintiff was not an employee, but rather that they wished to form some sort of an association: a partnership or a joint venture.

General Laws c. 93A, § 11, provides, in pertinent part:

"Any person who engages in the conduct of any trade or commerce and who suffers any loss of money or property ... as a result of the use ... by another person who engages in any trade or commerce of ... an unfair or deceptive act or practice declared unlawful by section two ... may ... bring an action in the superior court...."

It is well established that disputes between parties in the same venture do not fall within the scope of G.L. c. 93A, § 11. See Zimmerman v. Bogoff, 402 Mass. 650, 662-663, 524 N.E.2d 849 (1988) (c. 93A inapplicable to transactions and disputes between parties to joint venture and fellow shareholders in a close corporation); Riseman v. Orion Research Inc., 394 Mass. 311, 313-314, 475 N.E.2d 398 (1985) (c. 93A inapplicable to claims by corporate stockholder against corporation stemming from dispute as to internal governance of corporation); Manning v. Zuckerman, 388 Mass. 8, 14-15, 444 N.E.2d 1262 (1983) (c. 93A inapplicable to dispute between employer and employee); Newton v. Moffie, 13 Mass.App.Ct. 462, 469-470, 434 N.E.2d 656 (1982) (c. 93A inapplicable to claims between individual members of same partnership which arise from partnership business). The development of c. 93A suggests that the unfair or deceptive acts or practices prohibited are those that may arise in dealings between discrete, independent business entities, and not those that may occur within a single company. Manning v. Zuckerman, supra at 12, 444 N.E.2d 1262. Although the judge ruled that the defendant was acting in a business context, we conclude that c. 93A requires that there be a commercial transaction between a person engaged in trade or commerce with another person engaged in trade or commerce. Once it has been established that a commercial transaction exists, then one may address whether the individuals were acting in a "business context" and apply the test discussed in Begelfer v. Najarian, 381 Mass. 177, 190-191, 409 N.E.2d 167 (1980).

There has been no commercial transaction on these facts in the sense required by c. 93A. The judge relied in part on the facts that the plaintiff sold his services to the business entity being formed by the parties and that the statutory definition of "trade or commerce" includes the act of "offering for sale ... any services." G.L. c. 93A, § 1. However, we concluded in Manning v. Zuckerman, supra, that the "services contemplated by this definition are those offered generally by a person for sale to the public in a business transaction." Id. at 13, 444 N.E.2d 1262. The defendant was not purchasing the plaintiff's services. The defendant and the plaintiff made a private arrangement to form a business together. They both contributed significant efforts to the project. The plaintiff's contribution was to be primarily his time and labor while the defendant was to contribute the property where the business was to be conducted, capital, as well as a lesser amount of time. There never was an exchange of goods or services between the parties, either actual or contemplated.

This is also not a situation where an individual was selling a service, a business, or part of a business. See McEvoy Travel Bureau, Inc. v. Norton Co., 408 Mass. 704, 563 N.E.2d 188 (1990) (travel agency selling travel services to business); Lynn v. Nashawaty, 12 Mass.App.Ct. 310, 423 N.E.2d 1052 (1981) (sale of business assets from one party to another); Bio Vita, Ltd. v. Rausch, 759 F.Supp. 33 (D.Mass.1991) (selling licensing rights to investment group). The plaintiff claims that some of the misrepresentations occurred prior to the formation of their association and therefore it was an "arms-length transaction." The plaintiff's argument is unavailing because the prior events occurred in the course of developing their mutual association which culminated in an...