Opinion
19-P-926
12-07-2020
GARY D. LINGLEY v. RAYMOND K. HOYLAND & others.
NOTICE: Summary decisions issued by the Appeals Court pursuant to M.A.C. Rule 23.0, as appearing in 97 Mass. App. Ct. 1017 (2020) (formerly known as rule 1:28, as amended by 73 Mass. App. Ct. 1001 [2009]), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 23.0 or rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008).
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
This action arises from a dispute between real estate investors in the sale of an office building. A jury of the Superior Court returned a verdict, and a judgment was subsequently entered, on claims for intentional or reckless misrepresentation, and violation of G. L. c. 93A, in favor of the building's buyer, Gary D. Lingley, individually, and as trustee of the G.L. Realty Trust, and against the sellers, Raymond K. Hoyland and Technical Arts and Sciences Corporation (TASC). The plaintiff agreed to a reduction in damages and an amended judgment was entered on February 8, 2018. The defendants appealed. We affirm.
The remaining two defendants were dismissed at the end of trial prior to the jury's deliberations: Susan V. Reardon was dismissed on a motion for directed verdict, and The Software Works Corporation was dismissed by agreement of the parties. Reardon is not a party to this appeal.
The defendants also appeal from the orders on various posttrial motions. Those orders are subsumed in the February 8, 2018, judgment.
Background. We summarize the relevant facts, reserving certain details for our discussion of the issues. In 2008, Lingley purchased an office building at 1001 Worcester Road in Framingham (the property) from TASC, an entity controlled by Hoyland, a long-time family friend. In addition to the purchase price of $1,450,000, the sale included a promise by Hoyland to loan Lingley up to $50,000 for repairs to the property. To finance the purchase, Lingley obtained a loan of $1,575,000 from Randolph Savings Bank (the bank), secured by a mortgage on the property and two other rental properties Lingley owned. The difference between the property's purchase price and the loan amount was used for closing costs, and to pay off the loan on one of Lingley's existing properties.
The parties agreed that Hoyland and TASC functioned as one, except with respect to a general release involving only Hoyland.
Before buying the property, Hoyland told Lingley that the property's three tenants (each occupying a single floor) had agreed to renew their leases, with increased rents, for an additional three years. Hoyland also told Lingley that the first-floor tenant, a law firm, had offered to buy the building for $1.6 million, but he had decided to give Lingley a better offer because of their friendship, and because Hoyland hoped to do a § 1031 tax exchange with a Cape Cod property in which he was interested. Based on this information, Lingley believed he was getting a good deal. There was abundant evidence that none of these representations were true.
The agreement to purchase the property was initially memorialized in an offer to purchase, and, thereafter, in a purchase and sale agreement (P&S). After signing the offer to purchase, Hoyland provided Lingley with an income and expense statement, including a "rent roll," which contained the current rents of the three tenants, totaling $11,496 per month, or $137,952 per year. Before executing the P&S, Hoyland gave Lingley a pro forma, i.e., an updated financial statement and rent roll reflecting an anticipated increase in the rents, totaling $12,400 per month, or $148,714 per year. Hoyland expressed confidence that the tenants were satisfied and would extend their leases accordingly.
These and other financial documents were prepared by Susan Reardon, Hoyland's accountant, based on information provided by Hoyland.
Relying on Hoyland's financial documents and representations, Lingley and his mortgage broker concluded that the rental income from the property, combined with the rental income from Lingley's two other properties, would be sufficient to cover the mortgage note from the bank. Upon reviewing these same documents, and receiving the purported lease extensions from Hoyland through his attorney, the bank approved the loan. According to the policy and practice of the bank, had it not received the lease extensions, the loan would not have been approved.
The closing took place on September 23, 2008. While Lingley thereafter commenced repairs on the property, the $50,000 loan intended to cover the cost of the repairs did not materialize. Eventually, after multiple attempts by Lingley to obtain the loan, Lingley was directed to go to Hoyland's attorney's office, where on December 2, 2008, the attorney presented him with a promissory note and mortgage, along with a general release, and instructed him to sign the documents in exchange for the loan. Lingley believed that the release was a receipt. By executing the release, however, Lingley agreed to release Hoyland from any liability related to the sale of the property.
While Lingley received $15,775 in two payments out of the $50,000 loan, he never received the total amount, leaving him out-of-pocket for the repairs he had completed. Lingley reached out to Hoyland to obtain additional proceeds on multiple occasions but received neither a response, nor any kind of remedial action.
Contemporaneously, Lingley learned that the actual rents he was receiving were substantially less than what was represented by Hoyland in the pro forma. Hoyland explained the discrepancy as a mistake, and assured Lingley he would correct it. Lingley, in turn, continued to trust him.
Along with his representations that there was an error, in November, Hoyland gave Lingley a check for $1,100 that Lingley believed was to remedy the shortfall in the rent.
Lingley would thereafter discover that Hoyland had misrepresented the updated rents, had forged or altered the lease extensions for two of the three tenants, and had misrepresented the tenants' intentions to remain tenants. The three tenants eventually moved out leaving Lingley unable to make his mortgage payments. Lingley eventually lost the property, and the two other rental properties he had put up as collateral.
Lingley also never received his agreed-to one-half of the $32,546 in arrearages that Hoyland told him was owed by the tenants for "CAM charges" (back real estate taxes and CPI adjustments). Hoyland again claimed that it was a mistake. Lingley later learned that the tenants never paid the charges.
On April 15, 2010, Lingley, individually, and as trustee of G.L. Realty Trust, filed a complaint against Hoyland; TASC; The Software Works Corporation (another Hoyland entity connected to the property); and Susan Reardon, Hoyland's accountant and (at the time of the sale) a minority owner of TASC. The complaint asserted a myriad of claims, and after numerous continuances (but no dispositive motions), a jury trial commenced in May 2017. The jury considered special questions as to the liability of Hoyland and TASC on one claim for intentional or reckless misrepresentation, and a second claim for violation of c. 93A. The jury also considered the enforceability of the general release executed by Lingley with respect to whether it had been procured by fraud, and whether Hoyland had breached his agreement to loan Lingley the $50,000.
A counterclaim filed by Hoyland was not considered by the jury. A crossclaim filed by Reardon against Hoyland was dismissed on her motion for a directed verdict.
The jury returned a verdict on June 6, 2017, and judgment entered thereafter, in favor of Lingley, individually and as trustee, and against Hoyland and TASC, on all questions. An amount in excess of $6 million in damages was initially awarded, reflecting compensatory damages, and additional multiple damages on the c. 93A claim. Motions for a judgment notwithstanding the verdict (JNOV motion), and for a new trial or to alter or amend the judgment (motion for a new trial) were subsequently filed by the defendants. The trial judge denied the JNOV, and conditionally allowed the motion for a new trial contingent upon whether Lingley agreed to file a remittitur reducing the damages, which he did. An amended judgment issued thereafter, containing a revised award in the total amount of $4,679,083.50. The defendants appeal the judgment, the amended judgment, the trial judge's denial of the posttrial motions, and other trial rulings and motions.
While the appeal before us was filed on behalf of Hoyland, TASC, and The Software Works Corporation, the arguments contained therein apply only to Hoyland and TASC.
Discussion. 1. Liability. The jury returned a verdict in response to special questions, finding that Hoyland (acting together with TASC) intentionally or recklessly misrepresented material facts to Lingley, that Hoyland willfully or knowingly committed deceptive acts or practices concerning the sale of the property, and that a general release of these claims was not enforceable. The defendants challenge the verdict arguing, first, that the verdict was against the weight of the evidence, and second, that Lingley had voluntarily executed a written release waiving claims against him. Based on these arguments, the defendants contend that the trial judge erred in denying their motions for JNOV and for a new trial.
We review the denial of the defendants' JNOV motion for abuse of discretion, extending "considerable deference" where, as here, the trial judge and motion judge were the same. Parsons v. Ameri, 97 Mass. App. Ct. 96, 103 (2020). We consider whether the evidence, viewed in the light most favorable to the nonmoving party, is sufficient to support the verdict, such that whether "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be made in favor of the [nonmovant]" (citation omitted). O'Brien v. Pearson, 449 Mass. 377, 383 (2007). A reasonable inference, however, "must be based on probabilities rather than possibilities and cannot be the result of mere speculation and conjecture" (citation omitted). Reading Co-Op. Bank v. Suffolk Constr. Co., 464 Mass. 543, 556 (2013).
The denial of a new trial, on the other hand, "rests in the sound discretion of the judge and we disturb this ruling only if there has been an abuse of that discretion." O'Brien, 449 Mass. at 384. A jury verdict should only be set aside "when it is determined that the jury failed to exercise an honest and reasonable judgment in accordance with the controlling principles of law" (quotation and citation omitted). Id.
a. Reliance. To prove a claim of intentional or reckless misrepresentation, Lingley was required to prove that Hoyland "made a false representation of a material fact with knowledge of its falsity for the purpose of inducing [Lingley] to act thereon, and that [Lingley] relied on the representation as true and acted on it to [his] detriment" (citation omitted). Masingill v. EMC Corp., 449 Mass. 532, 540 (2007). Such reliance must be reasonable. Id. The jury were required to consider whether Lingley's reliance was justifiable in the circumstances, as opposed to blindly relying on representations that could have been discerned as false with a "cursory examination or investigation." Collins v. Huculak, 57 Mass. App. Ct. 387, 392 (2003), quoting Restatement (Second) of Torts § 541 comment a (1977).
The defendants' argument that the verdict was against the weight of the evidence rests primarily on the contention that the evidence precluded Lingley's reasonable reliance on Hoyland's representations. The defendants point to an assortment of evidence that they claim the jury failed to consider, and conclusions the jury improperly reached in the absence of evidence. The defendants' assertions, however, are either contradicted by the record, or are not relevant to whether Hoyland intentionally or recklessly misrepresented material facts in the sale of the property or whether it was unreasonable for Lingley to have relied on such representations.
For example, the defendants argue that there was no evidence that Hoyland forged or altered any of the lease extensions. To the contrary, however, there was testimony from the tenants and from Hoyland, and there was evidence found in a file box previously owned by Hoyland (that came into Lingley's possession upon the sale of the property), that could have been reasonably construed by the jury as evidence that the lease extensions were more likely than not to have been forged and altered by Hoyland. The defendants further argue that Lingley had an opportunity to speak with the tenants but chose not to do so. This assertion, however, was contradicted by Lingley's testimony that Hoyland specifically asked him not to speak with the tenants, and that it would be best to hide Lingley's identity as a prospective buyer so as to not alarm them.
The defendants' assertion that there were no allegations asserted against Hoyland personally is contradicted by their counsel's express agreement at the end of trial that Hoyland was acting on behalf of TASC, and that both he and TASC would be liable for any misrepresentations he was found to have made.
Other assertions by the defendants are not relevant to whether Lingley reasonably relied on Hoyland's misrepresentations, e.g., the assertions that there was no credible testimony as to who provided the bank with copies of the lease extensions; that Lingley had the financial ability to carry the mortgage had the rents remained as stated in the original rent roll; that the bank was negligent for approving Lingley's mortgage; or that Lingley voluntarily agreed to reduce the rent for the first-floor tenant. These facts do not preclude a jury from inferring that Hoyland misrepresented material facts and that Lingley's reliance on these misrepresentations was reasonable.
Nor do such facts suggest that the judge abused his discretion in denying the defendants' request to set aside the jury's verdict or to order a new trial. The record is replete with testimony from Lingley, his mortgage broker, bank representatives, and the tenants, as well as documentary evidence such as financial statements, rent rolls, forged or altered lease extensions (and supporting evidence thereof discovered in the file box), from which a jury could find that Hoyland had made a number of misrepresentations, including false representations about the rents and the intentions of the tenants to remain in the building, and had forged or altered two of the three lease extensions. There was sufficient evidence for the jury to have additionally concluded that these acts and misrepresentations were intended to persuade Lingley to purchase the property, and to convince the bank to approve his mortgage.
The jury could also infer that Lingley reasonably relied on these false representations given that Hoyland was a trusted family friend, and that, based on this trust, Lingley was misled and lulled into complacency. Lingley's reliance was further justified by being given financial statements prepared by an accountant that were consistent with Hoyland's representations; by having hired a mortgage broker to help him understand the details of the transaction; by having the bank affirm the legitimacy of the transaction and the leases by approving the mortgage; and by not coming into possession of the lease extensions (nor discovering the file box with the incriminating evidence) prior to the closing.
The defendants additionally argue that there was no evidence to support "Lingley's claim that he had no ability to read." Lingley, however, did not assert this. Instead, he characterized himself as more of an unsophisticated real estate investor who, for multiple reasons, struggled with some of the business aspects (such as understanding the details of a lease), and learned through a real estate seminar that he could rely on the bank as the mortgagor to verify the legitimacy of the transaction.
It is worth underscoring that Lingley was not the only one taken in by Hoyland's false representations or lease manipulations; the list includes Reardon, as Hoyland's accountant, Lingley's mortgage broker, as well as the bank's loan committee, the bank's senior loan officer, the appraiser, and the bank's attorney. Indeed, in this company of sophisticated financial and real estate professionals, one cannot say that Lingley blindly relied on false representations that could have been discovered with a "cursory examination or investigation" (citation omitted). Collins, 57 Mass. App. Ct. at 392. In these circumstances, a jury could find Lingley's reliance was justifiable.
In all, the evidence amply supports the jury's finding that Hoyland misrepresented material facts to Lingley, intending that Lingley rely on these misrepresentations, and that Lingley's reliance was reasonable. Such evidence further supported a c. 93A claim with multiple damages. Accordingly, we agree with the trial judge that the evidence presented to the jury was sufficient to warrant denial of the defendants' JNOV motion, and that the judge did not abuse his discretion to deny a new trial.
b. Release. Approximately ten weeks after the closing, after being told by Hoyland to contact his attorney, Lingley, at the attorney's direction, executed a general release under seal, releasing Hoyland from any liability related to the sale of the property in exchange for the right to borrow up to $50,000 for repairs. The jury determined that the release was not enforceable because it had been procured by fraud, and because Hoyland had breached his agreement to loan Lingley the $50,000. A release is voidable if the released party either procures the release by fraud, or materially breaches the agreement, whereby the releasing party's obligations under the agreement would be excused. See Green v. Harvard Vanguard Med. Assocs., Inc., 79 Mass. App. Ct. 1, 9, 11 (2011).
Hoyland contends that the release bars recovery because most, if not all, of the allegations of wrongdoing occurred prior to Lingley's signing of the release, and therefore it is not reasonable for Lingley to claim that the release was induced by fraud. Hence, according to Hoyland, at the time of execution Lingley already knew that the rent from the tenants was lower than what he had expected, knew that one of the tenants had given their twelve-month notice to vacate, and knew that the leases of the other two tenants had been either forged or altered.
We disagree. First, Lingley testified that Hoyland's attorney did not explain what the release was and, as a result, Lingley believed that the release was a receipt for the money he was given pursuant to the loan. Second, at the time he signed the release Lingley had not yet discovered that the lease extensions from two of the tenants had been forged or altered, or that a third tenant had given a twelve-month notice to vacate. Finally, as it was two and one-half months after the closing, Lingley was still discovering and processing the information he was gathering concerning the lower-than-expected rents, and the intentions of the tenants to remain tenants. Lingley was also still in the midst of reaching out to Hoyland to address the issues, and given the trust he placed in Hoyland, accepted Hoyland's assurances that these discrepancies were all mistakes, and that Hoyland would fix them. In determining justifiable reliance, the jury may consider whether Hoyland attempted to mislead or lull Lingley into ignoring obvious conflicts in the facts. See Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass. 459, 468 (2002).
Hoyland also argues that there was no material breach of Hoyland's agreement to loan Lingley up to $50,000 for repairs given that Lingley had, in fact, borrowed a portion of the loan (in the total amount of $15,775) on two separate occasions. These two payments, however, do not constitute full performance as the remaining funds never materialized despite multiple efforts by Lingley to obtain them. Lingley ended up using his own money to complete the repairs. On these facts, the jury could have found that Hoyland breached the agreement. See Thomas v. Webster Spring Co., 37 Mass. App. Ct. 180, 183 (1994) ("When an instrument under seal promises consideration, failure of consideration can be shown despite the seal").
In sum, we find that there was sufficient evidence from which the jury could have concluded that Hoyland had procured the release by fraud, and had breached his agreement to loan Lingley $50,000; and that either one of these findings would have been sufficient to void the release. We find no abuse of discretion on the part of the trial judge in denying the defendants' JNOV motion and motion for a new trial on these grounds.
2. Damages. The jury's award of single damages in the amount of $1,750,000 was reduced by the trial judge to $1,300,000 in response to the defendants' motion for a new trial, and upon Lingley's remittitur. An amended judgment was subsequently entered to reflect the reduction. The defendants, however, appear to be challenging the original judgment entered on the jury's award, rather than the amended judgment entered on the judge's order. The arguments presented by the defendants on appeal, echoing their arguments in their original motion for a new trial, focus exclusively on the award as determined by the jury, i.e., whether the jury's $1,750,000 award was warranted or excessive, whether the jury adhered to the judge's instructions, or whether the jury properly applied the benefit-of-the-bargain measure in determining damages. Such arguments concerning the jury's determination were not only rendered moot by the subsequent determination of the trial judge, but as these arguments do not address the amended judgment, the defendants have not furnished us with any basis to set aside the revised award. "The appellate court need not pass upon questions or issues not argued in the brief." Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1629 (2019).
Notwithstanding the above, and exercising our discretion in any event to consider the issue, we find that the judge did not abuse his discretion in awarding Lingley damages to make him whole, including a reasonable benefit-of-the-bargain amount reflecting Lingley's loss of not only the property, but also the loss of other rental properties, plus compensation for the labor and money he put into the property by way of repairs, other costs such as the broker's fee, and additional monies falsely promised by Hoyland. See VMark Software, Inc. v. EMC Corp., 37 Mass. App. Ct. 610, 619 (1994) (plaintiff is entitled to all damages suffered as "proximate result" of defendant's misleading representations, "including all 'out of pocket' expenses incurred in connection with the transaction, so as to restore the status quo ante, as if the transaction had never occurred"). Thus, a single damages award in the amount $1,300,000 constitutes a reasonable and fair measure of damages.
The defendants also claim that the judge's failure to reduce the damages award by the amount obtained by Lingley in a settlement with the bank in a related action constituted reversible error. See Morea v. Cosco, Inc., 422 Mass. 601, 602-603 (1996) (while evidence of settlement agreement in related action is typically not admissible, award of damages should be appropriately reduced to reflect amount already received). We, again, agree with the trial judge that, in this case, Lingley did not receive a cash settlement from the bank, nor was his debt forgiven. Instead, the bank and Lingley agreed that the property would be sold (and not foreclosed upon), with the proceeds going to the bank, in exchange for a percentage of any recovery received in this action. In these circumstances, there is no windfall requiring a reduction in damages.
We discern no abuse of discretion, or miscarriage of justice, in the judge's decision to reduce the award and deny the defendants a new trial on damages. See Reckis v. Johnson & Johnson, 471 Mass. 272, 299 (2015) (award of damages must stand unless permitting it to stand would be abuse of discretion, amounting to error of law, such as if damages awarded were greatly disproportionate to loss or represented miscarriage of justice).
3. Motions for directed verdict, motions in limine, and evidentiary rulings. The defendants assert a number of arguments without citation to any legal authority. As these general assertions fail to rise to the level of appellate advocacy, they constitute claims not adequately argued on appeal and are thus waived. See Maroney v. Planning Bd. of Haverhill, 97 Mass. App. Ct. 678, 683 n.8 (2020), citing Mass. R. A. P. 16 (a) (9) (A). Accordingly, we need not address the trial judge's denial of the defendants' motions for a directed verdict; denial of several motions in limine; failure to instruct the jury to strike Lingley's use of the word "forgery" when describing one of the tenant's signature on a lease extension; or failure to preclude a bank representative from testifying about the future value of the property.
Conclusion. For all the foregoing reasons, we find no error in the trial judge's order denying the defendants' motions for judgment notwithstanding the verdict, for a new trial, or to alter or amend the judgment, or in the judge's trial rulings, or orders denying the defendants' motions for directed verdict, and motions in limine.
Given our decision here, we need not address the defendants' few remaining arguments with respect to rulings on cross-examination, the preclusive effect of the parties' P&S, or whether the judge erred in allowing the introduction of documents stored in a file box that the defendants consider to have been stolen.
Amended judgment entered on February 8, 2018, affirmed.
By the Court (Desmond, Ditkoff & Singh, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: December 7, 2020.