Opinion
16-P-410
02-06-2017
Habib AMINIPOUR v. Eileen R. MCMANN.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff Habib Aminipour appeals from a judgment dismissing his claims of fraud and negligent misrepresentation against, and to pierce a corporate veil to reach the assets of, the defendant Eileen R. McMann. We affirm, albeit on grounds differing from those adopted by the motion judge on some claims. See Rasheed v. Commissioner of Correction , 446 Mass. 463, 478 (2006).
Background . The judgment of dismissal having been entered on cross motions for summary judgment, we recount, insofar as relevant here, the undisputed facts presented in connection with the motions. McMann was the president of Commonwealth Albanian Hydro Ventures, Inc. (CAHV), in the affairs of which her husband was centrally involved. In her capacity as president, she signed a "Finder's Agreement" in which CAHV promised to pay Aminipour $50,000 if he introduced a willing lender to CAHV. Aminipour then introduced one Joseph Lerman to CAHV; a loan was made to CAHV, with Lerman stating at the closing that he was the lender and Aminipour characterizing himself as "only a broker for the loan." McMann, again in her capacity as president, signed a $300,000 promissory note from CAHV to Lerman, due in thirty days and to bear twenty percent annual interest. The note stated that it was "secured by a ... letter of credit issued by Wachovia Bank, N.A." (Wachovia), and McMann's husband gave Aminipour a letter of credit purporting to be from Wachovia and naming Lerman as the beneficiary.
CAHV defaulted on the note; Aminipour sent CAHV and McMann's husband a "notice of default and demand" signed by Lerman as the "payee-holder"; and Wachovia subsequently refused to honor the letter of credit, informing Lerman that it appeared to be fraudulent. McMann's husband was indicted in Federal court and convicted of wire fraud in connection with, inter alia, the purported letter of credit.
Aminipour filed suit against CAHV, McMann, her husband, Lerman, and others, seeking payment to himself as lender of the $300,000 note plus twenty percent interest. Aminipour's complaint made no claim for or even mention of his $50,000 "finder's fee," which the judge later concluded had indeed been paid to him. Aminipour asserted claims against McMann for fraud and negligent misrepresentation, based on McMann's false statement that the note was secured by a letter of credit. Aminipour alleged that he had made the loan, through Lerman as his "straw," and that in doing so he had relied to his detriment on the false statement. Other than the statement in the note itself, Aminipour identified no false statement by McMann herself regarding the letter of credit. Aminipour also asserted a claim to pierce CAHV's corporate veil so as to recover from McMann individually on CAHV's $300,000 debt to him.
In ruling on the cross motions for summary judgment, the judge determined that it was essentially undisputed that McMann and her husband did not know that Aminipour was the actual lender and Lerman merely his straw. The judge observed that McMann had signed the loan documents solely in her capacity as president of CAHV. And, notwithstanding her husband's conviction, the judge saw "no evidence ... that she participated in her husband's fraud." He also concluded that there was "no evidence ... that she treated [CAHV] as her agent or alter ego" so as to justify piercing CAHV's corporate veil and holding McMann liable for CAHV's debt. He therefore ordered all claims against her dismissed. A separate and final judgment entered under Mass.R.Civ.P. 54(b), 365 Mass. 820 (1974), and Aminipour appealed.
The judge also entered summary judgment in Aminipour's favor, for $236,164.59, on his claims against McMann's husband (who had executed a personal guaranty of the note) and CAHV. As Aminipour had by this time already received $250,000 as restitution in the Federal case, and due both to Aminipour's own fraudulent concealment of his true role in the transaction, and his apparent violation of the usury statute, G. L. c. 271, § 49, the judge limited the judgment to the maximum amount Aminipour could lawfully recover as interest. Aminipour did not appeal that judgment. The resolution of the claims against the remaining defendants has no bearing on the issues in this appeal and therefore will not be discussed further.
Discussion . a. Fraud and negligent misrepresentation . Although we do not consider it dispositive that McMann signed the note solely in her capacity as president of CAHV, we affirm on the alternative ground that McMann's representation that the note was secured by a letter of credit was undisputedly made not to Aminipour, or for the purpose of inducing his reliance, but solely to Lerman, and solely in the text of the note itself. Given the state of the summary judgment record, this was fatal to Aminipour's fraud and negligent misrepresentation claims.
Even without piercing the corporate veil, "[a] corporate officer is personally liable for a tort committed by the corporation that employs him, if he personally participated in the tort." Townsends, Inc . v. Beaupre , 47 Mass. App. Ct. 747, 751-752 (1999), citing Refrigeration Discount Corp . v. Catino , 330 Mass. 230, 235 (1953). See Ray-Tek Servs., Inc . v. Parker , 64 Mass. App. Ct. 165, 177-178 (2005). Contrary to McMann's suggestion, this principle is not limited to officers "employed" by their corporations. See, e.g., Grand Pac. Fin. Corp . v. Brauer , 57 Mass. App. Ct. 407, 414 (2003) ("[A] corporate officer cannot evade personal liability for a tort that he himself committed").
A claim of fraud requires proof, inter alia, that the defendant made a false statement for the purpose of inducing the plaintiff's reliance. See Masingill v. EMC Corp ., 449 Mass. 532, 540 (2007). Similarly, a claim of negligent misrepresentation requires proof, inter alia, that the defendant has "supplied false information for the guidance of others in their business transactions, causing and resulting in pecuniary loss to those others by their justifiable reliance on the information." DeWolfe v. Hingham Centre, Ltd ., 464 Mass. 795, 800 (2013) (numbering of clauses omitted).
Here, McMann's cross motion established as undisputed that at the time of the transaction, Aminipour portrayed himself as the "broker" or "finder," not the lender. McMann argued that the loan was made by Lerman, that Aminipour was not the lender or a party to the loan contract (i.e., the note), and that Aminipour had no standing to sue based on the note. Aminipour, in his response, chose to rest on the fact that McMann had executed the note secured by the letter of credit. Aminipour did not assert, as either a disputed or undisputed fact, that McMann had made any representation about the letter of credit other than that contained in the note itself. Nor did Aminipour argue, or assert as either a disputed or undisputed fact, that McMann intended that Aminipour rely on the representation in the note—an essential element of his fraud claim, see Masingill , 449 Mass. at 540 —or that McMann made that representation for Aminipour's guidance—an essential element of his negligent misrepresentation claim, see DeWolfe , 464 Mass. at 799-800.
Aminipour never asserted that Lerman had indorsed or transferred the note to him; to the contrary, Aminipour attached to his summary judgment motion the notice of default and demand on the note, signed by Lerman as "payee-holder."
At oral argument before us, Aminipour conceded that there was no evidence McMann had made the representation directly to him.
In short, the summary judgment record established as undisputed fact that McMann's only false representation was contained in the note itself, which was given to Lerman, not Aminipour, and that McMann was unaware that Aminipour was or claimed to be the lender or would otherwise rely upon or be guided by the representation. Summary judgment for McMann on the fraud and negligent misrepresentation claims was therefore appropriate.
On appeal, Aminipour argues for the first time, and only in his reply brief, that his claims were viable because, although McMann may have made the misrepresentation solely to Lerman, she should have expected that Aminipour would rely upon it. He cites Reisman v. KPMG Peat Marwick LLP , 57 Mass. App. Ct. 100, 110 (2003) (on fraud claim, plaintiff need only show that he was "among those whom [defendant] had reason to expect would rely upon [defendant's] statements"), and Nycal Corp . v. KPMG Peat Marwick LLP , 426 Mass. 491, 496 (1998), quoting from Restatement (Second) of Torts § 552 (1977) (on negligent misrepresentation claim, plaintiff need only show that he was "the person or one of a limited group of persons for whose benefit and guidance [the defendant] intend[ed] to supply the [false] information or [knew] that the recipient intend[ed] to supply it"). Although these arguments might have avoided summary judgment if raised in the trial court, they were not, and we therefore need not consider them, particularly when asserted only in Aminipour's reply brief. See, e.g., R.W. Granger & Sons, Inc . v. J & S Insulation, Inc ., 435 Mass. 66, 74 (2001) ; Katz, Nannis & Solomon, P.C . v. Levine , 473 Mass. 784, 795 n.15 (2016).
At oral argument, Aminipour conceded that he had not raised these points in the trial court. Several weeks after oral argument, Aminipour submitted a letter pursuant to Mass.R.A.P. 22(c), as amended, 418 Mass. 1601 (1994), arguing that we should consider them notwithstanding the waiver doctrine. We decline to do so. As explained supra , McMann's cross motion argued that Aminipour was not a party to the note and had no standing to sue based upon it. At that point it became incumbent upon Aminipour to explain to the motion judge why he could sue even though the representation in the note had not been made to him. He had the opportunity to do so but did not take it. We see no injustice to Aminipour in holding him to that decision. Also, the waiver doctrine serves, inter alia, the interests of judicial economy, by incentivizing parties to raise all potentially meritorious arguments for the trial court judge's consideration and potential resolution of the case on those bases. We see no reason to undermine those incentives in this instance.
b. Piercing the corporate veil . Having concluded that McMann was entitled to summary judgment on Aminipour's fraud and negligent misrepresentation claims against her individually, we think the judge was also correct in these circumstances in ruling that Aminipour could not pierce CAHV's corporate veil to impose liability on McMann, on the same theories, due to her status as an officer and possibly a shareholder of CAHV.
The record shows only that Aminipour's complaint alleged, on information and belief, that McMann was a shareholder. McMann's answer denied knowledge and information as to this belief and denied knowing how CAHV was held. McMann's husband admitted the allegation, though Aminipour has not explained how that could bind McMann herself.
--------
"Only in rare instances, in order to prevent gross inequity, will a Massachusetts court look beyond the corporate form." Spaneas v. Travelers Indem. Co ., 423 Mass. 352, 354 (1996), citing My Bread Baking Co . v. Cumberland Farms, Inc ., 353 Mass. 614, 620 (1968). Cases decided since My Bread Baking have identified "twelve factors which should be considered in deciding whether to penetrate the corporate form." Evans v. Multicon Constr. Corp ., 30 Mass. App. Ct. 728, 733 (1991), citing Pepsi-Cola Metropolitan Bottling Co . v. Checkers, Inc ., 754 F.2d 10, 14-16 (1st Cir. 1985). "[B]ut the exercise is, of course, not one in counting. One examines the twelve factors to form an opinion whether the over-all structure and operation misleads." Evans , 30 Mass. App. Ct. at 736. "There is present in the cases which have looked through the corporate form an element of dubious manipulation and contrivance, finagling, such that corporate identities are confused and third parties cannot be quite certain with what they are dealing." Ibid . Accord Lee v. International Data Group , 55 Mass. App. Ct. 110, 117 n.7 (2002) ; Ray-Tek Servs., Inc . v. Parker , 64 Mass. App. Ct. 165, 177 (2005).
Here, while the summary judgment record on the issue was thin, and some of the factors might have favored Aminipour and others McMann, we view two fundamental points as dispositive. First, Aminipour identified no uncertainty about with what, or whom, he was dealing. See Evans , 30 Mass. App. Ct. at 736. His agreements were unambiguously with CAHV and with McMann's husband individually, see note 1, supra , and there was no evidence that he was confused into thinking that he was dealing with any other entity or with McMann individually—let alone that he suffered loss as a result of any such confusion. To the contrary, the judge ruled it undisputed that Aminipour, using Lerman as a straw, concealed his own role in the transaction, to collect both his $50,000 "finder's fee" and twenty percent annual interest as lender of $300,000. The judge aptly characterized this as "fraud" on Aminipour's part.
That leads to the second fundamental point: this is not one of those "rare instances" in which it is necessary to look beyond the corporate form "in order to prevent gross inequity" to Aminipour. Spaneas , 423 Mass. at 354.
Judgment affirmed .