Summary
rejecting the argument that the knowledge of individual unit owners governs because individual owners do not have a fiduciary duty to the Trust and their ability to bring a derivative action regarding common areas is restricted
Summary of this case from Berish v. Bornstein, NoOpinion
No. 94-3597-H
June 27, 2000
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT
In 1987, construction commenced on the Back of the Hill Townhouses Condominium ("BOTH"), a 165 unit condominium mixed-income townhouse complex that sprawls over eight residential streets in the Roxbury and Jamaica Plain communities of Boston. BOTH's developer was a non-profit company — the defendant Bricklayers and Laborers Non-Profit Housing Company, Inc. ("Bricklayers"), whose President was the defendant Thomas McIntyre ("McIntyre"). As developer, the Bricklayers retained the defendant Turner Construction, Inc. ("Turner") as its general contractor and the defendant William Rawn Associates Architects, Inc. ("Rawn") as its architect. All eight phases of construction took place in 1988 and 1989, when construction was substantially completed.
On December 12, 1988, as required by G.L.c. 183A, the Bricklayers created the Back of the Hill Townhouses Condominium Trust ("the Condominium Trust" or "Trust") as the Organization of Unit Owners to manage and regulate BOTH, which it had created by a Master Deed that same day. The Bricklayers installed McIntyre, its President, and Patrick Walsh, its Treasurer, as the Original Trustees of the Condominium Trust. On March 29, 1991, McIntyre and Walsh resigned as Trustees, their resignation becoming effective on the date their resignation was recorded at the Registry of Deeds, which did not take place until September 11, 1991. They were replaced by the Trustees elected by BOTH's unit owners at a Special Meeting on December 10, 1990 — the plaintiff Trustees Alfreda Harris, Roger Dow, Linda Percy, Mary Urban, and Randy Meyers Wolfson ("the plaintiffs" or "the plaintiff Trustees").
All appear to agree that Walsh was only nominally a Trustee and that McIntyre essentially served as the sole Original Trustee.
These elected Trustees, on behalf of the Condominium Trust, brought this action against the defendants on July 5, 1994, alleging eleven counts:
Count I: Breach of fiduciary duty against McIntyre
Count II: Breach of contract against Bricklayers
Count III: Negligence against Bricklayers
Count IV: Breach of implied warranty against Bricklayers
Count V: Negligence against Turner
Count VI: Breach of implied warranty against Rawn
Count VII: Negligence against Rawn
Count VIII: Violations of G.L.c. 93A against Bricklayers
Count IX: Violations of G.L.c. 93A against McIntyre
Count X: Breach of implied warranty against Turner
Count XI: Violations of G.L.c. 93A against McIntyre
Count XI was actually added in the amended complaint, and is identical in substance to Count IX except that Count XI adds allegations of knowing and willful behavior, of violations of regulations, and of McIntyre's failure to make an offer of settlement in reply to the demand letter. In addition, Count IX alleges a violation of G.L.c. 93A, § 11, while Count XI alleges a violation of G.L.c. 93A, § 9.
The crux of their complaint is that "[t]he common areas of the condominiums, as designed, constructed, and delivered, are replete with myriad defects and deficiencies," including, but not limited to:
"water penetration through improper construction and installation of walls, windows.
b. improper and deficient roofing installation and construction as to flashing, siding, trimming, and gutter installation.
c. improper and deficient siding installation, including a lack of vapor barrier, and improper caulking and flashing.
d. improper and deficient construction of ventilation ducts.
improper and deficient installation of plumbing fixtures including outside faucets.
improper and deficient site grading as to porches, balconies and associated stairways.
improper and deficient construction of porches, balconies and associated stairways."
Amended Complaint at ¶ 19. The plaintiffs blame Bricklayers, Rawn, and Turner for creating these defects through their negligence, and McIntyre for failing to investigate, discover, and disclose these defects.
The defendants have each moved for summary judgment as to all counts. Their motions raise many difficult legal issues, which I shall resolve in turn.
The third-party defendants have filed memoranda in support of defendant Turner's motion for summary judgment.
Turner's Motion for Summary Judgment The Negligence Claim (Count V)
Turner rests its motion for summary judgment on the negligence claim on the argument that this claim is time-barred under the three year statute of limitations established in G.L.c. 260, § 2B, which provides in pertinent part:
Actions of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property . . . shall be commenced only within three years next after the cause of action accrues; provided, however, that in no event shall such actions be commenced more than six years after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner.
G.L.c. 260, § 2B. Since the complaint was filed on July 5, 1994, this Court must determine whether there is any genuine issue of material fact as to whether the negligence cause of action against Turner accrued before July 5, 1991.
In order to reach that determination, this Court must first determine, as a matter of law, when the cause of action accrued. In White v. Peabody Construction Co., Inc., 386 Mass. 121 (1982), the Supreme Judicial Court determined when a cause of action accrued on a negligence claim in a construction case:
In all cases the statute of limitation begins to run when the injured person has notice of the claim. The "notice" required is not notice of every fact which must eventually be proved in support of the claim. . . Rather, "notice" is simply knowledge that an injury has occurred.
Id. at 130. However, the Court recognized the existence of the "discovery rule under which certain causes of action based on inherently unknowable wrongs do not accrue until the plaintiff learns, or reasonably should have learned, that he has been harmed by the defendant's conduct." Id. at 129.
Turner argues that the discovery rule is triggered only when the plaintiffs did not know (and reasonably should not have known) that they had been injured. The plaintiff Trustees argue that the discovery rule is triggered when the plaintiffs know of an injury but do not know (and reasonably should not know) that the injury was caused by the defendant's negligence. Both arguments find support in the Supreme Judicial Court's language in White. In White, the plaintiffs sued the developer and general contractor of a housing project for design and construction defects that caused water to leak into the common areas of the project. Id. at 122-123. The Court held that the discovery rule did not apply in White because the plaintiffs admitted that the building had been plagued with serious leakage from its inception and this knowledge was sufficient to put the plaintiffs on notice that they had been injured. Id. at 129. Turner focuses on this language in arguing that the plaintiffs' cause of action accrued when they had knowledge of serious leakage, regardless of whether or not they understood the cause of the leakage. However, the Court in White later declared that the discovery rule did not apply in that case because the plaintiffs "should reasonably have known that widespread water leaks in a newly constructed building are almost certainly the result of design or construction defects." Id. at 130. The plaintiff Trustees seize upon this language to argue that the plaintiffs' cause of action did not accrue until they knew or reasonably should have known that the leakage was the result of design or construction defects.
In order to resolve this debate, this Court looks to the Supreme Judicial Court's more complete discussion of when a cause of action accrues in another type of negligence case — where medical malpractice is alleged. Under G.L.c. 260, § 4, as with G.L.c. 260, § 2B, a malpractice action against a physician must be commenced within three years "after the cause of action accrues." In 1980, in Franklin v. Albert, the Supreme Judicial Court for the first time declared that a cause of action for medical malpractice did not accrue until the "patient learns, or reasonably should have learned, that he has been harmed as a result of a defendant's conduct." 381 Mass. 611, 612 (1980). More recently, in McGuinness v. Cotter, the Supreme Judicial Court clarified that a malpractice cause of action accrues when the patient: "(1) knew or had sufficient notice that she was harmed; and (2) knew or had sufficient notice of the cause of the harm." 412 Mass. 617, 627 (1992). Notice is sufficient to start the limitations clock when the plaintiff possessed sufficient information or was aware of such suspicious circumstances that she recognized (or a reasonably prudent person in the plaintiff's position should have recognized) that the medical treatment she received from the defendants may have caused her harm. See McGuinness v. Cotter, 412 Mass. at 627 (cause of action accrues when plaintiff had "knowledge or sufficient notice that the obstetrical care she received from the defendants may have caused [plaintiff's] disabilities."); Bowen v. Eli Lilly Co., 408 Mass. 204, 207 (1990) (must be "significant notice of causation" such that "a reasonable person in the position of the plaintiff would have been on notice that her mother's ingestion of DES may have caused the plaintiff's cancer"); Fidler v. Eastman Kodak Co., 714 F.2d 192, 199 (1st Cir. 1983) ("notice of likely cause is ordinarily enough to start the statute running"); Malapanis v. Shirazi, 21 Mass. App. Ct. 378, 383 (1986) ("the three-year limitations period commences to run when a reasonably prudent person (in the tort claimant's position), reacting to any suspicious circumstances of which he might have been aware (what the Court of Appeals in Fidler called 'likely cause'), should have discovered that he had been harmed by his physician's treatment").
This Court does not believe there is any sound reason for the standard as to when a cause of action accrues to be different in a construction case than a medical malpractice case. Nor does this Court believe that the Supreme Judicial Court intended to articulate different standards. This Court concludes that, regardless of whether the substance of the claim is the alleged negligence of a general contractor, an architect, or a physician, a cause of action does not accrue until the plaintiff (1) knows or should know that she was harmed, and (2) possesses sufficient information or becomes aware of such suspicious circumstances that she recognizes or should recognize that the defendant's conduct may have caused the harm.
Identifying the amount of information needed to trigger this duty of inquiry is no simple task. Certainly, the information need not be so great that it demonstrates negligence. McGuinness v. Cotter, 412 Mass. at 627; Bowen v. Eli Lilly Co., 408 Mass. at 208. Nor need it demonstrate the full extent of the causal connection. White v. Peabody Construction Co., Inc., 386 Mass. at 130 ("The 'notice' required is not notice of every fact which must eventually be proved in support of the claim."); Malapanis v. Shirazi, 21 Mass. App. Ct. at 386. It must, however, be significant enough to alert a person of ordinary prudence in the plaintiff's position of the reasonable likelihood that the injury was caused or substantially worsened by another's conduct. See Bowen v. Eli Lilly Co., 408 Mass. at 207 (statute of limitations starts to run when "an event or events have occurred that were reasonably likely to put the plaintiff on notice that someone may have caused her injury"); Hendrickson v. Sears, 365 Mass. 83, 89 (1974) ("cause of action accrues on the happening of an event likely to put the plaintiff on notice").
It is in the application of this standard that the Supreme Judicial Court appears to distinguish between cases alleged medical negligence and those alleging negligence in the design and construction of newly-built structures, and for sound reasons. A physician does not create the human body he is treating, so ailments following his treatment cannot always so readily be attributed to his conduct. A developer, general contractor, and architect, in new construction, do literally create the buildings from scratch, so problems that emerge following the completion of construction often reasonably alert the owner or occupants to the reasonable likelihood that the problems are the result of design or construction defects. That is why the Supreme Judicial Court, as a matter of law, can declare in White v. Peabody Construction Co., Inc. that the plaintiffs "should reasonably have known that widespread water leaks in a newly constructed building are almost certainly the result of design or construction defects." 386 Mass. at 130.
In determining when the cause of action accrues, this Court must also determine whose knowledge shall be deemed the knowledge of the plaintiff Trustees. The plaintiff Trustees were all unit owners but they were not elected until December 10, 1990, did not assume the duties of Trustees until the resignation of McIntyre and Walsh on March 29, 1991, and did not formally become Trustees until the resignations of McIntyre and Walsh were recorded at the Registry of Deeds on September 11, 1991. They argue that it is their own collective personal knowledge which must be considered in determining when the cause of action accrued. The defendant Turner argues that it is the knowledge of any unit owner which governs, since every unit owner held the power to assert these claims through a derivative action. See Cigal v. Leader Development Corp., 408 Mass. 212, 219 (1990). This Court finds that it is the collective knowledge of the Trustees and their agents that constitutes the knowledge of the Trust for purposes of identifying when a cause of action accrues.
While the plaintiffs are the Trustees, the true plaintiff in interest is the Condominium Trust. The Trustees in this action are acting solely on behalf of the Condominium Trust and it is the Trust that will be the beneficiary of any judgment procured by its Trustees. See G.L.c. 183A, § 10 (unit owners trust is empowered to conduct litigation regarding common areas and facilities); Declaration of Trust at § 2.4 (Trustees hold all common areas and facilities in trust for beneficial interest of unit owners). Indeed, the Trust is the only entity that can litigate claims for negligent construction of the common areas. Cigal v. Leader Development Corp., 408 Mass. at 219. Therefore, it is the Trust's knowledge that is determinative of when a cause of action accrues.
A cause of action is deemed to accrue upon knowledge of a potential claim because the knowledge allows the putative plaintiff to act upon that knowledge by filing suit. Therefore, the knowledge that matters for a Trust is the knowledge of those who may act on behalf of the Trust. A Trust routinely may act through its Trustees. In addition, the Condominium Trust was specifically authorized by the Declaration of Trust to employ agents as deemed appropriate to manage the Trust property and conduct the business of the Trust. Declaration of Trust at § 5.1.15. Pursuant to this authority, on December 15, 1988, just three days after the execution of the Declaration of Trust that created the Condominium Trust and empowered the Trustees, the Trust entered into a Management Agreement with Barkan Management, Inc. ("Barkan") in which it retained Barkan as its agent to supervise the operation and management of the common areas and facilities. It is a well-accepted precept of agency law that a principal is bound by the acts and knowledge of its agent. See generally Restatement (Second) of Agency, § 272 (1957); Sarvis v. Boston Safe Deposit and Trust Company, 47 Mass. App. Ct. 86, 96 (1999); United States v. Bank of New England, 821 F.2d 844, 856 (1st Cir. 1987). Indeed, a principal may be bound by his agent's actions even if the agent violated his instructions and acted in a manner expressly forbidden by the principal. See generally Restatement (Second) of Agency §§ 8A, 160, 161, and 194 and associated commentary (1957); Alperin Shubow, 14 Massachusetts Practice: Summary of Basic Law, §§ 1.26, 1.30, and 1.32. Therefore, it is hardly unfair to conclude that a Trust is deemed to have notice of a claim if either a Trustee or its agent has notice of a claim.
This Court recognizes that the individual unit owners can assert claims regarding common areas directly through a derivative action. Cigal v. Leader Development Corp., 408 Mass. at 219. However, in order to file a derivative action in Massachusetts, the plaintiff unit owner must allege with particularity the efforts he made to cause the Trustees to file the action or, if no such efforts were made, the reasons why such efforts were futile. See Mass.R.Civ.P. 23.1. He also must establish that he fairly and adequately represents the interests of the similarly situated unit owners. Id. The mere fact that a unit owner could, in theory, litigate a claim on behalf of the Trust is not sufficient to attribute his knowledge to that of the Trust, because a unit owner does not have the same fiduciary duty to the Trust as a Trustee or an agent, and a unit owner is restricted by law in his ability to bring such a claim. Indeed, if a unit owner's knowledge alone were enough to deem a cause of action to have accrued, a Trust may be foreclosed from bringing suit on a claim on statute of limitations grounds when a single unit owner, and nobody else, had notice of the claim more than three years earlier. Therefore, this Court finds that the collective knowledge of the Trustees and its agent — Barkan — constitutes the knowledge of the Trust for purposes of determining when a cause of action accrues.
In examining the collective knowledge of the Trustees and Barkan before July 5, 1991, the date three years before the filing of the complaint on July 5, 1994, it is plain that McIntyre and Barkan had a great deal of knowledge about unit owners' complaints regarding water leaking into units through the foundation and roofs, and about concrete steps pulling away from the foundation. McIntyre specifically concedes this knowledge in his affidavit. McIntyre even admits that a subcontractor, A.A. Will Corporation, was retained to install a french drain to prevent water from penetrating some building foundations and that he did not bill the cost of the french drain to the Trust because he "felt the problem was a construction cost and not a maintenance cost." He also conceded that he caused persons to be hired to caulk the steps that were separating from the building foundations and that he did not bill the Trust for this work because he "felt the problem was construction cost and not a maintenance cost." McIntyre recognized the roof leak problems to be serious enough to cause persons to be hired to caulk the roofs, though he viewed these as maintenance costs and billed their work to the Trust. All of this work was completed before July 5, 1991, so the problems had to have been known before that date. Knowledge of these problems prior to July 5, 1991 is supported by more than simply McIntyre's affidavit. There are numerous maintenance requests and complaints from unit owners to McIntyre and Barkan complaining of roof, ceiling, and gutter leaks, and separation of the front stairs from the foundation. There were interoffice memoranda between McIntyre and Barkan about the need for roof and stairs caulking. The plaintiff Trustees, in both questionnaires and depositions, admitted to knowing before July 5, 1991 about serious problems of water leaks and stair separation.
The plaintiffs make three arguments why their negligence claim should not be deemed to have accrued before July 5, 1991 despite this knowledge. First, they contend that McIntyre held most of this information, and he breached his fiduciary duty to the unit owners by failing to act upon it. This argument will be discussed at length later in this decision in considering the plaintiffs' claims against McIntyre individually and the Bricklayers. It suffices here to say that this argument cannot be used against Turner, with whom McIntyre had no affiliation.
Second, they contend, in the alternative, that neither McIntyre nor the Trustees had enough information to be on notice that the source of the water leak problems and stair separation were design or construction defects rather than maintenance problems. This Court is mindful that, in considering summary judgment, "the question when a plaintiff knew or should have known of his cause of action is one of fact which in most instances will be decided by the trier of fact." Riley v. Presnell, 409 Mass. 239, 240 (1991); Castillo v. Massachusetts General Hospital Chelsea Memorial Health Care Center, 38 Mass. App. 513, 515 (1996). This Court is also mindful that, in evaluating a summary judgment claim, I am obliged to rely only on facts not in dispute and disputed facts viewed in the light most favorable to the party opposing summary judgment, which in this case are the plaintiffs. Beal v. Board of Selectmen of Hingham, 419 Mass. 535, 539 (1995). Yet, I am also mindful that the Supreme Judicial Court has declared, in evaluating whether the discovery rule applies to a claim otherwise barred by the statute of limitations, "Inherent unknowability is not a fact, but rather a conclusion to be drawn from the facts." Melrose Housing Authority v. New Hampshire Insurance Co., 402 Mass. 27, 31 n. 4 (1988). Most importantly, I recognize that the Supreme Judicial Court in White v. Peabody Construction Co., Inc., which presented facts on summary judgment quite similar to those presented here, found as a matter of law that the plaintiffs "should reasonably have known that widespread water leaks in a newly constructed building are almost certainly the result of design or construction defects." 386 Mass. at 130. Relying on that controlling precedent, this Court finds, as a matter of law, that the Trust had sufficient information prior to July 5, 1991 to alert a person of ordinary prudence in the plaintiffs' position of the reasonable likelihood that the leaks and stair separation were caused by design or construction defects. Id. As a result, the negligence cause of action accrued before that date and is barred by the three year statute of limitations.
The plaintiffs' third argument is that, even if the knowledge of the Trust may bar some share of its claims against Turner, it does not bar all of its claims. Specifically, the plaintiffs seek to salvage two types of damage to BOTH's common areas: (1) defective design and installation of flashing and vapor barrier in the brick masonry cavity, and (2) balcony settlement. Notice of one type of design or construction defect does not necessarily constitute notice of all design or construction defects. Campanile v. Suffolk Construction Company, Inc., 1994 WL 879741 (Mass.Super. 1994) (Fremont-Smith, J.). At the same time, notice of one problem that may result from a design or construction defect may provide notice as to another problem likely to emanate from the same design or construction defect. In this case, the separation of the stairs from the foundation provided notice of the reasonable likelihood of settlement defects, which properly should have triggered inquiry into their cause. The problems of balcony settlement were simply another manifestation of the alleged settlement defects. The fact that the balconies did not sag from the settlement problems until after July 5, 1991 does not mean that the Trust did not have notice of the settlement defects before that date. Since the Trust had knowledge of facts which should have provided notice of the settlement defects, a negligence cause of action based on the balcony settlement is also foreclosed by the statute of limitations.
This Court is aware that one of the plaintiff Trustees, Roger Dow, testified at deposition that, beginning in June 1990, he observed the balconies on Ellingwood Street "bending out into the street." However, the Court does not rest its statute of limitation finding with respect to the balcony settlement on this testimony because there was contrary evidence that the balcony settlement problems did not surface until after June 5, 1991. There is, however, no genuine dispute that the stairway settlement problems had surfaced before June 5, 1991, and it is solely on that basis that this Court bars the negligence cause of action to the extent that it alleges settlement defects in design or construction.
It is far less plain that knowledge of the water leaks provided notice of the reasonable likelihood of defects in the design and installation of flashing and vapor barrier in the brick masonry cavity, so this Court will deny summary judgment on this portion of the negligence claim. The evidence in the record reflects that these alleged defects were reasonably likely to have been the source of water condensation in the walls, but there is little evidence that condensation problems were known to be widespread at BOTH before July 5, 1991. Since there are genuine issues of material fact as to whether the water condensation problems were well known to the Trust before July 5, 1991 and whether the well known water leak problems provided notice of the reasonable likelihood of defects within the brick masonry cavity, these statute of limitations issues cannot be decided as a matter of law and properly should be decided by the trier of fact. See Riley v. Presnell, 409 Mass. at 240. Therefore, Turner's motion for summary judgment on the negligence claim (Count V) is allowed except to the extent the claim alleges negligence in the design or construction of the flashing and vapor barrier in the brick masonry cavity.
The Breach of Implied Warranty Claim (Count X)
The plaintiffs contend that, even if their negligence claim against Turner were to fail on statute of limitations grounds, their breach of implied warranty claim nonetheless survives because it sounds in contract, with its six year statute of limitations period. The breach of implied warranty claim, however, in substance is simply a negligence claim dressed as a contract claim. The complaint alleges that the breach of implied warranty is Turner's failure "to construct the buildings in a good and workmanlike manner," which is different phraseology for claiming that Turner was negligent in its construction.
The three year statute of limitations set forth in G.L.c. 260, § 2B in "[a]ctions of tort for damages arising out of any deficiency or neglect in the design, planning, construction or general administration of an improvement to real property" cannot be avoided simply by framing the allegations as a breach of implied warranty. McDonough v. Marr Scaffolding Co., 412 Mass. 636, 642 (1992). As in McDonough, "[t]he plaintiffs' breach of warranty claims essentially allege the same elements as the negligence claims . . . ." Id. "To allow the plaintiffs to recast their negligence claim in the form of a warranty claim in order to circumvent the operation of [§ 2B] would nullify the purpose of [that statute] altogether." Id. at 642-643. See also Klein v. Catalano, 386 Mass. 701, 719-720 (1982) (when plaintiff is barred under G.L.c. 260, § 2B from bringing a negligence claim, he cannot bring essentially the same claim under a breach of implied warranty theory); Anthony's Pier Four, Inc. v. Crandall Dry Dock Engineers, Inc., 396 Mass. 818, 823 (1986) ("A plaintiff may not, of course, escape the consequences of a statute of repose or statute of limitations on tort actions merely by labeling the claim as contractual.").
The Supreme Judicial Court in McDonough was focused on preserving the repose provisions of § 2B, but its rationale applies with equal force to the limitation provision of that statute, which also reflects the Legislature's "balance between the public's right to a remedy and the need to place an outer limit on the tort liability of those involved in construction." Id. at 643 quoting Klein v. Catalano, 386 Mass. 701, 710 (1982). Indeed, if the plaintiffs' arguments prevailed here, the effective statute of limitations for such claims would be six years, the same length of time established in the statute of repose in § 2B. The Legislature plainly did not intend the statute of limitations and the statute of repose to be identical.
Therefore, Turner's motion for summary judgment on the plaintiffs' breach of implied warranty claim (Count 10) is allowed to the same extent as its motion for summary judgment on the plaintiffs' negligence claim — it is allowed except to the extent the claim alleges a breach of implied warranty in the design or construction of the flashing and vapor barrier in the brick masonry cavity.
Rawn's Motion for Summary Judgment
The entirety of the discussion above regarding Turner's motion for summary judgment on the claims of negligence and breach of implied warranty apply with equal force to the claims against Rawn of negligence (Count VII) and breach of implied warranty (Count VI). However, there is one substantial difference between Turner and Rawn that requires that Rawn's motion for summary judgment on statute of limitations grounds be allowed in its entirety and not simply in large part — all claims against Rawn, as a matter of contract, accrued on the date of substantial completion, which was long before July 5, 1991.
Section 11.3 of the Standard Form of Agreement Between Owner and Architect, executed by the Bricklayers and Rawn on July 2, 1987, provides:
As between the parties to this Agreement, as to all acts or failures to act by either party to this Agreement, any applicable statute of limitations shall commence to run and any alleged cause of action shall be deemed to have accrued in any and all events not later than the relevant Date of Substantial Completion of the Work, and as to any acts or failures to act occurring after the relevant Date of Substantial Completion, not later than the date of issuance of the final Certificate for Payment.
The plaintiffs concede that the Date of Substantial Completion of the Work was no later than April 1989. However, they contend that this contractual agreement regarding the accrual date does not apply to them, since Bricklayers, and not the Trust, was the signatory to this Agreement and the Bricklayers never assigned its interest in this Agreement to the Trust.
It is true that the Bricklayers never formally assigned to the Trust its interest in the Agreement but the Trust, with respect to its relationship to the architect, is nonetheless pragmatically a successor in interest to the Bricklayers. Under G.L.c. 183A, § 8, the Master Deed that creates a condominium must include the name of the trust through which the unit owners will manage and regulate the condominium. The Trust, upon its creation, may litigate all claims regarding the common areas and facilities. G.L.c. 183A, § 10(b)(4); Cigal v. Leader Development Corp., 408 Mass. at 219. In short, only the developer can litigate claims against the architect regarding construction defects before the Master Deed is executed creating a condominium, but both the developer and the trust can litigate such claims after the Master Deed is executed.
Moreover, after the condominium is created, the financial interest in the condominium also passes from the developer to the unit owners, represented by the Trust. When a person purchases a condominium unit, he receives an undivided interest in the common areas and facilities, as set forth in the Master Deed, roughly approximate to the relation of the fair value of his unit to the fair value of all units. G.L.c. 183A, § 5. The unit owner's interest in the trust is equal to his proportionate interest in the common areas and facilities. G.L.c. 183A, § 10. Therefore, at the beginning of the condominium, when the developer still owns all or most of the units, the developer controls the trust. As more and more units are sold to unit owners, the developer's interest in the trust diminishes until, when all the units are sold, the developer's interest in the trust equals or approaches zero. Therefore, the trust, for all practical purposes, becomes the successor in interest to the developer both in terms of its power to litigate and its financial stake in the condominium.
As the successor in interest to Bricklayers, the Trust must abide by the accrual date contractually contained in the Agreement unless public policy prohibits the enforcement of such a provision. It does not. Where the parties to an agreement, as here, are sophisticated business entities engaged in a negotiated arms length transaction, Massachusetts courts have recognized the right of parties to enforce contractual provisions which limit liability. See Canal v. Westinghouse Electric Corp., 406 Mass. 369, 374-375 (1990) (enforcing a provision excluding consequential damages); Deerskin Trading Post, Inc. v. Spencer Press, Inc., 398 Mass. 118, 123-124 (1986) (upholding a limitation of damages provision contained in a final price quotation). Under these circumstances, consensual allocation of risk is not contrary to Massachusetts public policy. Minassian v. Ogden Suffolk Downs, Inc., 400 Mass. 490, 493 (1987). Indeed, since the Massachusetts Supreme Judicial Court has enforced contractual provisions completely releasing a defendant from all liability, it is not apparent why a contractual provision that simply limits and defines the accrual date for statute of limitations purposes should not be enforceable. See Cormier v. Central Mass. Chapter of the Nat'l Safety Council, 416 Mass. 286, 287-289 (1993) ("[t]here is no rule of general application that a person cannot contract for exemption from liability for his own negligence and that of his agents and servants.").
This accrual date provision should not be deemed void against public policy, especially when agreed to by sophisticated parties of roughly equal bargaining power, as found here. Since the statute of limitations can be extended through application of the discovery rule, this provision provides both parties with the certainty of knowing the true deadline for bringing suit based on conduct that pre-dates the Date of Substantial Completion. Under the circumstances found in this case, there is no sound reason to bar parties from agreeing to such a limitation. That is why it is not surprising that this contractual accrual date provision, which is part of the Standard Form of Agreement Between Owner and Architect used throughout the nation, has been found enforceable in every reported decision by every court that has considered this argument. Harbor Court Associates v. Leo A. Daly Co., 179 F.3d 147, 151 (4th Cir. 1999) and cases cited. See also Seal Harbor III Condominium Trust v. Add Inc., Civil No. 93-4535 (Suffolk Super. Ct. November 19, 1997).
Since the accrual date provision in the Standard Form of Agreement Between Owner and Architect applies to the Trust as the effective successor in interest to the Bricklayers, all the Trust's claims accrued no later than April 1989 and expired under the three year limitations period long before the complaint was filed in this case on July 5, 1994. Therefore, Rawn's motion for summary judgment is allowed in its entirety as to both the negligence claim (Count VII) and the breach of implied warranty claim (Count VI).
McIntyre's Motion for Summary Judgment
McIntyre's motion for summary judgment on the claims against him individually for breach of fiduciary duty (Count I) and violations of G.L.c. 93A (Counts IX and XI) raises new issues.
Breach of Fiduciary Duty (Count I)
McIntyre contends that the scope of his personal liability on a claim of breach of fiduciary duty is sharply limited by Section 3.6 of the Declaration of Trust, which provides in pertinent part:
No Trustee shall be personally liable or accountable to be deprived of compensation by reason of any action taken, suffered or omitted in good faith, or . . . by reason of honest errors of judgment, mistakes of fact or law, the existence of any personal or adverse interest, or by reason of anything except his own willful malfeasance and default.
This Court finds that this provision, as applied to McIntyre, who throughout his term as Trustee was also the President of the Bricklayers, is void as violative of public policy.
The Declaration of Trust, like most condominium declarations of trust, was written by the developers — the Bricklayers. Under the Declaration of Trust, the Bricklayers select the two Original Trustees, who continue to serve until the earliest of two events: (1) four months after the conveyance of 75 percent of the units by the Bricklayers, or (2) six years after the conveyance of the first unit. Declaration of Trust, § 3.1. Therefore, for all practical purposes, the Original Trustees, both of whom were officers of the Bricklayers, would likely remain as the only trustees until at least 75 percent of the units were sold, when the unit owners would select replacement trustees. During this initial period, the Original Trustees would have duties of loyalty both to the Trust as Trustees and to the Bricklayers as officers, and it was foreseeable that those duties may occasionally be in conflict. Section 3.6 of the Declaration of Trust attempts to limit the Trustees' duty of loyalty to the Trust to nothing more than a duty not to engage in "willful malfeasance and default," but it does nothing to limit their duty of loyalty to the Bricklayers.
Although the evaluation of this provision appears to be a question of first impression, other courts have recognized the need for careful judicial scrutiny when a developer totally dominates the Trust and effectively attempts to act as its fiduciary. See Raven's Cove Townhomes, Inc. v. Knuppe Development Co., 114 Cal.App.3d 783, 171 Cal.Rptr. 334 (1981); Wisconsin Avenue Associates, Inc. v. 2720 Wisconsin Avenue Cooperative Association, Inc., 441 A.2d 956, 964 (D.C.Ct.App. 1982). If this provision had been enacted by the unit owners to protect their elected Trustees from liability, it may survive judicial scrutiny. But it cannot survive careful judicial scrutiny when the provision is enacted by the developer to protect the officers it selects to manage the Trust from liability. If such a provision were allowed to survive, a Trust would have no recourse against a Trustee selected by the developer if he continually favored the developer's interests over those of the Trust but fell short of engaging in willful malfeasance. For all practical purposes, this provision would diminish the duty of loyalty owed by the developer-sponsored Trustee to the unit owners to little more than a duty not to steal. Given the conflicting loyalties that are inherent when a developer-sponsored Trustee is responsible for protecting the interests of unit owners, this enfeebled duty of loyalty is inadequate as a matter of public policy. See Wisconsin Avenue Associates, Inc. v. 2720 Wisconsin Avenue Cooperative Association, Inc., 441 A.2d at 964.
Having found that this provision is void as violative of public policy, what should be put in its place? The duties of a trustee to condominium unit owners are analogous to the duties owed by a corporate officer or director to a corporation's shareholders. See Cigal v. Leader Development Corp., 408 Mass. at 219. Therefore, it is appropriate to define a developer-sponsored trustee's duty of loyalty to unit owners in the same way that Massachusetts law defines an officer or director's duty of loyalty to shareholders — by applying the business judgment rule set forth in G.L. 156B, § 65. Cf. Pederanzi v. Guerriere, 1995 Mass. Super. LEXIS 188 (Mass.Sup.Ct. 1995) (Hely, J.). Under that statutory standard, an officer or director "shall perform his duties . . . in good faith and in a manner he reasonably believes to be in the best interests of the corporation, and with such care as an ordinarily prudent person in a like position would use under similar circumstances." G.L. 156B, § 65. However, when there is a conflict between the interests of the officer or director and that of the corporation, that conflict must be disclosed and the burden of proof rests on the officer or director to show that the decision substantively was fair to the corporation. Demoulas v. Demoulas Super Markets, Inc., 424 Mass. 501, 531 (1997). This Court would apply that same standard to the developer-sponsored trustee of a condominium trust — the trustee must perform his duties in good faith and in a manner he reasonably believes to be in the best interests of the unit owners, and with such care as an ordinarily prudent person in a like position would use under similar circumstances. When matters arise in which the interests of the developer and the unit owners diverge, the trustee must disclose the conflict and, if the trustee proceeds to act on behalf of the trust after such disclosure, the trustee must act in a manner that substantively is fair to the unit owners.
Applying this standard to the evidence in the summary judgment record, viewing that evidence in the light most favorable to the plaintiffs (as I must on summary judgment), this Court finds that there are material factual issues in dispute which prevent this Court from determining on summary judgment whether McIntyre satisfied this standard during his tenure as Trustee.
Even if the standard were willful malfeasance, genuine issues of material fact would still remain in view of McIntyre's admissions in his affidavit that the cost of the french drain and the caulking of the building steps were construction costs rather than maintenance costs. This admission permits the inference that he recognized that the problems the french drain and caulking were designed to cure emerged from construction defects, but still failed to investigate either their source or their magnitude, instead limiting his efforts to remedy these defects to these two relatively small expenditures.
McIntyre further argues that, even if there are genuine issues of material fact that otherwise preclude summary judgment, he is still entitled to summary judgment on the breach of fiduciary duty claim on statute of limitations grounds, since the plaintiff Trustees were on notice of this claim before July 5, 1991. This Court, for three independent reasons, denies summary judgment on this ground.
First, McIntyre was the Trustee of the Condominium Trust until September 11, 1991, when the formal resignation he executed on March 29, 1991 was recorded at the Registry of Deeds. Even though the plaintiff Trustees assumed his duties on March 29, 1991, legally he remained as Trustee until September 11, 1991, and legally he and Walsh were the only persons who, without initiating a derivative action, could bring litigation on behalf of the unit owners regarding common areas and facilities. See Cigal v. Leader Development Corp., 408 Mass. at 219. McIntyre can hardly claim that the statute of limitations has run out on the Trust's claims against him because he, as Trustee, had notice of these claims before July 5, 1991.
Second, a cause of action for breach of fiduciary duty "does not accrue until the trustee repudiates the trust and the beneficiary has actual knowledge of that repudiation." Demoulas v. Demoulas Super Markets, Inc., 424 Mass. at 518 (emphasis in original). There remain genuine issues of material fact as to whether the plaintiff Trustees personally had actual knowledge of McIntyre's alleged repudiation of the trust before July 5, 1991.
Third, there is a genuine issue of material fact as to whether the elements of equitable estoppel have been satisfied. Equitable estoppel is a doctrine created by the courts to prevent results contrary to good conscience and fair dealing. Mackeen v. Kasinkas, 333 Mass. 695, 698 (1956); Stated simply, it means that the law will not permit a party to be better off by acting badly. See Harrington v. Fall River Housing Auth., 27 Mass. App. Ct. 301, 307 (1989) (stating that "[e]stoppel is an equitable doctrine created to prevent one from benefiting from his own wrongdoing and to avoid injustice"). Equitable estoppel of a statute of limitations defense is appropriate when "the defendants made representations they knew or should have known would induce the plaintiffs to put off bringing a suit and . . . the plaintiffs did in fact delay in reliance on the representations." White v. Peabody Construction Co., Inc., 386 Mass. at 134. See also Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 123 (1992); Tardanico v. Aetna Life Casualty Company, 41 Mass. App. Ct. 443, 446 (1996). There is evidence in the record to support a finding that McIntyre, while wearing the dual hats of President of the developer Bricklayers and Trustee of the Trust, concealed from the plaintiff Trustees the magnitude of the problems at BOTH and misrepresented these problems to be maintenance concerns rather than design or construction defects. There is also evidence in the record that the plaintiff Trustees relied on these representations by delaying any inquiry into the source of these problems, which delaying the bringing of this action.
Since there remain genuine issues of material fact as to whether McIntyre committed a breach of fiduciary duty and since these three reasons are sufficient to deny summary judgment to McIntyre on statute of limitation grounds, McIntyre's motion for summary judgment as to the breach of fiduciary duty claim (Count I) is denied.
The G.L.c. 93A Claims (Counts IX and XI)
McIntyre argues that he is entitled to summary judgment on the G.L.c. 93A counts, since he was not acting "in trade or commerce" as a Trustee and therefore falls outside the scope of Chapter 93A. "Chapter 93A 'is not available where the transaction is strictly private in nature, and is in no way undertaken in the ordinary course of a trade or business.'" Planned Parenthood Federation of America, Inc. v. Problem Pregnancy of Worcester, Inc., 398 Mass. 480, 491 (1986) quoting Lantner v. Carson, 374 Mass. 606, 608 (1978). In determining whether parties are engaged in trade or commerce, the Court looks to the following factors: "(1) the nature of the transaction, (2) the character of the parties, (3) the activities participated in, and (4) whether the transaction was motivated by business or personal reasons." Planned Parenthood Federation of America, Inc., 398 Mass. at 491.
Courts have uniformly held that a condominium trust is not involved in trade or commerce, and that claims made against such a trust may not be brought under c. 93A. See, e.g., Granby Heights Association, Inc. v. Dean, 38 Mass. App. Ct. 266, 270 (1995); Trustees of the Harwichport Resort Club Condominium Trust v. Henry Connor, No. 93-1006 (Mass.Sup.Ct. Jan. 25, 1995) (O'Neill, J.) at 5. Therefore, Count IX, which alleges a violation of G.L. c. 93A, § 11, cannot survive summary judgment because it requires a showing that the plaintiff Trust is engaged in trade or commerce.
Count XI, which alleges a violation of G.L.c. 93A, § 9, also cannot survive summary judgment, but for different reasons. A claim brought by a stockholder against a corporation with respect to the internal governance of the corporation is beyond the scope of c. 93A, because the stockholder and corporation are not deemed to be in trade or commerce with each other with respect to issues of corporate governance. Riseman v. Orion Research, Inc., 394 Mass. 311, 313-314 (1985). Since the relationship between the stockholders and a corporation is similar to the relationship between the unit owners and a condominium trust, it must also be the law that a claim brought by a unit owner against a condominium trust regarding issues of condominium governance is also beyond the scope of c. 93A. See, e.g., Barbara Betzger, as Trustee of Skyline Heights Condominium Trust v. Robert Chin and Annie Chin, No. 94-1613 (Mass.Sup.Ct. March 24, 1995) (Connolly, J.) at 9. This Court recognizes that the c. 93A, § 9 claim in Count XI is not brought by a unit owner against the Trust but rather is brought by the Trust against a former Trustee. This claim nonetheless falls within the corporate governance analogy because the Trust is acting on behalf of the unit owners so, effectively, the unit owners are suing a former trustee for his alleged misconduct as Trustee.
Another analogy further demonstrates the inapplicability of c. 93A to claims like these. A claim under c. 93A may not be brought by an employer against an employee regarding disputes arising out of the employment relationship. Manning v. Zuckerman, 388 Mass. 8, 12-15 (1983). Since a trustee performs duties on behalf of the condominium trust, albeit generally without pay, a trustee is analogous to an employee and a trust to his employer. Since this claim arises out of the trustee relationship that McIntyre had with the Trust, this claim, like those arising out of the employment relationship, falls outside the scope of c. 93A.
The plaintiff Trustees contend that this case is distinguishable because McIntyre was a developer-sponsored Trustee and is alleged to have made misrepresentations in part to protect the interests of the developer from the remedies that would be sought by the Trust. This Court is not persuaded. Allegations of self-dealing and conflict of interest commonly arise in disputes involving corporate governance and employment but these allegations do not transform the relationship between the shareholders and the officers or directors, or between the employer and employee, into one involving trade or commerce. Indeed, if courts were to look in each case to the specific allegation brought by a shareholder against a corporation or by an employer against an employee to determine whether it may be brought under c. 93A, the present clarity in the law would soon be lost.
For all these reasons, McIntyre's motion for summary judgment is allowed as to the G.L.c. 93A claims (Counts IX and XI).
Plaintiffs' Motion to Supplement Response to Interrogatory 30
Finally, McIntyre contends that the plaintiffs' claim against him for breach of fiduciary duty should be limited to the amount of the repair bills for waterproofing and caulking that he submitted for payment to the Trust. He argues that this limitation is warranted by plaintiffs' response to Interrogatory 30, which asked the plaintiffs to state the factual basis for their allegation that McIntyre had acted in bad faith. The plaintiffs replied that "McIntyre, or his agents, completed 'waterproofing' and other repairs to the Condominium and charged these repairs to the Condominium when they should have been construction costs." McIntyre contends that the plaintiffs' motion to supplement this interrogatory response should be denied, since he had relied on this response and the requested supplementation is not timely, coming after the close of discovery.
Although this response was probably not complete even when made and could have been supplemented after McIntyre's deposition, this Court will permit the supplementation of the response, since it finds that the delay in supplementation was not strategic in intent and that McIntyre is not unfairly prejudiced by its timing. The complaint itself alleges that McIntyre failed adequately to investigate the alleged construction defects, that he initiated inadequate repairs of these defects, and that in doing so he misrepresented that these defects could be effectively remedied by these repairs. In view of the complaint, McIntyre had fair notice that the damages sought against him were greater than the cost of these repairs. While I understand why he would want to take advantage of the plaintiffs' error in answering Interrogatory 30, he can hardly be surprised by the scope of the supplemented response. Therefore, the plaintiffs' motion to supplement the response to Interrogatory 30 is allowed.
Bricklayers' Motion for Summary Judgment
The plaintiffs have alleged four causes of action against the Bricklayers: breach of contract (Count II), negligence (Count III), breach of implied warranty (Count IV), and violations of G.L.c. 93A (Count VIII). The breach of contract claim alleges a breach of the individual purchase and sale agreement to the original unit purchasers "by delivering common areas and facilities which have material and substantial defects, and do not conform to building codes." Amended Complaint at ¶ 25. The summary judgment record, however, contains no evidence of any express warranty to this effect in the purchase and sale agreements. Consequently, Count II must be recognized as a claim of implied warranty, identical for all practical purposes to Count IV, and subject to the same three year statute of limitations for negligence in construction and design set forth in G.L.c. 260, § 2B.
The Bricklayers attempt to piggy-back on Turner's arguments that the statute of limitations on these claims has expired. The difference from Turner, however, is that Turner did not control the Trust and its President and Treasurer were not its sole trustees. Stripped to its essence, the Bricklayers contend that, since its President and Treasurer had notice of these claims before July 5, 1991 and failed to bring suit against the non-profit corporation they controlled, the Trust should be barred on statute of limitations grounds from ever bringing these claims.
This Court will not permit a developer to prevail on statute of limitations grounds against a condominium trust when the trustees the developer appointed and continued to employ failed timely to sue the developer. "If a person liable to a personal action fraudulently conceals the cause of such action from the knowledge of the person entitled to bring it, the period prior to the discovery of his cause of action by the person so entitled shall be excluded in determining the time limited for the commencement of the action." G.L.c. 260, § 12. See also Demoulas v. Demoulas Super Markets, Inc., 424 Mass. at 517-521. Consequently, if McIntyre, the President of the Bricklayers, had concealed from the Trustees its cause of action against the Bricklayers, the time period of that concealment would be tolled. In the case at bar, McIntyre, the President of the Bricklayers, was for all practical purposes the only active Trustee. Certainly, if the law requires the statute of limitations period to be tolled when one conceals a cause of action from the person entitled to bring that action, it must also toll the statute of limitations period when the only person entitled to bring the cause of action fails to do so because of a conflict of interest, and fails to request others who are disinterested from making this judgment on behalf of the Trust. In addition, as stated earlier, there is evidence in the record of concealment and misrepresentations sufficient to support a finding of equitable estoppel. Therefore, the Bricklayer's motion for summary judgment on statute of limitations grounds is denied.
The Bricklayers' contend that summary judgment is required on the G.L.c. 93A claim because there is no evidence of anything but negligence. In fact, there is evidence in the record that McIntyre, the Bricklayers' President, knowingly concealed the existence of design and construction defects and misrepresented the source of building problems in order to protect the Bricklayers from suit. Finally, the Bricklayers argue that its relationship to the Trust is not in trade or commerce within the meaning of c. 93A. Since the developers sold the units in BOTH to the unit owners and since the Trust represents the unit owners with respect to all common areas and facilities, this Court concludes that the Bricklayers are indeed in trade or commerce with the Trust with respect to matters relating to the design and construction of the property purchased by the unit owners. Consequently, the Bricklayers' motion for summary judgment on the c. 93A claim is denied.
ORDER
For the reasons stated above, this Court hereby ORDERS as follows:
1. Turner's motion for summary judgment on the negligence claim (Count V) is ALLOWED except to the extent the claim alleges negligence in the design or construction of the flashing and vapor barrier in the brick masonry cavity.
2. Turner's motion for summary judgment on the plaintiffs' breach of implied warranty claim (Count X) is ALLOWED to the same extent as its motion for summary judgment on the plaintiffs' negligence claim — it is allowed except to the extent the claim alleges a breach of implied warranty in the design or construction of the flashing and vapor barrier in the brick masonry cavity.
3. Rawn's motion for summary judgment is ALLOWED in its entirety as to both the negligence claim (Count VII) and the breach of implied warranty claim (Count VI).
4. McIntyre's motion for summary judgment is DENIED as to the breach of fiduciary duty claim (Count I).
5. McIntyre's motion for summary judgment is ALLOWED as to the G.L.c. 93A claims (Counts IX and XI).
6. Plaintiffs' motion to supplement the response to Interrogatory 30 is ALLOWED.
7. The Bricklayers' motion for summary judgment is DENIED.