Opinion
No. 15–P–631.
08-15-2016
Howard MARKOWITZ & another v. K.A.S.P. DEVELOPMENT CORPORATION & others.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
This case arose out of a troubled building project that occurred between 2003 and 2004 (project). On February 20, 2009, homeowners Howard and Sandra Markowitz filed a ten-count complaint against the general contractor, K.A.S.P. Development Corporation (KASP), KASP principal Stephen Sluyski, and the bookkeeper on the project, Virginia Sluyski.
Sluyski was not a party to the “General Contractor/Owner Compensation Agreement” between KASP and the Markowitzes. The Markowitzes named Sluyski as a defendant in counts II and VI–IX (alleging misrepresentation, conversion, fraud, money had and received, and a request for an accounting).
After defaulting Sluyski for failing to answer the complaint, the same judge of the Superior Court denied, on several occasions, Sluyski's attempts to remove the default. Twenty-two months after the completion of the assessment of damages hearing, the judge denied Sluyski's “motion for directed verdict/finding” and issued a decision in favor of the Markowitzes against all the defendants. This appeal by Sluyski alone followed.
Because directed verdicts are proper only when a jury has been empanelled, the motion should have been brought and decided under Mass.R.Civ.P. 41(b), 365 Mass. 803 (1974) (involuntary dismissal). See Kendall v. Selvaggio, 413 Mass. 619, 620 nn. 3 & 4 (1992).
We consider the propriety of (1) the orders denying Sluyski's motions to vacate the default judgment and for reconsideration; and (2) the order of judgment (a) assessing attorney's fees in the amount of $4,930.50 and costs as a sanction for unnecessary motion practice for the attempts to remove the default, and (b) awarding damages to be entered against Sluyski, jointly and severally, in the amount of $697,380.41 (plus prejudgment interest of $782,524.99 dating back to October 15, 2004, the date the judge determined was the date of breach). The total amount of the judgment was $1,484,835.90.
1. Denial of motions to vacate default judgment and for reconsideration. The standard of “good cause” under Mass.R.Civ.P. 55(c), 365 Mass. 822 (1974), applied here because the entry of a default, without a determination of damages, is not a final judgment. Even assuming arguendo that the more rigorous excusable neglect standard of Mass.R.Civ.P. 60(b)(1), 365 Mass. 828 (1974), applied to Sluyski's motion to vacate, see MVP, Inc. v. Department of Rev., 26 Mass.App.Ct. 932, 932–933 (1988), we conclude that the judge's refusal to remove the default amounted to a clear abuse of discretion. See Scannell v. Ed. Ferreirinha & Irmao, Lda., 401 Mass. 155, 157–158 (1987).
All of the relevant factors ordinarily calling for relief were established by Sluyski. See Berube v. McKesson Wine & Spirits Co., 7 Mass.App.Ct. 426, 430–431 (1979). Sluyski was an unsophisticated litigant who was unfamiliar with the judicial process. The neglect leading to the default judgment that entered on September 24, 2009, was attributable to her first attorney. No conscious plan to frustrate the progress of the litigation emerged from this record. Sluyski's default, her first in the case, occurred at the beginning of this litigation. See id. at 429 (“a liberal ... application” of rule 60 [b] is warranted where, as here, “the mischief leading to the judgment occurs at the pretrial stage”). Upon learning of the default judgment, Sluyski acted reasonably promptly by hiring competent replacement counsel to seek relief. Sluyski demonstrated through her detailed affidavit and facts apparent on the record that she had one or more meritorious defenses worthy of investigation. See id. at 433. The prejudice to the Markowitzes from the delay was insubstantial compared to that resulting from imposing liability on Sluyski, a comparatively minor player, whose liability was not adequately pleaded. See Henshaw v. Travelers Ins. Co., 377 Mass. 910, 911 (1979) (an abuse of discretion may be found where “the consequences flowing from the default judgment exceed the bounds of reasonableness”); Mullen Lumber Co. v. F.P. Assocs., 11 Mass.App.Ct. 1018, 1019 –1020 (1981) (reversing orders denying defendants' motions for relief from judgment).
A single justice of the Supreme Judicial Court suspended Sluyski's first attorney from the practice of law, in part, for his representation of the defendants in this action. We were informed at oral argument that this attorney has defaulted in the legal malpractice action brought by Sluyski.
Between the date of the default judgment and her retention of new counsel, Sluyski participated in a court-ordered mediation. On November 18, 2009, successor counsel served the Markowitzes' attorney with a motion to vacate the default judgment.
For example, Sluyski denied the factual bases of the intentional tort claims lodged against her, averring that she made no representations at all to the Markowitzes or requests for payments, and that in performing her duties, she relied on the instructions of her son. (Indeed, Sluyski's defense was later validated in part by Sandra Markowitz, who testified that she first met Sluyski after the project was completed.) In addition, the claims for misrepresentation and fraud (counts II and VII) appear to have been inadequately pleaded as to Sluyski, lacking particularity and allegations to support essential elements of the claims. See Equipment & Sys. for Indus., Inc. v. Northmeadows Constr. Co., 59 Mass.App.Ct. 931, 931–932 (2003). These defenses were not subject to waiver. See Mass.R.Civ.P. 12(h)(2), 365 Mass. 754 (1974); Jones v. Boykan, 464 Mass. 285, 295–296 & n. 10 (2013). Contrast Mass.R.Civ.P. 8(c), 365 Mass. 749 (1974).
For example, the misrepresentation count against Sluyski in the complaint does not identify a specific misrepresentation made by her to the Markowitzes on which they reasonably relied.
Even if a finding of an abuse of discretion was not compelled by these circumstances, the judge exceeded the bounds of his discretion by his subsequent rulings. Having firmly secured the default judgment, the Markowitzes presented the judge with affidavits and a proposed order for judgment that substantially increased the amount of damages sought, less than twenty-four hours before the rescheduled assessment of damages hearing. Up to that point in the litigation, the Markowitzes had given the defendants no notice that they were seeking that level of damages. While the judge continued the hearing to permit the defendants to engage in limited discovery, he denied Sluyski's request to actively defend the case on the merits. This significant expansion of Sluyski's potential liability without relieving the default, we think, ran afoul of Mass .R.Civ.P. 54(c), 365 Mass. 820 (1974), and amounted to an abuse of discretion. See Scannell v. Ed. Ferreirinha & Irmao, Lda., 401 Mass. at 163–164 ; Buffum v. Rockport, 36 Mass.App.Ct. 377, 382–383 & n. 7 (1994).
The Markowitzes indicated on their civil action cover sheet that they sought damages of “at least $36,878.27” on the noncontract claims and “above $25,000” on the contract claims (on which Sluyski was not named). See also count X of the complaint (seeking $36,878.27 against KASP for certain contract damages). By December 17, 2009, the Markowitzes' damage claims had ballooned to over $2 million.
2. Order of judgment. a. Attorney's fees. In light of our conclusion that Sluyski's motion to vacate the default should have been allowed either initially or on reconsideration, the judge's award of sanctions cannot stand.
b. Damages. All issues relating to damages remained open after default. See Marshall v. Stratus Pharmaceuticals, Inc., 51 Mass.App.Ct. 667, 670–671 (2001). At the hearing, the Markowitzes had the burden of establishing that they sustained damages within the scope of any legitimate claims alleged in the complaint. See Nancy P. v. D'Amato, 401 Mass. 516, 519 (1988). Since the Markowitzes were seeking unliquidated damages, they were also required to prove, through competent evidence relevant to the claims pleaded, the extent of those damages. See National Grange Mut. Ins. Co. v. Walsh, 27 Mass.App.Ct. 155, 157–158 (1989) ; Bissanti Design/Build Group v. McClay, 32 Mass.App.Ct. 469, 470–471 (1992). We conclude that the Markowitzes failed to meet their burden as to Sluyski.
Although the Markowitzes presented a significant amount of evidence at the hearing about the harm they suffered as a result of the misconduct by KASP and Stephen, they presented no evidence that they sustained damages caused by any misrepresentations made to them by Sluyski upon which they relied, or any other properly pleaded tortious conduct. The Markowitzes sought contract damages caused by the defective work, overcharging, and contractual allowances not credited by KASP and Stephen. The judge adopted the Markowitzes' entire theory of damages, and awarded the exact amount sought for these breaches ($697,380.41). There was no factual basis alleged in the complaint (or facts presented at the hearing) that would support holding Sluyski personally liable for these contract damages. She was not a party to any contract with the Markowitzes and she did not perform any of the work on the project. Indeed, the Markowitzes' proposed judgment included judgment in the amount of $697,380.41 for counts I–IV of the complaint. Of those counts, only count II, misrepresentation, was pleaded against Sluyski. The complaint failed to show that the Markowitzes' losses were proximately caused by Sluyski's conduct.
While the judge's findings identified ways in which Sluyski failed to properly manage the financial aspects of the project, the findings did not adequately connect those actions to any damages suffered by the Markowitzes or any duty Sluyski owed to the Markowitzes (as opposed to any duty she owed to KASP). The damage award was thus improperly entered without a supporting evidentiary basis. See Jones v. Boykan, 464 Mass. 285, 294 (2013). See also Productora e Importadora de Papel, S.A. de C.V. v. Fleming, 376 Mass. 826, 834–835 (1978) (rejecting view that default establishes causation). Where, as here, the factual allegations and findings did not support an award of damages on any theory pleaded, Sluyski was entitled to the dismissal of the complaint against her. See Christakis v. Jeanne D'Arc Credit Union, 471 Mass. 365, 372 (2015).
Conclusion. So much of the February 18, 2014, order of judgment as imposes joint and several liability against Sluyski and awards attorney's fees and costs to the Markowitzes is reversed. In all other respects, the order of judgment is affirmed. A judgment shall enter in favor of Sluyski dismissing the complaint against her with prejudice.
The plaintiffs' request for appellate attorney's fees is denied.
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So ordered.