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16-P-165 Appeals Court
COPLEY PLACE ASSOCIATES, LLC vs. CARLOS TÉLLEZ-BORTONI.
No. 16-P-165.
Suffolk. December 9, 2016. - March 16, 2017.
Present: Milkey, Massing, & Sacks, JJ.
Fraud. Deceit. Real Property, Lease. Contract, Lease of real
estate. Practice, Civil, Summary judgment, Judgment
notwithstanding verdict.
Civil action commenced in the Superior Court Department on
April 24, 2012.
A motion for summary judgment was heard by Peter M.
Lauriat, J.; the case was tried before Robert B. Gordon, J., and
a motion for judgment notwithstanding the verdict was heard by
him.
Robert E. Curtis, Jr., for the defendant.
Martin M. Fantozzi (David M. Zucker also present) for the
plaintiff.
SACKS, J. The defendant, Carlos Téllez-Bortoni, appeals
from a judgment entered against him in favor of the plaintiff,
Copley Place Associates, LLC (Copley), on claims for fraud and
violation of G. L. c. 93A. He argues that a judge of the
2
Superior Court erred in awarding Copley partial summary judgment
against him on liability. We conclude that Copley's motion
failed to establish as undisputed fact that Copley relied to its
detriment on false representations made by Téllez-Bortoni. We
therefore vacate the judgment and remand for further
proceedings.
Background. Copley's claims arose out of a failed venture
in which Irish Pub Group, Inc. (IPG), was to have operated a
restaurant in space leased from Copley in its mall located in
Boston. Téllez-Bortoni signed the lease on IPG's behalf.
Section 24.11 of the lease stated, "If Tenant is or will be a
corporation, the persons executing this Lease on behalf of
Tenant hereby covenant and warrant that . . . the person signing
this Lease on behalf of the corporation is an officer of Tenant,
and is duly authorized to sign and execute this Lease."
Sometime after the lease was signed, Téllez-Bortoni informed
Copley that one Raymond Houle was "a part of [IPG]," causing
Copley to inform a bank that Houle could negotiate a large check
Copley had issued to IPG as a portion of a "Landlord's
Contribution" provided for in the lease. Houle deposited the
check in IPG's account.
IPG did not use the funds to further the project as
required by the lease, the restaurant never opened, and Copley
sued IPG, Téllez-Bortoni, Houle, and others on a variety of
3
theories, seeking to recover amounts due under the lease and
other damages. IPG never denied that Téllez-Bortoni's signature
sufficed to bind IPG to the lease; instead, IPG failed to appear
and was defaulted. After obtaining default judgments against
IPG and all other defendants except Téllez-Bortoni, the judge
awarded Copley partial summary judgment against Téllez-Bortoni
on liability for fraud and violation of G. L. c. 93A, premised
on Copley's claimed detrimental reliance on his assertedly (1)
false representations that he was an officer of IPG, duly
authorized to sign the lease, and (2) misleadingly incomplete
statement concerning Houle's role with IPG. After a trial on
damages presided over by a different judge, a jury returned a
verdict of $865,060.44, to which the judge added $126,440.09 in
attorney's fees and costs. Téllez-Bortoni moved for judgment
notwithstanding the verdict (JNOV) and, upon the trial judge's
denial of that motion, Téllez-Bortoni filed this appeal, in
which he challenges the partial summary judgment ruling.
Discussion. After briefly reviewing the law of fraud or
deceit,1 we discuss in turn the summary judgment record regarding
Téllez-Bortoni's representations to Copley (1) as to his status
1
For present purposes we may treat the terms "deceit" and
"fraud" as interchangeable. See Graphic Arts Finishers, Inc. v.
Boston Redev. Authy., 357 Mass. 40, 44 (1970); Brown v.
Gerstein, 17 Mass. App. Ct. 558, 567 n.14 (1984).
4
as an IPG officer with authority to sign the lease, and (2) as
to Houle's status vis-à-vis IPG.
"In a deceit action, the plaintiff must prove 'that the
defendant made a false representation of a material fact with
knowledge of its falsity for the purpose of inducing the
plaintiff to act thereon, and that the plaintiff relied upon the
representation as true and acted upon it to his damage.'" Danca
v. Taunton Sav. Bank, 385 Mass. 1, 8 (1982), quoting from
Barrett Assocs. v. Aronson, 346 Mass. 150, 152 (1963). "Such
reliance by the plaintiff must be reasonable." Masingill v. EMC
Corp., 449 Mass. 532, 540 (2007). Further, "[i]f a statement of
fact which is susceptible of actual knowledge is made as of
one's own knowledge and is false, it may be the basis for an
action of deceit without proof of an actual intent to deceive."
Pietrazak v. McDermott, 341 Mass. 107, 110 (1960). See Snyder
v. Sperry & Hutchinson Co., 368 Mass. 433, 444 (1975). Finally,
incomplete statements may in some circumstances amount to
actionable fraud. Greenleaf Arms Realty Trust I, LLC v. New
Boston Fund, Inc., 81 Mass. App. Ct. 282, 291-292 (2012).
1. Representations of officer status and authority. On
Copley's motion for partial summary judgment, the judge
correctly ruled it undisputed that Téllez-Bortoni's
representations and warranties that he was an officer of IPG,
5
and duly authorized to execute the lease, were false.2 Based on
Pietrazak v. McDermott, 341 Mass. at 110, the judge did not find
it necessary to address whether Téllez-Bortoni made the
representations with an actual intent to deceive.3 The judge
then concluded, "On the basis of those representations, Copley
. . . did lease premises to [IPG], and it consequently suffered
financial losses." In short, the judge viewed as undisputed
that Copley had relied to its detriment on Téllez-Bortoni's
representations in the lease.4
The summary judgment record did not support these
conclusions. Although Copley's memorandum in support of its
motion recognized that it needed to establish detrimental
2
Téllez-Bortoni's affidavit stated that he had instructed
an associate to file incorporation papers for IPG listing him as
an officer, that he had believed he was an officer, and that he
had invested a substantial sum in IPG, but he ultimately
acknowledged that he in fact was never an officer of IPG.
3
Téllez-Bortoni argues, for the first time on appeal, (1)
that his scienter in making these representations presented a
genuine issue of material fact; and (2) that Copley failed to
plead with particularity, as required by Mass.R.Civ.P. 9(b), 365
Mass. 751 (1974), that its fraud claim was based on these
representations. These arguments are waived. It is
nevertheless telling that, although Copley's complaint alleged
detrimental reliance on several other specific false statements
by the defendants, Copley did not think to include in this list
Téllez-Bortoni's representations and warranties in the lease.
4
The judge also did not address two other essential
elements of Copley's fraud claim: whether Téllez-Bortoni's
representations were "material" and whether Copley's reliance on
them was "reasonable."
6
reliance, its supporting statement of undisputed facts failed to
do so.
The closest Copley came to addressing reliance was the
statement in its memorandum in support of the motion that "it is
obvious that Copley . . . would never have signed the Lease and
issued a check for the first installment of Landlord's
Contribution if it had known that [Téllez-Bortoni] was not
authorized to enter into the Lease on behalf of [IPG]." But
this assertion was not supported by any citation to the
statement of undisputed material facts or to any of the
underlying materials that may be considered on a motion for
summary judgment. Téllez-Bortoni argued that Copley had failed
to establish such reliance. Although it is plausible that
Copley actually relied on the representations when entering the
lease, particularly where the lease contained a "covenant and
warrant" by Téllez-Bortoni as to the truth of the
representations, we find no evidence to that effect in the
record.5 Moreover, it is also plausible that Copley's principal
5
We do not agree with Copley's argument that the
incorporation of Téllez-Bortoni's representations and warranties
into the lease was itself sufficient to establish reliance in
view of the principle that "no part of the contract is to be
disregarded." Starr v. Fordham, 420 Mass. 178, 190 1995),
quoting from Boston Elevated Ry. v. Metropolitan Transit Authy.,
323 Mass. 562, 569 (1949). That is a principle of contract
interpretation, not of tort law. To be sure, Copley could also
have brought a claim in contract for breach of warranty. See
Carolet Corp. v. Garfield, 339 Mass. 75, 79 (1959). This might
7
interest was in the lease being signed and then the lessee
recognizing and performing its obligations thereunder, rather
than in any formal defects in the signer's authority. "In
reviewing an order granting summary judgment . . . we of course
apply our traditional test and consider the facts in their light
most favorable to the nonmoving party, drawing all reasonable
inferences in [that party's] favor." Sullivan v. Liberty Mut.
Ins. Co., 444 Mass. 34, 38 (2005).6
Nor did Copley establish that it suffered any detriment as
a result of the falsity of Téllez-Bortoni's assertion of officer
status and authority to sign the lease. It offered no evidence
have avoided the need to prove reliance, but Copley still would
have had to prove, as on any contract claim, that it suffered
harm as a result of the breach, see Singarella v. Boston, 342
Mass. 385, 387 (1961), much as Copley was required to show on
its fraud claim that its reliance caused it detriment. See
infra at .
6
This hole in the summary judgment record is not filled by
Copley's introduction of evidence, at the subsequent trial on
damages, that it routinely insists upon the inclusion of a
provision like the one at issue here in all of its commercial
leases, and that it will not sign a lease unless the prospective
tenant has signed first, thus warranting his or her authority to
do so. As the trial judge stated in his JNOV decision, the jury
were instructed to determine only damages -- not the question
whether Copley had relied on Téllez-Bortoni's
misrepresentations, which the trial judge viewed as already
having been decided by the partial summary judgment.
Accordingly, and because the parties have not included the trial
record in the materials submitted on appeal, we can have no
confidence that Téllez-Bortoni had a fair opportunity at trial
to meet Copley's evidence of reliance. We also note the trial
judge's observation in his JNOV decision that the evidence of
Copley's reliance was "by no means overwhelming."
8
of such detriment, and IPG has never asserted that Téllez-
Bortoni lacked authority to bind it to the lease with Copley, or
otherwise disavowed anything he might have done in IPG's name.
IPG did not defend against Copley's suit on the ground that the
lease was invalid; rather, IPG defaulted and had a multi-million
dollar default judgment entered against it. Put differently,
although Copley may have suffered detriment caused by Téllez-
Bortoni's bare signing of the lease (because, without a signed
lease, Copley might not have allowed IPG onto the premises), we
cannot discern on this record how Copley suffered detriment
caused by the falsity of Téllez-Bortoni's representations in the
course of signing the lease. Rather, the detriment to Copley
appears to have been caused by IPG's breach of its lease
obligations.7
2. Representations as to Houle. Although the motion judge
did not rest his ruling on the point, Copley suggests that its
reliance on Téllez-Bortoni's representation that Houle was a
part of IPG, is another ground on which it was entitled to
summary judgment on liability. We are not persuaded.
7
"Proof of damages flowing from misrepresentations is
essential to recovery. Cardullo v. Landau, 329 Mass. 5, 7
(1952)." Poly v. Moylan, 423 Mass. 141, 149 (1996), cert.
denied, 519 U.S. 1114 (1997). In Massachusetts, a broader rule
of causation has been applied in fraud cases involving the
purchase or retention of stock. See Reisman v. KPMG Peat
Marwick LLP, 57 Mass. App. Ct. 100, 111-120 & n.22 (2003). We
are aware of no decision extending this broader approach beyond
that context.
9
The summary judgment record shows that, as required by the
lease, Copley issued a check for $452,450 to IPG as a portion of
the "Landlord's Contribution" to assist in the build-out of the
leased premises, and Houle attempted to negotiate the check.
Copley's bank and a second bank questioned whether this was
proper. Copley asserted that its bank raised the question
directly with IPG, although there is no record support for this
assertion. The record does show that one Elizabeth Hazan, who
had worked with Téllez-Bortoni on IPG matters, sent an
electronic mail message (e-mail) to him requesting, without
reference to the check or other explanation, that he in turn
send an e-mail to Copley confirming that Houle was "part of
[IPG]." Téllez-Bortoni did so.8 Copley forwarded the e-mail to
the bank, which then accepted the check for deposit into IPG's
account.
Copley has not asserted that Téllez-Bortoni's statement
that Houle was a part of IPG was itself false. To the contrary,
the record shows Copley's position, based on public corporate
filings, that Houle was in fact the sole officer and director of
8
Téllez-Bortoni stated at his deposition that he sent the
e-mail at Hazan's request but without her ever having explained
why she wanted him to do so. He had never met Houle and did not
know who Houle was, but Hazan had told him that Houle was "one
of the new investors at [IPG]," that they were "buying [Téllez-
Bortoni] out," and that Houle "needed to be . . . part of
[IPG]." He understood that the e-mail to Copley was necessary
because Houle was "a new character, a new partner" in IPG.
10
IPG at that time. Nor has Copley asserted that its reliance on
Téllez-Bortoni's statement about Houle led to any direct
detriment or harm. The "Landlord Contribution" check, made out
to IPG and endorsed by Houle, was deposited in IPG's account,
just as Copley intended.
Rather, the harm Copley asserts is that once the check was
deposited, IPG did not use the money to build out the leased
premises as required by the lease.9 Further, Hazan had told
Téllez-Bortoni that she expected to receive some money soon from
Copley and that once she did so, she could loan him $15,000,
which he had the "impression" would come from the Copley
payment. When the check was deposited, Hazan paid him $15,000.10
Copley asserted that the "Landlord Contribution" would not
have been made, and thus could not have been misused, but for
Téllez-Bortoni's failure to disclose, in his e-mail to Copley,
that (1) he had never met and did not know Houle, (2) he did not
know what position Houle held with IPG, and (3) he had agreed to
sell his interest in IPG to Hazan. Copley pointed to the rule
9
Copley obtained a default judgment against Houle for
$6,682,975.60 in damages, presumably based not only on the use
of the "Landlord Contribution" but on Houle's other acts and
omissions with regard to IPG's relationship with Copley.
10
Téllez-Bortoni's deposition testimony is unclear on
whether this was a loan or part of the payment to buy out his
interest in IPG. Also, the summary judgment record does not
establish as undisputed fact that the $15,000 was paid using
funds IPG received from Copley.
11
that misleadingly incomplete statements may amount to actionable
fraud:
"[E]ven in an arms-length transaction, though there may be
no duty otherwise imposed, if a party does speak 'to a
given point of information, voluntarily or [otherwise], he
is bound to speak honestly and to divulge all the material
facts bearing upon the point that lie within his [or her]
knowledge. Fragmentary information may be as misleading
. . . as active misrepresentation, and half-truths may be
as actionable as whole lies.' Kannavos v. Annino, 356
Mass. 42, 48 (1969)."
Greenleaf Arms Realty Trust I, LLC v. New Boston Fund, Inc., 81
Mass. App. Ct. at 291-292.
Although this theory has some appeal, at this stage of the
case it is not a ground for affirmance of the judgment against
Téllez-Bortoni. The theory depends both on facts that may
remain in dispute and on drawing inferences in favor of Copley,
whereas we must draw them in favor of Téllez-Bortoni as the
nonmoving party. See Sullivan v. Liberty Mut. Ins. Co., 444
Mass. at 38. For example, Copley has not established as
undisputed that Téllez-Bortoni knew he was being asked to inform
Copley of Houle's role in order to clear the way for Houle to
deposit the check; thus it remains unclear what additional
information about Houle, if any, Téllez-Bortoni had a duty to
convey to Copley.11 Nor is it evident how Copley's damages from
11
Nor has Copley established as undisputed that, had it
been told of the additional information it asserts Téllez-
Bortoni misleadingly omitted, it would have stopped Houle from
12
its reliance on Téllez-Bortoni's statement about Houle could
exceed the misused $452,460 "Landlord's Contribution" and thus
justify the entire verdict of $865,060.44 returned by the jury.
In sum, whether Téllez-Bortoni's statement to Copley about Houle
constituted fraud and justified the judgment requires further
development on remand.12
Conclusion. The order granting partial summary judgment on
liability against Téllez-Bortoni is vacated. The judgment
against Téllez-Bortoni entered September 24, 2015, Paragraph 3
of the Consolidated Final Judgment entered October 16, 2015, and
the order denying the motion for JNOV are vacated. The jury
verdict on damages is set aside, and the case is remanded for
further proceedings consistent with this opinion.
So ordered.
negotiating the check and then altered its relationship with
IPG.
12
Although reliance is not a necessary element of a G. L.
c. 93A claim, see Giuffrida v. High Country Investor, Inc., 73
Mass. App. Ct. 225, 240–241 & n.16 (2008) (adding that causation
remains an essential element), the parties' arguments on appeal
treat Copley's G. L. c. 93A claim as dependent on the success of
its fraud claim, or at least on a claim of negligent
misrepresentation. Both fraud and negligent misrepresentation
claims require proof of detrimental reliance. See Masingill v.
EMC Corp., 449 Mass. at 540; DeWolfe v. Hingham Centre, Ltd.,
464 Mass. 795, 799-800 (2013). Because that has not been shown
on this record, and because Copley has not argued that its G. L.
c. 93A claim is separately viable (an issue on which we express
no view), we vacate the G. L. c. 93A liability ruling as well.