United States Court of Appeals
For the First Circuit
_____________________
No. 01-1330
ROBERT V. SPARKS, d/b/a WATERMARK PROPERTIES,
Plaintiff, Appellant,
v.
FIDELITY NATIONAL TITLE INSURANCE COMPANY and
NATIONS TITLE INSURANCE COMPANY OF NEW YORK,
Defendants, Appellees.
_____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya Zobel, U.S. District Judge]
_____________________
Before
Torruella, Circuit Judge,
Stahl, Senior Circuit Judge,
and O'Toole,* District Judge
_____________________
Nelson G. Apjohn, with whom Augustus F. Wagner, Francis R.
Powell and Nutter, McClennen & Fish, LLP, were on brief, for
appellant.
John H. Henn, with whom Matthew C. Baltay and Foley, Hoag &
Eliot, LLP, were on brief, for appellees.
_____________________
July 1, 2002
_____________________
_____________________
* Of the District of Massachusetts, sitting by designation.
O'TOOLE, District Judge. Appellant Robert V. Sparks
appeals from the district court's grant of summary judgment in favor
of the defendants, Fidelity National Title Insurance Company
("Fidelity") and Nations Title Insurance Company of New York
("Nations").1 Sparks, a real estate broker doing business as
Watermark Properties, sued the defendants for failing to compensate
him for his efforts on their behalf to sell certain property on
Martha's Vineyard. Sparks claims that the defendants breached their
brokerage listing agreements with him, misrepresented the extent of
their ownership of the property in question, breached an implied
covenant of good faith and fair dealing, and committed unfair or
deceptive acts or practices in violation of Mass. Gen. Laws ch. 93A,
§§ 2 and 11. After thorough review of the detailed summary judgment
record, we affirm the judgment of the district court.
I. Background
The dispute between the parties centers around a 235-acre
property situated in Edgartown, Martha's Vineyard, alternatively
called "Wintucket Farms" or "Vineyard Acres II." During the time
period at issue, the property was zoned and permitted as a 148-lot
residential subdivision. As a result of prior title problems
affecting land within the development, Nations, and later Fidelity
as its successor, acquired ownership of 99 of the lots. Another 45
lots were owned by Nicholas Cambio and his associates, and four lots
were owned by the Sheriff's Meadow Foundation, a conservation group.
1
Sparks also appeals the denial of his cross-motion for partial
summary judgment.
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In addition, a previous developer of the property, Louis Giuliano,
had the right under an agreement with Nations' predecessor to
approve the minimum price at which the defendants sold any of the
lots in the subdivision, subject to the proviso that he could not
unreasonably withhold his approval. Moreover, in a suit he filed
against Nations in 1996, Giuliano asserted an ownership interest in
the property arising from his dealings with Nations' predecessor.
In January 1998, this court affirmed the district court's rejection
of his ownership claim. See Giuliano v. Nations Title, Inc., 134
F.3d 361 (table), No. 96-2331, 1998 WL 45459 (1st Cir. Jan. 23,
1998).
Sparks entered into three successive listing agreements
regarding the Wintucket Farms property. The first was executed
between Sparks and Nations and covered the period from June 27, 1995
through December 31, 1995. In the agreement, Sparks agreed to "use
reasonable efforts to procure BUYERS for said PROPERTY, ready,
willing, and able to purchase same in accordance with the price,
terms, and conditions to be agreed upon." Nations, in turn, agreed
to pay Sparks a specified broker's fee for each homesite or home
that he sold in the subdivision. Under the agreement, Sparks had
the exclusive right to list, represent, and sell the property.
The agreement described the property to be sold as
follows:
This LISTING AGREEMENT covers and includes those lots or
homesites and model homes located in the Wintucket Farms
subdivision, located in Edgartown on the Island of
Martha's Vineyard, off the West Tisbury Road, further
identified by the Town of Edgartown's Assessor's Book Map
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22, Lots numbered 57 through 210 as shown on a plan drawn
by Smith & Dowling, engineers, dated 1982 and filed at
the County of Dukes County Registry of Deeds as case file
279 for the Town of Edgartown.
The parties agree that this is a reference to the 148 residential
lots that comprise the Wintucket Farms subdivision. The agreement
also recited that Nations "represents and warrants that it is the
owner of said property."
The second listing agreement, also between Sparks and
Nations, covered the period from January 1, 1996 to December 31,
1996, and contained substantially the same terms as the first, with
one notable difference. In this second agreement, Sparks agreed to
"use reasonable efforts to procure BUYERS for said property, ready,
willing, and able to purchase same in accordance with the price,
terms, and conditions, described in attachment 'A'." Attachment
"A" listed 15 specific lots in Wintucket Farms and named prices for
all but three of the identified lots.
The third agreement was executed between Sparks and
Fidelity, a corporate affiliate of Nations that had succeeded to
its interest in the property. This agreement covered the period
from May 1, 1996 to October 31, 1996. It was substantially similar
to the second agreement, but different in three significant ways.
First, the attachment "A" to the agreement listed 23 lots
(including the same 15 listed in the second agreement) and
specified prices for all but two. Second, the third agreement
provided: "It is understood and agreed that the Seller [Fidelity]
shall have the exclusive right to modify the prices on Attachment
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'A' provided it notifies Broker thereof at least ten (10) days
before the prices are changed." Third, the agreement stated that
if Fidelity were to secure "a single buyer to purchase more than
ten (10%) percent of the entire property during the term of this
agreement," Sparks would not receive a commission from such sale.
Sparks alleged that during the effective terms of
the three listing agreements he made selling Wintucket Farms his
full-time job. He closed his office and relocated his business to
a model home on the property, and he forewent other brokering
opportunities. He attempted both to sell individual lots and to
sell the entire property to a single buyer. Over time, he
generated and presented to the defendants offers from buyers both
for particular individual lots and for the whole property.
None of the offers presented by Sparks for the purchase
of individual lots was accepted by the defendants. The closest
Sparks came to concluding the sale of an individual lot was an
offer in September 1996 by Elizabeth and David Kotek to purchase a
lot that had a model home built on it. Although the sale price was
acceptable to Fidelity (the owner at the time), Fidelity responded
to the Koteks' offer with a counteroffer that insisted on two
conditions: Fidelity would have the right to repurchase the
property within a year for a stipulated price and the Koteks would
agree to accept the subsequent imposition of any covenants,
conditions and restrictions that might in the future be placed
uniformly on all lots within the subdivision. Fidelity and the
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Koteks never settled on final terms and never signed a purchase and
sale agreement.
Sparks also located several buyers who made offers to
purchase the entire property. These offers ranged in price from
$6 million to $13 million and included a variety of additional
terms. For example, the offers varied in the size of the down
payment and the length of time over which the balance of the
purchase price would be paid. The offers were generally contingent
on governmental approvals and on the buyer's ability to obtain the
necessary financing. In no case was a binding purchase and sale
agreement executed between a prospective purchaser and either of
the defendants.
The defendants came close to completing a sale of the
entire subdivision with only one potential buyer. In 1997, the
Osprey Vineyard Trust ("Osprey"), a potential buyer located by
Sparks, offered to purchase the entire property for the purpose of
developing it into a golf course. Negotiations between Fidelity
and Osprey resulted in a draft purchase and sale agreement in which
Osprey promised to buy the property for $15 million to be paid if
certain contingencies were met. However, Osprey ultimately
notified Fidelity that it could not obtain the necessary financing
and withdrew the unsigned purchase and sale agreement.
After Sparks' listing agreements with the defendants
had expired, Fidelity ultimately sold the subdivision for
$15.93 million to Martha's Vineyard Golf Partners ("MVGP"), a buyer
not introduced by Sparks. Negotiations between Fidelity and MVGP
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began in November 1997, and after several extensions of the closing
date, the sale was concluded in July 2000.
II. Proceedings Below
Sparks filed this action in the Massachusetts Superior
Court, and the defendants removed it to the district court on the
basis of the parties' diversity of citizenship. See 28 U.S.C.
§ 1332. The complaint set forth four claims under Massachusetts
law. After discovery, the defendants moved for summary judgment on
all claims, and the district court granted the motion. The court
also denied a cross-motion by Sparks for partial summary judgment
of liability on his theory that the defendants had breached a
warranty of ownership. The district court determined that under
the applicable law of Massachusetts regarding brokers' fees,
Sparks had not earned the right to a commission under the listing
agreements and therefore the defendants had not breached any of
those agreements by failing to compensate him. Similarly, the
district court concluded that Sparks could not prove that any
alleged misrepresentations or other wrongful conduct by the
defendants had caused him any damage, and it ordered judgment for
the defendants on all counts.
III. Standard of Review
We review the district court's grant of a summary
judgment motion de novo. See MacDonald v. Cohen, 233 F.3d 648, 651
(1st Cir. 2000). Summary judgment is appropriate only when "there
is no genuine issue as to any material fact" and "the moving party
is entitled to a judgment as a matter of law." Fed. R. Civ.
-7-
P. 56(c). In deciding a summary judgment motion, we must view the
evidence in the light most favorable to the nonmoving party and
must draw all reasonable inferences in the nonmoving party's favor.
See LeBlanc v. Great Am. Ins. Co., 6 F.3d 836, 841 (1st Cir. 1993).
IV. The Rule of Tristram's Landing and
the Right to a Broker's Commission
Since the middle of the nineteenth century, Massachusetts
courts repeatedly have been asked to decide disputes about whether
a real estate broker had earned a commission. See Gaynor v.
Laverdure, 291 N.E.2d 617, 620 (Mass. 1973) (recounting the history
of such cases). In the middle of the twentieth century, the
Supreme Judicial Court ("SJC") recapitulated what was then regarded
as the settled rule:
Through a maze of conflicting facts and
confusion of varying circumstances one clear
rule has been established and that is that a
broker in the absence of special
circumstances is entitled to a commission if
he produces a customer ready, able, and
willing to buy upon the terms and for the
price given the broker by the owner.
Henderson & Beal, Inc. v. Glen, 110 N.E.2d 373, 375 (Mass. 1953).
Under this rule, "a broker who has procured a customer is not
obliged to see that the owner and the customer enter into a binding
contract or that the contract, if one is made, is carried out."
Gaynor, 291 N.E.2d at 621.
The SJC acknowledged that some might regard the rule as
"unduly favorable to brokers," because it would permit the broker
to recover a commission even where the buyer failed to consummate
the purchase, leaving the owner to sue the buyer for breach of
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contract or for specific performance. Id. at 622. This prospect
was tolerable, the court said, because the seller could,
by appropriate language in his dealings with
the broker, limit his liability for payment
of a commission to the situation where not
only is the broker obligated to find a
customer ready, willing and able to purchase
on the owner's terms and for his price, but
also it is provided that no commission is to
become due until the customer actually takes
a conveyance and pays therefor.
Id. In other words, while the default rule favored brokers, owners
could avoid any possible harshness by getting the broker to agree
to an alternate rule.
In 1975, however, finding it necessary to "clarify"
the law regarding the conditions that would entitle a real estate
broker to recover a commission, the SJC adopted a new rule
that effectively shifted the law's presumptive favor from brokers
to sellers of real estate. Tristram's Landing, Inc. v. Wait,
327 N.E.2d 727, 731 (Mass. 1975). The court expressed the new rule
as follows:
When a broker is engaged by an owner of
property to find a purchaser for it, the
broker earns his commission when (a) he
produces a purchaser ready, willing and able
to buy on the terms fixed by the owner, (b)
the purchaser enters into a binding contract
with the owner to do so, and (c) the
purchaser completes the transaction by
closing the title in accordance with the
provisions of the contract. If the contract
is not consummated because of lack of
financial ability of the buyer to perform or
because of any other default of his . . .
there is no right to commission against the
seller. On the other hand, if the failure of
completion of the contract results from the
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wrongful act or interference of the seller,
the broker's claim is valid and must be paid.
Id. at 731 (citation and internal quotation marks omitted). The
court noted that the rule newly articulated "places the burden with
the broker, where it belongs." Id. The court later explained that
the broker is in a better position than the
seller to protect [his legitimate]
expectations by including, in the brokerage
contract, a provision that the broker is
entitled to its commission when it produces
a ready, willing and able buyer whom the
seller, for whatever reason, refuses to
accept. In the absence of such a provision
the burden is rightfully placed on the
broker. . . .
Capezzuto v. John Hancock Mut. Life Ins. Co., 476 N.E.2d 188, 190-
91 (Mass. 1985). In other words, brokers could avoid any possible
harshness by getting the owner to agree to an alternate rule.
We recount this history to emphasize that the present
rule represents a conscious policy decision by the SJC to replace
a common law default rule favorable to brokers with a default rule
favorable to sellers. In subsequent cases Massachusetts courts
have given no indication of any substantial retreat from the
requirement that the three conditions outlined in Tristram's
Landing must be satisfied in order for a real estate broker to
become entitled to a commission for work on behalf of a seller.
Indeed, in Bump v. Robbins, 509 N.E.2d 12 (Mass. App.
Ct. 1987), the court unblinkingly acknowledged the reality, harsh
perhaps to brokers, that brokerage contracts, "by their very
nature, entail a high risk of noncompensation. It is not at all
uncommon for a broker to perform services for which he is not
-10-
compensated." Id. at 19 (internal citation omitted). Although the
adoption of the Tristram's Landing rule was undoubtedly influenced
by concern for infrequent or inexperienced sellers -- such as
individual homeowners -- who normally contemplate paying any
broker's commission out of the proceeds of the sale, see Tristram's
Landing, 327 N.E.2d at 731, the courts have not restricted the
application of the rule to such cases but have applied it to
sophisticated sellers as well. See, e.g., Hillis v. Lake, 658
N.E.2d 687, 688 (Mass. 1995) (applying rule to seller who was a
real estate developer and owner of a construction company);
Capezzuto, 476 N.E.2d at 188 (applying rule to seller who was a
life insurance company); see also Hunneman and Co. v. LoPresti, 476
N.E.2d 191, 194 (Mass. 1985) (Wilkins, J., concurring)
(acknowledging that the rule was designed for the "uninitiated
prospective seller" but should be applied to experienced sellers as
well because "it is probably more important that the rule of law in
cases of this character be clear").
There is a relatively narrow exception to the Tristram's
Landing requirements. A broker has an enforceable claim against a
seller when a sale is thwarted by "the wrongful act or interference
of the seller." Tristram's Landing, 327 N.E.2d at 731; see also
Hillis, 658 N.E.2d at 689. That is, a seller may have to pay a
commission notwithstanding the absence of a consummated transaction
if he "has engaged in bad faith dealing, or some other misconduct
which prevents an agreement between the broker's client and the
seller, or which suggests a purpose on the part of the seller to
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obtain without payment a profit from the broker's exertions."
Capezzuto, 476 N.E.2d at 191 (citations and internal quotations
omitted). See also Bump, 509 N.E.2d at 20 (holding that a seller
may be liable for a commission if he either wrongfully defaults on
his promise to sell the property or if he intends to take advantage
of the broker's efforts without paying him any compensation).
To take advantage of this exception, a broker must show
more than that the failure to consummate the sale as contemplated
was somehow attributable to the seller. Rather, the absence of a
completed transaction must be attributable to the seller's
"wrongful act or interference." Hillis, 658 N.E.2d at 689 (quoting
Tristram's Landing, 327 N.E.2d at 731) (emphasis added). A
seller's act that interferes with a sale but is not wrongful will
not entitle the broker to a commission.
In Bennett v. McCabe, 808 F.2d 178, 184 (1st Cir. 1987),
this court held that a broker would be entitled to a commission
under the Tristam's Landing rule where the broker "succeeded in
locating a ready, willing, and able purchaser for their property
and only [the sellers'] default, due to an inability to convey good
title, caused the transaction ultimately to fail." In Bennett, the
sellers' default was described as "technical" or "innocent," and
not "wrongful." Id. at 183. We concluded that the Massachusetts
courts, if confronted with the question presented in the case,
would decide to treat an innocent default by a seller the same as
a wrongful one and would permit the broker, who had produced a
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buyer fully ready, willing and able to complete the transaction, to
recover as if the transaction had been completed.
Subsequently, however, the SJC declared that our
interpretation of the Tristram's Landing rule in Bennett was "not
a correct statement of Massachusetts law." Hillis, 658 N.E.2d at
687-88. The SJC reiterated that Massachusetts decisions "have
consistently insisted on wrongful conduct on the part of the seller
which undermines completion of the sale as a prerequisite to a
broker's recovery." Id. at 689-90. In circumstances like those
presented in the Bennett case, the court said, "the broker is not
entitled to a commission unless it appears that the closing is
prevented by wrongful conduct on the seller's part." Id. at 691.
Conduct is "wrongful" if it is in itself a violation of
an existing legal duty or obligation. See Black's Law Dictionary
1606 (7th ed. 1999) (defining "wrongful conduct" as "[a]n act taken
in violation of a legal duty; an act that unjustly infringes on
another's rights"). A seller's wrongful conduct, accordingly,
encompasses unjustified repudiation of a valid purchase and sale
contract. See, e.g., Lewis v. Emerson, 462 N.E.2d 295, 300 (Mass.
1984) (finding that broker's commission was due when seller
breached valid purchase and sale agreement by refusing without
justification to convey property as promised); Lobosco v. Donovan,
565 N.E.2d 819, 821 (Mass. App. Ct. 1991) (holding that repudiation
of binding purchase and sale agreement was "wrongful act" under
exception to the Tristram's Landing rule). In this case, the
defendants never entered into a binding purchase and sale agreement
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with any buyer produced by Sparks or during the period of his
exclusive brokership, and there was no breach of any such agreement
that could qualify as a "wrongful act or interference."
The exception to the Tristram's Landing rule is limited
in another important way as well. To permit recovery by a broker,
a seller's "wrongful act or interference" must have upset the
completion of a sale that was called for by a binding purchase and
sale agreement entered into between the broker's client and the
seller. That is to say, the exception is only available when the
first two of Tristram's Landing's three conditions are met --
production of a purchaser willing and able to buy on terms fixed by
the owner and formation of a binding contract for purchase -- but
the third -- actual closing of the sale -- is thwarted by the
wrongful conduct of the seller. For the broker to prevail under
the Tristram's Landing exception, proof of a binding contract of
sale is necessary. "[I]n situations where the seller is
responsible for the failure to complete the transaction, no
commission is owing unless the seller has signed a binding
agreement with the broker's client." Capezzuto, 476 N.E.2d at 190;
see also Hillis, 658 N.E.2d at 689-90 (holding that a broker has an
enforceable claim when the first two requirements are met but the
seller's wrongful act prevents completion of the contract).
Applying these principles to this case, it is clear that
Sparks has no cognizable claim to a broker's commission under
either the Tristram's Landing rule or its exception. Plainly, he
never satisfied the three conditions of the rule itself, and his
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arguments have focused on his coming within the exception. As
discussed above, to have an enforceable claim under the exception,
Sparks must be able to prove that either Nations or Fidelity,
having entered into a binding purchase and sale agreement with a
buyer produced by him, wrongfully prevented the consummation of a
sale that was contemplated by such an agreement. As neither
defendant ever entered into a binding agreement with a would-be
buyer produced by Sparks, the opportunity offered by the exception
is not available to Sparks, even if he could establish some
"wrongful act or interference" by either defendant with the
consummation of a sale.
Sparks maintains that the defendants wrongfully refused
to enter into a binding agreement with any buyer in the first
place, and that such conduct ought to be regarded as coming within
the exception to the Tristram's Landing rule. We reject that
argument for several reasons.
First, the argument rests on a proposition that has not
been endorsed by any Massachusetts case. Our task is to apply the
law of Massachusetts as we find it, not to alter or extend it. See
Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148, 1151 (1st Cir.
1996). We are especially mindful of that responsibility, after
Bennett, in this corner of the law.
Second, to the extent such a proposition has been
noticed in the Massachusetts cases, it has been rejected. In
Capezzuto, the court observed that "a seller ordinarily expects
that he is free to sell to whomever he chooses, until he has signed
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a purchase and sale agreement." 476 N.E.2d at 190. In other
words, the refusal to sign a binding agreement is not itself a
basis for liability. In Hunneman, decided the same day as
Capezzuto, the seller refused to accept an offer from the broker's
client that apparently met the seller's previously expressed terms.
Nonetheless, the court refused to label the seller's refusal as
wrongful, noting again that "a seller is ordinarily privileged to
sell to whomever it chooses." 476 N.E.2d at 193.
Third, even assuming that Massachusetts would be
receptive to it, the principle proposed by Sparks would only excuse
the non-occurrence of the second (as well as the third) of the
Tristram's Landing conditions. A broker-plaintiff would still have
to show that the first condition had been satisfied. Here, for all
the proposals he produced, Sparks cannot point to any -- except the
Osprey proposal, which was ultimately withdrawn by the buyer -- on
behalf of "a purchaser ready, willing and able to buy on the terms
fixed by the owner." Tristram's Landing, 327 N.E.2d at 731.
It is true that some of the cases reserve
the possibility that a broker may have a claim notwithstanding the
non-occurrence of the three Tristram's Landing conditions "where
the seller has engaged in bad faith dealing, or some other
misconduct which prevents an agreement between the broker's client
and the seller." Capezzuto, 476 N.E.2d at 191. Apart from
expressing the reservation, however, no case has yet held that a
broker is entitled to a commission because the seller had "engaged
in bad faith dealing" or "other misconduct which prevent[ed] an
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agreement." See, e.g., Bump, 509 N.E.2d at 19-20 (discussing "bad
faith" reservation, but finding it inapplicable); see also Bonin v.
Chestnut Hill Towers Realty Corp., 466 N.E.2d 90, 97-98 (Mass.
1984)(same).
It appears that the bad faith reservation can be traced
to pre-Tristram's Landing broker's fee cases, represented by
Kacavas v. Diamond, 20 N.E.2d 936 (Mass. 1939). See Bonin, 466
N.E.2d at 97 (quoting extensively from Kacavas). In Kacavas, a
business broker sued for a commission, claiming that he had
originally introduced the successful buyer and was thus the
"efficient cause" of the ultimate sale, though the sale terms were
not agreed upon until after the intervention of a second broker.
20 N.E.2d at 937-38. The plaintiff-broker alleged that the owner
had acted in bad faith by employing the second broker in order to
avoid paying him a commission. In rejecting the argument, the SJC
rehearsed the principles that would guide a determination of "bad
faith" in this context:
It is settled that a liability to pay the
broker's commission may . . . exist in
consequence of unethical conduct of the
employer which results in preventing full
performance by the broker although the
benefit which the employer sought from the
broker's exertion is obtained by him.
Unethical conduct or bad faith in a case such
as the present one means a purpose on the
part of the defendants to obtain without
payment a profit from the plaintiff's
exertions. Bad faith exists where the
employer revokes the broker's authority or
makes the sale through other means when the
broker has performed all he has undertaken,
or is plainly or evidently approaching
success in his undertaking.
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Id. at 938 (citations and internal quotations omitted). At the
time, a broker had given "full performance" when he produced
a buyer "who was ready, able and willing to purchase" on the
seller's terms, regardless of whether the sale was consummated.
Id. at 937-38. In this context, obtaining the benefit of the
broker's exertions without paying him meant, for example,
contriving to complete the sale to the broker's client without
paying the broker a commission, which is essentially what the
plaintiff was claiming in Kacavas.
Similarly, in Bonin, the plaintiff brokers alleged that
the owner of real estate had acted in bad faith by secretly dealing
with a syndicator originally introduced by the brokers with the
purpose of evading payment of a commission. 466 N.E.2d at 97.
Quoting Kacavas, the court rejected the argument. Id. at 97-98.
In language that could be applied to Sparks' situation, the court
noted that "the plaintiffs continued to bring prospects to the
defendants. There was no showing that the defendants prevented the
plaintiffs from performing under their contract to produce a buyer
for the property." Id. at 98.
In Bump, the Massachusetts Appeals Court elaborated
further on the "bad faith" basis for liability:
There are two lines of authority relevant to
Bump's claim of bad faith revocation. The
first is based on the notion that the
Tristram's Landing requirement of a completed
transaction is not applicable where a seller
wrongfully defaults. To recover on this
theory, Bump would have to have shown at the
very least that he had produced a customer
ready, willing, and able to purchase [the
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business] on acceptable terms. His efforts
. . . yielded results far short of that
accomplishment.
In the second group of cases, recovery is
based upon a purpose on the part of the
seller to obtain without payment a profit
from the broker's exertions when the broker
has performed all he has undertaken, or is
plainly or evidently approaching success.
Bump's evidence does not bring his claim
within the principles of these cases. Even
if it could be said that he was approaching
success with [a particular buyer], there is
no evidence that the defendants were
attempting in any way to take advantage of
Bump's efforts with [that customer] without
paying him a commission.
509 N.E.2d at 20 (citations and internal quotations omitted).
Review of the cases thus leads to the conclusion that
the "bad faith" reservation is narrowly focused, or, as the Bump
court put it, "limited." Id. As the excerpt from the Bump opinion
points out, "bad faith" in this context is a coordinate alternative
to a "wrongful act or interference." After Tristram's Landing, for
a broker's claim for a commission to be viable, the effect of any
alleged bad faith must be, as must be the effect of any "wrongful
act or interference," to prevent the consummation of a sale to
which the buyer and seller have agreed.
There is nothing in the summary judgment record that
indicates that either Nations or Fidelity dealt with Sparks in bad
faith as the relevant cases use that term. There is no evidence
that Sparks had done everything required to earn a commission --
which, under Tristram's Landing, would require at the very least
producing a buyer ready, willing and able to purchase on terms
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established by the seller -- but that by some evasive tactic, the
defendants maneuvered out of paying the commission. The evidence
might support a finding that the defendants stubbornly refused to
accept objectively reasonable offers presented by Sparks, but that
would not prove the necessary bad faith. Until a seller commits in
a binding contract to particular terms, the seller is free to set
the terms upon which it will sell. See Capezzuto, 476 N.E.2d at
190. Unless he specifically agrees to do so, the seller has no
obligation to accept even objectively reasonable terms offered by
a buyer. To conclude otherwise -- to equate bad faith with the
rejection of an objectively reasonable offer -- would effectively
reverse the Tristram's Landing rule. It would permit a broker to
recover a commission by proving that he had produced a buyer ready,
willing and able to purchase on objectively reasonable terms,
without proving any of the three conditions laid down in Tristram's
Landing. The Massachusetts courts, we can confidently say, would
not permit the exception thus to swallow the rule.
For these reasons, Sparks had no right to a broker's
commission, and the district court properly granted summary
judgment on his claim that Nations and/or Fidelity breached any of
the listing agreements by failing to pay him a commission.
V. Alternate Theories of Relief
Sparks also claims that the defendants misled him in
various ways and that, thus misled, he wasted time and effort
trying to find buyers for the property. He advances a variety of
factual allegations in this regard. His principal argument is that
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both Nations and Fidelity falsely represented that they owned the
full Wintucket Farms property when they did not. Each of the
listing agreements recited that the seller, Nations or Fidelity as
the case may be, "represents and warrants that it is the owner of
the property." Sparks claims that representatives of the
defendants repeated the misrepresentation orally during the course
of his dealings with them. In fact, these representations were
false because the defendants only owned 99 of the lots in the
subdivision, while Cambio owned 45 lots, and 4 were owned by the
conservation group. Sparks says that he relied on the
representations of ownership in undertaking to try to find buyers
for the property and asserts that he would not have done so if he
had known the truth.
He also alleges that the defendants withheld from him
the information that Giuliano had a right to approve the sales
prices for lots in the development. Again, he asserts, he would
not have engaged to try to find buyers if he had known that fact.
In addition, he claims that Giuliano's refusal to approve the sale
price caused Fidelity to reject the offer from the Koteks to
purchase one of the model homes. Sparks presents these claims by
asserting causes of action based on theories of breach of warranty,
misrepresentation, breach of an implied covenant of good faith and
fair dealing, and unfair and deceptive business practices in
violation of Mass. Gen. Laws ch. 93A.
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A. Breach of Warranty
Sparks asserts that in the listing agreements Nations
and Fidelity each made an express warranty of ownership of the full
Wintucket Farms property. Because the warranty was literally false
when it was made, Sparks argues that the defendants are liable for
breach of the warranty under contract law principles.2 We
disagree.
In the first place, it is doubtful whether the statement
in the listing agreement constitutes an express warranty in favor
of Sparks at all. Under Massachusetts law, as elsewhere, an
express warranty in a contract is a promise of a particular
standard of performance, and it imposes on the warrantor an
obligation to fulfill the promise made. See Coca-Cola Bottling Co.
of Cape Cod v. Weston & Sampson Eng'rs, Inc., 695 N.E.2d 688, 694
(Mass. App. Ct. 1998)(noting that an express warranty sets a
standard of performance). In the event of a breach, the warrantee
may bring a contract action for damages. See Anthony's Pier Four,
Inc. v. Crandall Dry Dock Eng'rs, Inc., 489 N.E.2d 172, 175 (Mass.
1986)(finding that a claim for breach of express warranty is an
action of contract). In effect, the warrantor proposes to
indemnify the warrantee for any damage resulting from a variation
between what was promised and what actually came to pass. See
Carolet Corp. v. Grafield, 157 N.E.2d 876, 878 (Mass. 1959).
2
This argument formed the basis for his cross-motion for partial
summary judgment as to liability under the breach of contract
count.
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It is difficult to see how the "warranties" in the
listing agreements constituted a promise of performance for Sparks'
benefit. They were, at most, assurances that if Sparks found a
buyer for the whole property, the seller would be able, because it
owned the property, to convey it. Indeed, Sparks himself does not
characterize the statements as being promises of performance, nor
can his damages claim fairly be characterized as one for
indemnification. Rather, he contends that he relied upon the
defendants' false assertions of complete ownership in deciding to
commit his efforts to selling the property. That claim is
appropriately classified as one for misrepresentation, discussed in
the next section.
Even if the statements could be understood as promises
of performance, however, they clearly were contingent and
contemplated performance at some uncertain time in the future. The
defendants' obligations under the warranty would not accrue until
Sparks had fulfilled the Tristram's Landing conditions by
presenting a buyer offering terms acceptable to the seller who had
entered into a binding purchase and sale agreement. There was no
breach of warranty simply because at some time the assertion that
the defendants owned the entire property was not true. The breach
would occur only if at the necessary time the statement was untrue,
and the promised performance was not forthcoming. Although we may
be expressing it somewhat differently, the district court
essentially made the same ruling in concluding that Sparks could
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not prove that any breach of warranty was the cause of any damage
to him, a matter to which we now turn.
B. Misrepresentation of Ownership
of Entire Subdivision
The district court concluded that, assuming for purposes
of the summary judgment motion that the defendants had
misrepresented the extent of their ownership of property in the
subdivision, Sparks could not prove that the deception was the
cause of any injury or damage to him. We agree.
We assume for this discussion that but for the
representation in each of the listing agreements that the
defendants owned the entire property, Sparks would not have entered
into the brokerage relationship with the defendants and would not
have devoted time and expense to the effort to sell either
individual lots or the entire subdivision. But the fact that the
defendants' misrepresentations caused him to enter into a business
relationship with them does not prove that the misrepresentations
were the cause of Sparks' lack of success in brokering the property
and thus the cause of any consequent economic damages. The
evidence in the record does not permit the conclusion that the fact
that Cambio owned 45 lots prevented Sparks from presenting, or the
defendants from accepting, any particular offers to purchase.
While any sale of the entire property would require Cambio's
cooperation, the need to include his lots in any sale certainly did
not make it impossible to sell the entire subdivision or futile for
Sparks to try to find a buyer whose offer would be accepted. After
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all, ultimately the entire subdivision was sold, with Cambio's
cooperation.
Even if Sparks had been induced to undertake his
brokering efforts by a misrepresentation, he might still have
succeeded, notwithstanding the falsity of the representation of
ownership, if he had produced the right offer. Indeed, he came
close. The Osprey offer produced by Sparks would have earned him
a commission had it not been withdrawn by the purchaser. At the
time it was withdrawn, deeds for the conveyance of Cambio's lots as
part of the transaction had been executed and were held in escrow.
Neither Cambio's ownership nor any other condition or factor on the
seller's side stood as interference to the completion of that
sale.3 It might be a different story if Sparks had produced an
offer viable in all other respects that would have proceeded to a
consummated sale but for the fact that the defendants could not
deliver the whole subdivision. See Discover Realty Corp. v. David,
731 N.E.2d 79 (Mass. App. Ct. 2000). There is no evidence in the
record, however, of such an offer.
C. Nondisclosure of Giuliano's
Right to Approve Sales Prices
Sparks also claims that he was misled into undertaking
his brokering efforts on behalf of the defendants because they
withheld from him the fact that Giuliano had a qualified right to
approve the prices at which individual lots would be sold. The
3
Similarly, Camio's ownership in some lots in the subdivision
played no role in the failure of the Koteks' offer for an
individual lot, because the lot in question was owned by Fidelity.
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defendants respond that they were under no obligation to disclose
such information to Sparks.
The approval right in question stems from a settlement
agreement between Nations' predecessor, TRW, and Giuliano, dated
March 21, 1991. Pursuant to that agreement, Giuliano and his
partner agreed to transfer certain property interests in Wintucket
Farms to TRW in exchange for a cash payment and the right to
receive the amount by which proceeds from the sale of lots in the
subdivision exceeded TRW's "sunk costs." The agreement included
the following undertaking by TRW to develop the subdivision: "TRW
will market and sell the lots at retail, at offering and minimum
prices consistent with market conditions, the prices being subject
to [Giuliano's] approval, which will not be unreasonably withheld."
Under Massachusetts law, Nations was not obliged to
disclose Giuliano's right to approve minimum sales prices. Because
the relationship between Nations and Sparks was at arm's length, it
did not give rise to any affirmative obligation to disclose
what criteria Nations would apply in deciding whether, and on what
terms, to sell any of the lots. See Nei v. Burley, 446 N.E.2d 674,
676-77 (Mass. 1983)(stating that no duty to disclose exists when
two parties negotiate a deal at arm's length). In the absence of a
specific duty to disclose, a seller is not liable for an omission
of information. See Greenery Rehab. Group, Inc. v. Antaramian, 628
N.E.2d 1291, 1294 (Mass. App. Ct. 1994)(noting that in absence of
affirmative duty to disclose a weakness in the subject of a
transaction, nondisclosure of such information "is not a
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conventional tort of any kind"); see also DePasquale v. App, 542
N.E.2d 309 (Mass. App. Ct. 1989) (rescript)(finding no actionable
misrepresentation where seller failed to disclose to broker
existence of right of first refusal that prevented sale to broker's
client). In this respect, Massachusetts follows the general
principles summarized in the Restatement of Torts. See Restatement
(Second) of Torts § 551.
Moreover, the right to approve minimum sales prices
could not reasonably be construed as granting Giuliano an ownership
interest in any of the lots, so the defendants had no duty to
qualify their ownership representations in the listing agreements
by disclosing Giuliano's price approval right. The cases cited by
Sparks that relate to the duty to speak completely about a subject
one chooses to broach are inapposite. See Greenery Rehab., 628
N.E.2d at 1294.
Whether or not Giuliano's refusal to give his approval
actually prevented the consummation of any particular sale, and
thus prevented Sparks from earning a commission on the sale,4 is
immaterial in the absence of a disclosure duty.
D. Breach of Implied Covenant of
Good Faith and Fair Dealing
To the extent that Sparks' count alleging breach by the
defendants of an implied covenant of good faith and fair dealing
seeks to recover a commission, it lacks merit for the reasons
4
There is some evidence that Giuliano's insistence on a higher
price may have been a factor in the failure of Fidelity to come to
terms with the Koteks for the sale of the model home.
-27-
previously discussed. See supra § IV, at 8-21. An implied
covenant of good faith and fair dealing imposes on the parties the
obligation, once they have exchanged mutual promises of
performance, to act in good faith to accomplish the purposes of
their agreement. See Druker v. Roland Wm. Jutras Assocs., Inc.,
348 N.E.2d 763, 765 (Mass. 1976). It does not, however, add new
substantive obligations to their contractual undertakings. Here,
the parties' listing agreements did not exclude, and therefore
included as a matter of law, the Tristram's Landing prerequisites
to the earning and payment of a commission. An implied covenant of
good faith and fair dealing does not lessen the broker's
responsibility under the contracts, nor does it limit the seller's
freedom to set the terms it wants or to reject offers that it finds
unsatisfactory. Just as there was no "bad faith" in the sense of
the Tristram's Landing exception in failing to accept offers
produced by Sparks, there was no absence of good faith or fair
dealing in the same exercise of what the cases recognize as the
legitimate prerogative of the seller until a binding agreement for
sale has been concluded.
E. Unfair or Deceptive Acts or Practices
Chapter 93A of Massachusetts General Laws creates a
broad prohibition against "unfair or deceptive acts or practices in
the conduct of any trade or commerce." Mass. Gen. Laws ch. 93A,
§ 2. While Sparks correctly asserts that he does not have to
succeed on either his tort or contract law based claims to qualify
for relief under chapter 93A, he must show that Nations or Fidelity
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engaged in "conduct which is (1) within at least the penumbra of
some common-law, statutory, or other established concept of
unfairness; [and] (2) is immoral, unethical, oppressive, or
unscrupulous." Levings v. Forbes & Wallace, Inc., 396 N.E.2d 149,
153 (Mass. App. Ct. 1979)(citations and internal quotations
omitted).
To argue for liability under chapter 93A, Sparks relies
heavily on Bump, 509 N.E.2d at 12. In that case, a business broker
brought suit after he discovered that a business he was attempting
to sell was about to merge with another company. Id. at 15. The
defendants had been in serious negotiations about the merger even
before they hired the business broker, but they did not reveal
their plans to the broker until the merger was almost complete.
Id. at 16-17. The defendants also deliberately misrepresented the
value of their company to the broker. Id. at 22. The
Massachusetts Appeals Court concluded that the broker was entitled
to recovery under chapter 93A because the defendants' conduct
induced the broker to spend "time and money in a futile effort to
sell a company that was worthless and, as a practical matter, not
even available for sale." Id.
It is important to note in Bump the court did not permit
the broker to recover a commission. The court held that the
broker's efforts "yielded results far short" of meeting the three
Tristram's Landing requirements, and that he could not fit within
any exception to those requirements. See id. at 20. Nevertheless,
the court permitted the broker to sue under chapter 93A for what
-29-
was essentially a kind of quantum meruit remedy for "out-of-pocket
expenditures for travel and long-distance telephone calls, time
spent at meetings and in other related activities, and the usual
charges Bump made for his time." Id. at 22.
The peculiar facts in Bump prevent it from being useful
precedent on Sparks' behalf. There, the finding that the
defendants were liable for unfair practices depended on the factual
findings that the broker was induced to try to sell land that was
"worthless" and not genuinely available for sale. Id. In
contrast, the land Sparks was engaged to sell was clearly valuable,
and available for sale. Moreover, unlike the broker in Bump,
Sparks cannot show that the defendants induced him to pursue a
course of conduct that was "futile." Admittedly, the sale of
Wintucket Farms was not easy to accomplish, but it clearly was not
impossible, as was evidenced first by the near success of the
Sparks-sponsored Osprey deal and then by the ultimate sale to MVGP.
It would be a mistake, we think, to interpret Bump as
creating a new exception to the Tristram's Landing rule. In
effect, Sparks invokes Bump to argue for a broker's right to
recover damages for wasted time and expense in circumstances where
recovery under the brokerage contract is foreclosed by the
Tristram's Landing rule. In the first place, it is doubtful that
the Bump court itself would have viewed its opinion as opening that
door; the opinion hewed close to the factual findings of the trial
judge, and did not purport to be announcing a hitherto unannounced
avenue for compensating a broker who had not earned a commission
-30-
under his brokerage agreement. Even if that was the essay of the
Bump court, we have reason to doubt, given the SJC's rather firm
and enduring adherence to the Tristram's Landing rule, see Hillis,
658 N.E.2d at 691-92, that such a holding would be consistent with
the body of Massachusetts law on the matter and thus would command
our allegiance. After all, in Tristram's Landing the SJC said that
a broker has no right to payment for his efforts unless and until
he has located a buyer whom the seller formally accepts, the buyer
and the seller sign a binding contract, and the parties complete
the transaction. The court allowed a limited exception for
circumstances in which the seller wrongfully thwarts the completion
of an agreed sale, but it certainly did not suggest that a broker
who had worked hard but had been unsuccessful because the seller
never accepted any offer produced by the broker could nonetheless
be paid for his time and expenses in that effort. Indeed, as the
Bump court itself recognized, the Tristram's Landing rubric makes
very real the prospect that a broker would go without compensation
for genuine and substantial efforts on behalf of the seller.
See 509 N.E.2d at 20.
Sparks also attempts to analogize his situation to that
of the broker-plaintiff in Discover Realty, 731 N.E.2d at 79. In
that case, the seller misrepresented to the broker that he had
obtained certain releases from abutters to his property. Id.
at 81. The trial court found that "the seller had engaged in
'wrongful conduct' by misrepresenting the status of the three
releases to the broker at the time the listing agreement was
-31-
executed and at the time the purchase and sale agreement was
entered into." Id. Importantly, however, the court went on to
conclude that the broker was owed a commission because the seller's
misrepresentation had prevented the completion of the sale after
the buyer and seller had entered into a contract. Id. In
contrast, none of Sparks' buyers ever entered into a binding
agreement with the defendants. Sparks did not earn a commission
because the defendants did not accept any of the offers he
produced, not because the defendants' wrongful or legally unexcused
behavior prevented the completion of an agreed sale.
VI. Conclusion
In sum, the substance and policy of the Tristram's
Landing rule dictate that Sparks' tort and statutory claims fail
for the same reasons as his breach of contract claim. Sparks never
produced a buyer willing to purchase either the entire subdivision
or any particular lot on terms set by the seller (with the
exception of the Osprey offer, which might well have been completed
had not the purchaser withdrawn). Nor was there ever a binding
purchase and sale agreement concluded between a potential buyer and
the defendants. Nor did the defendants, through bad faith or other
wrongful conduct, prevent the consummation of any sale. Even if
the defendants wrongly represented in the listing agreements that
they owned the entire property, the fact that they did not cannot
be shown to have interfered with any sale. Finally, Massachusetts
law does not countenance a quantum meruit claim by a broker for his
time and services when the conditions established by Tristram's
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Landing and subsequent cases have not been met. The judgment of
the district court granting summary judgment in favor of the
defendants on all counts of the complaint and denying the
plaintiff's motion for partial summary judgment is affirmed.
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