Opinion
No. 96-0832C
January 27, 1998
MEMORANDUM AND ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
The defendants, Cincinnati Milacron Inc. ("Milacron") and Thomas F. Schimpff, Jr. ("Schimpff"), have moved for summary judgment under Mass.R.Civ.P. 56(c) on all counts of the Complaint. For the reasons stated below, the motion is ALLOWED as to Count V of the Complaint, claiming breach of contract, and DENIED as to Counts I through IV of the Complaint, claiming promissory estoppel, fraud and deceit, tortious misrepresentation, and violations of Chapter 93A.
BACKGROUND
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 is the plaintiff. Beal v. Board of Selectmen of Hingham, 419 Mass. 535, 539 (1995). According to that vision of the case, Milacron owned property on New Bond Street in Worcester that it stopped using in 1992. It sought to sell the property but was not successful in finding a buyer, and in 1995 began to look for potential tenants.
The plaintiff, M.H. Promotion Group ("MHPG"), was a growing T-shirt business that, early in 1996, was looking to move to a new facility in the Worcester area with the additional commercial space it needed to keep apace of its rapid growth. MHPG consulted with James Umphrey, the vice president of a Worcester-based real estate brokerage firm, who showed MHPG a number of properties, including Milacron's New Bond Street site. MHPG expressed interest in the New Bond Street property, and negotiations commenced regarding the leasing of that property.
Early in those negotiations, one of the brokers used by Milacron to market its property, Eyal Shapira, told Umphrey, MHPG's broker, that Milacron had previously tried to sell the property but had now decided to lease the building, get it fully tenanted, address the property's environmental problems, and then try to sell the property. Schimpff, Milacron's Real Estate Manager, told Umphrey that Milacron did not believe it could sell the property at the time because of the environmental problems, and decided that it wanted to lease the building.
Milacron and MHPG exchanged a number of lease proposals. Then, on February 1, 1996, Umphrey faxed to Shapira a four page proposal to lease space at the New Bond Street site, providing for, among other terms, a five year initial lease period, two three-year options to extend, annual rents for each year of the initial lease period (beginning at $140,000 for the first year) and the option years, and numerous improvements to be made by the landlord to the facility to meet the needs of MHPG.
The last paragraph of MHPG's proposal contained the following language:
This proposal sets forth the proposed business terms and conditions of the contemplated lease but is not intended to constitute a legally binding agreement or create any legally binding obligation on either party. This proposal is further subject to the execution of Owner's building standard lease and is subject to cancellation and/or withdrawal for any reason by either party without notice at any time prior to the execution of a mutually agreeable lease.
Shortly after this proposal was received, Umphrey, along with MHPG's Treasurer (David Hurowitz) and Human Resources Director (Andrew Miller), met at the New Bond Street site on February 6, 1996 with Schimpff and Ed Wortman, Milacron's Project Manager for building construction and improvements, who was based in Cincinnati. At this and subsequent meetings which carried over until the next day, Schimpff assured Hurowitz that Milacron had abandoned its efforts to sell the building and that he had the authority to enter into a lease agreement. They agreed on all pertinent lease terms identified in the February 1 proposal, including the duration of the lease, the amount of the rent, the improvements that were to be done, and the commencement date of the lease. At the conclusion of the last of these series of meetings on February 7, Schimpff told Hurowitz, "If those are all your improvements, then you got yourself a building." Hurowitz responded, "Great, you got yourself a tenant." They shook hands and Schimpff added, "You got yourself a landlord here, kid." Schimpff said a lease would be on its way within a week's time.
Hurowitz, immediately after the handshake, told Schimpff that he had some equipment he was looking at to meet his growing customer demands. On February 12 and 13, Hurowitz traveled to Buffalo and purchased $140,000 worth of equipment on behalf of MHPG. This equipment would not fit into MHPG's current space and was purchased in reliance on the oral representations of Schimpff and the consequent expectation that MHPG would be moving into the larger New Bond Street space in March 1996. On or about February 16, Miller asked Umphrey to ask Schimpff if MHPG could store this equipment at the New Bond Street facility, and Schimpff agreed. MHPG understood Milacron's willingness to allow them informally to store equipment at the facility before the lease was executed to indicate that their tentative agreement was still on track.
MHPG also hired a production manager, Donald Frank, to operate the new equipment, all in the expectation that the equipment would be installed in the new facility in March 1996. Indeed, Mr. Frank entered on the MHPG payroll in March 1996.
On December 15, 1995, Schimpff had received a letter from a broker informing him that Great Northern Recycling was interested in purchasing the New Bond Street site. Only hours after having shaken Hurowitz's hand on February 7, 1996 and telling him that "you got yourself a landlord," Schimpff met with representatives of Great Northern Recycling to explore its possible purchase of this site. At that meeting, Great Northern made an offer to purchase the property, and Milacron counter-offered the next day. Schimpff at this time believed that Great Northern Recycling was not interested in having tenants in the building if it were to purchase it.
This meeting with Great Northern Recycling set in motion a series of discussions that ultimately resulted in Great Northern buying the New Bond Street property. Milacron preferred to sell the property and put off any lease discussions with MHPG until it could determine whether the sale to Great Northern would go through. Milacron never sent the lease to MHPG it promised; it sent instead simply a blank lease form. Roughly two weeks after the February 7 handshake, after two or three calls from Umphrey asking about delivery of the promised lease in which Schimpff made no mention of Milacron's discussions with Great Northern, Schimpff finally told Umphrey that Milacron was not going to do the deal.
Once MHPG learned that Milacron was not going to rent it the New Bond Street property, it went in search of alternative space, but had little success. Great Northern offered to rent MHPG the same space, but at more then three times the rent agreed to by Milacron. MHPG rejected Great Northern's offer. MHPG finally located other space, but it was far from Worcester, inaccessible by public transportation, and cost $620,000 more over the five year lease term than what it would have paid had the New Bond Street lease been honored.
MHPG concedes that it recognized that there would be a formal written lease and that no such lease was ever executed. It nonetheless claims damages on counts of promissory estoppel, fraud and deceit, tortious misrepresentations, Chapter 93A violations, and breach of contract.
DISCUSSION
To prevail on summary judgment, the moving party must establish that there is no genuine issue of material fact on every element of a claim and that it is entitled to judgment on that claim as a matter of law. See generally Mass.R.Civ.P. 56(c); Highlands Insurance Co. v. Aerovox, Inc., 424 Mass. 226, 232 (1997). Where, as here, the party opposing summary judgment has the burden of proof at trial, the moving party is entitled to summary judgment if it "demonstrates, by reference to material described in Mass.R.Civ.P. 56(c), unmet by countervailing materials, that the party opposing the motion has no reasonable expectation of proving an essential element of that party's case." Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991). "To be successful, a moving party need not submit affirmative evidence to negate one or more elements of the other party's claim." Id. It is sufficient to demonstrate that "proof of that element is unlikely to be forthcoming at trial." Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991).
Milacron contends that the Statute of Frauds bars the breach of contract claim. That statute provides that:
No action shall be brought: . . .
Upon a contract for the sale of lands, tenements or hereditaments or of any interest in or concerning them; or . . .
Upon an agreement that is not to be performed within one year from the making thereof;
Unless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.
G.L.c. 259, § 1. There is no dispute that the oral New Bond Street lease claimed by MHPG falls within the scope of the Statute of Frauds: the lease concerns a tenancy interest in land and is five years in duration, and there was no writing signed by anyone authorized by Milacron that reflects the terms of the purported oral agreement.
In addition, under a separate statute, not cited by either party, this oral agreement, even if intended to last five years, would be limited to a tenancy at will. General Laws, c. 183, § 3 provides:
An estate or interest in land created without an instrument in writing signed by the grantor or by his attorney shall have the force and effect of an estate at will only, and no estate or interest in land shall be assigned, granted or surrendered unless by such writing or by operation of law.
MHPG, however, cites a long list of Massachusetts cases that have held that the Statute of Frauds does not bar relief when the plaintiff has been misled to his detriment and the denial of relief would cause an injustice. See, e.g., Greenstein v. Flatley, 19 Mass. App. Ct. 351 (1984); Simon v. Simon, 35 Mass. App. Ct. 705 (1994); Levin v. Rose, 302 Mass. 378, 381-382 (1939) ("It is settled that the statute [of frauds] is not a bar where the denial of relief, to one who has been misled to his harm, would cause an unjust and unconscientious injury and loss.") Milacron acknowledges these precedents but insists they do not apply to the undisputed facts of this case, since it contends that MHPG cannot establish a promise sufficient to form the basis for a promissory estoppel claim. Most importantly, it argues that it is undisputed that all parties contemplated a written lease agreement, and that, as a matter of law, no "promise" could be found because reliance on an oral promise under such circumstances would be patently unreasonable, especially by the capable businessmen associated with MHPG, one of whom was formerly an associate at a major Boston law firm. See Rhode Island Hospital Trust National Bank v. Varadian, 419 Mass. 841, 850 (1995) (an oral promise regarding a $43.5 million construction loan was not a "'promise' in the contractual sense" when both parties contemplated a written agreement governing its intricacies and "therefore no amount of reliance on the part of the promissees would give rise to a 'contract' by virtue of reliance.")
This case forces a hard look at the basic principles of contract and promissory estoppel in the context of the legislative mandates set forth in the Statute of Frauds and G.L.c. 183, § 3. If the alleged misconduct of Milacron can create an enforceable contract via promissory estoppel, then the Statute of Frauds and G.L.c. 183, § 3 mean nothing in any case involving reliance. Yet, if they bar all relief, then these statutes may be used as instruments of inequity. As detailed below, I choose a middle path: when the Statute of Frauds and G.L.c. 183, § 3 bar enforcement of an agreement in contract, reliance does not justify a contract action but only an action in tort. The consequence of this legal distinction is that, in these cases, damages are limited to those available in a tort action: the actual loss proximately caused by the reliance, in other words, the amount needed to place the plaintiff in the same position he would have been in had the tortious representation never been made. Vmark Software, Inc. v. EMC Corp., 37 Mass. App. Ct. 610, 619 (1994). The promissee will not be entitled to the usual contract measure of damages: the benefit of his bargain, that is, the amount needed to place the plaintiff in the same position as if the promise had been performed. Vmark Software, Inc. v. EMC Corp., 37 Mass. App. Ct. at 611 n. 2.
Massachusetts law has long permitted a cause of action founded on reliance where the promisor made a promise that he reasonably should have known would induce reliance, it did indeed induce reliance, and the promisee who reasonably relied on the promise suffered injury because the promise was not fulfilled. See, e.g., Levin v. Rose, 302 Mass. 381-382; Simon v. Simon, 35 Mass. App. Ct. at 711-712. This cause of action, when characterized as promissory estoppel, is based in contract, and, when justice requires, can make the relied-upon promise binding if justice can only be avoided by enforcement of the promise. Restatement (Second) of Contracts, § 90. See also Simon v. Simon, 35 Mass. App. Ct. at 711; Boylston Development Group, Inc. v. 22 Boylston Street Corp., 412 Mass. 531, 542 (1992); Greenstein v. Flatley, 19 Mass. App. Ct. at 357. However, this same conduct may also yield a cause of action based in tort, usually characterized as claims of reliance, fraud and deceit, negligent misrepresentation, or Chapter 93A violations. Indeed, in most of the cases cited by the defendant MHPG, the relief sought and granted was not based on contract or promissory estoppel, but on violations of Chapter 93A. See, e.g., Greenstein v. Flatley, 19 Mass. App. Ct. at 356; Wasserman v. Agnastopoulos, 22 Mass. App. Ct. 672 (1986).
In the instant case, a tort measure of damages, apart from any multiple damages that potentially could be sought on the Chapter 93A claim, would permit the plaintiff to recover for its reliance damages, that is, its additional costs resulting from the actions it took in reliance on its belief that the Milacron lease would commence in March 1996. However, if that same conduct, combined with reasonable reliance, were to transform that promise into a contract, the measure of damages potentially could be far greater. While reliance damages, that is, "expenditures made in reliance upon a contractual obligation that was not performed," are permitted in appropriate contract cases, "[t]he long-established general rule for breach of contract recovery in Massachusetts is that the wronged party should receive the benefit of his bargain, i.e. be placed in the same position as if the contract had been performed." Vmark Software, Inc. v. EMC Corp., 37 Mass. App. Ct. at 611 n. 2. In the instant case, if benefit of the bargain damages were awarded — the difference between the rent MHPG would have paid under the oral lease and the rent it is presently paying for equivalent space — the plaintiff would receive far more money than if reliance damages were awarded. As a result, it matters a great deal whether the conduct alleged here is sufficient to make out a claim of contract, thereby raising the possibility of benefit of the bargain damages, or is limited to claims sounding in tort, thus limiting the plaintiff to reliance damages.
I find as a matter of law, based on the undisputed facts and those disputed facts viewed in the light most favorable to MHPG, that summary judgment must be granted on the breach of contract claim — Count V of the Complaint. There is good reason why the Legislature enacted a Statute of Frauds; the requirement of a writing in all agreements involving land and all agreements that cannot be performed within one year greatly reduces the danger of fraud and error in interpreting such agreements. Kuhlmann v. Hy-Crest Ranches, Inc., 4 Mass. App. Ct. 542, 545 (1976). The common law permits this requirement to be negated only in those cases where, if the Statute were applied, the law would be siding with the wrong person — he who made a promise with the intent to induce the promisee to rely on it, and then reneged on that promise after the promisee had reasonably relied on the promise to his detriment. See, e.g., Simon v. Simon, 35 Mass. App. Ct. at 711-713. The basic principle is that a wrongdoer should not be allowed to benefit from his wrong. This Court can honor that equitable purpose and yet respect the legislative purpose behind the Statute of Frauds, certainly given the undisputed facts of this case, by finding that the Statute of Frauds forbids the oral lease agreement from being enforced as a contract but does not bar claims in reliance and tort based on the allegations of unkept promises and induced reliance. The consequence of this finding is to bar benefit of the bargain damages but permit reliance damages, thereby fully compensating the promisee for all damages resulting from his unfortunate but reasonable reliance on the unkept promises of the promisor but denying him the damages that would have resulted had the written lease been executed and breached.
There are at least five reasons for this finding. First, it best preserves the purpose and clear meaning of the Statute of Frauds; an oral promise concerning land may create legal obligations, but it does not create an enforceable contract. Equitable estoppel, while characterized by MHPG as an equitable bar to the invocation of the Statute of Frauds as a defense to a contract claim, is not that at all; it states a separate and distinct cause of action of reliance. It cannot transform a promise into an enforceable contract but it can prevent injustice by compensating the promisee for any harm he suffered by relying on that unkept promise to his detriment. As the Supreme Judicial Court declared in
Boylston Development Group, Inc. v. 22 Boylston Street Corp.:
A successful assertion of equitable estoppel requires: (1) 'a representation or conduct amounting to a representation intended to induce a course of conduct on the part of the person to whom the representation is made[;] (2) [a]n act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made[;] (3) [and d]etriment to such person as a consequence of the act or omission.'
412 Mass. at 542 quoting Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722, 728 (1974). Whether one characterizes this cause of action as sounding in contract or tort, it remains an equitable claim, and thereby limited in remedy to its equitable purpose — to undo the detriment caused by reliance on the misrepresentation.
The plaintiff, based on its Complaint, recognizes the distinction between the damages appropriate to a reliance claim and those appropriate to a breach of contract claim. It filed separate claims for promissory estoppel (Count I) and breach of contract (Count V). On its promissory estoppel claim, it seeks "damages the Court finds that MHPG has sustained as a result of its reliance on Cincinnati Milacron's promise to lease space to MHPG." Complaint at 11. On its breach of contract claim, it seeks damages "the Court finds that MHPG has sustained as a result of Cincinnati Milacron's breach of contract." Complaint at 11.
The consequence of this summary judgment decision is to permit the promissory estoppel claim to go forward but to dismiss the breach of contract claim. Whether the estoppel claim sounds in contract or in tort, the practical consequence is the same in view of the damage allegations in the complaint — the plaintiff is limited to reliance damages.
Second, this interpretation is most consistent with the language of the Statute of Frauds, which declares that "[n]o action shall be brought . . . [u]pon a contract for the sale . . . of any interest in or concerning [land]" unless the contract is in writing and signed by the promisor. G.L.c. 259, § 1. Read literally, this statute bars plaintiff in this case from even bringing a contract claim based on the oral lease. Its language does not bar a claim other than one in contract, and does not bar a claim based on something other than the contract, such as a misrepresentation or broken promise.
Third, a claim in contract is barred by the language of G.L. c. 183, § 3, which limits oral agreements such as this concerning an interest in land to "the force and effect of an estate at will only." Consequently, even if one were to construe the oral promise of a lease to be enforceable as a lease, that lease would be at will only, and benefit of the bargain damages would not be appropriate because the landlord lawfully could declare it terminated on its first day.
Fourth, it reflects the undisputed understanding among the parties. The plaintiff contends that it reasonably believed it had a lease based on the February 7, 1996 statements of the parties that the terms were agreed to and they each now had a landlord and a tenant, punctuated by the traditional handshake reflecting an oral agreement. Yet, plaintiff at this very moment knew that there was no lease, because there was discussion then and there about receipt of a written lease agreement. Indeed, plaintiff concedes that it knew that there was to be a written lease agreement, so it had to know that the promises that were exchanged were something less than a lease. Rather, viewed in the light most favorable to the plaintiffs, they could be seen as promises to execute a written lease on the terms that had been agreed to orally. In short, plaintiff believed it had the promise of a lease, not a lease. To permit a claim of breach of the lease to go forward to trial, with its possibility of benefit of the bargain damages, ignores this distinction. Milacron never executed a lease and MHPG knows it did not, so it should not be liable for contract damages as if it had executed that lease. Ucello v. Cosentino, 354 Mass. 48, 51-52 (1968) (unsigned agreement not enforceable when parties proposed to be bound by it only when all had signed it); Rhode Island Hospital Trust National Bank v. Varadian, 419 Mass. at 850 (oral promise is not binding agreement when both parties contemplated written agreement setting forth details of transaction). If Milacron did make a promise, it should be at risk of liability for reliance damages resulting only from its promise to execute a lease, not contract damages from a lease it never executed.
Fifth, MHPG acknowledges that it seeks an equitable remedy in estoppel, but it would be inequitable to enforce the oral promise as an executed written contract on behalf of MHPG. In its final written proposal to Milacron, written just six days before the oral promise it now claims was a binding lease, MHPG made it crystal clear that it would not be legally bound by anything other than a mutually agreeable executed written lease. See infra for the language of the February 1, 1996 proposal. MHPG cannot have it both ways; it cannot declare that it will be bound only by a written lease agreement, then later seek to bind Milacron to an oral promise to lease and invoke equity in its behalf. See Greenfield Country Estates Tenants Assn., Inc. v. Deep, 423 Mass. 81, 90 (1996) (equitable relief may not be granted where it will allow one party an inequitable advantage).
I must deny summary judgment on the remaining claims. All of them are variations on the theme of estoppel, and estoppel is ordinarily a question of fact reserved for the jury. Simon v. Simon, 35 Mass. App. Ct. at 712; Levin v. Rose, 302 Mass. at 382. The evidence presented by the plaintiff, if believed by the jury and interpreted by them in a favorable light, is sufficient to raise triable issues regarding reliance. The case law is clear that it may be tortious conduct to make a promise, then fail to inform the promisee that the promise may not or will not be honored when the promisor knew or should have known that the promise may have induced detrimental reliance by the promissee. See, e.g., Greenstein v. Flatley, 19 Mass. App. Ct. at 355-357. In this case, there is sufficient evidence that Milacron promised to lease the New Bond Street facility to MHPG, then quickly realized that it may renege on that promise once it began negotiating seriously with Great Northern for the sale of the property. Yet, it failed to inform MHPG of that possibility even though it knew or reasonably should have known that MHPG was beginning to make business decisions in reliance on the lease being executed. In addition, there is evidence sufficient to permit a jury to find a knowing misrepresentation if it believes that Schimpff told MHPG that Milacron had given up trying to sell the property at a time when Milacron not only was actively looking for buyers but had a prospective buyer express renewed interest in such a purchase. Since this conduct, if proven, fits "within the penumbra of some common-law, statutory, or other established concept of unfairness," PMP Associates, Inc. v. Globe Newspaper Co., 366 Mass. 593, 596 (1975), it may support a Chapter 93 claim as well as the claims of promissory estoppel, fraud and deceit, and tortious representation. See Greenstein v. Flatley, 19 Mass. App. Ct. at 356.
I have considered and reject the defendant's contention that no reliance on the promise to lease could be reasonable as a matter of law when the plaintiff contemplated that a written lease would be prepared and recognized that the lease was not final until that written document was executed. See Rhode Island Hospital Trust National Bank v. Varadian, 419 Mass. at 850. As I have found, this is a sound reason to dismiss the contract claim, but it does not warrant dismissal of the reliance claims. Even though MHPG knew that there would be no enforceable lease until the written lease was executed, the evidence permits the jury to find that it reasonably expected such a lease to be executed, that it made known to Milacron that it was taking steps in reliance on MHPG's promise to finalize the lease, and that Milacron did not act reasonably to forestall such detrimental reliance by promptly informing MHPG that it was negotiating with a prospective buyer for the property. This is sufficient to make out the reliance claims, with reliance-related damages.
ORDER
For the reasons stated above, it is hereby ORDERED that summary judgment is granted on behalf of all defendants as to Count Five of the Complaint. Summary judgment is denied as to Counts One through Four.
_____________________________ Ralph D. Gants Justice of the Superior Court
Dated: January 27, 1998