Opinion
21-P-129
04-19-2022
Nitin DALAL & others v. Scott J. M. WOLAS & another.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
The plaintiffs appeal the denial of their motion for reconsideration of an award of summary judgment in favor of the defendants, Arthur Foley and Annex Realty, Inc. (Annex), on the plaintiffs’ claims of vicarious liability for the criminal misconduct of the defendants’ real estate salesperson, Scott Wolas, negligent hiring and retention, and violation of G. L. c. 93A. On appeal, the plaintiffs claim: (1) there exists a genuine issue of material fact as to whether Wolas was the defendants’ employee, as opposed to an independent contractor, for the purposes of the vicarious liability claim; (2) the judge erred in awarding summary judgment on the negligent hiring and retention claim where the defendants owed a duty to the public to further investigate Wolas prior to offering him employment; and (3) where the defendants allowed Wolas to allegedly violate G. L. c. 112, § 87RR, the award of summary judgment on the plaintiffs’ claim under G. L. c. 93A was improper. We affirm.
Wolas and IFI are not parties to this appeal. Following the award of summary judgment, the judge entered separate and final judgment as to the plaintiffs’ claims against Foley and Annex only. The plaintiffs did not file a notice appeal, but, eight months later, sought reconsideration of the judgment. Although the plaintiffs filed a notice of appeal within thirty days of denial of the motion for reconsideration, Mass. R. A. P. 3, as appearing in 481 Mass. 1603 (2019), the notice was untimely as to the judgment, because the motion for reconsideration was not filed within ten days of entry. See Mass. R. A. P. 4 (b) (2), as appearing in 481 Mass. 1606 (2019). As such, only the denial of the motion to reconsider the entry of judgment in favor of Foley and Annex on the claims against them is before us. See DeLucia v. Kfoury, 93 Mass. App. Ct. 166, 170 (2018) (timely notice of appeal is jurisdictional prerequisite to our authority to consider any matter).
Discussion. 1. Vicarious liability. The plaintiffs claim that the award of summary judgment on the vicarious liability claim was improper where there existed a genuine issue of material fact as to whether Wolas was an employee of Foley and Annex. We disagree.
The plaintiffs contend that the judge erred in relying upon Monell v. Boston Pads, LLC, 471 Mass. 566, 576 (2015), in holding that any real estate salesperson must as matter of law be an independent contractor of his or her affiliated broker, rather than an employee. However, this assertion misstates the judge's discussion of Monell in his decision, as the judge merely relied upon Monell for the proposition that G. L. c. 112, § 87RR sets out the licensing scheme for real estate salespersons and expressly authorizes salespersons to be independent contractors. See id. See also G. L. c. 112, § 87RR (Salesperson "may be affiliated with a broker ... as an independent contractor"). Contrary to the plaintiffs’ claim on appeal, at no point in his decision did the judge rule that Monell means that Wolas is an independent contractor of Annex as matter of law. Instead, the judge explicitly stated that it was "the factual circumstances" that "do bear out the defendants’ contention as to Wolas’ non-employee status with Annex." Upon careful review of the record, we agree that the factual circumstances of Wolas's relationship with Annex and Foley render him an independent contractor. Wolas, like the other salespersons, entered into an independent contractor agreement with Annex in which both parties expressly agreed, on numerous occasions, that they were not creating an employee-employer relationship. This agreement, coupled with other aspects of the parties’ relationship, demonstrated that the parties neither intended nor acted as if Wolas was an employee of Annex; rather, all parties operated as if Wolas was an independent contractor of Annex, as expressly authorized by G. L. c. 112, § 87RR. Thus, we discern no error.
The plaintiffs, for the first time in a motion for reconsideration, argued that Wolas fraudulently signed the independent contractor agreement under the name Eugene Joseph Grathwohl, and as such, the agreement was a legal nullity. The plaintiffs likewise argued for the first time in their motion for reconsideration that, where Wolas also created IFI under the assumed name of Eugene Joseph Grathwohl, the entity is also a legal nullity. Thus, the plaintiffs argue, where both the agreement and IFI were legal nullities, the judge erred in considering them. However, because such arguments were not raised at summary judgment, and were raised only for the first time in the plaintiffs’ subsequent motion for reconsideration, the arguments are waived. See AA&D Masonry, LLC v. South St. Business Park, LLC, 93 Mass. App. Ct. 693, 697-698 (2018).
Annex retained only five employees and utilized between fifty-five and seventy real estate salespersons, each of whom operated under "Broker-Salesperson Independent Contractor" agreements. Annex provided independent contractors like Wolas with a key to a Quincy office, which was furnished with desks, equipment, and conference rooms. Wolas, like other salespersons, was given free access to use Annex's office for broker-related business, as well as unrelated personal matters.
However, the plaintiffs also argue that the award of summary judgment on their vicarious liability claim was improper where Wolas acted with the apparent authority of Foley and Annex as their purported agent. We disagree.
The plaintiffs also argue that a jury could reasonably find that Foley acted as an "investment supervisor," such that he exercised direct control over Wolas in the management of the Beachcomber project. While Foley did become suspicious of Wolas's conduct in the weeks immediately before Wolas's disappearance, and expressed such concerns directly to Wolas, Foley's conduct does not suggest he served as Wolas's direct supervisor on the Beachcomber project; instead, it merely demonstrates Foley's own individual personal concerns as an investor. Nonetheless, where the plaintiffs fail to cite any legal authority in support, the argument fails to rise to the level of sufficient appellate argument and is waived. See Kellogg v. Board of Registration in Med., 461 Mass. 1001, 1003 (2011) ("bald assertions of error" that lack legal argument and authority provide insufficient basis to consider appellant's claims). See also Mass. R. A. P. 16 (a) (9) (A), as appearing in 481 Mass. 1628 (2019).
"Apparent authority exists when the principal, by his or her words or conduct, causes a third person to reasonably believe that the principal consents to the agent acting on the principal's behalf." Fergus v. Ross, 477 Mass. 563, 567 (2017). Here, the plaintiffs claim that Wolas acted with apparent authority as an agent of Foley and Annex in the Beachcomber project. In particular, the plaintiffs allege that it was their reliance upon "the national Century 21 brand," under which Annex operated, that made them comfortable enough to invest with Wolas in the Beachcomber project. However, such reliance on the "national Century 21 brand" alone is insufficient to create a genuine issue of material fact that Annex cloaked Wolas with the apparent authority to act on its behalf. See Theos & Sons, Inc. v. Mack Trucks, Inc., 431 Mass. 736, 743-746 (2000) (use of truck manufacturer's logos and brand name by authorized truck dealer and servicer insufficient to create cloak of apparent authority where plaintiff sought to hold truck manufacturer liable for non-warranty truck repairs that fell outside scope of manufacturer's relationship with authorized dealer and servicer). This is particularly true where Annex had no listed involvement in the Beachcomber project, which took place entirely under the domain of IFI, a separate and distinct entity. See id.
The plaintiffs also argue that their comfort in investing with Wolas arose from his use of a business card that identified his place of business as the Annex office in Quincy. The plaintiffs allege that Wolas met with clients at this office, received mail at that address, and even held himself out to be the "[t]op producing real estate broker [at] Century 21 Annex, Quincy." However, each of these representations came not from Annex or Foley, but instead from Wolas himself. Thus, they cannot as matter of law form the basis for finding apparent authority. See Licata v. GGNSC Malden Dexter LLC, 466 Mass. 793, 801 (2014) ("a purported agent's own representations, absent authority from the principal to make such representations, cannot establish apparent authority"). At bottom, where the record is entirely devoid of any indicia that Wolas had the apparent authority to act as an agent of Foley and Annex, we discern no error.
The plaintiffs argue that, when LoRe spoke to Foley to assess Wolas's credibility and credentials, Foley responded that Wolas had been with Annex for a number of years, was a "good guy," and was one of Annex's top producers. Foley's statements came during a meeting at the Neighborhood Club in Quincy, in which plans for the Beachcomber project were discussed. Foley himself was an investor in this project, though, and his statements were made as a personal investor in the project, not in his official capacity as president of Annex.
2. Negligent hiring and retention. The plaintiffs argue that the judge erred in granting summary judgment on the negligent hiring and retention claim because the defendants owed a duty to further investigate Wolas's criminal past. We disagree.
"Negligent retention ... occurs when, during the course of employment, the employer becomes aware or should have become aware of problems with an employee that indicated his unfitness, and the employer fails to take further action such as investigating, discharge, or reassignment" (citation omitted). Foster v. The Loft, Inc., 26 Mass. App. Ct. 289, 291 (1988). As we concluded above, Wolas was not the defendants’ employee; rather, he was hired by both Foley and Annex as an independent contractor. However, the doctrine of negligent hiring and retention may still apply to independent contractors where the hiring entity possesses actual knowledge of the independent contractor's past misconduct, and, as a result, owes a duty to the public to take sufficient action to avoid preventable harm. See Copithorne v. Framingham Union Hosp., 401 Mass. 860 (1988) (hospital owed duty of care to patient to prevent subsequent sexual assault, despite neurosurgeon being independent contractor, where it knew of neurosurgeon's past sexual misconduct). Here though, both Foley and Annex had no actual knowledge of Wolas's criminal past. Contrast id. at 865. The plaintiffs nonetheless argue that the failure to make any inquiry into Wolas's past renders both Foley and Annex negligent as matter of law. However, the failure to inquire into an employee's possible criminal record alone is insufficient to sustain a claim for negligent hiring and retention, even where that employee will work directly with the public. See Foster, supra at 295 n.8. Moreover, the mere hiring of an individual with a criminal record also does not open the door for liability on the part of Foley and Annex on the theory of negligent hiring and retention. See id. at 294 n.6. Thus, we discern no error in the judge's award of summary judgment on this claim.
This is particularly true where at all times Wolas conducted business under the assumed name of Eugene Joseph Grathwohl. Foley and Annex would have had no reason to perform a background check on Scott Wolas, where Wolas's real estate salesperson license was issued under the name Eugene Joseph Grathwohl and he conducted all of his business under that assumed name. See Ledet v. Mills Van Lines, Inc., 97 Mass. App. Ct. 667, 672-673 (2020) (party only liable for foreseeable harm that results from hiring or retaining employee).
Even if the plaintiffs could demonstrate that both Foley and Annex owed a duty to further investigate Wolas prior to hiring him as a real estate salesperson, the plaintiffs’ claim is barred by the economic loss doctrine. See Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club, Inc., 455 Mass. 458, 469-470 (2009) (no recovery on negligence claim where plaintiff's injuries are purely economic losses, rather than physical harm or property damage).
3. Chapter 93A claim. Finally, the plaintiffs claim that the award of summary judgment on their c. 93A claim was improper because the defendants permitted Wolas to carry on a separate real estate venture in violation of G. L. c. 112, § 87RR. We disagree.
The plaintiffs argue that, where G. L. c. 112, § 87RR prevented Wolas from operating his own real estate business, both Foley and Annex were necessarily responsible, legally, for Wolas's conduct on the Beachcomber project, such that Wolas was by statute their agent. We disagree. Nothing in the plain language of G. L. c. 112, § 87RR suggests that every salesperson is an agent of the realtor for all purposes and in all circumstances, and the plaintiff has provided no case law to that effect.
General Laws c. 112, § 87RR, governs the relationship of a real estate broker to its salespersons. The statute requires exclusivity for salespersons, such that they may conduct business only with one broker at a time. See G. L. c. 112, § 87RR. In pertinent part, G. L. c. 112, § 87RR states, "No salesman may conduct or operate his own real estate business nor act except as the representative of a real estate broker who shall be responsible for the salesman and who must approve the negotiation and completion by the salesman of any transaction or agreement which results or is intended to result in the sale, exchange, purchase, renting or leasing of any real estate or in a loan secured or to be secured by mortgage or other encumbrance upon real estate."
On appeal, the plaintiff isolates the initial language of the statute, "No salesman may conduct or operate his own real estate business," for the proposition that both Foley and Annex permitted Wolas to violate G. L. c. 112, § 87RR, when Wolas independently solicited investors for the Beachcomber development project through IFI. We disagree.
First, the plaintiffs have cited no legal authority that supports their isolation of the statutory language of G. L. c. 112, § 87RR. Contrary to the plaintiffs’ argument, we do not read statutory language in isolation. See Casseus v. Eastern Bus Co., Inc., 478 Mass. 786, 795 (2018). We look to the entirety of the plain language of the statute to effectuate the Legislature's intent, and we "construe clear and unambiguous statutory language as written, unless doing so would produce an absurd outcome or otherwise frustrate legislative intent." Id. Here, the statute governs only the relationship between a broker and its real estate salespersons. See G. L. c. 112, § 87RR. It does not seek to regulate any and all business that a salesperson may engage in that indirectly relates to real estate. See Turnpike Motors, Inc. v. Newbury Group, Inc., 403 Mass. 291, 293-295 (1988) ( § 87RR primarily regulates recovery of commissions by salespersons in sale of real estate). Any such interpretation would produce an "absurd" outcome that would obliterate the crux of the statute, to create a licensing scheme applicable to all salespersons prior to their engagement in brokerage services. See G. L. c. 112, § 87RR. See also Casseus, supra at 795; Simon v. State Examiners of Electricians, 395 Mass. 238, 249 (1985) (statutory interpretation must be supported by actual language of statute as well as "context from which it arose" [emphasis added]).
As it relates to the Beachcomber project, Wolas and IFI were engaged in the solicitation of investors for real estate development. The summary judgment record contained no information that either Wolas or IFI sought to act as the plaintiffs’ broker on the Beachcomber deal such that it would fall within the licensing scheme of G. L. c. 112, § 87RR. Therefore, where we reject the plaintiffs’ overbroad interpretation of the language of G. L. c. 112, § 87RR, and, where Wolas's business transactions through IFI do not fall within the scope of the statute, we discern no violation. Absent a violation of G. L. c. 112, § 87RR, the plaintiffs’ derivative claim for violation of c. 93A fails as matter of law. See Flemming v. Greystar Mgt. Servs., L.P., 100 Mass. App. Ct. 469, 475 (2021).
Order denying reconsideration affirmed.