Bos. Cap. Funding v. BEK Winchester Winning Farm

224 N.E.3d 1028

103 Mass.App.Ct. 573

BOSTON CAPITAL FUNDING, LLC

v.BEK WINCHESTER WINNING FARM LLC & another.¹

No. 22-P-630

Appeals Court of Massachusetts, Middlesex.

Argued September 7, 2023

Decided November 29, 2023

Contract, Performance and breach, Offer and acceptance, Misrepresentation, Consumer Protection Act, Unfair act or practice. Real Property, Attachment. Bond, To dissolve attachment. Practice, Civil, Summary judgment, Attachment.

Civil action commenced in the Boston Municipal Court Department on October 21, 2019.

Civil action commenced in the Superior Court Department on February 18, 2020.

After consolidation, the case was heard by Cathleen E. Campbell J., on motions for summary judgment, and a motion to discharge a bond of dissolution was heard by Christopher K. Barry-Smith, J.

Shannon F. Slaughter, Boston; for the plaintiff.

Richard Joyce, for the defendants.

Present: Meade, Hershfang, & D’Angelo, JJ.

D’ANGELO, J.

₅₇₄This case arises from the efforts of defendant BEK Winchester Winning Farm LLC (BEK) to obtain financing to develop land in Winchester (project). In 2017, BEK contracted with Newmark Real Estate of Massachusetts, LLC, doing business as Newmark Grubb Knight Frank (Newmark), to procure financing for the project. Then, in 2018, BEK signed an agreement with the plaintiff, Boston Capital Funding, LLC (BCF), purporting to grant BCF "exclusive authorization" to act on BEK’s behalf in procuring equity for the same project. Later in 2018, Newmark procured financing for the project, at which point BEK informed BCF that its services were no longer needed. BCF appeals from (1) a summary judgment dismissing its claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of G. L. c. 93A and (2) an order discharging a surety bond. We conclude that BCF did not have a binding, exclusive right to act on BEK’s behalf in procuring equity for the project, and that summary judgment properly entered on BCF’s contract-based claims. However, on BCF’s c. 93A claim, where there is evidence from which one could conclude that BEK enticed BCF to work on its behalf by intentionally misrepresenting the exclusivity of BCF’s authorization, summary judgment should not have entered. We further conclude that there was, no abuse of discretion in the order discharging the surety bond.

Background.² BEK was formed for the purpose of purchasing and developing land in Winchester. Pursuant to an agreement with the seller of the land, BEK had to provide proof of financing by April 12, 2018, although that deadline was later extended for several months. As noted, this case arises from BEK’s efforts to obtain the financing.

On April 4, 2017, BEK entered into a "Commercial Financing Procurement Fee Agreement" with Newmark (Newmark agreement). BEK granted Newmark "the exclusive right to arrange Commercial Financing" for eighteen months, and Newmark agreed to "use its commercially diligent efforts to procure Commercial Financing from any Referral Source." BEK agreed to pay Newmark a flat fee of $200,000 if it successfully procured financing.

By April 2018, Newmark had not acquired any financing for ₅₇₅the project. Thus, on April 30, 2018, before the expiration of the Newmark agreement, BEK entered into a separate "Engagement Agreement" with BCF (engagement agreement). BEK "grant[ed] [BCF] exclusive authorization to act on [BEK’s] behalf in the procurement of Equity for the [project]." The "authorization include[d] but [was] not limited to the sharing of personal and business financial information of [BEK] with any proposed Equity Participant deemed fit by [BCF]." BEK agreed to pay BCF three percent "of the procured Equity amount," which was both "earned" and "paid at Funding of the Equity." BEK also agreed to, pay BCF "a retainer fee in the amount of $2,500.00," which "[was to] be credited to [BEK] … at the closing." In reliance on the grant of "exclusive authorization," BCF forwent other opportunities and exerted efforts to procure equity for the project. On or about June 3, 2018, BEK sent BCF an "Offering Document" stating that Newmark had been granted the right to procure equity for the project, but Kevin Hern, the principal of BCF, did not read the entire document and did not see the provision about Newmark.

On June 18, 2018, Newmark procured four million dollars in financing for the project from Novaya Real Estate Ventures (Novaya).³ The next day, BEK sent BCF an e-mail message stating that BEK had secured financing for the project, requesting the return of the $2,500 retainer, and suggesting that the parties "find something else we can do together." BCF did not return the $2,500, and no commission was ever paid to BCF.

BCF asserted claims against BEK and BEK’s principal, Eric M. Katz, for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of G. L. c. 93A. The parties submitted cross motions for summary judgment, and a Superior Court judge denied BCF’s motion but allowed BEK’s motion. A summary judgment entered, and BCF appeals.⁴

[1, 2] ₅₇₆Discussion. 1. Standard of review. "Summary judgment is appropriate where there is no material issue of fact in dispute and the moving party is entitled to judgment as a matter of law." HSBC Bank USA, N.A. v. Morris, 490 Mass. 322, 326, 190 N.E.3d 485 (2022). See Mass. R. Civ. P. 56 (c), as amended, 436 Mass. 1404 (2002). "Our review of a decision on a motion for summary judgment is de novo" (citation omitted). HSBC Bank USA, N.A., supra. "In instances of cross motions, the appellate court assesses the factual materials in the light most favorable to the unsuccessful opposing party." Epstein v. Board of Appeal of Boston, 77 Mass. App. Ct. 752, 756, 933 N.E.2d 972 (2010). "The court will draw all permissible inferences and resolve any evidentiary conflicts in that party’s favor." Id.

[3] 2. Breach of contract. BGF argues that BEK committed a breach of contract, entitling BCF to expectation damages equaling three percent of the amount of the financing procured by Newmark. We conclude that the engagement agreement between BEK and BCF was in the form of a revocable offer that BEK would pay BCF a commission if BCF procured equity for the project. The language purporting to grant BCF "exclusive authorization" did not alter the nature of the transaction, Where BEK permissibly revoked its offer before BCF procured any equity, summary judgment properly entered on BCF’s breach of contract claim.⁵

[4] The issue presented turns on the distinction between unilateral and bilateral contracts. "Traditionally, contract law divides offers into one of two categories: (1) offers looking to a bilateral contract, and (2) offers looking to a unilateral contract." H.J. Alperin, Summary of Basic Law § 5:12 (5th ed. 2014) (Alperin). "[A]n offer for a bilateral contract requires a promise from the offeree in ₅₇₇order to form a binding contract," and the promise operates as a manifestation of mutual assent and consideration. 2 R.A. Lord, Williston on Contracts § 6.2 (4th ed. 2023). With respect to an offer for a unilateral contract, the offeree must perform an act to form a binding contract, and the act operates as the manifestation of mutual assent and consideration. See id. Until the offeree performs the act, thereby providing mutual assent and consideration, the offeror may revoke the offer at any time, 1 R.A. Lord, Williston on Contracts § 5.15 (4th ed. 2022).⁶

[5] An offer for a unilateral contract can work a hardship to the offeree, who may expend resources to perform the act only to have the offer revoked. See 1 Williston on Contracts, supra at § 5.15. To mitigate the possibility of hardship, offerees sometimes seek the exclusive right to perform the act, as BCF did here. However, the mere statement that the offeree has the exclusive right to perform the act does not alter the fundamental revocable nature of an offer for a unilateral contract. See Des Rivieres v. Sullivan, 247 Mass. 443, 446-447, 142 N.E. 111 (1924). See also Bump v. Robbins, 24 Mass. App. Ct. 296, 303-304, 509 N.E.2d 12 (1987). To make the exclusivity binding, the parties must enter into a bilateral contract whereby the offeree makes a promise. See Samuel Nichols, Inc. v. Molway, 25 Mass. App. Ct. 913, 913, 515 N.E.2d 598 (1987). See also Bump, supra.

Under our case law, the above principles have often been discussed in the context of brokerage agreements involving commissiona for the sale of property. In DesRivieres, 247 Mass. at 445, 142 N.E. 111, the parties signed an agreement stating that (1) the broker was the "exclusive agent to sell [the owner’s] houses," (2) the owner "agree[d] to pay [the broker] a regular broker’s commission, in any event, when a sale [was] consummated," and (8) the broker was "to do his advertising and showing of the property at his own expense." Because the broker did not promise to do ₅₇₈anything in exchange for the right to be the exclusive agent, and therefore did not provide any consideration for that right, the owner’s offer to pay the broker a commission was construed as a revocable offer. See id. at 448, 142 N.E. 111. See, e.g., Bartlett v. Keith, 325 Mass. 265, 267, 90 N.E.2d 308 (1950); Huang v. RE/MAX Leading Edge, 101 Mass. App. Ct. 150, 163-164, 190 N.E.3d 518 (2022), S.C., 491 Mass. 235, 201 N.E.3d 713.(2023).

In contrast, in Samuel Nichols, Inc., 25 Mass. App. Ct. at 914, 515 N.E.2d 598, the owner agreed that, "[i]n consideration of [the broker’s] listing for sale and undertaking to find a purchaser for the real estate," the owner gave the broker "the sole and exclusive right to sell the same." Through this language, the broker promised to list the real estate for sale and undertake to find a purchaser. See id. That promise served as consideration for the right to be the exclusive agent, and the parties successfully entered into a bilateral contract. See id. See also, e.g., John T. Burns & Sons, Inc. v. Brasco,...