FOX v. BURNS LEVINSON LLP (2019)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

In this attorney malpractice action, the plaintiffs appeal from a defense verdict, asserting primarily that a new trial should have been granted because the facts “overwhelming[ly]” demonstrated that the defendant attorneys breached their duty of care. The case involves a “general guaranty” (guaranty) that the plaintiffs executed, to guarantee payment of a real estate development loan. The plaintiffs' theory is that they were forced to make a payment on the guaranty because the defendant attorneys failed to incorporate critical limiting language into the guaranty. We affirm.

Background. The underlying loan of $22.5 million was made by IndyMac Bank FSB (IndyMac) to 16 Miner Street, LLC (16 Miner Street), on July 8, 2005. The loan was to be used to construct fifty-three condominium units in Boston. The plaintiffs, Robert Fox and Jonathan S. Sherwin, were the principals of 16 Miner Street. Fox and Sherwin entered into the guaranty for the loan on the day the loan closed. The guaranty stated, in pertinent part:

“The Guarantor absolutely and unconditionally guarantees the punctual and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the following (the “Guaranteed Obligations”): (a) present and future indebtedness evidenced by the Note dated the date of this Guaranty in the face principal amount of $22,500,000.00 ․ provided, however, that notwithstanding anything to the contrary contained in this Guaranty or any of the Loan Documents, recovery under the Guaranty is limited to the sum of (i) the principal amount of $11,250,000.00, plus (ii) interest on the principal amount set forth in section (i), plus (iii) late charges relating to the principal amount set forth in section (i), plus (iv) Lender's fees and costs incurred in the enforcement of this Guaranty.”

16 Miner Street defaulted on the loan in May of 2008, after making some payments. IndyMac ⁴ foreclosed on the loan in July 2009, and thereafter sold the property at auction for $13.5 million. IndyMac then pursued the plaintiffs for the unpaid balance, based upon the guaranty. The plaintiffs eventually paid IndyMac $200,000 to settle the case, after significant litigation in the Superior Court.

The plaintiffs then instituted this malpractice action against the defendants, Leslie B. Muldowney and Burns & Levinson, LLP (Burns & Levinson), seeking to recover the $200,000. Muldowney and Burns & Levinson were the lawyers who advised the plaintiffs with respect to the loan documents, and in particular, the guaranty. The plaintiffs' theory was that pursuant to their signed “preliminary term sheet” (term sheet) with IndyMac, the plaintiffs' guaranty should have been limited so that the plaintiffs only guaranteed repayment of the first $11.25 million of the loan; put another way, the plaintiffs contended that once IndyMac received repayment of $11.25 million from any source, the plaintiffs' guaranty should have been satisfied. The plaintiffs relied on the language of the term sheet, which stated: “Repayment guaranty from the principals will be limited to the top 50% of the loan.”

The term sheet was signed on March 3, 2005, well before the loan documents were drafted and the loan was closed. It stated across the top, “Preliminary Term Sheet -- For Discussion Purposes Only,” and all parties agreed that it was not a contract. The plaintiffs testified, however, that they expected Muldowney to incorporate the terms of the term sheet into the final loan documents, including the guaranty. Furthermore, the plaintiffs adduced evidence that the “top 50%” language from the term sheet reflected IndyMac's agreement that the guaranty would be limited to repayment of the first $11.25 million of the loan, that Muldowney had failed to incorporate that concept into the guaranty, and that Muldowney had never advised the plaintiffs of this failure or even discussed the terms of the guaranty with them.

The case was tried to a jury for eleven days in October of 2016, with the bulk of the trial time spent with the plaintiffs putting on their affirmative case. In response to special questions, the jury found that the defendants did not “breach their duty of care” to either plaintiff. Judgment accordingly entered for the defendants, and the judge denied the plaintiffs' posttrial motions. We affirm.

Discussion. The plaintiffs' principal argument on appeal is that the judge should have granted their motion for new trial, because the evidence that the defendants breached their duty of care was “overwhelming.” The plaintiffs' argument appears to be based upon a syllogism, as follows: (1) as a matter of law, the term sheet was ambiguous; (2) as a matter of law, the term sheet set forth limitations -- i.e., the “top 50%” language -- that were not included in the guaranty; (3) that the defendants' duty of care required them to advise the plaintiffs of this discrepancy between the term sheet and the guaranty; and (4) that because the defendants conceded that they had no such communication, the evidence of breach of duty was overwhelming.

We reject the plaintiffs' contention, for many reasons. First, much of the argument the plaintiffs now make was never made to the trial judge, either during trial or in the plaintiffs' motion for new trial. In particular, the plaintiffs never argued to the trial judge that he should determine, as a matter of law, that the term sheet was ambiguous and that its language did not match the language of the guaranty. The argument is accordingly waived. See Palmer v. Murphy, 42 Mass. App. Ct. 334, 338-339 (1997).

Second, and in any event, the plaintiffs are incorrect that the judge should have ruled, as a matter of law, that the terms of the guaranty did not match the language of the term sheet. While it would be the judge's role to construe the guaranty if a construction were requested, see Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998), we note that the guaranty was not ambiguous. The guaranty plainly set forth the plaintiffs' obligation to pay up to $11.25 million of the amounts due under the loan, without limitation. As to whether the guaranty matched the term sheet -- in particular, the “top 50%” language -- the parties presented conflicting evidence on that issue. The defendants adduced both fact and opinion testimony that the terms of the guaranty did match the terms of the term sheet. The term sheet was not a contract, as to which construction by the judge would have been required. It was not error for the judge to allow the jury to consider testimony the defendants presented as to the intent and meaning of the term sheet, when evaluating whether the defendants had breached their duty of care.

Third, the plaintiffs are wrong in any event in asserting that they “overwhelming[ly]” showed malpractice, simply because they showed that there was no explicit communication from the defendant lawyers to the plaintiffs regarding the language of the guaranty. The plaintiffs were sophisticated businesspeople, and they were provided, read, and signed both the term sheet and the guaranty. The plaintiffs also testified that the terms of the guaranty were important to them. There is accordingly a question as to what the plaintiffs knew, and whether they understood the scope of the guaranty at the time they signed it. It was for the jury to determine whether the defendants breached their duty of care, in light of what their clients (the plaintiffs) may have known, or should have known, about the meaning of the term sheet and the obligations of the guaranty.

A judge should only grant a new trial where “the verdict ‘is so greatly against the weight of the evidence as to induce ․ the strong belief that it was not due to a careful consideration of the evidence, but that it was the product of bias, misapprehension, or prejudice.’ ” Passatempo v. McMenimen, 86 Mass. App. Ct. 742, 746 (2014), quoting Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 127 (1992). Here, the jury's conclusion was not against the great weight of the evidence.

The plaintiffs next argue that the defendants should have been “judicially estopped” from arguing, during trial, that the term sheet was not ambiguous. The plaintiffs urge that the defendants' trial position was directly contrary to the position the defendants took in opposing summary judgment, where they argued (according to the plaintiffs) that the term sheet was ambiguous. The plaintiffs assert that the verdict must be vacated as a result of the defendants' allegedly inconsistent argument.

This argument also fails. Once again, the plaintiffs did not make a “judicial estoppel” argument to the trial judge, so it is waived. See Palmer, 42 Mass. App. Ct. at 338. Even if we were to reach the merits, however, we would reject the argument. While the contours of the judicial estoppel doctrine are not precise, the doctrine at least requires that the party being estopped adopted a position in litigation that was directly inconsistent with a position that it took previously, and as to which it achieved a successful result. Otis v. Arbella Mut. Ins. Co., 443 Mass. 634, 641 (2005).

Here we find no such inconsistency. The defendants' position at trial was that the language of the guaranty was consonant with the term sheet. That is the same position the defendants articulated in their summary judgment opposition.⁵ While the defendants also pointed out that the term sheet could be found to be ambiguous (and had been so found, in the deficiency action), that argument was accurate, and not directly inconsistent.⁶ Arguing in the alternative was certainly permissible in the circumstances. See Mass. R. Civ. P. 8 (e) (2), 365 Mass. 749 (1974); Matter of Hilson, 448 Mass. 603, 613 (2007) (“Modern rules of pleading permit alternative pleading”). See also 18B C.A. Wright & A.R. Miller, Federal Practice and Procedure § 4477, at 607 (2002) (“Inconsistent pleading is so well accepted that there is little need to remark that judicial estoppel does not forbid [it]”).

The plaintiffs' final argument on appeal attempts to fault the judge for allegedly “direct[ing] out” their breach of contract claim, and not presenting it to the jury. The plaintiffs argue that their breach of contract claim differed from their tort claim, because the contract claim did not assert a breach of the attorneys' duty of care, but rather contended that the defendants had a separate contractual obligation to import the language of the term sheet into the language of the guaranty.

This argument was not preserved below. The trial judge clearly advised the plaintiffs that he would not include special questions regarding the plaintiffs' contract claim, because in his view the basis for both the tort claim and the contract claim was the same alleged breach of the attorneys' duty of care. He did not “direct out” the claim. In any event, the plaintiffs did not preserve an objection to the judge's decision in this regard; they did not object to the special questions put to the jury, nor did they object to the jury instructions on the ground that the contract claim was not addressed. The argument is waived.⁷

Judgment affirmed.

Orders denying motions for new trial and for relief from judgment affirmed.

FOOTNOTES

4.   The entity that foreclosed on the loan was distinct from the original entity but bore a similar name. IndyMac failed around July of 2008, and was taken over by the Federal Deposit Insurance Corporation (FDIC). The following year, a company named IndyMac Ventures, LLC, purchased the original IndyMac assets from the FDIC.

5.   In their motion for summary judgment, the plaintiffs contended that the undisputed facts were that Muldowney had “alter[ed]” the terms of their guaranty from those stated in the term sheet, that she had done so without the plaintiffs' knowledge or consent, and that this conduct amounted to a breach of the attorneys' standard of care as a matter of law. The defendants responded that there were several genuine issues of fact to be resolved; for example, the defendants pointed out that the lender's position in the deficiency action was that the guaranty was not limited, and was never intended to be limited, in the manner the plaintiffs asserted. Furthermore, Muldowney's affidavit stated her belief that the guaranty as executed reflected the terms of the term sheet and did not differ from it.

6.   As an alternative ground for denying summary judgment, the defendants stated:“Merely establishing that an attorney is responsible for ambiguous contractual language does not establish that the attorney's conduct fell below the standard of care․ Here, the Superior Court in the Deficiency Action found that the Guaranty is ambiguous as to whether it limits the Guarantors' obligations to only the first $11.25 million under the $22,500,000 Loan. To the extent that, as the Lender argued, and as Ms. Muldowney agrees, ․ the scope of liability in the term sheet is consistent with the scope of liability in the executed Guaranty, plaintiffs' claim that B&L was negligent because Ms. Muldowney omitted a material contractual term fails. A jury should resolve this issue, not this Court as a matter of law.” (Emphasis added.)

7.   The plaintiffs also claim that a new trial is required because the judge restricted the length of their second day of cross-examination of defendant Muldowney, and thereby cut off allegedly critical questioning. After review of the record, we discern no error. The general conduct of trial is within the discretion of the trial judge. Commonwealth v. Fleming, 360 Mass. 404, 409 (1971). This will include, from time to time, the need to set and to enforce reasonable limits on trial questioning. See Commonwealth v. Caruso, 476 Mass. 275, 296 (2017), citing Mass. G. Evid. § 611(a), (b) (2016). Here the trial judge did just that. He both explained the basis for his limits and gave advance notice to counsel that the time limits had been reached. The plaintiffs had ample opportunity to ask the allegedly critical questions within the time allotted.