Greenleaf Arms Realty Trust I, LLC v. New Boston Fund, Inc.
81 Mass. App. Ct. 282
| Mass. App. Ct. | 2012Background
- Bagliones invested 1.3 million in New Boston Fund in 2003 under a §1031 like-kind exchange plan; funds were managed by New Boston.
- Settlement in May 2007 created two TIC interests in Westborough and Franklin properties as resolution of prior litigation.
- Westborough property later defaulted; tenant did not renew, property value declined, losing Bagliones’ principal on that TIC.
- 2009 complaint alleged fraud and breach of fiduciary duties by New Boston and affiliates, based on misrepresentations and nondisclosures.
- Trial judge dismissed under 12(b)(6) citing exculpatory, disclaimer, and merger clauses; court held that ruling was legal error and allowed appeal.
- Court remanded for further proceedings; Rule 11 cross-appeal by New Boston was denied as frivolous on the given disposition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are exculpatory/merger provisions a complete bar to fraud claims? | Bagliones contend contracts do not bar fraud when fiduciary duties and misrepresentations exist. | New Boston argues the provisions bar all claims as a matter of law. | Not per se bar; fraud claims survive to be evaluated on the record. |
| Are deceit/fraud claims adequately pleaded? | Bagliones allege false representations, knowledge of falsity, intent, justifiable reliance. | Claims are barred by contract provisions and lack plausible entitlement to relief. | Deceit claims adequately pleaded at this stage. |
| Are fiduciary-duty claims adequately pleaded? | New Boston owed limited partners utmost loyalty and full disclosure; failure alleged. | Contract and relationships limit duties; need further record. | Pleading sufficient; mixed question of law and fact to be resolved on record. |
| Was New Boston’s Rule 11 relief correctly denied? | Rule 11 sanctions warranted given frivolous litigation posture. | No improper conduct; defense appropriately challenged on 12(b)(6) grounds. | Rule 11 denial affirmed as foreclosed by the appellate disposition. |
Key Cases Cited
- Bates v. Southgate, 308 Mass. 170 (1941) (fraud overrides exculpatory clauses to prevent contract shielding fraud)
- Plumer v. Luce, 310 Mass. 789 (1942) (discussion of exculpatory clauses and fraud in settlements)
- Turner v. Johnson & Johnson, 809 F.2d 90 (1st Cir. 1986) (policy considerations in contract-based fraud defenses)
- Sandler v. Elliott, 335 Mass. 576 (1957) (fraud is not merged into contract; contractual exculpation not absolute)
- Masingill v. EMC Corp., 449 Mass. 532 (2007) (elements of deceit in Massachusetts)
- Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578 (1975) (fiduciary duties between general and limited partners)