51 Mass. App. Ct. 667 | Mass. App. Ct. | 2001
The central issue in this appeal by the plaintiff is the extent to which issues remained open on a hearing to assess damages after a default had entered against the defendants under Mass.R.Civ.P. 55(a), 365 Mass. 822 (1974), for failure timely to file their answers.
The gist of the plaintiff’s complaint, filed in the Superior Court, was that the defendants, Stratus Pharmaceuticals, Inc. (Stratus), Albert Hoyo, and Keith Pyle, failed to pay for the plaintiff’s services in breach of contract and that the defendants, having never intended to pay for all of such services, acted in violation of G. L. c. 93A. The plaintiff also claimed entitlement, under an assignment from one Ed Brody, to payment for the latter’s services to the defendants. After the denial of the defendants’ motions to dismiss the complaint for lack of personal jurisdiction under Mass.R.Civ.P. 12(b)(2), 365 Mass. 754 (1974) — the motion judge found that they had transacted business in Massachusetts — the defendants, two Florida residents and a Florida corporation, failed timely to file answers and were defaulted. A judge of the Superior Court held a hearing to assess damages, and, after making extensive findings and rulings of law in a thorough memorandum, entered “JUDGMENT BY DEFAULT UPON ASSESSMENT OF DAMAGES — Mass.R.Civ.P. 55(b)(2) AS AMENDED” of $51,280.21, plus interest, against Stratus and entered judgments for the individual defendants Pyle and Hoyo. At numerous times during the hearing the judge indicated, usually in response to the plaintiff’s objection, that the only issues to be tried were those relating to damages.
The plaintiff urges numerous errors, primarily focusing on the
Although the defendants in their brief also claim numerous errors, including the ruling that there was personal jurisdiction over the defendants
We therefore proceed to the plaintiff’s claims, focusing on the allegations of the complaint, rather than on the findings of the judge, as the factual allegations determine the effect to be given the default on the issues of liability. See Productora e Importadora de Papel, S.A. de C.V. v. Fleming, 376 Mass. 826, 828, 834 (1978). The issue of damages, however, remains open after a default, id. at 837-844; Bissanti Design/Build Group v. McClay, 32 Mass. App. Ct. 469, 471 (1992), and on the questions relating to damages, the judge’s findings, if not clearly erroneous, control.
The counts which bear scrutiny are (1) the count alleging breach of the defendants’ contract with the plaintiff
1. Liability of individual defendants on contract count. The plaintiff contends that given the defaults, “the factual allegations of [his] complaint regarding the services he had performed and for whom, must be accepted as true, and the liability of all Defendants, including Hoyo and Pyle, individually, under any and all of the . . . theories of liability must be taken as admitted.” The plaintiff’s contention is neither correct as to the law governing default nor as to the reasonable interpretation of his contract allegations.
As stated in Multi Technology, Inc. v. Mitchell Mgmt. Sys., Inc., 25 Mass. App. Ct. 333, 334-335 (1988), citing Productora e Importadora de Papel, S.A. de C.V. v. Fleming, 376 Mass. at 833-835, “Upon default under Mass.R.Civ.P. 55(b), 365 Mass. 822 (1974), the factual allegations of a complaint are accepted
At the hearing on damages, the plaintiff claimed that the individual defendants were liable on an oral promise to provide services to them individually on two matters, a dispute they had with other stockholders of Stratus, and a pending case against the individual defendants in which they were sued by a former employer claiming, according to the plaintiff, fraud, copyright infringement, and misuse of property. A review of the contract count, discussed below, indicates that it refers to a written contract, and it does not expressly or by implication assert there was either a separate oral contract or that the kinds of services allegedly performed under that oral contract were within the description of the services covered by the contract described in the complaint.
The opening portions of the complaint entitled “Parties” and “Facts” describe the defendants: Stratus Pharmaceuticals, Inc., a Florida corporation; Keith Pyle, an individual with a residence in Florida, who, at all relevant times, was the president of Stratus; and Albert Hoyo, an individual with a business address in Florida, who, at all relevant times, was the vice president and treasurer of Stratus.
The following facts are alleged in the complaint:
“On or about February 10, 1993, Plaintiff entered into an agreement with Stratus, Pyle, and Hoyo, (collectively ‘Defendants’), whereby Defendants agreed to employ and pay Plaintiff for his services as an advisor and consultant to Defendants in, among other things, the commercial development of new drugs and device products; the planning and implementation of effective regulatory strategies for obtaining FDA approval; and the design and validation of manufacturing facilities. (‘Agreement’).
“As part of that Agreement, Defendants agreed to pay*672 Plaintiff compensation at the rate of $1,000 per day, with a specified minimum number of days per year.”
The complaint then asserts that from February 10, 1993, through February 18, 1994, the plaintiff “fulfilled all of his obligations as contemplated under said Agreement.”
After incorporating the foregoing provisions of the complaint, the breach of contract count alleges that for services performed by the plaintiff pursuant to “the Agreement,” he made demand for payments on various specified days resulting in a total indebtedness to him of $77,649.70, and that on certain specified dates the defendants made various payments to him leaving a balance owed to him of $56,813.80, which, despite repeated demands by plaintiff, the defendants still refuse to pay, “thereby breaching the Agreement.” The plaintiff claims that he is entitled to attorney’s fees and costs, and that, pursuant to G. L. c. 231, § 6C, and “the Agreement,” interest is due from the specified dates of demand.
The parties had entered into a written agreement on February 10, 1993, and the complaint’s reference to “the Agreement” manifestly refers to that document. Although the written agreement was not appended to the complaint, the plaintiff introduced it at the hearing on the assessment of damages, over the objection of counsel for the defendants; no opposition is voiced on appeal by the defendants to its introduction. In the circumstances we do not think it unfair to either the plaintiff or the defendants to treat the agreement in the same manner as if it had been appended to the complaint. Moreover, in determining the effect of a plaintiff’s allegations, a court “should not be hamstrung simply because the plaintiff fails to append to the complaint the very document upon which by [his] own admission the allegations rest.” Beddall v. State Street Bank & Trust Co., 137 F.3d 12, 17 (1st Cir. 1998).
The agreement was signed as follows:
“For: Stratus Pharmaceuticals, Inc.
s/Keith Pyle
Title: President
The signature makes clear that Pyle was contracting on behalf of Stratus. As pointed out in Porshin v. Snider, 349 Mass. 653, 655 (1965), quoting from Restatement (Second) of Agency § 320 and comment a (1958), “Unless otherwise agreed, a person making or purporting to make a contract for a disclosed principal does not become a party to the contract.” See Nishimatsu Constr. Co. v. Houston Natl. Bank., 515 F.2d 1200, 1205-1207 (5th Cir. 1975), where contentions similar to the ones made here by the plaintiff as to the effect of a default were defeated because the signature of an officer on behalf of a corporation precluded his liability in his individual capacity.
Even read liberally, the complaint, as mentioned earlier, does not state or imply that the plaintiff was relying on an oral contract or that he was seeking payment for services relating to disagreements among stockholders of Stratus or actions against the individual defendants by a former employer. It thus failed to give the defendant notice that there was a dispute about services outside “the Agreement” for which the plaintiff was seeking compensation on a legitimate legal theory.
This conclusion is in accord with the policy considerations set forth in the Massachusetts Rules of Civil Procedure allow
“A judgment by default shall not be different in kind from or exceed in amount that prayed for in the demand for judgment.”
The theory underlying the rule is that the defendant should be able, based on the allegations of the complaint, to know what he is admitting and to make a rational decision whether to save time and effort by avoiding litigation of liability issues and proceeding directly to the assessment of damages. Scannell v. Ed. Ferreirinha & Irmao, Lda., 401 Mass. 155, 163 (1987).
That there was, in the present case, an affidavit of the plaintiff in opposition to the defendants’ motions to dismiss for lack of jurisdiction in which the plaintiff asserted that the individual defendants “assured me that I would be paid in full for my services, whether provided to Stratus or to them individually,” does not change the result. The affidavit was filed for a separate purpose and should not, in fairness, be viewed as amplifying the complaint. See Krijn v. Pogue Simone Real Estate Co., 896 F.2d 687, 689-690 (2d Cir. 1990); B.V. Optische Industrie De Oude Delft, Oldelft N.V. v. Hologic, Inc., 909 F. Supp. 162, 167 (S.D.N.Y. 1995). Compare Gucci America, Inc. v. Gold Center Jewelry, 997 F. Supp. 399, 404-405 (S.D.N.Y.), aff’d on this issue, 158 F.3d 631, 635 (2d Cir. 1998), cert. denied sub nom. Home Boy 2000 v. Gucci America, Inc., 525 U.S. 1106 (1999) (defendants alerted by plaintiffs’ specific application for statutory damages although such damages were not sought in the complaint).
2. Liability of the defendants under plaintiff’s G. L. c. 93A count. The allegations of the c. 93A count, after incorporating previous portions of the complaint, stated:
“Defendants solicited and accepted products and services from Plaintiff and thereby induced Plaintiff to work for Defendants and expend personal funds, all the while never intending to pay Plaintiff in total for the products provided and services performed, nor to reimburse Plaintiff for his expenditures of personal funds.”
The count continued, repeating the foregoing allegations as to the conduct of the defendants, and stating that such conduct constituted “unfair or deceptive acts or practices prohibited by M. G. L. c. 93A, § 11,” adding that such acts were done “wil[l]fully and knowingly.”
The judge ruled that the plaintiff had failed to present sufficient evidence that the defendants’ conduct constituted an
That ruling should not have been made. Although the last sentence of Mass.R.Civ.P. 55(b)(2), as amended, 423 Mass. 1402 (1996), set forth in the margin,
The allegation that the defendants never intended to pay for the services stated sufficient facts to constitute a claim for relief under c. 93A. Levings v. Forbes & Wallace, Inc., 8 Mass. App. Ct. 498, 504 (1979) (if X ordered goods and services from Y and thereby induced Y to work, all the while never intending to pay for the labor and materials, Y would have a c. 93A action against X). Since an adequate statement of a claim for relief under c. 93A was stated in the count, the defendants by virtue of the default admitted the factual allegations that they never intended to pay for all the services for purposes of establishing liability. See Multi Technology, Inc. v. Mitchell Mgmt. Sys., Inc., 25 Mass. App. Ct. at 334-335. The plaintiff, not having been given advance notice that he would be put to proof on the issue, had no burden to produce evidence as to the defendants’ liability on the c. 93A count. Were the conclusion otherwise, defendants, defaulted for failing to answer, would not only be given the opportunity to litigate what had already been deemed
The judge’s conclusion was erroneous not only as to Stratus but also as to the individual defendants. Although Hoyo and Pyle were not parties to the contract between Stratus and the plaintiff, the facts concerning the deceitful conduct of the defendants set forth as the basis of the 93A claim are distinct from those giving rise to the breach of contract claim. The § 11 claim is predicated on the tort theory of common law misrepresentation. Although acting within their authority as officers of Stratus, Hoyo and Pyle are “personally liable for their own misrepresentations made to [the plaintiff] in violation of G. L. c. 93A, § 11, even though they did not sign the agreement” in their individual capacities. Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass. App. Ct. 545, 550-551 (1995), and cases cited. The Community Builders, Inc. v. Indian Motocycle Assocs., Inc., 44 Mass. App. Ct. 537, 560 (1998) (settled that corporate officers may be held liable under c. 93A for their personal participation in conduct invoking its sanctions).
Although the plaintiff alleged that the misrepresentations were wilful, the entitlement of a plaintiff to double or triple damages because of the wilfulness of a defendant is treated as a question relating to damages and, therefore, is not precluded by a default. See Multi Technology, Inc. v. Mitchell Mgmt. Sys., Inc., 25 Mass. App. Ct. at 336 (while not specifically discussing the point, by implication approved a procedure in which the judge at the damages hearing considered whether the violations were wilful and thereafter awarded double damages); Bissanti Design/Build Group v. McClay, 32 Mass. App. Ct. at 471, (“punitive damages cannot be fixed without an evidentiary hearing to determine how egregious was the conduct of the defendant,” citing Flaks v. Koegel, 504 F.2d 702, 706-707 [2d Cir. 1974]). See also McGinty v. Beranger Volkswagen, Inc., 633 F.2d at 231, (suggesting that question may be viewed as relating to the amount of damages due and therefore not established by the default); Gilleran, The Law of Chapter 93A § 12:9 (1989).
3. Plaintiff’s claims under the Brody counts. The factual allegations in these counts were that the defendants had entered
These allegations were sufficient to provide Stratus with enough information to give it notice of what the dispute was about and what legal theory gave the plaintiff a right to recover. Multi Technology, Inc. v. Mitchell Mgmt. Sys., Inc., 25 Mass. App. Ct. at 335. Here, as in the plaintiff’s own contract count, the allegations did not give the individual defendants notice that claims were being made against them personally. Although no contract was appended, the nature of the services described indicated they were intended for the corporation.
The judge ruled that “Marshall did not have the authority to bind Stratus with respect to work performed for Stratus by Brody. Therefore, Marshall is not entitled to recover for amounts assigned to him by Brody.” Since the plaintiff was not given advance notice that liability on this claim would be open on the assessment of damage hearing, the judge should not have ruled as she did. Only the amount of damages remained open.
The plaintiff also alleged a c. 93A claim as Brody’s assignee, as set forth in the margin,
4. Miscellaneous matters. The plaintiff’s challenges to the judge’s findings on his various invoices are, except as indicated earlier as to the Brody claims, without merit.
The judge, noting that Stratus had filed a counterclaim for conversion of its property — drugs and laboratory reports which Marshall had kept as security for payment — ordered Marshall to return the items as the defendant did not present any evidence establishing the market value of the withheld items. Since Stratus was defaulted, the counterclaim contained in its rejected answer should not have been considered. The matter, however, related to damages. The invoices indicate that for most of these items Marshall billed a total of $6,000 as expenses.
The questions of when interest is to begin and on what
In conclusion:
1. We affirm the judgment in so far as it awards the plaintiff contract damages against Stratus. If the plaintiff wishes to retain and not return the property that he holds belonging to Stratus, $6,000 is to be deducted from his damage award. He must prove how much the property described in note 14, supra, is worth and such amount shall also be deducted from his damage award.
2. The individual defendants are not liable for damages on any counts other than the c. 93A counts.
3. Stratus is liable to the plaintiff on the Brody contract count and damages therefor are to be assessed.
4. The individual defendants, as well as. Stratus, are liable on the c. 93A counts both as to the plaintiff’s claim and Brody’s assigned claim. Attorney’s fees, damages, and whether such damages are to be multiplied are to be determined by the Superior Court judge.
Accordingly, the matters set forth in items 3 and 4 above and, at the plaintiff’s option, the ascertainment of the value of the items retained by him, are remanded to the Superior Court for further proceedings consistent with this opinion.
So ordered.
The record suggests that a judgment against Stratus may not be collectible.
Stratus’s answer, which was returned to it because it was defaulted, sought these items in a counterclaim alleging conversion.
Were we to consider the claim, we would likely conclude that all the defendants had sufficient contacts with Massachusetts to uphold the finding of personal jurisdiction. See Good Hope Indus., Inc. v. Ryder Scott Co., 378 Mass. 1, 5-6 (1979); Sonesta Intl. Hotels Corp. v. Central Fla. Invs. Inc., 47 Mass. App. Ct. 154, 160-163 (1999).
Our invariable practice is that unless each party intending to be an appellant or cross appellant pays the docket fee referred to in Mass.R.A.P. 10(a)(1), such person is not considered an appellant in the absence of a motion filed and allowed under Mass.R.A.P. 10(a)(3), as amended, 378 Mass. 937 (1979), prior to the appeal being heard or, if there is no hearing, prior to its being decided. See Mass.R.A.P. 10(c), as amended, 417 Mass. 1602 (1994).
Although the plaintiff asserted numerous other counts, among them quantum meruit and account annexed, they need not be considered. He is only entitled to one recovery for his services. See Szalla v. Locke, 421 Mass. 448, 454 (1995). Both the count alleging account annexed as to the plaintiff as well as the one as to Brody explicitly allege that they are dependent on the respective contract claims. If the plaintiff is entitled to recover on a contract, he cannot recover in quantum meruit. Greene v. Boston Safe Deposit & Trust Co., 255 Mass. 519, 523 (1926). As to promissory estoppel see note 7, infra.
The plaintiff’s allegations of promissory estoppel fail for the same reason, namely, the complaint failed to provide the individual defendants with notice that the dispute was about personal promises of payment or for matters not within “the Agreement” rather than promises made in their corporate capacity. See Clark v. Rowe, 428 Mass. 339, 346 (1998). The plaintiff’s legal argument that Hoyo and Pyle are personally liable for their promises under the “main purpose” doctrine also fails. The complaint fails to state that the individual defendants made personal promises to pay Stratus’s debts. Compare Barboza v. Liberty Contractors Co., 18 Mass. App. Ct. 971, 971-972 (1984).
Although the court in Scannell was referring to the plaintiffs inability to obtain more dollars than in the ad damnum, a matter specifically mentioned in rule 54(c), we consider the same reasoning applies here by analogy.
The judge found for the individual defendants on an alternate ground. Although at the hearing on damages, she denied the plaintiff’s attempt to amend his complaint to include allegations of an oral contract, quite rightly pointing out that it would be unfair to broaden the scope of liability, she accepted, de bene, over the defendants’ objections, evidence of the plaintiff’s services to the individual defendants. The defendants presented evidence denying that such services were performed, and the plaintiff, after complaining of surprise, was allowed to provide evidence to the contrary. While the judge found defendant Hoyo’s testimony claiming that all of such services were unauthorized incredible, she found that the parties “never reached a meeting of the minds on any oral agreement concerning matters not specified in the consulting agreement.”
The amount the judge deducted from the invoices on account of services that were not within the Stratus agreement was $1,000. She did not discuss the question of quantum meruit for those services.
The last sentence of Mass.R.Civ.P. 55(2)(b) states as follows: “If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearings or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required by statute” (emphasis supplied).
That the plaintiff, claiming surprise, was permitted to introduce additional evidence in his favor did not cure the matter. The plaintiff claimed throughout that liability was not open on the assessment of damages hearing and, in the absence of advance notice, he should not have been forced to litigate the issue.
The count in relevant part reads: “Count X [VIOLATION OF M.G.L. Ch. 93A — MISREPRESENTATION AND UNFAIR OR DECEPTIVE ACTS OR PRACTICES — ASSIGNEE]
“Plaintiff/Assignee repeats, realleges and incorporates by reference the averments and allegations contained in paragraphs one (1) through four (4) and twenty-nine (29) through thirty-five (35), as if specifically set forth here.
“Defendants solicited and accepted services from Brody and thereby induced Brody to work for Defendants, all the while never intending to pay
The count continued by stating that such conduct was in violation of c. 93A, § 11.
The judge did not err in holding that Stratus was not obliged to compensate Marshall for the day spent at the initial interview with Stratus negotiating the agreement as this was prior to any written agreement or employment. This ruling was not inconsistent with the judge’s allowing the plaintiff travel costs on the basis that Stratus had requested the plaintiff to come to Miami. Her deduction for time spent on a trip to India was supported by evidence that this trip was unnecessary, and the deduction of a day from the Orlando trip was supported by the plaintiff’s testimony as to the time spent on travel which was not compensable under the agreement.
The judge also referred to documents received from Ambix Laboratories. The record before us does not include an invoice showing a bill for this item. If the plaintiff wants to keep such documents, he must carry the burden of showing their value.
If the plaintiff pursues the option of not returning Stratus’s property, he shall inform the Superior Court and Stratus within thirty days of the issuance of the rescript.
The order denying the plaintiff’s motion for a new trial is affirmed.