Narrator: Constance M. Sullivan V Five Acres Realty Trust
-: Mr. Lewin.
-: Thank you, good morning.
May it please the court.
I will begin with the 93A verdict under count four.
And specifically the issue of whether
under Lantner versus Carson.
And under the applicable standard of review.
The sale of the Gagliardi's home
was an isolated sale of a private home
not in the ordinary course of business.
It is our contention that this was an isolated sale.
The evidence at trial was that in
the course of 39 years from 1974 to 2013
the Gagliardi's sold only one property.
A two-family home to their daughter, Maria in 2003.
The Gagliardi's history of home ownership is that
in beginning of 1974 they lived in two homes
for 14 years each.
Inverting them each to two-family homes
and keeping them for rental income.
In 2002 the Gagliardi's bought their home in Dover and-
-: Mr. Lewin, I think it'd be helpful if you would just
point out what the legal parameters of
the thing you're challenging.
You're saying the evidence is not sufficient for this, why?
What is it that the plaintiff had to prove and didn't prove?
-: The plaintiff had the burden of proving
that this was under Lantner versus Carson.
An isolated stale sale.
That this was not an isolated sale of a private home.
And that this was in the ordinary course of
the business conducted by the Gagliardi's.
In order to fall within the definition of trade or commerce
under Mass. General Laws Chapter 93A.
-: Okay, thank you.
-: The home in Dover was sold after
the Gagliardi's lived there for almost 11 years.
The sale was at a loss of $300,000 compared to
the original purchase price.
-: Mr. Lewin, how many homes did
they convert into rental properties?
And how many times was your,
One of your clients,
the client who did the mortar business
involved in sort of doing work on those homes?
-: They converted a two two-family homes.
They converted two two-family homes.
They were single-family homes
converted to two-family homes.
They purchased a third three-family home.
And there were renovations done to the two conversions.
The building permits-
-: I don't understand what you mean by
the renovations to the two conversions?
You mean the multiple family homes?
-: They were single-family homes converted to two-family
that was I meant by conversion.
-: And did your client do the renovations himself?
-: I believe he did the masonry work
involved in the renovations
on the two two-family homes.
-: So I guess that's (inaudible).
Assuming all of those facts are true.
It's still a motion to dismiss should have been granted
or summary judgment should have been granted.
On those facts were they are sort of
they're not just sort of normal homeowners.
They they're sort of normal homeowners who were doing
some personal renovations and then there's some conversions.
I guess that isn't enough to get you
into the business context.
I take it you're saying.
-: That's correct.
That should not be the standard
for whether or not the sale of a home-
-: So then are we at
the point where it's really not so much a question of
whether the evidence was sufficient at the trial.
But really that in any view of the light most favorable to
the purchasers there's not enough?
-: That is correct your Honor.
That is our view.
-: And if that were not true.
I mean, I know that were not true.
But if that were not...
If the standard is not...
If we conclude that
the motion to dismiss was properly denied,
or the summary judgment was properly denied.
Then we're left somewhere with a quantum of evidence issue.
Is that correct?
-: That is correct.
-: And then if we look at that quantum of evidence.
What is it that persuaded the judge
and what is it that persuaded the jury
to hold against your client in terms of
that quantum of evidence going over to business?
-: I believe that the jury conflated
the business of apartment rentals
and the business of masonry construction.
With what occurred at this property.
I believe that the jury was angered by the failure
to obtain a permit for renovations done
some seven years, almost seven years prior to the sale.
Renovations to the kitchen and to the porch.
Which were done for the purpose of providing
a place for hosting family and friends.
-: Would they have had to believe that
the purpose was resale or could they have accepted that
the purpose was to host family and friends
and have a more enjoyable kitchen?
-: I do not believe that even if the purpose was for resale.
That should be sufficient
or that should be acceptable evidence.
-: So then if I'm following that.
Then what they wanted to do it for
was irrelevant in your mind.
But the jury was angry about the failure to get the permit.
-: Correct.
And then the structural deficiencies
that the Gagliardi's admitted were present
as a result of the repair effort.
With respect to the improvements.
I think there's millions of homes in Massachusetts.
People make improvements when they go to sell it.
When they're about to sell their home all the time.
Paint the house, remodel a bathroom.
I don't think that the fact that improvements are made
here seven years prior.
But even if they're made in connection with a home
that doesn't necessarily converts
the sale of a home into a business.
Because it would create an untenable standard.
-: Mr. Lewin,
I know you want to focus on this one transaction.
But does it not at all matter that the defendants here
were in the masonry business, right?
And several times have purchased, renovated, and rented out
homes over the course over the last several years.
Isn't that something to consider?
-: I don't believe it matters
in connection with the sale of a private home.
If you conclude that this was
an isolated sale of a private home.
And they were not in the business of selling houses,
renovating and selling houses.
Then I think that you...
If you create a standard that says,
"Well let me look at what other businesses that they were in
and see if there's a connection between those businesses
that they're in and the isolated sale of their home."
I'm going to say then, that every home that is sold
is subject to General Laws Chapter 93A.
Well then that would require the court to look at
the experience, knowledge and sophistication
of a broad range of people.
I mean attorneys know that you're supposed to get
building permits when you do renovations to your home.
-: Mr. Lewin, let me ask you about this
part of the case where the spouse did the books for
the masonry business in the house, and some of that.
Where would that lead us in today's world?
Where most people have, well not most.
But a lot of people have home offices, accountants, lawyers
in the like doing zoom calls out of their homes right?
Shouldn't we look at that.
And would concern whether or not that converts
a primary residence into a place of business.
-: Yes, yes your Honor.
It would create an untenable standard.
Because every transaction a home sale would be scrutinized
to see what degree did people work at home especially now.
And what were they doing in their house?
What were they using their house for?
I agree with that point of view.
Here, Mrs.Gagliardi worked in the home
for two to four hours a week.
Doing the books for the masonry business
and for the apartment rental business.
-: Mr. Lewin, can I ask you please about
the implied warranty of habitability.
And on the same issue you've been on
about a single transaction.
And the issue is whether Albrecht versus Clifford
should be extended to this situation.
And what I mean by this situation;
if you've got a contractor
who is aware of a latent defect
that resulted from that contractor renovating the home.
Is that a natural extension of all that
we should consider as it relates to
the implied warranty of habitability.
-: First your Honor,
I believe the evidence is that
the defendants were aware that
they failed to obtain a building permit.
They had done these renovations for themselves.
They were not aware that there were structural defects
to the porch renovations and to the kitchen expansion.
But putting that aside.
I would suggest that the standard for extending the
or for applying the (inaudible) warranty should be limited
to those persons in the business of
developing residential property for resale.
The builder, in other words the builder-vendor.
Once you extend it beyond the builder-vendor,
then I think that you get into an area where
the standards become very blurred.
And then anyone with some knowledge and experience
and knowledge of building permits
such as a real estate attorney
could then be subject to the implied warranty for
the failure to obtain a building permit.
-: Mr. Lewin, can I ask that-
Justice Lowy, are you done?
-: Yes, thank you.
-: So Mr.Lewin, I know you're a construction Lawyer.
There's something about this case that troubles me.
Cause I can't...
It seems like it's odd.
I mean, in an ordinary...
So we've got people building.
Doing renovations in a home without getting a license.
How do you normally sue and recover for that?
I understand we've got this sort of oddity here.
We've got this 93A claim based on they're in the business.
We've also got this implied warranty of habitability.
If this were...
There's gotta be some way of recovering
for doing construction in a home
without going to the building inspector.
And then you get stuck with this house.
How would this normally have been dealt with?
This seems an oddity.
I'm just trying to understand in conventional parlance.
There's gotta be a right.
A remedy for a wrong.
I'm just trying to understand conventionally
how would it have been dealt with?
-: Your Honor, I would say conventionally
it would be dealt with
a purchase and sale agreement that contains provisions
relating to the discovery of latent defects.
Instead of releases as we had in this case.
A purchase and sale agreement that released
the seller from all liability.
There was the second-
-: But I'm trying to understand.
Some contractors, you're quite familiar with contractors.
Some contractors and also your client
built without a permit.
You're client also knows he shouldn't build without permit.
I'm just trying to understand as a conventional matter
how do you recover if you end up with one of those homes.
Is 93A the conventional way this is dealt with?
or implied warranty of habitability?
What is the sort of standard way we deal with
these kinds of, you know, basically improper conduct.
You can't build without a building permit, right?
So I'm just trying to understand.
You say "This is an inapplicable."
I'm trying to understand how it should have been remedied
cause there's a wrong here, right?
-: That's correct, your Honor.
And it should have been remedied through a purchasing,
through the terms of a purchase and sale agreement.
Breach of the purchase and sale agreement.
If there are the terms of a purchase and sale agreement-
-: But there's negligent construction, right?
No one knows negligent construction better than you.
This is negligent construction.
But we don't have a negligence claim here.
I'm just trying to...
This just seems very odd this case.
I cant get my arms around why it's odd but-
-: Yeah.
-: But there's gotta be a remedy for a wrong.
There was construction done on a house
without getting a permit.
So is 93A not the way to do this?
What is...
Should the contractors...
So I'm just trying to understand
conventionally how do you recover for this wrong?
Particularly when your client who's a builder,
does it without a permit.
So I'm just trying to get a sense of...
I don't sense the equities on your side.
But I'm not sure if these theories are correct.
-: Your Honor, the remedy is through the contract.
Through a purchase and sale agreement
that protects the buyer.
With representations that appropriate permits were obtained.
And in fact the Greater Boston Real Estate Board
standard form of purchase and sale agreement
has a checklist that includes a representation
that permits were obtained for all constructions.
-: But so you don't...
When a builder builds without getting a...
and going through the building inspector
and the house ends up getting lived in and sold.
You don't have a negligent construction claim?
I am-
-: I apologize.
Your Honor, if your focus is on the builder.
-: Well, but your client is also a builder.
He did some of the masonry work, right?
-: My client does masonry work. Yes.
Foundations.
-: But he knocked down the wall in the building, right?
He knocked-
-: The carpenter that he hired knocked down the wall. Yes.
-: Okay. All right.
I'm not getting anywhere but I-
-: May I ask you a question counsel.
I think one of the answers Justice Kafker may be looking for
is that the regular route would be prevented by
the statute of repose, is that right?
-: That's what I was getting there.
But yeah. -: Okay.
And so if that's not available.
Then going to the claims that the judge did dismiss
reach the the fraud and the misrepresentation.
What was the theory under which of those were dismissed?
-: The Law on fraud and misrepresentation with regard to,
as applied to the purchase and sale agreement.
Is that there is no duty to disclose the lack.
There's no duty to disclose
the absence of a building permit.
-: Okay, and so really your theory is...
Putting everything else aside.
I agree with Justice Kafker.
It doesn't look like the equities are good for your client.
But the Law might not get the other side
where they want to be.
But here typical way to approach this normally
would have been to sue on the basis of
the contract violation on the purchase and sale.
But you're saying in this case there's a set,
there were separate releases instead of the typical language
in the purchase and sale that released your home,
your clients from all liability.
-: That's correct.
And then there was a clause.
And there was an inspection done by the buyer.
And the inspector told the buyer-
-: The inspector hired by the buyer said,
"Hey check out. We didn't look at the permitting history.
You should do that basically."
Lewin: Yes.
-: Any further questions for Mr. Lewin.
Thank you Mr. Lewin.
Mr. McGlynn.
-: Thank you. Good morning your Honors.
And may it please the court.
Taking up the questions posed by Justices Kafker and Cypher.
Under this contract there would have been no remedy.
And the remedy here is based upon two things, your Honors.
Latent defects number one.
And number two defects that were concealed.
Defects that were illegal.
In this particular instance the remedy,
putting aside Chapter 93A,
is breach of the implied warranty of habitability.
For the simple reason that an exculpatory clause
or a release in a contract is not going to a bar
that type of a remedy so long as-
-: I find that really odd.
I mean, I understand the 93A claim.
But I mean the breach of
the implied warranty of habitability.
They lived in the house themselves for a long time, right?
I mean, so I'm not handy.
But say I we're like Justice Gaziano.
I'm a very handy homeowner.
And I make improvements to my house.
And then down the road I sell the house.
I'm you know, I live in it for years.
-: Gaziano got all the permits he needed.
-: Yeah, but I'm just trying to understand
how we've got an implied warranty of habitability here.
A lot of people work on their homes.
It just seems like that's a real reach.
-: Justice Kafker,
that is not this case.
Obviously somebody that goes down to Home Depot
on the weekend and gets a new kitchen
or a new bathroom and remodels it.
That's what not, what's did not happen here.
What we have here is evidence that was presented
to the jury during this nine day trial.
That not only were the Gagliardi's engaged
in trade or commerce under 93A.
But they were also builder-vendors.
We have a gentleman Mr.Gagliardi,
who had a construction license for I believe 50 years.
He also owned his own masonry business.
He would also qualified and was registered
as a home renovator.
So we have construction knowledge and experience.
We also have Mrs. Gagliardi who was part of that business.
Managing it from the Dover home.
So we have one of the the elements
we think of builder-vendor here.
This experience, this expertise.
They also would...
The jury also heard your Honors
that Mr.Gagliardi in particular
performed a fair amount of the renovations
to the kitchen and the so-called Tuscan room himself
and with his son.
He used equipment from his business
J & F Contracting to perform some of that work he-
-: Mr. McGlynn, and again I don't mean to be difficult.
I'm just trying to make sure that we don't convert every
homeowner who goes to Home Depot
into an implied warranty person.
How is...
I understand they did some work
and converting some homes into rental units.
But how long do they live in this Dover before,
after the renovations, before they sell it?
They live for how long?
-: They acquired the property in 2002 I believe.
They began renovations Justice Kafker at approximately 2006.
Those renovations were completed in 2010.
We don't know the exact date because Mrs.Gagliardi
spoliated crucial evidence relating to the renovations.
-: They live in...
While those renovations are going
I take it they're living in the home during...
They're like Thomas Jefferson.
They're living in their house
while they're constructing, right?
-: That is my understanding, your Honor.
And once those renovations were completed in 2010.
In May 2011, less than a year later.
They put the house on the market
with an asking price of about $3.3 million
a roughly 1.12 million
over what they purchased it for in 2002.
The point is that that's only one of the factors
that would determine what we would submit
as a pervasive element of commerciality
in terms of what they did here.
This was Justice Kafker and your Honors,
I believe the fifth property where what we discussed
and presented to the jury during the trial.
Was the Gagliardi business model.
Putting aside the fact that they were
operating their two businesses;
the construction business and the real estate business
out of the Dover property.
And they stored equipment.
There is a clear record-
-: Can you go back to
that storage of equipment issue for a moment.
Reading the record it seems to me that there's some conflict
Your argument is that they're storing
all this equipment there.
The other side saying, "Look, it just happened once or twice
a year when he was going. When his jobs were close to home
he kept his truck there."
What the resolution of that?
-: Considering the standards of review
of this case Justice Cypher.
If there was conflicting evidence on that
the jury was certainly free to choose, to reject that
"it was only here a couple of weeks".
And under the standards of review Justice Cypher
the contrary evidence should be rejected and not considered.
So the jury certainly took that into consideration.
Not only the trucks that were stored there,
but also the scaffolding that they use to install
the chimney and some of the foundation work
on the so-called Tuscan home.
So this business model
extended for approximately four decades
and they had a cycle where they would acquire a property.
They would renovate it as my brother indicated.
I believe in two properties they expanded from one apartment
to two apartments to double the rent rental income.
They did that repeatedly.
They use the equity in these properties
to acquire additional properties.
They use the equity of those properties to acquire Dover.
And then-
-: Did they ever live in those homes?
I understand- -: [McGlynn Yes They.
-: Sorry.
-: Yes they did.
I'm sorry, I didn't mean to talk over you.
It's a little bit of the electronic transmission.
As we stated in our briefing papers.
The evidence was that they would stay in a home.
Not every home that they acquired,
but for approximately 10 years.
During that time they'd renovate them.
They'd then live in them for a while
and then they would put them in the-
-: Can I be more specific McGlynn: Certainly.
-: So let's just focus on where you're...
I don't mean to mispronounce them, the Gagliardi's
lived their whole life.
Forget about their children and other things.
So they lived in how many...
cause I'm sure Mr. McGlynn
you've probably lived in five houses.
A lot of us had moved in, you know
benefited from the going-up in the market.
I just want to make sure we're not writing decisions
that apply to everybody here.
But something specific because a lot of people
improve their homes, move to a better home,
improve that home, and they moved to another one.
I just want to make sure we're not sweeping in
those people into a 93A claim.
So just tell me how many times did the Gagliardi
change homes, go ahead, over their lifetime here.
-: I believe your Honor,
that they changed homes approximately four or five times.
They lived in two of the rental properties
which they renovated.
Then they use the equity in those rental properties to
acquire a commercial property,
which obviously they did not live in.
They use the equity to acquire the Dover property
which they did live in and-
-: Is that different from a normal people
who are successful in the world.
They're making little money and they're buying
a little bigger house.
Are they really different from just what
a lot of people want to do.
The American dream you know,
go from one house to another that's a little better
than the house they were in before.
-: This is not a case of the American dream
where they've had some good luck in
maybe capitalizing on a hot market.
This is something that they have done over 40 years.
Where they would renovate.
They obviously they would improve
the value of those properties.
They would pull out the equity from those properties
to acquire other properties.
They would take that equity and use it to renovate.
Dover was within that chain.
I believe it was the fifth of the six properties
that they acquired.
They then use the equity in Dover to acquire Weston.
They moved out of Dover to Weston at the time that
they sold the house to the Sullivans in 2013.
There is evidence Justice Kafker
that they considered renting out Dover.
But the client decided not to do that because of its
remoteness and its size it was going to be a difficult rent.
But what they did do is while they were finishing
the renovations in Dover they use the equity from Dover.
They acquired Weston, they renovated Weston in 2009.
And they use that and generated approximately $36,000
worth of income annually
just from that one property alone.
Again this rental income
from the evidence presented to the jury.
Was well over 50% of the total income
that these individuals received annually.
It was disproportionately
rental income as opposed to salaries.
They also obviously achieved a significant wealth by
virtue of the increase in value of these properties
as they were renovated.
-: You recognize from Dover, that they lost about $300,000.
But let me ask you this,
because I wanna come at this from a different perspective.
Because you've been asked a lot of questions about,
and so is Mr. Lewin about
"Is this the right course of action here?"
And we've got a statute of repose that's complicating it.
But one could argue that what's going on here is trying to
shizzle in this circumstance into
a course of trade and commerce.
And I know that the fraud case was dismissed.
But why isn't this fraud?
You've got fragmentary information, at least.
The United States Supreme court once said,
"The best way to lie is, to surround truth around the lie."
So I don't understand why
instead of...
Well I do understand because you got
attorney fees and multiple damages.
But it seems to me that the real problem
in what's going on here is fraud.
They decided to talk and not say the real big thing which is
"Not only do we not have a permit.
But we got structural problems here.
And by the way we're contractors."
-: To address your question in two fold banner Justice Lowy.
Number one, the fraud count was dismissed.
-: We do think- Lowy: I know.
-: We do think that there was actionable fraud
and that was the basis of one of our cross appeals.
There was actionable fraud under Kannavos verses Annino here
Based upon the representations in the marketing materials
touting these rather these renovations.
Obviously without disclosing
no permits and defective construction.
And also when Mr. and Mrs.Gagliardi separately escorted
the Sullivans around during the pre-closing inspection.
And Mr.Gagliardi is promoting the renovations he made in
the so called Tuscan room.
Mrs.Gagliardi is promoting the renovation she made.
-: No, but they're proud of...
A couple of things,
One they liked them, they're proud of this room.
They've lived in it. It's there...
Whether they know its,
if they knew it was structurally deficient
they were risking their own lives living in there.
I guess Mr. McGlynn, none of us trust
the person who sells us our house.
That's why we hire a building inspectors.
And you know have the termites person come.
I'm not sure this is fraud as opposed to,
They're not...
I don't see this necessarily as fraud as is,
isn't this what the building inspectors supposed to pick up?
Your client is also a sophisticated business person
who can afford a building inspector.
They must look at it and say,
"Wow, this wiring isn't right."
You know, I don't know.
It just seems like this is tricky, this thing.
-: Yes, there was a building inspector here.
But the jury heard the testimony from
the building inspector.
The jury heard the testimony from
the Sullivan's as well as the expert witnesses.
And whether or not
the building inspectors testimony may have been
consistent with what you're suggesting Justice Kafker.
The jury had every right to reject that testimony.
And it should not be considered
for purposes of the standards of review.
which cabins all of the evidence that we have in this case.
The evidence-
-: Mr. McGlynn, can I ask on that point?
And again this is in your, so let me finish the question.
So did they move to dismiss the 93A
and the implied warranty of habitability claims
when they were originally brought?
-: If I understand your question your Honor.
Via for example a motion to dismiss or summary judgment.
Kafker: Yeah. Was it- -: Twice, twice.
Kafker: They tried- -: Twice
Kafker: Okay.
-: Twice they tried and they failed.
We are up as, as you are well aware on two motions;
motion to alter or amend or a motion to new trial.
The Justices are certainly much better aware of what
the standards are there.
The evidence here is we think substantial of
not only trade or commerce but the builder-vendor.
I just want to get back to one thing.
And that is we do-
-: Your time is running out.
So be quick, please.
-: All right, we don't believe that there's any
legal flood gates that are,
litigation flood gates that are going to be open here
because a plaintiff is going to have to demonstrate
each and every factor for a breach.
For example of 93A or violation of 93A
or the breach of implied warranty,
builder-vendor causation damages,
statute of limitations,
statute of oppose.
Thank you.
-: Thank you, Mr.McGlynn.