RICHARD P. BROWN & another [Note 1] vs. BARRY H. GERSTEIN & another. [Note 2]

GREANEY, J. The plaintiffs' amended complaint sought to recover damages from the defendants, both lawyers, on allegations (1) that Gerstein had committed malpractice in representing them in connection with a suit to restrain a mortgage foreclosure; (2) that his conduct also violated G. L. c. 93A; and (3) that Weiner, who practiced law with Gerstein, was derivatively liable for Gerstein's actions as his "partner by estoppel." The common law claims were tried to a jury; the c. 93A claim to the judge. See Nei v. Burley, 388 Mass. 307, 311-315 (1983). At the conclusion of the plaintiffs' case the judge allowed a motion filed by the defendants on the c. 93A claim captioned "Motion for Directed Verdict." [Note 3] The jury returned a verdict in the

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amount of $15,000 for the plaintiffs, which the judge set aside on the defendants' motion for judgment notwithstanding the verdict. Mass.R.Civ.P. 50(b), 365 Mass. 814 -815 (1974). The plaintiffs have appealed from the judgment entered for the defendants. We reverse the judgment for Gerstein and order a new trial as hereinafter set out. We affirm the judgment for Weiner.

In deciding whether the judge acted properly in entering judgment notwithstanding the verdict on the common law claims, we apply the standard applicable to a motion for directed verdict. D'Annolfo v. Stoneham Housing Authy., 375 Mass. 650, 657 (1978). Moran Travel Bureau, Inc. v. Clair, 12 Mass. App. Ct. 864 (1981). This test focuses on whether "anywhere in the evidence, from whatever source derived, any combination of circumstances could be found from which a reasonable inference could be drawn in favor of the plaintiff." Raunela v. Hertz Corp., 361 Mass. 341, 343 (1972), quoting from Kelly v. Railway Exp. Agency, Inc., 315 Mass. 301, 302 (1943). Miles v. Edward O. Tabor, M.D., Inc., 387 Mass. 783, 785-786 (1982).

Viewing the evidence in this light, we conclude that the jury could have found the following. [Note 4] In 1975, the plaintiffs owned a parcel of commercial property in Wenham which they had purchased in 1967. The parcel contained a building, a major part of which was leased to Richdale Dairy Stores, Inc., for the operation of a convenience store, and the balance of which was rented to a second store under a tenancy at will. In the summer of 1974, the mortgagee on the property, Danvers Savings Bank (bank), claimed a default in the mortgage, an assertion which the plaintiffs contested. They consulted Gerstein, and, at Gerstein's request wrote a letter detailing to him their dispute with the bank. [Note 5] In January, 1975, the plaintiffs formally retained

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Gerstein "to bring suit against the . . . bank for breach of contract" based on the bank's alleged mishandling of their loan. [Note 6] Gerstein advised the plaintiffs "not to have anything to do with the [bank because] . . . he would handle everything."

By letter dated April 18, 1975, the bank notified the plaintiffs that its board of investment had voted to commence foreclosure, that future payments on the loan would not be accepted, and that the plaintiffs would be liable for any deficiency resulting after foreclosure. Gerstein assured the plaintiffs "not to worry about [the notice] . . . [t]hat he would take care of everything [a]nd that he was drawing up papers to file against the bank."

Shortly after June 13, 1975, the plaintiffs received from the bank's attorneys a copy of the order of notice issued by the Superior Court on the bank's complaint to foreclose the mortgage. Gerstein also received a copy of this notice and again assured the plaintiffs "not to worry . . . that it [the foreclosure] wouldn't happen [because] he would take care of everything."

On July 30, 1975, the plaintiffs received written notice advising them that a foreclosure sale would be held on or after September 3, 1975, and that they would be liable for any resulting deficiency. The Browns promptly brought this notice to Gerstein's attention. Gerstein advised them that an amended complaint was being prepared, [Note 7] and made no mention of any problems.

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On August 1, 1975, the plaintiffs signed and swore to an amended complaint. This complaint alleged that the bank was solely responsible for the mortgage default, and that it had improperly refused to allow the plaintiffs to cure the default. The complaint sought preliminary injunctive relief to enjoin the foreclosure as well as an accounting and damages. Gerstein told the plaintiffs that he would file the complaint in the Superior Court. Shortly thereafter he advised the plaintiffs that he had in fact filed the complaint and that "there would be no foreclosure." The plaintiffs relied on these assurances. Gerstein never filed the complaint. He did not tell the plaintiffs that it had not been filed or that neither a temporary restraining order nor an injunction would be applied for.

On August 15, 1975, the plaintiffs received a copy of the bank's legal advertisement of the foreclosure sale which had been published in a local newspaper. This notice set the foreclosure sale at 2:00 P.M. on September 3, 1975. The notice was immediately brought to Gerstein's attention. Gerstein advised the Browns that "everything was being held in abeyance" and "that there would be no foreclosure." On August 28, 1975, Richard Brown met Gerstein. He again told Brown that "there wasn't going to be any auction sale and that he (Gerstein) might . . . have a customer for the property." These representations were false. [Note 8] The

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property was sold to a third party at foreclosure auction on September 3, 1975, for $62,000 without the plaintiffs' knowledge.

When the plaintiffs discovered that the property had been sold they confronted Gerstein, who then told them that he had had a "deal" with the bank's attorney, see note 8, supra, and that this lawyer had "double-crossed him." Gerstein recommended that the plaintiffs file an immediate suit against the bank and its counsel and assured the Browns that he would appear as a witness on their behalf at the trial. To this end, Gerstein directed the plaintiffs to another lawyer in his office. This lawyer prepared yet another complaint against the bank. This complaint, seeking damages, accused the bank of bad faith and repeated the substance of the amended complaint with one difference; it contained an assertion that at the time of the foreclosure sale "the plaintiffs were . . . financially unable to purchase the property." [Note 9] The plaintiffs reviewed the complaint and swore to its contents. The attorney, however, declined to represent the plaintiffs after receiving information from the bank's counsel which made it doubtful that the plaintiffs could prevail at trial. As a result, the complaint was never filed and the lawyer terminated his relationship with the plaintiffs after telling them that he had returned their file to Gerstein.

There was testimony that Gerstein never advised the plaintiffs of options to prevent foreclosure. [Note 10] The judge excluded testimony, preserved by a proper offer of proof, that had the Browns known that Gerstein had not filed the complaint

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and that the foreclosure sale would take place, they would have sought to avoid the sale by: (1) engaging another attorney to file suit and seek an injunction on a different theory of law, [Note 11] (2) curing the default by paying the arrearage, [Note 12] (3) attempting to sell the property or to refinance the debt with another lender, (4) attending the foreclosure sale with the required deposit either to purchase the property or to bid it up to full market value, or (5) discharging the mortgage by paying the entire indebtedness. There was further testimony that the plaintiffs had funds, independent of borrowing, which could have been used for these purposes. These funds were contained in two trusts for the benefit of Ann Brown. The first was a personal trust containing about $30,000, the terms of which permitted payments of principal to Ann Brown in the sole discretion of the trustees. The second was a testamentary trust, containing about $70,000. Ann Brown could obtain principal from the latter trust "as she deem[ed] advisable." The annual income from the testamentary trust averaged $4,000. In addition to the assets of the trusts, there was testimony that the plaintiffs had substantial equity in their home.

A few other facts are relevant to the discussion of the common law claims. The measure of damages was stipulated to be the difference between the $62,000 paid by the

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buyer at the foreclosure sale and the fair market value of the premises. There was evidence which would have warranted a finding that, on September 3, 1975, the premises had a fair market value of at least $100,000. The judge considered the common law malpractice claims as solely limited to Gerstein's negligence in failing to file the amended complaint. On this hypothesis, the judge instructed the jury that the plaintiffs could recover only if they found that an injunction could have been obtained on the facts alleged in the amended complaint, declining to put to the jury the question whether Gerstein was liable for deceit.

1. We first consider the common law claims of malpractice. It is conceded that an attorney-client relationship existed between Gerstein and the Browns and that Gerstein was negligent in failing to file the amended complaint. We are satsified that the judge properly rejected the plaintiffs' claim that the foreclosure would have been enjoined for the reasons stated in his memorandum on the motion for judgment n.o.v. In that memorandum, the judge pointed out that the plaintiffs had to establish that they "would have succeeded in the underlying litigation but for the attorney's negligence in not bringing suit." See McLellan v. Fuller, 226 Mass. 374, 378 (1917); Glidden v. Terranova, 12 Mass. App. Ct. 597, 600 (1981). He correctly concluded that the plaintiffs had not presented any evidence from which the jury could find that the various assertions of wrongdoing on the part of the bank were true and that the plaintiffs would have succeeded in enjoining the foreclosure sale. As a consequence, there was no evidence which would warrant a finding that Gerstein's failure to file the amended complaint proximately caused the plaintiffs any damage.

The plaintiffs argue, however, that Gerstein was negligent because he failed to advise them of alternatives to avoid foreclosure (and in the case of the remedy allegedly provided by G. L. c. 244, Section 22, because he failed to find and plead that statute), and that Gerstein was liable for deceit. Because of this conduct, the Browns claim they were unable to take action which would have saved their property. The

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defendants argue, on the other hand, that the judge properly kept these theories from the jury because (1) Gerstein was hired only to prepare, file and try the amended complaint and not to give general advice on other avenues that might prevent foreclosure, (2) in any event, expert testimony was necessary to establish that a lawyer in Gerstein's position would have given advice about such alternatives, (3) deceit was never pleaded and tried, and (4) there was insufficient proof that if any of the alternatives had been pursued, the foreclosure could have been avoided.

We think the plaintiffs cannot prevail on their theory that Gerstein was negligent in failing to advise them of the options to avoid foreclosure, see note 10, supra. The only evidence concerning the scope of Gerstein's employment confined his representation to "bring[ing] suit against the . . . bank for breach of contract." Whether a lawyer whose employment was so limited would undertake to give his client general advice about ways to avoid foreclosure was a subject requiring expert testimony in accordance with the rule that "expert testimony is generally necessary to establish the standard of care owed by an attorney in the particular circumstances and the defendant's alleged departure from it." Glidden v. Terranova, 12 Mass. App. Ct. at 598. We also think the plaintiffs could not recover on the theory that Gerstein failed to discover or plead G. L. c. 244, Section 22. That statute is beyond the understanding of lay people and expert testimony was necessary to establish that a lawyer in Gerstein's position should have discovered the statute and, if he had, that it could have been used to obtain an injunction. [Note 13] What has been said so far eliminates the various negligence theories from the case.

This does not end the matter, however, because we must consider whether the evidence was sufficient to hold Gerstein

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liable for deceit. [Note 14] "Fraud or deceit . . . is no more a necessary incident to the rendition of legal services than dishonesty is to any other profession. The avoidance of fraudulent conduct requires no special skill or knowledge, but only basic precepts of honesty and integrity. When committed by an attorney, the tort of fraud or deceit is determined by essentially the same rules that apply to any defendant, regardless of whether he is a professional." Mallen & Levit, Legal Malpractice Section 107 (2d ed. 1981). See S.J.C. Rule 3:07, DR 1-102(A)(4), as appearing in 382 Mass. 769 , 770 (1981) ("A lawyer shall not . . . [e]ngage in conduct involving dishonesty, fraud, deceit, or misrepresentation"). Here the jury could have permissibly found that Gerstein had knowingly made false representations of material fact to the effect that the foreclosure sale would not take place, that the Browns had expressly relied on these representations, and that had the Browns been told the truth, they would have sought to avoid a forced sale by pursuing other alternatives.

2. We then come to the question whether any damage resulted from the deceit. See Szpiro v. Corkin, 340 Mass. 260, 262 (1960); Mallen & Levit, Legal Malpractice Section 107, at 185 (2d ed. 1981). We have already concluded that the plaintiffs cannot prevail on the theory that they were denied recourse to G. L. c. 244, Section 22. We also conclude that causation was not established with respect to payment of the arrearages, [Note 15]

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sale, or remortgage of the property, [Note 16] and the possible purchase of the property by bidding at the foreclosure sale. [Note 17] The plaintiffs' proof, however, was sufficient to warrant a jury in concluding that they could have paid off the entire mortgage had they known that the sale was going to occur. On this issue, the jury could have found that the plaintiffs had funds available to Ann Brown in a testamentary trust which she could have withdrawn without restriction. The jury could have also found that the amount of available money in that trust was sufficient to discharge the mortgage loan. [Note 18] We conclude that the plaintiffs should have been allowed to go to the jury on the theory that Gerstein's deceit had caused damage (the measure of which was stipulated) by preventing them from paying off the entire mortgage indebtedness. [Note 19]

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3. We next take up the plaintiffs' assertion that the judge erred in the disposition of their claim under G. L. c. 93A. The plaintiffs concede that they could not recover under Section 9 of c. 93A because no demand letter was sent to the defendants. See Slaney v. Westwood Auto, Inc., 366 Mass. 688, 704 (1975); Entrialgo v. Twin City Dodge Inc., 368 Mass. 812, 813 (1975). They argue, however, that the evidence of deceit was sufficient to warrant findings that Gerstein had violated Section 2(a) of c. 93A, inserted by St. 1967, c. 813, Section 1, and that they could recover for the violation under Section 11 of c. 93A, inserted by St. 1972, c. 614, Section 2. The judge appears, however, to have ruled, as matter of law, that such

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an action could not be maintained because the attorney-client relationship does not involve "trade or commerce" within the meaning of those words in Sections 2(a) and 11. The defendants urge that this ruling be upheld, relying principally on the line of cases decided under both Section 9 and Section 11 of c. 93A which exclude essentially private transactions from the statute's application. See Lantner v. Carson, 374 Mass. 606, 611 (1978); Manning v. Zuckerman, 388 Mass. 8 (1983); Weeks v. Harbor Natl. Bank, 388 Mass. 141 (1983); Newton v. Moffie, 13 Mass. App. Ct. 462 (1982).

In deciding whether Gerstein's alleged wrongdoings occurred within the conduct of trade or commerce as required by Section 2(a) of c. 93A, we find the decision of Guenard v. Burke, 387 Mass. 802, 808-811 (1982), controlling. [Note 20] Guenard held that a claim against an attorney by his client for damages in connection with the attorney's execution of an unlawful contingent fee agreement could be maintained under G. L. c. 93A, Sections 2(a) and 9. The decision further held (at 809) that the attorney's reliance on the illegal agreement for his fee constituted, as matter of law, an unfair or deceptive act prohibited by c. 93A, Section 2(a), and that the violation entitled the plaintiff to press her claims for multiple damages, attorney's fees, and costs.

While the issue raised here is not expressly discussed in Guenard, that decision in straightforward fashion applies c. 93A to the attorney-client relationship. We consider Guenard to be authority for the proposition that in circumstances like those here present the practice of law constitutes "trade or commerce" for purposes of liability under c. 93A. We, therefore, proceed no further to ponder the relevance of the private action decisions to c. 93A claims arising out of the attorney-client relationship.

The question whether the plaintiffs were engaged in trade or commerce (a prerequisite to recovery under Section 11), [Note 21]

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was one for the judge as the trier of fact. The evidence warranted a finding that the plaintiffs as lessors of commercial property (and perhaps as commercial clients of Gerstein) were acting in a business context and thus engaging in "trade or commerce." See Linthicum v. Archambault, 379 Mass. 381, 387 (1979). See also Begelfer v. Najarian, 381 Mass. 177, 190-191 (1980); Lynn v. Nashawaty, 12 Mass. App. Ct. 310, 313-314 (1981) (identifying and defining a "business context" test to determine whether a particular transaction constitutes trade or commerce under Section 11). The evidence also warranted a finding that Gerstein's deceit constituted unfair or deceptive conduct proscribed by the act. [Note 22] We conclude that the c. 93A claim should have been considered on its merits.

4. We reach the plaintiffs' argument that, under the doctrine of partnership by estoppel, Weiner is liable to the same extent as Gerstein. [Note 23]

The common law doctrine of partnership by estoppel is codified for the Commonwealth in G. L. c. 108A, Section 16. See Standard Oil Co. v. Henderson, 265 Mass. 322, 326 (1928). The Henderson case establishes that to prevail under this doctrine a plaintiff must prove: (1) that the would-be partner has held himself out as a partner; (2) that such holding out was done by the defendant directly or with his consent; (3) that the plaintiff had knowledge of such holding out; and (4) that the plaintiff relied on the ostensible partnership to his prejudice. Ibid. See also Reuschlein & Gregory, Agency and Partnership Section 198 (1979); Crane & Bromberg, Partnership Section 36 (1968); Rowley on Partnership 423-436 (2d ed. 1960); Painter, Partnership by Estoppel 16 Vand. L. Rev. 327 (1963). Failure to establish any of these requirements precludes recovery on an estoppel theory.

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In setting aside the verdict against Weiner, the judge concluded that the evidence was insufficient to satisfy the second requirement, viz., that any holding out was done directly by Weiner or with his consent. On this issue, there was evidence that on October 16, 1972, the Browns had made a check payable to "Gerstein and Weiner" (apparently for legal services unrelated to the instant case) which was deposited in "Gerstein and Weiner clients' account"; that in 1975, in connection with the pending foreclosure, the plaintiffs made out a retainer check in the amount of $150 payable to Gerstein alone; that the plaintiffs thereafter received letters from Gerstein on stationery bearing the legend "Gerstein and Weiner;" and that Gerstein testified in his deposition that Weiner knew that he (Gerstein) was using Gerstein and Weiner stationery. There was no evidence that the plaintiffs ever met Weiner or that Weiner rendered any legal services on their behalf.

The judge's conclusion was correct. The evidence concerning the 1972 check and the account in which it was deposited is irrelevant to establish consent in connection with the 1975 transactions before us. It is of significance that the 1975 retainer check was made payable to Gerstein alone. Hence the plaintiffs' proof on consent came down to Weiner's knowledge that his name was being used on the office stationery. The Henderson decision (at 326) establishes, however, that the use of a person's name in a business, even with that person's knowledge, is too slender a thread to warrant a favorable finding on the consent element. See also Joseph v. Greater New Guide Baptist Church, Inc., 194 So.2d 127, 130 (La. App. 1966). See generally Mallen & Levit, Legal Malpractice Section 33 (2d ed. 1981). Weiner was entitled to judgment in his favor.

5. Two issues that may arise upon retrial may be disposed of summarily.

(a) Although the attorney-client relationship is essentially contractual in nature, the claims to be retried (deceit and c. 93A) basically sound in tort. Consequently, if the plaintiffs prevail after retrial, interest on any sum recovered should be computed in accordance with G. L. c. 231, Section 6B.

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(b) Retrial of the case will follow the usual judicial assignment procedures in the Superior Court.

6. To sum up: There is to be a new trial limited to (a) whether Gerstein's conduct constituted deceit which prevented the plaintiffs from paying the bank's mortgage in full and (b) whether Gerstein's deceit violated G. L. c. 93A, Sections 2(a) and 11. On the balance of the claims against Gerstein, the plaintiffs have failed in their proof, as they also have on their claim of derivative liability on Weiner's part.

The judgment insofar as it disposes of the claims against the defendant Gerstein except those identified above is affirmed. The balance of the judgment for Gerstein is reversed and a new trial ordered consistent with this opinion. The judgment insofar as it relates to the defendant Weiner is affirmed.

So ordered.