BRIAN J. QUINLAN & another [Note 1] vs. RICHARD J. CLASBY & another. [Note 2]

KANTROWITZ, J. Defendant O'Kiley Real Estate Agency, Inc. (O'Kiley or broker) appeals from a judgment of the Superior Court finding liability for unfair and deceptive acts or practices under G. L. c. 93A. Two points are raised on appeal: that a real estate broker cannot be held liable under G. L. c. 93A for advertising a house as a three-family dwelling when, in actuality and without the broker's knowledge, the home as configured

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violates zoning requirements; and that there was error in the calculation of damages. [Note 3] We reverse.

Facts. In 1992, the defendant, Richard J. Clasby, purchased a house in the South Boston section of Boston that contained four separate apartments. As the house was in need of repairs, Clasby cleared it of tenants, filed a request for a variance to change the property to a three-family residence in 1993, and obtained the requisite permits for the renovations in 1995. Clasby subsequently discovered a 1974 decision from the zoning board of appeals granting the home a variance to be used as a three-family residence, but providing "that there shall not be more than one (1) apartment above the first floor." Clasby withdrew his request for another variance, believing that he did not need to pursue further action because a three-family dwelling was already a permitted use. The property was renovated as planned, resulting in a three-family home with two second-floor apartments. Clasby leased all three units to tenants. [Note 4]

In 1998, Clasby approached O'Kiley to sell the house. Elizabeth Dynan, an agent for O'Kiley, served as the listing broker. Clasby informed Dynan that the property was a "three-family." Dynan and Gayle Kiley, the owner of O'Kiley, inspected the property, noting that the house was being used as a three-family residence. Kiley also obtained copies of tax records through the 1997 tax year that indicated that the property had been taxed as a four-family residence from 1989 until 1997. [Note 5] Without checking the applicable zoning bylaws or the 1974 variance, the broker

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advertised the house as a three-family dwelling. The plaintiffs, Brian J. Quinlan and Warren T. Quinlan, purchased the property from Clasby for $221,000 in August of 1998. [Note 6] The house continued to be used as a three-family residence.

In 2001, the plaintiffs decided to sell the property. They received an offer from Kathleen McCarthy for $390,000, and a purchase and sale agreement was executed. After learning that the property, as configured, was not a lawful three-family house, [Note 7] McCarthy decided, as the parties agree was her right under the agreement, not to proceed with the sale.

The plaintiffs then received a second offer in December, 2001, from Cara Bufalino for $350,000. A rider to the purchase and sale agreement required, as a contingency of purchase, that the plaintiffs obtain "a Certificate of Occupancy from the City of Boston stating that the legal occupancy of the Premises is a three family." When the plaintiffs were unable to acquire the required documentation, Bufalino terminated the deal.

The plaintiffs learned that they would have to obtain relief from the zoning board of appeals. Rather than pursue that route, they listed the property as a two-family house and sold it as such to Joseph Middleton on March 25, 2002, for $320,000. The property continued to be assessed as a three-family residence following the sale.

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The plaintiffs filed the instant lawsuit on December 3, 2002, alleging breach of contract, misrepresentation, and intentional infliction of emotional distress by Clasby, [Note 8] and one count of unfair or deceptive acts or practices in violation of G. L. c. 93A with respect to O'Kiley.

At trial, the plaintiffs produced the testimony of Brian Quinlan; Clasby; Kiley; the first prospective purchaser, McCarthy; and attorney Lynn Deitzer, who represented Bufalino in the second offer to purchase. [Note 9] The defendants called Warren Quinlan; Ellen McLaughlin, executive secretary of the Boston assessing department; and Dynan, the listing broker at O'Kiley who was assigned to assist Clasby in the sale of his property. [Note 10]

Kiley testified that before listing a piece of property, she typically obtains information from the owner, inspects the property, checks the deed and tax information, and considers the selling price of comparable properties. Kiley further testified that she does not check the zoning status of properties she lists. While Kiley indicated that she knows what zoning is, she stated that she "was not familiar with the legal zoning of the properties," and that she "wasn't experienced to tell people . . . what the zoning of a property is." The plaintiffs produced no contrary evidence that brokers typically verify whether a property is in compliance with zoning laws, [Note 11] nor did they produce an expert as to the norm in the industry.

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On February 17, 2005, the jury returned a verdict for the defendants on the breach of contract and G. L. c. 93A claims. [Note 12] Notwithstanding the jury's view on the c. 93A count, the trial judge, at a subsequent hearing, ruled in favor of the plaintiffs, finding that

"[Kiley], as a Realtor, as a broker, had an obligation when she marketed the property . . . to be sure that it was what she marketed it as, which was a three-family home. It seems to me that the ordinary, reasonable meaning of the term, 'three-family, unattached dwelling,' which is how she marketed it, is that the property both physically and lawfully contains three units for occupancy. The property did not, and that was something that she should have realized, that the firm, the defendant firm, should have realized."

The trial judge did not, however, find any intentional or wilful misstatement. Rather, the judge concluded that "it was improper and, therefore, unfair for her to market it one way when it was knowable and should have been known by the defendant firm to be another." [Note 13]

On May 9, 2005, judgment entered in favor of Clasby against

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the plaintiffs, [Note 14] and for the plaintiffs against O'Kiley, awarding damages in the amount of $70,000 with interest, plus attorney's fees and costs of $26,286.50. [Note 15]

Liability under G. L. c. 93A. O'Kiley argues, in part, that the judge erred in ruling that listing the property as a "three-family, unattached dwelling" without ascertaining whether the property was lawfully zoned for that use constituted a violation of G. L. c. 93A. [Note 16] We agree.

Generally, liability under G. L. c. 93A is premised on a wilful misstatement of fact. See Mayer v. Cohen-Miles Ins. Agency, Inc., 48 Mass. App. Ct. 435 , 443 (2000). While the statute requires disclosure of all material facts known to a party at the time of a transaction, it does not impose "liability for failing to disclose what a person does not know." Underwood v. Risman, 414 Mass. 96 , 100 (1993). See Fernandes v. Rodrigue, 38 Mass. App. Ct. 926 , 928 (1995). "The notion of disclosure necessarily implies that the fact in question is known to the person expected to disclose it." Lawton v. Dracousis, 14 Mass. App. Ct. 164 , 170 (1982), quoting from Restatement (Second) of Contracts § 161 comment b (1979). A negligent misrepresentation of fact may, however, constitute an unfair or deceptive act within the meaning of G. L. c. 93A, if the truth could have been reasonably ascertained. Glickman v. Brown, 21 Mass. App. Ct. 229 , 235 (1985).

Here, the trial judge explicitly found that there was no intentional or knowing misstatement regarding the lawful use of

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the property. Thus, the issue is whether the broker should reasonably have known that the property was not a lawful three-family residence.

The plaintiffs argue that the broker should have checked the zoning of the property and verified its lawful status before marketing the home as a three-family residence. Specifically, they argue that the existence of the 1974 variance, a public record, made the fact of the property's zoning violation reasonably ascertainable.

On these circumstances, we discern no G. L. c. 93A violation. The broker was under no duty, under the facts of this case, to determine if the property was in compliance with the applicable zoning laws. Real estate brokers do not typically review zoning records, and while Kiley indicated that she knows what zoning is, she stated that she does not provide advice concerning the zoning of a particular property. Kiley provided the only testimony on this issue, which the plaintiffs failed to rebut; no evidence was offered as to what real estate brokers are typically expected to do when marketing a home, specifically as to whether zoning records should be examined.

After investigating the property and preparing a listing, there was little, if any, reason for the broker to suspect that the property was not lawfully a three-family residence. Kiley testified that in a typical sale a broker would conduct a personal inspection of the property, examine the deed, tax records, and utility bills, and check comparable sales to arrive at a listing price. After being informed by Clasby that the property was a "three-family," Kiley inspected the property, confirmed that there were in fact three separate apartments, and obtained relevant tax documents. [Note 17] Simply put, the broker did all that was legally required of a real estate broker in the sale of Clasby's property to the plaintiffs. Had the Quinlans hired an attorney when they first purchased the property, the zoning issue presumably would have been identified.

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This court's ruling in Fernandes v. Rodrigue, 38 Mass. App. Ct. at 928, is instructive. In that case, the sellers told the real estate broker that they believed their parcel contained five acres, when in actuality it contained only 2.8 acres. Id. at 926-927. The broker checked town records and found a tax bill and a copy of the deed, both of which indicated the size of the parcel was around four acres; the broker so informed the buyer. Ibid. This court rejected the argument that the broker, by "reasonably diligent inquiry," could have known that the property contained significantly less than four acres, noting that "[i]t is hard to think what inquiries about area a real estate broker might have made beyond those that [the defendant] followed up with the town. One would hardly expect the broker to have a survey made." Id. at 927-928. See Lawton v. Dracousis, 14 Mass. App. Ct. at 170 (no c. 93A liability where broker informed buyer that there were no building code violations when, in fact, there were, because broker was not aware of such violations).

In conclusion, the broker here had no obligation in the circumstances presented to verify compliance with zoning laws and, absent knowledge of such a violation, cannot be liable under G. L. c. 93A. [Note 18], [Note 19]

Judgment reversed.