WILLIAM DONIUS v. JOHN R. MILLIGAN, ROBERT M. GRAVIS, and RICHARD HOLLAND.

Plaintiff William Donius filed this complaint seeking specific performance of a contract for the sale of real estate, specifically, for condominium unit 8 at 93 Commercial Street, Provincetown (the “Property). Donius alleges in his Verified Complaint that text messages between his real estate agent and the agent for the defendant sellers, in which the agents agreed on a sales price and a closing date, and which was followed by an emailed copy of a “contract to purchase,” signed by Donius as buyer, and accompanied by an emailed image of a deposit check, constituted a valid and binding contract obligating the sellers, defendants John Milligan and Robert Gravis, to sell the Property to Donius.

On June 2, 2016, the court (Speicher, J.) endorsed a memorandum of lis pendens pursuant to G. L. c. 184, §15 on motion of the plaintiff, with notice to the defendants. At the hearing on the motion for endorsement of a memorandum of lis pendens, the court discussed with the parties and scheduled the filing and hearing of a special motion to dismiss pursuant to G. L. c. 184, §15(c). In accordance with the court’s scheduling order, the defendants Milligan and Gravis filed a special motion to dismiss, the plaintiff filed an opposition, and a hearing on the special motion to dismiss was held on July 14, 2016. Prior to hearing the special motion to dismiss, the court allowed the motion to intervene of Richard Holland, who has entered into a purchase and sale agreement to purchase the Property from Milligan and Gravis. Counsel for Holland participated in the hearing on the special motion to dismiss, but did not make any written submission.

For the reasons stated below, the defendants Milligan and Gravis’s special motion to dismiss pursuant to G. L. c. 184, §15(c), is ALLOWED, and the Verified Complaint will be dismissed with prejudice.

FACTS

In accordance with the requirements of G. L. c. 184, §15(c), “[i]n ruling on the special motion to dismiss the court shall consider the verified pleadings and affidavits” submitted by the parties. The plaintiff has submitted a Verified Complaint, as well as the Affidavit of Michael Hall, his real estate agent. The defendants Milligan and Gravis submitted an Affidavit of Emily Flax, their real estate agent in the subject transaction. Based on the Verified Complaint and the affidavits submitted by the parties, the court accepts as true the following facts for the purposes of consideration of the special motion to dismiss.

Emily Flax, a real estate agent in Provincetown, was the listing broker authorized by Milligan and Gravis to market their condominium unit at 93 Commercial Street in Provincetown. The listing agreement signed by Milligan and Gravis specified that Flax’s agency, Atlantic Bay Sotheby’s International Realty, “is being hired to market the property.” The listing agreement authorized Flax to sign only the following listed documents, to be sent to the Multiple Listing Service (“MLS”) on behalf of the sellers: “A listing price change, a [listing] contract extension or withdrawal.” [Note 2] The listing agreement did not explicitly or implicitly authorize Flax to sign any other documents on behalf of the sellers of the Property.

Michael Hall, a real estate agent representing Donius, contacted Flax to arrange a showing of the Property. Following the showing on May 10, 2012, the parties commenced to negotiate a possible sale of the Property, mostly through text messages and emails between the two real estate agents, Hall on behalf of the Donius, the proposed buyer, and Flax on behalf of Milligan and Gravis, the sellers. The texts between Hall and Flax included the following:

May 12

Hall: Good afternoon. I emailed an offer over to you [f]or 93 [C]ommercial.

Flax: Hi Mike. Won’t hear back til morning. Talk to you then.

May 13

Hall: Hi, he said he would split the difference at $962,500.

Flax: OK. I’ll convey.

May 14 [Note 3]

Hi Mike. The sellers accept the price. They are proposing a closing date of 6/24 in order to have time to come and take their personal belongings. I can explain further when we speak. Also want to make sure that the offer language about furnishings agrees with new TRID regulations and that you conveyed to him the info I left in your voicemail yesterday about the 6/30 – 7/10 rental and the fact that the sellers are leaving all furnishings and linens and towels but will remove artwork and personal items and all… (balance of message cut off) [Note 4]

On Monday, May 16, 2016, Hall emailed to Flax a document entitled “Contract to Purchase – Massachusetts”, dated May 15, 2016, and signed by Donius. Also emailed along with the Contract to Purchase, was a “Supplemental Agreement to MA Contract to Purchase Dated 5/15/2016”, also signed by Donius, and an image of a check, signed by Donius, in the amount of $1,000.00, and made payable to Flax’s real estate firm.

The Contract to Purchase included the price, $962,500.00, which Flax had informed Hall by text message the sellers had accepted, and it included the closing date, June 24, 2016, that Flax had also said in a text message would be acceptable to the sellers. The Contract to Purchase also included the following additional terms that are not mentioned in any of the text messages or other communications between Hall and Flax:

-- an additional deposit of $95,000.00 to be paid by June 3, 2016;

-- “Broker Standard Purchase and Sale Agreement or substantially equivalent form” to be executed by the parties by June 3, 2016;

-- an inspection contingency allowing the buyer terminate the contract “[i]f the results are unsatisfactory to BUYERS, in BUYERS’ sole discretion,…”; and

-- a mortgage financing contingency allowing the buyers to terminate the contract if they are unable to obtain a commitment for financing of 80% of the purchase price by June 10, 2016.

Notwithstanding the representation in the Contract to Purchase that the $1,000.00 deposit, “receipt of which is hereby acknowledged”, had been delivered to the sellers’ agent, the $1,000.00 check had in fact not been delivered as of the time of delivery of the contract by email from Hall to Flax. Only an image of the check was sent.

The Contract to Purchase, as emailed by Hall to Flax, also contained a section entitled “Conditions of Acceptance”, which provided in part, “This proposed Contract to Purchase by BUYERS shall be effective until 7:59 PM on May 16, 2016 (the ACCEPTANCE DATE )…if SELLERS do not execute and deliver to BUYERS a copy of this Contract to Purchase on or before the ACCEPTANCE DATE, this proposed Contract to Purchase shall be considered as rejected and all Deposits shall be returned to BUYERS forthwith.”

Milligan and Gravis did not sign or return the Contract to Purchase, and subsequently entered into a purchase and sale agreement with another buyer.

DISCUSSION

I. Standard of Review.

This matter is before the court on a “special motion to dismiss” pursuant to G. L. c. 184, §15(c), which provides in relevant part that “[t]he special motion to dismiss shall be granted if the court finds that the action or claim is frivolous because (1) it is devoid of any reasonable factual support; or (2) it is devoid of any arguable basis in law; or (3) the action or claim is subject to dismissal based on a valid legal defense such as the statute of frauds. In ruling on the special motion to dismiss the court shall consider verified pleadings and affidavits, if any, meeting the requirements of the Massachusetts rules of civil procedure.”

The standard of review on a special motion to dismiss was stated succinctly by the court in St. John’s Holdings, LLC v Two Electronics, LLC, 24 LCR 190 (2016) (Foster, J.):

The standard of review for a special motion to dismiss is the functional equivalent of a motion for summary judgment; it requires the court to assess the plaintiff’s claim in light of the record before the court. Faneuil Investors Group v. Board of Selectmen of Dennis, 458 Mass. 1 , 2-3 (2010); Gould v. Lancaster Tech. Park Ltd. P’ship, No. 20051153, 2006 WL 700884, at *1 (Mass. Super. Feb. 17, 2006); Trolio v. Friedman, No. 051170, 2005 WL 1683601, *2 (Mass. Super. May 3, 2005). The court does not weigh evidence, assess credibility, or find facts; it may only consider undisputed material facts and apply them to the law. Augat, Inc. v. Liberty Mut. Ins. Co., 410 Mass. 117 , 120 (1991). In viewing the factual record presented as part of the motion, the court is to draw “all logically permissible inferences” from the facts in favor of the non-moving party. Willitts v. Roman Catholic Archbishop of Boston, 411 Mass. 202 , 203 (1991).

The judge must consider the verified pleadings and affidavits in ruling on the special motion and, if the motion is granted, award costs and attorney's fees to the aggrieved party. McMann v. McGowan, 71 Mass. App. Ct. 513 , 519 (2008); Lindblad v. Holmes, No. BACV200400469, 2004 WL 3152376. *3-4 (Mass. Super. Nov. 24, 2004).

Donius argues that Milligan and Gravis are bound by the terms of the Contract to Purchase emailed by Hall to Flax, on the grounds that (1) Flax’s text messages to Hall constituted a signing sufficient to satisfy the statute of frauds; (2) Flax was authorized by Milligan and Gravis to bind them to the sale of the Property; and (3) the text messages contained sufficient material terms of the sale so as to constitute a binding agreement. In order to succeed in this argument, Donius needs to succeed on every prong of the argument. However, Donius’s argument fails with respect to every prong, and accordingly his claim must be dismissed.

I. The Text Messages Did Not Satisfy the Statute of Frauds.

“No action shall be brought:… Upon a contract for the sale of lands, tenements or hereditaments or of any interest in or concerning them;…Unless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized”. G. L. c. 259, §1 (fourth) (the “Statute of Frauds”). “However plain and complete the terms of an oral contract for the sale and purchase of real estate, it cannot be enforced against a party thereto unless, as required by the statute of frauds, he, or his agent, has signed a written memorandum which recites the essential elements of the contract with reasonable certainty.” Michelson v. Sherman, 310 Mass. 774 , 775 (1942). Where, as here, the defendants have raised the Statute of Frauds as a defense, “the party seeking performance under the alleged contract bears the burden of proof of its existence.” Slover v. Carpenter, 24 LCR 1 , 4 (2016) (Scheier, J.).

The allegations of the Verified Complaint, as buttressed by the Affidavit of Michael Hall, if proved at trial, would fail to carry the plaintiff’s burden of demonstrating the existence of a contract sufficient to withstand the Statute of Frauds defense. That the writing upon which the plaintiff relies is a series of text messages is not the determinative factor. Text messages and emails can potentially satisfy the Statute of Frauds, provided that they, like other writings, contain the essential terms of the transaction and are signed by the parties to be bound or their authorized agents. See St. John’s Holdings, LLC v Two Electronics, LLC, supra (signed text message incorporating detailed letter of intent sufficient to withstand special motion to dismiss); Feldberg v. Coxall, 2012 WL 3854947 (Mass. Super. Ct. May 22, 2012) (emails between attorneys sufficient to rebut Statute of Frauds defense). However, unlike the electronic messages in St. John’s Holdings and Feldberg, the text messages here are not signed by either the proposed buyer or seller, nor are they signed by the agents. Further, for reasons stated below, there is no showing, even as an allegation, that the seller’s agent, Flax, was authorized to bind her principals to an agreement, and the substance of the text messages relied on by the plaintiff demonstrate, at best, circumstances “where the parties have merely reached the stage of ‘imperfect negotiation’ prior to formalizing a contract, and have not yet reduced their agreement to terms.” Lafayette Place Associates v. Boston Redevelopment Authority, 427 Mass. 509 , 517 (1998).

II. There is No Showing that Flax was Authorized to Sign On Behalf of Milligan and Gravis.

Even assuming Flax’s texts constituted a signing of an otherwise sufficient writing to satisfy the statute of frauds, the plaintiff must demonstrate that Flax was authorized to sign a binding agreement for the sale of real estate on behalf of Milligan and Gravis.

To support such a conclusion, Donius alleges only that Flax “was authorized to negotiate an agreement to purchase and sell the Unit on the Sellers’ behalf.” [Note 5] In the Affidavit of Michael Hall, Hall asserts that, “It is customary and usual for a listing agent to have the authority to negotiate transaction terms on behalf of the owners whom she represents, and that was the case here with Ms. Flax and her clients, the owners of the Unit.” Accepting as true the assertion in the Verified Complaint and in the Hall Affidavit that listing agents in general, and Flax in particular, have the authority to negotiate terms of a real estate contract, such an assertion falls far short of being a representation that a listing agent has the authority to bind a principal to terms she has negotiated. Negotiating is something that real estate agents and attorneys do on behalf of their clients, but negotiating proposed terms of a contract does not generally bind the clients to the negotiated terms until the clients accept the results of the negotiation, as indicated by a writing to that effect. The plaintiff’s allegations in this respect fall far short of even an allegation that Flax was actually authorized to bind her clients with her signature.

Assuming that Hall intended his affidavit to be a representation that Flax had actual authority to bind Milligan and Gravis to the sale of the Property, the assertion still fails. Although Hall makes the conclusory assertion that Flax had the authority to bind the sellers, he does so on the strength of nothing more than an assumption on his part. He does not allege that he has had any communications with Milligan or Gravis upon which to base his conclusion, nor does he claim that he learned of Flax’s authority from her, or from any other source, other than his assertion that it is “customary” for listing brokers to have such authority. Drawing all reasonable inferences in favor of the nonmoving party, the court cannot infer Flax’s actual authority on the basis of Hall’s mere assumption that she had such authority.

In order to bind a principal on a theory of apparent, as opposed to actual, authority, as Donius appears to be trying to do, Donius “would have to show some word or conduct on the part of (Milligan and Gravis), the principal(s), and not (Flax), the agent, that caused (him) to reasonably believe that (Flax) was authorized” to act on Milligan and Gravis’s behalf to execute a binding agreement. Normandin v. Eastland Partners, Inc., 68 Mass. App. Ct. 377 , 385 (2007). Here, Donius has failed to even allege any conduct on the part of Flax, let alone Milligan and Gravis, that would justify an inference that she had such authority. An assertion in an affidavit, while cloaked with the representation that it is based on personal knowledge, need not be accepted by the court if it is plain on the face of the document that it is not based on personal knowledge and is in fact no more than an assumption. Without any personal knowledge upon which to base an assertion that Flax had the authority to bind her principals to the sale of real estate, Donius’s claim fails.

III. The Plaintiff Did Not Demonstrate Agreement on All the Materials Terms Necessary for a Sale of Real Estate.

Even had Donius demonstrated that Flax had the authority to bind Milligan and Gravis, and that she had signed the text messages, Donius has failed to demonstrate that Flax agreed to all of the material terms necessary to constitute a binding agreement for the sale of real estate. Moreover, the proposed Contract to Purchase added new material terms that had not been agreed to or discussed. “A failure of the parties to agree on material terms may not merely be evidence of the intent of the parties to be bound only in the future, but may prevent any rights or obligations from arising on either side for lack of a completed contract.” Rosenfield v. U.S. Trust Co., 290 Mass. 210 , 216 (1935).

The text messages relied upon by Donius, at best, contain agreement on the sale price, and perhaps on the closing date. The Contract to Purchase sent by Hall with Donius’s signature added new material terms to the proposed transaction, none of which were even arguably discussed, let alone agreed to by Flax on behalf of Milligan and Gravis. To the extent Donius argues (as he does in his opposition to the special motion to dismiss) that the text messages themselves constitute the binding contract of the parties, then the texts lack sufficient material terms to constitute a binding contract for the sale of real estate, lacking, as they do, any terms related to place of closing, title, additional deposit to be paid upon execution of a purchase and sale agreement, financing or lack of financing, and other material terms. A real estate agreement that does not resolve at least “all significant economic issues” cannot constitute a final and binding agreement. Goren v. Royal Investments, Inc., 25 Mass. App. Ct. 137 , 141 (1987). Price is not the only significant economic issue in the sale of real estate. Amount of deposit and whether and to what extent there will be a financing contingency, in particular, are as material as the price.

If, on the other hand, Donius argues that the Contract to Purchase (as opposed to the text messages) became the contract between the parties notwithstanding that it does not bear the signatures of the sellers, then his argument fails because the Contract to Purchase introduces significant material terms that Donius does not contend had been negotiated or accepted by the sellers before he chose to include them. While counsel for Donius argued at the hearing on this motion that all of the material terms added by Donius to the Contract to Purchase without any discussion were “customary” and therefore not necessary to negotiate, the Verified Complaint and the Hall Affidavit are notably devoid of any assertion that any of these additional terms had been discussed or were in fact so routine as to be customary. Where a preliminary writing (the text messages) is devoid of any mention of material terms introduced in a later writing (the Contract for Purchase), the new material terms not contemplated by the earlier writing will render the earlier writing unenforceable. See Blomendale v. Imbrescia, 25 Mass. App. Ct. 144 (1987) (introduction of new terms in purchase and sale agreement inconsistent with accepted offer to purchase rendered accepted offer unenforceable where earlier writing contemplated no contingencies). New terms added in a subsequent document with respect to the details of mortgage financing are an indication that the earlier document, in this case the text messages, “represented merely the parties' intent to negotiate further in the hope of coming to terms in a formal purchase and sale agreement on the specifics of a complex real estate transaction.” Walsh v. Morrissey, 63 Mass. App. Ct. 916 , 917 (2005).

Material terms not discussed or agreed upon in the text messages, which were proposed for the first time in the Contract to Purchase, include the deposit, the inspection contingency, the mortgage contingency, and the requirement for execution of a “broker standard purchase and sale agreement”.

The Deposit. Leaving aside the $1,000.00 deposit to bind the “Contract to Purchase”, which is contemplated by its own terms to be preliminary to the execution of a more comprehensive purchase and sale agreement, there is no mention in the text messages of the amount of the additional deposit to be paid upon execution of the purchase and sale agreement. Such a deposit, which generally will be put at risk by the liquidated damages clause in a purchase and sale agreement in the event of default by the buyer, is a material term. Neither the Verified Complaint nor the Hall Affidavit contains any assertion that the amount of the deposit, which is proposed in the Contract to Purchase to be just under ten percent of the purchase price, had been discussed, agreed to, or is so customary as to not require discussion, nor would such an assertion be proper, since the amount of a deposit on a nearly one million dollar sale is a material term to be negotiated by the parties, not imposed by the buyer on the seller.

The Inspection Contingency. Similarly, the inspection contingency clause added by Hall to the Contract to Purchase, also not negotiated or mentioned previous to its inclusion in the Contract to Purchase, provides not only that an inspection will be conducted, but that “[i]f the results are unsatisfactory to BUYERS, in BUYERS’ sole discretion,…” the buyer may terminate the contract. The court takes judicial notice that it is customary to include an inspection contingency, but there is no suggestion in the record that the parties agreed to the circumstances pursuant to which, following the inspection, the buyer would be entitled to terminate the contract. The clause as proposed in the Contract to Purchase is fairly characterized as the buyer’s first proposal, giving the buyer total discretion to terminate. Such a buyer-tilted clause is rarely the final result in an executed real estate contract, and there is no suggestion in the record that the sellers in this case agreed to such an unlimited, completely discretionary “out” for the buyer.

The Mortgage Contingency Clause. Again, the plaintiff fails to allege, other than by representations of counsel at argument, that the existence of a mortgage contingency clause and its details, which is not mentioned in the text messages, is so routine as to be a term that is not material and did not need to be negotiated by the parties. Mortgage contingency clauses are an important and generally negotiated term, especially in a “hot” real estate market, which plaintiff concedes is the case here. [Note 6] All other things (especially price) being equal, in a “hyper-competitive market with a plethora of cash buyers”, a buyer who does not insist on a mortgage contingency is more attractive to a seller than one who needs or insists on a mortgage contingency. For the plaintiff to suggest that sellers do not favor cash buyers, and therefore do not negotiate the inclusion or exclusion of a mortgage contingency clause, is to contradict his own allegations in paragraph 18 of the Verified Complaint, as well as the realities of the “hyper- competitive” real estate market he concedes prevails in Provincetown.

“Broker Standard Purchase and Sale Agreement.” In determining whether the writing offered by the plaintiff represents the agreement of the parties to be bound, “The controlling fact is the intention of the parties.” McCarthy v. Tobin, 429 Mass. 84 , 87 (1999). In McCarthy, the parties had agreed in a signed writing to execute “the applicable Standard Form Purchase and Sale Agreement recommended by the Greater Boston Real Estate Board…” The seller, Tobin, was bound by the earlier signing of an “Offer to Purchase” (the equivalent of the “Contract to Purchase” in the present case) because, as the SJC held, the Offer to Purchase contained all the material terms of the parties’ agreement, with any departures from the standard terms being “ministerial and nonessential terms of the bargain.” Id. at 87. In the present case, the plaintiff asks the court to determine that the parties intended to be bound by a set of documents (the text messages), which contemplated the signing of a Contract to Purchase, which in turn contemplated the signing of a “Broker Standard Purchase and Sale Agreement”, the terms of which are not disclosed in the record. The holding in McCarthy does not contemplate or justify such a vast leap into assumptions about what the parties intended on the basis of text messages agreeing to only price and closing date. In McCarthy, the Offer to Purchase signed by both buyer and seller demonstrated agreement on all material terms. By contrast, the plaintiff here introduces for the first time in the Contract to Purchase, a document that is not signed by the sellers or their agents, material terms necessary for the completion of the transaction, and asks the court to further assume that there are no additional material terms added or changed in the “Broker Standard Purchase and Sale Agreement”, the contents of which are not disclosed, and which, of course, have not been negotiated or signed by any party.

IV. There was a Failure of Consideration.

Donius concedes that no deposit was ever tendered to the sellers with the proposed Contract to Purchase. Although the document, if signed by the sellers, would include their acknowledgment of receipt of the $1,000.00 deposit, the Verified Complaint and the Hall Affidavit concede that on May 16, the date the document was transmitted to the sellers, only a digital image of the check for the deposit was transmitted with it. The Contract to Purchase, by its terms, was to be accepted by 7:59 P.M. on the date it was transmitted to the sellers, but if they had signed it, they would have been acknowledging receipt of a deposit that they had not in fact received. The buyer, Donius, would have been free to breach the agreement without fear of loss of the deposit. Where the buyer is thus not bound, the sellers cannot be bound. Failure to deliver the contemplated deposit renders the agreement unenforceable. See Blomendale v. Imbrescia, supra (restriction against cashing deposit check until execution of purchase and sale agreement rendered accepted offer to purchase unenforceable).

CONCLUSION

For the reasons stated above, the court finds and rules that the Verified Complaint is frivolous because (1) it is devoid of any reasonable factual support; (2) it is devoid of any arguable basis in law; and (3) it is subject to dismissal based on a valid Statute of Frauds legal defense. Accordingly, the defendants’ special motion to dismiss is ALLOWED.

G. L. c. 184, §15(c) further provides, “If the court allows the special motion to dismiss, it shall award the moving party costs and reasonable attorneys fees, including those incurred for the special motion, any motion to dissolve the memorandum of lis pendens, and any related discovery.”

Therefore, it is

ORDERED that the defendants are to file and request a hearing for a motion for costs and attorneys’ fees, supported by affidavits and other sufficient documentary support regarding costs and attorneys’ fees, consistent with the requirements of G. L. c. 184, §15.

It is further

ORDERED that upon a determination by the court regarding costs and attorneys’ fees, judgment is to enter DISMISSING the Verified Complaint with prejudice, and DISSOLVING the memorandum of lis pendens.

So Ordered.