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Haney v. Greenbaum, Nagel, Fisher & Paliotti, LLP

Superior Court of Massachusetts, Suffolk

April 9, 2018

Matthew HANEY
v.
GREENBAUM, NAGEL, FISHER & PALIOTTI, LLP

          File Date: April 12, 2018

          MEMORANDUM OF DECISION AND ORDER ON DEFENDANT’S MOTION TO FOR SUMMARY JUDGMENT

          Mary K. Ames, Justice Superior Court

          This action for legal malpractice arises from defendant Greenbaum, Nagel, Fisher & Paliotti, LLP’s (GNFP) representation of plaintiff Matthew Haney in connection with his purchase of a rooming house located at 277 Marlborough Street in Boston. Haney alleges that GNFP, and in particular Attorney Stephen Greenbaum, negligently arranged the purchase of 277 Marlborough through a non-profit entity, instead of a for-profit entity. GNFP now moves for summary judgment, contending that Haney’s claim for malpractice is time barred and that Haney cannot otherwise prove the claim’s essential elements For the reasons that follow, the Motion is ALLOWED.

         BACKGROUND

         Boston Aging Concerns-Young and Old United, Inc. (BAC-YOU) owned two buildings at 186 and 277 Marlborough Street, both of which operated under the oversight of its affiliate, Nuestra Comunidad Development Corporation (Nuestra) Nuestra’s mission, among other things, is to provide housing to people in underserved communities who are largely unable to find housing unless subsidized. Consistent with that mission, 186 and 277 Marlborough housed low-income individuals. 186 Marlborough had a low-income housing restriction that required it to be sold to a non-profit entity, while 277 Marlborough had no such restriction. At some point in 2008, BAC-YOU determined that it should sell both buildings to another nonprofit entity. Around this time, Haney contacted Nuestra to ask if 186 and 277 Marlborough were for sale and Nuestra advised him that BAC-YOU was soliciting offers from nonprofits.

         On February 2, 2009, Haney submitted an offer on behalf of his company, the Massachusetts Preservation Corporation (MPC), to purchase both buildings for $1.6 million. Several weeks later, on February 27, Haney submitted another offer to purchase 277 Marlborough alone for $650, 000. After receiving the offers, Nuestra requested information about MPC and Haney advised Nuestra that the purpose of MPC, which Haney described as a "newly-formed non-profit," was to engage in activities consistent with IRC § 501(c)(3) and G.L.c. 180, and that MPC’s main mission was to preserve affordable housing, open space, and historic buildings.[1] Haney assured Nuestra that MPC would be "very sensitive to the resident’s [sic] hardships and financial abilities," that the property would "be operated in the same manner and mission as [Nuestra], providing affordable housing to the underserved," and that new tenants would be found through Rosie’s Place. Joint Exhibit List (JE) Ex. 9. At the time Haney conveyed this information, MPC did not yet formally exist. The offers were not accepted.

         In June 2009, Haney sent an offer to BAC-YOU on behalf of MPC to buy 186 Marlborough for $650, 000, which stated "Buyer and Seller acknowledge that the Agreement shall cover the purchase and sale of both 186 and 277 Marlborough Street ... and that the closing under the Agreement shall be contingent on the sale of both properties." JE at Ex. 11. The offer was not accepted.

          On September 17, 2009 and October 8, 2009, Haney submitted offers for MPC to buy 277 Marlborough for $1, 055, 000 with an option to purchase 186 Marlborough for $100. On October 26, 2009, he submitted another offer for MPC to buy 277 Marlborough for $1.35 million, which did not include an option to buy 186 Marlborough. BAC accepted this offer. As part of the sale, MPC agreed to enter into a two-year affordable housing restriction.

         On October 27, 2009, Haney asked Attorney Stephen Greenbaum, a partner at GNFP, to draft Articles of Organization (Articles) for MPC. Two days later, Haney signed the Articles, under the pains and penalties of perjury, and filed them with the Secretary of the Commonwealth. The Articles identified MPC’s mission as: "To expand affordable housing opportunities for low-income persons or families, very low-income persons or families, and people with disabilities within the City of Boston as well as ... to conduct such other activities and programs in furtherance of the foregoing purposes as may be carried out by a corporation organized under [G.L.c.] 180 and described in [IRC § 1] 501(c)(3)[.]" JE at Ex. 17. Attorney Greenbaum listed himself as an MPC director in the Articles.

         At the time the sale for 277 Marlborough closed in December 2009, Haney was anticipating that MPC would be able to acquire 186 Marlborough in the near future. 277 Marlborough was subject to an $8, 000 per month mortgage, and Haney intended to use the income from 186 Marlborough to pay MPC’s mortgage for 277 Marlborough. This was his only strategy for paying the mortgage on 277 Marlborough at the time he purchased the building. MPC, however, was unable to acquire 186 Marlborough.

         In September 2011, the Massachusetts Attorney General’s Office (AG) sent Haney a letter, which advised Haney that it had been informed that MPC was deceptively promoting itself as a charity providing affordable housing in violation of G.L.c. 93A, § 2. The letter also noted that MPC had failed to register as a charity in violation of G.L.c. 12, § 8E. In response, Attorney Greenbaum sent a letter to the AG that stated "we disagree with your assumption that MPC is subject to the oversight of the Attorney General" and emphasized that MPC had never solicited or received charitable donations, nor received any tax exemptions or funding from the Commonwealth or the federal government. JE at Ex. 52.

         A few months later, on January 17, 2012, the AG sent Haney another letter advising that MPC was in violation of G.L.c. 12, §§ 8E and 8F because it had failed to register with the AG as a public charity and had not submitted the appropriate annual filings to the AG. The letter ordered MPC to cease and desist all activity until it was in compliance with Sections 8E and 8F, and informed Haney that a failure to comply with Sections 8E and 8F could result in civil penalties against him.

         At some point after the January 2012 letter, Attorney Greenbaum and Haney decided to file a complaint against the AG in this Court. On March 15, 2012, as they were in the process of drafting that complaint, Haney sent Attorney Greenbaum an email in which he asked: "Do you think the AG has legal oversight over MPC? Is MPC a public charity?" JE at Ex. 30. In response Greenbaum explained that:

The AG looks to the charter of the corporation, which sets out a charitable purpose ... The AG has taken the position that they can have oversight because of the charter, apart from whether there is any actual charity going on.
The law on this area is very limited, as all pertinent cases involve corporations trying to qualify as charities, and courts saying they aren’t. The principals set out in these cases is that merely because you are a c. 180 corporation does not make you a charity or subject to the AG’s oversight-there has to be more. I believe that we are on solid ground, but you need to remember that when we set this up, it was solely for the benefit of Nuestra’s comfort, and not because we believed that the AG would ...

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