Date: 07-12-2015

Case Style: JESSICA RAMOS & others1 vs. INTERNATIONAL FIDELITY INSURANCE COMPANY

Case Number: 13-P-1305

Judge: RUBIN, J.

Court: Supreme Judicial Court of Massachusetts

Plaintiff's Attorney: Peter Slepchuk

Defendant's Attorney: Thomas F. McGuire & Mike Serduck

Description: The plaintiffs commenced these actions against
the defendant, International Fidelity Insurance Company (IFIC),
to recover cash collateral and certain bail bond insurance
premiums collected from each of them by IFIC's agent William
Fiore, who is now deceased. On cross motions for summary
judgment, the motion judge allowed the plaintiffs' motions on
their counts alleging breach of contract, and also allowed
IFIC's motions on the counts alleging a violation of G. L.
c. 93A. The plaintiffs, with the exception of Ashley M. Keyes,
appeal from the dismissal of their 93A claims, and the defendant
appeals from the allowance of the plaintiffs' motions on the
breach of contract claims. The defendant also appeals from the
calculation of prejudgment interest.
Background. William Fiore worked as a bail bondsman in
Hampden and Berkshire Counties. It is undisputed that Fiore
acted as an agent for IFIC, a New Jersey corporation. IFIC is a
successor to Atlas Bonding Agency with whom Fiore had an "Agency
Contract." While that agreement was in effect, Fiore was
authorized to act as Atlas's -- and then IFIC's -- agent for the
soliciting and writing of bail bonds. Fiore had been approved
and registered by the Administrator of Bail as a professional
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bondsman for the Commonwealth of Massachusetts and was
authorized to act as an agent for the defendant. That approval
and registration were in effect at all times relevant to this
case.
Fiore was supplied by IFIC with powers of attorney and was
authorized to issue bail bonds on IFIC's behalf. He sold bail
bonds to each of the plaintiffs. On each plaintiff's bond, IFIC
was the named surety. Each bond bore the signature of the given
plaintiff, along with that of Fiore, who crossed out the word
"Surety" and signed as "agent for International Fidelity Ins.
Co."
Under the terms of the bail underwriting agreement between
IFIC and Fiore, Fiore was to collect and deliver to IFIC
collateral and to collect bond premiums, some of which were
remitted to IFIC. Cash collateral received on behalf of IFIC
was required to be "held in a separate cash collateral account
and not [to] be commingled with other funds." Each of the
plaintiffs in this action utilized Fiore's services as a bail
bondsman to obtain either his own release or the release of a
third party on bail, from Hampden County Superior Court, Holyoke
District Court, Springfield District Court, or Berkshire County
Superior Court. Each paid a premium and each posted cash
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collateral.3 Typically, upon receipt of a premium and collateral
from the plaintiffs, Fiore wrote on the back of his business
card "received $[amount] dep. [presumably deposit] from
[plaintiff]. To be returned when case is over." He then dated
and signed this receipt.4
In each case Fiore instructed the plaintiff that ten
percent of the total bond amount constituted a nonrefundable
cash bail bond insurance premium payment. This premium was
charged in violation of rule 16 of the Superior Court Rules
Governing Professional Bondsmen, which prohibits the charging of
excessive or exorbitant fees, and provides that "any fee which
exceeds in amount or value five percent of the amount of the
recognizance when the bondman has received security . . . shall
be deemed excessive or exorbitant."
In the case of each plaintiff, except Hassan Ali, at the
end of the underlying criminal case, the plaintiff sought return
of his or her collateral. In each case, that plaintiff
discovered that Fiore had died, not having deposited any of the
collateral in escrow, and leaving an insolvent estate. In the
3 Some also provided additional noncash collateral.
4 There are seven plaintiffs in these consolidated cases. Five of the plaintiffs retained their receipts from Fiore, while two -- Hassan Ali and David Hale -- stated in affidavits that they had either lost or misplaced their receipts. The difference is immaterial to the issues presented in this appeal.
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case of Hassan Ali, the defendant on whose behalf Ali purchased
the bail bond defaulted. As a consequence, Ali's payments to
Fiore totaled $50,000, the full bail forfeiture amount. Fiore
failed to pay this money over to the court, which ultimately
demanded payment from IFIC; IFIC eventually fully satisfied the
bail forfeiture amount, which IFIC negotiated down to only
$25,000. Despite obtaining such reduction in the forfeiture
amount, IFIC did not return the excess $25,000 (over the actual
bail forfeiture amount) Ali had paid to its agent Fiore.
Each plaintiff except Keyes sent a timely demand letter, a
prerequisite to bringing an action under G. L. c. 93A, § 9,
asserting among other things that Fiore was IFIC's agent and
that IFIC was liable to the plaintiff under established
principles of agency law. Each received a reply from IFIC
stating that Fiore "was an independent businessman who had a
contractual relationship with" IFIC, that the "relationship was
defined by this contract," and that IFIC therefore was not
liable for his wrongdoing. This response amounted to a denial
of an agency relationship, the contours of which are defined not
only by contract, but by common and statutory law. Each
plaintiff subsequently brought suit against IFIC. These suits
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were consolidated by the Superior Court.5 Each claimed a
violation of G. L. c. 93A and a breach of contract.6
The Superior Court judges' rulings had three components
that are the subject of this appeal. First, the judge who ruled
on the motions for summary judgment allowed the plaintiffs'
motions for summary judgment on their breach of contract claims,
concluding that Fiore was an agent of IFIC when he entered into
agreements with the plaintiffs, as evidenced by IFIC's granting
of a power of attorney. The judge determined that IFIC was
vicariously liable for Fiore's acts. The judge ruled that IFIC
was liable to the plaintiffs for the amounts wrongfully
appropriated by Fiore, as well as the premium overcharges (in
excess of five percent) and the amount of interest that would
have accrued on the plaintiffs' money. The judge also ruled
that Ali should recover $25,000, the amount that exceeded what
IFIC actually paid into court. IFIC appeals from this ruling.
Second, the motion judge granted IFIC's motion for summary
judgment on the plaintiffs' G. L. c. 93A claims. The motion
5 Ramos, Ortiz, Feliciano, Lozada, and Ali filed a complaint on September 2, 2010, while Keyes filed a complaint on November 17, 2010, and Hale filed a complaint on January 3, 2011. The Superior Court consolidated the plaintiffs' cases on February 10, 2011, but separate docket numbers were retained, and separate judgments entered in the three cases.
6 The plaintiffs also brought claims under G. L. c. 176D. They have not appealed from the allowance of IFIC's motion for summary judgment on these claims.
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judge analyzed only IFIC's wrongful denial of liability in
response to the plaintiffs' demand letters and concluded that
the element of causation (that the unfair or deceptive act
actually cause harm to the plaintiffs) was lacking. All the
plaintiffs except Keyes, who did not send a demand letter,
appeal from this ruling.
Third, after the motion judge initially entered orders on
the summary judgment motions, a second judge of the Superior
Court held a hearing on November 6, 2012, to determine the date
from which interest would be calculated on the plaintiffs'
breach of contract claims. The second judge ruled that each of
the contracts was breached when Fiore took additional security
over the lawful amount and held that interest began to run from
that date; final judgments entered accordingly. IFIC appeals
from this ruling.
Discussion. 1. The plaintiffs' appeal on the G. L. c. 93A
claims. The judge concluded that the plaintiffs could not
proceed on their G. L. c. 93A claims because the defendant's
responses to the plaintiffs' demand letters -- in which IFIC
asserted that Fiore was an independent businessman -- did not
cause the plaintiffs harm. "[C]onduct in disregard of known
contractual arrangements and intended to secure benefits for the
breaching party constitutes an unfair act or practice for c. 93A
purposes." Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass.
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451, 474 (1991) (internal citation and quotation marks omitted).
As explained infra, IFIC had a contractual obligation to return
the plaintiffs' collateral due to its agency relationship with
Fiore. IFIC's agent Fiore breached the contracts with the
plaintiffs by failing to return their collateral. If the jury
were to find that the response letters from IFIC falsely denying
the agency relationship were sent when IFIC knew that it had an
obligation because of that relationship to return the
plaintiffs' collateral, and in an attempt to cause the
plaintiffs to decline to enforce their rights, a jury could find
such conduct to constitute an independent c. 93A violation.
Nonetheless, the judge was correct that there was no evidence
here that this conduct by IFIC injured the plaintiffs. They
were not misled into failing, before the expiration of the
statute of limitations to file claims for the underlying
damages, for example, nor is this a case under G. L. c. 176D,
§ 3(9)(f), which requires a defendant to make a prompt, fair,
and equitable settlement offer when liability has become
reasonably clear, nor have the plaintiffs provided any other
evidence in the record of injury caused them by the response
letters sent by IFIC. See, e.g., Van Dyke v. St. Paul Fire &
Marine Ins. Co., 388 Mass. 671, 676 (1983). Consequently,
summary judgment on the c. 93A claim was correctly entered in
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favor of the defendant to the extent it was based on the
defendant's response to the demand letters.
The plaintiffs, however, also argue that IFIC is
vicariously liable under G. L. c. 93A for the overcharges
themselves. We agree with the major premise of this argument -
that the overcharge in each case not only violated the Superior
Court rules, but independently was an unfair and deceptive act
or practice in violation of c. 93A. Compare Casavant v.
Norwegian Cruise Line Ltd., 460 Mass 500, 504 (2011) (holding a
violation of certain regulations also violates c. 93A).
IFIC's primary argument in response is that this theory was
not put forward below. But while the judge did not address the
matter, each c. 93A count of the complaint on which summary
judgment is being appealed alleges as to IFIC that the
mishandling of the security funds (and collateral) and the
excess premium charges were unfair and deceptive acts or
practices. These allegations are reiterated in the plaintiffs'
demand letters; the letters also assert that "well established
agency and vicarious liability principles" render IFIC liable.7
Likewise, each appealing plaintiff's motion for summary judgment
includes the statement that "Mr. Fiore's practice of charging 10
7 Keyes, again, is not appealing from the summary judgment on her c. 93A count.
10
percent premiums contrary to law [was an] unfair and deceptive
act[.]" The issue was adequately preserved.
The defendant argues in the alternative that vicarious
liability under G. L. c. 93A is unwarranted here.8 It is
undisputed that Fiore was IFIC's agent, acting with actual
authority provided by IFIC's agreements with him. IFIC argues
it should nonetheless not be held liable because (1) Fiore's
actions were not motivated by a desire to benefit it, and (2) it
was wholly ignorant of such actions.
"[A] principal," however, "may be liable for the fraud of
an agent who is acting entirely for his own purposes but who, to
the defrauded party, is apparently acting for the principal."
Restatement (Second) of Agency § 282 comment (f) (1957). "A
principal who puts a servant or other agent in a position which
enables the agent, while apparently acting within his authority,
to commit a fraud upon third persons is subject to liability to
such third persons for the fraud." Id. at § 261. See id. at
§ 262 ("A person who otherwise would be liable to another for
the misrepresentations of one apparently acting for him is not
relieved from liability by the fact that the servant or other
agent acts entirely for his own purposes, unless the other has
8 Vicarious liability means "liability imposed upon one person because of the act or omission of another, such as his employee." Ballentine's Law Dictionary 1342 (3d ed. 1969).
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notice of this"). See also New England Acceptance Corp. v.
American Mfrs. Mut. Ins. Co., 373 Mass. 594, 597 (1977), aff'g.
4 Mass. App. Ct. 172, 180 (1976) (adopting this rationale, as
spelled out in the Appeals Court's decision). These principles
apply to the circumstances here, even were we to accept IFIC's
characterization of events (which of course is not how we
proceed in this appeal from allowance of IFIC's motion for
summary judgment). These principles apply in actions under
G. L. c. 93A, as well as in common law tort cases, see Kansallis
Fin. Ltd. v. Fern, 421 Mass. 659, 671-672 (1996), and liability
for multiple damages under c. 93A may be imposed upon a
principal corporation with no knowledge of its agent's
wrongdoing, "because of the knowing and wilful acts of [its]
agent[]." Id. at 673.
The case of Cranston v. Healer Motors, Inc., 358 Mass. 806
(1970), on which IFIC would rely, does nothing to assist it. In
that fraud case, the defendant car dealership was not
vicariously liable for "an exchange" by one of its salesman "of
two cars not owned by the defendant on premises unconnected with
the defendant." Ibid. As the court there explained, "[t]he
salesman's authority extended only to sales made in the usual
course of business, which would not include an exchange of two
cars not owned by the defendant on premises unconnected with the
defendant." Ibid. Here, Fiore's entry into contracts for the
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sale of bail bonds was well within his actual authority. The
allowance of the defendant's motion for summary judgment with
respect to the plaintiffs' c. 93A counts therefore is reversed,
and the case is remanded with instructions to allow the
plaintiffs' motion with respect to the plaintiffs' c. 93A claims
stemming from Fiore's illegal overcharging. Any damages and
attorney's fees pertaining to these claims will be determined on
remand.
2. IFIC's appeal: the contract claims. A. Summary
judgment.
IFIC's only argument in support of reversal of the judge's
allowance of the motions for summary judgment on the plaintiffs'
contract claims is that under the agency principles applicable
to fraud by an agent, it is not liable for Fiore's conduct.
This argument misses the mark in two respects.
First, as described above, under agency principles, IFIC is
liable for the acts of its agent in this case. Second, these
are not in any event claims for fraud, they are claims for
breach of contract -- so the question is not one of vicarious
liability, but only whether the principal, IFIC, is bound by the
terms of the contracts entered into by its agent. It seems
clear that the entry into contracts for bail bonds issued by
IFIC is within the scope of the authority granted Fiore, and so
IFIC is bound by his signature, but we need not rule
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definitively on the issue because IFIC has not argued to the
contrary, and any such claim therefore has been waived.
B. Prejudgment interest. In a contract case, the
prevailing party is entitled to prejudgment interest. See G. L.
c. 231 § 6C. If the prevailing party establishes the date of
the breach or demand, it is entitled to interest beginning at
that date. Ibid. It is the plaintiff's burden to
satisfactorily establish the date of breach or demand. Striar
v. American Med. Intl., 45 Mass. App. Ct. 87, 104-105 (1998)
(affirming calculation of interest from date of suit). If the
plaintiff fails to do so, interest runs "from the date of the
commencement of the action." G. L. c. 231 § 6C, as appearing in
St. 1993, c. 110, § 224.
To determine the date of the breach of each contract, we
must determine what the terms of the contracts are. This is
easier said than done. The primary evidence of the agreement
between each plaintiff and Fiore is the cursory statement on the
back of his business card stating that the collateral was "to be
returned when case is over." Obviously this brief entry does
not contain all the terms of the contract. Some may be inferred
from the bail bonds themselves, which detail the surety's
commitment to the Commonwealth that the criminal defendant will
appear and which detail what constitutes a default. In the
circumstances of the case, the other terms of the contract must
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be implied in order to effectuate the underlying intention of
the parties. Bernard v. Cameron & Colby Co., 397 Mass. 320,
321-322 (1986). See Situation Mgmt. Sys., Inc. v. Malouf, Inc.,
430 Mass. 875, 878 (2000) ("[T]o create an enforceable contract,
there must be agreement between the parties on the material
terms of that contract, and the parties must have a present
intention to be bound by that agreement. . . . It is not
required that all terms of the agreement be precisely specified,
and the presence of undefined or unspecified terms will not
necessarily preclude the formation of a binding contract").
The motion judge concluded that the contract in this case
was breached when Fiore charged each plaintiff a premium of
twice the maximum lawful rate. The plaintiffs' affidavits,
however, show that they agreed to pay that unlawful premium.
While that term certainly was not enforceable, and might have
rendered the contract voidable, the plaintiffs cite no authority
stating that the inclusion of such a term in a contract amounts
to a "breach" of the very contract in which it is included.
Alternatively, the plaintiffs argue that Fiore's failure to
put their cash collateral in escrow violated the contract. We
have been pointed to no statute or regulation requiring the use
of an escrow account. And, while the contract between IFIC and
Fiore required the use of one, it also states that such funds
are held for the benefit of IFIC. The plaintiffs do not argue
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that they are third-party beneficiaries of that contract, and we
therefore express no opinion on the question. Obviously the use
of escrow would seem to be prudent, but in the absence of
further legislative or regulatory action requiring it, we do not
think the plaintiffs have shown that failure to place their cash
collateral in escrow violated the terms of their own contracts
with IFIC, entered into through its agent Fiore.
We may assume without deciding that it is an implied term
of each contract that the plaintiff's collateral would not be
converted to the use of the surety's agent. However the
plaintiffs have not provided sufficient evidence for a court to
determine the exact dates on which Fiore converted the property
to his own use.
Finally, then, except with respect to plaintiff Ali,
discussed separately below, the earliest date upon which the
plaintiffs have shown breach of each contract was the date on
which Fiore (or his estate) failed to return the funds upon each
plaintiffs' satisfaction of the terms of his or her bail bond --
what the writing signed by Fiore called "the end of the case."
Because the date each plaintiff's terms of bail was satisfied is
reflected in the evidence, such dates are the earliest
appropriate dates of breach to be used in calculating
prejudgment interest with respect to each contract (except
Ali's). On that date, the collateral should have been returned
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to each plaintiff though it was not. The dates vary for each
plaintiff: Ramos: October 13, 2009; Ortiz: January 31, 2008
(for a first bail bond contract) and October 13, 2009 (for a
second); Feliciano: May 20, 2008; Lozada: May 8, 2008; Keyes:
January 9, 2009; and Hale: May 27, 2010.
C. Hassan Ali. Ali's case presents some additional
wrinkles. The overcharging for premiums, while a c. 93A
violation with respect to Ali as well as the other plaintiffs,
did not amount to a breach of contract. And, because the
criminal defendant for whom he purchased the bond, Sol Oritz,
defaulted, Ali was not entitled to a return of collateral –- so
failure to return his collateral also was not a breach of
contract.
An implied term of Ali's contract with IFIC made through
its agent Fiore, however, was that collateral would be taken to
the extent necessary to pay the amount of the bail forfeiture
funds that the surety would be required to pay to the
Commonwealth upon Solis Ortiz's default -- and no more. Fiore
collected money from Ali several times: initially, Ali paid
Fiore $10,000, $5,000 of which was a nonrefundable premium
(although $2,500 of this premium was illegal); Ali also signed
documents giving Fiore a mortgage on property Ali owned through
a corporation. After the default, Ali paid Fiore $5,000 to
delay foreclosure on his property. Ali then refinanced the
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property, generating income sufficient to provide Fiore with a
$36,500 check (with $1,500 of that amount ostensibly covering
Fiore's expenses). All told, then, Fiore collected $51,500 from
Ali, although Ali excludes the last $1,500 from his claim,
asserting that the relevant amount he paid was $50,000. Ali's
claim is that he is entitled to the return of his $25,000
overpayment, because IFIC ultimately negotiated the bail
forfeiture amount downward to $25,000.
We agree with Ali and the motion judge: IFIC is bound to
return $25,000 to Ali from the amount collected by its agent
Fiore on its behalf. To be sure, it appears that Fiore did not
pay any of the money over to the defendant. Nonetheless,
Fiore's breach of his contract with IFIC does not defeat Ali's
claim: Ali agreed to allow his collateral to be used to satisfy
the Commonwealth in the event of a default. He did not agree to
allow the balance of his collateral to be kept by IFIC if the
default amount was reduced. That IFIC's agent kept the money
Ali paid rather than turning it over to IFIC for use in
satisfying the Commonwealth may have given IFIC a cause of
action against the agent or his estate. But it did not change
the terms of IFIC's agreement with Ali who bears no
responsibility for limiting the harm done IFIC by Fiore.
Here, the Superior Court accepted a payment of $25,000 in
satisfaction of IFIC's obligation on the bail bond. IFIC, whose
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agent collected $50,000 from Ali, must return the $25,000 Ali
requested because it constitutes an amount in excess of that
required to satisfy IFIC's obligation on the bail bond. The
failure to return that $25,000 amounts to a breach of contract,
and, given IFIC's knowledge of its agency relationship with
Fiore, to a violation of G. L. c. 93A. Prejudgment interest on
Ali's contract claim should run from the date on which Ortiz's
bail was reduced from $50,000 to $25,000.
Conclusion. In the case of Ashley M. Keyes vs.
International Fidelity Insurance Company (No. HDCV2010-1038),
the portion of the judgment designating the date upon which
statutory interest begins to run is vacated, and an amended
judgment shall enter with the date of January 9, 2009, as the
date for computing statutory interest. In all remaining
respects, the judgment is affirmed.

Outcome: In the cases of Jessica Ramos vs. International Fidelity
Insurance Company (No. HDCV2010-792) and David Hale vs.
International Fidelity Insurance Company (No. HDCV2011-4), the
portions of the judgments setting forth the amount of damages
for each breach of contract claim are affirmed. The remaining
portions of the judgments are vacated for further proceedings
consistent with this opinion.

Plaintiff's Experts:

Defendant's Experts:

Comments: