Opinion
No. 11–P–1194.
2012-08-23
Jonathan KERR v. MENARD, MURPHY & WALSH, LLP, & another.
By the Court (SIKORA, CARHART & SULLIVAN, JJ.).
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The plaintiff, Jonathan Kerr, appeals from a judgment entered by a judge of the Superior Court in favor of the defendants, the law firm of Menard, Murphy & Walsh, LLP (MMW), and attorney John E. Coyne. The judge rested judgment upon two independent grounds. First, she allowed the defendants' motion for judgment upon the pleadings pursuant to Mass.R.Civ.P. 12(c), 365 Mass. 756 (1974), because the plaintiff's first amended complaint and the defendants' answer to it established a conclusive defense of issue preclusion. Second, she allowed the defendants' motion for dismissal pursuant to Mass.R.Civ.P. 12(b)(3), 365 Mass. 755 (1974), because the first amended complaint established that the plaintiff's action in Hampden Superior Court failed to comply with the requirement of G.L. c. 223, § 1, confining proper venue to a county in which one or more of the parties resides or maintains a usual place of business. For the following reasons, we affirm the judgment. Background. The following facts emerge from the pleadings as undisputed. As an element of the pleadings, we consider the defendants' enlargement of their answer by attachment of the findings and rulings of a magistrate judge of the United States District Court of Massachusetts at the conclusion of a three-day bench trial generated by the same transaction at issue here. No appeal was taken from the judgment in the United States District Court. The Superior Court motion judge was entitled to rely upon the sixty-two page memorandum and order of the Federal magistrate as material incorporated by reference and attached to the defendants' answer. See Mmoe v. Commonwealth, 393 Mass. 617, 620 (1985); Schaer v. Brandeis Univ ., 432 Mass. 474, 477 (2000). Additionally, this court may take judicial notice of the docket entries of the Federal courts and of the contents of papers filed there. Howe v. Prokop, 21 Mass.App.Ct. 919, 920 (1985). On appeal here, no question has arisen over the accuracy of the copy of the Federal decision in our record.
1. Facts. This dispute arose from protracted negotiations and one preliminary contract during the period of May through November, 2006, for the sale from Terry Vince and Sybil Vince to a corporation sustained by Jonathan Kerr of the stock of corporations owning two Best Western Hotels, one in Keene, New Hampshire, and one in West Springfield, Massachusetts. The negotiations ultimately failed to achieve an agreed sale.
In the first stage of negotiations, Kerr and the Vinces (with the involvement of brokers) executed a preliminary contract entitled “Letter of Intent” (the May LOI). The May LOI encompassed the purchase of stock of corporations owning the hotels in Keene and West Springfield, as well as a third hotel in Albany, New York. The Vinces signed the May LOI. Kerr signed the May LOI as an officer of BMG Holdings Corporation (BMG) as the “Buyer.”
In addition to the Vinces as sellers, two other individuals holding ownership of stock in the Albany hotel signed the May LOI.
The terms of the May LOI set the purchase price for the stock interests in the three hotels at $25.72 million. It called for the parties to exercise good faith efforts for the achievement of a purchase agreement by close of business on June 20, 2006. It required the delivery of a “$150,000 deposit” to be held by the law firm of MMW until the time of full execution of a purchase agreement and then to be applied in accordance with the terms of such a purchase agreement. The May LOI also permitted the “Buyer” to recover the deposit if a purchase agreement did not result from the parties' continuing efforts. It allowed the “Buyer” to terminate the May LOI and to recover the deposit. Meanwhile the sellers were free to continue to solicit and to negotiate the sale of their stock to other potential buyers.
Kerr signed the May LOI as a representative of BMG Holdings Corporation (BMG). On May 24, he signed a check for the $150,000 deposit drawn on the account of Metro Capital Partners, LLC (Metro Capital), and payable to the order of “Menard, Murphy & Walsh Escrow Agent.” The check cleared and posted to the account of MMW on May 30, 2006.
Financing efforts and continuing negotiations did not achieve a purchase agreement by close of business on June 20, 2006. Kerr did not request the return of the deposit of $150,000 at that time. He eventually requested its return on September 13, 2006.
Meanwhile, the parties continued to attempt to achieve a deal. They undertook a second letter of intent in September (September LOI). Kerr executed the document. It covered the sale of stock controlling only the Keene and West Springfield hotels; the new total price was $15,320,000. It provided for an additional deposit of $100,000 by the buyer. It set a date of October 15, 2006, for closure of the deal. Kerr executed another check, again on the account of Metro Capital Partners, LLC. He signed the September LOI as “president” of BMG as buyer. However the Vinces did not sign the new LOI. As a result, two days later (September 22), Kerr stopped payment on the $100,000 check. No purchase agreement or sale resulted by close of October 15. Nonetheless, the parties continued with negotiations until approximately November 17, still unsuccessfully. Thereafter, the Vinces sold their stock to other buyers.
2. Procedural history. When the Vinces did not return the $150,000 deposit to Kerr, he brought an action for its recovery in the United States District Court in Boston. He pleaded five counts against the Vinces and related corporations: (1) breach of contract; (2) conversion; (3) unjust enrichment; and two counts for relief denominated as causes of action under the headings of (4) declaratory judgment, and (5) injunctive relief.
The Vinces brought counterclaims irrelevant to our litigation.
By detailed findings and rulings, the Federal magistrate judge determined (1) that Kerr lacked individual or personal standing to sue for the return of the $150,000 deposit because, under the terms of the May LOI, it belonged to the “buyer,” BMG; (2) that he lacked standing also as the sole shareholder of BMG and as the president of the corporation because the corporation continued in existence and precluded his status as a successor in interest; (3) that no equitable piercing of the corporate veil assisted him in these circumstances because he was not the victim of any fraudulent or unfair conduct by a third party; and (4) that he lacked any ownership interest necessary for assertion of a claim of conversion of the $150,000 because that payment check drew upon the account of Metro Capital, another separate corporate entity.
The magistrate judge rejected Kerr's remaining or third substantive claim of unjust enrichment. It rested upon allegations that he had worked effectively as a partner to the Vinces to achieve a successful deal, that they had benefited greatly from his efforts, and that he was entitled to remuneration for those efforts. The magistrate judge effectively found that Kerr had been working as an independent bargainer, and not as benefactor of the Vinces.
Several passages encapsule the central finding and ruling of the Federal decision.
“Plaintiff failed to offer any evidence of an agreement between and among plaintiff, the Vinces and either BMG or Metro Capital providing plaintiff with a direct ownership interest in the funds [footnote omitted]. To the contrary, the May LOI directs the return of the $150,000 to BMG....
“Plaintiff also did not demonstrate an individual right to the funds by way of showing an agreement between plaintiff and either BMG or Metro Capital. This court declines to imply such a contract in this circumstance where there has been no evidence offered.”
The judge summarized, “As the trier of fact and weighing all of the evidence in the record, this court finds [that] it does not entitle plaintiff individually to recover the $150,000” (emphasis in original).
Finally, the findings and rulings of the magistrate judge establish that, at all relevant times, Kerr knew that the law firm of MMW and particularly partner John Coyne were serving as escrow agents and stakeholders of the $150,000 deposit. In particular, the Federal complaint alleged, “By failing to return funds totaling $150,000.00 which [were] paid to the Defendant[s]' agents in anticipation of Kerr's acquisition of [the desired stock,] the Defendants have converted funds which do not belong to them or their agents.” Consequently, Kerr's Federal court complaint itself characterizes MMW and necessarily Coyne as the “agents” of the defendant Vince parties.
The record never tells why BMG, as the apparent originator of the $150,000 deposit, did not sue for its recovery.
Analysis. In the present action Kerr's Superior Court first amended complaint charges MMW and Coyne with wrongful retention of the $150,000 deposit upon the following theories: (1) conversion by Coyne; (2) conversion by MMW; (3) fraud by Coyne; (4) G.L. c. 93A wrongdoing by Coyne; (5) G.L. c. 93A wrongdoing MMW; and (6) breach of fiduciary duty by both Coyne and MMW.
1. Issue and claim preclusion. The doctrine of claim preclusion makes a valid, final judgment conclusive on the parties to that judgment and on persons and entities in privity with those parties. It bars further litigation of all matters which the parties did submit to adjudication in the first action or which the parties could have submitted to adjudication in that action. Heacock v. Heacock, 402 Mass. 21, 23 (1988), citing Franklin v. North Weymouth Coop. Bank, 283 Mass. 275, 279–280 (1933). Preclusion applies even though a claimant may in the second instance present new evidence, new theories, and new prayers for ultimate relief. Heacock v. Heacock, supra at 23–24. See Bagley v. Moxley, 407 Mass. 633, 638 (1990); Jarosz v. Palmer, 436 Mass. 526, 530–531 (2002); Boyd v. Jamaica Plain Co-op. Bank, 7 Mass.App.Ct. 153, 163 (1979); Massaro v. Walsh, 71 Mass.App.Ct. 562, 565–566 (2008).
In appropriate circumstances, complete mutuality of the parties is not mandatory. A nonparty may use collateral estoppel or issue preclusion defensively against the party to the original action who had a full and fair opportunity to litigate the issues in question earlier against that nonparty. Martin v. Ring, 401 Mass. 59, 61 (1987). See Rodriguez–Garcia v. Miranda–Miran, 610 F.3d 756, 770–771 (1st Cir.2010) (same), cert. denied, 131 S.Ct. 1016 (2011).
Finally, the doctrine of issue preclusion operates between Federal and State courts. “Simply stated, if a set of facts gives rise to a claim based on both State and Federal law, and the [claimant] brings the action in a Federal court which had ‘pendent’ jurisdiction to hear the State claim but the [claimant] declines to assert such State claim, he may not subsequently assert the State ground in a State court action.” Anderson v. Phoenix Inv. Counsel of Boston, Inc., 387 Mass. 444, 450 (1982). Accord Mancuso v. Kinchla, 60 Mass.App.Ct. 558, 565–572 (2004).
These precedents and their purposes converge upon the present case. Issue preclusion applies. The clear and acknowledged agency relationship between the Vince parties and MMW and Coyne established a relationship of privity. Even if these parties did not have a relationship of privity, nonmutual defensive issue preclusion would apply because Kerr had a full and fair opportunity to litigate his essential claim of entitlement to the $150,000 deposit against MMW and Coyne as the escrow agents and stakeholders of that alleged interest as a pendent State law claim against MMW and Coyne in the Federal suit. He failed to do so. He has suffered no unfairness. The policy of claim and issue preclusion serves the important purpose of efficiency (avoidance of unnecessary duplicative expenditure of time, money, and effort on the part of both the parties and the courts) and the purpose of consistent results (the avoidance of contradictory results for similarly situated parties).
2. Improper venue. The Superior Court motion judge was entitled independently to dismiss the action for improper venue within the meaning of Mass.R.Civ.P. 12(b)(3). General Laws c. 233, § 1, requires venue in a county in which one or more parties reside or do business. The opening paragraph of Kerr's Superior Court amended complaint recites his residence in Litchfield, Connecticut, and the business addresses of MMW and attorney Coyne in Boston, Suffolk County, Massachusetts. He should not have commenced this action in the Superior Court for Hampden County.
Fees and costs. The present appeal is unmeritorious but not so frivolous within the meaning of Mass.R.A.P. 25, as appearing in 376 Mass. 949 (1979), as to warrant the sanction of an assessment of appellate attorney's fees. However, like the motion judge, we believe that the persistent procedural defects of the litigation warrant the imposition of double costs. Pursuant to Mass.R.A.P. 25, the defendants/appellees, MMW and Coyne, are entitled to an award of double their appellate costs or expenses.
Judgment affirmed.