Opinion
14-P-503
12-02-2015
GAYLE RICHARDSON, administratrix, & another v. DANA E. CASHER & others.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008). MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The defendants, attorneys Leonard Krulewich and Dana E. Casher and their law firm, appeal from so much of a judgment of the Superior Court as ordered them to pay the plaintiffs, United Policyholders (UP) and the estate of George E. Richardson, on counts 1 and 2 of their amended complaint, as third-party beneficiaries of an "allocation agreement" executed by Casher and her clients, Juan Nunez; Stefano, Judith, Melita, and Athena Picciotto; and Foreign Car Center, Inc. For the reasons that follow, we reverse.
The remainder of the judgment was in favor of the defendants; the plaintiffs have not filed a cross appeal.
We shall refer to Nunez, Foreign Car Center, Inc., and the Picciotto family as the "Picciotto parties."
Background. On behalf of the Picciotto parties, Casher successfully negotiated a $9,000,000 settlement with Travelers Indemnity Co. (Travelers) to resolve underlying litigation, including two civil actions, one commenced in 1983 and one commenced in 1994. Several attorneys had previously represented the Picciotto parties and had liens on the underlying litigation. The settlement agreement with Travelers required the attorneys to release their liens before Travelers paid the $9,000,000.
After reaching the settlement with Travelers but before Travelers paid any money, Casher and the Picciotto parties executed an allocation agreement through which they agreed how to allocate and disburse the settlement proceeds. The agreement first provides that the settlement proceeds "shall be allocated as follows: $4,000,000 shall be deemed to be settlement of 83-740 and $5,000,000 shall be deemed to be settlement of 94-2155." Next, the agreement provides that "so as to accommodate the needs of all parties hereto, anticipating that there will be a delay and, perhaps, an adjustment (due to the claims of various lienholders on the settlement of 83-740) in the disbursement of the 83-740 settlement . . . [u]pon the receipt of payment of the $5,000,000 settlement of 94-2155," disbursements shall be made of $1,900,000 to Juan Nunez (38 percent), $1,900,000 to the Picciotto family (38 percent), and "$1,200,000*" to Casher for legal fees (24 percent). The asterisk to the Casher distribution, admittedly in Casher's handwriting, provides for payment of $150,000 to George Richardson and $150,000 to UP. The payments to Richardson and UP each represent 12.5 percent of the distribution to Casher.
The allocation agreement specifically provides that its purpose is to settle any and all claims between Casher and the Picciotto parties relative to allocation of the settlement proceeds anticipated from the performance of the Travelers settlement agreement "or any amendment to such [s]ettlement [a]greement as may hereafter be executed."
The agreement further provides that "[u]pon receipt of further disbursements of the balance of the Settlement Proceeds for 83-740,*" disbursements shall be made of $1,100,000 to Juan Nunez (27.5 percent), $2,100,000 to the Picciotto family (52.5 percent), and "$800,000*" to Dana E. Casher "for legal fees" (20 percent). Again the Casher award contains an asterisk pursuant to which Casher is to pay Richardson and UP each $100,000. There is an asterisk with a circle which appears to pertain to the disbursement of the entire settlement proceeds for 83-740, which provides that "[i]n the event that less (or more) than $4,000,000 shall be received after resolution of the interpleader action, the amount received shall be disbursed pro-rata based upon the percentages represented by these figures." This provision suggests that the parties to the allocation agreement were aware that an interpleader action was a distinct possibility and also suggests that they anticipated it would involve only $4,000,000 of the settlement monies.
George Richardson was an attorney who commenced the 1983 action on behalf of the Picciotto parties and even after successor counsel took over, continued to provide legal advice to the Picciottos until his death. The judge found that he was a third-party beneficiary of the allocation agreement but was unaware of its existence until 2006.
UP is a charitable organization which focuses on providing amicus briefs in matters promoting coverage for insurance policy holders. UP successfully identified a basis for Travelers's coverage of the Picciotto parties' claims in the underlying litigation. UP does not charge for its legal services and although it sometimes receives donations from grateful parties, UP did not expect to be compensated for the work it did on behalf of the Picciotto parties. The judge found that UP was a third-party beneficiary of the allocation agreement and that it, too, was unaware of the agreement until 2006.
When presented with the allocation agreement, Travelers rejected it outright. In addition, the attorneys refused to release their liens. The settlement agreement with Travelers, therefore, was amended to provide, in pertinent part, that Travelers would (i) pay $500,000 to Casher, as attorney for the Picciotto parties, and (ii) file an interpleader action and pay the remaining $8,500,000 into the court. Travelers performed pursuant to the amended settlement agreement and paid out the full $9,000,000 anticipated by the settlement, but not in the manner set forth in the allocation agreement. The Superior Court judge presiding over the interpleader action took control of the settlement funds, immediately released another $1,000,000 to Casher as attorney for the Picciotto parties, and thereafter controlled the release of the settlement funds.
The interpleader action proved costly and dragged on over a number of years. Release to Casher and the Picciotto parties of $5,000,000 never occurred. Upon motion of the Picciotto parties at various intervals during the proceedings, the judge released funds to Casher as attorney for the Picciotto parties, sometimes noting the monies were required to fund the expenses of the interpleader action, including legal fees. Casher testified that distributions of released funds were made pursuant to instructions signed by the Picciotto parties. There was no evidence that distributions to any party to the allocation agreement were made pursuant to the terms of the agreement or the formula contained in the allocation agreement. So far as appears from the record, none of the signatories to the allocation agreement sought to enforce it or otherwise treated it as being in full force and effect.
The trial judge found that in the course of the interpleader action, a total of $3,450,000 of the settlement funds was released to Casher as attorney for the Picciotto parties, a fraction of the amount the Picciotto parties expected to receive when they signed the allocation agreement. The judge found that Casher received $1,050,000 for fees, an additional $1,000,000 was spent on litigation costs, and $1,400,000 was distributed to the Picciotto parties. Casher did not pay George Richardson or UP pursuant to the allocation agreement. The record reflects that George Richardson filed a complaint in the interpleader action and received an award of $30,574. The trial judge found that the condition precedent to Casher's obligations under the allocation agreement had been met when Travelers paid the full $9,000,000 to Casher and the court and Casher received $2,050,000 from those funds. The judge ordered the defendants to pay Richardson's estate and UP pursuant to the allocation agreement, including an increase pursuant to the circled asterisk because Casher had received more than the allocation agreement had directed. The defendants appeal.
Discussion. The parties all agree that the allocation agreement is not ambiguous. The question is simply whether the judge correctly decided that the condition precedent to Casher's obligations to pay the plaintiffs under the allocation agreement was met by Travelers's performance under the settlement agreement and Casher's ultimate receipt of $2,050,000 of settlement funds. We conclude that the condition precedent to Casher's obligations under the agreement was not met.
"A condition precedent defines an event which must occur before a contract becomes effective or before an obligation to perform arises under the contract. If the condition is not fulfilled, the contract, or the obligations attached to the condition, may not be enforced." Twin Fires Inv., LLC v. Morgan Stanley Dean Witter & Co., 445 Mass. 411, 420-421 (2005), quoting from Massachusetts Mun. Wholesale Elec. Co. v. Danvers, 411 Mass. 39, 45 (1991). While "[e]mphatic words" generally are necessary to create a condition precedent that will forfeit a right under an agreement, and "upon," alone, has not been considered "emphatic," "a condition precedent may nonetheless be found to exist if the intent of the parties to create one is clearly manifested in the contract as a whole." Massachusetts Mun. Wholesale Elec. Co., supra at 46. To determine whether the parties intend to create a condition precedent, "a court considers the words used by the parties, the agreement taken as a whole, and surrounding facts and circumstances." Twin Fires, supra at 420, quoting from Massachusetts Mun. Wholesale Elec. Co., supra at 45-46.
The defendants contend that the conditions precedent to Casher's obligation to pay the plaintiffs anything under the allocation agreement included the allocation of the settlement proceeds and the receipt by the parties (as opposed to the mere payment of funds into court) of the $5,000,000 allocated to the 1994 action in the agreement. We agree. To hold otherwise removes the allocation component from the allocation agreement.
The plaintiffs and the trial judge focus only on Travelers's performance and Casher's ultimate receipt of settlement funds. A contract should be interpreted, however, as a whole and "[i]f possible, reasonable effect must be given to all of its provisions." King Features Syndicate, Inc. v. Cape Cod Bdcst. Co., 317 Mass. 652, 654 (1945). "Its main purpose should be promoted where its language permits." Ibid.
Here, the contract is entitled "Allocation Agreement" and the first thing it accomplishes is a division of the settlement proceeds into two parts, allocating $4,000,000 to settlement of the 1983 case and $5,000,000 to settlement of the 1994 action. The agreement further provides that the parties agree to distribute the funds as allocated to accommodate the needs of the parties in anticipation of a potential delay in the disbursement of the 1983 settlement. Indeed, it appears the signatories anticipated only the $4,000,000 portion would be delayed by a potential interpleader action. Distribution to Casher and the Picciotto parties and by Casher to the plaintiffs was to occur upon receipt of the allocated sums.
Reading the agreement as a whole, it seems clear that the parties were principally concerned with the anticipated immediate distribution of the first $5,000,000 lump sum. In these circumstances, we conclude that the allocation of the settlement proceeds and distribution of the first $5,000,000 was a condition precedent to Casher's duties to the plaintiffs under the allocation agreement.
The allocation and corresponding distributions never occurred to satisfy the condition precedent that would give rise to Casher's obligation to pay the plaintiffs. Travelers rejected the allocation agreement and the distribution it proposed, and there is no indication the interpleader judge gave the allocation agreement any force or otherwise made any distributions pursuant to it. It is true that over the course of years of litigation of the related interpleader action, Casher ultimately received significant disbursements of settlement funds. To attribute those distributions as made pursuant to the allocation agreement, however, ignores the reality of what occurred. The funds were released piecemeal and often the interpleader judge specifically noted the release of funds was necessary to fund the interpleader action. Significantly, the trial judge made no finding that the allocation agreement determined the parties' respective entitlement to distributions of settlement proceeds, or that any settlement proceeds released to Casher were in satisfaction of what was owed to her under the allocation agreement. Any suggestion that the funds were distributed to her pursuant to the allocation agreement is not supported by the record.
The plaintiffs, even as intended third-party beneficiaries, cannot enforce an agreement where the condition precedent to their benefits did not occur. Similarly, the plaintiffs' argument that Casher was obligated to pay them before paying the litigation costs of the interpleader action is unavailing.
Moreover, we note that Richardson intervened in the interpleader action and received an award of $30,574, and Casher testified that some monies were distributed to Richardson from the funds released by the Superior Court.
The judgment as to counts 1 and 2 of the amended complaint is reversed; in all other respects the judgment is affirmed.
By the Court (Green, Milkey & Maldonado, JJ.),
The panelists are listed in order of seniority.
/s/
Clerk Entered: December 2, 2015.