Opinion
19-P-1657
06-01-2021
BASS RIVER TENNIS CORPORATION & others v. Manuel C. BARROS.
MEMORANDUM AND ORDER PURSUANT TO RULE 23.0
This appeal arises from litigation brought by the Bass River Tennis Corporation (BRTC) and its current owners, Mark Greenberg and Michael LaPierre, against the company's founder and former owner, Manuel C. Barros, to satisfy a judgment the plaintiffs obtained against Barros in an underlying action. Barros appeals from a postjudgment order of a judge of the Superior Court appointing a special master to sell by auction a twenty percent membership interest owned by Barros in a related entity to satisfy the judgment. We affirm.
The following third-party defendants did not participate in this appeal: 660 Cambridge Street, LLC; Barros Exchange, LLC; Bass River Golf Management, Inc.; Trustees of the 104-106 Perkins Street Realty Trust; Trustee of the 11-13 Seckel Street Realty Trust; Cambridge Savings Bank; and T.D. Bank.
Background. We summarize the relevant facts, reserving certain details for our discussion of the issues. This case arises out of litigation that began in 2012 when BRTC and its owners, Greenberg and LaPierre, sued Barros to collect on a promissory note and for breach of a securities purchase agreement. The details and prior procedural history have been set forth in previous summary decisions of this court and need not be repeated at length here. We rely particularly on the most recent memorandum and order, Greenberg v. Barros, 97 Mass. App. Ct. 1109 (2020) (2020 decision).
An unpublished decision issued pursuant to Appeals Court rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009).
Our focus here is on another entity formed by Barros, 31 Tozer Road, LLC (Tozer), which is the owner of the property on which BRTC is situated. To satisfy outstanding debts owed by Barros, Greenberg and LaPierre had previously acquired an eighty percent controlling interest in Tozer pursuant to the securities purchase agreement (SPA) that Barros, Tozer, and BRTC entered into with Greenberg and LaPierre in 2010. A panel of this court affirmed that acquisition in the 2020 decision.
At the time of its execution, Barros was the sole owner of both BRTC and Tozer, and he signed the agreement as president and manager of each entity respectively.
While the appeal of the 2020 decision was pending, a judge of the Superior Court allowed the plaintiffs’ motion for a postjudgment equitable reach and apply attachment pursuant to G. L. c. 223, § 86A, to acquire the remaining twenty percent ownership interest in Tozer still held by Barros, with the purpose of selling the interest once the judgment became final (attachment order). When the judgment became final the following year, the plaintiffs sought the appointment of a special master to auction off Barros's interest (motion to appoint a special master). After a hearing in March 2019, the motion was allowed, and an order issued on June 20, 2019, establishing sale procedures and appointing the special master to execute the sale (order).
The attachment order prohibited Barros from transferring, pledging, or encumbering the twenty percent interest in Tozer, or receiving any dividends, distributions, or payments therefrom.
In the intervening months, the parties were engaged in extensive postjudgment motion practice; Barros sought reconsideration and pursued interlocutory appellate relief related to the attachment order, while the plaintiffs sought discovery.
Barros sought stays of the order from the trial court, and single justices of both the Appeals Court and the Supreme Judicial Court, all without success. He also appealed our court's single justice denial to a full panel, but the appeal was dismissed as moot.
The special master conducted a sale by auction on August 15, 2019, in accordance with the procedures set forth in the order. Plaintiffs Greenberg and LaPierre submitted the only bid, purchasing the remaining twenty percent interest in Tozer for $75,000. The auction was held at the office of the special master in Foxborough, Massachusetts, approximately fifty-six miles from Tozer's property in Beverly, Massachusetts. The city of Beverly had assessed the value of Tozer for fiscal year 2019 at $2.78 million. The special master never asked the motion judge to confirm the auction as he was permitted to do under the order, if requested to do so by the successful bidder. The special master filed a final report and a request for approval of his fees, which was allowed by the judge shortly thereafter. Barros timely appeals from the order appointing the special master and setting forth the procedures for the auction.
Tozer had acquired the property in 2007 for $4.5 million. At the time of the auction, Tozer owed around $2 million on its mortgage.
Discussion. 1. Motion to appoint a special master. We review a grant of equitable relief for abuse of discretion. See Cahaly v. Benistar Prop. Exch. Trust Co., 68 Mass. App. Ct. 668, 678-679 (2007). A motion judge possesses broad equitable powers to facilitate a creditor's collection of its judgment. See Foster v. Evans, 384 Mass. 687, 689 (1981) ( G. L. c. 214, § 3, "authorizes the courts to do certain things which they could not do under their general [equity] jurisdiction, and impliedly authorizes them to take any measures analogous to ordinary proceedings of courts of equity which may be necessary or proper to accomplish the work which they are set to do" [citation omitted]).
The plaintiffs argue that the motion judge acted within his discretion in exercising his broad equitable powers, subject to a reach and apply attachment after judgment entered, to appoint a special master to auction off Barros's remaining twenty percent interest in Tozer. The statutory authority relied on by the plaintiffs includes G. L. c. 223, § 86A, and G. L. c. 214, § 3 (6). See G. L. c. 223, § 86A (granting jurisdiction "by appropriate procedure and process to cause to be reached, held and thereafter applied in payment of any such judgment or decree"); G. L. c. 214, § 3 (6) (granting jurisdiction in "[a]ctions by creditors to reach and apply, in payment of a debt, any ... interest, legal or equitable, of a debtor"). See also Salvucci v. Sheehan, 349 Mass. 659, 661-664 (1965) (permitting reach and apply attachment and appointment of special master to sell property in event of arbitration award in plaintiff's favor).
Barros challenges the plaintiffs’ argument primarily on two grounds. First, he contends that the auction was carried out in violation of the limited liability company statute, G. L. c. 156C (act). Specifically, Barros states that § 40 of the act supersedes and supplements the statutory authority relied on by the plaintiffs such that a charging order is the exclusive remedy available to the plaintiffs as judgment creditors of a member of a limited liability company. In the absence of a charging order, Barros claims that the motion judge should have unwound the auction and returned the twenty percent interest to Barros.
Questions of statutory interpretation require us to look first to the language of the act. See City Elec. Supply Co. v. Arch Ins. Co., 481 Mass. 784, 788 (2019). "It is well established that ‘[a] statute is not to be deemed to repeal or supersede a prior statute in whole or in part in the absence of express words to that effect or of clear implication.’ " Skawski v. Greenfield Investors Prop. Dev. LLC, 473 Mass. 580, 586 (2016), quoting Commonwealth v. Palmer, 464 Mass. 773, 777 (2013). Ultimately, the touchstone is the intent of the legislation. See id. at 586-587.
The parties agree, as do we, that there is no express language in § 40 stating that it preempts any preexisting remedies. We are thus required to consider whether preemption was clearly implied. In the absence of explicit language, the intention to abrogate prior law may be established only by implication that is "so clear that it overcomes our ‘strong presumption against implied repeal of a prior law.’ " Skawski, 473 Mass. at 586, quoting Dartmouth v. Greater New Bedford Reg'l Vocational Tech. High Sch. Dist., 461 Mass. 366, 374 (2012). See George v. National Water Main Cleaning Co., 477 Mass. 371, 378 (2017) ("Repeal is not clearly implied [u]nless the prior statute is so repugnant to and inconsistent with the later enactment that both cannot stand" [quotation and citation omitted]). "It may also be clear where the subsequent legislation comprehensively addresses a particular subject and impliedly supersedes related statutes and common law that might frustrate the legislative purpose" (citation omitted). Skawski, supra.
While we agree with Barros that the act, generally, created a comprehensive statutory scheme for the formation, operation, and dissolution of a limited liability company, we do not agree that § 40 was similarly intended to be as comprehensive in defining the remedies available to a judgment creditor. We are not persuaded that we should interpret the mere absence of any explicit reference to G. L. c. 223, § 86A, and G. L. c. 214, § 3 (6), in § 40 of the act as clearly implying that § 40 was intended to displace or limit such statutory authority. Nor has Barros offered any other evidence of such an intent. To the contrary, the language of § 40 is permissive, not mandatory, giving the judgment creditor the option of seeking a charging order. See G. L. c. 156C, § 40 (upon application by judgment creditor, "the court may charge the limited liability company interest of the member with payment of the unsatisfied amount of the judgment with interest" [emphasis added]).
We are equally unpersuaded by Barros's additional argument that the later enactment of the act, and specifically § 40, is sufficient to manifest an intent to abrogate prior law given that it is presumed that "the Legislature is aware of existing statutes when it enacts subsequent ones." Thurdin v. SEI Boston, LLC, 452 Mass. 436, 444 (2008). The date of enactment, standing alone, does not sufficiently establish the intent to supersede prior law, especially given that it is well established that "the implied repeal of a statute by a subsequent statute has never been favored by our law" (quotation and citation omitted). George, 477 Mass. at 378. "[W]e do not mechanically determine that the more recent or more specific statute ... trumps the other" (quotation and citation omitted). Id. There is nothing inconsistent between the various remedial statutes, and nothing which suggests they should be understood as mutually exclusive. Both charging orders and reach and apply attachments are nonexclusive remedies based on "remedial" statutes and should be given "broad interpretation." See Monell v. Boston Pads, LLC, 471 Mass. 566, 575 (2015) ("In cases [w]here two or more statutes relate to the same subject matter, they should be construed together so as to constitute a harmonious whole consistent with the legislative purpose" [quotation and citation omitted]). Accordingly, we will not disturb the shared legislative purpose of such statutory authority to enable creditors to collect debts.
In sum, we agree with the plaintiffs that § 40 contains no clear implication that the Legislature intended it to be the exclusive remedy available to a judgment creditor of a member of a limited liability company, or that it otherwise impliedly supersedes and supplements the statutory authority relied on by the plaintiffs here. We, therefore, determine that the motion judge did not abuse his discretion in appointing a special master to auction off Barros's remaining twenty percent interest in Tozer.
2. Transfer restrictions in the operating agreement. Barros next asserts that the anti-assignment clause of Tozer's operating agreement, which places a restriction on the voluntary sale or transfer of a member's interest, precluded the sale of his Tozer interest. The clause, however, does not similarly restrict an involuntary transfer by court order as occurred here. The reach and apply statutes upon which the plaintiffs rely are "very broadly written and contain[ ] no express reservation for cases in which an anti-assignment clause exists." Tilcon Capaldi, Inc. v. Feldman, 249 F.3d 54, 61 (1st Cir. 2001) (applying Massachusetts law). A restrictive provision, like the anti-assignment clause here, "is inoperative as to a particular transfer unless the restriction specifically applies to the transfer." Durkee v. Durkee-Mower, Inc., 384 Mass. 628, 631-633 (1981) (restrictions on transfers contained in corporate charters are strictly construed such that "the scope of the restriction cannot be greater than its actual language"). Thus, Barros cannot invoke Tozer's operating agreement to shield himself from the remedy the plaintiffs obtained as judgment creditors. Construing the anti-assignment provision strictly, as we must, we conclude that the operating agreement does not bar the acquisition by the plaintiffs of the remaining twenty percent interest in Tozer through a reach and apply sale pursuant to a judgment.
Section § 7.01(a) of the operating agreement restricts voluntary transfers by members.
Barros also argues that the plaintiffs were not properly members of Tozer under G. L. c. 156C, § 41. That contention, however, is now moot based on our previous determination, as set forth in the 2020 decision, that the plaintiffs properly owned an eighty percent interest in Tozer, which made them members of Tozer at the time of the auction.
3. Whether the auction occurred in good faith and in a commercially reasonable manner. Barros also argues that we should reverse the order because the auction itself was not conducted in good faith and in a commercially reasonably manner. More specifically, Barros contends that plaintiffs Greenberg and LaPierre should not have been permitted, as the only bidders, to purchase the twenty percent interest in Tozer for an amount that was well below what he claims was its market value. He additionally points to several alleged deficiencies related to the auction, including the fact that the plaintiffs refrained from having the sale approved by the Superior Court as they would have been permitted to do under the order; the fact that the special master held the auction at his office, which was some distance from Tozer's property; and the fact that the requisite due diligence documents were made available to prospective buyers only ten days prior to the auction date. While Barros acknowledges that these acts were all in compliance with the auction procedures approved by the motion judge and set forth in the order, he contends that mere compliance with the terms of the order is insufficient when determining whether the auction was conducted in good faith and the sale was commercially reasonable. Thus, according to Barros, by failing to secure the optimum sale price, the special master and the plaintiffs committed a breach of their fiduciary duty to exercise good faith and reasonable diligence. The main problem with Barros's argument is, as the plaintiffs argue, that Barros did not object to these procedures at the time of their approval by the motion judge, and so he is precluded from raising his objections for the first time on appeal. See Carey v. New England Organ Bank, 446 Mass. 270, 285 (2006).
Barros notes that the $75,000 sale price constituted less than thirty percent of the amount he owed to the plaintiffs under the judgment.
Beyond that, even if we were to consider Barros's argument, it is meritless. To support it, Barros relies on a trio of mortgage foreclosure cases, and argues that the foreclosure standard, which requires mortgagees to act with good faith and reasonable diligence in securing the maximum price in a foreclosure sale, should apply equally to judgment creditors. See Sandler v. Silk, 292 Mass. 493, 496 (1935) (mortgagee "executing a power of sale contained in a mortgage" must "exercise good faith and put forth reasonable diligence"). See also Williams v. Resolution GGF OY, 417 Mass. 377, 383 (1994) ("mortgagee's duty [of good faith and reasonable diligence] is more exacting when it becomes the buyer of the property"); Property Acquisition Grp., LLC v. Ivester, 95 Mass. App. Ct. 170, 176 (2019) (compliance with statutory mandates "is insufficient to satisfy a mortgagee's duty of good faith and reasonable diligence"). The plaintiffs counter that these cases are inapposite, and that Barros failed to cite to any legal authority holding a judgment creditor to the same standard.
While we decline to address here whether the foreclosure standard is, in fact, applicable to judgment creditors, we nevertheless conclude that the auction was conducted in good faith and in a commercially reasonable manner for the following reasons: First, the auction was subject to judicial oversight, and the procedural details of the auction were specifically set forth in a court order. The special master's compliance with these details is undisputed. Even were we to rely on the cases Barros cites, and agree that the plaintiffs and the special master owed him an exacting fiduciary duty, under the foreclosure standard, "the mortgagee's fiduciary duty to the mortgagor is not violated unless the failure of diligence is ‘of an active and conspicuous character.’ " Property Acquisition Grp., LLC, supra at 175, quoting Pemstein v. Stimpson, 36 Mass. App. Ct. 283, 287 (1994). No such failure is present here.
Second, while Barros claims that the purchase price does not reflect the actual value of the twenty percent interest in Tozer, there is no independent appraisal in the record before us indicating what the fair market value would have been. Nor does Barros mention that Tozer was in bankruptcy at the time of the auction. Again, even under the foreclosure standard, the "mere inadequacy of a foreclosure sale price, alone, does not necessarily prove an absence of good faith or reasonable diligence ...; [t]here are any number of reasons that a foreclosure sale might bring a price below the fair market value." Property Acquisition Grp., LLC, supra, citing Sher v. South Shore Nat'l Bank, 360 Mass. 400, 402 (1971).
In sum, even were we to apply the foreclosure standard as Barros asks us to, we determine that there was no "failure of diligence" here, and certainly none that rises to the level of "an active and conspicuous character." Property Acquisition Grp., LLC, supra. Accordingly, we conclude that the motion judge committed no abuse of discretion in the appointment of the special master, and that the auction was conducted in good faith and in a commercially reasonable manner.
4. Appellate attorney's fees and costs. The plaintiffs contend they are entitled to an award of attorney's fees and costs pursuant to § 7.6 of the SPA, and note further that Barros's obligation to pay such fees is well established given that we granted such requests in previous appeals. Barros argues that the plaintiffs are not entitled to attorney's fees and costs because he asserts the exclusive applicability of the charging order under G. L. c. 156C, § 40, in good faith, and contends that he has a reasonable expectation of reversal on appeal. We conclude, however, that the plaintiffs are entitled to appellate attorney's fees and costs under the agreement. Accordingly, the plaintiffs may submit a petition for such fees and costs, together with supporting materials, within fourteen days of the date of the decision. Barros shall have fourteen days thereafter to respond. See Fabre v. Walton, 441 Mass. 9, 10-11 (2004).
Under the express terms of § 7.6 of the SPA, Barros agreed to hold the plaintiffs harmless against losses arising from litigation to enforce the SPA, including attorney's fees and costs.
To the extent that any arguments are not expressly addressed, they were not overlooked, but rather, "[w]e find nothing in them that requires discussion." Commonwealth v. Brown, 479 Mass. 163, 168 n.3 (2018), quoting Commonwealth v. Domanski, 332 Mass. 66, 78 (1954).
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Postjudgment order appointing special master affirmed.