Opinion
14-P-1042
09-15-2015
JESSICA VENINCASA v. MICHAEL VENINCASA & 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 plaintiff, Jessica Venincasa, appeals from a Superior Court judgment on the retrial of her damages claim, reducing a jury award by $2,910,602.71. She argues that the jury award was not "markedly against the weight of the evidence" and that, as a result, the trial judge abused her discretion in allowing the motion for a new trial on the issue of damages. Jessica also contends that the judge erroneously found for the defendant, Michael Venincasa, on her fraudulent transfer claim. We affirm, essentially for the reasons well explained in the judge's thoughtful memorandum.
Because the parties share a last name, we refer to each party by his or her first name.
Michael did not file a responsive brief in this appeal.
Background. We briefly summarize the relevant facts, which are not in dispute. Michael established a successful group of family real estate development businesses and then transferred them to his daughter, Jessica, in 2002 when she graduated from college. The transfer documents provided that Michael could, at any time within ten years, reacquire any part of the business he chose. Although Jessica had no business experience, the businesses functioned relatively well until 2008. However, as the trial judge noted, "[t]he jury could reasonably have found that as the combined result of inexperience (Jessica), inattention (Michael), and greed (family-wide), the enterprise was poised for disaster when the recession hit." When Michael eventually discovered a number of facts that troubled him in the business records, he determined that he should take the business back from Jessica. In so doing, he reacquired a corporation with all of the business assets, but left in Jessica's name a corporation with all of the liabilities. This case arose from Jessica's resulting claims against her father and her brother, James, among others.
A number of other corporate entities also were involved as part of the corporation's various real estate projects. As relevant here, after exercising his right to repurchase all of the stock of Northeast from Jessica, on May 12, 2009, Michael (as the, then, sole officer of Northeast) transferred Compass Pointe from Northeast to his own name individually; on May 20, 2010, he transferred Compass Pointe out of his own name and into the newly formed corporation, Signature Homes Communities, LLC, which was formed in order to carry on the family business and to entice subcontractors to again work with him on the Compass Pointe project.
Before the case was submitted to the jury, James's motion for a directed verdict was allowed as to all claims against him. He is not a party to this appeal.
At trial in May, 2012, the jury considered only two of the six claims that Jessica had alleged in her amended complaint -- breach of fiduciary duty and unjust enrichment -- both against Michael. The jury found for Michael on the unjust enrichment claim and for Jessica on the breach of fiduciary duty claim, awarding Jessica $3,343,985.06 in damages.
Jessica's amended complaint also alleged other counts -- corporate freeze-out (count I), corporate mismanagement (count II), fraudulent transfer (count IV, which is at issue in this appeal) -- and sought remedies of receiver and dissolution (count VI, voluntarily dismissed by Jessica). The equitable claims alleged in counts I, II, and IV were reserved for decision by the judge, who eventually ordered the entry of judgment in Michael's favor on each count.
On July 19, 2012, Michael's motion for a new trial was denied on the issue of liability, but allowed with respect to remittitur of the damages award. The judge determined that the jury's damages award was derived from adding together amounts from three trial exhibits. Two amounts are not at issue. However, exhibit twelve was a demand letter from Country Bank for Savings (bank) relating to the Compass Pointe Estates, LLC (Compass Pointe), development, loan obligations personally guaranteed by Jessica and, later, by Michael, totaling $2,910,602.71. The judge concluded, "that portion of the jury award which tracked the demand letter of January 17, 2012, from Country Bank for Savings to Signature Homes Communities, LLC, on certain of the parties' obligations totaling $2,910,602.71, was not proved by a preponderance and with the reasonable degree of certainty required to constitute damages proximately caused to Jessica by Michael's breach of fiduciary duty."
Exhibit seventeen represented a judgment and execution for $197,774.97 against Signature Homes Building Group, Inc., and Jessica individually; exhibit sixteen represented a demand on Stiles Crossing, LLC, and Jessica, individually, in the amount of $235,607.38.
Jessica declined to remit the damages. At a jury-waived retrial, solely on the issue of damages, the same judge found that Jessica had failed to prove that "any damage associated with the guarantees . . . was proximately caused to her by Michael's breach of fiduciary duty." In so concluding, the judge determined that the loans guaranteed by Jessica (and Michael) were not in default at that time and that any past defaults had been satisfactorily cured; a subsequent bank agreement and loan modification had decreased Jessica's risks from the guaranty by adding other guarantors or collateral; and Jessica's guaranty obligation was contingent upon many speculative factors, including exhausting all other sources of security or repayment, or working with Michael with whom the bank had an historically successful relationship. Indeed, the indebtedness Jessica had guaranteed only decreased after Michael resumed control of the family business. Judgment entered in favor of Michael on Jessica's claim of fraudulent transfer (count IV), and final judgment on all claims was entered on July 1, 2013, in favor of Jessica in the amount of $433,382.35.
Discussion. Motion for a new trial. Jessica's primary argument is that the judge erroneously allowed Michael's motion for a new trial with respect to the damages award. She asserts that the evidence presented at the first trial, considered as a whole, was sufficient to support the award. We are not persuaded.
"The grant or denial of a motion for 'a new trial on the ground that the verdict is against the weight of the evidence rests in the discretion of the judge.'" Turnpike Motors, Inc. v. Newbury Group, Inc., 413 Mass. 119, 127 (1992) (citation omitted). We grant "considerable discretion to a judge's disposition of a motion for a new trial, especially where" she was also the trial judge, and "we will reverse the ruling only for an abuse of discretion." Passatempo v. McMenimen, 86 Mass. App. Ct. 742, 746 (2014), quoting from Gath v. M/A-Com, Inc., 440 Mass. 482, 492 (2003).
At trial, the jury heard evidence of a letter dated January 17, 2012, from the bank, regarding loan obligations by Compass Pointe (of which Jessica also had been the sole officer). However, that debt had been assumed by a new borrower, Signature Homes Communities, LLC (SHC), and, in addition, both Michael and Northboro Properties, LLC, had been added as guarantors, further reducing Jessica's potential exposure. As a result of the bank letter, Michael had put an "action plan" into place that prevented the bank from foreclosing on the outstanding mortgages. He also had begun paying down the large loan obligations Jessica had incurred without requiring further action from the bank on the guaranties.
Following Jessica's departure, Michael had formed SHC, into which he conveyed the Compass Pointe properties formerly held by Northeast. See note 5.
A bank representative testified at trial that, after Jessica left the company in a "very dire financial position," Michael stepped in and was trying to "salvage the relationship and get everything square with the bank, which [Michael] and [James had] done over the past couple of years." Michael was able to bring down the outstanding loan amounts (from approximately $8.2 million to $2.76 million) through "hard money financiers," by building on sites he owned separately from the family business, and through the sale of various assets, as the bank would not extend additional funds to get the subdivision homes built and ready for sale. Jessica's liability was contingent upon the bank calling in the guaranties, and it appears that it was not necessary for the bank to do so because Michael had cured any default and drastically reduced the debt. See Cadle Co. v. Webb, 66 Mass. App. Ct. 269, 272-273 (2006), describing the conditional nature of a guaranty.
Michael sold his boat and cars, rented out the condominium in which he was living (because he could not sell it), and moved into a motel at a truck stop; James sold his home, car, and snowmobile. Jessica sold nothing.
On these facts, we agree with the judge that Jessica did not incur any damage as a result of Michael's breach of fiduciary duty in connection with her guaranty of the Compass Pointe loan obligation. In ordering this remittitur, the judge correctly followed the direction to reduce "so much of the damages awarded as 'the court adjudges is excessive.'" D'Annolfo v. Stoneham Hous. Authy., 375 Mass. 650, 661 (1978), quoting from Mass.R.Civ.P. 59(a), 365 Mass. 827 (1974). We see no error, nor any abuse of discretion.
Fraudulent transfer. Jessica also argues that the judge improperly dismissed her equity claim against Michael for fraudulent transfer, contending that the evidence overwhelmingly demonstrated that Michael had transferred the Compass Pointe property to a new corporation so as to defraud creditors, including Jessica as one such creditor, and that the judge's conclusion to the contrary is erroneous. This argument also fails.
In a jury-waived trial, "[f]indings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses." Mass.R.Civ.P. 52(a), as amended, 423 Mass. 1402 (1996). See Yankee Microwave, Inc. v. Petricca Communications Sys., Inc., 53 Mass. App. Ct. 497, 504 (2002). For Jessica to succeed on her claim for fraudulent transfer, she "must demonstrate (1) that [she] is a creditor[ ] and (2) that [Michael] fraudulently transferred[ ] the [Compass Pointe] property. See G. L. c. 109A, § 5." Alford v. Thibault, 83 Mass. App. Ct. 822, 827 (2013). The Uniform Fraudulent Transfer Act (UFTA) enumerates several factors a judge may consider in determining whether a debtor acted with actual intent to defraud his creditors. See G. L. c. 109A, § 5(b).
Pursuant to the Uniform Fraudulent Transfer Act, a creditor is defined as "a person who has a claim." G. L. c. 109A, § 2, inserted by St. 1996, c. 157. A claim is defined as "a right to payment, whether or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." G. L. c. 109A, § 2, inserted by St. 1996, c. 157.
A transfer is fraudulent if a debtor makes a transfer either "(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer . . ., and the debtor . . . (ii) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due." G. L. c. 109A, § 5(a), inserted by St. 1996, c. 157. See Alford v. Thibault, 83 Mass. App. Ct. 822, 827-828 (2013).
Here, the judge properly concluded that Jessica is a creditor under the meaning of the UFTA based on her fiduciary relationship with Michael; however, the evidence was sufficient to support the judge's finding that the transfers of the Compass Pointe property made in 2009 and 2010 were not fraudulent. There is no evidence in the record before us that Michael's actions in reclaiming the Compass Pointe project were done with actual intent to make himself insolvent or to defraud any creditor, including Jessica. See G. L. c. 109A, § 5(a). In fact, the opposite appears to be the case.
As the judge concluded, "Michael's efforts were singularly geared to reestablishing some viability to the family real estate business, so that he could continue to support his and James'[s] households." But for Michael's willingness personally to guarantee Northeast's obligations with the bank, foreclosure on the Compass Pointe property was very likely. It is also undisputed that the transfers did not result in a loss of value of the property, but rather created value through Michael's efforts in reducing the debt on the project from $8.2 million in 2009, to $2.76 million as of the time of trial. See Alford, supra at 828. See also Richman v. Leiser, 18 Mass. App. Ct. 308, 312 (1984).
The evidence clearly supports the judge's determination that Michael, in making the transfers, was acting in good faith in order to complete the Compass Pointe project, and not to benefit his own interests to Jessica's detriment. As a result, the judge's conclusion that Michael's transfers in 2009 and 2010 were not made with intent to "hinder, delay, or defraud" Jessica, was not clearly erroneous. Weiler v. PortfolioScope, Inc., 469 Mass. 75, 91 (2014).
Judgment affirmed.
By the Court (Grainger, Hanlon & Carhart, JJ.),
The panelists are listed in order of seniority. --------
Clerk Entered: September 15, 2015.